What do Nordic political changes mean for the  future of sanctions on Russia and beyond?

 At a time of acute economic and security challenges, when there seemed to be a whipsaw of leadership changes all across Europe, the same had not held quite as true in the Nordics. As we are now in the fluid period of government formation in Denmark, with the effort being led by the same  official, Prime Minister Mette Frederiksen, who was the center of the entire election, questions remain on what the government’s program will be and thus will there be any impact on sanctions.

While commentary and polls prior to the elections noted increasing concern with the security situation in the Nordics and the gloomy economic outlook, that sentiment did not materialize into calls for a change in policy approach to Russia and Ukraine in the campaigns in Denmark or Norway. Even in the face of the sabotage of the Nord Stream pipelines and recent threats to critical infrastructure in Norway, discussion of foreign policy was largely absent from the election debates, without mention of reversing the monumental actions from the spring and summer of Sweden’s still-to-be-finalized NATO ascension and Denmark removing their defense reservation toward the EU. 

What about the direction of sanctions in Europe as a whole?

The recent election results in Denmark and Sweden have resulted in historic political change, however they are overturning the stable pillar of Scandinavian policy of  standing up for international norms and leading and supporting sanctions on Russia and their continued use to face new challenges. We are likely to see some growing pains toward further integration of EU implementation and enforcement, particularly given that the EU-skeptic government in Stockholm will take over the rotating EU Council presidency at the start of 2023, but the direction towards collaboration and cooperation will continue. As Germany’s creation of the new Central Office for the Enforcement of Sanction demonstrates, the lessons learned from the ‘Freeze and Seize Task Force’ is centralization of information and action is key to enforcement and the future for sanctions in Europe is clearly headed toward more robust sanctions enforcement based on collaboration and coordination across country lines.

What does this mean for Nordic Companies? The continued use of sanctions as a tool of foreign policy will progress to see new programs developed and applied to threats around the world, the scope and complexity of which will be compared with Russia sanctions as a benchmark.  Coupled with the heightened focus on enforcement of sanctions means increased regulatory scrutiny and increased reputational risk even in the absence of civil or criminal inquiries.  Prevention is always the best medicine and now is the time to understand your company’s exposure and dependency on flash point areas, particularly China, and to implement a sanctions compliance program that can efficiently and effectively adapt to the challenges of tomorrow.