Sanctions and Quota Cuts Deepen East Finnmark's Economic Downturn
Fishing boats out for skrei cod in the Arctic. Source: iStock.com/piola666
Kimek CEO Eirik Wikan has many blank pages in his order book. Across East Finnmark, sanctions against Russia and cuts to fishing quotas are weighing on the economy. The county mayor and the Confederation of Norwegian Enterprise (NHO) are calling for measures to reverse the trend.
The autumn sun hangs low over Kirkenes harbor, creating an idyllic scene, but the calm surface masks grim figures. Marine industries are feeling the impact.
“They have suffered massive losses,” says Kristina Amalie Hamre, general manager of the Kirkenes Business Association.
Only Remnants Remain
Activity was bustling at the Henriksen Shipping site right up until February of 2022.
Today, activity has dropped by more than 90 percent, and most of the floating docks have been sold.
The sanctions hit the business community in Sør-Varanger with full force after the Ministry of Foreign Affairs issued a “reminder” in May 2023 clarifying how the sanctions applied to services for Russian fishing vessels. Many local businesses viewed the clarification as a tightening of the rules.
The Kirkenes Business Association has now produced a report showing that inflation-adjusted private-sector revenue in Sør-Varanger fell by about NOK 160 million from 2023 to 2024.
Abrupt Halt, but a Quick Restart
Kimek was established in the mid-1980s to repair Soviet—and later Russian—fishing vessels. Its establishment was part of the restructuring Sør-Varanger municipality underwent as operations at the mining company Sydvaranger were scaled back.
Then came the abrupt halt in 2023, a consequence of Ukraine crisis.
“We had a summer where things were very quiet,” says Kimek CEO Eirik Wikan.
“Fortunately, we secured a contract to build well-control modules for Equinor. We worked on that through May 2026.”
Now, he is uncertain whether there will be more work in the near future.
“We haven’t received any new assignments from Equinor, and that’s where things stand. We prided ourselves on being able to pivot, but we were standing on one leg. Then we shifted our weight to the other leg, but now that one is starting to give way, too.”
Natural Growth
There is growth in some sectors.
“This applies to both tourism and construction. Value creation in these areas has increased since 2020. Of course, we have to remember that 2020 was an exceptional year because of the coronavirus pandemic. Given that context, it is natural that tourism has grown,” says Hamre.
Quota Cuts on Top of Sanctions
The consultancy firm Orinor prepared the report on behalf of the Kirkenes Business Association. It also examined the situation across East Finnmark, where inflation-adjusted private-sector revenue fell by about NOK 1.4 billion from 2023 to 2024.
In coastal municipalities, reduced fishing quotas have compounded the effects of sanctions. The report identifies quota cuts as the most important factor behind the regional decline, particularly for the fishing fleet and onshore processing industry, while sanctions have added pressure elsewhere.
“Their financial margins are shrinking. This means they have less money to spend in their local communities. It creates ripple effects for the entire community,” says Hamre.
Switching to Videos and Online Sales
Several businesses are already adapting. One of them is the clothing store Me & Me, which had to restructure when the coronavirus pandemic left the shop without customers.
“That was probably the biggest shift for us, though naturally, we miss the Russian customers. We certainly lost some revenue when they stopped coming. However, the restructuring process we were already undergoing helped us pull through,” says general manager Vibeke Berntsen.
Part of that restructuring involves selling clothing through online videos.
“We hold weekly broadcasts and reach customers all over the country. That is arguably the biggest development—or shift, if you want to call it that.”
The electronics company Barel previously had production facilities in both Murmansk and Kirkenes. Production has now been moved to the Norwegian side of the border.
CEO Bård Gamnes notes that the company’s situation differed from that of other businesses in Sør-Varanger and East Finnmark. Barel’s market is not in Russia but elsewhere.
“It is easier to manage in terms of turnover and future revenue. Nevertheless, moving 40 jobs from Murmansk to Kirkenes has been a demanding journey.”
Anastasija Orlova is one of the employees who has been part of the transition. She is pleased with the move to Kirkenes.
“It’s a great place to work, with friendly colleagues. It’s a peaceful place,” she says.
Taking Action, but Missing a National Initiative
Finnmark county mayor Hans-Jacob Bønå (Conservative Party) says the county municipality is taking steps to mitigate the effects of sanctions and reduced fishing quotas.
“We have established a quota fund for fishers.”
The county also has recruitment and coastal development funds.
At the same time, Bønå would like to see a greater response from central authorities.
“There is a lot of focus on Finnmark and the challenges we face up here when the Storting or the government visits. We don’t really see much happening afterward.”
That is why he believes Finnmark lacks a national initiative. Bønå has advocated applying the Svalbard tax model in Finnmark, but he says tax incentives alone are of little use if jobs are disappearing.
“It is really a matter of creating new jobs and ensuring successful recruitment to Finnmark to handle new tasks. This requires creating favorable conditions for the business sector and offering tax incentives to companies as well.”
Four Demands
Kristina Amalie Hamre, general manager of the Kirkenes Business Association, has four demands aimed at supporting positive development in East Finnmark: better flight connections, a more reliable power supply, state investment to restart the Sydvaranger mine, and a transition package for industries affected by sanctions.
“The sanctions are national, and we support them fully. At the same time, we must acknowledge that they have hit us hard here in Sør-Varanger.”
Contracts Must Go to Local Firms
Geir Håvard Hanssen, regional director for the Confederation of Norwegian Enterprise (NHO) in the Arctic, wants the Armed Forces to play an active role as a customer for businesses in Finnmark.
“When the Norwegian Defence Estates Agency invests billions in Finnmark, we must ensure that these investments boost business activity in the region. Short, regional value chains strengthen both emergency preparedness and business development in East Finnmark. We cannot let defense investments in Finnmark go exclusively to companies based in other parts of Norway. We need to involve the regional business community so they can participate in these investments,” says Hanssen.
Source: NRK