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BACKGROUND: War reparations proved beneficial for Finnish economic development

By Marko Taivalkoski

By the time the eight-year effort was over, Finland had delivered 226.5 million dollars worth of war reparations goods to the Soviet Union.
   
The consignments included electric motors, pumps, and valves - mostly products of the engineering industry. Industrial centres of the Soviet Union had suffered extensive damage during the war, and the country needed all of the extra material that was available.

At first the Finns saw the demand
that the war reparations include engineering products as malicious and vengeful: at the time Finnish industry mainly focused on wood processing.
   
Later things started to look different, as it became generally recognised that Finland had actually profited from the demands.
   
Paying the war reparations meant that capital, labour, and technical know-how had to be diverted to the metals industry, and this helped speed up what proved to be a beneficial structural change in industry.
   
The Soviets imposed heavy monetary penalties for late delivery: five percent a month of the value of the whole delayed consignment.
   
Initially the penalties were paid in full, but later the Soviets relented and started rounding the numbers downward. In the last five years of the war reparations the Soviet Union stopped charging the penalties for the delays, and the total amount was ultimately less than a million dollars - less than half a percent of the total value of the war reparations.

The Soviet Union made skilful use
of the reparations in its efforts to influence Finnish domestic politics. When men that were to Moscow's liking rose to the Finnish leadership, the pricing of the war reparations goods was re-evaluated in Finland's favour.
   
The signing of the Treaty on Friendship, Cooperation, and Mutual Assistance in 1948 was rewarded by reducing the remaining reparations by half.
   
The rapid postwar recovery of Finland's exports and loans from the West helped Finland complete its war reparations.
   
A loan granted by the United States strengthened Finland's basic economic structure in a way that made it possible to efficiently steer the country's resources toward production for the war reparations. The Soviet Union did not object to Finland's borrowing from the West, because it was important for the Soviets for Finland to succeed in its effort and not cause political difficulties.
   
The last train carrying war reparations goods was dispatched with a small ceremony in the west coast city of Pori in early July 1952. The steam locomotive crossed the border at Vainikkala on August 30 at 2:46 PM, pulling behind it 23 carriages of goods.

A few minutes after crossing
the border, train driver Leo Salosaari stopped the train, marked with Soviet insignia, at Lushaika station, and conductor Erkki Olkinuora handed the papers to Soviet officials - a move which marked the end of Finland's war reparations obligations.
   
On the following day Helsingin Sanomat wrote: "But in one respect this August will certainly raise our spirits: this month we have completely paid off our massive war reparations."
   
"And it is, friends and debtors, a most wonderful achievement, worthy of celebration not only by the leaders of Soteva (the authority set up to deal with the war reparations effort), and gives cause to breathe a deep sigh of relief."

Helsingin Sanomat / First published in print 30.8.2002

More on this subject:
 Last war reparation train crossed Finnish-Soviet border 50 years ago
 BACKGROUND: War reparations proved beneficial for Finnish economic development


MARKO TAIVALKOSKI / Helsingin Sanomat
marko.taivalkoski@sanoma.fi

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