During fall 1939 Stalin demanded that the Soviet Union should be allowed to set up military bases in Finland as protection against Germany. This after an agreement between Germany and the Soviet Union, see Ribbentrop-Molotov pact. With nationalism running high and strong sentiments against both Germany and the Soviet Union, Finland said no and Stalin attacked on November 30 with 23 divisions (450,000 men). Stalin expected to conquer the whole country by the end of the year, a puppet government was already in place in Terijoki on December 1, the 'Democratic Government of Finland'. Stalin found that it wasn´t to be the walkover he expected.
The Finns with an army of only 160,000 men, turned out to be a fierce adversary, with their local knowledge and guerilla tactics playing an important part. A certain improvised petrol bomb adapted from the Spanish civil war was used with great success, and gained fame as the ´Molotov Cocktail´ (after the Soviet foreign minister). That winter was very cold (-40°C was not unusual) and this was to the advantage of the Finns.
In late February 1940 the Allies offered help, on rather suspect terms. 100,000 troops were to debark at the Norwegian port of Narvik and support Finland from Sweden. Suspicions that this was a scheme to occupy the shipping harbour of Narvik and the Swedish iron ore fields in order to stop the export to Germany caused Norway and Sweden to deny transit. Germany suggested that Finland should negotiate with the Soviet Union. Peace terms were received by February 12 and the Finnish government agreed to negotiate on February 29.
On March 6 1940 an armstice was signed, although fighting continued, but the Russians had had enough. Their casualties had been high, with the Spring thaw approaching they risked becoming bogged down in the forests, and the political embarrassment was huge and increasing. After four months of fighting, the Russians had lost around 400,000 men and many tanks and other material. Finnish losses were only around 30,000 men, but it was fortunate that the Russians did not know that the Finns were all but out of ammunition by the end of February.
Peace came with a high price for the Finns. By the Peace Agreement of March 13 Finland ceded 10% of its territory, all of Karelia (including its second largest city Viipuri) to the Russians. 422,000 people left their homes to avoid becoming part of the Soviet Union.