Why can’t Sweden sell its Gripen fighter jets?
In December, French President Emmanuel Macron visited the United Arab Emirates. He left with one $19 billion order for French Dassault Rafale fighter jets. You wouldn’t see Sweden’s Prime Minister Magdalena Andersson making energetic sales pitches for Sweden’s equally fine Gripen jets as Macron does for French military equipment – or as most leaders in other countries with defense industries do for their local companies.
Since the end of the Cold War, the Swedish government has mostly put defense exports in the hands of the globalized market. But with other countries’ leaders pitching their companies to governments now investing more in defense, that’s the wrong strategy. Strangely enough, Swedish governments of various kinds have placed their trust in an invisible hand that simply does not exist when it comes to defense equipment.
In September last year, the USA, Great Britain and Australia presented their so-called AUKUS agreement, which will see Australia build nuclear-powered submarines using British and American technology. That in turn meant that Australia waived an agreement with the French company Naval Group for diesel-powered submarines. Apoplectic fury followed from Paris, with accusations that friends had stabbed France in the back.
In December, French President Emmanuel Macron visited the United Arab Emirates. He left with one $19 billion order for French Dassault Rafale fighter jets. You wouldn’t see Sweden’s Prime Minister Magdalena Andersson making energetic sales pitches for Sweden’s equally fine Gripen jets as Macron does for French military equipment – or as most leaders in other countries with defense industries do for their local companies.
Since the end of the Cold War, the Swedish government has mostly put defense exports in the hands of the globalized market. But with other countries’ leaders pitching their companies to governments now investing more in defense, that’s the wrong strategy. Strangely enough, Swedish governments of various kinds have placed their trust in an invisible hand that simply does not exist when it comes to defense equipment.
In September last year, the USA, Great Britain and Australia presented their so-called AUKUS agreement, which will see Australia build nuclear-powered submarines using British and American technology. That in turn meant that Australia waived an agreement with the French company Naval Group for diesel-powered submarines. Apoplectic fury followed from Paris, with accusations that friends had stabbed France in the back.
A few years earlier, the Swedish Gripen suffered a similar setback. In 2012, Switzerland got ready to buy new fighter jets, and after examining its options, the government – with the support of the armed forces – chose Gripen over other top contenders, France’s Dassault Rafale and Eurofighter Typhoon.
The Gripen offered the best value, Bern concluded. But no sooner had the Swiss government announced its decision than a mysterious assessment of the Gripen began to circulate in the local media. The Report, which was allegedly endorsed by Swiss Air Force Chief Lieutenant General Markus Gygax – although the report gave him the title “Three-star General M. Gygax” – concluded that the Dassault Rafale would actually be the best choice for Switzerland. However, Gygax had supported buying the Gripen. When the report began to circulate, the Swiss Minister of Defense Ueli Maurer remained firm: “What is good enough for Sweden is good enough for us,” he explained. Indeed, the two countries – and other medium-sized nations – share the need for a versatile fighter that doesn’t break the bank.
But the damage was already done. The report prompted an alliance of peace activists and Gripen opponents to speed up a referendum, there 53.4 percent of people voted against Gripen. Last year, the Swiss government finally decided on a new approach. It opted for F-35 over the Dassault Rafale, Eurofighter Typhoon and Boeing’s F/A-18 Super Hornet – hardly the outcome the Gripen referendum supporters had in mind. Stockholm was barely visible in all this. No public outbursts, no mentions of backstabbing, no Macron-esque engagements with Swiss politicians.
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 Minister of Defense who saw through most of it, Björn von Sydow, did it based on the idea that the government would support the companies by building relationships with other governments,” stated Robert Limmergard, Director General of Swedish Security – and the Defense Industry Association, known as SOFF. “But after a while that idea disappeared. People believed in globalization.”
In fact, 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. Since Swedish defense equipment is considered top class, the thinking went, Swedish companies could fight for contracts with foreign governments pretty much on their own. Defense equipment “is clearly an area where Sweden is punching above its weight,” says Pal Jonson, chairman of Sweden’s Riksdag’s defense committee and defense spokesperson for the Moderates, the largest opposition party, to FP. “But you can’t fight with one arm tied behind your back. There must be strong political support for defense exports to demonstrate that sales are not just arms deals but a partnership between two countries based on trust and security of supply, including in the event of a crisis or war.”
The reticence is partly a cultural thing. Although Swedish officials provide a measure of hands-on support in arms deals, it is hard to imagine Andersson or her predecessor, Stefan Lofven, selling Swedish defense products to foreign governments in the way that French presidents and even British politicians do. But in a globalized defense market, such political commitment becomes necessary the moment other countries engage in it.
In 2015, the Social Democratic Party and the Green Party, which then governed in coalition, dissolved the government’s defense export authority which demanded of the greens. “We are one of the only ones [a] few countries in Europe do not 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 arm’s length licensing basis, leaving it essentially to a tight export licensing structure and … Sweden’s private defense sector,” he told FP.
Unfortunately for Swedish companies, this means the risk of losing lucrative contracts, especially in developed markets. This is because the governments of other countries have radically different views on the international arms market. Just as Macron travels the world on behalf of French defense companies, so do British politicians, who sometimes send out members of the royal family as well. Past French presidents have also eagerly helped French companies sell their goods to foreign governments.
“For the past two decades, the most important defense company in Sweden – Saab – has done well with its fast Gripen jet,” noted Wheeldon. “However, 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 – the Dassault Rafale being the other – the Gripen has struggled. This may well be due to Sweden’s reluctance to accept government-to-government agreements, a system that both Britain and France have benefited from for many decades.”
Buying governments prefer to deal with the governments of the country making the military platform rather than dealing directly with the manufacturer. “One of the main reasons for this is that selling governments can provide or arrange financing for the buying government,” Wheeldon pointed out. “Selling governments may also offer other guarantees, and the buying government may be able to secure investments in countries or similar cross-trade requirements.”
The US of course sells US protection through its defense industry: This year, that reality helped to motivate Sweden’s closest friend, Finland, to buy the F-35 over the Gripen. “Even in Denmark and Norway, they do things completely differently than in Sweden,” Limmergard said. “They are sending the crown prince. They send the king and queen.”
Certainly the Swedish government supported Saab about a decade ago when the company made its bid Gripen contract with Brazil. But on most other fronts it is far less involved than the governments of other countries’ businesses. Given that defense companies do not sell consumer products but very specific goods that only governments can buy, that absence matters.
Industry managers hardly have the opportunity to build relationships with foreign ministers, while other ministers can do just that. As defense equipment lasts for decades and needs to be continuously updated, foreign governments want to be extremely sure of the relationship they enter into. Having some companies bid with massive government support for the deal while Swedish companies bid with only modest government involvement clearly indicates that for foreign governments that the Swedish government simply does not like them. “You build trust at the government level, not between a government on one side and a business on the other,” Limmergard noted.
Certainly, in a perfectly efficient Adam Smith world, all firms would compete on the basis of their products. But the invisible hand of the economist does not work so effectively when it comes to munitions. Sweden also has the complication that, as a relatively small country, it is highly 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 produced in France and 50 percent of that produced in Germany. Given that the needs of the Swedish Armed Forces are smaller than those of the French Armed Forces and the Bundeswehr, the figure should be higher.
Government export support will become even more important as the countries’ defense spending increases. Among NATO member states, defense spending has adult by at least 3 percent per year since 2016, and the Stockholm International Peace Research Institute numbers shows that defense spending is increasing in most other parts of the world as well. That obviously doesn’t mean Andersson or her successor need to fly to Riyadh to offer Gripens to Saudi Crown Prince Mohammed bin Salman (although other Western countries, including UK and France has continued to sell arms to the Saudis).
However, this means that Swedish politicians must accept the fact that weapons are intimately linked to governments and that without government interference in the global arms market, Sweden’s highly regarded defense equipment stands to lose as other countries’ investments increase.
“What’s the game called?” the Swedish band ABBA sang. They tried to answer: “You make me talk/And you make me feel/And you make me show.” Sounds like a recipe for a successful defense export strategy.