Norway’s skyrocketing oil and gas wealth is expected to climb to new heights this year, boosted by higher fossil fuel prices in the wake of Russia’s nearly year-long onslaught in Ukraine.
The ballooning petroleum profits of the Scandinavian country put Oslo in a unique position: As many in Europe are struggling to cope with the region’s worst energy crisis in decades, Norway — already extremely rich — is getting richer still.
It has ignited an impassioned debate about international justice, with many questioning whether it is fair for Norway to rake in record oil and gas revenues at the expense of others’ misfortune.
Opposition lawmakers, prominent economists in the country, and even titans of Norway’s energy industry have called on the government to set an example to the world by pumping its fossil fuel revenues into a new international solidarity fund that helps countries meet their climate goals.
Norway’s Finance Ministry expects the state’s revenues from oil and gas sales to climb to 1.38 trillion Norwegian krone ($131 billion) this year. That’s up from a previous record of 1.17 trillion krone last year, and a nearly fivefold increase from 288 billion krone in 2021.
“They are war profits,” Lars-Henrik Paarup Michelsen, director of the Norwegian Climate Foundation think tank, told CNBC via telephone.
“Most European countries are getting poorer because of the war. Norway is getting richer — much richer.”
Michelsen said he was fearful that by choosing to pocket its bumper oil and gas profits, Norway is damaging its international reputation, warning that the country is at risk of being perceived as “very egocentric.”
“We are in a completely different position than the rest of Europe and I think, with that, it also bears a responsibility,” Michelsen said. He called for the government to redirect its extraordinary windfall to further help Ukraine, accelerate Europe’s energy transition and provide climate finance for low-income countries.
“This situation is certainly not of our making and not to our liking,” Norway’s Deputy Foreign Minister Eivind Vad Petersson told CNBC via telephone. He argued that it is critically important for Europe’s energy security that Norway keeps gas production high.
Petersson said the government’s financial support to Ukraine is approaching 1.5 billion euros ($1.63 billion), adding that the country’s policymakers are working on a multi-year program to continue to help Kyiv.
When asked about accusations that the country is war profiteering, Petersson replied, “No, not really … The indirect effect, we fully acknowledge, is that our revenues have increased, but I do not accept that label.”
“We are very well aware of the responsibility that comes with the fact that we have these resources. Of course, the responsibility to protect it, bearing in mind the crucial role of energy security now in Europe for this winter and possibly next,” Petersson said.
He added that Norway’s government is also “fully aware of the responsibility that comes with being a supporter and donor, not only to Ukraine but also other countries across the world suffering the effects of Russia’s war.”
‘We should contribute more with this money’
Norway, which last year overtook Russia as Europe’s biggest natural gas supplier, has been one of the world’s top crude producers for the past half-century. That’s thanks to its gigantic North Sea petroleum deposits — the spoils of which have been used to provide a robust safety net for current and future generations.
The Norwegian government’s net cash flow from petroleum sales is transferred into Norway’s $1.3 trillion sovereign wealth fund. The government can only spend a small part of the fund each year, but this is still estimated to amount to nearly 20% of the government budget.
The so-called Government Pension Fund Global, among the world’s largest sovereign wealth funds, was established in the 1990s to invest the surplus revenues of Norway’s oil and gas sector. To date, the fund has invested in more than 9,300 companies in 70 countries around the world.
“These excess profits, as we may call it, are a direct result of the war,” said Ingrid Fiskaa, foreign affairs spokesperson for Norway’s Socialist Left, whose support is critical for Prime Minister Jonas Gahr Store’s minority government.
Fiskaa highlighted that legislation in Norway limits the use of oil revenues in the domestic economy to avoid high inflation — and that, she argues, strengthens the case for investing in international solidarity.
“There should be a lot more debate on this issue,” Fiskaa told CNBC via telephone. “Oil companies are getting richer and richer, but we don’t see that money — and who is really paying for this? It is the rest of the world. We should contribute more with this money.”
Norway’s aid budget has hovered near 1% of its gross national income for more than a decade, making it one of the world’s most generous donors.
Store’s government was sharply criticized last year for proposing to cut the proportion of GNI it spends on foreign aid to 0.75%. That level is still significantly above the Organization for Economic Cooperation and Development’s average of 0.3%, but civil society groups described the move as “embarrassing” at a time when Oslo was making money like never before.
Norway’s foreign ministry has since pledged to deliver on its aid budget target of 1% of GNI in 2023.