Nordic governments explore joint loans to fund defense buildup

HELSINKI — Nordic governments are exploring the feasibility of an ambitious proposal to permit the Helsinki-based Nordic Investment Bank (NIB) to provide competitively priced loans to defense companies in the private and state-ownership domain.

Founded by the five Nordic states in 1975, the NIB was intended to function as a financial institution supporting the regional and international growth of non-defense industries. The Baltic states Estonia, Latvia and Lithuania joined the NIB as full members in 2005.

“The NIB hasn’t in the past financed defense companies in the military-industry complex. However, the world has changed,” said André Küüsvek, the NIB’s chief executive. “Such a development can have immense symbolic value. It’s a change in our business under consideration by our owner governments.”

The central discussion at the government level revolves around what type of capital investments within the defense sphere the bank might be sanctioned to finance.

Any future pan-Nordic agreement to authorize the NIB to provide development loans to the defense industry would represent a significant annex to the bank’s operations. At present, the NIB is primarily focused on funding projects within the portfolios of infrastructure and green transformation, such as wind and hydropower, hydrogen-fueled transportation, green buildings, airports and road networks.

Most Nordic states, led by Sweden and Norway, want to strike a balance between those activities and the additional field of national and regional security, like drone systems and and surveillance technologies.

The NIB, which traditionally prioritizes high-impact projects, completed $1.1 billion in new lending during the first three months of 2024. In 2023, the bank paid out $3.7 billion in loans to Nordic companies. A significant and increasing proportion of the lending is extended for research and development.

The final decision as to whether the NIB is cleared to provide financing to the Nordic defense sector is “in the hands of the bank’s government owners,” said Küüsvek.

Sweden is the largest owner in the NIB with 34.6% of the bank’s shares, followed by Norway with 21.5%, Denmark with 21.1%, Finland with 17.7%, Iceland with 0.9%, Lithuania with 2%, Latvia with 1.3% and Estonia with 0.9%.

Nordic government interest in using the NIB to support the growth potential of defense companies has followed quickly on the heels of formerly non-aligned states Sweden and Finland joining NATO, a development that removed many obstacles to closer cross-Nordic defense collaboration. Nordic governments have made no secret of their desire to exercise what they see as the “Nato-dividend” to deepen cooperation in key areas such as joint weapons development and production.

One joint Nordic cooperation project that got underway in the first quarter of 2024 saw the Finnish Defense Forces (FDF) transfer military equipment to stores in neighboring Norway. The FDF plans to commence a similar operation to move equipment to stores in Sweden in the fall.

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