Finns Cashing In as Russians Snap Up Cottages

bloombergKutakov standing with his wife, Natalya, and their children in front of their house in the southeastern town of Imatra.
HELSINKI -- Arja Viitikko agonized before selling her home and land to Russians. Then she took the money.

"I thought about it -- am I selling piece by piece the land my grandfather fought for?" said Viitikko, 45, who in November 2006 sold a 21-hectare island and, later, a house in Savonlinna, north of Helsinki, to Russian buyers. "But these days, someone is going to sell anyway, so why wouldn't it be me?"

Buoyed by rising oil wealth, Russians are snatching up lakeside cottages and building single-family houses in Finland, whose border lies just 200 kilometers from St. Petersburg. On the dirt roads of Eastern Finland, Jeeps and sport utility vehicles driven by the new buyers mix with Toyotas and Volkswagens owned by locals.

Russians spent 76 million euros ($111 million) on Finnish property last year, accounting for three-quarters of all property sales to foreigners, up from one-quarter four years ago.

The purchases illustrate the double-edged sword Finland faces as Russia, 50 times larger in land mass and 27 times larger in population, reasserts itself in European affairs. Finland enjoys Russia's money while treading quietly on the political front. Finnish Prime Minister Matti Vanhanen, for instance, avoided condemnation of Russia's invasion of Georgia this month, saying, "We aim to be as [equal-handed] as possible."

"The more Russia engages in power politics either through economic, political or military means, the more cautious" Finland becomes, said Risto Penttilae, director of the Finnish Business and Policy Forum EVA in Helsinki.

Russia is one reason why Finland has stayed out of NATO, one of only six European Union members to do so. Finland supports Russia's bid for membership in the World Trade Organization, as well as the Nord Stream gas pipeline being built under the Baltic Sea off Finland's coast to connect Russian supplies with the German market, Vanhanen has said.

Finland depends on Russia for two-thirds of its energy imports by value, including all of the natural gas it uses, according to Statistics Finland. Russia became Finland's biggest trading partner in the first quarter of 2008 for the first time since the collapse of the Soviet Union.

At the Finnish-Russian border, truck lines sometimes stretch for a few kilometers, angering locals sandwiched between large Russian transports.

"They're dangerous. And it isn't right that when we now finally have good roads, they're being turned into parking lots for Russian trucks," said Lappeenranta resident Reijo Litmanen, 55, who drives his van past the lines daily.

The surge in trade and property purchases comes six decades after two wars between the countries ended in the Paris Peace Treaty of 1947, which ordered Finland to surrender an area the size of Denmark to the Soviet Union and pay reparations of $300 million. Finland was neutral in the Cold War.

While Finland's 1995 EU entry was a step toward the West and a security-policy statement, that goal was never openly spoken, said Liisa Jaakonsaari, a member of the Finnish parliament since 1979.

"We don't react like that to any other country," said Jaakonsaari, who chaired the parliament's foreign affairs committee from 1999 to 2007. "There's too much sensitivity" toward Russia, he said.

Finland's strategy has been to curry favor by maintaining constructive and friendly relations, the EVA Forum's Penttilae said. It doesn't always work: Russia has imposed duties on the exports of timber from the country to help modernize its pulp and paper industry. For the Finnish forestry industry, which relies on Russia for 16 percent of its raw material, the tariffs will increase costs by about 150 million euros each year, Finland's foreign ministry estimates.

"I think it's clear that this strategy hasn't produced results," Penttilae added. "Finland is minuscule and insignificant from the Russian perspective."

Not to Russian real estate buyers, though. In Savonlinna, 335 kilometers northeast of Helsinki, Russians bought 15 percent of all properties sold last year, according to the National Land Survey of Finland.

"I'm up to my neck in work now," said Tatyana Ivanova, 37, who started a business in Imatra, in southeastern Finland, scouting for cottages and acting as an intermediary between Finnish real estate agents and Russian buyers. "Business has soared from absolutely no demand five years ago."

Down the road in Taipalsaari, near the border, Mayor Jari Willman says the influx of Russians is a tricky business.

"The price level has gone up," Willman said. And because the homes are only used in the summer, "the houses stay dark, snow isn't plowed and the town gains no economic benefit."

But in Imatra, St. Petersburg construction company owner Valery Kutakov relaxed on the lawn of his new cottage and said he couldn't be happier.

"Finland's so clean and safe," said Kutakov, 52, as he looked at the pale green wooden house he had just renovated for his family. "Finns are law-abiding, and there is little crime."