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