Since the start of the Russian invasion, oil and gas prices have risen sharply, and so have profits for the Scandinavian energy giant. Now that Russia threatens to turn off the gas tap to Europe, analysts predict even higher prices. In Norway, it sparks a debate in parliament and in the media: shouldn’t some of the profits go back to the victims of the war?
Norway is the second largest oil and gas exporter in Europe after Russia. The country supplies about a quarter of the natural gas used by European countries. Much of the profit flows directly or indirectly, through taxes and concessions, to the Norwegian state.
A profit of 28 billion euros was budgeted for 2022, but the bank Nordea predicts that 150 billion euros will flow in. The extra profit is entirely attributable to the price increases, as Norwegian gas production is already running at full capacity. A Russian gas blockade will therefore not lead to higher production in Norway.
Compensation
The Norwegian newspaper Dagbladet speaks now of ‘an unpleasant war gain’. ‘Where Ukraine is crushed, and other countries mainly experience the negative effects of the war, such as rising energy prices and inflation, we experience an advantage.’ The newspaper asks the government to “show solidarity” and allocate more money for aid to Ukrainians. Norwegian EU climate ambassador Paal Frisvold called on his country to give up the ‘super profits’ and compensate European consumers for the price increases.
The left-wing Environmental Party also wants Norway to dig deep into their pockets. Member of Parliament Rasmus Hansson launched a plan for a solidarity fund modeled on the Marshall Aid that European countries, including Norway, received from the United States after World War II.
“Our principle is that the extra oil and gas profits are the direct result of the war and that they should also be used for the victims,” Hansson says on the phone. ‘The money must go to the refugees, but also to countries such as Poland, which are hosting a large part of the four million refugees.’
Largest fund in the world
The money Norway earns from the sale of oil and gas has been flowing into a special investment fund, the Statens pensjonsfond Utland (SPU), for decades. The fund, the largest in the world, now contains 1,200 billion euros, or 220 thousand euros per Norwegian. This should cover future pension costs, but also serves as a backstop for setbacks and crises. In addition, the investments provide the Norwegians with a lot of return.
The government is allowed to use 3 percent of the annual return for the budget, a ceiling that is almost sacred in Norway. But according to Hansson, the situation is now exceptional. “These gains are of a completely different order,” he says. “It would be grotesque if we just continue to invest now, as if the disaster in Ukraine was not happening.”
The Norwegian government sees it differently. Minister of Finance Trygve Slagsvold Vedum emphasized in an interview with time that Norway has already earmarked 200 million in its current budget for aid to Ukraine, more than most other European countries. In addition, he pointed out that he is obliged to put the oil and gas profits into the fund. “There has always been a lot of support for this model among the people and in politics,” he added.
No guaranteed profit
According to Kjetil B. Alstadheim, the newspaper’s political commentator aftenposten, the political debate is not moving towards the proposal of the Environmental Party for the time being. “One of the problems is that it is a prediction and not a guaranteed profit. In addition, the investment fund has also lost a lot of value due to the war and the associated falling stock markets. So it is still unclear how much profit will be made,” he says on the phone.
Another problem with the Environmental Party’s proposal, according to Alstadheim, is that if you link profit to aid, the opposite can also apply. ‘Shouldn’t Norway suddenly help in times when little or no profit is made?’
In his speech to the Norwegian parliament last Wednesday, Ukrainian President Volodimir Zelensky did not ask for Norwegian gas money. Instead, he asked for more weapons and sanctions against Russia, such as closing Norwegian ports to Russian ships.
Exception
The Norwegian government promised to deliver another 2,000 anti-tank weapons. The armament is special for Norway, which presents itself internationally by facilitating peace negotiations and by awarding the Nobel Peace Prize every year. ‘Since the 1950s, the Norwegian government has enforced the rule not to send weapons to countries at war, but now an exception has been made. That is very special’, says Alstadheim.
The war in Ukraine has also caused decades-old principles to be abandoned in Norway, as in the neighboring countries of Sweden and Finland, which also supply weapons and where NATO membership is discussed aloud. Norway is already a (prominent) member of the military alliance. Norwegian NATO boss Jens Stoltenberg decided to stay on for a year longer last week; in fact, his term was over and he would transfer to the Norwegian central bank this year.
The question is whether the sacred rule that oil and gas profits may not be touched can also withstand the pressure. The fund has already announced that it wants to get rid of its Russian interests, a sign that political interests play a role. Member of Parliament Hansson: ‘We are still in a marginal position, but the seed is growing. I expect that all parties will propose something similar in the not too distant future.’