How a Great Power Falls Apart
Decline Is Invisible From the Inside
In early June, Finns learned that a civilian had put in a bid for a property near a Finnish Defense Force test-shooting range in the town of Taipalsaari, located some 20 kilometers from the Russian border. At first, nothing seemed unusual about this; civilians often live near military shooting ranges. But there was one detail that triggered concern in the Finnish military and government: the prospective buyer was Russian.
Plenty of ordinary Russians do, of course, buy summer homes in Finland. But some of these properties don’t resemble holiday retreats: they’re decaying cottages or empty plots of land coincidentally located near strategic military areas such as ammunitions depots, radar stations, and key electricity supply lines. According to statistics collected by the Finnish market research company TAK, in 2013, Russian buyers with an address in Russia, as opposed to in Finland, made up 89 percent of all purchases in the border region of South Karelia—where Taipalsaari is located—compared to only 46 percent in 2004. In addition to that lower share, fewer people were concerned about these purchases in 2004 when Russia was still considered a largely peaceful country. Ever since its annexation of Crimea, however, Russia’s neighboring countries are paying closer attention to its actions and those of its citizens.
“People’s attention and attitude to this issue have changed dramatically in past year or so,” says Charly Salonius-Pasternak, a defense expert at the Finnish Institute of International Affairs. “Before, no official would say on the record that there might be security-related issues involved with some of these purchases. Now that’s no longer the case.” People are aware, he said, “that war isn’t just tanks rolling over the border.”
Finland’s new defense minister, Jussi Niinistö, who took office in May, quickly took action on the Taipalsaari sale, instructing the state forest management agency to bid for the plot on behalf of the Finnish Defense Forces. But its $3.72 million offer fell far short of the reported $8.45 million Russian bid. Niinistö also requested that the defense forces participate in future sales of strategic plots, and he has announced that he’ll introduce legislation that gives the government right of first refusal in sales to buyers outside of the European Union. This spring, President Sauli Niinistö (no relation to Jussi Niinistö) proposed passing a bill that would give the government the right to approve sales in sensitive areas on a case-by-case basis, and former Defense Minister Carl Haglund advocated for a government right of first refusal.The Finns may, of course, be overreacting. It is quite possible that the properties near military installations are simply vacation homes, but the Finnish suspicion comes from a long and traumatic history of living with latent Russian-Soviet aggression and the occasional invasion. For over a century Finland belonged to Russia, before declaring independence in 1917. Even after independence, it continued to face Russian aggression. In the so-called Winter War of 1939 and 1940, 180,000 Finnish soldiers fought valiantly against the Red Army’s invading force of 340,000, launching a clever insurgent campaign. Soviet leader Joseph Stalin had predicted a Soviet victory within 12 days, but the Finns miraculously held out for 105 days before succumbing to defeat. Perhaps this bitter experience is why Finland has maintained a stoic policy of neutrality and non-provocation, like its neighbor Sweden, which opted out of NATO membership.
“Worries regarding Russia overwhelm any other issue in Finland,” Markku Kivinen, a professor of sociology at the University of Helsinki, told me over the phone last month. And that seemed apparent in a recent article in the independent military journal Suomen Sotilas, by retired general Hannu Luotola and several others. The authors argued that the Russian armed forces could use the forlorn-looking properties as depots and staging grounds.
Other observers take a different view. “For decades, it wasn’t legally possible for Russians to buy property in Finland,” Kivinen said. Now, he continued, “The real reason that they’re doing it is that they see it as an insurance policy if things get really bad in Russia.”
Outi Salovaara, an investigative journalist at the Finnish papers Etelä-Saimaa and Helsingin Sanomat, seems to agree with that assessment. She lives only six miles from the Russian border and has painstakingly investigated every real estate transaction in the region since 2005. “Buying real estate near military installations sounds bad, but the concerns about these transactions are exaggerated,” she argues. “I’m convinced that the Finnish Defense Forces know what’s going on around their installations. A more significant concern is money laundering connected to the purchases. And if the Russians were really up to something suspicious in buying these properties, they’d use Finns as front men.” Besides, Salovaara adds, Russia can simply use satellites to gather intelligence. “They don’t need a bunch of cottages in order to figure out what’s going on in Finland,” she says.
Lending credence to Kivinen and Salovaara’s claims is that the ownership of many these properties are difficult to pin down. The tourism company Airiston Helmi has bought several properties over the past few years, including near the harbor of Turku, where it is based, and other important naval routes. The company has a Russian CEO and board of directors. According to Finnish media investigations, some of the company officials are registered as living in Russia, while one lives in Latvia. The others’ countries of residence are unknown. Since its founding eight years ago, the company has yet to acquire a website and offers no physical address. Even though it only has two employees and capital of $11,200, and has made a loss every year since 2008, it continues to buy new properties.
It is also possible that Airiston Helmi is either a shell company used to hide money laundering operations or a completely ordinary tourism and real estate company—but its recent purchase of two Finnish navy transport ships confuses that picture. Airiston Helmi may have plans to revitalize the ships as a tourist attraction, but its managing director, Elena Romanova, did not respond to a request for comment. Because Russian companies and individuals are legally entitled to buy properties in Finland, the Finnish authorities have no reason to investigate these claims.
On a recent visit to the Port of Turku, I saw an industrial area with modern commercial buildings glinting in the sun and a Finnish navy vessel docked nearby. Like most Finns, Salonius-Pasternak takes a very moderate stance on Russia and believes war is highly unlikely, but he explained to me how a Russian adversary could use the Airiston Helmi buildings in the port to observe Finnish naval activities and also attack Finnish ships—there is a naval base in the city’s Pansio harbor, as well as plans for a liquefied natural gas import terminal. Apart from offering a few sea cruises, Turku is not a hugely popular tourist area, but the high-tech city is a key Baltic Sea commercial seaport.
Arto Luukkanen, a lecturer in Russian and Eastern European Studies at the University of Helsinki, is similarly suspicious. In 2008, he received an unexpected phone call from a man, who turned out to be a well-respected retired businessman, who wanted to alert him of a string of mysterious purchases by Russian individuals and companies. “I thought he was overreacting, but we met, and he had some really interesting information,” he said. The man had noticed the increasing number of Russian-bought properties in his home region of South Karelia that year, and together with friends, assembled the transactions’ legal deeds into a database. “[The properties] we’re talking about are small cottages where little old ladies had once lived,” Luukkanen explained. “These are not great residences. In fact, nobody would want to live there. But they’re close to military bases.” After analyzing the man’s database and noticing the strategic location of many of the derelict properties, Luukkanen concluded that the man was voicing sensible concerns.
Although these deeds contain the official buyers’ identity, many of whom appear to be ordinary Russian civilians, it’s near impossible to find out if they are operating on behalf of the Russian government. “The initial buyer may not be the intended owner, and where ownership is then transferred that becomes problem,” says Salonius-Pasternak.
With the upcoming sale near the Taipalsaari range, Salovaara, the dogged real estate detective, says that the sale has not yet closed. She interprets it as a real estate maneuver. “The owners may just be using the supposed Russian buyer to get a higher price,” she says. Indeed, that would be an unorthodox but effective new real estate strategy: Offer me a good price or I’ll sell my property to the Russians. Finnish politicians, however, are taking no chances. As Dubai’s controversial, and ultimately unsuccessful, attempt in 2006 to invest in U.S. port infrastructure demonstrated, foreign ownership of crucial property seems to make people and politicians panic. For the United States, it was fear of a potential terrorist attack. For Finland, it is about diplomatic balancing, nurturing friendly relations with its mighty neighbor while at the same time placating Finnish fears about Russian aggression.