The Swedish Arms Industry

Despite nominal neutrality and pacifist branding, Sweden is one of the world’s largest arms exporters. The country’s defense industry is seeking to expand at home and abroad.

Submarine production at the Saab shipyard in Karlskrona, Sweden in 2018. Photo from Saab AB. Source.

Sweden is internationally regarded as an exemplar of social democracy, European pacifism, and the Nordic model of development, which prioritizes a comprehensive welfare state, collective bargaining, and high public sector employment. Swedish government ministers have described the country as a “humanitarian superpower,”¹ a self-image that dovetails with egalitarian domestic policies and Sweden’s historical military neutrality. It is perhaps then surprising that, despite a relatively small population of just over 10 million people, Sweden is one of the world’s largest exporters of weapons. In 2014, it was the third largest weapons exporter per capita at $53.1 per capita, behind only Israel at $97.7 and Russia at $57.7.² From 2009 to 2019, it was the world’s ninth largest arms exporter in U.S. dollars with a cumulative value of $14.3 billion.³ In the same time period, it ranked eighth in arms as a percentage of total exports.⁴ Swedish factories produce not just small arms, but advanced systems like fighter aircraft, missiles, tanks, submarines, corvettes, and air-defense platforms.

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This remarkable output of weapons would seem to indicate that Sweden’s nominal tradition of neutrality and non-alignment is instrumental, rather than coming from a sincere ideological commitment to pacifism. This is corroborated by the Swedish state’s defense and intelligence cooperation with foreign countries. Unlike most of its European neighbors, Sweden is not a member of the U.S.-led North Atlantic Treaty Organization (NATO), though Sweden has participated in military exercises with NATO and has joined the European Union’s Common Security and Defense Policy (CSDP), a framework for increasing military integration between EU member states. Sweden has contributed troops to the NATO-led interventions in Bosnia, Afghanistan, and Libya. During World War II and then the Cold War, Sweden’s primary military threats came from Nazi Germany and the Soviet Union, respectively. Unlike its Nordic neighbors, Sweden successfully avoided occupation by Germany and military conflict with the Soviet Union. Neutrality played a key role here, giving Sweden the affordances to make compromises first with Germany and then with the United States, in exchange for both implicit and explicit military assistance against the USSR. Today, while Sweden continues to be essentially fully aligned with the U.S. in practice due to the threat of Russian aggression, neutrality allows Sweden to avoid U.S. pressure, through NATO, to disarm or dismantle its domestic defense industry.⁵

Sweden’s arms industry is a consequence not only of Sweden’s neutrality, but also of its corporatist economic model. Contrary to its branding as a highly egalitarian nation, Sweden’s economy is defined by concentrated wealth at the very top, where a small number of influential family dynasties effectively own the entire economy. The most influential of these, the renowned Wallenbergs, are the biggest economic players in Sweden's defense industry. While Western countries nominally define themselves by individualism and meritocracy, Sweden highlights the viability of dynastic, family-oriented elites in creating and maintaining powerful industrial societies. Sweden is in fact an exemplar of a unique European model of governance and political economy, but one that cleverly and counterintuitively wraps elite-led industrial strength intended to support military capacity in an egalitarian and pacifist packaging.

The Policy of Ambiguous Non-Alignment

A Swedish Visby-class corvette takes part in NATO exercises in 2020. Source.

Sweden has followed a policy of neutrality and non-alignment since the 19th century. This stance persisted even during World War II, when Sweden collaborated with both Germany and the Allies and managed to avoid military occupation or warfare. After the war, Sweden emerged as one of the most prosperous nations in the world, with an estimated GDP per capita in 1950 higher than any European country except Switzerland.⁶ With Germany defeated, the newly-expanded Soviet Union, which now bordered Sweden across the Baltic Sea, became the country’s biggest security threat. Non-alignment created the imperative to develop a strong domestic armaments industry and the Swedish government undertook a major effort to expand its conventional capabilities and lay the groundwork for acquiring nuclear weapons. 

The country started research into nuclear weapons early in 1945, and by 1954, had developed its first experimental reactor for the production of plutonium, a key fissile material for nuclear weapons.⁷ By 1955, it had developed drafts for Swedish-made nuclear warheads. General Nils Swedlund, who was Supreme Commander of the Swedish Armed Forces from 1951 to 1961, was perhaps the country’s strongest proponent of developing nuclear weapons and was also instrumental in planning secret resistance operations in the event of a Soviet invasion. Rather than striking at population centers from long range, the Swedish rationale was to develop tactical nuclear bombs that could be used against military and infrastructure targets to hinder an invasion. The USSR in 1950 had a population more than 20 times larger than Sweden’s, so nuclear bombs were seen as a major force equalizer for the small country. Sweden only definitively chose non-nuclear status when it signed and ratified the nuclear Non-Proliferation Treaty (NPT) in 1968 and 1970 respectively.⁸

The decision of Sweden’s long-serving Prime Minister Tage Erlander to renege on the bomb was heavily influenced by Sweden’s informal alliance with the U.S, which had declined to provide nuclear expertise to Sweden and strongly opposed Sweden’s nuclear weapons program. Sweden could not access highly enriched uranium due to strict U.S. export controls, and so opted for plutonium produced from a military reactor as the key fuel. But Swedish scientists and engineers saw enriched uranium as critical to develop commercial nuclear energy, as opposed to less efficient natural uranium. In 1956, the United States agreed to provide Sweden with enriched uranium, in exchange for assurances that it would not be used for military purposes. Further reductions in export restrictions allowed Sweden to accelerate its commercial nuclear industry while also giving the U.S. more leverage to curtail unwanted military development. In contrast, France was able to circumvent American enriched uranium restrictions during this time and successfully conclude its own nuclear weapons program. Sweden, unlike France, did not aspire to be a great power.

Aside from offering commercial nuclear technology to gain leverage, the U.S. also offered military assistance in conventional armaments to improve Sweden’s defense forces. In 1952 and 1962, two agreements were signed between Sweden and the United States regarding cooperation in military technology. This included Sweden manufacturing U.S. missile systems designed by Hughes Aircraft and Raytheon under license, including the Falcon and Sidewinder air-to-air missiles and the Hawk surface-to-air missile.⁹ There were sound strategic reasons for abandoning the program as well. Nuclear weapons provide deterrence, but can also make a country a priority target in the event of a great power conflict. Rather than commit to a contingency strategy of fighting a likely suicidal war with the USSR, Sweden opted instead for a deeper informal alliance with the U.S.

Swedish neutrality has therefore been more de jure than de facto since at least the early Cold War. The consistent trend in Swedish defense policy has instead been maneuverability, and this is applied to its European neighbors today. Unlike French, German, and even EU leaders, the country is explicit in its opposition to the idea of a “European Army.”¹⁰ While it has generally opposed Franco-German pushes for more conventional integrated armed forces, in 2014 it joined the British-led Joint Expeditionary Force (JEF), a smaller and more ad hoc partnership for defense cooperation, including the United Kingdom and all Northern European countries. Sweden is technically a member of the Common Security and Defense Policy (CSDP) and the Permanent Structured Cooperation (PESCO) of the European Union in the area of defense and security, but prioritizes it for crisis management cooperation rather than military integration. Swedish military representatives have even voiced opposition to Sweden becoming a net-contributor to PESCO.¹¹ It is viewed as just one of many multilateral and bilateral agreements with actors like the U.K. and the Nordic countries. Sweden desires a security architecture where the EU is secondary to NATO and where it can maintain maximum influence over its two domains: territorial defense and military exports. 

The Swedish defense industry also has a complex relationship with the EU. The European Defence Fund (EDF) is a Brussels-led fund intended to spend €8 billion between 2021-2027 on defense R&D and procurement under the CSDP.¹² This fund was originally meant to be allocated strictly to companies which are established in the EU and are not subject to control by a third country. Swedish officials complained that this discriminates against Swedish defense firms, which rely heavily on American, Norwegian, and British stakeholders. The regulation for third parties was subsequently eased so as to allow for countries that “ensure the security and defence interests” of the EU.¹³ This language in effect allows British and American companies to utilize the fund, undermining the push for a fully independent European military industrial base. The posture of Swedish officials and companies in relation to European defense shows the conflicting interests that make the European Union less than the sum of its parts in security and on the international stage. Sweden, like many smaller countries, has no interest in an independent European security architecture.

Despite its EU membership and absence from NATO, Sweden prioritizes its relationship with the United States, which has also been the largest beneficiary of Swedish military equipment since 1990. In exchange, besides licensing agreements, the U.S. has sold American hardware to Sweden. In 2017, an agreement was made for U.S. defense giant Lockheed Martin to supply Sweden with four Patriot medium-range air defense systems by 2022 for €4 billion. The purchase of Patriot missiles was noteworthy in that it came at the expense of Franco-Italian manufacturer Eurosam, which offered a similar system.¹⁴ Sweden’s non-committal position gives it the best of both worlds, particularly when it comes to exports of armaments. It enjoys an implicit alliance with NATO via EU membership and shared equipment interoperability, while also being officially neutral and able to sell to countries that don’t want to align fully with the Western bloc. While the 2022 Russian invasion of Ukraine has created pressure on Sweden to join NATO, Swedish leaders have stated that this would destabilize the Baltic.¹⁵ NATO membership would only formalize an existing security arrangement, which would reduce Sweden’s diplomatic and security maneuverability. 

The Wallenberg Family Drives Sweden’s Arms Industry

The Saab logo above a company building. Photo from Saab AB. Source.

Today, the bulk of Swedish defense revenue, and particularly exports, is consolidated by the publicly-traded Saab AB, which currently uses the tagline “it’s a human right to feel safe.” With 18,000 employees, it is responsible for aircraft, air defense, missiles, radar, and shipbuilding.  In 2021, it relied on defense markets for 92% of sales, totaling $3.9 billion.¹⁶ Swedish military procurement has historically been consolidated around a small number of suppliers. In 1973, the four biggest companies made up 72% of all procurement expenditures.¹⁷ These were the state arsenal FFV-Carl Gustaf, plus Saab-Scania, Volvo, and Bofors. Importantly, and unlike many other European countries including France, Swedish defense companies are not heavily nationalized. During the 1990s, facing a drawdown in funding, many Swedish defense assets were sold to British and European competitors.¹⁸ Moreover, Saab itself is largely controlled by the influential Wallenberg family, which owns nearly 40% of company shares and nearly 50% of the company’s voting rights.¹⁹ The Wallenbergs have been historically influential in Sweden’s defense procurement. In 1973, companies owned by them produced 39% of all military equipment delivered to the Swedish armed forces.²⁰ With Saab dominating Swedish defense procurement today, their influence in defense is at its highest point. 

Other major Swedish defense companies have foreign ownership. In 2018, divisions of Saab accounted for 75% ($2.3 billion) of revenue from sales of military equipment among the 15 largest Swedish defense companies, to both domestic and foreign recipients, but another 12% ($384 million) was accounted for by divisions of the British BAE Systems, which owns the historic Swedish defense manufacturers Hägglunds and Bofors.²¹ Germany’s Volkswagen owns Scania, Sweden’s premier manufacturer of trucks and buses. German engineering firm IBD Deisenroth owns Åkers Krutbruk Protection AB, a manufacturer of protection equipment for armored vehicles. French energy materials company Eurenco, Norwegian ammunition company Nammo, and British defense contractor Qinetiq all have Swedish subsidiaries. Importantly, while these companies have foreign ownership, the manufacturing base has largely remained in Sweden. These major players are supplemented by smaller private domestic companies such as Sepson, which produce vehicle-mounted winches for heavy-lift logistics. 

Figure 1. Value of total invoiced military equipment domestically and abroad in 2018 for top Swedish defense companies. Source: SIPRI.

As the major national champion, Saab has begun to attain greater control over the Swedish defense industry,  recouping some of the sense of national ownership following the globalization of the 1990s. In 2010, the Wallenbergs bought BAE Systems’ shares in Saab following a protracted investigation into allegations of bribery against BAE Systems by Britain’s Serious Fraud Office (SFO), which brought Saab into disrepute.²² Caught up in bribery accusations for deals involving its Gripen fighter aircraft, Saab blamed its British ownership.²³ This provided a convenient pressure point for the Wallenbergs to bring back more of Saab under Swedish control. In June 2014, Saab announced that it would acquire the Swedish shipyard and naval vessel builder Kockums AB from German industrial giant ThyssenKrupp. This transaction, valued at a very affordable SEK 340 million (approximately $50 million U.S. dollars) brought 900 workers and significant naval shipbuilding capability back under Swedish control. This has further consolidated Saab as the largest Swedish defense actor, reversing the globalization of the industry’s ownership. Moreover, the extremely low price seems to have been the result of duress on the part of the Swedish government. The acquisition occurred just months after the Russian annexation of Crimea in early 2014 spooked the Swedish defense establishment and was preceded by a secret dawn raid by armed Swedish soldiers, who entered the Kockums shipyard to forcibly repossess materiel and blueprints after ThyssenKrupp initially refused to sell Kockums to Saab.²⁴ The reacquisition required considerable upfront investment to get the shipyard back in order, and Saab hopes to increase its profitability by exporting submarine design and production to Western countries like the Netherlands.²⁵ 

Major Successes and Failures of Defense Procurement

A Gripen fighter flies over Visby, Sweden in 2021. Source.

In Sweden, the government agency tasked with procurement for the military is the Försvarets materielverk (lit. “Defense Materiel Administration,” abbreviated FMV), which has over 3000 staff and was formed by a merger of procurement bureaucracies from each military branch in 1968. While much smaller, the FMV is comparable to France’s Directorate General of Armaments (DGA), as a unified professional bureaucracy tasked with coordinating defense procurement and planning for the entire armed forces. Sweden’s biggest domestic procurement successes have come from partnerships between the FMV and Saab, most notably in aerospace. Since the beginning of the Cold War, the air force has been the most important arm of the Swedish military, as denying air superiority to any potential Soviet or Russian invasion force would be the nation’s first line of defense. Sweden has developed indigenous manufacturing capability for fighter aircraft, avionics, and air defense. In contrast, there is no indigenous bomber, heavy air-lift, or helicopter capacity, which shows the significant slant towards a defensive military posture. At the time of the Soviet Union’s collapse in 1991, the Swedish Air Force was one of the world’s largest, comprising 425 combat aircraft in 28 squadrons.²⁶ This force structure has since been reduced to just 5 squadrons of 73 operational fighter aircraft and a further 24 for training.²⁷

The Gripen fighter is the primary showpiece of Sweden’s military industrial base and its most promising export. It is designed for defensive counter-air operations in a relatively contained theater. In 2013, the government announced it would purchase 60 Gripen E’s to form the bulk of their fighter force. The Gripen E improves on its predecessors with expanded fuel and weapons capacity, a powerful engine, an improved pilot display and radar system, and the addition of split avionics that separate flight safety and tactical applications. Being a relatively small vehicle at 6 metric tons, the Gripen is designed for short-range, line-of-sight interceptions.²⁸ For comparison, the U.S. air superiority fighter, the F-22, weighs 20 tons, while the French Rafale weighs 10 tons. A small engine and light frame means the Gripen lacks the potential range, top speed, and payload capacity of comparative fighter aircraft. It is not designed to conduct proactive attempts to gain air superiority and is inferior to other fighters beyond visual range. It is designed for close range dogfights where its light weight and avionics can tip the balance in its favor, making it a defensive fighter in principle. The Gripen’s singular engine was designed by the now-defunct Volvo Aero, highlighting how indigenous fighter development requires having a wide range of engineering competencies in place. Importantly, the Gripen has thrived in the export market. It has been sold to Hungary, the Czech Republic, Thailand, Brazil, and South Africa.²⁹ One of the key reasons for its success has been its price. At $60 million, it is about half the upfront cost of an American F-35.³⁰ Its operational cost is also estimated to be lower than comparable Western fighters.³¹

The Gripen’s reliance on electronic warfare and its need to close the distance against bombers and other encroaching aircraft requires early warning and situational awareness. This is provided by the Saab Erieye Airborne Warning and Control System (AWACS). The Erieye is a radar system which uses active electronically scanned array (AESA) technology developed by Swedish telecommunications giant Ericsson. The technology behind AWACS makes indigenous development rare. The United Kingdom canceled its domestic Nimrod AEW3 AWACS in 1986, instead buying the American Boeing E3 Sentry.³² Sweden’s mastery of radar technology via Ericsson translates into export opportunities. The Saab 340 aircraft was sold to Thailand, Greece, and the United Arab Emirates (UAE). Brazil’s own Embraer AWACS aircraft relies on the Erieye system. Pakistan has bought seven modern Erieye-equipped Saab aircraft, while Saudi Arabia operates two.³³ Erieye has also been fitted onto the Canadian Bombardier 6000/6500 business jet, with export orders signed by the UAE in 2015.

Sweden’s ground-based vehicles are primarily sourced from BAE Systems AB, the Swedish subsidiary of BAE Systems. It serves as a holding company for BAE Land Systems Hägglunds AB and BAE Systems Bofors AB. Hägglunds builds the Combat Vehicle 90 infantry fighting vehicle (IFV). With over one thousand built since 1993, this vehicle has been successfully exported to Denmark, Estonia, Switzerland, Finland, the Netherlands, and Norway, due to its reliability and track record of operating in extreme weather.³⁴ Bofors, which traces its origins all the way back to 1646, has a legacy in artillery and naval guns. Its most famous armament is the 40 mm Bofors cannon, which became widely used by the British military during the Second World War.³⁵ Today, it develops the FH77 150 mm howitzer and the Archer self-propelled artillery system. While BAE Systems acquired the artillery component of Bofors, Saab acquired the missile component and manufactures surface-to-air missile (SAM) assets which supplement the Swedish Army’s singular air defense regiment. These include the RBS 70 short-range man-portable air defense system (MANPADS) and medium-range surface-to air missile (SAM) systems in the RB 97. The country nevertheless relies on the U.S. for Patriot SAM systems for ranges beyond 40 kilometers. Bofors has specialized in anti-tank weaponry, notably the Carl-Gustaf recoilless rifle and the “Miniman” Pansarskott m/68. Saab Bofors Dynamics is responsible for designing and licensing the famous Next Generation Light Anti-Tank Weapon (NLAW), which has been well-tested in combat against Russia by Ukrainian forces in early 2022.³⁶ 

The Swedish Navy is small, with a regular force of 2900 and a reserve of 2050.³⁷ It has no blue water capability.³⁸ It does, however, possess domestically-built attack submarines and corvettes, another rarity for a nation of its size. The Gotland attack submarine, of which Sweden has three, relies on air-independent propulsion (AIP) as opposed to noisier diesel-electric or nuclear propulsion. A heat engine charges the submarine’s seventy-five-kilowatt battery using liquid oxygen.³⁹ This allows the submarine to remain underwater for two weeks at a time. The Gotland was the first submarine to implement this novel propulsion method, which was designed in-house by Kockums AB. This system can loiter in littoral theaters largely undetected. The Gotland showed its value in 2005 during a wargame in which it successfully sank the U.S. Navy Carrier USS Ronald Reagan while avoiding detection.⁴⁰ The relatively low price of the Gotland-class, at just $100 million,⁴¹ is thus very notable when compared to the upcoming Gerald Ford-class U.S. carriers, which will cost at least $13 billion each.⁴² 

The 1990s and 2000s also saw major delays in weapon systems. The Visby-class corvette is a light warship designed to operate in shallow waters and can undertake a variety of roles from reconnaissance, patrol, escort, and mine countermeasures, to more aggressive actions like anti-surface and anti-submarine warfare. It is an excellent demonstration of Swedish expertise in materials science and electronics. It is, however, the only modern corvette with no air defenses, an omission that makes it incredibly vulnerable in any realistic combat scenario. Only recently has it been agreed that the systems will receive air defense capabilities, after decades of delays. Another example of unsatisfactory procurement is the Archer artillery system. Designed by the FMV and manufactured by Bofors, the system has automatic fire control, is said to be able to set up, fire, and begin redeploying in 30 seconds and has a range of 40 km, increasing to 70 km with U.S.-made Excalibur shells.⁴³ But its complexity led to major delays. Norway’s government was a partner in the project, but in 2013 pulled out claiming non-performance of contract-terms.⁴⁴ Twenty-four Archers have been built⁴⁵ and the Swedish military is persevering to have 48 by 2025, but the two export orders for Norway and Croatia have been canceled. Every failed procurement is an opportunity cost, and if the systems cannot be exported, they amount to a significant waste in resources and time. Avoiding such costly failures will be critical as Sweden’s defense budget continues to increase.⁴⁶ 

The Defense Industrial Base Increasingly Relies on Exports 

Marcus Wallenberg (center), who serves on the board of Saab, meets with the Brazilian Ministry of Defense in 2015. Source.

Sweden’s history of arms exports is as old as its modern arms industry. In 1935, the government explicitly decided against nationalizing the Swedish arms industry so as to promote exports. Bofors, for example, exported 60% of its military production in 1979.⁴⁷ These were exceptionally high figures at the time, and today Saab relies on exports for 62% of its revenue.⁴⁸ Although Sweden has, from 2020, added $3 billion to its military budget from 2021 to 2025, foreign markets are going to become increasingly critical to sustaining the country’s industrial base.⁴⁹

The importance of exports—both military and commercial—has grown as domestic consumption slows. Sweden’s trade surplus jumped from $60 million in 1990 to $23.6 billion in 2020—from 0.02% of GDP to 4.4%.⁵⁰ From 2015 to 2019, exports as a share of the defense industry’s value⁵¹ grew from 41% to 53.5%,  from $760 million to $1.6 billion.⁵² As a result, military goods as a share of total export value have also gone up from 0.64% to 1.07%.⁵³ In the context of low to zero growth, this small but fast growing source of income is becoming critical both to Swedish finances and to its military capacity and has made Sweden one of the world’s largest exporters of weapons, both in absolute terms and per capita. Moreover, the arms industry’s growth is important not just for balancing the national budget, but for Sweden’s social democratic political economy, which finances a generous welfare state while preserving wealth inequality by relying on the revenues of capital intensive, export-oriented industries. 

Sweden’s biggest export market has traditionally been the West. From 1993 to 2020, Sweden exported $23 billion worth of military equipment, of which 9% went to the U.S. Here, exports include small arms like the Carl-Gustaf M4⁵⁴ and larger projects including Boeing and Saab’s $9 billion advanced trainer aircraft partnership, the T-X.⁵⁵ Saab’s expertise in electronic sensors has also led to it being subcontracted for radars, and the company is hopeful that the U.S might open up competition on a new AWACS order that will consider the Erieye.⁵⁶ Managing this relationship is of central importance to the defense industry, even if it means being beaten by American competitors in other defense contracts. In December 2021, Saab lost out on what could have been its largest ever deal when Finland announced Lockheed Martin as its supplier for fighter aircraft, choosing 64 F-35 As over 64 Gripens and 2 AWACs.⁵⁷ Saab’s CEO has discussed the importance of seeming more “American” by moving production, research and marketing assets to the U.S., while retaining Saab’s role as the bedrock of Sweden’s national defense.⁵⁸

A further 48% of exports went to EU, NATO, and Five Eyes countries. Nearly 40% was directed to non-Western countries, including Brazil (7%), South Africa (5%), India (5%), Pakistan (5%) and Thailand (4%).⁵⁹ Over a shorter time frame, non-Western countries have become more important. Measured by Trade Indicator Value (TIV),⁶⁰ from 2016 to 2021 the largest recipients were the U.S., Pakistan, Brazil, the United Arab Emirates, and Algeria. Sweden will also seek to take advantage of Germany’s newly rediscovered commitment to defense, with a proposed €100 billion defense budget for 2022.⁶¹ Germany’s quick purchase of American F-35s and a commitment to a joint sixth-generation fighter development with France make Gripen-related exports unlikely, and other items on Germany’s list include heavy airlift capacity and unmanned combat aerial vehicles (UCAVs). Swedish companies will likely only be able to sell smaller arms, radars, and light air defense systems in significant capacity. Demand from smaller nations could extend to additional infantry fighting vehicle orders. Swedish firms will have to be proactive  if they want to benefit from European rearmament. From 2012 to 2016, Swedish arms exports were 1.2% of the global total, but from 2017 to 2021 this fell to 0.8%.⁶² France’s defense industry, in contrast, increased its share from 6.4% to 11% in the same period.⁶³ Western markets will likely remain the primary source of military export revenue for Sweden, and particularly Saab. 

Other opportunities for Swedish export growth are the rising regional powers of Asia and Africa, who themselves lack the industrial capacity to meet all their military needs. The Gripen fighter is one of the aircraft considered for India’s massive Medium Multi-Role Combat Aircraft (MMRCA) tender. It is being advertised for its competitive pricing versus the French Rafale, but more importantly, Sweden remains a neutral party for India, another nation that officially avoids entangling military commitments. With a potential deal value of $7.3 billion, winning this tender would affirm Sweden as an arms exporting power.⁶⁴ 

The promotion of arms exports has been controversial among the Swedish public and had previously not been heavily advertised, but was discreetly run out of the FMV. In 2010, this changed when the Defense and Security Export Agency (FXM) was created.⁶⁵ FXM subsumed responsibilities to explicitly champion Swedish defense exports.⁶⁶ The purpose was to provide greater transparency on export deals. It was quickly shut down in 2015 as part of a parliamentary negotiation between Sweden’s Social Democratic Party (SDP) and their Green coalition partners. Part of the alleged reason was internal disagreement about seeking export opportunities in countries like Saudi Arabia, which had cut ties after a disagreement with the Swedish foreign minister in 2015 regarding corporal punishment.⁶⁷ The decline of the SDP in electoral terms has seen opposition parties push protocols that would, in theory, reduce exports based on moral grounds. In 2018, following FXM’s closure, the conservative opposition party successfully pushed a “democracy” criterion that determined buyers could only be governments deemed democratic, but it offers considerable room for interpretation.⁶⁸ Importantly, FXM’s closure and the democracy criterion have not stopped an expansion of exports to countries like the United Arab Emirates or Algeria, but rather can be seen as reducing transparency for export controls and allowing a justification for denying exports compatible with Sweden’s purported neutrality. As an independent export agency that explicitly advertised armaments exports, FXM went against the modus operandi of Swedish statecraft, which is implicit and discreet. Now the promotion of exports is safely returned to a process directed by the FMV and the Swedish Security & Defense Industry Association (SOFF).

The Swedish combination of non-alignment and an active defense industry serves as a key counter-example to several common assumptions about small states, military power, and European pacifism. Sweden shows that the economies of scale and specialized knowledge required to sustain a domestic defense industrial base capable of producing internationally competitive, high-end military equipment such as fighter aircraft or attack submarines are far smaller than those enjoyed by military giants like the U.S., Russia, or China, or even middle powers like France or Turkey. If Sweden can build its own competitive planes and ships, the possibility should be considered that an even smaller country could do the same, given the right political economy and investment in industry. Technological and manufacturing advances in unmanned aerial systems and loitering munitions have made them far more impactful on the battlefield, and the lower industrial capacity needed to produce them also suggests that smaller states could attain a greater degree of independent military power, though so far the most gains in this area have been made by Turkey. 

The leading role played by the Wallenberg family suggests that, even in a small country, giving a single live player or family dynasty a major stake in national defense can be a successful model to promote both industrial growth and consolidation of ownership within national borders. After Sweden’s privatization of defense assets in the 1990s, the Wallenbergs bought BAE’s shares in Saab, have improved the company’s exports, and have reacquired strategic assets like the Kockums shipyard, with the apparent assistance of the Swedish state. Sweden also serves as a counterexample to the argument that European countries are lax on defense due to an ideological shift against waging war. As Europe witnesses the start of its largest conventional war since World War II in 2022, Sweden may stop being an exception in the coming decades and instead come to be seen as a model of defense industrial planning for small European states negotiating their positions between far greater military powers like the U.S. and Russia. Lastly, the defense industry’s role in Sweden is likely to extend far beyond strictly military matters. As a low-growth, aging society, Sweden relies on export growth more than ever to maintain its growing government expenditures. It will be increasingly difficult for Sweden and other European states to dominate in new areas of technology, as China and the U.S. resort to greater protectionism. As a nominally neutral party, Sweden has established export relationships with a wide range of clients around the world and will come to rely on them for a considerable amount of its future economic growth.

1.  “Sweden among the "big three" EU foreign policy leaders,” Radio Sweden, February 18, 2015, https://sverigesradio.se/artikel/6091340 

2.  Allison Jackson, “Peace-loving Sweden and Switzerland are among top arms exporters per capita in the world,” Global Post, May 23, 2014, https://theworld.org/stories/2014-05-23/peace-loving-sweden-and-switzerland-are-among-top-arms-exporters-capita-world 

3.  “World Military Expenditures and Arms Transfers 2021 Edition,” U.S. State Department, December 30, 2021, https://www.state.gov/world-military-expenditures-and-arms-transfers-2021-edition/ 

4.  Ibid;

5.  Samo Burja and Matt Ellison,“Why America Prefers a Weak and Peaceful Europe,” The National Interest, June 30, 2019, https://nationalinterest.org/feature/why-america-prefers-weak-and-peaceful-europe-64826 

6.  “Economy > GDP per capita in 1950: Countries Compared,” Nation Master, 2022, https://www.nationmaster.com/country-info/stats/Economy/GDP-per-capita-in-1950 

7.  Paul Cole, “Sweden Without the Bomb: The Conduct of a Nuclear-Capable Nation Without Nuclear Weapons,” RAND Corporation, 1994, https://www.rand.org/pubs/monograph_reports/MR460.html 

8. Ibid;

9.  Thomas Jonter, “The Swedish plans to acquire nuclear weapons, 1945–1968: An analysis of the technical preparations,” Taylor & Francis Group, Science & Global Security, 18:61–86, 2010, https://scienceandglobalsecurity.org/archive/sgs18jonter.pdf 

10.  Anke Schmidt-Felzmann,“PeSCo: The Swedish Perspective,” The General Jonas Žemaitis Military Academy of Lithuania, March 2019, https://www.iris-france.org/wp-content/uploads/2019/03/Ares-38.pdf 

11.  Ibid;

12.  “EU budget: Stepping up the EU's role as a security and defence provider,” European Commission Press Release, June 13, 2018, https://ec.europa.eu/commission/presscorner/detail/en/IP_18_4121 

13.  “EU defence gets a boost as the European Defence Fund becomes a reality,” European Commission Press Release, April 29, 2021, https://ec.europa.eu/commission/presscorner/detail/en/IP_21_2007 

14.  Martin Lundmark, “The Patriot act — Sweden choice of medium range air defense,” Swedish Defense University, December 10, 2017, https://www.frstrategie.org/sites/default/files/documents/publications/defense-et-industries/2017/10-2.pdf 

15. Niclas Rolander, “ Swedish PM Says NATO Bid Now Would Destabilize Region,” Bloomberg, March 8, 2022, https://www.bloomberg.com/news/articles/2022-03-08/swedish-pm-says-nato-bid-now-would-destabilize-situation?sref=ZqW0mZJf 

16.  “Saab AB Financial Report 2021,” Saab AB Website,  February 11, 2022, https://www.saab.com/newsroom/press-releases/2022/saab-year-end-report-2021-a-year-with-growth-and-strong-cash-flow-generation   

17. Niklas Stenlås, “Technology, National Identity and the State: Rise and Decline of a Small State’s Military Industrial Complex ,” Institute for Futures Studies, July, 2008,  https://www.iffs.se/media/1296/20080627133522film45uvbzrf2zl896v77ad.pdf 

18.  Masako Ikegami ,“The End of a ‘National Defense’ Industry? : Impacts of globalization on the Swedish defence industry,” in “Scandinavian Journal of History, Volume 38- Issue 4: Wars, States and Economic Change in the Scandinavian Countries, 1600–2000,” 2013, https://www.tandfonline.com/doi/abs/10.1080/03468755.2013.823536 

19. According to Saab’s official website. See here: https://www.saab.com/investors/our-share/ownership 

20.  Niklas Stenlås, “Technology, National Identity and the State: Rise and Decline of a Small State’s MilitaryIndustrial Complex ,” Institute for Futures Studies, July, 2008, https://www.iffs.se/media/1296/20080627133522film45uvbzrf2zl896v77ad.pdf 

21.  Strategic export controls in 2019: military equipment and dual-use goods – Sweden,” Stockholm International Peace Research Institute, April 9, 2020, https://www.sipri.org/sites/default/files/2021-04/sweden_arms_export_control_report_2019_english.pdf 

22.  “BAE Systems Selling Stake in Sweden’s Saab,”Defense Industry Daily, March 7, 2010, https://www.defenseindustrydaily.com/BAE-Systems-Selling-Stake-in-Swedens-Saab-06223/ 

23.  Bjarne Wildau, “South Africa Re-opens Arms Bribe Probe Involving Saab / BAE,” Scandasia, August 1, 2011, https://scandasia.com/9237-south-africa-re-opens-arms-bribe-probe-involving-saab-bae/ 

24.  “Sanningen om den hemliga gryningsräden mot Kockums,” Dagens Nyheter, May 19, 2014, https://www.dn.se/nyheter/sverige/sanningen-om-den-hemliga-gryningsraden-mot-kockums/ 

25. According to a press release from Saab which can be read here: https://soff.se/en/medlemsnyhet/saab-and-damen-submarine-targets-dutch-requirement/ 

26.  Richard R. Bitzinger, “Facing the Future: The Swedish Air Force, 1990 - 2005,” RAND Organization, 1991. https://www.rand.org/content/dam/rand/pubs/reports/2007/R4007.pdf  

27. “Jane's Sentinel Security Assessment - Central Europe And The Baltic States,” Capstone National Defense University, December 5, 2019, https://capstone.ndu.edu/Portals/83/20-2%20EUR2%20Trip%20Book%20Vol%20II%20red.pdf 

28.  Tom Chivers, “The Gripen Aims to Be the iPhone of Fighter Aircraft,” Air & Space Magazine, February,  2021, https://www.smithsonianmag.com/military-aviation/smart-fighter-180976751/ 

29.  Robert Farley, “Don't Overlook the Saab Gripen as a Serious Export Fighter,” The National Interest, September 9, 2021, https://nationalinterest.org/blog/reboot/dont-overlook-saab-gripen-serious-export-fighter-193298 

30.  “Fact Sheet: F-35 Joint Strike Fighter: Costs and Challenges,” Center for Arms Control & Non-Proliferation, July, 2021, https://armscontrolcenter.org/f-35-joint-strike-fighter-costs-challenges/

31.  Saurabh Joshi, “Gripen operational cost lowest of all western fighters: Jane’s,” StatPost, July 4, 2012, https://stratpost.com/gripen-operational-cost-lowest-of-all-western-fighters-janes/ 

32.  Ray Moseley, “British Decide To Buy AWACS, Scrap Their Warning System,” The Chicago Tribune,  December 19, 1986, https://www.chicagotribune.com/news/ct-xpm-1986-12-19-8604040775-story.html 

33.  “Pakistan Air Force receives AEW&C radar equipment from Saab,” Airforce Technology, April 16, 2019, https://www.airforce-technology.com/news/pakistan-aewc-radar-equipment-saab/ 

34.  Robert Clark, “Replacing Ajax with Warrior – A short-term fix for a long-term problem,” UK Defence Journal, September 6, 2021, https://ukdefencejournal.org.uk/replacing-ajax-with-warrior-a-short-term-fix-for-a-long-term-problem/ 

35.  John Penny, “The Air Defence of the Bristol Area - 1937-44,” The Bristol Branch of the Historical Association, University of Bristol, 1997, http://www.bris.ac.uk/Depts/History/bristolrecordsociety/publications/bha090.pdf 

36.  “Ukraine’s Javelin and NLAW tank-killer missiles could see Russia shift war tactics,” South China Morning Post, March 16, 2022, https://www.scmp.com/news/world/europe/article/3170632/ukraines-javelin-and-nlaw-tank-killer-missiles-could-see-russia 

37.  “Jane's Sentinel Security Assessment - Central Europe And The Baltic States,” Capstone National Defense University, December 5, 2019https://capstone.ndu.edu/Portals/83/20-2%20EUR2%20Trip%20Book%20Vol%20II%20red.pdf 

38.  Robert Farley, “What Makes a Real "Blue Water Navy? Here's a List,” The National Interest, April 22, 2021, https://nationalinterest.org/blog/reboot/what-makes-real-blue-water-navy-heres-list-183441 

39.  Domink Kimla, “Conventional (AIP) Submarine – a Weapon of Choice for the 21st Century,” Frost & Sullivan, February 28, 2013,https://www.iqpc.com/media/7250/3472.pdf 

40.  Taylor, P. Daniel, “Pacing the Threat: Navy balances training with environmental concerns as it seeks to counter quiet diesel submarines.” Seapower 53, no. 3, March, 2010, 

41.  Sebastien Roblin, “How One Cheap Submarine from Sweden 'Sank' the U.S. Navy in 'Battle',” The National Interest, May 1, 2018, https://nationalinterest.org/blog/the-buzz/how-one-cheap-submarine-sweden-sank-the-us-navy-battle-25639 

42.  Anthony Capaccio, “Next Carrier’s Cost Creeps Up After First One Hit $13.3 Billion,” Bloomberg, August 5, 2020, https://www.bloomberg.com/news/articles/2020-08-05/next-carrier-s-cost-creeps-up-after-first-one-hit-13-3-billion?sref=ZqW0mZJf 

43.  Allistair Finlan,“The shape of warfare to come: a Swedish perspective 2020–2045,”  Defense & Security Analysis, Volume 37, 2021 https://www.tandfonline.com/doi/full/10.1080/14751798.2021.1995976 

44. “Sweden’s Archer Self-Propelled Artillery Project,” Defense Industry Daily, September 29, 2015, https://www.defenseindustrydaily.com/sweden-norway-to-cooperate-on-archer-artillery-project-05142/ 

45.  “Jane's Sentinel Security Assessment - Central Europe And The Baltic States,” Capstone National Defense University, December 5, 2019https://capstone.ndu.edu/Portals/83/20-2%20EUR2%20Trip%20Book%20Vol%20II%20red.pdf 

46.   Johan Ahlander, “Sweden to boost defence spending by $300 mln in 2022,” Reuters, March 16, 2022, https://www.reuters.com/world/europe/sweden-boost-defence-spending-by-300-mln-2022-2022-03-16/ 

47.  Niklas Stenlås, “Technology, National Identity and the State: Rise and Decline of a Small State’s Military Industrial Complex ,” Institute for Futures Studies, July, 2008, https://www.iffs.se/media/1296/20080627133522film45uvbzrf2zl896v77ad.pdf 

48.   “Saab AB Financial Report 2021,” Saab AB Website,  February 11, 2022, https://www.saab.com/newsroom/press-releases/2022/saab-year-end-report-2021-a-year-with-growth-and-strong-cash-flow-generation   

49.  Tom Dunlop, “Sweden to increase defence spending by 40 percent,” UK Defence Journal, October 20, 2022, https://ukdefencejournal.org.uk/sweden-to-increase-defence-spending-by-40-percent/ 

50.  “Sweden Trade Balance,” Macrotrends, 2022, https://www.macrotrends.net/countries/SWE/sweden/trade-balance-deficit

51. This figure is found by comparing military equipment export value with total value of invoiced military equipment in and outside Sweden, as defined by the Stockholm International Peace Research Institute.

52.  Strategic export controls in 2019: military equipment and dual-use goods – Sweden,” Stockholm International Peace Research Institute, April 9, 2020, https://www.sipri.org/sites/default/files/2021-04/sweden_arms_export_control_report_2019_english.pdf 

53.  Ibid;

54.  Robin Hughes, “US Army to acquire Carl-Gustaf M4,” Janes, February 19, 2019, https://www.janes.com/defence-news/news-detail/us-army-to-acquire-carl-gustaf-m4 

55.  John A. Tirpak, “How Boeing Won the T-X,” Air Force Magazine, July 1, 2019, https://www.airforcemag.com/article/how-boeing-won-the-t-x/ 

56.  Valerie Insinna, “Saab’s CEO wants a shot at an AWACS replacement competition,” Breaking Defense, November 23, 2021, https://breakingdefense.com/2021/11/saabs-ceo-wants-a-shot-at-an-awacs-replacement-competition/ 

57. See the announcement here: https://valtioneuvosto.fi/-/lockheed-martin-f-35a-lightning-ii-on-suomen-seuraava-monitoimihavittaja 

58. “Saabs vd Micael Johansson: ”Spioneriet pågår hela tiden,”” Dagens Nyheter, May 4, 2021 https://www.dn.se/ekonomi/saabs-vd-micael-johansson-spioneriet-pagar-hela-tiden/ 

59. “ Strategic export controls in 2020: military equipment and dual-use goods – Sweden,” Stockholm International Peace Research Institute, April, 2021,  https://www.sipri.org/sites/default/files/2021-11/swe_2020_swedish_0.pdf 

60.  “SIPRI Arms Transfers Database - Methodology,”Stockholm International Peace Research Institute, April, 2022, https://www.sipri.org/databases/armstransfers/background 

61.  Peter Hille, Nina Werkhäuser, “Germany's army: Will €100 billion make it strong?” Deutsche Welle, March 3, 2022, https://www.dw.com/en/germanys-army-will-100-billion-make-it-strong/a-60996891 

62.  Pieter Wezeman, Alexandra Kuimova and Siemon Wezeman, “Trends in International Arms Transfers,” Stockholm International Peace Research Institute, March, 2022, https://reliefweb.int/sites/reliefweb.int/files/resources/fs_2203_at_2021.pdf 

63.  Ibid;

64.  Visahl Thapur, “Sweden’s Saab Pitches Gripen Fighter Aircraft To India At “Half The Price Paid For Rafale”, BW Business World, December 1, 2021, https://www.businessworld.in/article/Sweden-s-Saab-Pitches-Gripen-Fighter-Aircraft-To-India-At-Half-The-Price-Paid-For-Rafale-/01-12-2021-413505/ 

65.  Johan Matz, “Arms exports and intelligence: the case of Sweden,” Intelligence & National Security, March 9, 2022, https://www.tandfonline.com/doi/full/10.1080/02684527.2022.2034318 

66.  “Strategic export controls in 2011: military equipment and dual-use goods – Sweden,” Stockholm International Peace Research Institute, March 15, 2012,  2021, https://www.sipri.org/sites/default/files/research/armaments/transfers/transparency/national_reports/sweden/SWE_11_ENG.pdf 

67.  Jenny Nordberg, “Who’s Afraid of Feminist Foreign Policy?” The New Yorker, April 15, 2015 https://www.newyorker.com/news/news-desk/swedens-feminist-foreign-minister 

68.  Samuel Perlo-Freeman,“Sweden’s proposed “Democracy Criterion” for arms exports – Taking the lead in export controls, or new words for old policies?” World Peace Foundation, December 12, 2017, https://sites.tufts.edu/reinventingpeace/2017/12/12/swedens-proposed-democracy-criterion-for-arms-exports-taking-the-lead-in-export-controls-or-new-words-for-old-policies/