by Sakari Linden

Republic of Karelia and its Head Alexander Hudilainen have targeted their eyes and hopes to China. After its relations with the West have been deteriorated due to the Ukraine crisis, Russia has increasingly directed geopolitically and economically towards Eurasia and China. Russia’s new direction changes position of Karelia, but at the same time it opens totally new opportunities for the region. From the point of view of Karelia, the ability to exploit the full potential of its connections to China will be determined by to what extent Finland and other Nordic countries are interested in being connected to Chinese markets via Karelia.

Alexander Hudilainen caused sensation in the International Economic Forum of Beijing, held on 4 and 5 September 2015, by revealing plans to connect Karelia to China’s gigantic project known as the New Silk Road. The plans revealed by Hudilainen include building of a nearly 2 700 km long motorway, which connects markets of the Nordic countries from the Finnish border via Karelia and the regions of Archangelsk, Komi and Perm to Ural mountains and the New Silk Road of and to the huge market of China. According to the plans, the first phase of the construction works will be a new motorway to be built from the Finnish border to Petrozavodsk, the capital of Republic of Karelia.

The New Silk Road: the greatest construction work of our era

The project known in China as “One Road, One Belt” (一带一路) is the biggest ever construction work, which was presented to the world by President Xi Jinping in 2013. Its goal is to spread China’s economic growth with help of investments and common infrastructure projects to countries situating along the New Silk Road. China’s eventual goal is to create new market areas for its own corporations in its neighbouring areas.

The goal of the One Road, One Belt is to connect China logistically to economically important regions with help of motorways and railroads directed to Eurasia, as well as with a sea road directed to the Mediterranean via India and the Middle East. Hence, the main parts of the mega project are the New Silk Road to be built through Eurasia, and the Maritime Silk Road to be built to the Mediterranean, to which China invests especially to the development of ports in Bangladesh, Sri Lanka, Maledives and Pakistan.

On the continent, the plans about the New Silk Road include a building of a modern passage and trade road from China via Kazakhstan, Russia, Belarus, and Poland to Germany. The countries situated along the route need investments for the building of high-speed railroads, roads and highways, energy transmission and distributions networks, as well as fiber optic networks. Investments will be focused especially to the cities situated close to the New Silk Road.

Russia is a vital country for the execution of the New Silk Road due to its geographical size and central location. Consequently, Russia is in the centre of China’s logistical plans on the continental side of the One Road, One Belt. While President Xi was visiting Moscow as part of the festivities of the Victory Day in May 2015, China and Russia signed several treaties, which connect the development of the New Silk Road to the goals of the Eurasian Economic Union.

One of the treaties signed by China and Russia is related to the building of the high-speed railroad, firstly from Moscow to Kazan and then further on via Kazakhstan to China. An estimated cost of the railroad is almost 20 billion euros. Eventually, according to the plans, the high-speed railroad will be connected to a high-speed railroad, to be built from Moscow to Europe.

Will Nordic countries be able to use potential of the east?

The motorway connection between China and Europe creates the basis upon which the motorway from will be connected to the Ural Mountains. A general agreement about the motorway construction plan has been signed between the government of the Republic of Karelia, Northwest Development Corridor Inc. and AVIC International Renewable Energy Development Company Limited.

Logistical connection of markets of the Nordic countries is at the core of the plan, which simultaneously determines its success. What then is Finland and other Nordic countries’ interest to take part to the construction of the motorway to Karelia and further on to Urals.

Conditions for a mutual agreement on the logistical plans between Finland and Russia already exist. According to a current government programme of Finland, the government aims to advance export, internationalisation of the SMEs and trade with Asian countries. Rail freight transportations from Finland and other Nordic countries via Karelia to China commenced in May 2015. Transportations are planned to occur on weekly basis in the future.

China’s interest in Karelia as a logistical route will hardly remain as a short-term phenomenon. Russia and China signed in August 2015 an agreement related to customs control and monitoring, which aims to facilitate and speed up treatment of goods in custom houses. According to Li Wei, the Vice President of the National Board of Customs of China, China is ready to develop through transports with Russia, among others via Karelia to Finland.

The New Silk Road of China is especially interesting to Finland, because Finland joined as a founding member to the Asian Infrastructure Investment Bank (AIIB), which is the main source of funding of the New Silk Road. Finland’s former Minister of Treasury Antti Rinne argued in March 2015 the joining of Finland to the AIIB by saying that there is a huge need for infrastructure investments in developing Asia, which can support Finland’s trade policy goals and export industry.

Moscow has remarked the potential of Karelia

Russian government informed in June 2015 about the launch of the Karelian Development Program, which tells about the grown importance of the region. The Karelian Development Program aims to improve Karelia’s investment climate until 2020. Goals of the program include the renewal of the railway station of Värtsilä as an international border crossing station and the building of a border crossing station in Syväoro. However, Finland has already turned down the latter opportunity due to its costs.

Besides the Karelian Development Program there are only three equivalent regional development programs in Russia. The Ministry of Regional Development of the Russian Federation has even established a special unit dedicated to the development of Karelia, Kaliningrad and Crimea.

From all goals of the Karelian Development Program one is above all else from the point of view of Finland’s strategic interests. Plans about the building of international ports to Belomorsk and Kem could, if they come true, offer export of Finland its badly needed access to a year-round melt harbour. Moreover, the harbour would offer Finland access to the Northeast Passage, which will shorten distance between Europe and Asia by several thousands of kilometres.

There are clearly converging goals in the interests of Finnish business and Russia. Thus, President Vladimir Putin stated in his Presidential Address to the Federal Assembly on 3 December 2015 that the Northern Sea Route should become a link between Europe and the Asia-Pacific Region.

The decision of the Head of Karelia Alexander Hudilainen to exploit the Russian new geopolitical direction based on the country’s membership in the BRICS and the Shanghai Cooperation Organization and use the New Silk Road as its leverage is an excellent decision from the point of view of the economic development of the Republic of Karelia. At the beginning of his incumbency, Mr. Hudilainen visited Finland several times in order to attract foreign direct investment and Finnish entrepreneurs to Karelia with help of a new advantageous investment law, but, however, without any success worth mentioning.

Karelia’s geographical location seems totally different compared to the situation a few years ago due to China and the launch of the New Silk Road project. Similarly to Russia’s role as the New Silk Road’s bridge between China and Europe, Karelia can be Finland and other Nordic countries’ bridge to the New Silk Road and to economic opportunities of China. Geographical and at least partly still existing linguistical and cultural proximity could help Karelia to function as a springboard of the Finnish business to Russian and Chinese markets.

More sanctions or towards new opportunities?

Relations between the European Union and Russia and the leeway they give to Finland in order to promote its own economic interests determine will Finland be able to benefit from the opportunities of Chinese markets through Russia and Karelia. On the other hand, in order to get leeway in foreign and trade policy, Finland either has to resign from the EU’s common foreign and security policy, which promotes classical goals of transatlantic geopolitics, or a turn in decisions taken by Brussels to a more favourable direction from the point of view of exploitation of opportunities of the east.

The United States tried to block the participation of its allies to the Asian Infrastructure Investment Bank, which is essential information from the point of view of the building of Finland’s trade relations. As George Friedman, founder and chairman of Stratfor, has pointed out, the primordial interest of the United States is to stop a coalition between Germany and Russia. The phenomenon is related to a classical geopolitical struggle between maritime and land powers, determined by Harold Mackinder, according to which the main goal of the maritime powers is to prevent a coalition of Russia and Germany.

Austrian research institute WIFO (Österreichisches Institut für Wirtschaftsforschung) estimated in its research published in June 2015 that 40 000 jobs are under threat because of the sanctions the EU has imposed on Russia and decreased number of Russian tourists visiting Finland. It remains to be seen whether Finland will concentrate on constructive economic cooperation e.g. in order to exploit the transport routes of the New Silk Road and the Northeast Passage after voluntarily damaging its own economy by sanctions.

Sakari Linden is a geopolitical writer, who holds Master’s degrees in
Political Science and International Law.”

The Essential Saker: from the trenches of the emerging multipolar world