How NATO membership transformed Sweden’s defence export strategy—and what it reveals about alliance geopolitics
Executive Summary
Since formally joining NATO in March 2024, Sweden has fundamentally restructured its defence export portfolio, with military sales to Turkey surging 109% in 2025 compared to the previous year. This dramatic reversal—from a de facto arms freeze to Turkey becoming a priority export destination—represents one of the most significant strategic pivots in Swedish industrial policy in decades. For Nordic business leaders and defence sector investors, the shift illuminates both the economic opportunities and the complex political calculations that accompany alliance integration.
The Data Behind the Diplomacy
Swedish defence exports to Turkey have more than doubled year-over-year in 2025, according to Inspectorate of Strategic Products (ISP) data. This growth trajectory began during Sweden’s 2022-2024 NATO accession negotiations, when the ISP reversed a 2019 ban on arms sales to secure Ankara’s ratification support.
The numbers tell a broader story of Swedish defence industrial expansion. Total Swedish military exports reached a record 29 billion SEK (approximately $2.8 billion USD) in 2024—a 63% increase from 2023—driven largely by post-accession security dynamics and European rearmament following Russia’s invasion of Ukraine. While Turkey remains outside Sweden’s top-tier export markets (the U.S., Hungary, and Brazil led 2025 rankings), its 109% growth rate signals a strategic recalibration.
Key Export Categories:
- Electronic warfare systems and components
- Defence software and cybersecurity platforms
- Technical assistance and maintenance services
- Follow-on deliveries for existing equipment programs
The Transactional Foundation: Understanding the 2023 Vilnius Agreement
The defence trade normalisation was not incidental—it was contractual. At the July 2023 NATO Summit in Vilnius, Sweden and Turkey formalised a bilateral Security Compact that explicitly committed Stockholm to “resuming arms exports” as part of a broader counter-terrorism cooperation framework.
The agreement’s Article 4 specifically addressed defence trade, with both nations committing to “the principle that there should be no restrictions, barriers or sanctions to defence trade and investment among Allies”. This language effectively transformed Sweden’s 2019 export restrictions—imposed following Turkey’s military incursion into Syria against Kurdish YPG forces—into a negotiating instrument for NATO accession.
Business Implication: The Vilnius model demonstrates how NATO membership negotiations increasingly function as comprehensive trade and security packages, with defence industrial cooperation serving as both leverage and outcome.
Geopolitical Risk Assessment: The Erdogan Factor
Turkish President Recep Tayyip Erdoğan has consistently demonstrated willingness to leverage Turkey’s NATO veto power for strategic economic and military gains. The Sweden case follows an established pattern:
1. The F-16 Parallel: Simultaneous to Sweden’s accession approval, the U.S. authorized a $23 billion sale of 40 F-16 fighter jets and modernization kits to Turkey—equipment sought since Ankara’s 2019 exclusion from the F-35 program over its Russian S-400 acquisition.
2. The Canada Precedent: Ottawa lifted its arms embargo against Turkey concurrent with Sweden’s NATO ratification.
3. The European Context: Turkey’s defence and aerospace exports reached a historic $10.56 billion in 2025, with 56% directed to EU, NATO, and U.S. markets. This positions Turkey simultaneously as a customer and competitor to Swedish defence firms.
Critical Analysis: The transactional nature of Turkey’s NATO diplomacy creates ongoing business uncertainty. Erdoğan’s December 2024 threat to block NATO cooperation with Israel over Gaza demonstrates continued willingness to use alliance leverage for non-defence political objectives. Swedish exporters must factor this volatility into long-term contract planning.
Industrial Strategy: Beyond the Headline Numbers
While the 109% growth figure attracts attention, sophisticated analysis reveals a more nuanced industrial strategy:
Asymmetric Interdependence: Sweden’s exports to Turkey remain modest compared to its top markets. The strategic value lies not in immediate revenue but in:
- Securing Turkey’s long-term diplomatic alignment within NATO
- Positioning Swedish firms for Turkey’s $17.8 billion in new defence contracts signed in 2025
- Countering Turkish defence industry competition in Eastern Europe, where Turkish firms have secured major contracts in Slovakia and the Czech Republic
Technology Transfer Considerations: Recent Swedish exports have emphasized electronic systems and software over hardware—a category that generates recurring licensing revenue while limiting reverse-engineering risks. This aligns with Sweden’s broader strategy of maintaining technological leadership in NATO’s northern flank.
Human Rights and ESG Considerations
The trade resumption has generated significant civil society opposition. Isa Turan of the Swedish Support Committee for Human Rights in Turkey characterised the export surge as “alarming,” reflecting ongoing concerns about Turkey’s domestic human rights record and military operations in Syria.
Compliance Landscape: Swedish defence exporters must navigate:
- The EU’s ongoing assessment of Turkey’s human rights compliance
- Potential U.S. Congressional scrutiny of NATO ally military sale
- Sweden’s own 2024 national strategies on counter-terrorism and organised crime, which emphasize judicial cooperation and information-sharing
The bilateral Security Compact established in January 2025—featuring annual ministerial meetings and working groups on terrorism financing—provides a framework for addressing these concerns while maintaining trade flows.
Market Outlook: The New NATO Defence Economy
The Sweden-Turkey defence trade normalisation exemplifies a broader structural shift in European security economics:
1. Alliance-Driven Procurement: NATO membership now functions as a trade facilitation mechanism, with Article 5 obligations creating presumptive approval for intra-alliance defence transfers.
2. Nordic Defence Integration: Sweden’s NATO accession has accelerated joint procurement with Finland, Norway, and Denmark. Turkey’s role as both supplier and customer creates triangular trade opportunities.
3. Counter-Russian Rearmament: With Turkey’s defence exports growing 103% between 2015-2019 and 2020-2024 periods, and Sweden’s 63% 2024 export surge, both nations are capturing market share from traditional suppliers constrained by production capacity.
Strategic Recommendations for Nordic Business Leaders
For Defence Sector Executives:
- Monitor the Sweden-Turkey Joint Economic and Trade Committee (JETCO) outcomes for procurement opportunities
- Evaluate Turkey’s growing role as a NATO-standard defence supplier in Eastern Europe as both competition and potential partnership avenue
- Assess exposure to Turkey’s volatile diplomatic posture through scenario planning
For Institutional Investors:
- Swedish defence stocks (Saab, BAE Systems AB) have outperformed since NATO accession; Turkey’s $10.56 billion export market represents both demand and competitive threat
- Consider the “NATO premium” in defence valuation models—accession countries demonstrate measurable export growth post-membership
For Policy Stakeholders:
- The Vilnius Agreement model suggests future NATO applicants should anticipate defence trade normalisation as an accession requirement
- Sweden’s experience indicates that formal embargo reversals require bilateral security compacts with measurable counter-terrorism commitments
Next in Our Series: The Nordic Defence Industrial Complex
Coming in our May issue: “From Neutrality to NATO: How Sweden’s Defence Industry is Reshaping Northern European Security Architecture.” We’ll examine Saab’s Gripen fighter expansion, BAE Systems AB’s CV90 platform dominance, and the emerging Nordic-Baltic procurement alliance. Plus: exclusive analysis of Sweden’s 2026 defence budget doubling and its implications for SME suppliers.
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About the Analysis: Data current as of April 2026. Sources include Swedish Inspectorate of Strategic Products (ISP), NATO official communiqués, SIPRI Arms Transfers Database, and Turkish Ministry of Defence industry reports. All currency conversions calculated at April 2026 rates.
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