Finland’s Hushed Energy Dealings with Russia

Photo: Gas pipeline. Credit: Antonin Duallia
Photo: Gas pipeline. Credit: Antonin Duallia

Finland would rather not discuss its stake in Nord Stream 2, or its other energy dealings with Russia.

In the growing disputes between Russia and the West, Finland is wedged between a rock and a very hard place. The government describes itself as militarily non-allied, a traditional Finnish position underlined by its regular role as a summit host, like the Trump-Putin Helsinki summit in 2018. That underlines its geographic reality — despite being a European Union (EU) member, Finland has not joined NATO, and is also on Russia’s doorstep. That can lead to some peculiar outcomes, like Finland’s quiet role in the Nord Stream 2 pipeline.

Last year, the Finnish energy company Fortum, which is majority-owned by the government, bought a controlling share in the German energy company Uniper and now owns 76.1%. This might initially have looked like another everyday European business transaction between two slightly dull companies with predictably anodyne mottos (“For a cleaner world” and “Empower energy revolution”), and Finland’s government would probably be content if that were the case.

In fact, the Finns were purchasing one of the five key investors which together provided 50% of the funding for Nord Stream 2. Uniper has lent up to €950m to Gazprom to finance the project, and has worried about the loan ever since. Last year, it warned that it might have to be written off because of U.S. sanctions.

Not that this would be obvious from Fortum’s website, which returns zero results for the search term Nord Stream 2. And when browsing Fortum’s webpage FAQ about Uniper, there are plenty of answers about Datteln 4, the controversial new coal power plant that Uniper opened in Germany, but none about Nord Stream 2. In fact, there is no mention of Nord Stream 2 at all: only vague references to gas and Fortum’s role in Uniper’s energy operations.

As one Finnish energy consultant told me: “The tight-lipped silence is telling: if the Fortum-Uniper cooperation via-a-vis Nord Stream 2 isn’t a big deal, why isn’t it mentioned?”

Finland’s broader role in Nord Stream 2 is sometimes forgotten. The pipeline passes through 374km of Finnish territorial waters, something Finland’s prime minister described in 2016 as primarily an environmental issue.

Finland has consistently sought to depoliticize energy policy, and with good reason. The Nordic country’s bigger, more powerful neighbor, Russia, has used energy as a control screw, and Finland is heavily reliant on Russian gas and oil. With Nord Stream 2, along with Rosatom’s nuclear plant at Hanhikivi (where construction has now begun, 11 years after its initial approval), Finland’s approach has been to keep things technical. In practice, this means determining whether a project, like Nord Stream 2, meets environmental standards. But Fortum’s actions inevitably reflect on the Finnish state, and there are choices to be made, which Finnish political culture is unsure how to handle because the discussion would be difficult and the answers telling.

This hush extends beyond the Fortum-Uniper relationship, Finland’s conveniently apolitical environment-first policy, and hand-washing on Nord Stream 2. Dealings under the Hanhikivi scheme, run by a joint Russian-Finnish consortium called Fennovoima, have raised eyebrows as well.

Originally, Fortum did not want to join the Fennovoima consortium and only did so after some backroom deals, in which Rosatom offered to facilitate Fortum’s acquisition of Russian hydropower assets that the company had been eyeing.

Back in 2015, the Finnish press covered the scandal that a company seeking to join the consortium, Migrit Energia, was a Russian-owned shell company — potentially leading all the way back to Rosatom itself. That appeared a clear breach of the project mandate from the Finnish government, which stipulated that the project had to involve majority-owned by EU countries or firms based in the bloc. The Ministry of Economic Affairs investigated and blocked the company’s involvement, but the incident highlighted the lengths to which Russia would go to court Finnish businesses and politicians behind closed doors, and hide its Migrit mess from the light of day.

Not that Finland is under any illusions about Russia. It has a friendly relationship with NATO, has been a member of the Partnership for Peace program for almost three decades, and enjoys extensive ties to the alliance, while Finland’s foreign minister is a frequent visitor at ministerial meetings. Finland recognizes that Russia presents the likeliest threat to its security (there is a reason Finland still has conscription and the strongest land force among the Nordics).

The recent U.S. decision to effectively allow Nord Stream 2 to proceed, thus avoiding a serious dispute with Germany, one of the scheme’s parents, means that Fortum has probably won its gamble. The Uniper loan will not have to be written off and Finland’s governing class may feel a quiet elation.

But for the U.S. and those of Finland’s near-neighbors that oppose the scheme as inimical to their security (like Poland) there are lingering concerns about how Finnish policy is made and executed.

Talking to Finland about energy is a confusing process. It is unclear where to start — should it be the Finnish president, as relations with Russia come under the Head of State’s mandate? Or the prime minister, who handles the EU? Or perhaps another minister who would give guidance on Fortum, Uniper, and Nord Stream 2. Certainly, none of them can comment on the critically important environmental impact assessments (EIA), as those are administrative decisions, not to be touched by politicians.

If cornered, the Finnish government would invariably say that it lacks influence over Russia and must deal with the realities of any smaller state facing a large and aggressive neighbor. In this version of events, Finland’s ownership of Fortum, control of Uniper, its murky relationship to Russian state-owned entities — themselves the catspaws of Russian state policy — are simply facts created by this reality. But regardless of whether the government wants to admit it, Finnish interests are all-too-often bound up with Russia’s.

July 7, 2021