This chapter outlines how Russia’s war of aggression against Ukraine has fundamentally reshaped the geopolitical and economic context of Finland’s eastern and south-eastern border regions. The chapter highlights the collapse of Finnish-Russian trade, severe economic impacts on tourism and logistics, and broader adjustments required across border-region industries. It also summarises Finland’s emerging policy response, including new development programmes and investments in security, infrastructure, and regional resilience.
Transition Strategies for Finland’s Eastern and South‑Eastern Border Regions
Adapting to Geopolitical Change
Abstract
Finland’s evolving security landscape: impacts of Russia’s war of aggression against Ukraine and strategic responses
The latest Finnish Government's report on foreign and security policy (Ministry for Foreign Affairs of Finland, 2024[1]) highlights that Russia's aggressive actions have fundamentally and permanently altered Finland's security environment. Russia's war of aggression against Ukraine is seen as a continuation of its aggressive behaviour, following actions in Georgia (2008) and Crimea/Eastern Ukraine (2014). The report identifies Russia as seeking to strengthen its great power status and re-establish spheres of influence in Europe.
The bilateral relations between Finland and Russia have been fundamentally affected by Russia's invasion of Ukraine. Finland has frozen political relations and bilateral co‑operation with Russian authorities across the board since February 2022, though diplomatic relations remain functional. Communication channels between authorities have been maintained only in sectors essential for Finland, such as the border security, crime prevention, transport and security of supply.
The report highlights that hybrid influence activities targeted against Finland, particularly by Russia, have increased significantly. The instrumentalised migration seen on Finland's eastern border is specifically mentioned as an example of a hybrid attack. The report warns that this threat is unlikely to diminish in the near future, though the intensity and methods may vary. The report highlights that Finland, in co‑ordination with its EU partners and NATO allies, is working to address the challenge of instrumentalised migration. It emphasises the importance of EU regulations, including Schengen rules, allowing sufficient national flexibility to maintain public order, safeguard security, and uphold human rights.
Regarding military aspects, the report notes that Russia is expected to strengthen its military presence and operations on its western borders once resources allow. Currently, Finland is not facing an immediate military threat but must be prepared for the use or threat of military force. The report emphasises that Russia's ambitions to increase influence in the Baltic Sea and Arctic regions underscore the importance of strengthening NATO's deterrence and defence in Northern Europe.
Finland's eastern and southeastern border regions in the new defence reality
The 2024 Government Defence Report (Ministry of Defence, 2024[2]) marks a historic shift in Finland's defence posture, with significant implications for the regions bordering Russia. As Finland transitions from military non-alignment to NATO membership, the eastern border regions - from Lapland in the north through Kainuu and North Karelia and down to South Karelia and Kymenlaakso in the southeast - face both new challenges and opportunities.
Finland's 1 340 km border with Russia has gained renewed strategic importance as it becomes NATO's external border. The 2024 Government Defence Report identifies Russia as a "protracted security threat" to Finland and Europe. While Russian forces have been redeployed to Ukraine, the report notes that Russia plans to strengthen its military presence in its northwestern regions once resources allow, posing long-term security implications for Finland's eastern border and the broader EU.
The report argues that to address these challenges, Finland must maintain its ability to counter broad‑spectrum threats, resist prolonged military pressure, and prepare for potential large-scale conflicts. For the eastern border regions, this has implications especially on local and regional infrastructure, security of supply and safeguarding vital functions.
A key focus of Finland's new defence posture is infrastructure development, particularly in the northern and eastern regions. The report highlights the need for significant investment in "dual-use" infrastructure -facilities and networks that can serve both civilian and military purposes. In the north, this investment is driven by long distances, limited existing infrastructure, and the need to enhance military mobility, logistics, and alternative supply routes through Sweden and Norway in case Baltic Sea routes are disrupted.
For the eastern border regions, these developments include improvements to transportation networks, communication systems, and logistics facilities to meet the requirements of hosting and supporting NATO forces. Such investments could also bring economic development opportunities to these regions.
The report confirms that NATO will establish a Forward Land Forces presence in Finland, with Sweden serving as the Framework Nation. While specific locations are not detailed1, this presence is likely to affect eastern border regions by creating a need for facilities to host Allied forces, training areas and exercise grounds, logistics and support infrastructure, and enhanced air and missile defence systems.
While the Finnish Military Intelligence Review 2025 report indicates no immediate military threat, it highlights Russia's strategic intentions to strengthen its western military presence, also along Finland's eastern border (The Finnish Defence Forces, 2025[3]). According to the report, following the Ukraine war, Russia plans substantial military reinforcement in the region, including expanding forces in the Kola region and establishing a new army corps in Karelia. These developments could potentially increase Russian troop numbers from 30,000 to 80,000 in areas adjacent to Finland.
The establishment of the Leningrad Military District near Finland represents a significant element of Russia's military reforms, though major reinforcement is unlikely while the Ukraine conflict continues. The report emphasises the enduring strategic importance of the Baltic Sea region and the High North, including Lapland, with particular focus on Russia's interest in maintaining access to the Atlantic via northern sea routes and its strategic capabilities in the Kola Peninsula.
Recent challenges along Finland's eastern border, particularly regarding instrumentalised migration leading to border closures in late 2023 and early 2024, receive brief mention in the report's crisis mapping. The report warns of potential increases in Russian hybrid warfare methods, including cyber operations, infrastructure targeting, and migration weaponisation.
While Finland's NATO membership has not significantly altered Russian military activity levels, the report concludes that Russia's strategic interests fundamentally conflict with Western positions, offering little prospect for improvement. This assessment carries particular weight for Finland's eastern border regions, which now constitute part of NATO's and EU´s eastern frontier.
Note: 1. 200th Motorized Rifle Brigade; 2. 61st Naval Infantry Brigade; 3. 80th Motorized Infantry Brigade; 4. 44th Army Corps, 5. 69th Motorized Infantry Division; 6. 25th Motorized Infantry Brigade; 7. 76th Air Assault Division; 8. 18th Motorized Infantry Division, 9. 336th Naval Infantry Brigade; 10. Northern Fleet; 11. Baltic Fleet main naval base, 12. Baltic Fleet Leningrad naval base; 13. Olenya air base; 14. Monchegorsk air base; 15. Besovets air base; 16. Khotilovo air base; 17. Chkalovsk air base.
The economic development of eastern and northern Finland presents a complex picture that requires careful interpretation, particularly given significant data limitations and the considerable challenge of isolating specific causal factors in recent economic changes.
Finnish-Russian trade relations after February 2022
The Bank of Finland's analysis ( (Simola, 2024[4])) documents a dramatic transformation in Finnish-Russian economic relations following Russia's invasion of Ukraine. Trade between the two countries has collapsed (Figure 1.2), with the number of Finnish companies exporting to Russia falling from over 2 000 in 2019 to approximately 100 by late 2023.
Finnish exports to Russia declined sharply, from 5% of total exports in 2021 to just 0.9% by late 2023. The composition of exports changed significantly as well, shifting from a diverse mix of machinery, equipment, and industrial goods to a narrow range dominated by copper (65% of exports). Similarly, imports from Russia fell from 12% of Finland's total imports in 2021 to less than 2% by late 2023, with the remaining imports consisting primarily of specific industrial inputs such as nickel matte and ammonia.
Despite this substantial disruption in trade flows, the Bank of Finland concludes that the broader impact on the Finnish economy has been limited. Finnish companies have successfully adapted by finding alternative markets and suppliers, though this adjustment has led to some increased costs. The analysis shows that producer prices in sectors previously dependent on Russian imports rose 16% more than in other sectors. While Finland and the Baltic states faced greater initial exposure to trade disruption than other EU countries, the overall economic impact on Finland has remained comparable to the EU average, demonstrating the resilience of Finnish businesses in adapting to the new trade environment.
Monthly trade in goods, million EUR
Source: Based on Finnish Customs Statistics, available online at: https://uljas.tulli.fi/v3rti/db/0/cubes/28
Research result: Large enterprises adapt successfully, but regional small businesses bear the burden
A report by VATT Institute analyses how Russia's invasion of Ukraine and subsequent trade disruptions have impacted Finnish companies (Toikka, Laasonen and Toivanen, 2024[5]). Using firm-level data and statistical analysis, the research compares companies that traded with Russia before the war (treatment group) to other internationally-trading Finnish companies (control group).
The report notes that while the overall economic impact on Finnish companies has been moderate, certain sectors and company types have been more severely affected. Export firms have generally adapted better than import firms. While exporters saw an initial 10-15% decline in total exports compared to the control group, their turnover remained largely unaffected, suggesting they successfully found alternative markets or that Russian exports were a relatively small part of their operations.
According to VATT Institute’s report, import firms faced more significant challenges. Their imports declined by 15% initially and continued falling to 25-30% below the control group by 2023, with many companies completely ceasing import activities. However, notably, neither export nor import firms showed significant changes in employment levels or wage payments, indicating they have largely maintained their workforce despite trade disruptions.
Interestingly, it appears that the impact varied significantly by company size and type. Small enterprises, especially importers, experienced the most severe effects. Large enterprises showed remarkable resilience, with minimal impact on their operations. According to the research findings, wholesalers and retailers were more negatively affected than manufacturing firms. Companies that were highly dependent on Russian trade (more than 10% of their turnover or purchases) experienced substantially larger negative effects than those with more diversified operations.
Regarding regional impacts, the report makes limited direct references to Eastern and Northern Finland. The only specific mention is in the context of service sector impacts, where the researchers note that companies in Eastern Finland, near the Russian border, have been particularly affected by restrictions on Russian citizens' entry and the ban on leisure travel. The report also mentions that transport and logistics companies in these regions may have suffered from the decline in Russian trade, though these effects were not directly measured in the study.
The authors conclude that broad government support for affected companies is not necessary, as most firms have adapted to the new situation. However, they acknowledge that some smaller companies and those heavily dependent on Russian trade have faced significant challenges. As (Toikka, Laasonen and Toivanen, 2024[5]) observe, the situation demonstrates that "being reliant on a specific market imposes a large business risk and emphasises the importance of diversification; a lesson that should be learned to prepare for future crises".
A key limitation of the VATT study was that it only examined companies directly engaged in goods trade with Russia. It does not capture the full impact on service sector companies, particularly those in border regions dependent on Russian tourism and transit traffic. Additionally, the study excluded microenterprises, which might have been disproportionately affected if their business models were heavily dependent on Russian trade.
From gateway to barrier: Finland's border regions’ economy in transformation
Historically, Finland’s eastern and southeastern border regions have played a pivotal role in fostering cross-border economic activity and regional development. These areas have served as critical gateways between the European Union (EU) and Russia, benefitting from transit traffic, cross-border trade, energy flows, tourism, and EU-funded neighbourhood programmes. However, Russia’s war of aggression against Ukraine and the subsequent sanctions and countermeasures have brought these interactions to an abrupt halt, with severe economic repercussions to several sectors:
Tourism and retail: Russian visitors have traditionally generated substantial revenue for local hospitality businesses, shopping centres, and service providers. Many businesses in these regions specifically tailored their services to Russian customers.
Industrial production: Manufacturing facilities in these regions often relied on Russian raw materials and energy supplies while simultaneously serving the Russian market. The pulp and paper industry, in particular, developed significant trade relationships with Russian partners.
Energy: Limited options for developing alternative energy sources due to wind power restrictions. The halt of Russian woodchip exports has disrupted energy production in northern Finnish municipalities and impeded efforts to reduce peat consumption.
Logistics and transit: Border regions served as crucial transit hubs between Russia and the EU, supporting a robust logistics sector that employed many local residents and generated significant economic activity. The closure of the Saimaa Canal has terminated direct overseas transport routes, increasing logistics costs for regional businesses and placing additional burdens on rail and road infrastructure.
The cessation of normal economic relations with Russia has created considerable challenges for the Finnish eastern and south-eastern border regions. Local businesses have lost an important part of both their supply chains and their customer base, requiring fundamental restructuring of their operations. The immediate economic impact has been particularly severe in municipalities directly bordering Russia, where cross-border economic activity previously represented a significant portion of the local economy.
Regional economic profiles and impacts2
This subsection aims to provide some stylised aspects on the significance of Russian trade relations across eight Finnish border regions, highlighting the varied impacts of recent geopolitical changes on their economies.
Lapland's economy, centred around tourism and natural resources, has experienced significant disruption in cross-border activities. In eastern Lapland, the Salla border crossing, which previously facilitated 250 000 annual crossings, played a vital role in supporting both trade and tourism. The energy wood and pellet imports and mining equipment exports used to be important trade components for the region. Decrease in the volume of trade with Russia in local companies has meant about 5% drop in sales (in terms of volume) compared to the best of times.
Northern Ostrobothnia, particularly the Koillismaa subregion, has faced substantial challenges in its tourism sector, where Russian visitors previously accounted for 32% of international overnight stays in Kuusamo. The forestry sector has been similarly affected, with timber shortages disrupting production and increasing operational costs.
Kainuu's economy has experienced profound impacts, particularly in tourism, where Russian visitors comprised 36% of international overnight stays in 2019. The region's annual tourism revenue from Russian visitors, previously EUR 30-40 million (in 2012-13), has been lost. Additionally, the cessation of energy wood and pellet imports has significantly affected heating costs and industrial operations.
North Savo, while less dependent on Russian tourism, has faced disruptions in its forestry and manufacturing sectors. Key companies have encountered increased costs and lost markets, necessitating strategic diversification efforts. The region's technology and food industries have lost access to the Russian market, including the service market for their products, leading to significant company-level impacts.
North Karelia's economic ties with Russia were particularly strong, with exports to Russia accounting for 10% of the region's total exports - double the national average. The tourism sector, which generated EUR 27 million from Russian visitors in 2019, has faced significant challenges in finding replacement markets.
South Karelia has experienced perhaps the most severe impact, with Russian tourism previously contributing EUR 310 million annually to the regional economy. The loss of this revenue stream has resulted in approximately 800 person-years of employment lost annually. The forestry sector has faced additional challenges due to raw material shortages and disrupted logistics networks.
South Savo, despite its moderate reliance on Russian trade, has experienced significant indirect impacts, particularly in farming and tourism sectors. Rising costs of fertilizers and other agricultural inputs have strained local businesses. The decline in overnight stays by Russian tourists from 2019 to 2023 was significant.
Kymenlaakso's economy, heavily focused on forestry and logistics, has faced substantial disruptions in transport flows and supply chains. The region's forestry sector has encountered rising wood prices and logistical challenges, while declining global pulp demand has further complicated recovery efforts.
Overall, the economic relationship between Russia and Finland's border regions represents a complex web of interdependencies that has historically shaped regional development and prosperity. The depth of these economic ties varies significantly among regions, creating distinct vulnerabilities and challenges. While some regions face severe challenges due to their heavy reliance on Russian trade and tourism, others have shown greater resilience through more diversified economic structures. Moving forward, the success of these regions will depend on their ability to adapt to new economic realities through strategic diversification, innovation, and targeted investment in sustainable development initiatives.
In response to evolving geopolitical and economic challenges, the Finnish government launched work in spring 2024 to develop development programmes for Northern and Eastern Finland. The programmes are built on six fundamental objectives aimed at strengthening Finland's position:
Enhancing sustainable growth and attracting new investments
Developing clean energy capabilities and supporting digital transformation
Strengthening sustainable tourism
Advancing skills development and workforce availability
Reinforcing national security and self-sufficiency
Improving physical and digital accessibility
The initiatives operate under a dual leadership structure: the Northern Programme is led by the Prime Minister's Office, while the Eastern Programme is overseen by the Ministry of Economic Affairs and Employment. Both programmes are supported by preparatory groups and advisory boards, comprising representatives from regional councils, ministries, and key stakeholders, with a shared secretariat facilitating co‑ordination.
The preparatory groups were tasked to present concrete action proposals by 31 December 2024, with advisory boards continuing their oversight throughout the government term.
The Northern Programme emphasises strengthened connections with Sweden and Norway, recognising the strategic importance of Nordic co‑operation. Key focus areas include energy security, cross-border logistics, and workforce development. The northern regions of these three countries form a globally significant area for innovation and Arctic expertise.
The Eastern Programme addresses broader EU-strategic considerations, particularly regarding the EU's external border with Russia. The government approaches this as a strategic EU-level matter requiring both national solutions and active European engagement.
The programmes integrate with broader government priorities, including industrial policy strategy, clean energy initiatives, and research and development funding reforms. This ensures alignment with national strategic objectives while addressing specific regional needs. Target outcomes and measurable milestones will be monitored by the advisory boards mentioned above until the end of the Government period. The frequency of monitoring has not been determined yet, but the first comprehensive evaluation is scheduled for early 2025.
The successful implementation of both Programmes must involve extensive collaboration between the business sector, cities, regional authorities, higher education institutions, research institutes, and state administration. This is supported by a government investment programme focusing on infrastructure development, including major transport corridors and rail projects benefiting both regions3.
Northern Finland Programme: A strategic framework for growth and security
The northern Finland Programme, released on 6 February 2025, provides a strategic framework for strengthening the economic, security, and infrastructure development of Lapland, Northern Ostrobothnia, Kainuu, and Central Ostrobothnia. Each region contributes distinct strengths to Finland’s economic and strategic landscape - Lapland’s Arctic expertise, Northern Ostrobothnia’s ICT and technology leadership, Kainuu’s battery chemical production, and Central Ostrobothnia’s bioeconomy and energy transition initiatives.
The programme’s timing is particularly significant, shaped by major geopolitical shifts, including Russia’s invasion of Ukraine, Finland’s NATO membership, and increasing energy security concerns. These developments have positioned Northern Finland as a key player in Nordic co‑operation, energy supply, and security infrastructure.
The economic potential of northern Finland is substantial, with investment opportunities estimated at EUR 76 billion across clean energy, mining, technology, and sustainable tourism. The programme outlines key policy interventions, infrastructure improvements, and investment incentives needed to unlock this potential. It prioritises strategic funding mechanisms, including EU financing instruments, national funding, and public-private partnerships.
The programme’s key priorities include:
Workforce development and demographic renewal: Measures to attract international talent, strengthen vocational training, and enhance housing and social infrastructure to ensure the availability of skilled workers.
Infrastructure development: Investment in transport and energy networks, including the 400-kilovolt power grid expansion, rail and road connectivity improvements, and cross-border logistics to support economic growth and security.
Clean energy transition: Expansion of renewable energy production, industrial decarbonisation, and digital transformation, ensuring Northern Finland plays a leading role in Finland’s energy security and green economy.
Security and resilience: Strengthening national and regional security through Arctic expertise, NATO co‑operation, and critical infrastructure protection, with a particular focus on supply chain resilience and defence logistics.
Nordic co‑operation: Plans for a joint strategic programme with Sweden and Norway by 2025, fostering collaboration in energy, security, and infrastructure development.
The programme provides a structured implementation framework, setting out key funding pathways, governance structures, and monitoring mechanisms to track progress. While some investment initiatives require further clarification regarding funding allocations and timelines, the programme establishes a clear direction for Northern Finland’s long-term development.
The success of the programme will depend on strong political commitment, effective co‑ordination among regional, national, and international stakeholders, and the ability to secure sustained investment. Leveraging EU and NATO funding while aligning with national priorities will be crucial to achieving its objectives.
Eastern Finland Programme: Strengthening economic and strategic resilience
The eastern Finland Programme sets out a comprehensive strategy to enhance the economic vitality, security, and connectivity of Kymenlaakso, South Karelia, South Savo, North Savo, North Karelia, and Kainuu. Published on 6 February 2025, the programme outlines concrete actions to drive sustainable growth, advance the clean energy transition, strengthen regional industries, improve workforce availability, enhance security, and upgrade infrastructure. It also acknowledges Eastern Finland’s strategic importance for Finland and the European Union, highlighting the need to strengthen self-sufficiency, security of supply, and resilience in response to geopolitical changes.
A key initiative is the establishment of “Invest In” teams, designed to attract domestic and international investment, with additional incentives and support services for businesses. Research and development activities are a central focus, with funding pathways clearly identified through EU structural funds, national programmes, and private-sector partnerships, supporting Finland’s 4% R&D investment target.
The clean energy transition is a priority, particularly in ensuring energy security and enabling industrial growth. The programme includes power grid expansion, increased wind and bioenergy capacity, and integration of defence-related energy resilience measures. These initiatives aim to enhance energy independence while supporting new energy-intensive industries in eastern Finland.
Sustainable tourism measures focus on diversifying visitor markets and reducing reliance on Russian tourists. Investments will be directed towards nature-based tourism, cultural heritage sites, and digital tourism services, strengthening Eastern Finland’s position as a leading destination for domestic and international travellers.
To tackle workforce availability and demographic challenges, the programme introduces targeted initiatives to attract and retain skilled workers, particularly in key industries. These include enhanced education and vocational training opportunities, international recruitment efforts, and workforce mobility support. While demographic shifts remain a long-term concern, the programme provides practical measures to boost the region’s attractiveness as a place to live and work.
Recognising eastern Finland’s geopolitical significance, the programme prioritises security and resilience. A Security Competence Centre will be established to develop expertise in cybersecurity, crisis preparedness, and defence logistics. Infrastructure upgrades, including railway modernisation, air transport connections, and digital connectivity improvements, are framed as both economic enablers and strategic security measures.
The programme sets out a structured implementation plan with defined priorities, funding pathways, and measurable milestones. However, some initiatives remain at a preparatory stage, with further clarification needed on precise funding allocations and timelines for execution. Ensuring a well-co‑ordinated approach and sustained investment will be crucial for achieving long-term impact.
With its structured approach, well-defined priorities, and concrete implementation plan, the Eastern Finland Programme provides a solid foundation for long-term economic and regional resilience. Its success will depend on strong co‑ordination between national and regional actors, private sector engagement, and sustained investment in innovation and infrastructure.
The proposal by the Confederation of Finnish Industries (EK) offered a complementary private sector vision for Eastern Finland's development. EK's action programme introduces the concept of establishing Eastern Finland as a special economic zone. The proposal is built around four strategic pillars: leveraging EU support while strengthening security, accelerating energy and green transition investments, improving digital and transport connectivity, and fostering growth of medium-sized enterprises. A distinctive feature of EK's approach is the proposed appointment of a special envoy reporting to the Prime Minister's Office, who would co‑ordinate implementation across regional boundaries. The programme's business impact assessment suggests strong potential. This private sector initiative provides valuable input for refining and strengthening the Eastern Finland Programme, particularly in areas such as implementation mechanisms and private sector engagement (Box 1.2).
The Eastern Finland’s regions published their joint proposal in August 2024 for actions to be included in the Eastern Finland Programme, following Prime Minister Petteri Orpo's initiative launched in March 2024 (North Karelia Regional Council, 2024[6]). The proposal encompassed six regions: South Karelia, South Savo, Kainuu, Kymenlaakso, North Karelia and North Savo. The document emphasised the strategic importance of Eastern Finland for the country's security, self-sufficiency and economic resilience, particularly given the changed geopolitical situation. The regions called for immediate government action and funding allocation in the 2025 budget to implement key measures.
Proposals from Eastern regions included allocating EUR 75 million from the Ministry of Employment and Economy's green investment fund specifically for Eastern Finland projects and establishing a EUR 100 million pilot financing programme through Finnvera to support regional businesses with direct loans and higher risk tolerance. The regions identified potential investments totalling EUR 19 billion across various sectors including energy, solar, wind power, hydrogen, battery clusters, data centres and bioeconomy.
The programme focused on four main areas: sustainable growth and investments; clean energy and digital green growth; sustainable tourism; and security of supply, self-sufficiency and comprehensive security. Specific infrastructure priorities included expanding the 400kV power grid to enable industrial development and strengthening rail connections, particularly the Karelia and Savo lines.
The proposal also emphasised improving digital connectivity, supporting workforce availability through education and immigration initiatives, and strengthening comprehensive security through enhanced cyber security and critical infrastructure. A particular focus was placed on developing tourism to compensate for the loss of Russian visitors, including launching an international sustainable tourism growth programme.
The regions stressed that Eastern Finland's development was crucial for the entire country's security and self-sufficiency, with special relevance to both EU and NATO co‑operation. They argued that national unity and balanced regional policy were Finland's strengths in a changing world, calling for immediate implementation of these measures given the new geopolitical situation and closure of the eastern border.
The Confederation of Finnish Industries (EK) proposed an action plan to designate Eastern Finland, comprising six regions, as a special economic zone. The plan emphasises Eastern Finland's economic revitalization as a national priority, given the current security situation, and seeks to sustain its population and economic viability while supporting Finland's growth. EK estimates the measures would cost EUR 100-120 million annually, partially offset by EU funding. The report highlights significant challenges in the region, including population decline and more pessimistic business outlooks compared to other areas, driven by declining demand and rising costs.
The programme suggested by EK aims to transform Eastern Finland into a special economic zone to accelerate economic growth through four main strategic priorities:
1. Leveraging EU support and security: the plan calls for directing EU funding to Eastern Finland, particularly focusing on border regions, and developing a six-region network model for comprehensive security. This recognises Eastern Finland's strategic importance to the EU, especially given the changed geopolitical situation.
2. Energy and green transition investments: the programme emphasises strengthening the power grid infrastructure and accelerating green transition investments. Currently, less than 4% of Finland's wind power is located east of Highway 5, a major north-south route that runs from Heinola in the Päijät-Häme region of southern Finland to Sodankylä in Lapland, passing through eastern regions such as South Savo, North Savo, and Kainuu, presenting a significant opportunity for development.
3. Digital, transport and tourism connections: A five-year broadband programme is proposed to enable remote work in rural areas. The plan also includes improving air connections and strengthening tourism resources, with additional funding for Visit Finland to promote the region.
4. Supporting medium-sized enterprise growth: The programme focuses on removing growth barriers for "Mittelstand" companies (50-499 employees) through pilot programmes addressing skills shortages, ownership transitions, and business service availability.
The EK report suggests a special envoy to be appointed to co‑ordinate the programme, working under the Prime Minister's Office to ensure effective collaboration between regional actors and national government.
A survey* of regional businesses indicates strong potential impact: 83% of companies are strongly committed to operating in their current location, and 35% anticipate significant expansion of operations if the proposed measures are implemented. The programme particularly emphasises supporting the approximately 2 000 employer companies needing ownership transitions in coming years, currently providing 14 000 jobs across Eastern Finland.
The programme represents a strategic effort to reverse Eastern Finland's economic challenges through co‑ordinated action between public and private sectors, with implementation planned from 2024 through 2030. Success will require strong co‑operation across regional boundaries and effective utilisation of both national and EU resources.
Note: *The survey, conducted by Confederation of Finnish Industries from March 2024, gathered responses from 325 companies operating in eastern Finland.
Finland’s security landscape has undergone a fundamental shift due to Russia’s aggression and evolving geopolitical realities. The Finnish Government’s 2024 report on foreign and security policy underscores that Russia’s war aggression against Ukraine has permanently altered Finland’s security environment. Russia’s efforts to reassert its influence in Europe have led Finland to reassess its national defence strategy, particularly as it transitions into NATO membership. The report highlights that while Finland does not currently face an immediate military threat, it must prepare for long-term geopolitical instability, requiring a strengthened defence posture and deeper co‑operation with NATO and the EU.
The eastern and southeastern border regions are now at the forefront of Finland’s national security strategy. With EU’s and NATO’s external border extending along Finland’s 1 340 km frontier with Russia, the eastern and southeastern regions have gained renewed strategic importance. This shift has direct implications for infrastructure development, military preparedness, and economic resilience. The 2024 Government Defence Report identifies the need for extensive investment in dual-use infrastructure, such as upgraded transport and logistics systems, which serve both civilian and military purposes. These developments not only bolster security but also offer economic opportunities for the border regions.
Hybrid threats, including instrumentalised migration and cyber operations, pose ongoing challenges to national security. Finland has experienced increased hybrid activities from Russia, including the weaponisation of migration along its eastern border. These tactics, described in Finland’s 2024 Government Defence Report, reflect broader Russian efforts to destabilise European nations. In response, Finland has tightened border security measures and enhanced co‑ordination with NATO allies to counter such threats. Additionally, the report highlights the necessity of EU regulatory flexibility to safeguard security and public order while maintaining human rights protections.
The economic impact of border closures has been significant, with Finnish-Russian trade collapsing since 2022. The Bank of Finland’s analysis reveals that Finnish exports to Russia have plummeted from 5% of total exports in 2021 to less than 1% by 2023. Import disruptions have been similarly severe. While large enterprises have successfully diversified their markets, small businesses - particularly those in eastern border municipalities - have struggled to adjust, facing increased costs and declining revenues. Tourism, logistics, and industries reliant on cross-border trade have been particularly affected, necessitating targeted economic support measures.
Regional adaptation strategies must focus on economic diversification and infrastructure investment. The transformation of Finland’s eastern border from an economic gateway to a security barrier requires a shift in regional development policies. The loss of Russian trade necessitates investment in new economic sectors, such as clean energy, sustainable tourism, and digital industries. Additionally, infrastructure improvements - including rail, enhanced road networks, and expanded digital connectivity - are essential to maintaining economic vitality and attracting investment. The Finnish Government’s new development programmes for Northern and Eastern Finland aim to address these needs.
References
[7] Confederation of Finnish Industries (EK) (2024), Itäisestä Suomesta erityistalousalue, Confederation of Finnish Industries, Helsinki, https://ek.fi/wp-content/uploads/2024/03/EK_Itainen_Suomi_ohjelma_net_FINAL.pdf (accessed on 28 January 2025).
[1] Ministry for Foreign Affairs of Finland (2024), Government report on Finnish foreign and security policy, Finnish Government, https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/165723/VN_2024_35.pdf?sequence=1&isAllowed=y (accessed on 7 January 2025).
[2] Ministry of Defence (2024), Government Defence Report, Finnish Ministry of Defence, https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/166004/PLM_2024_7.pdf?sequence=4 (accessed on 7 January 2025).
[6] North Karelia Regional Council (2024), Itäisen Suomen maakuntien esitykset toimenpiteistä Itäisen Suomen ohjelmaan, https://pohjois-karjala.fi/wp-content/uploads/2024/08/Itaisen-Suomen-maakuntien-esitykset-toimenpiteista-Itaisen-Suomen-ohjelmaan-2024.pdf (accessed on 28 January 2025).
[4] Simola, H. (2024), The collapse of trade with Russia has had a limited effect on Finnish manufacturing, Bank of Finland, https://www.bofbulletin.fi/en/2024/3/the-collapse-of-trade-with-russia-has-had-a-limited-effect-on-finnish-manufacturing/ (accessed on 16 January 2025).
[3] The Finnish Defence Forces (2025), Finnish Military Intelligence Review 2025, The Finnish Defence Forces, Helsinki, https://puolustusvoimat.fi/documents/1948673/2014902/PV_sotilastiedustelu_raportti_EN_2025_web.pdf/c0125ed9-1467-23e7-e7b6-a7891c4fb5fe/PV_sotilastiedustelu_raportti_EN_2025_web.pdf?t=1737033107374 (accessed on 21 January 2025).
[5] Toikka, M., H. Laasonen and O. Toivanen (2024), Russian Invasion of Ukraine: Effect on Finnish Companies Trading in Goods with Russia, VATT Institute for Economic Research, https://vatt.fi/en/publication?pubid=URN%3ANBN%3Afi-fe20230925137357 (accessed on 16 January 2025).
← 1. On 29 August 2025, Finland decided to establish NATO’s Multi-Corps Land Component Command North (MCLCC‑N) in Mikkeli, which became operational on 1 September 2025 at the Finnish Army Command base. Furthermore, the Forward Land Forces (FLF) will be stationed in Rovaniemi and Sodankylä in the Lapland region.
← 2. This section is mostly based on information provided by the regions in OECD questionnaire to regions (the questionnaire was sent to the regions on September 23, 2024, and responses were received by November 4, 2024).
← 3. The potential government decisions on additional funding needed to implement the measures described in the two Programmes will be made in the budget framework negotiations in March or April 2025.