In the aftermath of the Winter War, both the Soviet Union and Finland were preparing for a new war while the Soviets pressured the Finns politically. In early 1940 Finland sued for an alliance with Sweden but both the Soviet Union and Germany opposed it. In April, Germany occupied Denmark and Norway. In June the Soviet Union occupied the Baltic states. The next year, Finland negotiated their participation in the Axis invasion of the Soviet Union.
The 1939 Molotov-Ribbentrop Pact clarified Soviet–German relations and enabled the Soviet Union to bring pressure to bear on the small Baltic republics and Finland, perhaps in order to better her strategic position in Eastern Europe in case of a widening of the war. The Baltic republics soon gave in to Soviet demands for bases and troop transfer rights, but Finland continued to refuse. As diplomatic pressure had failed, arms were resorted to, and on November 30, 1939, the Soviet Union began an invasion of Finland—the Winter War.
The Winter War produced in Finns a rude awakening to international politics. Condemnation by the League of Nations and by countries all over the world seemed to have no effect on Soviet policy. Sweden allowed volunteers to join the Finnish army, but did not send military support, and refused passage to French or British troops—which were in any event made ready in lower numbers than promised. Even right-wing extremists were shocked to find that Nazi Germany did not help at all, and also blocked material help from other countries.
The Moscow Peace Treaty, which ended the Winter War, was perceived as a great injustice. It seemed as if the losses at the negotiation table, including Finland's second largest city, Viipuri, had been worse than on the battlefield. A fifth of the country's industrial capacity and 11% of agricultural land were lost. Of the 12% of Finland's population who lived in the lost territories, only a few hundred stayed, the remaining 420,000 moving to the Finnish side of the border.
The Moscow Peace Treaty, signed on March 12, 1940, was a shock for the Finns. It was perceived as the ultimate failure of Finland's 1930s foreign policy, which had been based on multilateral guarantees for support from similar countries, first in the world order established by the League of Nations, and later from the Oslo group and Scandinavia. The immediate response was to broaden and intensify this policy. Binding bilateral treaties were now sought where Finland formerly had relied on goodwill and national friendship, and formerly frosty relations with ideological adversaries, such as the Soviet Union and the Third Reich, had necessarily to be eased.