Following World War II, Sweden attempted to mollify the Soviets by forcing Baltic refugees to repatriate and granting Moscow substantial financial credits. The Soviets, however, did not show much gratitude. After Swedish diplomat Count Raoul Wallenberg negotiated the release of Hungarian Jews, he was apprehended by Soviet agents and disappeared. This aroused great anti-Soviet sentiments in Sweden. Other early Cold War Soviet provocations included the presumed Soviet downing of a Swedish surveillance aircraft in 1951 and Soviet efforts to disrupt the subsequent search and rescue mission.
In the immediate postwar years, Sweden failed in its attempt to create a nonaligned Nordic bloc to keep all of Scandinavia out of the Cold War. Finland signed a mutual aid, cooperation, and friendship treaty with the Soviet Union in 1948, while Denmark and Norway joined the North Atlantic Treaty Organization (NATO) in 1949. This constellation of Norwegian and Danish NATO membership, Swedish nonalignment, and Finland's ties to the Soviet Union has frequently been termed "the Nordic balance." During the early Cold War, Sweden's Social Democrats and center-rightist political parties differed little on the practical aspects of nonalignment. Nevertheless, Sweden conducted security-related consultations with the United States and NATO in both the political and military spheres. On occasion, the center-rightists did advocate a tougher line with the Soviets in regard to Eastern Europe.
Although Swedes experienced some economic dislocation in the immediate post–World War II years, having escaped wartime destruction meant that their economic, political, and social institutions were still intact in 1945. In the elections of that year, the Social Democrats formed a majority government under Prime Minister Per Albin Hansson. When he died the following year, Tage Erlander replaced him and held the premiership until 1969. During 1951–1957, the Social Democrats had to share power with the Peasant Party, as it had done during the interwar years.
Swedish society was thoroughly democratic and civic-minded in its social and political structures. Swedes enjoyed a well-functioning social welfare state, a high level of social and corporate organization, and a strong public sector. Much of this was made possible by a thriving industrial base, funded by domestic financing. Swedish exports included high-value industrial products such as automobiles, machine tools, and ball bearings. But the postwar era also witnessed the rapid depopulation of rural Sweden, as industry and commercial concerns in the cities lured workers from the hinterlands.
Despite fears of provoking Soviet suspicions, Sweden accepted Marshall Plan aid and in 1951 also adopted the U.S. Cold War initiative that called for an embargo of strategic commodities and products to the Eastern bloc. Sweden also put recognition of the German Democratic Republic (GDR, East Germany) on hold until 1972 in accordance with the general Western view that recognition could be seen as a hostile act against the Federal Republic of Germany (FRG, West Germany), a major trading partner.
In the areas of trade and other transnational interactions, Sweden did align itself with the West. Swedish policymakers thus created a tension between nonalignment and economic necessity. The European Council provided one arena for interacting with other democracies without being tied to a bloc. The European Free Trade Association (EFTA) allowed for free trade outside the more politicized European Economic Community (EEC), which Swedish officials refused to join because it would contradict nonalignment.
As East-West tensions eased beginning in the mid-1960s, many nonaligned states had more freedom of action of foreign affairs. Accordingly, the Social Democratic government moved from pure realpolitik to a more idealistic foreign policy. At the core of this reorientation were expectations of a new economic world order, decolonization, nuclear disarmament, and the curbing of great power influence. The move away from realpolitik became most evident at the UN by Swedish participation in peacekeeping missions in the Middle East and the Congo and by Dag Hammarskjöld's posting as UN secretary-general. Indeed, rapid decolonization swelled the number of nonaligned states and broadened the appeal of Swedish foreign policy.
Swedish leaders did not shy away from confronting the United States. Prime Minister Olof Palme spoke out fiercely against the Vietnam War. Indeed, after the U.S. Christmas Bombings of Hanoi in December 1972, Palme compared the incident to the Holocaust. President Richard M. Nixon's administration was outraged and withheld its ambassador from Stockholm until 1974. Sweden also provided asylum to U.S. draft dodgers seeking to escape service in Vietnam, a policy that particularly rankled Washington.
In 1976, U.S.-Swedish relations improved markedly when the political Right gained power under Prime Minister Thorbjörn Fälldin. The Peasant Party, to which Fälldin belonged, had changed its name to the Center Party and simultaneously aligned itself with the political Right. Still, no major policy changes occurred, although the idealism of the Social Democrats was drastically toned down.
With Cold War tensions already on the rise again in the late 1970s, the Swedish government condemned the 1979 Soviet invasion of Afghanistan and the imposition of martial law in Poland in 1981. At the same time, dramatic events were also unfolding closer to home. In October 1982, a Soviet submarine ran aground outside the Karlskrona naval base in southern Sweden. Moscow acknowledged the undeniable fact of the grounded sub (which the Soviets blamed on a damaged navigation system) but denied that there had been any systematic Soviet violation of Swedish territorial waters. Nonetheless, Soviet intrusions by submarines into Swedish waters continued.
When the Social Democrats and Palme regained power in 1986, Swedish officials withdrew their protests of Soviet submarine violations and announced an upcoming state visit to Moscow. However, Palme was assassinated in February 1986, and the trip was made by his successor, Ingvar Karlsson, in 1987. The rapprochement between the Soviet Union and Sweden was facilitated by new Soviet leader Mikhail Gorbachev's reforms.
The end of the Cold War transformed the Baltic Sea from a part of the Iron Curtain to an increasingly important line of communication between Sweden and the former Eastern bloc countries. As such, Sweden's influence in the region grew. However, friction was also apparent. Estonia, Latvia, and Lithuania harbored a grudge toward Sweden for its 1940 recognition of the Soviet takeover of these republics and had not forgotten Sweden's forced repatriation of Baltic refugees back to the Soviet Union in 1945. There was also some Baltic discontent over Stockholm's tepid support during the 1989–1991 struggles for independence. Baltic skepticism toward Sweden also had deep historical roots, as it was here that Sweden had vied with Russia for Baltic supremacy in the seventeenth and early eighteenth centuries.
With the end of the Cold War, Sweden no longer regarded the European Union (EU), the successor of the EEC, as part of a political bloc to which membership on their part would be a breech of their nonalignment policy. Thus, Sweden joined the EU after a referendum in 1994.
At the end of the twentieth century, government interventionism and large-scale industrial structures marked a troubled Swedish economy. It faced the challenge of globalization and demands for harmonizing with EU standards. Unemployment has been comparatively high by Scandinavian standards, placing additional burdens on social services. Foreign interests have purchased Swedish trademarks such as Volvo and Saab, and production has moved to countries in which labor costs are lower. Fearing unemployment and diminished benefits, Swedish trade unions have not always been cooperative in making necessary sacrifices in order to make Sweden's industry more competitive.
Bjereld, Ulf, and Ann-Marie Ekengren. Cold War Historiography in Sweden. Odense: University Press of Southern Denmark, 2004.; Hanhimäki, Jussi. Scandinavia and the United States: An Insecure Friendship. New York: Twayne, 1997.; Lundestad, Geir. America, Scandinavia and the Cold War. Oslo: Universitetsforlaget, 1982.