Policy
Offset is crucial for industry in small countries, but the instrument must be used wisely.
That is the message from industry organisations in Denmark and Norway, as Defence Nordic has focused in recent days on offset, also known as industrial participation.
Advertisement- As long as defence markets remain largely closed to genuine competition, such agreements will remain important. Used wisely, they can also help strengthen bilateral relations and support the implementation of security policy, says Torleiv Opland, CEO of FSI.
In Denmark, offset rules have also been central for companies, says Joachim Finkielman, director of DI Defence and Security.
- The value of offset has been immense for our members. It has been fundamental to the Danish defence industry, as offset opportunities have helped build competencies in different ways.
15 billion euro
Offset refers to requirements placed on foreign suppliers of defence materiel to direct work to national industries.
Denmark, Norway and Finland all use the system, though in different ways. Sweden, as an exporter, is more often affected by offset obligations as a supplier.
Foreign defence suppliers hold at least 15 billion euro in outstanding industrial obligations across Denmark, Norway and Finland, according to data optained by Defence Nordic.
AdvertisementFinland, for example, requires 30 percent industrial participation in major procurements such as the F-35, involving both companies and research institutions.
Offset regimes in the Nordic defence market
Denmark and Norway operate the most formalised offset systems in the Nordics, while Finland applies a hybrid model and Sweden has no structured offset regime.
- In Denmark, industrial cooperation is mandatory in major defence procurements and is governed through binding contracts between foreign suppliers and the Danish authorities. These contracts define the value of obligations, timelines and eligible activities, and the system is characterised by a relatively high level of transparency, with publicly available data on supplier commitments and remaining obligations.
- Norway also maintains a formal offset system, where industrial cooperation agreements are typically required in large defence acquisitions. The Norwegian approach places stronger emphasis on long-term industrial partnerships, technology transfer and export opportunities for domestic firms, rather than purely financial return. While the system is well established, public transparency is more limited compared to Denmark.
- Finland does not operate a traditional offset regime but instead applies industrial participation requirements selectively in major programmes, often justified by national security considerations. These arrangements focus on securing supply chains, building domestic capabilities and integrating Finnish companies into global defence value chains. The approach is flexible and case-by-case, but significantly less transparent.
- Sweden stands apart in the Nordic context by not having a formal offset system. Defence procurement is primarily governed by EU-based rules, with exemptions used only when justified by essential security interests. Industrial cooperation may occur, but it is not systematically required. Instead, Sweden relies more heavily on international cooperation programmes and targeted support for maintaining key national defence-industrial capabilities.
Overall, the Nordic region presents a fragmented landscape: Denmark and Norway enforce structured offset obligations, Finland applies conditional industrial participation, and Sweden operates without a formalised system.
Norway uses the system to establish strategic partnerships, while Denmark has taken a more "old-school"-approach, linking agreements directly to specific procurements like armoured vehicles etc.
In Norway, several major defence export successes stem from industrial cooperation agreements, according to Opland. Arrangements linked to major acquisitions have not only opened markets but also led to extensive and deep cooperation with foreign suppliers.
- This has significantly advanced technological development in Norwegian industry, with wide-ranging spillover effects. Norway has a niche-oriented defence industry, in many ways tailored for close cooperation with other countries, Opland says.
Little direct relevance
In Denmark, the armed forces were not involved in offset before the war in Ukraine, as the system was managed by the Danish Business Authority.
This sometimes resulted in projects with little direct relevance to the development of Danish defence capabilities, Finkielman says.
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- Only now are we considering how to use these instruments to develop in-demand competencies and create a more relevant industrial base. The Danish Defence Acquisition and Logistics Organisation has become more engaged in the dialogue and is discussing offset with suppliers in specific areas, he says.
Danish Business Authority are not able to comment due to the governmental negotiations in Denmark.
DI will host a seminar in early May where Danish companies will meet suppliers of ground-based air defence systems to explore development potential.
- We are gradually seeing a shift, says Finkielman.
- We need to move towards agreements where Danish companies help maintain and develop the systems we procure, so they become part of the international supply chain. With the orders in the pipeline, these will involve substantial commitments.
AdvertisementFinkielman hopes Denmark will begin to use offset in a more modern and strategic way, closer to Norway’s approach.
He points to Norway’s cooperation with Germany, under which Germany supplies submarines to Norway, while Norway supplies missiles for German ships and aircraft.
As another example, he notes that Denmark has recently bought air defence from Kongsberg. Norway uses a different command-and-control system from that supplied by Danish IT company Systematic, whose systems are used in more than 20 NATO countries.
- In negotiations with Norway and Kongsberg, one could require reciprocal investment in the Danish command-and-control system, so that it becomes standardised across the Nordic region. That is essentially normal business practice. It could also apply to maintenance and similar areas, Finkielman says.
Denmark procures materiel from 10 to 15 international companies with which it has long-term relationships and will continue to do business for decades, he adds, arguing that partnerships are preferable to offset.
- But until we have that alternative, offset is the best tool we currently have to further develop the industry. It offers greater flexibility and greater value.
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