Ulf Kristersson (left), leader of Sweden's Moderate Party and Jimmie Akesson, leader of the Sweden Democrats, before a televised debate with other party leaders in Stockholm on September 9, 2022. Swedish Prime Minister Magdalena Andersson on September 14 announced that she would resign after an unprecedented right-wing and far-right bloc appeared on course to win the general election. AFP
Ulf Kristersson (left), leader of Sweden's Moderate Party and Jimmie Akesson, leader of the Sweden Democrats, before a televised debate with other party leaders in Stockholm on September 9, 2022. Swedish Prime Minister Magdalena Andersson on September 14 announced that she would resign after an unprecedented right-wing and far-right bloc appeared on course to win the general election. AFP
Ulf Kristersson (left), leader of Sweden's Moderate Party and Jimmie Akesson, leader of the Sweden Democrats, before a televised debate with other party leaders in Stockholm on September 9, 2022. Swedish Prime Minister Magdalena Andersson on September 14 announced that she would resign after an unprecedented right-wing and far-right bloc appeared on course to win the general election. AFP
Ulf Kristersson (left), leader of Sweden's Moderate Party and Jimmie Akesson, leader of the Sweden Democrats, before a televised debate with other party leaders in Stockholm on September 9, 2022. Swed

Sweden's new government unlikely to derail Nato accession, analysts say


Sunniva Rose
  • English
  • Arabic

A shock outcome of Sweden's general election has resulted in the demise of the prime minister who lodged the country's application to join Nato. However, analysts do not see the emergence of a new prime minister throwing up new obstacles to the historic decision.

Breaking with a long history of neutrality, Sweden and Finland both requested to join Nato after Russia’s invasion of Ukraine in February. The Swedish Prime Minister Magdalena Andersson, who has led the accession talks, last week conceded defeat and announced she would resign after a surge in support for a nationalist party helped the right-wing opposition triumph.

Swedish politicians will likely continue supporting the move, despite the large gains made by the historically anti-Nato Sweden Democrats during the September 11 election.

The party, which has neo-Nazi roots, will try to “tone down its sceptical attitude towards the EU and Nato,” said Robert Dalsjo, senior analyst with the Swedish Defence Research Agency.

Spain on Thursday became the 26th country out of Nato's 30 members to ratify Sweden and Finland’s entry to the alliance. The procedure enjoys wide support.

But one country has thrown a spanner in the works: Turkey, a Nato partner which houses a US military airbase.

Turkey threatened at first to block Sweden and Finland’s accession, seemingly mostly aggrieved with Sweden’s sympathy for Kurdish militants viewed as terrorists in Ankara.

But then Turkey lifted its veto in June at the same time as President Joe Biden’s administration said that it publicly supported Ankara’s years-long request to purchase F-16 fighter jets.

Mr Biden is expected to intensify pressure on Congress to approve the sale of F-16s to Turkey in an attempt to enable Sweden and Finland to join Nato, analysts told The National.

“The pressure to come to a resolution is very powerful,” said Zachary Selden, associate professor of political science at the University of Florida.

Turkish President Recep Tayyip Erdogan met Mr Biden at a Nato summit in Madrid in June.

It became evident that an “informal link” was established between Turkey’s ratification of Sweden and Finland’s Nato accession deal and its ability to purchase F-16s, Sinan Ulgen, a senior fellow at Carnegie Europe, told The National.

US and Turkish officials have been reluctant to link the two issues in public. The New York Times in June reported that senior American officials said they “did not bargain” with Turkey in exchange for agreeing to Sweden and Finland joining Nato.

The US blocked Turkey from purchasing F-35s after Ankara bought S-400 missile systems from Russia in 2017. Washington interpreted this as Ankara edging closer to Moscow.

Turkey wants F-16s instead and, while the White House supports their sale to Ankara, Mr Biden must try to change the position of the US Congress, which has been increasingly hostile to Turkey since a 2019 military operation in Syria.

Sweden's Prime Minister Magdalena Andersson, left, shakes hands with Turkish President Recep Tayyip Erdogan during a visit to the Prado museum with heads of state and dignitaries in Madrid, Spain, in June 2022. Nato heads of state are meeting for a summit. AP
Sweden's Prime Minister Magdalena Andersson, left, shakes hands with Turkish President Recep Tayyip Erdogan during a visit to the Prado museum with heads of state and dignitaries in Madrid, Spain, in June 2022. Nato heads of state are meeting for a summit. AP

Mr Biden must certify that Turkey has not breached Greek airspace for 120 days. He must also agree that the sale of the jets is in the US national interest to change the amendment of the defence authorisation blocking it that was passed by Congress in July.

“I think that the president [Biden] can twist some arms. Members of his own party put the amendment forward so he has a bit of sway,” said Mr Selden, also a previous deputy secretary general for policy at the Nato Parliament assembly.

Views of Turkey in Congress might have become more favourable since Turkey’s donation of drones to Ukraine, Mr Selden said.

“Bringing Sweden and Finland into the alliance is too big a deal to let these concerns derail it, so some solution will be found,” he said.

Renewed pressure

Turkish Foreign Minister Mevlut Cavusoglu last week renewed pressure on Sweden and Finland, stating that they had taken “no concrete steps” so far.

“There is no softening of Turkey’s stance,” Mr Ulgen said.

Both sides are aware that extraditions are decided by the judiciary, not politicians.

“There can’t be credible commitments regarding the outcome of these [extradition] proceedings,” Mr Ulgen added.

But Ankara is still watching closely Sweden’s introduction of anti-terrorist legislation. This is especially the case when it comes to the Kurdish Workers’ Party (PKK), which is classified by the EU as a terrorist organisation, Mr Ulgen said.

Finland hosted talks with Sweden and Turkey in August, seemingly in an attempt to appease Mr Erdogan. But little is known about these negotiations.

“We have not seen all the parts of the agreement between Sweden, Finland and Turkey. There’s a bit of secrecy surrounding it,” said Anders Sannerstedt, a professor of political science at Lund University.

So far, one Kurdish refugee in Sweden threatened with deportation to Turkey has gone on hunger strike.

In Sweden, Mr Erdogan’s demands are widely viewed as having domestic aims before a general election next year, said Mats Engstrom, an analyst at the European Council on Foreign Relations.

“Maybe Erdogan needs to show that he has gained something from Sweden,” he said.

Mr Ulgen agreed that internal Turkish politics played a role.

Mr Erdogan has come under fire from the Turkish opposition for making his annoyance with Sweden public, instead of holding closed-door negotiations, to kindle nationalist support.

“Grievances with Sweden are bi-partisan. What the government is criticised for domestically is the way it articulated them,” Mr Ulgen said.

Meanwhile, Nato members such as the UK have signalled that they would defend Sweden should it come under attack from Russia ― even if its entry to the alliance has not yet been formally ratified.

“We’ve seen a much greater US presence in the Baltic region to show that at least America and other allies are putting their hand out to Sweden and Finland before they formally become members,” Mr Dalsjo said.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Updated: September 19, 2022, 11:19 AM