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Economic security

The aim of the activities of KAPO in ensuring economic security is to prevent economic pressure that could damage the security of the Republic of Estonia. These pressures may include dependence on foreign markets, suppliers, technologies, capital or labour, as well as the vulnerability of infrastructure to the activities of foreign investors. Naturally, we do not consider the source of the threat to be the European Union and NATO partner countries. The economic sectors exposed to the greatest security risks continue to be energy, transport (including transit) and IT, which are the focus of our work. We have been writing about economic security in our annual reviews since 2005. The threats and risks remain largely unchanged. Their intensity changes in time and space in tandem with economic cycles. While we have highlighted China as a threat in our previous annual reviews, it has now become more visible in the global economy, in the EU and in Estonia. Russian capital has become more hidden because of the extensive use of third-country legal entities and companies. In matters of economic security and money laundering, it is important to identify the actual beneficiary of an entity. So we cannot be sure by looking at statistics alone that investments actually originate from EU member states and not from countries that do not share our values.

  • For years, Estonia has been striving to increase its energy independence, along with its friendly neighbours. Estonia’s situation has changed: previously a producer and exporter of electricity, it became a net consumer for the first time in 2019. This means that we have started buying electricity from outside Estonia, not consuming locally produced power. In terms of continuity and security of supply, this entails risks of dependence on external connections and on electricity produced elsewhere, which could jeopardise energy security.
  • The most important project in the transport sector is Rail Baltic. For large-scale infrastructure projects, we assess the potential risks of corruption as well as the broader security perspective. Infrastructure is essential for the functioning of vital services in the country and for cooperation with allies. Together with Estonian and foreign competent authorities, we work to prevent, detect and counter these risks. The strategic plan sees the Rail Baltic project as part of a larger EU transport infrastructure development. Representatives of the People’s Republic of China have also expressed interest in Rail Baltic as a new transport option. The aim of China’s Northern Silk Road49 is to establish a land connection from a northern Norwegian port by rail to Finland, a Tallinn–Helsinki tunnel and the Rail Baltic railway to Central Europe. In this context, it is important for the countries where the infrastructure is located to protect the interests of their nation and people in carrying out these projects. This means taking into account economic, legal, security and political interests and values.
  • International sanctions have  been imposed on countries or regimes that threaten peace and security. Russia has not changed its destabilising actions against Ukraine and sanctions remain in place. Extremely wide-ranging international sanctions were imposed to ensure the integrity, sovereignty and independence of Ukraine, and to respond to the illegal annexation of Crimea and Sevastopol and Russia’s destabilising activities. The sanctions cover economic resources, finance, and the import and export of weapons. KAPO’s task is to prevent and investigate criminal violation of international sanctions. KAPO cooperates with the ministries and agencies responsible for the implementation of international sanctions.
  • Foreign investment helps  boost productivity and speed up income growth. Aside  from the positive effects, it should not be forgotten that foreign investment can have its downsides. Foreign investment planned or to be made in any sector of the economy must be prevented if it relates directly or indirectly to persons or companies on the sanctions list. These must not be the actual beneficiaries of the investment. If they were, the investment might generate economic benefits in the short term but in fact constitute an activity damaging to security. Understandably, Russia is trying to question the appropriateness and effectiveness of the sanctions. From a security standpoint, it is important to identify and prevent foreign investment that threatens our strategic assets, critical infrastructure and supply chain. Defence and security technologies and financial intermediation remain sensitive areas in terms of security. Together with its cooperation partners, KAPO monitors such investments when they are related to countries that seek to undermine Estonia’s security. In Estonia, it is necessary to discuss the legal bases for screening50 foreign investments, taking into account both security and investment-promotion principles. When screening foreign investments, it is important that our responsibilities and opportunities are similar to those of the EU’s neighbours, to prevent unequal competition in investment or security vulnerabilities. Legislation must provide a framework to prevent Estonia becoming a haven for dangerous foreign investment.