During the two world wars and the Cold War, the five small Nordic states were forced into difficult balancing acts, but retained their independence and developed peaceful democracies. The Nordic states had been neutral during World War I, but during World War II they could no longer stand apart from world politics. The Soviet Union attacked Finland in 1939 and Finland ceded territory following the Winter War. In 1941, Finland launched a retaliatory strike in conjunction with the German attack on the Soviet Union. However, more territory was lost and for many years to come Finnish foreign policy was based on appeasing the Soviet Union, even though Finland was able to retain its democratic form of government. Denmark and Norway were occupied by Germany in 1940. The Allies responded by occupying Iceland, the Faroe Islands and Greenland. Sweden managed to formally maintain its neutrality in the Axis/Allies conflict and avoided direct hostilities, but in practice it adapted to the wishes of the dominant power – first Germany, later the Allies. However, during the Winter War between Finland and Russia in 1939–1940, Sweden did support Finland and declared itself "non combatant" rather than neutral.