Following Russia’s invasion of Ukraine in February, the debate around NATO membership has escalated in Sweden and Finland – the only Nordic countries not currently members of the alliance. Both countries have long histories, but very different relationships, with Russia as well as modern – though not huge – defence capabilities. Swedish and Finnish NATO membership would have significant geopolitical and defence implications. It would shore up NATO’s presence in the Baltic region and double the length of NATO’s direct border with Russia. The associated increase in defence spending (which both Sweden and Finland have already pledged, separate to NATO membership discussions) would also open up opportunities for Western defence companies to invest in two countries with established and technologically advanced industries.  

All quiet on the Eastern front? 

It now seems highly likely that both countries will apply to join NATO. They have had different reasons for not being a NATO member to date. Sweden has long positioned itself as neutral in European and global conflicts. Following the Second World War, Finland developed a unique political and diplomatic relationship with Russia based on mutual respect and non-interference. Russia’s invasion of Ukraine has forced both countries to fundamentally rethink their geopolitical and defence positions and has shifted public opinion in favour of NATO membership in a matter of months.   

On 12 May, the Finnish President and Prime Minister announced their support for membership. In April, a special Parliamentary Committee was set up to follow the process with a mandate to decide on whether or not to proceed with the application for membership, virtually with a day’s notice.  

 Sweden is also moving at pace, but the ruling Social Democrats are divided. Unlike Finland, where national security, defence, and the approach to Russia, have been cross-party issues for decades, there has been little bi-partisan dialogue on defence in Sweden. The Swedish Government has ramped up its international diplomacy in recent weeks with the Prime Minister and Foreign Minister travelling to the US, Germany and Canada. And UK Prime Minister Boris Johnson visited both Sweden and Finland this week. This increased engagement could be seen as Sweden building support for a potential bid and wanting to get confirmation that NATO would support Sweden (militarily) during the bid process should Russia retaliate. But there remains internal disagreement within the Social Democrats.  

From a geopolitical and geographical standpoint, Swedish and Finnish NATO membership would “complete” NATO’s presence in Northern Europe. NATO forces could be stationed on the Swedish island of Gotland, which would secure and stabilise the Baltic Sea. It would also reinforce NATO’s presence in the Arctic where both Russia and China are increasingly present. Overall, it would also bolster the two countries’ national security and defence situations, and therefore strengthen the investment climate.  

Pursued by (Russian) bear 

In response to these moves, Russia has threatened Sweden and Finland with ‘serious military consequences’. No one expects Russia to turn a blind eye. It would be a significant policy setback and would undermine the narrative for the ‘special mission’ in Ukraine. It will also increase Putin’s perception of Russia’s encirclement. But Putin will understand that the more he threatens the two countries, the higher the support for their NATO application.  

 In general, the time between applying for and becoming a NATO member takes between 18-24 months. In Sweden and Finland’s case this raises a fundamental question of granting them a special security guarantee for that period, or indeed fast-tracking the process, in case Russia poses direct threats or attacks them. But it is difficult to imagine that NATO would stay passive should Russia attack Sweden or Finland considering the strategic importance of the Baltic region. The recent military exercise in Finland with participation of NATO-contingents, including UK and US heavy armoured battle groups, could be part of such a step to deter Russia from attacks and make the Finns feel more secure in the interim. And this week Boris Johnson signed security pacts with both countries pledging UK support – which may include military means - against any Russian threats.    

 There is also a question as to whether some NATO members might block or use the application process to obtain counter-concessions. This is unlikely and we expect broad approval for a Swedish and Finnish application. But some traditionally Russia-friendly countries like Turkey, Hungary and Montenegro may be less supportive. And most recently, the Croatian President said he would not support Swedish and Finnish applications – though this is because of complex domestic Croatian politics. But with the US strongly in favour, Croatia is unlikely to have the political strength to block the application, although it could delay the process. In that case some heavy lifting will be needed by the US, EU, UK and other influential NATO members. 

Defence spending on the rise 

Since Russia’s invasion, both Sweden and Finland have pledged to increase defence spending significantly – with Sweden committing to raise it to 2% of GDP as soon as ‘practically possible’. The countries’ defence capabilities are efficient and highly modernised, but insufficient to withstand a Russian attack in the long run following years of cutbacks. Like other NATO members, they will need to increase capabilities and further integrate them into NATO standards – though the latter is expected to be relatively straightforward thanks to years of cooperation. Sweden and Finland will also need to adhere to NATO standards in relation to defence procurement, communications, strategic surveillance, intelligence, data exchange, and cyber protection. 

 Both countries have important national defence industries covering planes, naval ships, submarines, armoured vehicles, light arms, missiles and ammunition. Key companies include Saab, Volvo Defense, Scania, SAKO and Nammo. Overall, these companies are supportive of NATO membership as it would expand their own exports of arms and weapons and open new investment and cooperation opportunities. But in some areas, they may also need to buy NATO-conforming equipment from foreign industrial producers – particularly in the US – which would open new markets for Western defence companies. 

Key upcoming dates 

Author

Maria Tjader Manager joined Flint in 2019 and supports clients in the tech, energy, life sciences and FMCG sectors to understand and respond to political and regulatory developments. She has over five years’ experience in advising business on UK and global political and policy risks and developments. 

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