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Diana project provides Nato tech dividend to Finland

Finnish tech sector to receive a boost following the country’s decision to join Nato

Finland’s cyber defence and technology sectors are primed to benefit from a North Atlantic Treaty Organisation (Nato) membership dividend following a decision by the alliance to locate accelerator research and development (R&D) facilities and test centres in the country.

Amid tensions with Russia, Finland formally joined Nato in April 2023, ahead of Nordic neighbour Sweden, which became a member of the alliance in March 2024.

The project to build R&D labs and test centres in Finland is being run as a joint venture between the state-backed Valtion Teknillinen Tutkimuskeskus (VTT) technical research centre and Nato’s Defence Innovation Accelerator for the North Atlantic (Diana) programme.

Launched in 2021, the Nato-Diana initiative was established to identify future challenges in the defence and security sectors through strategic engagements with private sector companies to find technological solutions that advantage the alliance ’s long-term operational effectiveness.

The initiative, which will mainly involve private Finnish technology companies, will focus on developing security-focused devices, technologies and innovations for civilian and defence sectors. Moreover, the Diana accelerator will be used to train private Finnish companies, including firms in technology fields other than security, to operate in the defence and security sectors.

Finnish tasks and missions

Under the terms of their joint venture, VTT and Nato-Diana will build an accelerator in Helsinki and test centres in Oulu . The technology tasks and missions of the accelerator and test centres will drive innovations that help deliver next-generation solutions in core areas such as defence communication systems, 6G technology, cyber security, space innovations and forward-looking quantum computing technologies.

“This is an ideal project for VTT. It will not only connect Finnish R&D to the Diana network’s accelerator and test centre activities, but it will spotlight Finland’s ground-breaking expertise in key target areas. The project will also help pioneering companies to develop the deep technologies that will safeguard Nato and the billions of people the alliance protects,” said Sauli Eloranta, vice-president of VTT’s security and defence technologies division.

The project will help pioneering companies to develop the deep technologies that will safeguard Nato and the billions of people the alliance protects
Sauli Eloranta, VTT

VTT, supported by Finland ’s Ministry of Defence (MoD), started to conduct preparatory work on potential joint venture projects with Nato in 2023, following the country’s accession to the alliance . The agreed framework for the collaboration plan will result in the location of a Diana accelerator facility in the Otaniemi district of Espoo, a satellite town within the Helsinki metropolitan area.

VTT’s designated test centre sites at Otaniemi and the University of Oulu will focus on R&D and tasking within the specialised areas of secure connectivity, space and quantum technologies. The test centre at the University of Oulu will also offer companies the opportunity to test 6G network technologies and explore how innovations can be best exploited to enhance defence and security capabilities. 

The Otaniemi-based venture represents a broad collaboration between VTT, Nato-Diana and the technology departments of Aalto University and the University of Helsinki .

The accelerator’s services offered by VTT and Nato-Diana will be specifically targeted at startups and small- to medium-sized enterprises (SMEs) with limited experience in the defence and security sector, said Eloranta.

“The project is a significant event for Finland . It’s the first time that Finnish operators are able to harness their cutting-edge expertise for Nato’s Diana innovation activities on such a large scale. Although Finland has a large number of technologically advanced and innovative startups and SMEs, as a country we have found it difficult to invest in export-led technologies relevant to the defence sector,” said Eloranta.

At its core, the VTT and Nato-Diana project will enable Finnish companies to train in the use of accelerators and gain an in-depth knowledge about the alliance ’s technical and procurement requirements. The project will develop and launch company-specific business training programmes that will provide a high-speed lane for enterprises interested in securing a foothold in fast-growing segments of the global defence and security sphere.

Finnish companies selected to participate in the VTT and Nato-Diana accelerators project will be first filtered through the so-called Diana Challenge Programme’s applications process. The first applications round, which is set to be rolled out in the second half of 2024, will be open to tech startups developing dual-use solutions.

Sweden next

After Finland, Nato is also expected to reach out and invite Sweden to join the Diana programme, although concrete talks on a potential joint venture have yet to begin.  

Sweden came a step closer to Diana in April 2024 when the country gained official Limited Partner status in the Nato Innovation Fund (NIF). Backed by 23 Nato members and capitalised at €1bn, the NIF functions as a deeptech-driven investment vehicle for advanced technology and science projects that are geared to bolstering the defence, security and resilience of alliance states.

Pål Jonson, Sweden’s defence minister, described participation in the NIF as the “perfect opportunity” for the country’s technology sectors to showcase their various research and innovation talents. 

“Being part of the NIF means we will be able to not only leverage our strategic geographic position and military resources, but also that part of our robust defence and security sector that drives technological innovation and development,” said Jonson.

Significantly, the linked historic decisions by Sweden and Finland to join Nato has set in motion landmark talks among Nordic governments regarding the possible establishment of a common innovation fund to support advanced R&D projects run by companies in the region’s defence and security domain.

Initial inter-state dialogue between the Nordic states, all of whom are Nato members, is leaning towards using the Nordic Investment Bank (NIB) as a conduit to provide low-interest loans to fund technology-driven R&D projects by defence and security companies.

“The NIB hasn’t in the past financed defence companies in the military industry complex. However, the world has changed. Such a development can have immense symbolic value. It’s a change in our business that is currently under consideration by our owner governments,” said André Küüsvek, CEO of the NIB.

Founded by the five Nordic states in 1975, the NIB was originally tasked to operate as a financial institution supporting the regional and international growth of non-defence industries. The Nato-aligned Baltic states Estonia , Latvia and Lithuania joined the NIB as full members in 2005.   

The NIB completed $1.1bn in new lending during the first three months of 2024. In 2023, the bank paid out $3.7bn in loans to Nordic companies. An increasing proportion of the bank’s lending is provided for R&D projects.

The final decision as to whether the NIB will be authorised to provide financing to the Nordic defence sector is “in the hands of the bank’s government owners”, said Küüsvek.

Sweden is the largest owner in the NIB, holding about 34% of the bank’s shares, followed by Norway with 21.5%, Denmark with 21%, Finland with 18%, Iceland with 1%, Lithuania with 2%, Latvia with 1.3% and Estonia with 1%.  

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