Valery Shlyamin
Minister of External Relations of the Republic of Karelia and Chairman of the Committee for International and Foreign Trade, the North-West Association
As we are approaching the tenth anniversary of the creation of the Council of Baltic Sea States as well as the tenth anniversary of the signing of the inter-governmental agreement on cooperation between the contiguous regions of the Russian Federation and Finland, it is a perfect time to draw preliminary conclusions, to celebrate the undoubted successes of which we are proud and, to analyse critically what has been done so far.
The Republic of Karelia, situated on the borders of the Russian Federation and EU member Finland, simultaneously holds an important place both in the northwest region of Russia and in the Baltic and Barents Sea regions. It is worth pointing out that Russia has joined the framework Madrid Convention (May 1980) on cross-border cooperation between border regions and communities, and has conceptualised a strategy for such cooperation.
Our Republic’s position, of course, presupposes that the regional government takes a sensible stance on the place and role of the Republic of Karelia in the inter-regional division of labour during Russia’s transition to a market economy. On the other hand, Karelia, like its neighbours – the other administrative regions of the Russian Federation in the northwest, on the state border – plays quite an important role in integrating the Russian Federation’s economy into the international division of labour in northern and western Europe.
That is why in the Republic of Karelia’s strategic planning documents – in the Concept for the Socio-economic Development of Karelia until 2010 and in specially-designated programmes – an equally important place is given to realising the Republic’s own potential, its cross-border contacts with Finland and also mutually-beneficial trade, economic and other links with partners from other countries in the world, primarily in the Baltic region.
It is worth saying that all this activity is carried out in strict accordance with the Constitution and legislation of Russia, and taking the interests of the whole of Russia into account.
As is well known, in 1997 our valued neighbour Finland launched the Northern Dimension initiative of the European Union which gained the status of an official EU strategy in 1999. Also in 1997, the USA’s North-European initiative was launched. In these documents, the North West of Russia, and Karelia in particular, took on the role of priority territories. On 17 May 2001, President Putin of Russia and the President of the European Commission, Romano Prodi made a declaration on the need to create a unified EU–Russian economic space, which they confirmed at the beginning of October 2001. There is evidence that the integration process between Russia and the EU is going ahead in the North (to be precise, in the northwest of Russia) far more intensively than in the South.
As we see it from Petrozavodsk, such attention to the northwest presupposes that Russia has its own foreign-economic strategy for the north of Europe in response to the challenges of the EU’s Northern Dimension initiative and the US’s North European initiative. Exactly one year ago we took relevant proposals to the President’s Plenipotentiary in the North-Western Federal District, Viktor Cherkesov and he supported them. Only if there is an attuned all-Russian line based on statewide priorities and projects will it be possible to have talks with the European Union and draw up a joint plan of action.
In our opinion, without a revival of the practice of special strategic planning, both on a countrywide level and on the macro-regional level, we will not achieve a mutually beneficial dialogue within the framework of the Baltic and Barents Sea regions, nor within the framework of the long-term EU–Russian Federation relations. We are actively participating in the process of drawing up a strategy for the socio-economic development of the northwest of Russia. We are also proposing, in particular, to elaborate the section on foreign economic activity and to take into account the earmarking of northwest Russia’s administrative regions on the border as resource and transit regions to play a linking function in the integration process.
It is precisely in this context that we are carrying out programmes for cross-border contacts with Finland and seeking understanding with our partners. We highly value our links with Finland as a whole. Over nine years we have carried out more than 200 joint projects (e.g. on small and medium enterprises, environment, health and agriculture) to the value of around €32m and more than 280m roubles.
In the last 7–8 years, trade and economic links have been developing well in Karelia. There are more than 100 Russian–Finnish businesses in Karelia. The foreign trade turnover between the Republic of Karelia and Finland has for a long time been above the US$200m per year (on average, 27% of total trade turnover). Karelian exports to Finland – worth around US$140m – traditionally exceed the value of imports from Finland. Moreover, foreign trade by Karelian businesses covers a greater geographical area than those from other regions. Trade contacts exist with firms from 92 different countries, and furthermore, approximately 50% of our foreign trade is with countries from the Baltic region. In the last 2–3 years, trade with Estonia, Latvia and Lithuania has increased noticeably. Karelia’s main exports are newsprint, craft paper, sawn timber and iron ore semi-finished products (including aluminium). We are currently sell up to 3 billion cubic metres of untreated wood in Finland, which creates work for over 4,000 people and generates considerable revenues, by comparison to wood sales on the domestic market. However, the cost-effectiveness of our exports is by no means maximised. Finnish businesses, by contrast to those in other countries, are so far unwilling to invest resources in setting up reprocessing and production facilities in the Republic of Karelia, citing the unsatisfactory economic climate in Russia as a whole and the unjustifiably strict policies of lending institutions. Finnish investment accounts for 11% of all foreign investment into the Republic over the last nine years. We cannot say that the Finns have a low opinion of our investment attractiveness. The level of political and commercial risk in the country as a whole, and in Karelia, has without a doubt fallen significantly in the last two years. On the other hand, in the last ten years we have increased the bureaucratic barriers to foreign investment. Furthermore, the Finnish business community is coming to regard Karelia as some sort of raw-material appendage, especially in the timber industry.
As well as overcoming this stereotype, we have to deal with the perception that Karelia and its leadership are drifting towards Finland. We have to overcome barriers such as the gap between standards of living, our attitudes, the condition of the border infrastructure, and transport, communication and customs regimes. Both the Karelian and Finnish sides are equally interested in pursuing this and are prepared to meet the other halfway. Let us examine the possible scenarios for how events could develop in the medium term in cross-border relations between Russia (that is, the Republic of Karelia) and Finland.
Scenario One
The two sides maintain the traditional form of cross-border relations that developed in the 1990s (small joint projects, twinned cities and communities, tourism, direct links between businesses and government officials on all levels and so on). The border regions of Russia and Finland are of no particular interest to the European Union as it stands on the threshold of forthcoming enlargement and the increasing pace of economic globalisation. As a result, we will be behind in the integration process. The Northern Dimension will lose its appeal and Finland will be unlikely to claim a role as the new business centre of northern Europe; and Russia will lose an opportunity to boost the development of its northwest region. Demand for our resources in northern and western Europe will be put aside until the distant future.
Scenario Two
The two sides will adopt new forms of cross-border relations aimed at accelerated development of transport systems, energy corridors and telecommunications, and will jointly set up industrial complexes on the border, as centres of technological innovation. They will harmonise customs procedures on the border, give joint guarantees to attract investment from third countries and will strive to make the business environment less risky.
Such a scenario is possible only if the leaders of both sides have the political will and if the business community has an understanding of the consequences. Then, it will be totally feasible to harmonise comprehensive strategic planning at state and regional levels, and through national corporations and inter-regional corporations. There can be no doubt that with such an approach, the EU’s Northern Dimension and the corresponding Russian strategy for Northern Europe will bring the desired results.
This positive scenario was exactly what we, in the Republic of Karelia, had in mind when, in 1988, we proposed to our Finnish neighbours that we set up a Euro-region called Karelia. A Euro-region can be defined as part of the border area formed from territorial and administrative units on both sides of the border, united by common interests concerning economic development, environmental protection, the preservation and development of culture, and the expansion of academic exchanges. The Euro-region is a unique umbrella project with a framework for realising bilateral and multilateral projects in specific sectors. By 1999, the concept of the Euro-region had been drawn up, and in February 2000, in the border town of Joensuu, the Statute of the Karelia Euro-region was adopted and its executive committee and fund were set up. Joining the Republic of Karelia in this Euro-region were three border Unions of Communities from Eastern Finland Northern Karelia (Finnish jurisdiction), Kainuu and Northern Ostrobothnia. When setting up the Euro-region – which was the first land Euro-region on the external borders of the Russian Federation – we of course studied carefully the experience of similar organisations that are already in existence, for example, Baltica (a sea-based Euro-region which comprises Kaliningrad Oblast together with regions of Denmark, Latvia, Lithuania, Poland and Sweden) and Egrensis (on the German–Czech border). Each of the more than 100 Euro-regions in the continent make decisions on cross-border challenges specific to their own region. By setting up ‘Karelia’ we have set ourselves the following goals:
1. Our Euro-region should be part both of the EU’s Northern Dimension and of Russia’s future strategy for Northern Europe. There will be no chance of carrying it out successfully if we do not fully take into account the regional factor and the specifics of Russo-Finnish cross-border relations in the Northern Dimension initiative and Russia’s corresponding strategy.
2. The Euro-region, as an all-embracing project, gives us an opportunity to use regional planning for the border area with the aim of matching resources in joint projects to bring benefit to both sides. For example, by using the timber and labour resources of Karelia in our transport, technical and customs infrastructure in combination with Finnish technology for the sustainable use of timber and re-forestation, it will be possible to create the most effective and competitive production facility in Northern Europe for treating wood and cellulose-paper.
3. The Euro-region is a way to gradually overcome the gap in living standards between each side of the state border. This can be achieved, for the most part, by the trans-border projects in their entirety, by creating the conditions to attract innovative production facilities to the Republic and by setting up a variety of businesses in the service sector.
4. When we were devising the Euro-region, our starting point was the following overriding challenge: to maintain for future generations the unique culture of the Slavic and Finno-Ugric peoples who live in the border area. The first steps towards this goal have been taken. A project to set up ethno-cultural centres is underway under the logo of the world-famous Finnish literary epic Kalevala. [This was a folk poem which was part of the oral tradition among speakers of Balto-Finnish languages in Finland and Karelia for 2,000 years. Ed.] I am sure that in future we will pay special attention to these cultural centres. The spirited nature of this project is one of the main differences between our Euro-region and other similar ones in Europe.
5. The Euro-region presents excellent opportunities for establishing civil society in the Republic of Karelia. Civil society is like a building with a complicated architectural design. So far in Karelia only the first elements of civil society have emerged, for example, an attempt to set up independent local self-government and clear signs of a modern political system in the regional executive, legislative and judicial branches of power. Mass media of different political persuasions are published in the Republic. Furthermore, it is perfectly clear that without establishing civil society and its fundamental democratic institutions, we in the Russian Federation and in the Republic of Karelia in particular will not be successful either in the economic sphere or in social programmes.
6. Environmental Protection. We and our Finnish neighbours have many common problems in the environmental protection of the forests of Fenno-Skandi, the unique reservoirs of fresh water and the region’s biological diversity. I am sure that the ecological element will become more significant in the macro-regions of the Baltic and Barents Seas.
7. The customs, posts and transport infrastructure on the border. Here we want to see the bilateral and international crossing points more evenly spaced along the 790-kilometre line of the Karelian part of the Russian state border. This would be in the interests of all districts and towns of Karelia and their twin-towns in Finland, and in the interests of optimising the flow of people and freight. The Northern Dimension initiative presupposes the creation of a transit and resource Euro-region that will enable freight to cross the border more effectively. The Karelia Euro-region can certainly meet this objective.
The government of the Republic of Karelia has drawn up a programme for cross-border cooperation for 2001–06 with participation by businesses, districts, towns and universities and the Karelian academic centre of the Russian Academy of Sciences. Over 50 projects have been signed on.
The Finnish side has drawn up a programme called Interreg 3A–Karelia, which conforms with the domestic development plans of all three border Unions of Communities. On 2 November 2001, we approved the programme Our Common Border for 2001–06 and, within the framework of the Karelia Euro-region, we designated nine priority joint projects and two areas of activity, each of which has either already received funding, or has support and guarantees of funding. Among them I would highlight the Electronic Karelia project as one having great prospects.
In these ways, it can be said that the Republic of Karelia and the border regions of Finland have moved towards a new stage of cooperation. Some of our opponents would say that the Euro-region is no more than administrative tourism. In response, I would point out that the Euro-region is only one of the projects that combines the administrative resources of both sides with the aim of giving a boost to dozens of joint projects in different spheres. The cross-border relations of the Republic of Karelia and Finland have already involved many thousands of people who have got some pleasure from the reciprocal links between the two sides.
