Decoupling from the Russian energy speeds up energy transition, and with its highly diverse energy mix and security of supply thinking, Finland is in a better position than many other countries. However, energy transition can only be encouraged in Finland and elsewhere in Europe if there is understanding of the cross-linkages characterising the current energy crisis.
In Finland as in elsewhere in Europe, there was a strong belief in the interdependence created by energy trade between Russia and Europe. On paper, it looked like that Europe even had the upper hand as one third of Europe’s energy came from Russia, whereas the European market accounted for more than half of Russia’s energy exports.
The idea of Germany’s Ostpolitik was based on the imperative of economic reason: trade was believed to be a force for peaceful coexistence. This approach was largely in line also with Finland’s policy towards its eastern neighbour. It was considered impossible that Russia would break the interdependence between East and West. In 2022, the true nature of Russian imperialism finally became clear to everybody from the strongest apologists for Russian policies to the most ardent believers in interdependence: for Putin, the economy is subordinate to his superpower ambitions.
In February 2022, Finland, like many other EU countries, was highly dependent on Russian energy. But Finland differs from many other EU countries in one respect: while we relied on Soviet and later on Russian energy for foreign policy reasons, we also built a diverse and a relatively resilient energy system. No energy sector plays a dominant role, and thus the Finnish energy mix is well diversified. In Finland, natural gas accounts for only six per cent of total energy consumption. This is the exact opposite of the Czech and German energy systems, where households are directly connected to the flow of Russian gas.
Decoupling from Russian energy has nevertheless been a challenge for Finland as one third of our energy and more than 60% of our energy imports have come from Russia. High overall dependency is where Finland has stood out. Long-term supply contracts, such as those for uranium and LNG are another obstacle to complete exit from Russian energy. Finland, a country governed by the rule of law, cannot renege on its obligations despite the fact that these contracts have been concluded with Russia, which has broken countless international agreements.
Finland is fortunate to have started its green transition in time. “Ruxit” will only accelerate this trend.
Despite this, almost all energy flows from Russia to Finland have already stopped. In this respect, Finland will also be in a better position than gas-dependent Central European countries in the coming year.
Finland was also fortunate in that it started its green transition in time. “Ruxit” will only accelerate this trend. Renewable energy already accounts for more than 40% of our energy consumption, making Finland one of the leaders in Europe in this respect. For example, Finland’s wind power capacity will double over the next three years and a large hydrogen economy is planned alongside it. Most of the wind power plants are built in Western Finland because military considerations have prevented their construction in eastern parts of the country. A solution to this problem is being sought, which is essential as regional inequalities would otherwise deepen and make Finland less resilient as the energy transition progresses.
A great deal is also happening in the traditional energy sectors. The oil refining company Neste had been known as a specialist in refining Siberian oil for decades, but it took the company only six months to switch from Russian Urals crude oil to other grades. Neste is also speeding up the transition from fossil energy. The floating LNG terminal in Inkoo, the latest joint project by Finland and Estonia, became operational at the end of 2022. Together with the LNG terminal in Hamina, it will replace all Russian natural gas imports, which ended in May 2022.
In the electricity sector, the situation is more difficult as Finland is connected to the European electricity market through the Nordic Nordpool. In Central Europe, electricity prices have been boosted by dwindling and thus expensive natural gas supplies and the prices have also increased in Finland. In the coming year (especially during the winter months), Finland will prepare for controlled power outages if consumption exceeds the supply. This may happen on cold days. However, the Olkiluoto 3 nuclear power plant, which will come on stream in 2023, will bring relief. It will supply 10% of Finland’s electricity needs, the same percentage as the past imports from Russia.
Ruxit and energy transition are essential to defending democracy, to protecting the climate and to guaranteeing European security of supply and competitiveness.
Historically, Finland has benefited from cheap Russian energy an estimated one billion euros each year and large Finnish energy companies (Fortum, Neste and Gasum) have made significant profits from trade with Russia. Morally, it would be right if all these companies across Europe that have benefited from trade with Russia would contribute to the costs of decoupling from Russian energy. Taking responsibility for past mistakes would convince Europeans that the energy crisis is being successfully tackled – together.
With its highly diverse energy mix and security of supply thinking, Finland is in a better position than many other countries. However, energy transition can only be encouraged in Finland and elsewhere in Europe if there is understanding of the cross-linkages characterising the current energy crisis. Ruxit and energy transition are essential to defending democracy, to protecting the climate and to guaranteeing European security of supply and competitiveness.