In August 1939, Nazi Germany and the Soviet Union signed the Molotov–Ribbentrop Pact, where Finland and the Baltic states were allocated to the Soviet "sphere of influence". After invading Poland, the Soviet Union sent ultimatums to the Baltic countries, where it demanded military bases on their soil. The Baltic states accepted Soviet demands, and lost their independence in the summer of 1940. In October 1939, the Soviet Union sent a similar request to Finland, but the Finns refused these demands.
The Soviet Union invaded Finland on 30 November 1939, launching the Winter War, with the aim of annexing Finland into the Soviet Union. The Finnish Democratic Republic was established by Joseph Stalin at the beginning of the war with the purpose of governing Finland after Soviet conquest. The Red Army was defeated in numerous battles, notably at the Battle of Suomussalmi. After two months of negligible progress on the battlefield, as well as severe losses of men and materiel, the Soviets put an end to the Finnish Democratic Republic in late January 1940 and recognized the legal Finnish government as the legitimate government of Finland. Soviet forces began to make progress in February and reached Vyborg in March. Fighting came to an end on 13 March 1940 with the signing of the Moscow Peace Treaty. Finland had successfully defended its independence, but ceded 9% of its territory to the Soviet Union. The Soviet Union was expelled from the League of Nations as a result of the invasion.
Captain Aarne Juutilainen at the front at Kollaa during the Winter War. After the Winter War the Finnish Army was exhausted, and needed recovery and support as soon as possible. The United Kingdom declined to help, but in autumn 1940, Nazi Germany offered weapon deals to Finland, if the Finnish government would allow German troops to travel through Finland to occupied Norway. Finland accepted, weapon deals were made and military co-operation began in December 1940.
Hostilities resumed in June 1941 with the start of the Continuation War, when Finland aligned with Germany following Germany's invasion of the Soviet Union. Finland was involved with the Siege of Leningrad and occupied East Karelia from 1941 to 1944. This irredentist sentiment of a Greater Finland, whose inhabitants were culturally related to the Finnish people, although Eastern Orthodox by religion, resulted in other countries being considerably less sympathetic to the Finnish cause.
Finnish forces won several decisive battles during the Soviet Vyborg–Petrozavodsk offensive of 1944, including the Battle of Tali-Ihantala and the Battle of Ilomantsi. These victories helped ensure Finnish independence, and led to the Moscow Armistice with the Soviet Union. The armistice called for the expulsion of German troops residing in northern Finland, leading to the Lapland War whereby the Finns forced the Germans to withdraw into Norway (then under German occupation).
Finland was never occupied by Soviet forces. Its army of over 600,000 soldiers saw only 3,500 prisoners of war. About 96,000 Finns died, or 2.5% of a population of 3.8 million; civilian casualties were under 2,500. Finland managed to defend its democracy, contrary to most other countries within the Soviet sphere of influence, and suffered comparably limited losses in terms of civilian lives and property. It was, however, punished harsher than other German co-belligerents and allies, having to pay large reparations and resettle an eighth of its population after having lost an eighth of its territory, including the major city of Viipuri. After the war, the Soviet government settled these gained territories with people from many different regions of the USSR, for instance from Ukraine.
The Finnish government did not participate in the systematic killing of Jews, although the country remained a "co-belligerent", a de facto ally of Germany until 1944. In total, eight German Jewish refugees were handed over to the German authorities. In the Tehran Conference of 1942, the leaders of the Allies agreed that Finland was fighting a separate war against the Soviet Union, and that in no way was it hostile to the Western allies. The Soviet Union was the only Allied country against which Finland had conducted military operations. Unlike any of the Axis nations, Finland was a parliamentary democracy throughout the 1939–1945 period. The commander of Finnish armed forces during the Winter War and the Continuation War, Carl Gustaf Emil Mannerheim, became the President of Finland at the very end of the Continuation War. Finland made a separate armistice agreement with the Soviet Union on 19 September 1944, and was the only bordering country of USSR in Europe (alongside Norway, which has only gained its own border with the Soviet Union after the war) that kept its independence after the war.
During and in between the wars, approximately 80,000 Finnish war-children were evacuated abroad: 5% went to Norway, 10% to Denmark, and the rest to Sweden. Most of the children were sent back by 1948, but 15–20% remained abroad.
The Moscow Armistice was signed between Finland on one side and the Soviet Union and Britain on the other side on 19 September 1944, ending the Continuation War. The armistice compelled Finland to drive German troops from its territory, leading to the Lapland War 1944–1945.
In 1947, Finland reluctantly declined Marshall aid in order to preserve good relations with the Soviets, ensuring Finnish autonomy. Nevertheless, the United States shipped secret development aid and financial aid to the non-communist SDP (Social Democratic Party). Establishing trade with the Western powers, such as Britain, and the reparations to the Soviet Union caused Finland to transform itself from a primarily agrarian economy to an industrialised one. After the reparations had been paid off, Finland continued to trade with the Soviet Union in the framework of bilateral trade.
Finland's role in the Second World War was unusual in several ways. Despite massive superiority in military strength, the Soviet Union was unable to conquer Finland when the former invaded in 1939. In late 1940, German-Finnish co-operation began; it took a form that was unique when compared to relations with the Axis. Finland signed the Anti-Comintern Pact, which made Finland an ally with Germany in the war against the Soviet Union. But, unlike all other Axis states, Finland never signed the Tripartite Pact, meaning that Finland was not de jure an Axis nation.
Although Finland lost territory in both of its wars with the Soviets, the memory of these wars was sharply etched in the national consciousness. Finland celebrates these wars as a victory for the Finnish national spirit, which survived against long odds and allowed Finland to maintain its independence. Many groups of Finns are commemorated today, including not just fallen soldiers and veterans, but also orphans, evacuees from Karelia, the children who were evacuated to Sweden, women who worked during the war at home or in factories, and the veterans of the women's defense unit Lotta Svärd.
Some of these groups could not be properly commemorated until long after the war ended in order to preserve good relations with the Soviet Union. However, after a long political campaign backed by survivors of what Finns call the Partisan War, the Finnish Parliament passed legislation establishing compensation for the war's victims.
Finland retained a democratic constitution and free economy during the Cold War era. Treaties signed in 1947 and 1948 with the Soviet Union included obligations and restraints on Finland, as well as territorial concessions. The Paris Peace Treaty (1947) limited the size and the nature of Finland's armed forces. Weapons were to be solely defensive. A deepening of postwar tensions led a year later to the Treaty of Friendship, Cooperation, and Mutual Assistance (1948) with the Soviet Union. The latter, in particular, was the foundation of Finno-Soviet relations in the postwar era. Under the terms of the treaty, Finland was bound to confer with the Soviets and perhaps to accept their aid if an attack from Germany, or countries allied with Germany, seemed likely. The treaty prescribed consultations between the two countries, but it had no mechanism for automatic Soviet intervention in a time of crisis. Both treaties have been abrogated by Finland since the 1991 dissolution of the Soviet Union, while leaving the borders untouched. Even though being a neighbor to the Soviet Union sometimes resulted in overcautious concern in foreign policy ("Finlandization"), Finland developed closer co-operation with the other Nordic countries and declared itself neutral in superpower politics.
The Finnish post-war president, Juho Kusti Paasikivi, a leading conservative politician, saw that an essential element of Finnish foreign policy must be a credible guarantee to the Soviet Union that it need not fear attack from, or through, Finnish territory. Because a policy of neutrality was a political component of this guarantee, Finland would ally itself with no one. Another aspect of the guarantee was that Finnish defenses had to be sufficiently strong to defend the nation's territory. This policy remained the core of Finland's foreign relations for the rest of the Cold War era.
In 1952, Finland and the countries of the Nordic Council entered into a passport union, allowing their citizens to cross borders without passports and soon also to apply for jobs and claim social security benefits in the other countries. Many from Finland used this opportunity to secure better-paying jobs in Sweden in the 1950s and 1960s, dominating Sweden's first wave of post-war labour immigrants. Although Finnish wages and standard of living could not compete with wealthy Sweden until the 1970s, the Finnish economy rose remarkably from the ashes of World War II, resulting in the buildup of another Nordic-style welfare state.
Despite the passport union with Sweden, Norway, Denmark, and Iceland, Finland could not join the Nordic Council until 1955 because of Soviet fears that Finland might become too close to the West. At that time the Soviet Union saw the Nordic Council as part of NATO of which Denmark, Norway and Iceland were members. That same year Finland joined the United Nations, though it had already been associated with a number of UN specialized organisations.[83] The first Finnish ambassador to the UN was G.A. Gripenberg (1956–1959), followed by Ralph Enckell (1959–1965), Max Jakobson (1965–1972), Aarno Karhilo (1972–1977), Ilkka Pastinen (1977–1983), Keijo Korhonen (1983–1988), Klaus Törnudd (1988–1991), Wilhelm Breitenstein (1991–1998) and Marjatta Rasi (1998–2005). In 1972 Max Jakobson was a candidate for Secretary-General of the UN. In another remarkable event of 1955, the Soviet Union decided to return the Porkkala peninsula to Finland, which had been rented to the Soviet Union in 1948 for 50 years as a military base, a situation which somewhat endangered Finnish sovereignty and neutrality.
Officially claiming to be neutral, Finland lay in the grey zone between the Western countries and the Soviet Union, and it also developed into one of the centres of the East-West espionage, in which both the KGB and the CIA played their parts. The 1949 established Finnish Security Intelligence Service (SUPO, Suojelupoliisi), an operational security authority and a police unit under the Interior Ministry, whose core areas of activity are counter-Intelligence, counter-terrorism and national security,[89] also participated in this activity in some places. The Finno-Soviet Treaty of 1948 (Finno-Soviet Pact of Friendship, Cooperation, and Mutual Assistance) gave the Soviet Union some leverage in Finnish domestic politics. However, Finland maintained capitalism unlike most other countries bordering the Soviet Union. Property rights were strong. While nationalization committees were set up in France and UK, Finland avoided nationalizations. After failed experiments with protectionism in the 1950s, Finland eased restrictions and committed to a series of international free trade agreements: first an associate membership in the European Free Trade Association in 1961, a full membership in 1986 and also an agreement with the European Community in 1973. Local education markets expanded and an increasing number of Finns also went abroad to study in the United States or Western Europe, bringing back advanced skills. There was a quite common, but pragmatic-minded, credit and investment cooperation by state and corporations, though it was considered with suspicion. Support for capitalism was widespread. Savings rate hovered among the world's highest, at around 8% until the 1980s. In the beginning of the 1970s, Finland's GDP per capita reached the level of Japan and the UK. Finland's economic development shared many aspects with export-led Asian countries.
Building on its status as western democratic country with friendly ties with the Soviet Union, Finland pushed to reduce the political and military tensions of cold war. Since the 1960s, Finland urged the formation of a Nordic Nuclear Weapons Free Zone (Nordic NWFZ), and in 1972–1973 was the host of the Conference on Security and Cooperation in Europe (CSCE), which culminated in the signing of the Helsinki Accords in 1975 and lead to the creation of the OSCE.
