Blog 5 min read 20 July 2022

What Sweden’s and Finland’s NATO Memberships Mean for Companies

On June 29, Sweden and Finland were invited to join the North Atlantic Treaty Organization (NATO). While the national parliaments in NATO’s current 30 member states have yet to ratify the membership, the invitation to the two Nordic states marks a development few could have imagined just months ago. For more than 200 years, Sweden has made neutrality – or at least independence and aversion to military alliances – into a kind of state religion.

Yet the Russian invasion and brutality in Ukraine changed all of that, causing the public and politicians in Finland and Sweden to rethink their non-aligned status. Becoming part of NATO is now seen as necessary to protect and defend oneself from the Russian bear trying to tear the neighborhood to pieces.

The deal is, however, far from done. It would be naïve to overlook the possibility that new hindrances could come up during the ratification process. But anything short of the two states joining NATO at some point in autumn or next year would be cataclysmic.

As members, the two states are likely to find the transition smooth going, in contrast to their entry into the European Union in 1995. Sweden joined the EU somewhat reluctantly: the Swedish public was divided over entering the Union, and even staunch EU supporters in the country still tend to focus on the cooperative union's shortcomings. Nonetheless, Sweden is arguably the most disciplined member state in the EU, largely following and swiftly implementing its common decisions. Over time, Swedes have also grown more affirmative in their embrace of European cooperation. A similar experience is expected as Sweden enters the NATO alliance.

But what will a Swedish and Finnish NATO membership mean for companies? The answer to the question is twofold: one focusing on long-term issues, the other on the short term.

Long term: Few major implications, but a natural fit for a free and open global economy

Sweden has a fairly strong defense industry – it is the world’s 13th-largest exporter of major arms – that would probably benefit from a membership. Some other limited exceptions may exist, but unlike the European Union, which is to a large extent based in economic cooperation, NATO is a defensive alliance. As such, NATO membership is unlikely to have much impact on business.

That said, the national security interests of both Sweden and Finland are tied to NATO and the West. Establishing NATO membership serves to strengthen stability for both countries in the long run. That stability contributes positively to the business and investment climate in Sweden and Finland.

Indeed, few other economies rely as heavily as Sweden and Finland on a free and global economy; their businesses are dependent on export to larger markets abroad. Consequently, geopolitics matter a great deal. It is in companies’ best interests to be able to operate in a world and a free market where openness, rule of law, and democracy prevail. Given that the interests of NATO also lie in a free and stable geopolitical environment, their interests overlap, and the advantages of the two countries joining the NATO alliance become obvious.

On a symbolic note, Sweden and Finland strengthening political ties with other Western societies may also deepen informal economic ties. It may open new opportunities for cooperation and trade with companies in these markets.

Short term: Cyber and hybrid measures may target companies

Analysts widely agree that the period when the NATO applications are pending – from mid-May, when the countries formally declared their intent to join the alliance, up to the point when membership is approved – is a time of heightened national security threats. Those dangers are not likely to be of a conventional military nature. Rather, disinformation, sabotage, and cyberattacks targeting governmental actors and businesses alike pose the most credible threats. If someone wishes to harm Swedish and Finnish interests, a cyberattack is an easy way to do that: the two nations are some of the world’s most digitalized economies, but they do not rank as high within cybersecurity.

For example, the number of ransomware attacks targeting Swedish companies increased by 26% in 2021, according to a report from the IT security provider Truesec. Sweden is at the top among the most vulnerable countries to cyberattack. Companies will need to strengthen their preparedness.

A widely reported story from Moscow this spring tells of another challenge that may lie ahead. A Russian poster campaign from an unspecified sender accused several famous Swedes of being Nazis – one of the accused being children’s book author Astrid Lindgren. Last week, the story went ahead, as Lindgren’s Pippi Longstocking was portrayed as a puppet controlled by the US.

This started to occur even before Sweden and Finland had applied for NATO membership. According to experts, additional actions can be expected from Russia. Many Swedish and Finnish companies have voluntarily ended business ties to Russia following the war. While that is probably the correct response on the part of business, such actions turn them into active participants in the eyes of Russia. The risk exposure becomes greater.

Seen from this perspective, it is maybe less surprising if, and when, Russian propaganda refocuses its ire from historical celebrities towards well-known Swedish and Finnish corporate brands. The late Ingvar Kamprad – founder of IKEA - has already been mentioned in the propaganda campaign, most likely because of IKEA’s strong brand recognition and credibility in Russia.

False rumors, spread on the internet and in social forums, can have harmful consequences for companies well beyond the borders of Russia. Companies therefore must have a strategy to prevent and counteract fake news in social media. It is possible to turn around fake news and rumors by being proactive and connected.

That is the case even if it’s not the company that’s being targeted, but rather its home country. In recent years, Swedish companies have competed in world markets by using their Swedish heritage as a basis in brand building. Sweden as a country has come to be associated with innovation, sustainability, quality, and design. Those associations resonate with consumers all across the world.

The NATO accession process may turn out to be a bumpy ride for Swedish and Finnish companies in the short term. It will certainly be a complex journey, not least because it is a situation few of us have been able to prepare for. But the tools we’ve used in other areas and at other times will prove useful to us here, as well.