Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Will There Be a Second Wave of the Crisis?

The answer can be searched for in the movements of the Russian stock exchange. The Russian stock market started to show signs of instability in summer 2008 and the indexes dropped especially in August last year. On the other hand, the stock prices have risen during the whole of the year 2009, except for a short fall in summer.

How about the amount of investments? In the first half of 2009, foreign direct investment (FDI) into Russia was 45 percent less than in the same period in 2008 ($6.1 billion), while all foreign investment decreased 30.9 percent to $32.2 billion. FDI inflows to Russia went mostly into projects that had already been started; not many new large projects were started.

In October, the Economic Development Ministry estimated that there would be a small inflow of capital till the end of the month and that there would not be a net outflow of capital in the rest of the fourth quarter. In the third quarter the net outflow of capital was $31.5 billion and $6 billion in September, which was $10 billion less than in July.

Nevertheless, Russia (and China) still belong in the top five markets most attractive for FDI; the others being the USA, Brazil and India. There are signs that some multinational corporations have been increasing their investment into emerging markets to be able to use the opportunities created by the financial crisis.

SEZ as a government tool in switching to an innovation-based economy

In Russia, the government has started programs of economic diversification in order to turn Russia into an innovation-based economy and away from an economy depending mainly on raw materials. As one part of this change, Special Economic Zones (SEZs) have been created. Russian SEZs that were able to offer the infrastructure and administrative support necessary for investors were introduced in 2005, although there have been special zones with simple tax benefits since the middle of the 1990s. Today there are already 13 SEZs with 170 resident companies. The investments in these SEZs now total more than $4 billion. Since the beginning of 2009, 33 new resident companies have been registered in Russian SEZs.

Russian trade today — A survival test for Finnish industries

Russia has traditionally been one of the most significant business partners for Finland. In 2008, export and import between the two countries reached an all-time peak, and Russia became Finland’s most important trade partner for the first time since the collapse of the Soviet Union. The value of trade between Finland and Russia was about €18 billion, import from Russia (€10.2 billion) being a bit higher than export from Finland to Russia (€7.6 billion). Russia’s trade with the EU totaled €233 billion, so Finland’s share at 8 percent is relatively big.

Still, there are several challenges to Finnish-Russian trade. Export from Russia to Finland comprises mainly energy products and raw materials, reflecting the situation inside Russian industries. Original Finnish export to Russia is mainly investment goods (machinery, metal constructions, equipment etc), more than half of the total export from Finland to Russia.

Another peculiarity of Finnish export to Russia is the transit trade. Efficient Finnish ports are the only way to import the required materials and goods to Russia, which at least in the European part of the country does not have sufficient port capacity. Finnish logistics companies and ports have benefited greatly in the past decade from the revival of the Russian economy and the Russians’ propensity for consumption. They formed a very efficient cluster of service companies and at the peak in 2008 employed tens of thousands of Finns in the container logistics business, despite the majority of trucks being Russian-operated.

The total volume of Finnish-Russian trade has dropped about 40 percent in the first half of 2009. Most affected is the export of investment goods (machinery, equipment) from Finland to Russia, where the drop has been 50 percent of value compared with 2008.

Most Finnish companies consider, however, that the situation today is temporary. Activity among Finnish business towards Russia continues, including direct investments. The company Konsu Ltd (, established in Russia since 1993, advises its clients and partners to stay and not to leave the Russian market as many did during the crises of 1998. Instead now is the time to invest in finding the right people, perfecting logistics and fine-tuning the management systems of the Russian business unit, so that it has the best possible foundation from which to meet the economic recovery.

What are the perspectives for the future of Finnish-Russian trade? Considering the economic structure of Russia, its export to Finland will be dominated by energy and raw materials in future as well. Finns have to gain and retain their market position in Russia by offering price competitiveness and quality. Understanding Russian companies’ problems with finance investments, consumer goods and service business should be emphasized more than before in the Finnish export portfolio. Different types of engineering and other specialist services have been and likely will be yet more in demand, as the Russian state will have to start to invest in improving the infrastructure.