Amid Iran war, Finland leverages lack of gas to accelerate energy transition

(Vaasa, Finland) — The minimal reliance on natural gas in Finland sets the Nordic nation apart from the rest of Europe and has somewhat shielded it from the worst effects of the recent energy crisis stemming from the Iran war.

Nonetheless, the country’s proximity to Russia as well as the escalating Middle East crisis are leading Finland to seek diversification of energy supply routes while accelerating the energy transition.

As part of that, the country is pursuing plans for the so-called Nordic Connector across the Kvarken, the narrowest part of the Gulf of Bothnia connecting the Sweden and Finland coasts.

The project could become a “strategic piece of Northern Europe’s emerging energy architecture…A multi-utility corridor that can accommodate electricity transmission lines, gas pipelines, and future hydrogen infrastructure, alongside its primary transport function,” Sarah Vare, growth manager at the Kvarken Council, told Gas Outlook.

The Kvarken Council is a Nordic cross-border cooperation platform for three Ostrobothnian counties in Finland and the regions of Västerbotten and Västernorrland in Sweden.

As much as 90% of Finnish exports and imports move via ports, and the country shares a 1,340 km border with Russia.

Disruption in maritime shipping in the Baltic Sea could heavily impact Finland and to a smaller extent, Sweden, she said in a presentation during Energy Week in Vaasa, one of the main energy clusters of the Nordics.

“A corridor of this type provides important redundancy and resilience for the Nordic power system, enabling a stronger and more flexible link between Finnish and Swedish energy networks,” she continued.

“This is especially significant as offshore wind, green hydrogen, and new industrial loads expand across the northern Nordic region.”

The infrastructure would allow movement of people and goods but also the secure transfer of energy thus “reducing exposure to maritime vulnerabilities and creating long-term synergies in electricity and future hydrogen markets.”

“Energy transmission across the Kvarken is considered a strategic asset for both countries, enabling bidirectional flows depending on seasonal surpluses, market conditions, or system stress.”

As Finland increases nuclear generation and strengthens its wind capacity, and as Sweden modernises its grid and industrial base “the corridor forms part of a future northern backbone for a more integrated Nordic–European energy system.”

Against that backdrop, the Middle East crisis is accelerating the need for secure alternative routes between Finland and its Nordic neighbours, she added.

“The crisis is functioning as a de facto accelerant for the energy transition,” she said, with high fossil fuel prices, constrained LNG markets, and renewed awareness of geopolitical risk pushing governments across Europe to speed up deployment of domestic renewables, reinforce transmission grids, and invest in new energy storage and hydrogen solutions.

“The more unstable global fossil markets become, the stronger the economic case for clean domestic generation and cross-border integration.”

Finland is particularly well-positioned to benefit from this accelerated transition thanks to its reliance on nuclear power and wind energy for power generation.

Fossil fuels account for only 30% of total energy consumption, with the almost totality of electricity generation being fossil-free.

While natural gas has only a marginal role, Finland has focused in recent years on transitioning away from Russian gas through the deployment of the Inkoo FSRU, which began operating in 2023, as well as imports through the Hamina LNG terminal.

Commenting on the strategic role of the Inkoo project for both Finland and Estonia, Estonian ambassador Janne Jõesaar-Ruusalu said the Russia-Ukraine crisis has highlighted the need for further collaboration between Baltic and Nordic countries on energy.

“The best energy security policy includes progressive climate and energy policy and reducing imports of fossil fuels,” she told the Energy Week conference in Vaasa.

International cooperation should also focus on countering the activity of Russia’s shadow fleet which seeks to bypass sanctions, she said.

The “ongoing crisis in the Middle East reminds us how quickly geopolitical developments can ripple through energy systems,” she added.

Protection of critical underwater infrastructure in the Baltic Sea is another key area of international cooperation between countries as the “Baltic Sea has become one of the most interconnected regions in Europe…Safeguarding that is part of (our) collective (energy) security.”

Intervening at the same event, Belgium’s ambassador to Finland, Karel Tousseyn noted that Europe is now pursuing a dual strategy of renewables as the backbone of its energy system with nuclear as a “stabiliser” and is targeting deployment of small modular reactors.

“Europe must be able to rely on itself” for energy, he said.

Belgium is also building the world’s first artificial energy island, the Princess Elisabeth Island in the North Sea, which will serve as a power hub connecting offshore wind farms with electricity network in Belgium and neighbouring countries.

(Writing by Beatrice Bedeschi; editing by Sophie Davies)