Norway: NATO’s wild card against Russia?

Norway is to Europe what Saudi Arabia is to the Middle-east. Huge hidden oil reserves and sales since the 1960s, when it hit oil, made Norway, the land of midnight sun, a top economy in Europe and the world.

Compared to 1960, Norway’s population has grown from about 36 lakhs to 55 lakhs currently (about 53%), while its per capita income and GDP have risen from US$1,440 to US$90,000 (about 625%), and US$5.16 billion to US$480 billion (about 930%), respectively.

However, the most fascinating thing about Norway is its handling of oil stocks and the money from it. It decided to put all the oil money in a Pension Fund, when it was still one of the poorer countries in Europe much like Saudi Arabia. It uses only about 3% of the fund (currently US$1.4 trillion; the world’s largest) for welfare with rest for posterity, and avoided the “resource curse” – an oil economy with less economic growth, democracy and social equality.

However, did it ever expect to release oil and gas from its depleting reserves to cover the deficit arising from Russia diverting its exports following its war with Ukraine. Production of oil and gas in Ukraine has slowed over the years.

In this context, one would expect Norway to be frugal with exports. However, the Russia-Ukraine war changed it all. While the US and European countries in the NATO have abstained from a direct war with Russia, they have supported Ukraine with weapons and logistics. The US in particular has actively participated in the unexpectedly long war with weapons and money.

Most of us had expected the war to last only a few months, given Europe’s dependence on oil and gas on Russia, especially in the winter months. Prices were expected to soar and stock traders pumped in money in mid-2022. However, by winter prices had slumped to record lows – reaching almost zero in December 2022, and all the money was sucked by a few countries – the US that released its strategic reserves meant for wartime, and Norway, which most traders had not priced in, which also released gas and oil to Europe.

Norway’s crude production accounts for about 2% of global demand, and natural gas about 3%. However, Norway’s exports are significant – it exports about 95% of all production and is the third largest Natgas exporter (behind Russia and Qatar). Prior to the Ukraine was, Norway used to supply about 25% of the EU gas demand, and in 2022, it likely rose to 50-60% — the reason why someone pro-Ukraine from the UK tweeted in December “No one is freezing in the UK…”.

According to The Guardian, Norway’s Finance Ministry said the country likely earned about NOK1,200bn (about Rs.10 lakh crore or US$120 billion) from petroleum sales by end-2022, fuelled mainly by demand in Europe due to the Russia-Ukraine war. This suggests per capita income should have grown by US$22,000 (around Rs.18 lakhs), with another 20% likely increase in 2023.

However, ground reports say otherwise. Inflation has increased to around 7% — highest in 35 years, and much above the targeted 2% — a sign of impending recession. People looking for vouchers have doubled and electricity costs have surged following deficient rainfall (lower hydropower production). All this while it hosts ever growing refugees from Ukraine. The reason is the government considers the oil money as war-profits.

Which war and whose war as we enter 2023? Norway is still a strong welfare state and is the originator of the idea of a four-day week. But has it lost its prudence? Has NATO put Norway’s future in jeopardy? The government says that increasing adoption of EVs is likely to reduce reliance on oil and its traditional fishing industry is still strong. However, can one imagine the Arabs living on dates and palms, in tents, and riding camels? Hard to do so.

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MDDTimes Staff Writer

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