Sweden and Finland formally applied to join the North Atlantic Treaty Organization (NATO) ahead of the NATO summit in Madrid on 29-30 June.

As neighbors of Russia, Finland and Sweden assess the Ukraine invasion to have fundamentally shifted their own threat perceptions vis-à-vis Russia. The timing and co-ordination of the two countries' applications suggests that they are aiming for joint accession.

Finland and Sweden already meet most military, political, and legal criteria to join NATO, likely shortening the technical aspect of accession. It is likely that that aspect of accession would proceed much faster than for other more recent member states such as North Macedonia, where such negotiations took around six months.

Most NATO members look likely to support Finland's and Sweden's memberships at the NATO summit in June. Ratification is required by all 30 NATO members and Turkey has expressed opposition. Turkey has criticized Sweden and Finland for what it assesses as support for the Kurdistan Workers' Party (PKK), which it views as a terrorist organization, and the Fethullah Terrorist Organization (FETÖ), the group Turkey blames for the attempted 2016 coup.

Still, Turkey is unlikely to veto Finland's and Sweden's applications for NATO membership. Turkey's implicit veto threat probably signifies an intent to extract concessions from other NATO members rather than genuine opposition to their accession. US President Joe Biden's administration is likely to attempt to meet some of Turkey's demands by pressing a reluctant Congress to agree to expand US military support beyond a pending USD400-million weapons deal to include some F-16 aircraft.

Turkey would also need to signal to Russia - given significant bilateral relationships around food supply, energy, tourism, and Syrian security - that it has not simply accepted the Finnish and Swedish applications without resistance. Nevertheless, negotiations around concessions have the potential to delay ratification.

Russia publicly declared its opposition to NATO enlargement in Northern Europe. Any retaliation is likely to be limited to mostly non-military responses, including more frequent incidents of Russian military aircraft and naval vessels violating Finnish and Swedish airspace and territorial waters in the Baltic Sea.

Russia is also likely to retaliate by disrupting energy supplies. On 13 May, RAO Nordic, a Russian energy firm, cut electricity supply to Finland, which had been receiving about 10% of its electricity from Russia. Russia would also be likely to disrupt the supply of natural gas to Finland (5% of Finland's energy mix), which would have significant negative impacts on the chemical, forestry, and food processing sectors in Finland. The scope for further economic restrictions by Russia is limited by the existing EU sanctions against Russia and Russian retaliatory embargoes already in place.

This post was written with contributions from Jeremy Domballe, a Maritime & Trade subject matter expert with S&P Global Market Intelligence.

Posted 24 May 2022 by Dijedon Imeri, Senior Analyst, Country Risk, S&P Global Market Intelligence and

Jessica Leyland, Senior Analyst – Middle East & North Africa, S&P Global Market Intelligence and

John Raines, Principal Global Risks Adviser and Head of North America, Economics & Country Risk, S&P Global Market Intelligence and

Laurence Allan, Head of the Europe/CIS Insights and Analysis, S&P Global Market Intelligence and

Petya Barzilska, Sr. Research Analyst II, Europe & CIS Country Risk, S&P Global Market Intelligence

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.