Prime Minister Paavo Lipponen at the Diplomatic Academy Moscow, 28 February 2002

In Russia Finland is often referred to as "our northern neighbour". In 1995 the Finnish-Russian border became the first and so far the only Russian border with the European Union. In this way the European Union - which most Russians perceive as being in the west - has become a "northern neighbour" too.

The coming enlargement of the Union will bring the Union and Russia nearer each other as four of the acceding countries are Russia's neighbours. The relationship between the Union and Russia is essential in formulating the future of our continent.

For Finland, membership in the European Union was a logical step in our foreign policy which has always aimed at opening markets and stabilizing the position of Finland in Europe.

The Finnish society has adapted well to EU membership. New opportunities have opened for our regions, municipalities and citizens. They have direct contacts to Brussels. EU has strengthened regional self-government and given a stable framework for our agriculture.

Students are among the beneficiaries of EU. Last year over 4 000 Finnish students studied in other member states. At the same time our own universities have become more "European" as around 2 000 EU-students come to study in Finland through the Union's exchange programmes.

Compared to this 170 Russian students in Finnish universities is a rather small number. The same can be said about the Union as a whole. Expanding exchange programmes should be among our priorities. I will take this up when I visit the European Commission later this spring.

Finland’s membership in the European Union is a new element in our relations with Russia. Mutual trade is regulated by agreements between the Union and Russia. We apply EU-rules for example when issuing visas or clearing custom goods. As a member of the Union and as a neighbour of Russia, Finland has actively participated in the formulation of EU-Russia relations.

Finland's membership in the Union has in no way weakened our bilateral relations. They have in fact only gained from the growing interdependence between Russia and the Union.

The opening of the Russian society made regional co-operation over the border possible. In early 1992 we signed an agreement on cooperation between the nearby regions. It allowed after decades of isolation direct links between the Russian border regions - Murmansk and Leningrad regions, Karelia and St Petersburg - and Finland. In ten years a dense network of contacts has been formed. Not only between authorities and NGOs but also between ordinary people.

There is a continuous exchange of visits between Finland and Russia. Today I will have my eleventh bilateral meeting with a Russian prime minister, the fourth with Prime Minister Mihail Kasyanov. On our agenda we have bilateral as well as European questions.

Earlier today I met with President Vladimir Putin, who made an official visit to Finland last September. President Putin has a long standing relationship with Finland and he knows our country well. As Prime Minister of Russia he led the Russian delegation to the EU-Russia summit in Helsinki in October 1999 and presented us Russia's first EU-strategy. It was a turning point committing Russia to cooperation with the EU.

Tomorrow I will participate together with Prime Minister Kasyanov in the first Finnish-Russian Forestry Summit. Forestry questions have regularly been on the prime ministers' agenda. In our meeting last July in Savonlinna in Eastern Finland we decided that it is time to hold a special summit dedicated to forestry and forest industry questions. The meeting has been thoroughly prepared and it will bring together the leading Finnish and Russian industrialists and experts.

Mutual opportunities are plentiful: Russia has one quarter of world's forest resources and Finland is the home of Europe's largest forest companies and a leading provider of technology. Our discussions tomorrow will concentrate on three main topics: First how to assure the sustainability of forestry, secondly how to facilitate trade in timber and thirdly how to enhance investment in forest industry.

Finnish-Russian trade is booming. In 2001,trade turnover was over 6 billion Euros. In a market economy governments' role is to provide predictability and assistance for projects which are of non-commercial nature or where governmental approval is needed. Trade and investment decisions are the responsibility of individual firms.

We have on our agenda several large environmental and infrastructure projects:

1. Finnish and Russian railways have decided to build a high-speed rail link between Helsinki and St Petersburg. In a few years’ time it will cut the present five and half hour travelling time to three hours.

2. Finnish and Russian companies with their European partners are planning to build a trunk gas pipeline through the Baltic Sea to Western Europe. This North Trans Gas pipeline will link the huge gas resources of North-Western Russia to EU markets.

3. Finland with other Nordic countries and international banks will participate in the financing of the South-West water treatment plant in St Petersburg. The building of the plant costs 150 million euros and it will dramatically improve the water quality of the Baltic Sea.

4. As an answer to rapidly increasing sea traffic in the Gulf of Finland, Finland, Russia and Estonia are developing a sea traffic management system to reduce the risk of collisions. Similar systems exist in the English Channel and in the Danish Straits. This trilateral co-operation is developing well and the system is expected to be operational already in 2003.

Russian tourists have discovered Finland. Last year Russians made altogether 1.5 million visits to Finland. We have become the number one destination among EU-countries to Russian tourists.

The enormous growth of trade and tourism would not have been possible without the improved border infrastructure. Both countries have invested in modern border crossing points. This year two new international crossing points financed by the TACIS programme are scheduled to be opened in Svetogorsk and in Salla.

After becoming a member in the Union we were rather surprised to see how little dialogue there was between the Union and Russia. We felt that there was clearly a need for more practical co-operation especially in the northern parts of Europe. The Union and Russia have great mutual opportunities and challenges in this region.

This was the background for my initiative on the Northern Dimension in autumn 1997. By now the Northern Dimension is already an established EU-policy with its own action plan approved by the Feira European Council in June 2000. Russia's strong support to the Northern Dimension has been vital in its development.

The Northern Dimension aims at strengthening the economic links between the North-Western parts of Russia and the Union. At the same time we continue to tackle common problems like organised crime, communicable diseases and environmental threats.

The international financing organisations headed by the European Bank for Reconstruction and Development and the Nordic Investment Bank (NIB) have created a Northern Dimension Environmental Partnership (NDEP). It will focus on financing environmental projects in North-West Russia. In addition to the banks and the EU commission the Nordic countries have committed funds. It is of utmost importance that the Russian government does the same and gives a green light to the fund and its activity.

The Partnership and co-operation agreement (PCA) is a good basis for EU-Russia relations. It covers the whole spectrum of common interests. It contains evolutionary elements like a future free trade area. It is also the foundation for common institutions: summits, co-operation council and co-operation committee. Also parliamentarians and business people have their own cooperation bodies.

Russia's membership in the World Trade Organisation WTO is the most important step in integrating Russia to world economy. We highly appreciate the efforts made by the Russian government in order to fulfill membership criteria. Russia has made considerable progress in the negotiations. It is important to continue the work in bilateral tariff negotiations as well in making Russian legislation to conform with the WTO-norms.

While the WTO-negotiations continue it is useful to consider how to additionally lower barriers hindering trade and investments. An efficient way to achieve this is the harmonisation of Russian economic and technical legislation with that of the Union. This could well be the main content of the European Economic Space initiative under preparation at the moment.

Energy questions dominate economic cooperation between the Union and Russia. European companies are willing to invest in energy production and transport. There will be more investment as the production sharing law and other measures to improve the investment climate will be applied on a large scale. This kind of practical questions should be the core of the ongoing energy dialogue between the Union and Russia.

The enlargement of the Union proceeds according to the time plan. It is foreseen that the next new members will join the Union in 2004.

The enlargement increases the coherence and competitiveness of Europe. A common market with some 450 million inhabitants will be created. This will have implications for Russia too.

The enlarged Union will be Russia's most important trading partner. It is estimated that the Union's share of Russian foreign trade will rise to 50 per cent. The Union's economic development and the fate of the Euro will be even more carefully followed by the Russian policy makers.

Basing on our experience it is clear that enlargement will have mainly positive consequences for Russia. New members will adopt Union's external duties, which are in most cases lower than their present duties.

These countries have traditional links with Russia. I am convinced that they have a strong interest in building EU-Russia relations and the Northern Dimension.

Kaliningrad has attracted a lot of interest. Next week foreign ministers of the Baltic Sea countries will meet there and I especially welcome the coming meeting of the Prime Ministers of Russia, Poland and Lithuania in Kaliningrad. I believe that practical problems concerning the movement of goods and people can be solved. The challenge is basically economic.

History, culture and tourism bind Russia to Europe. Trade and investment make the Russian economy more and more part of Europe. These are largely autonomous processes which take placeif not interfered with.

In ten years our economies will be even more closely linked. Many Russian companies will have become household names in the Union. The number of tourists will triple.

Today we take pride in seeing Finland fare so well in international comparisons, notably taking number one position in the World Economic Forum ranking on both overall competitiveness and sustainable development. It is the result of long-term reforms and broad cooperation across the whole political and social spectra.

Finland has had her hard times - including conflict with Russia - but today we want to underline what has been positive in our international relations and the historical continuity in our foreign policy.

It was a lucky strike for Finland to become an autonomous part of Russia in 1809. Our nation was born during those hundred or so years. Towards the end of the 19th century the Finnish economy was booming and the Finnish culture flourishing.

Paradoxically, moving to the periphery of St. Petersburg opened Europe to the Finns more than remaining in the periphery of Stockholm would have meant. But we also know that it was our luck to have been part of the Swedish kingdom and thereby escape European feudalism. And again, Finland was lucky to become independent in 1917 - just in time to escape the turmoil of the Russian revolution.

Finland's international position in the post-cold War world is characterised by our membership in the European Union, participation in Nordic and regional cooperation, active membership of the United Nations and various global and European intergovernmental organisations.

Our security policy is based on non-alignment with independent defense, participation in the common foreign and security policy of the EU, and international cooperation, mainly with Nato.

Since 11 September 2001 a world coalition against terrorism has emerged. Finland is an active participant in this fight with domestic legislative reforms, intensified operations by our authorities and international cooperation. The Tampere European Council in 1999 basically set the framework for developing EU's cooperation in justice and home affairs.

The global challenges - including poverty and sustainable development - make it necessary to further assess international cooperative structures. We welcome Russia's unequivocal response and readiness for common action after September 11. International security structures are evolving and Finland is also closely monitoring new developments.

Enlargement of Nato, Russia's possible new relationship with Nato, together with the need to strengthen EU's common security and defense policies are among the most important processes. We do not intend to be sidelined in the post-September 11 world. Nor do we intend to shun from showing solidarity and taking responsibility that can be expected from our countries.

We shall draw our own conclusions in the next government's security and defense report, due to be presented to parliament in 2004. Meanwhile, we follow the policy of non-alignment and have no plans to give it up.

One of the strengths of Finland as a small country is our good relationship with Russia, a great power. We have no need to consider the past as something to be erased from memory. On the contrary, we can see a historical continuity that shows how much neighbours can benefit from cooperation with each other. I believe we are just beginning to realize its great potential.