Still, to the dismay and chagrin of the Russians, Soviet attacks were stalled and in places thrown back with great casualties. Encirclement battles were fought along the few roads leading from the long Finnish border inland.
In several of these battles, whole Soviet divisions were dominated and their equipment was captured (crucial to the otherwise ill and under-equipped Finnish armed forces). Main contributors to these victories were the fighting spirit of the Finnish troops and the skillful use of small unit tactics in the forests on the road-bound attackers.
The Finns, realizing that the Soviets were relying on superior numbers alone to win the war, engaged in harassment warfare, costing the Russians dearly, while suffering relatively few losses themselves. However, lack of artillery, ammunitions and reserves for the Finns made the breaching of the main defensive line inevitable.
Finland, of course, realized that it could not hold against such overwhelming strength, and actively sought diplomatic means to end the war. The Russians, foreseeing such a turn of events, had set up a puppet "Democratic Republic of Finland" government, and refused to recognize the legitimate government, saying that they had fled to an unknown destination.
This People's Government of the Democratic Republic of Finland, "headed" by Finnish old-guard communist Otto Kuusinen, in fact had no real duties other than the publication of a newspaper and propaganda. That, and to carry on the illusion of being a legitimate government, in order to allow the Soviets to not lose credibility altogether for not negotiating. By only recognizing the puppet government, the Soviets could reject all proposals of peace talks, saying that
'the Soviet Union is not at war with Finland and does not threaten the Finnish people.
The Soviet Union maintains peaceful relations with the Democratic Republic of Finland.
The [Helsinki government is] not the real representatives of the people of Finland' 7
Because of this puppet government, all routes the Finns attempted to take to peace were blocked by the Russians. The Finns attempted to use the Swedes, the Americans, and the Germans as mediators, but the Russians ignored their cries for peace. Having those avenues blocked, the Finns next appealed to the League of Nations, where again they were given the same response. In the League of Nations, however, the Russians were harshly criticized for their actions. Nations not under the sphere of influence of the USSR were quick to proclaim that they were sickened by the abuse of power displayed by Russia.
So, for a time, the fighting went on, with no hope of a peaceful resolution in sight. After Finland had beaten back the first attacks, the Soviet Union changed the commanders leading the attack as well as the tactics employed by the army. Utilizing their absolute superiority in air power, artillery, and tanks, as well as sheer manpower, the Soviet attack gradually wore down the Finnish defense, forcing the Finns to withdraw to secondary defense lines.
On the Karelian isthmus the fighting resembled more of the First World War massive frontal attacks than the fluid encirclement battles fought elsewhere on the fronts. Both sides were suffering heavy losses, especially the Finns, as the fighting grew more fierce and widespread. Finally, near the end of January, Russia stated that it was not "opposed to concluding an agreement with the Ryti-Tanner government," and if the Finns made "adequate proposals," then they would indeed enter into negotiations yet again. Clearly, the swing in policy from ignoring the legitimate government to recognizing it was not a factor of the military situation. It can therefore only be attributed to the general world view of the situation.
Countries everywhere condemned Russia, actively sought peace, and in many cases, supplied aid to Finland. Sweden and Italy provided both equipment and volunteers, and the United States provided over one million dollars in aid. In addition to the three listed above, countless other nations rushed to the aid of Finland. The Allies (France, Britain, etc.), were in fact seriously considering coming to the aid of Finland militarily by "invading" Finland and fighting off the Russians.
With news of possible Allied activity spreading, Germany began putting heavy pressure on the Soviets to make peace, for an Allied presence in Scandinavia would pose a serious threat to the Third Reich. The pressure of Germany, the knowledge that a supposed week long conflict had turned into a Europe-wide war against Russia, and with world opinion turned sharply against them, the Russians had little choice but to reenter into negotiations.
On January 29, 1940, the Russians stated that they would reopen negotiations if the Finns would meet their original demands. The Finns, however, heartened by their unexpected "success" against Russia, and the promise of Allied military aid, stated that they would not make far-reaching concessions. The Allies were wholly ready to come to the aid of Finland, stating that Finland need only to request their aid. This created a very delicate situation for the Finns. In order for the Allied troops to reach Finland, they would have to transport through Norway and/or Sweden. Norway and Sweden, however sympathetic to Finland they were, would not allow this to happen for one reason.
The Germans, wary of an Allied presence in Scandinavia, warned that any "small nation, which under the circumstances now comes to Finland's aid will suffer the fate of Poland." 9 This threat was clearly aimed at Norway and Sweden, and it proved rather effective. Both Sweden and Norway denied the Allies the right to transport troops through their territory. With the hope of foreign military aid gone, the Finnish situation worsened, and Finland was just barely able to hold the front. Seeing that they were fighting a losing battle, the Finnish government informed the Russians that they were ready to enter into negotiations on March 6, 1940.
The Allies were greatly dismayed at this, for to them, peace on Russian terms meant victory for German diplomacy. No amount of pressure the Allies applied on Finland, Norway, and Sweden, however, could match the immense pressure on the Finns from Norway, Sweden, Russia, and Germany. By this token, the acceptance of Soviet terms of peace was almost accepted as fact. The conditions of the treaty hardly differed from those which Moscow had demanded before the outbreak of hostilities. The terms of the treaty state that
the entire Karelian isthmus with the city of Viipuri, the whole of Viipuri Bay with its islands,
as well as the territory west and north of Lake Ladoga with the cities of Keksholm and
Sorrtavala, were ceded to Soviet Russia. . . . In the region of Kandalaksha the border was also
moved farther west, and parts of the Rybachi and Sredni peninsulas and a number of the islands
in the Gulf of Finland were handed over to the Soviet Union.
In addition to those demands, the treaty also established the 30 year lease on the Hanko peninsula, for which the Finns were compensated eight million Finnish marks. As stated in the earlier demands, the Russians had the right to establish a naval base and garrison troops, along with any armed forces deemed necessary.
Finland was also banned from maintaining any armed naval vessel larger than one hundred tons, and from maintaining a total naval presence of more than 400 tons off the Arctic coast. The Russians were also granted the right to build a railway connecting the Soviet Union, Sweden, and Norway through Finland. The Soviets would then have the right to transport goods through Finland by rail free of tariffs, inspections, and fees.
The treaty was signed in Moscow on March 12, and the cease-fire went into effect at 12:00 PM, March 13, 1940. Although the terms of the treaty were terribly harsh for Finland, the Finnish government was "'happy that the agreement does not limit Finland's sovereignty and independence'". 11 For Finland, however, the worst was yet to come.
With the treaty signed, and the new borders drawn out, Finland was in a new dilemma. Who would be Finland's ally in case Moscow decided to present new demands? Certainly, the Allies would not help, since Finland had made peace directly against their wishes. With this in mind, Finland turned to her neighbors. Norway and Sweden were both too small and too scared to help, or be of any real assistance.
Aside from that, the proposed "Northern Alliance" was frowned upon by the Soviets, claiming that it was anti-Russian, and prevented the Finns from entering it. So the next logical step was to turn to Germany. When the Finns asked the Germans to guarantee the borders of Finland through a military alliance, the Germans agreed to do so.
Although nothing was ever set down in writing, "all indications point to Germany's having given some sort of a guarantee to Finland." 12 Indeed, the peace treaty had brought about a relationship between Finland and Germany that would later develop into a full fledged anti-Russian military alliance. In fact, Finland would play a rather important role in the remainder of World War II, both alongside and against Germany.