At the beginning of 1941 Sweden was in a situation that had drastically deteriorated during the previous year. The end of the Winter War (Russo-Finnish war) and the signing of peace in Moscow on 13 March 1940 were traumatic events in Sweden as well as in Finland. However, the conditions were not so devastating as they could have been had the Soviet war aims been achieved. Finland survived as an independent state, but within tighter borders.
The surprising and successful German attack on Denmark and Norway on 9 April 1940 brought serious consequences for Sweden. Sweden's political freedom became seriously limited. Threats from new directions had quickly to be taken into consideration. In one area, however, the German demands on Sweden created unexpected possibilities that were exploited well. Their request to hire telegraph lines going through Sweden made great successes for Swedish signals intelligence possible.
In mid-summer 1940, after the French capitulation and the Soviet occupation of the Baltic states, the Swedish intelligence service was faced with two important questions. Would Germany carry out ``Operation Seelöwe'', a naval invasion of Great Britain, during the autumn? Would the Soviet Union again attack Finland to re-establish Russian borders on the northern shore of the Gulf of Finland while Germany was engaged on the western front? There existed no guarantees that Stalin would wait until the German air war might lead to air supremacy over the British Isles or that he would wait for the German invasion. After developments in the Baltic, Stockholm considered it likely that the Soviet Union would attack Finland at the turn of the month July-August even before, or perhaps even without, a German invasion attempt on Great Britain. Germany would then probably take the same attitude as during the Winter War, i.e. benevolent neutrality. Indications, chiefly reported by attachés from Riga, Berlin and Moscow, showed such a development. The Finnish government was under enormous Soviet pressure, while Moscow-led communists tried to create internal trouble in the country. The pattern was the same as that before the Baltic states were occupied by the Soviet Union in June.
When, on 13 August 1940, Foreign Minister Günther explained the current situation to the Foreign Affairs Committee, his opinion was that there existed a real danger of such an attack. The German military attaché in Riga was given as the source. It is remarkable that no Swedish sources or Finnish military authorities' views were used or referred to. The Defence Staff's intelligence department was therefore also obviously restrained in its written reports to the military command and the government.
German fear of a Russian attack, however, caused Hitler to free the arms embargo against Finland shortly before 10 August. The arms' deliveries that had stopped under the Winter War were now let through. This political change of course indicated a renewed German interest for Finland's continued existence as an independent nation. The tension in Helsingfors was relieved. The immediate danger of a Russian attack was estimated to be over for the time being. As a result it was considered necessary that the Defence Staff's intelligence department concerned with Finland should be strengthened. Now, it was not only Finnish-Soviet relations but also German-Finnish relations that had to be watched. Since neither Finnish nor German military contacts were very communicative any longer, the task was not particularly easy.
The extraordinary Swedish military contacts in Finland were evidently about to be reduced because of Finland's German connections. The attaché reports from Berlin also showed a clear German interest in Finland. Speculations about a German attack on the Soviet Union started to appear in the reports from Berlin. Neither the Swedish attachés nor others could obtain any further information about Hitler's intentions. They were reduced to making assumptions about probabilities and possibilities. A German two-front war, however, was not considered probable by the Defence Staff's intelligence department. In autumn 1940 the situation did not seem particularly alarming to the Swedes. The concessions made, in response to German demands for troop transit and continued iron ore exports, appeared to be sufficient.
The reports from the military attaché in Moscow during the winter of 1940 no longer indicated a Russian build-up and deployment of forces against Finland. The Russian build-up of forces was instead concentrated in the border areas in the south and south-west, against Bessarabia and Bukovina. In Finland, however, they still felt that a new Russian attack was a real possibility.
As a consequence of the commonly perceived threat, the military intelligence exchange between Sweden and Finland which, as already explained, had diminished after the end of the Winter War, was again improved. However, once more the Finnish interest for co-operation diminished considerably during spring 1941, principally during and after April. Attaché von Stedingk in Helsingfors reported simultaneously that German-Finnish relations had dramatically improved. He also reported that Finnish contacts appeared to be prepared to take part in a German war against the Soviet Union, which German contacts said, with a surprising frankness, would start in early or mid-June. Colonel Carlos Adlercreutz, the chief of the Defence Staff's intelligence department, had during a conversation with the chief of the Finnish General Staff, General Heinrichs, clearly seen the possibility of Finland joining in a German attack on the Soviet Union, or being forced to participate in such an attack.
German probes about the transit of German troops from Norway to Finland through Sweden had already taken place in February. Sweden feared that these explorations would change into direct demands, but wondered if Hitler would be content with demands for transit if he intended to start a two-front war against the Soviet Union before Great Britain had been finally defeated.
The uncertainty about Hitler's intentions was brought to a head during the so-called ``March crisis'' that culminated in a large preparedness alert on 15 March. The alert was actually caused by a German communications error. In fact, there was no other intelligence about a German attack. However, the information obtained through signals intelligence made Swedish preparatory measures possible against regions where German units were positioned in Norway.
The deployment and build-up at the German eastern border now started to be obvious and was difficult to conceal. However, an uncertainty still prevailed as to whether Hitler really intended to attack the Soviet Union before Great Britain was conquered. Perhaps the build-up aimed only at applying pressure -- not a two-front war. How -- or if -- the received information was analysed at the Defence Staff and how -- or if -- the information in the military reports was weighed together with the rather uncertain and speculative diplomatic information, can no longer be clarified. At a presentation for the government on 21 April General Olof Thörnell, the chief of the Defence Staff, judged that a German-Soviet war was probable, and that in such a conflict Finland would participate on Germany's side. From the presentation it became clear what vague information was the basis for this judgement. The deception measures taken to protect the planning were hard for other intelligence services, including the Swedish, to penetrate.
The Soviet military intelligence service was informed about the coming attack. Nevertheless, Stalin refused to believe that the attack on the Soviet Union would start before Great Britain was conquered.
In one area the Swedish intelligence service was considerably in the lead. In spring 1941 the Swedish signals intelligence service furnished very interesting, extensive, accurate and unique information about German military dispositions in the vicinity of Sweden.