Foreign Relations of the United States, 1949, Western Europe, Volume IV

711.58/8–1549

Policy Statement of the Department of State

secret

[Washington,] August 15, 1949.

Sweden

a. objectives

The objectives of US policy toward Sweden are the preservation of Sweden’s independence and democratic outlook and the obtaining of Swedish cooperation in our efforts to achieve economic recovery and political stability in Europe. Therefore, within the framework of the friendly relations which have traditionally existed between the US and Sweden, our policy is designed to further the development of Sweden’s will and ability to participate effectively in resistance to aggression. We encourage Swedish cooperation with the other western democracies and in various international organizations.

Our economic policy toward Sweden seeks to maintain economic stability and productive capacity in Sweden as an important factor for European recovery and for the preservation of democracy. We will continue to encourage the fullest possible economic collaboration by Sweden with other participating countries in the European Recovery Program and will assist Sweden to the extent possible to maximise its exports to those countries and to solve its balance of payments problem.

b. policies

The traditional friendship between the US and Sweden is based upon many factors including a reciprocally advantageous commerce, mutually held concepts of democracy and the presence in the US of approximately a million and a quarter Americans of Swedish extraction. Trade between the two countries has long been important. For Sweden the US is an important source of industrial goods and raw materials and a necessary market for Swedish goods such as paper, pulp and iron ore. With the exception of the intermittent problems arising from Swedish neutrality, there has been an absence of major political issues between the US and Sweden.

1. Political

Our interest in Sweden in present circumstances is enhanced by its strategic geographic location and its position of influence among the northern countries. It occupies a vital position on the northwestern flank of the USSR and has a commanding position in respect to both the Baltic Sea and the Danish Straits. In the light of our military commitments to Norway and Denmark under the North Atlantic Treaty, an attack on Sweden could not fail to create the most serious effects for us. We would be subjected to extreme pressure from Norway and Denmark to intervene, and we would be faced with the fact that hostile occupation of Sweden would render infinitely more difficult any future defense of those countries. Occupation of Sweden would in addition furnish an attacking power with industrial and military potential of very great importance in the form of specialized products such as ball bearings, machine tools, electronics equipment, ordnance and high grade iron ore. For these obvious reasons, the position and policies of Sweden on current international issues are of great concern to the US.

The cornerstone of Swedish policy during the last 135 years has been neutrality and non-involvement in international political disputes in Europe. This policy, owing to its success in keeping Sweden out of two World Wars, has been strongly supported by the large majority of the Swedish people. In the recent war the Swedish people were generally pro-Allied and the Swedish Government made certain concessions to the Allies late in the war. However, the concept of neutrality remained as deeply imbedded as before. This fact combined with an ancient fear of Russia conditioned Sweden’s attitude at the outset toward the United Nations, and toward the tension since the war between the US and the USSR. Sweden has carefully sought to avoid disagreement with the USSR. Relations between the two countries have on the whole been correct and during the immediate postwar period Sweden attempted to function in the role of a bridge leading to better understanding between east and west. Until 1948 the official Swedish attitude regarding the cold war was “a plague on both your houses,” and the formation of blocs on either side was strongly decried by members of the Government and leading political figures.

Nevertheless, the events of the past 18 months have had a profound effect in Sweden, an effect which apparently may still be developing. The spectacle of Soviet bullying in eastern Europe, intransigence in the United Nations, and obstructionism in Germany and Austria has not been lost on the Swedes. The Communist coup d’état in Czechoslovakia and, most acutely, the ominous Soviet initiative in requiring Finland to negotiate a treaty of defense¹ finally thoroughly aroused the Swedish Government and people, and had a strong effect upon the isolationist Social Democratic and trade union leaders. Still another factor modifying the Government’s position of post-war aloofness was Sweden’s economic difficulties as manifested primarily by a seriously adverse trade deficit with the dollar areas.

Increasing tensions led the Swedish Government during the summer of 1948 to enter into discussions with the Norwegian and Danish Governments to formulate a Scandinavian defense pact. An even stronger motive was Sweden’s desire to prevent Norway and Denmark from joining a western defense association of the sort envisaged in the North Atlantic Treaty.² Technical discussions of the Scandinavian proposal proceeded during the summer and fall and culminated in a series of conferences ending in January, 1949.³ The failure to reach agreement on a Scandinavian pact, in spite of the logical grouping of the three countries, was caused by a basic difference of opinion between Sweden and Norway regarding the future relationship of the Scandinavian countries with the other western democracies. While Sweden offered an immediate alliance to Norway and Denmark, its offer was conditioned on a prohibition against any extra-Scandinavian military agreements by members of the proposed pact. Such a condition was unacceptable to Norway, which insisted upon the necessity for itself of future arrangements with the US for military support and arms supplies.

The US, while in favor of regional defense pacts in accordance with the charter of the United Nations, was opposed to the Swedish sine qua non as weakening collective resistance to aggression. In response to a Norwegian inquiry we informed the three Scandinavian Governments that under the terms of the Vandenberg Resolution it was unlikely that military equipment would be made available to countries other than those associated with us in defense arrangements or to which we had existing commitments.

Although Sweden has attempted to maintain its policy of non-involvement in the political disputes of great powers, the offer of an alliance with Norway and Denmark was, considering the strategic location of those two countries and their unpreparedness for defense, a departure from the traditional isolationist neutrality which Sweden had followed for so many years. Following the failure of the Scandinavian discussions and the adherence of Norway and Denmark to the Atlantic Pact, which Sweden feels increases the danger of Scandinavian involvement in any future war, Swedish foreign policy has been subject to apprehensive reexamination and reevaluation by the Swedish press and political leaders. Sweden is now hemmed in by the members of the blocs, the formation of which it had hoped would be avoided, and is subject to anxiety concerning the increased possibility of Soviet counter moves in the north, especially in Finland. All non-Communist parties are in agreement that the danger of the isolated Swedish position has greatly increased and that the armed forces must be strengthened. A general theme of the many press editorials and political pronouncements has been that, while Sweden cannot follow Norway into the Atlantic Pact, Sweden’s future course depends to a large extent on world developments, particularly those in relation to Finland, which might force such a decision. Speeches by top ranking Swedish military officers have with notable frequency stressed the need for supplies from and “technical cooperation” with the west, including the necessity for advance preparation for military aid from the west in the event of war. On the other hand, statements by the civilian chiefs of government do not support these ideas.

Under the stress of these developments the Swedish Government has expressed its hope that the US will continue to permit the commercial purchase here of materials needed for Swedish defense. Swedish military officials have explained that their military plans are conceived exclusively for defense … and that since Sweden is almost certain to be engaged if Norway and Denmark are attacked, these plans are based upon the joint defense of Scandinavia by the three countries. In respect to Swedish purchases of military supplies in the open market, our policy permits such purchases subject to appropriate checks to determine that there is no security problem involved and that the priorities of nations in the North Atlantic Treaty and others to which we have commitments can be taken care of.

During the last year and a half we have made clear to the Swedish Government our view that its policy of neutrality is dangerous and impractical. However, while we recognize the importance of Sweden for our own security and that of our allies, it is against our policy to exert pressure on Sweden to join the North Atlantic Pact.

Sweden’s past position in the UN has been marked, not by hostility to the objectives of the US, but rather by a relatively negative position on major political differences between east and west. Modifications in this attitude were noted, however, during the 1948 General Assembly sessions when Sweden on several occasions voted with the US and other western powers in opposition to the solid Soviet-dominated bloc. In fact, Swedish support of the US on the issues of the atomic bomb and disarmament has been the subject of critical Communist comment. Because of its severe dollar problem, Sweden has not been willing to assume the financial obligations incident to membership in ICAO or IRO, but continues to express its basic agreement with the objectives of these organizations.

Communism has not thrived in Sweden. A long history of democracy and independence, and a relatively high standard of living have combined to allay potential left-wing discontent and to hinder Communist organizational efforts in Sweden. Even though the Communists in Sweden lacked the prestige gained elsewhere from a record of commendable resistance to the Nazis, they nevertheless did successfully infiltrate certain labor unions and left-wing organizations during the war and immediate postwar periods. Since the end of 1947, however, the Communists have experienced a gradual decline in power in the unions and in influence throughout Sweden as the result of international events, the popular recognition of the fifth column characteristics of the Party, and the anti-Communist campaign of the Swedish Social Democrats and trade unions.

Communist representation in the lower house of the Riksdag was reduced from 15 to 8 seats by the last parliamentary elections held in September 1948. All the electoral constituencies in Sweden registered a net Communist loss in votes with the exception of the province of Norrland. Recent trade union elections similarily showed a strong anti-Communist trend, with the large locals of the powerful Metal Workers’ Federation as the most striking examples. Several union locals remain under Communist domination, however. Geographically Communist strength is centered in Stockholm, Göteborg and the province of Norbotten which includes the iron mining regions of Kiruna and Gallivare. Communists have failed to penetrate the military forces but have penetrated the police, civil defense, home guard, railways, and public utilities. However, in the absence of armed support from a foreign power, they do not constitute an immediately serious threat to Sweden’s peacetime security.

The attitude of the Swedish people toward the US is basically friendly. However, the US has come to represent different things to different groups of people in Sweden, and the observation can be made that the Swedish people generally are ignorant concerning US history, social development, culture, and foreign policy objectives. The Swedish people as a whole are inclined to regard the US as a country of great contradictions where the most bizarre occurrences are not only possible but common, and where materialism has triumphed over culture. American discrimination against the Negro race looms disproportionally large in this picture. To the business community the US is a paradise free of the ubiquitous influence of a socialist-directed state; to the laboring classes it is a capitalist barrier to the progress of socialism as well as communism and, consequently, is the object of a certain amount of Marxist-inspired dislike. During the early months of the debate over ERP, socialist and labor comments were somewhat skeptical of the dis-interest of American capitalism.

2. Economic

It is the policy of the US to assist Sweden not only to restore a healthy balance in its own economy but also to maximize Sweden’s contribution to the trade and reconstruction of western Europe. Economically, Sweden occupies a unique position among the countries of western Europe. Undamaged by the war, Sweden during the immediate postwar period made a significant contribution to the relief and rehabilitation of Europe through extensive loans and credits. However, the postwar dislocation in Europe seriously affected Swedish foreign trade and created a very heavy drain on Sweden’s financial resources. This fact was aggravated by the over-optimism of the Swedish Government which postponed too long the imposition of exchange controls. Sweden by late 1947 faced a heavy imbalance in its foreign trade and a foreign exchange deficit with hard currency areas of serious proportions involving the danger of a production crisis rising out of a shortage of imported raw materials.

Corrective measures were introduced, however, and the Swedish four-year economic plan as submitted to OEEC in Paris gives promise of a return to a stable economy by 1952. Controls applied to imports during 1948 have been effective in reducing Sweden’s deficit in trade with the US. We have contributed to the attainment of this result by loans through ECA, and by modification of the Reciprocal Trade Agreement of 1935 whereby Sweden has been permitted to determine its imports on an essentiality basis. Swedish industrial production has remained high. Trade with Europe has greatly increased while imports from the US have been reduced sharply by rigorous planning and controls.

In the field of foreign exchange, the policy of the US toward Sweden, which is not a member of the International Monetary Fund, is to work toward stability of exchange rates and the eventual elimination of restrictions on international payments.

The objective of our commercial policy toward Sweden is the establishment of commercial relations according to the principles of the projected International Trade Organization. Until Sweden becomes a member of this organization or a signatory of the interim General Agreement on Tariffs and Trade (GATT), commercial relations with the US will be regulated primarily by the provisions of the Commercial Treaty of 1935 as modified in 1947–1949.⁴

As one phase of its policy to encourage the free movement of international trade, the US is opposed to cartels because of their potentially restrictive influence on production and distribution, Swedish industry, however, is extensively organized along cartel lines in pulp and paper, timber, mining, metallurgical and electrical equipment, and this with the knowledge and concurrence of the Swedish Government. Because the danger from cartel arrangements in Sweden is more potential than actual, US policy remains one of alert observation for possible restrictive effects, which when discovered may be called to the attention of the Swedish Government under the terms of the bilateral ECA agreement.

Swedish participation in the ERP and various measures for European recovery has been active. Sweden has signed the bilateral Economic Cooperation Agreement with the US and has agreed to the intra-European payments scheme. Furthermore, it has reversed its initial position of opposition to the project for a customs union in Europe which was sponsored by OEEC in Paris, and replaced the Swedish observer on the committee studying this problem with a participating member. Sweden also is a member of the Scandinavian Economic Cooperation Committee which is attempting to achieve a reduction of customs barriers, a greater measure of regional specialization and improved economic integration in Scandinavia, with a customs union as a possible but more distant goal. We support these efforts to the extent they do not conflict with the provisions of the ITO charter.

Trade with eastern Europe as a whole, including the Soviet Zone in Germany, is of critical importance to Sweden, particularly in such items as coal from Poland and certain chemicals, ores and industrial equipment from the other areas. Realizing the need of maintaining Swedish production both for its own internal economy and the contribution that Swedish exports can make to the economy of western Europe, we interpose no objections to this trade provided it does not directly strengthen the war potential of eastern Europe, or affect adversely the security of western Europe and of the US. Negotiations are in process with the Swedish Government for the purpose of obtaining its cooperation in our east-west trade objectives.⁵

The US did not look with favor on the billion crown credit granted by Sweden to the USSR in 1946 to cover the successive five-year period. However, the provisions of this agreement have been slow of implementation, and the drain on Swedish production to meet its contractual deliveries to the Soviet Union has not approached what was initially anticipated or what is theoretically possible according to the treaty. By the end of 1949 Swedish deliveries to the USSR will have utilized less than one third of the total credit, and it appears unlikely that the agreement will ever be fully implemented. Swedish industry, which is fully employed, remains reluctant to forego its traditional trade outlets in the west in the interest of increased deliveries to the USSR.

c. relations with other states

. . . . . . . . . . . . . .

d. policy evaluation

US policy has been assisted by Swedish participation in the reconstruction of western Europe, primarily in the economic field through the agency of ECA. In the political field, however, Sweden has been less cooperative. Public sentiment has become more opposed to Communism and the USSR and more favorable toward the west, but Sweden continues to show a negative attitude toward plans for strengthening western Europe militarily against Soviet and Communist aggression. Nevertheless, developments in Scandinavia and current trends in Swedish public thinking encourage the belief that changes in Swedish foreign policy may be under way. The formation of the North Atlantic Pact is having a profound effect upon the Swedish strategic position and the thinking of the Swedish people. The implementation of the Pact combined with the evolution of popular thought may in time bring Sweden into participation in collective defense measures with the other western democracies. This evolution will be slow at best unless Russia takes some overt action.

1. For documentation on U.S. interest in this matter, see Foreign Relations, 1948, vol. iv, pp. 759 ff.
2. For documentation on Scandinavian discussions of a Nordic defense pact, see Foreign Relations, 1948, vol. iii, pp. 1 ff.
3. See documentation on the North Atlantic Treaty Organization, pp. 1 ff.
4. See Agreement between the United States and Sweden, infra.
5. Documentation on trade with the Soviet Union and Eastern Europe is scheduled for publication in volume v.