VZCZCXYZ0050
RR RUEHWEB

DE RUEHHE #0566/01 1671459
ZNR UUUUU ZZH
R 161459Z JUN 06
FM AMEMBASSY HELSINKI
TO RUEHC/SECSTATE WASHDC 2041
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS HELSINKI 000566 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
DOE FOR CLAY SELL 
 
E.O. 12958: N/A 
TAGS: ENRG ECON ETRD PREL EPET FI RU
SUBJECT: ENERGY DIVERSITY IN FINLAND AND WHAT IT CAN OFFER 
 
REF: A. MOSCOW 5869    B. BRUSSELS 790 
 
¶1. (SBU) Summary: Finland has the EU's longest border with 
Russia and the two maintain a complex and long-standing 
energy relationship.  While energy security is a concern 
for every country, Finland's somewhat unique position makes 
it very unlikely to suffer disruptions to its Russia- 
sourced energy supplies for a variety of reasons: 
Finland's status as a mature market; the diversity of its 
supply sources, including a robust nuclear program; 
Russia's need for trade with a stable market; Finland's own 
technological prowess; and the GOF's long-standing ability 
to manage effectively its political relations with Moscow. 
Although it enjoys this relatively safe bilateral position 
vis-a-vis Russia, Finland can still act as an important 
partner to the U.S. as we seek to establish a shared agenda 
for energy cooperation with Europe.  The GOF can serve as a 
helpful ally in the effort to transform Russia into a more 
reliable energy supplier that understands the advantages of 
submitting to accepted regulatory standards and playing 
according to free market rules.  End Summary 
 
Energy Circumstances and Future Projections 
------------------------------------------- 
¶2. (SBU) Finland has the third highest per capita energy 
consumption in the world, after the U.S. and Canada.  This 
is due mostly to long transport routes, a long heating 
season and several energy-intensive industries.  These 
realities have forced Finland to diversify its fuel sources 
to include oil, wood biomass, natural gas, coal and peat. 
Nevertheless, despite this domestic diversity, Finland 
imports nearly one fifth of its electricity, and virtually 
all of this is from Russia.  Finland is part of the Norway- 
Sweden-Finland Nordic Grid but its partners have little if 
any spare capacity for export.  Later this year Finland 
will link to Estonia, which has spare capacity. 
 
¶3. (SBU) Likewise, gas is used by industry and utilities 
and accounts for around ten percent of power generation. 
It is concentrated in the industrial south, and Russia is 
the sole supplier.  Finland is building a submarine 
pipeline to connect to Estonia and Latvia.  Both are 
dependent on Russia for supplies; however Latvia has 
storage capability and this would give Finland some 
flexibility.  Finland leapt into the nuclear age in the 
late 1970s and early 1980s, building four nuclear power 
plants (NPPs) during that period.  With other power sources 
either at capacity or with questions over expansion, 
nuclear is clearly Finland's option for the future. 
 
¶4. (SBU) Increasingly, nuclear energy fills the domestic 
gaps.  Finland is one of the most "pro-nuclear" countries 
in Europe, and the use of nuclear power is growing.  This 
diversity provides a buffer, should power source supplies 
be disrupted suddenly or market prices vary.  However, 
Finland's energy demand is growing steadily at 4% per year, 
and many sources are at maximum or near maximum usage, 
leaving nuclear power as the sole domestic alternative for 
growth. 
 
Russia as an Energy Supplier 
---------------------------- 
¶4. (SBU) Russia (including the Soviet Union) has always 
been a reliable supplier to Finland.  Finland has its own 
direct supply infrastructure for importing gas and 
electricity, and was therefore unaffected last winter when 
Russia interrupted supplies to Ukraine and (indirectly) to 
Central and Eastern Europe.  The Finns were not blind to 
the potential concerns engendered by those developments, 
and certainly understand that Moscow has the potential to 
play politics with fuel supplies.  However, the GOF and the 
Finnish private sector are also very confident in their 
ability to "manage" their huge neighbor to the east.  As 
Prime Minister Matti Vanhanen recently stated publicly, the 
GOF is not worried about its energy relationship with 
Russia because, "Russia has the fuel we need.  We have 
money that they need.  It's a business relationship, and to 
us it's sound." 
 
¶5. (SBU) During the Cold War, the Soviet Union was the sole 
supplier of oil to Finland, paid for through a centrally 
planned barter trade system.  Following the Soviet 
collapse, oil supplies temporarily disappeared and Finland 
turned to the North Sea and Saudi Arabia.  Finland now buys 
according to price, and the low transport costs mean that 
it currently gets about 80% of its oil from Russia. 
Finland imports 100 percent of its gas from Russia, makes 
rational use of it (industrial use in a concentrated area), 
and the price is good.  Gazprom has gone downstream and 
owns 20 percent of Finland's gas distribution network -- 
something the Finns view as positive, because (as Embassy 
Moscow suggested in Reftel A) it places at least that 
portion of Gazprom's operations under the eye of Finnish 
and European regulators.  Finland is importing about 14% of 
its electricity from Russia (and 3% from Sweden-Norway). 
The need to import is due to the deficit in Finland's own 
generating capacity.  The fifth Finnish NPP currently under 
construction will approximately offset the deficit. 
 
COMMENT 
------- 
¶6. (SBU) For both practical and political reasons, energy 
independence is not something the Finns will pursue. 
During her June 14 visit to St. Petersburg, President Tarja 
Halonen lauded Finnish-Russian "energy interdependence" as 
a crucial and positive element of the two countries' 
bilateral relationship.  Having diversified its own energy 
use and managed Moscow well, Finland is in a safe position 
to make such claims.  This said, the GOF can still serve as 
an important and helpful ally to the US as we seek to 
establish a shared energy security agenda with Russia that 
focuses on transforming Russia into a more reliable energy 
supplier.  Although unlikely to be a victim of Russian 
antics, Finland will always oppose any Russian efforts to 
use energy policy for political purposes.  Moreover, 
because it is clearly in Finland's interests, the GOF sees 
the importance of helping Moscow understand that submitting 
to global regulatory standards and playing according to 
free market rules is in Russia's long-term best interest. 
 
WARE