Mundus Brief June 2023

Fans of late twentieth century American comedy may remember the plot from the Austin Powers series where Austin realises that he’s lost his mojo (OK aficionados, it was actually stolen from him). Austin then needs to regain his mojo in order to overcome Dr Evil, save the world and get the girl. 

Why is that relevant? Well, we believe that there are some signs that the Kristersson government has realised how it needs to fight back against the various evils confronting Sweden – Russia, crime, the energy and climate crises and the challenges of migration. As with all good plots, for our presumptive hero, Ulf Kristersson, it’s not initially clear that he has regained his mojo. But, after a terrible start, there are signs that he just might. If so, it will be just in time. Voter support for his side of government has fallen precipitously since the election, and a recent poll shows that Swedes are amongst the gloomiest in the EU, with 71% feeling that things are going in the wrong direction. 

Waving a flag or throwing in the towel?

On 30 May, Sweden’s PM, Ulf Kristersson took to the Financial Times with an opinion piece, declaring that Sweden had stepped up its fight against terrorism. He wrote that as of 1 June, “new legislation enters into force in Sweden that makes it illegal to participate in a terrorist organisation in any way that promotes, strengthens or supports it. We are thereby delivering on the last part of our agreement [with Turkey].” Amongst the details of his argument was that the new “legislation closes a loophole in our anti-terrorism laws. Unlike some of its neighbours, Sweden has not previously prohibited participation in a terrorist organisation. This meant that there was a risk that those who were not directly involved in perpetrating a specific terrorist act but actively supported such activities in some other way — by providing logistics or administration, for example — could evade punishment. This is no longer the case. We now have legislative parity with our neighbours.”

But, that was not enough for Türkiye, which aims to drive a hard bargain to ensure more than just the letter of the law is upheld. Türkiye didn’t have to wait long to see red. On Sunday 4 June, hundreds of people attended a demonstration in Stockholm against NATO, the new Swedish terror law and Turkish President Erdogan. The police gave permission for the assembly despite Turkish demands, saying that it constituted a constitutionally protected expression of opinion – and was not affected by the terrorism law. 

Erdogan’s adviser Fahrettin Altun has disagreed with the Swedish police’s judgement prior to the manifestation, accusing Sweden of allowing “PKK terrorists to operate freely”, tweeting that, “our sincere hope is that the new anti-terror law, which comes into force on June 1, will be applied correctly. More specifically, Swedish authorities must prevent PKK members from demonstrating on 4 June if they are serious about addressing Turkey’s concerns,”. The Swedish police made no further move and the protest went ahead. On 7 June, Türkiye’s Ambassador to Sweden, Yönet Can Tezel drove the ball back into Sweden’s court in an opinion piece in the Swedish daily, Aftonbladet. He argues that those carrying the flag of the PKK, an organisation deemed to be terrorist by Sweden and many other states, are doing what Kristersson argued was illegal – supporting a terrorist organisation. Furthermore, he links the PKKs international terrorism with domestic gang violence and crime, which thrives in loopholes of Swedish law, and says Sweden should not be naive in allowing seemingly proper democratic demonstrations to be taken over by a terror group, and throwing down a challenge. “When Turkish and Swedish authorities meet next week to discuss the progress of the trilateral memorandum for Swedish membership in NATO, we will hopefully have a clearer idea of how much difference the new law makes.”

Is this now the end game, where Erdogan demands of Sweden a final concession of outlawing the PKK flag in Sweden, and after that Sweden’s application is approved. And would the Swedish government be able to accommodate this demand? With only a month to go until the Vilnius summit it will be a tense time to see which side gives, or if there can be compromise.

Last week’s vignette forms the postscript to our feature story in the June edition of the  Monthly Policy Review (MPR), “Sweden and the NATO Vilnius Summit”.  It is possible that no-one outside of President Erdogan actually knows the answer as to whether Sweden will formally be admitted to NATO in July, and also possible that a decision has not even been made yet. Nonetheless, it is Mundus’s sense that this battle can soon be won.

Which way is the wind blowing?

Yes, you’re right, this is one of our favourite topics. But Swedish politics means that we keep on needing to return to climate policy. In May, Sweden’s government approved two large offshore wind power projects. Our June MPR investigates “The Changing Winds of Energy Politics”. 

Our conclusion is that while the Government now seems to have corrected its anti-wind stance and now recognises the industry’s importance, given some very strong direction by Swedish industry, it still has a mountain to climb. The numbers are staggering. If industry’s asks are taken at face value, then Sweden needs to double its entire stock of electricity production within two decades. Sweden’s power system operator, Svenska kraftnät, made that very clear last week when it said “the situation is very serious and we therefore want to clearly signal that the plans we have to expand the main grid will only cover a small part of the very large needs for increased electricity output”. Trying to achieve that while fending off the Sweden Democrats, who are wind sceptics and have been openly politicising the issue for electoral gain, will be a tough challenge. 

Nonetheless, the Government needs to try and has organised a national climate meeting this week, bringing together leaders from politics, research and industry for a discussion. Furthermore, they took a step up by opening an inquiry into how to speed up environmental permissions for the energy sector in order to accelerate climate conversion and take advantage of green industrial export markets. Fronting the press conference were PM Kristersson (M), Busch (KD) and Pourmokhtari (L) accompanied by the unlikely figure of the Sweden Democrat Spokesperson for Climate and Environment, Martin Kinnunen. Kinnunen looked a little uncomfortable trying to agree that permitting should be fast-tracked, while arguing against the idea of wanting more wind power, so the perception must be that the SD is a reluctant hostage, dragged into a press conference to project a united Tidö front. If so, then the Government is coming close to flipping SD, neutralising their domestic political threat and opening up international trade opportunities.

From Open Hearts to Policy Shifts

While Sweden struggles to juggle justice and mercy on hot-button migration policy, such challenges should be kept in perspective with regard to those of Italy, Greece and other countries on the frontline, which receive most of the EU’s 966,000 asylum requests. In 2015, Sweden did accept hundreds of thousands of asylum seekers, with then PM Reinfeldt begging Swedes to open their hearts. Now the number of quota refugees to Sweden is down to a few thousand. Integration has proved very hard for both Swedes and those seeking asylum here. Last Thursday, Home Affairs ministers from the 27 EU member states attended a meeting in Luxembourg and concluded an agreement which had eluded them for 7 years. Among the key agreement details were two compromises. The ministers agreed to allow the re-migration of asylum seekers to third countries deemed safe for those whose asylum applications had been declined. And, critically for Sweden, countries agreed that there would be no forced reception of refugees into countries that did not want them. This had been a key demand of the Swedish side, for both political and practical reasons. Instead, countries which did not want to accept their ‘quota’ of refugees could pay €20,000 per migrant to see their quota go elsewhere.

The result should be seen as a historic victory for Sweden, which has invested heavily in the outcome, not only via its EU Presidency, but also with the EU Commissioner for Home Affairs, with responsibility for migration being the Swede, Ylva Johansson (S). Sweden’s Migration Minister Maria Malmer Stenergard (M) quipped “It’s a historic day, I’m very happy to row this all the way to port”.

Nonetheless, there are still risks in this for the Government. The Sweden Democrats had demanded that the Government put a halt to the Pact negotiations, and voted against their Moderates government partner in the EU Parliament. Thus, migration could be a trigger issue on which SD considers a Swexit and threatens a government crisis. But after Thursday’s announcement SD’s press manager Oskar Cavalli-Björkman wrote “We decline to comment on this today. However, we will have reasons to return to the pact in the near future.”

Keeping the Government together remains a challenge. This is compounded by the fact that the Liberals and SD come from quite different ideological camps, which not only makes it hard for them to tolerate each other’s opinions, but also makes the electoral maths hard to complete. Last week an opinion poll gave the Liberals just 1.7% of the votes, a seemingly desperate position from which to retain their relevance. With several high profile former leaders having resigned from the party following the election and government formation, pressure must be inexorably building within L to break away. The situation is not that much better for KD, although it remains closer to the 4% Riksdag, and closer ideologically to SD.

A bit too exposed

Another issue which may be approaching its end game is the future of Swedish property giant, Samhällsbyggnadsbolaget i Norden AB (SBB). The company was born in 2016 as the brainchild of former social democratic politician, Ilja Batljan. Its shares had a meteoric rise, and the company’s value skyrocketed from SEK 6 billion in 2017 to SEK 67 billion by December 2021. The fall was even more dramatic, as its valuation plummeted back to SEK 5 billion over the last 18 months. 

But the problems with Swedish property run deeper than just SBB. Hedge funds increased their bets against the Swedish real estate sector to their highest level in a decade, anticipating that higher interest rates and tighter bank lending would impact property prices. Concerns intensified after credit rating agency S&P downgraded SBB, highlighting its high leverage and tightening market liquidity, which also affected other domestic residential and commercial property competitors. Rising interest rates and the reliance on short-term debt make Swedish property groups vulnerable. “The closer we look at Sweden the worse things seem to appear,” said James McMorrow, Europe commercial property economist at Capital Economics.

SBB’s problems deepened last week, with Batljan forced to step down as CEO, and JP Morgan and SEB investigating whether to divide SBB into three separate entities. The Government will now investigate whether some of their rental properties can be considered a security risk, given that the fallen giant owns property where Sweden’s security and police forces are tenants, with concerns for whether such properties could end up in the hands of foreign actors.

Are things really looking up?

Of course, we may be a little premature in calling these scenarios. Equally, one swallow doesn’t make a summer. But with the Migration Pact almost done and if the Government can produce another win on NATO or climate then it may be fair to say that it has found its mojo. Perhaps something for even the gloomiest of Swedes to ponder as they count the swallows and tropical nights.

 Photo credit: Janerik Henriksson/TT