The Finnish- Russian economic rela3ons at a new level a6er Russia s WTO accession?

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1 The Finnish- Russian economic rela3ons at a new level a6er Russia s WTO accession? STRUCTURE OF PRESENTATION Larger perspec3ve on Finnish- Russian trade rela3ons: Russia and the Bal3c Sea region Finnish- Russian trade and its development Less conven3onal trade rela3ons: - re- exports from Finland to Russia - transit trade - large shopping tourism Investment rela3ons Future development? t Kari Liuhto Professor, Director Pan- European Ins3tute Helsinki

2 Finland among Russia s major trade partners (exports + imports in 2011) Impact of WTO? Others 28% Germany 9% Italy 6% Holland 8% Impact of Customs Union with Belarus and Kazakhstan? Poland 3% Turkey 4% Ukraine 6% Kazakhstan 2% Belarus 5% Japan 4% USA 4% South- Korea 3% United Kingdom 3% Finland 2% China 10% France 3% Eurasian Union? Source: Customs Russia 2012

3 Importance of the BSR countries to Russia s foreign trade rela3ons Share in Russia s foreign trade turnover in 2011 EU 48.0 % BSR countries 18.9% Germany 8.7 % Poland 3.4 % Finland 2.3 % Sweden 1.1 % Lithuania 1.0 % Latvia 1.0 % Denmark 0.5 % Estonia 0.5 % Norway 0.4 % Sources: Nordregio 2007; Russian Customs 2012

4 Trade between Russia and the BSR countries (value of total trade in USD billion in 2011) Russian imports from BSR countries total $ 61 billion - Germany covers over 60% - imbalance between imports and exports Norway $ 2 bn Sweden $ 4 bn Finland $ 6 bn Poland $ 7 bn Estonia $ 1 bn Latvia $ 1 bn Lithuania $ 1 bn Value of Russia s foreign trade turnover (exports + imports) in 2011 Total trade $ 821 billion BSR countries $ 155 billion Germany $ 72 bn Poland $ 28 bn Finland $ 19 bn Sweden $ 9 bn Lithuania $ 8 bn Latvia $ 8 bn Denmark $ 4 bn Estonia $ 4 bn Norway $ 3 bn Sources: Russian Customs 2012

5 Importance of Russia to the BSR countries in 2011 Share of Russia in imports of Share of Russia in exports of Denmark 2 % 2 % Estonia 8 % 11 % Finland 19 % 9 % Germany 5 % 3 % Latvia 10 % 11 % Lithuania 32 % 17 % Norway 2 % 1 % Poland 12 % 5 % Sweden 6 % 2 % Sources: na3onal sta3s3cs 2012

6 Russia extremely important partner for Finland: 200 year perspec3ve Finland exports s imports 17% 9% 7/2012 Sources: ETLA, Customs Finland 2012

7 Short- term development of Finnish- Russian trade ( mn) Finnish exports to Russia dropped to the level of 2006 July Imports to Finland Exports to Russia Balance Sources: CEMAT 2011, Customs Finland 2012

8 Finnish imports from Russia ( mn) Machinery Finished goods Chemicals Fuels 3/4 Other raw materials Agricultural products Jan-Aug 2010 Jan-Aug 2011 Source: CEMAT 2011

9 Finnish exports to Russia (1-5/2012) Source: East Office of Finnish Industries 2012

10 Re- exports from Finland to Russia ( million in 2010) Mobile phones Medicine Radios, TVs, etc ICT equipment Passanger cars Fuels Electrical tools Household appliaences Vans Source: Customs Finland 2012

11 Road transit from Finland to Russia ( bn) 1/3 machinery and automobiles 1/5 TVs and computers Value of transit = 4 3mes our exports to Russia Transit employs directly around 3000 Finns Road transit has not recovered from the crisis, and its recovery will be slow due to Ust- Luga. Source: Customs Finland 2012

12 Russian tourism in Finland Around 7.3 million foreigners visit Finland annually, out of which the Russians form almost a half. Russian tourism complements the Finnish tourism - peak seasons are January and August, but even in February some 175,000 visits from Russia. Eastern Finland in par3cular aoracts Russians, over 40% of their visits. Several des]na]ons 18% Helsinki 18% Some 5.5 million hotel nights spent by foreigners, out which 1/4 made by the Russians. Lapland 1% Southern Finland 16% Foreign tourists consume worth 2.2 bn in Finland, out which the Russians cover 40%. Source: MEK 2012 Eastern Finland 42% Western Finland Central 2% Finland 3%

13 Tax free sales in Finland (- 000 ) Russians cover some 90% of tax free sales in Finland. City Sales 2011 Sales 2010 Change Share 40% of sales done close to border and the border trade increases fast even casinos are established at the border 60% of tax free sales consists of ordinary daily goods Source: Global Blue Finland Oy 2012

14 Finnish FDI to Russia ( mn) Fortum s investments cover ½ out of total ( 5-8 bn) Sources: CEMAT 2011; East Office of Finnish Industries 2011

15 The Russian FDI stock in Finland ( mn) Russian FDI stock in Finland has grown but the growth has been slower than that of EU countries, and as a consequence, the share of Russia has dropped from 4% in 1994 to 1% in 2011 in Finland s inward FDI stock. Some publicly- known Russian- owned firms in Finland: Teboil, Gasum, Suomen Petrooli, Norilsk Nickel Harjavalta, Delta Motor Group, RAO Nordic, Sekom Trading some 2000 firms with the Russian ci3zens in the BoD - very small and a number of inac3ve firms substan3al. Source: Bank of Finland 2012

16 Future development? SOME NEW PHENOMENA LNG imports from Russia to Finland at the end of this decade? Western goods produced in St. Petersburg sold to Finland Russian high- tech companies come to Finland in order to start produc3on, though the target market is Russia Finnish- Russian innova3on collabora3on with a target to sell goods to third markets (global market) t but who knows what happens in the future? Kari Liuhto Professor, Director Pan- European Ins3tute Helsinki