FINLAND WARNS EU ABOUT PROPOSED RUSSIAN TRANSPORT

C O N F I D E N T I A L HELSINKI 000223 SIPDIS NSC FOR J.HOVENIER E.O. 12958: DECL: 06/11/2019 TAGS: ELTN ETRD ETTC FI PREL SUBJECT: FINLAND WARNS EU ABOUT PROPOSED RUSSIAN TRANSPORT DECREE REF: 09 HELSINKI 211 Classified By: Charge d'Affaires Michael A. Butler for reasons 1.4(b) a nd (d) ¶1. (C) SUMMARY. Finnish officials have raised in EU circles their concerns that container transport restrictions proposed by the Russian Customs Service will adversely impact trade bound for Russia through Finland, Estonia and Latvia. With the vast majority of containers crossing the Finnish-Russian border by road, the Finnish government considers the proposed diversion of container traffic from road to rail or sea as a barrier to trade that would constitute a serious blow to Finland's export-driven economy. Finnish officials are uncertain about the motives behind the proposed decree, and say they have received mixed signals from Russian officials. While the Finns hope to place this matter on the EU's agenda with Russia, they are pursuing a solution bilaterally. In a June 3 meeting between Russian Prime Minister Putin and Finnish Prime Minister Vanhanen, Putin offered no concessions and pointed to prevention of "contraband" across the border as the reason for the decree, an assertion Finnish officials find extremely puzzling. Nevertheless, the Finns hope the pressure to resolve disputes in advance of the twice-annual high-level bilateral meetings will resolve this matter. END SUMMARY. RUSSIA PROPOSES SHIPPING RESTRICTIONS ¶2. (U) On Thursday June 11 Finnish Minister of Transport Anu Vehvilainen informed EU transport ministers about the likely effects on freight traffic from the EU to Russia of a decree proposed by the Russian Federal Customs Service. According to the Finnish government, the proposed decree will require containers over 20 feet long to arrive in Russia by rail or ship, not by road. It would apply to container shipments arriving via Finland, Estonia, Latvia and Ukraine. FINLAND: TRANSPORT DECREE IS TRADE BARRIER ¶3. (C) In a June 9 meeting with Pol/Econ Chief, Maimo Henriksson (Director of the MFA,s Unit for Russia) complained about the decree. Henriksson said the decree constitutes a barrier to trade, as Russian authorities must realize that such a shift from road to rail would be impossible to achieve in the near future (especially considering that the decree would come into force six months after formal adoption). According to Henriksson in 2008 ;approximately 196,000 containers crossed the Finnish-Russian border, and only 7000 traveled by rail. She added that the decree would hurt certain businesses by hampering their ability to choose the most suitable form of transportation; she pointed to food producers who require special containers and fewest delays, supporting road vice rail transport. ADVERSE IMPACT ON EU AND FINNISH TRADE ¶4. (C) In a June 9 press release, the Transport Ministry stated that "in practice this scheme would paralyze freight traffic along the entire eastern border, as railroads do not have the capacity or rolling stock to carry such large volumes of containers to Russia." In a June 3 meeting with Pol/Econ Chief, Mikko Hautala, advisor to Foreign Minister Stubb, said the decree would deliver a serious blow to the export-driven Finnish economy. Hautala said that should Russia impose the decree most trans-shipments through Finland to Russia would necessarily shift away from Finland; as Finnish exporters enjoy lower costs from the high ship traffic due to heavy transit through Finland to Russia, the diversion of shipping away from Finland would mean higher shipping costs for Finnish exporters. RUSSIAN MOTIVES UNCLEAR: PUTIN BLAMES CONTRABAND ¶5. (C) Finnish officials are not clear about the Russians, motives in proposing this decree. Customs Service officials pointed to environmental concerns as the basis. Repeating public comments by Minister Vehvilainen, Henriksson said the Finns welcome a shift from road to rail for environmental reasons, but they believe such a shift cannot be done quickly, and should be done cooperatively and not by unilateral decree. Hautala was skeptical about the Custom Service,s claimed environmental motives, and speculated that the real motive might flow from reduced trade from the economic recession and a desire to increase shipments through Russian ports. ¶6. (C) According to Henriksson Prime Minister Vanhanen raised the proposed decree during President Putin,s recent visit to Finland (REF). Putin alleged a large amount of contraband flowed outside of Russia over the Finnish border via road. This explanation completely surprised the Finn, as they had never heard it before and in meetings with Emboffs they refer positively to Finnish-Russian cooperation on border controls. Finnish officials took Putin's comment less as a sign of a common Russian position and more a sign of an unprepared Putin crafting a response on the spot. STILL SEEKING BILATERAL SOLUTION ¶7. (C) In a conversation with POL/ECON analyst, Silja Ruokola (Director of the Unit for Logistics and Russia Cooperation at the Ministry of Transport) said the Finnish Government had previously informed other EU Member States, including Sweden, about the decree. The letter to EU transport ministers was simply the next step in the government's attempts to get this matter on the EU agenda and ensure the decree comes as "no surprise" to Member States. The Finns continue to engage the Russians directly. Finnish officials have told Emboffs that the Russian Transport Ministry does not support the decree, and the Finns hosted transport ministry officials on June 11. Ultimately, Ruokola said, the matter is in the hands of the Russian PM and the Customs Service. The Finns place considerable importance on the twice-yearly rhythm of meetings with Russian leadership, and hope that the pressure to resolve disputes in advance of such meetings will work in their favor on the transport decree. BUTLER