Ukraine War: Why Can’t Swedish Arms Maker Fill The Vacuum Left By Russian Arms Maker?

 The head of Russia’s weapons export branch said arms export revenue total in 2022 is likely to total about $10.8 billion, which would be roughly 26% lower than reported for 2021.

Alexander Mikheyev, the director general of Rosoboronexport, said arms exports have accounted for $5.4 billion so far this year, and the country expects the remainder of the year to bring in the same amount of revenue.

Meanwhile, Dmitry Shugayev, the head of the government’s Federal Service for Military-Technical Cooperation, said during the expo that arms exports brought in $14.6 billion in revenue for 2021. This year’s revenue has dropped significantly.

Russia is the second-largest arms exporter after the United States, according to the Stockholm International Peace Research Institute. India, China, Egypt and Algeria are the top foreign customers of Russian weapons, but India’s imports are declining, according to a report published in March by the think tank.

December, French President Emmanuel Macron visited the United Arab Emirates. He left with a $19 billion order for French Dassault Rafale fighter aircraft. You wouldn’t see Swedish Prime Minister Magdalena Andersson performing energetic sales pitches for Sweden’s equally fine Gripen jets the way Macron does for French military equipment—or the way most leaders of other countries with defense industries do for their local companies.

French President Emmanuel Macron welcomes Abu Dhabi’s Crown Prince Sheikh Mohammed bin Zayed al-Nahyan for a working lunch at the Chateau de Fontainebleau in Fontainebleau near Paris, France, September 15, 2021. REUTERS/Gonzalo Fuentes

Since the end of the Cold War, the Swedish government has mostly been putting defense exports in the hands of the globalized market. But with other countries’ leaders pitching their companies to governments now investing more in defense, it’s a flawed strategy. Oddly, Swedish governments of different stripes have put their faith in an invisible hand that does not exist regarding defense equipment.

RBS 98 surface-to-air missile

Is America Overextending Itself?

Last September, the United States, the United Kingdom, and Australia unveiled their so-called AUKUS agreement, which will see Australia build nuclear-powered submarines aided by British and American technology. That, in turn, meant that Australia relinquished an agreement with the French company Naval Group for diesel-powered submarines. Apoplectic anger ensued from Paris, with allegations that friends had stabbed France in the back.

President Joe Biden is welcomed by Saudi Arabian Crown Prince Mohammed bin Salman at Alsalam Royal Palace in Jeddah, Saudi Arabia, on July 15.
 Royal Court of Saudi Arabia/Handout/Anadolu Agency via Getty Images

What about Sweden?

A few years earlier, Sweden’s Gripen suffered a similar setback. In 2012, Switzerland was getting ready to buy new fighter jets, and having investigated its options, the government—backed by the armed forces—opted for the Gripen over other top contenders, France’s Dassault Rafale and the Eurofighter Typhoon.

Saab A26 Blekinge class submarine, the most stealthy submarine in the world and the successor of Gotland class submarine. A26 has been the front runner of the Dutch Walrus class submarine replacement project.

The Gripen offered the best value, Bern concluded. Swiss Air Force chief Lt. Gen. Markus Gygax, though, had supported buying the Gripen. When the report began circulating, Swiss Defense Minister Ueli Maurer remained firm: “What’s good enough for Sweden is good enough for us,” he declared. Indeed, the two countries—and other moderately sized nations—share the need for a versatile fighter that doesn’t break the bank.

IRIS-T SLS surface-to-air missile (SAM) systems with Saab fire control radar.

Last year, the Swiss government finally decided on a new course of action. It opted for the F-35 over the Dassault Rafale, Eurofighter Typhoon, and Boeing’s F/A-18 Super Hornet—hardly the outcome of the Gripen referendum’s supporters. In all this, Stockholm was barely to be seen. No public outbursts, no mentions of stabs in the back, no Macron-style engagement with Swiss politicians.

In recent years, successive Swedish governments have taken a remarkably laissez-faire approach to defense exports.

Indeed, in recent years, successive Swedish governments have taken a remarkably laissez-faire approach to defense exports. “When Sweden privatized its defense companies a few years after the end of the Cold War, the defense minister who saw most of it through, Bjorn von Sydow, did so based on the idea that the government would support the companies through relationship-building with other governments,” noted Robert Limmergard, director-general of the Swedish Security and Defense Industry Association, known as SOFF. “But after a while, that idea petered out. People believed in globalization.”

Indeed, post-Cold War Swedish governments of different ideologies have shared a seemingly unshakable belief in the power of international markets to let the best bidder win. Because Swedish defense equipment is considered top notch, the thinking went, Swedish companies would be able to battle for contracts with foreign governments pretty much on their own steam. Defense equipment “is clearly an area where Sweden fights above its weight,” Pal Jonson, chairman of the Swedish parliament’s defense committee and defense spokesperson for the Moderate Party, the largest opposition party, told FP. “But you can’t fight with one arm tied behind your back. There needs to be strong political support for defense exports to show that sales are not merely arms deals but a partnership between two countries that is based on trust and security of supply, including in case of a crisis or war.”

The reticence is partly a cultural thing. Although Swedish officials provide some practical support in arms deals, it’s hard to imagine Andersson or her predecessor, Stefan Lofven, peddling Swedish defense products to foreign governments the way French presidents and even British politicians do. But in a globalized defense market, such political involvement becomes necessary the moment other countries engage in it.

Saab RBS-15 Mk4 Anti-ship missile

In 2015, the Swedish Social Democratic Party and the Green Party, then governing in a coalition, disbanded the government’s defense export agency as demanded by the Greens. “We’re one of only [a] few countries in Europe that don’t have a defense industrial strategy,” Jonson noted. “That has to change.”

British defense analyst Howard Wheeldon makes a similar assessment. “Successive Swedish governments have preferred to treat defense exports on something of an arms-length license basis, leaving it essentially to a tight export licensing structure and … Sweden’s defense private sector,” he told FP.

Unfortunately for Swedish firms, that means the risk of losing lucrative contracts, especially in developed markets. That’s because other countries’ governments have radically different views regarding the international arms market. Just as Macron travels around the world on behalf of French defense companies, so do British politicians, who sometimes also dispatch members of the royal family. Previous French presidents, too, have eagerly helped French firms sell their wares to foreign governments.

“Over the past two decades, the most important defense company in Sweden—Saab—has done well with its Gripen fast jet,” Wheeldon noted. “But in recent years, although the Gripen is regarded as one of the best military jets produced in Europe and is one of only two produced by a single company—Dassault Rafale being the other—the Gripen has struggled. This may well be because of Sweden’s reluctance to embrace government-to-government deals, a system that, over many decades, both the U.K. and France have benefited from.”

Buying governments prefer to deal with the country’s governments making the military platform rather than dealing directly with the manufacturer. “One of the primary reasons for this is that selling governments can provide or arrange finance to the buying government,” Wheeldon pointed out. “Selling governments can also offer other guarantees, and the buying government may be able to secure in-country investment or similar cross-trade requirements.”

The United States, of course, sells U.S. protection through its defense industry: This year, that reality helped motivate Sweden’s closest friend, Finland, to buy the F-35 over the Gripen. “Even in Denmark and Norway, they do things completely differently from Sweden,” Limmergard said. “They send the crown prince. They send the king and queen.”

The Swedish government supported Saab about a decade ago when the company was bidding for its Gripen contract with Brazil. But on most other fronts, it’s far less involved than the governments of other countries’ companies. Considering that defense companies don’t sell consumer products but highly specific goods that only governments can buy, that absence matters.

BAE Systems Bofors FH77 BW L52 self-propelled howitzer

In a perfectly efficient Adam Smith world, all companies would compete on the basis of their products. But the economist’s invisible hand doesn’t work so efficiently when it comes to military equipment.

Industry executives are hardly in a position to build relationships with foreign ministers, whereas fellow ministers can do precisely that. Indeed, since defense equipment lasts for decades and needs to be continually updated, foreign governments want to be extremely sure of the relationship they’re entering into. Having some companies bid with massive government backing for the deal while Swedish companies bid with only modest government engagement clearly suggests to foreign governments that the Swedish government is just not that into them. “You build trust on the government level, not between a government on one hand and a company on the other,” Limmergard noted.

To be sure, in a perfectly efficient Adam Smith world, all companies would compete on the basis of their products. But the economist’s invisible hand doesn’t work so efficiently when it comes to military equipment. Sweden also has the complication that as a relatively small country, it’s vitally dependent on exports if its defense industry is to survive. Currently, 47 percent of Swedish-made defense equipment is exported compared to 40 percent of that made in France and 50 percent of that made in Germany. Considering that the needs of the Swedish Armed Forces are smaller than those of the French Armed Forces and the Bundeswehr, the figure ought to be higher.

Saab GlobalEye AEW&C with Gripen E.

Government export support will become even more vital as countries’ defense spending increases. Among NATO member states, defense spending has grown by at least 3 percent per year since 2016, and Stockholm International Peace Research Institute figures show that defense expenditure is up in most other parts of the world too. That clearly doesn’t mean that Andersson or her successor needs to jet off to Riyadh to offer Gripens to Saudi Crown Prince Mohammed bin Salman (though other Western countries, including the United Kingdom and France have continued to sell weapons to the Saudis).

French President Emmanuel Macron welcomes Saudi Arabia’s crown prince Mohammed bin Salman upon his arrival at the Elysee Presidential palace for a meeting on April 10, 2018 in Paris. Photo by Ludovic Marin/AFP/Getty Images.

It does mean, though, that Swedish politicians need to accept the fact that weapons are intimately linked to governments and that without state involvement on the global arms market, Sweden’s much-respected defense equipment stands to lose out as other countries’ investment increases.

© 2022, GDC. © GDC and Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to with appropriate and specific direction to the original content.

Be the first to comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.