At the beginning of February, I was taking a course to update my know-how of national defence, security of supply chains and crises situations. It was a continuation of the previous course. Six years ago, the things studied were distant and theoretical, today they are far too close. We have just survived the pandemic. A war is raging in Europe. After the course, I stay awake at night thinking about what the outbreak of war in the Baltic Sea would mean in practice.
Finland is dependent on sea transport. Most of Finland’s foreign trade takes place by sea, measured in terms of money, just under 60 percent, in tons even more than 90 percent. If the flow of goods traveling by sea is disrupted, the effects on the well-being of Finns and the functioning of business life will be significant.
Security of supply means preparing for possible crises and disruptions and securing vital functions. With regard to sea transport, the Security of Supply Act has been implemented by ensuring the adequacy of the vessel tonnage traveling under the Finnish flag and maintaining sufficient expertise in seafaring.
I had prepared for the course by reading the Finnish National Defense University’s Master’s thesis on Finland’s maritime security of supply. Senior Lieutenant Jani Iiskola states in his work that “Finnish tonnage as a measure of maritime security of supply is insufficient. It also generalizes the phenomenon too much, leaving critical information out of consideration. The available information does not allow for a sufficiently comprehensive or detailed analysis of maritime security of supply, and therefore also it is not sufficient for an evaluation of the achievement of the goals”.
It is undeniable that supporting the tonnage under the Finnish flag has labor and economic policy objectives. It supports maritime training and shipping companies, but according to Iiskola, it does not ensure security of supply. It also generalizes the phenomenon too much, so important information can be left out of decision-making.
How then should maritime security of supply be promoted? Below I consider three measures to ensure foreign trade: risk management of companies’ supply chains, alternative routes and increasing resources to protect ships in a war situation.
Risk management of supply chains
The dependence of Finnish society and business on imported products, semi-finished products and raw materials has increased considerably over the past decades. At the same time, production has moved further and further away to countries with cheap production. Products increasingly consist of parts and components, each of which can be made in a different country. The lack of any part or component can bring the entire complex supply chain to a standstill. In addition, unnecessary stocks have been removed from supply chains, which means they have become more sensitive to disturbances.
The container crisis during the pandemic taught us that supply chains to Finland can also be seriously disrupted, even though the problems are far from the Baltic Sea. Traditionally, disruptions in the supply chain would have been prepared with large warehouses, but nowadays companies use more versatile risk management methods, such as having more subcontractors, some of which are in Finland or Europe, and planning alternative products, forecasting demand and moving the order point to the last possible moment.
Alternative transport routes
However, if sea transport is disrupted in the Baltic Sea, alternative routes must be considered. In a study published by Confederation of Finnish Industries last year, it is stated that when maritime traffic in the Baltic Sea is blocked, it is easiest to replace unitized traffic by transportation via the Swedish and Norwegian side.
In addition, it is necessary to prioritize which products are transported. In any case, the capacity of ports and means of transport is limited, in a crisis situation not everything can be transported to Finland. Of the product groups examined in the study, the groceries, which is important to consumers, are the most reliable. About 80 percent of food is domestic. On the other hand there would be big challenges in the transportation of materials required by industry and energy production.
Military protection
When the threat of a crisis arises at sea, ship insurance companies monitor the situation relentlessly, are in contact with shipping companies and, if necessary, raise insurance fees, which inevitably makes shipping in the area more expensive. Finland is prepared to support ships in rising insurance fees. But are the shipping companies really ready to jeopardize the safety of the ship, cargo and crew, even if the financial support is given?
If a serious threat situation arises in the Baltic Sea – a war situation – shipping companies can quickly flag their ships under the flag of another country and change the operating area, and thus there is no longer any certainty about the availability of ships in a real crisis situation. Only state-owned ships will definitely remain under the Finnish traffic.
The Ukraine and Red Sea crises show that sailing under the flag of the wrong country actually increases the risk of being attacked. On the other hand, both seas are constantly occupied by ships that take great risks in the hope of financial gain. Part of the ships are also protected militarily.
In European cooperation, such as ensuring intra-European production and developing cross-border transport networks, Finland must actively emphasize security of supply. In addition, the military protection of ships must be brought up when agreeing on the forms of NATO cooperation. I guess, it would also be important for NATO that the maintenance of the peripheral state of the military alliance, as Finland, works even in a crisis situation.
Sources:
EK, Destia (2023). Toimintaympäristön riskiskenaario yrityslogistiikalle.
The article was previously published in Navigator Magazine in Finnish, an online magazine for maritime professionals, on February 16th, 2024.
Tales of Talsinki 