Saimaa Canal Becomes a Flashpoint at Finnish-Russian Border

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(Source: Visitlappeenranta.fi)

Executive Summary:

  • The Saimaa Canal, linking Lake Saimaa to the Gulf of Finland via Russian territory, is becoming a flashpoint in the deteriorating relationship between Moscow and Helsinki and, more generally, between Russia and NATO.
  • Both Russia and Finland have cut back their use of the canal due to sanctions and countersanctions resulting from Putin’s war in Ukraine and fears by both parties that the other will use the waterway to undermine their national security.
  • Russia is mulling canceling the agreement that allows Helsinki to rent the waterway. This would negatively affect both countries and others as far away as China, which uses Finland for transit.

The Saimaa Canal, which links the internal waterways of Finland to the Gulf of Finland via 34 kilometers (21 miles) of Russian territory, is rapidly becoming a flashpoint in the deteriorating relationship between Moscow and Helsinki. More generally, it is becoming a point of tension between the Russian Federation and the North Atlantic Treaty Organization (NATO), which Finland joined in 2023. The situation has even become a point of disagreement between Russia and China. The canal, built in 1856 and modernized several times since, has long been an important trade route not only for Russia and Finland but also as a transit for others. The traffic volume has declined to a fraction of what it was a decade ago, primarily due to sanctions and countersanctions arising from Russian President Vladimir Putin’s attacks on Ukraine and fears by both parties that the other will use the waterway to subvert  their national security. Helsinki is worried Moscow will use the canal to undermine Finland’s independence by sending in refugees or covert forces (Window on Eurasia, April 19). Moscow is convinced NATO is planning to use the waterway to invade Russia if Putin’s oft-threatened war between Russia and the West breaks out in earnest (Rzd-partner.ru, September 23; Stoletie, September 27).

The situation around the canal, already dire, now appears to be worsening. Less than a month ago, Finland suspended the body that oversees its cooperation with Moscow concerning the canal (Finish Ministry of Transport and Communications, September 11). Last week, well-connected Russian commentators suggested that the Kremlin is mulling canceling the agreement that allows Helsinki to rent the portion of the waterway on Russian territory—a step permitted this year under the most recent bilateral treaty governing the canal (Fond Strategicheskoi Kul’tury, September 26). This would effectively end the canal’s role as a trade route, negatively impacting  not only Finland and Russia, but also the Central Asian states and China. These latter two parties view Finland as an important transit country, something that could come to an end as a result of changes in the Saimaa Canal (Trans.ru, April 12). Consequently, the shuttering of the canal would send economic and political shockwaves far beyond Finland and Russia. This seemingly minor bilateral problem between Finland and Russia appears set to become a major international crisis in the near future.  

The situation in and around the Saimaa Canal deteriorated sharply after Putin annexed Crimea in 2014. This trend only continued following his expanded invasion of Ukraine in 2022, further compounded by Finland’s entry into NATO shortly thereafter. EU sanctions limited Russian transit through the canal as well as stops at various ports along the canal, and Russian counter-sanctions on Finland reduced trade going in the other direction. After Finland’s accession to NATO in 2023, Helsinki expressed concern that Moscow might use the canal as part of its effort to destabilize Finland by bringing refugees to the Finnish border or implant other forces covertly into Finland (The Moscow Times, April 13). Finally, the situation has almost been brought to a breaking point by public contemplation from  Moscow about canceling the Finnish-Russian agreement on the canal. The Saimaa Canal treaty is the only accord in which Russia has rented its territory to a foreign country, something that many find unacceptable in Russia’s increasingly nationalistic atmosphere (Svobodnaya Pressa, April 30).

Russian rhetoric regarding Finland over the last two and a half years has become increasingly sharp, and Helsinki has responded in kind, with President Alexander Stubb declaring that his country does not fear Russia and is not about to be pushed around (Topwar.ru, September 13). In addition,Stubb has annoyed Moscow further by being one of Ukraine’s most active supporters —and one of the most prominent critics of items viewed by the Kremlin as unquestioned prerogatives, such as Russia’s veto in the UN Security Council (Interfax, September 13; Helsinki Times, September 30). This stance has led Finland to impose ever more restrictions on the canal’s ports (many of which have been closed) and its use by passenger vessels and cargo carriers(T.me/first_arctic, November 28, 2023; T.me/customs_rf; Rosbalt; The Moscow Times, April 13). These actions, in turn, have prompted further arguments from Russia that the agreement should be ended, with the Kremlin arguing that NATO is using Finland for its own goals (Fond Strategicheskoi Kul’tury, December 29, 2023). 

Given all this, one might have expected one of the parties to have already canceled the Saimaa Canal agreement. Both Finland and Russia, however, have compelling reasons not to do so, although the force of those reasons seems to be wearing down. Finland is keeping the accord in the hopes that after Putin’s war in Ukraine ends, it will be allowed to use the canal as a transit corridor to the extent it did previously—a powerful stimulus for the area’s economy. Many of Finland’s other ports are suffering because of the reduced use of the Saimaa Canal (Fond Strategicheskoi Kul’tury, December 29, 2023). Finland’s economic prospects are thus far dimmer than they would be if the canal were to recover, especially because building alternative routes would be extremely—perhaps prohibitively—expensive in the short-to-medium term (Rzd-partner.ru, September 23; Fond Strategicheskoi Kul’tury, September 26). Russia, too, has some important reasons to want to keep the canal agreement in place and see traffic volume recover. On the one hand, Helsinki currently pays $1.5 million in annual rent for the canal, something it has been doing even as the use of the waterway has collapsed (Window on Eurasia, April 19). Given Moscow’s budgetary stringencies since the start of Putin’s expanded war in Ukraine, few in the Russian capital are going to want to lose this source of income. Likewise, if the canal were closed, Russia would lose important leverage over Finland and likely alienate Helsinki for decades to come. Most important from Putin’s current point of view, however, is the fact that any such move would infuriate Beijing, which hopes to use Finland as a transit route (Kazak Invest, April 11).

Such considerations may temporarily slow the move to end the Saimaa Canal’s unique role, but the longer the war in Ukraine goes on, the less compelling any of these are likely to be. If it continues, Finnish and Russian moves may very well combine to end the agreement governing the canal, with serious consequences for both countries, the West, and China.