Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
World
Philip Oltermann in Oslo

‘Battle for the nation’s soul’: Norway faces debate about gas and oil wealth

The Munch Museum illuminated at dusk in Oslo, Norway.
The Munch Museum illuminated at dusk in Oslo, Norway. Photograph: Markus Schreiber/AP

As the sun plunges into the Oslofjord on a December evening, passersby stop outside Norway’s new €620m national art gallery, the new €300m Munch Museum, the new €240m public library and the €550m opera house to take in the dying light.

Thanks to oil and gas reserves in the waters off its coast, Norway is not only extremely rich but getting richer still. Already the World Bank’s seventh wealthiest country by GDP per capita at the start of this year, the resource-rich Scandinavian country’s profits have ballooned to record levels over the last 12 months, as prices on the energy markets tripled due to Russia’s invasion of Ukraine and Norway replaced bellicose Moscow as Europe’s largest supplier of gas.

But in Norway, the wealth of the nation can be an intangible affair. Hakon Midtsundstad, 33, his mother, Elin, and her sister Berit, have stopped at the Oslo waterfront to marvel at the crimson sunset. Asked if Norway is rich, they point at the architectural palaces around them. Asked if they feel as if they’ve become richer this year, the response is a drawn-out “Noooo”, followed by complaints about rising electricity bills.

As the citizens of Europe’s biggest energy producer experience their own cost-of-living crisis this winter, and Nato allies question the fairness of one state getting rich from others’ misfortune, Norway is debating where all its money should go – and whether it should be all for one country to keep.

According to its finance ministry, the Norwegian state is likely to have earned almost 1,200bn Norwegian kroner (€113bn) from petroleum sales by the end of 2022, meaning Russia’s war of aggression has made every Norwegian citizen at least €20,000 better off on paper. Profits for 2023 are estimated to rise to €130bn, a five-fold increase on 2021.

“Of course, this money is not ours; it belongs to the victims of this war,” said Kalle Moene, a professor of economics at Oslo University. In a column for the financial newspaper Dagens Næringsliv, published in June, Moene called for this year’s €100bn excess profit to be put into a new international solidarity fund, with the express purpose of aiding Ukraine and other countries suffering as a result of the war’s knock-on effect on global supply chains, such as Yemen.

An oil drilling platform near Stord, Norway.
An oil drilling platform near Stord, Norway. Photograph: Reuters

“There is a long philosophical tradition that says a fair system should compensate those suffering bad luck but tax those who are at the receiving end of good fortune,” said Moene. “If we don’t start talking about what to do with this insane amount of money, other countries will start to hate us. They will think we are greedy.”

When Moene made his proposal, however, it received little notice in political circles. On the contrary: in its summer budget, the government of Labour party prime minister, Jonas Gahr Støre, announced plans to reduce its aid budget in light of the record profits, from 1% of gross national income (GNI) down to 0.75%.

Jan Egeland, the secretary general of the Norwegian Refugee Council and a former party colleague of the government leader, described the announcement as “a punch in the stomach” for a nation that is used to seeing itself as a beacon of international solidarity.

“We started giving international assistance to Kerala, India, in the 1950s, while we were still receiving Marshall Fund aid money ourselves,” Egeland said. “This is a battle for the soul of our nation.”

While even the revised aid budget would see Norway donating a much higher percentage of its GNI than the OECD average of 0.3%, Egeland said the downward revision sent a fatal signal towards other donors considering cutting their budgets, such as Sweden and the UK.

The government’s reluctance to pick calls for an international aid fund is partly political. Since October 2021, Støre’s Labour party has led a coalition with the Centre party, a formerly agricultural party with a protectionist economic agenda.

But the inaction also speaks of a fear that debating the rights and wrongs of its petroleum profits could question a now widely popular system that Norway once took considerable political risk to implement.

When Norway, still one of Europe’s poorer nations in the first half of the 20th century, discovered oilfields in its North Sea territories in the late 1960s, it could have auctioned them off to private companies, like Denmark did, or used its profits to fund tax cuts, the way the UK did.

Instead, Norway used the spoils of the North Sea to expand its welfare state. State-owned company Statoil explored reserves and profits were piled into a collective piggybank, the government pension fund. A budget rule introduced in 2001, the Handlingsregelen, allows only a small percentage – previously 4%, now 3% – of the fund’s calculated annual return to be put back into the state budget.

As a result, Norway became one of the few countries in the world to escape what economists call the “resource curse”: the phenomenon of states with an abundance of fossil fuels or certain minerals ending up with less economic growth, less democracy and less social equality.

“We have taken a temporary resource and created a possibly everlasting cash stream that can benefit future Norwegian generations”, said Andreas Bjelland Eriksen, a state secretary at the ministry of petroleum and energy. “Over time we have had wise and longsighted politicians who have managed the difficult balancing act between financing important measures in the short term while saving for the difficult days.”

The oil fund continues to provide the country with a sturdy safety net: education is still cheap, university free even for foreigners, parental leave fully paid for 49 weeks. Life expectancy is 83.2, 10 years higher than the global average. As other Scandinavian states have cut back their welfare state or switched to workfare models, Norway has remained generous.

Tweaking such a winning formula, whether by giving gas discounts to struggling states or changing the budget rule, can trigger nervousness. “I do not think it is right to call Norway a war profiteer”, said Bjelland Eriksen. “We are not against any measure that can bring down high prices. But we cannot bring forward measures that would create an even more difficult situation.”

But even if Norway’s wealth fund model continues to enjoy the kind of cross-party consensus that is rare in western democracies, the war in Ukraine and its ripple effects are challenging old certainties.

Just a 15-minute walk from Oslo’s opulent waterfront, a queue of people started forming outside Grønland Church on a dark and icy Wednesday morning. From 9am, the church opens its doors to those seeking warmth or a voucher they can redeem for a bag of groceries at the Fattighuset food bank opposite.

Volunteer Astrid Asdakk next to stacked-up parcels at the Fattighuset food bank in Oslo's Grønland district.
Volunteer Astrid Asdakk next to stacked-up parcels at the Fattighuset food bank in Oslo's Grønland district. Photograph: Philip Oltermann/The Guardian

“We used get 300 people who turn up every day”, said Astrid Asdakk, 58, one of the charity’s volunteers. “Now it’s more like 600.” Most of them are Ukrainian refugees, many of whom struggle to navigate the bureaucracy in the country that has sheltered them. But others are Norwegian citizens who struggle with rising electricity prices, Asdakk said.

Household bills for electricity, 90% of which Norway draws from the hydroelectric power stations that dot its dramatic landscape, have risen to record levels this year – a result partly of unusually low rainfall earlier during the summer and high spot prices imported from the European market. Petrol prices are among the highest in the world.

“Norway is getting rich, but not necessarily the Norwegians,” said Lars Martin Dahl, 50, the Lutheran church’s pastor. “‘The state is making a profit, but I’m struggling to pay my bills’ – I hear that from a lot of people here. Maybe it’s part of the Protestant work ethic that we are not meant to be seeing this money.”

On Norway’s sizeable political left the energy crisis has led some to question the restraint on profits flowing into the national budget. Others want to rearrange energy exchange with Europe to bring down prices. Surprisingly, perhaps, it has not led to calls to abandon international solidarity.

The idea of a new solidarity fund has been backed by Norway’s Green party, its small Christian Democratic party, and the Socialist Left, whose support is crucial for Støre’s minority government.

“Our view is that we should share at least a part of the profits”, said Ingrid Fiskaa, the Socialist Left’s foreign affairs spokesperson, sitting in her office next to a cardboard 1% sign stuck with chocolate coins. Largely as a result of her party’s pressure, the parliament will this week debate a new solidarity mechanism that could see Norway sticking to its traditional aid target after all.

“Unfortunately, war is good for the oil and gas industries”, said Fiskaa. “There’s a collective silence about that fact in Norway. But that’s also because people don’t feel guilty about profits they can’t see. If every Norwegian was given €20,000 in cash, the guilt would certainly be there.”

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.