FINLAND

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90T00114R000303110001-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: January 27, 2012
• Sequence Number: 1
• Publication Date: April 28, 1987
• Content Type: MEMO

Declassified in Part - Sanitized Copy Approved for Release 2012/01/27: CIA-RDP90T00114R000303110001-0
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General
FINLAND
'ALT
Finland is a Constitutional Democracy with a 200-member unicameral parliament called the
Eduskunta. The Head of State, responsible for broad matters of foreign policy, is President
Mauno Koivisto, a Social Democrat. Presidential elections are held every six years, with the next
one falling in the,Sp.ring of 1988. The current Head of Government is Prime Minister Kalevi
Sorsa, also a Social Democrat. Parliamentary elections, conducted at least every four years,
were held on 15-16 March; coalition negotiations are in progress and no new Prime Minister has
yet been named. The following are the 1987 election results:
Seats in Parliament Percent of Vote
Nonsocialist Parties
National Coalition Party (Conservative)
Center Party
Swedish Peoples Party
Rural Party
Christian League
Greens
53 23.1%
40 17.7%
13 5.3%
9 6.3%
5 2.6%
4 4.0%
Socialist Parties
Social Democratic Party 56 24.2%
Communists (Eurocommunists) 16 9.4%
Communists (Stalinists) 4 4.3%
Other Parties
TOTAL
200 100.0%
Key Cabinet members in the present caretaker government are:
Prime Minister ....................................................Kalevi Sorsa
Foreign Minister ................................................Paavo Vayrynen
Minister of Trade and Industry .................Jermu Laine
These briefing memoranda were. reared by
European Analysis
EUR M8.7-20060
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FINLAND
"Good-Neighborly Relations" with the Soviet Union
In 1948, Finland signed the Treaty of Friendship, Cooperation, and Mutual Assistance (FCMA) with
the Soviet Union. After suffering significant loss of life and territory in two wars with the Soviet
Union earlier in the decade, Helsinki determined that the best way to provide for Finnish security
and independence was to reassure., the USSR against threats coming from Finnish
territory---thereby denying Moscow an excuse for interference in Finnish affairs.
This manner of dealing with the Soviet Union has been
institutionalized by Finland's three postwar presidents: Paasikivi,
Kekkonen, and Koivisto. Politicians of all parties believe that
Finland's independence compared to that of Eastern Europe speaks
for the success of this approach. Foreign policy is therefore
unlikely to change regardless of which parties form the new
government.
Nonetheless, Finland still sees the Soviet Union as a potential threat
to its security. In addition to denying the Soviets a pretext for
intervention, Finland's small but well-trained defense force could
serve to fight Soviet forces if political cooperation with Moscow
failed to prevent Soviet intervention.
Finland also attaches great importance to good relations with the
United States. Such contacts are important to the Finnish economy,
and serve to reinforce Finnish neutrality by balancing out Soviet
political influence. The Finns, however, consider good relations with
the Soviet Union a precondition to good relations with the West.
Promoting Regional "Stability"
Of the five Nordic countries, Finland is traditionally the strongest supporter of discussions on a
regional nuclear-weapons-free zone and naval confidence-building measures between NATO and
the Warsaw Pact. The Finns are cautious about how hard to push these policies because they
do not want to weaken the deterrent provided by NATO presence in the region.
Because the Soviet Union favors both initiatives, the Finns consider
their own support for discussion of these concepts part of their
policy of reassuring the Soviet Union.
More important, however, is the Finnish perception that East-West
conflict---rather than Soviet ambition---presents the real threat to
Finnish security by creating a context in which the Soviet Union
might feel compelled to intervene in Finland. The Finns thus
promote regional stability as the best way to reduce the likelihood of
East-West conflict in the Nordic area.
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FINLAND
Election Results
The 15-16 March parliamentary election reflected a slight shift toward the right in the Finnish
political spectrum. The Conservative Party picked up nine seats in Parliament and the Center
Party gained three. Although the Social Democratic Party remained the country's largest, it lost
100,000 votes---one eighth of its previous voter strength---and one parliamentary seat.
No political or economic issues were prominent in the election
campaign. The most important items on the political agenda were
personal differences between Social Democratic Prime Minister Kalevi
Sorsa and Foreign Minister Paavo Vayrynen, the ambitious leader of
the Center Party.
Building a New Government -
Little progress on forming a new government has been made since the March election, although
the Conservative Party has installed its Chairman as Speaker of the Parliament. The previous
Social Democratic-Centrist coalition is presently serving in a caretaker capacity. Regardless of
who forms the next government, foreign policy is unlikely to change significantly.
Since World War II, the Social Democratic Party has been the
traditional party of government, and Social Democratic President
Koivisto prefers that the party remain in government. The party
leadership, however, would rather move into opposition than cohabit
with Conservative policies or with Center Party Chairman Vayrynen.
The Conservative leadership has moderated the tone and substance
of its policy prescriptions, paving the way for Soviet acceptance of
its entry into government. No party members have cabinet
experience, however, making it unlikely a Conservative will become
Prime Minister.
If the Social Democrats leave power, the obvious choice for Prime
Minister is current Foreign Minister Vayrynen, the Center Party leader.
Vayrynen, however, is unpopular with the President, the.,public, and
his potential coalition partners because of his blatant desire to
become President in 1988 or 1994. Even so, the most likely outcome
of the ongoing bargaining may be a Center-Conservative coalition
led by Vayrynen.
Although Finnish foreign policy is unlikely to change significantly
regardless of which parties form a government, a
Center-Conservative coalition may push for privatization of state-run
firms and tax reform.
~, Declassified in Part - Sanitized Copy Approved for Release 2012/01/27: CIA-RDP90TOO114R000303110001-0
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FINLAND
General
Finland has successfully undergone a transition from an agrarian-based economy before World
War II to an increasingly high-tech industrial and service economy. Helsinki has sustained
steady economic growth and contained unemployment in the 1980s largely by finding external
markets for its products and by investing abroad.
Foreign Trade is an essential component of Finland's economy, with
exports and imports each accounting for roughly 30 percent of GDP
in recent years. Because of this reliance on trade, Helsinki actively
supports international efforts to expand free trade in goods and
services and has further opened its own economy in the past few
years by deregulating domestic capital markets and reducing foreign
exchange restrictions. Exports are generated largely in the forestry,
metal, and chemical industries.
Trade with the Soviet Union
Helsinki has developed strong trade ties with Moscow since the 1960s as part of its broader
strategy of maintaining a friendly relationship with the Soviet Union. Finnish-Soviet trade
operates on a clearing account basis (a barter arrangement which restricts the use of Finnish
export earnings to the purchase of Soviet goods) and accounts for 15-20 percent of Finland's
total trade.
The weakness in the world price of oil--Helsinki's most important
import from the Soviet Union--since 1986 has produced a strain in
this special trading relationship as Finland has accumulated an
undesired surplus with the Soviet Union that greatly exceeds the
mutually agreed credit limit. Protracted bilateral negotiations to
solve the problem have resulted in tentative agreements that call for
the Soviets to sell Finland an extra 250,000 tons of crude oil for
resale on world markets in 1987, begin exporting certain chemical
and mineral prodcuts which they have refused to provide in the past,
ship increased amounts of coal, and pay Helsinki a higher interest
rate on the excess trade surplus.
-- Finnish officials expect trade problems to continue for some time,
but are unlikely to take a hard line with Moscow over the issue
because of their overriding desire to maintain congenial relations.
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Trade with the United States
Imports from the United States account for 5-6 percent of total Finnish imports annually.
High-technology products, including aircraft, avionics, and computer-based systems for business
and manufacturing dominate US sales. Despite agricultural import barriers, certain commodities,
including raw tobacco, soybeans, and canned fruit, also figure prominantly in US exports.
Finland's main exports to the US market include paper and paper-making machinery, oil rigs
(operated under US license), and ferrous and non-ferrous metals.
Helsinki cooperates with Washington on export control. issues
because it realizes that a reputation as a supplier of controlled
technology to the Soviet Union could jeopardize its own access to
advanced technologies that are vital to Finnish industry.
Finland's recent revision of its export control laws has enhanced its
ability to restrict the transshipment of controlled Western technology
through its territory to the Soviet bloc. The most important change
in these laws is the use of an import certificate/delivery verification
form (IC/DV) that is parallel to those of the COCOM countries.
Domestic Economic Policy
Finland has a healthy economy with no major long-term problems that are likely to force a new
government to alter the course of recent economic policies. These policies have been aimed at
maintaining confidence in the Finnmark, controlling inflation, limiting the tax burden, deregulating
financial markets, and reducing foreign-exchange restrictions. Finns enjoy a high standard of
living even by Western standards, which is protected by an extensive welfare state.
-- Favorable short-run economic indicators provided little ammunition
for any of the major political parties in the recent election campaign.
Although
GDP grew at a rate of only 2 percent in
1986,
recent
forecasts
have displayed optimism that growth may
reach
3 or 4
percent in
1987. In addition, the joint government-labor Committee
on Incomes Policy recently reported that real household disposable
incomes rose by 2.5 percent in 1986 and may increase by 4.5
percent in 1987. These gains are attributable mainly to lower
inflation--down from 5.9 percent to 3.6 percent in 1986--and to
adjustments in income tax rates to offset inflation. Unemployment
rose slightly from 6.3 percent in 1985 to 7 percent in 1986, but
remains low among OECD countries and will probably be contained
this year.
--The new government may explore new initiatives on the economic
front such as the privatization of some of Finland's 19 state-owned
firms, and are continuing to assess the impact of an increasingly
internationalized and technological economy on Finland's national
identity. Deregulation of financial markets and foreign exchange
laws, tightening controls on reexport of US technology, controlling
inflation, and determining the future of the nuclear energy program
will also continue to be central to Finnish policy.
Declassified in Part - Sanitized Copy Approved for Release 2012/01/27: CIA-RDP90T00114R000303110001-0
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SUBJECT: FINLAND POLITICAL FACT SHEET
Distribution
Internal
1 - DCI-DDCI Executive Staff
1 - DDI
1 - NIC/AG
4 - CPAS/IMC/CB
1 - MPS/PES
1 - D/EURA
1 - DD/EURA
1 - C/EURA/WE
1 - DC/EURA/WE
2 - EURA Production Staff
1 - EURA/WE Production file
1.- EURA/WE branch production file
1 - NIO/Econ
1 - NIO/WE
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