Tag Archive for: Norway

Norway should cede its war windfall to Ukraine

Norway’s government has effectively become a war profiteer, we argued in a commentary in December. It is an opinion shared by a number of European politicians and by European and Norwegian media. But rather than paying attention, Norway’s government is getting defensive.

The basic facts are not up for debate. After the outbreak of the Ukraine war caused natural gas prices to rise sharply in Europe, Norway reaped windfall profits totalling some €108 billion, according to Norway’s Ministry of Finance. That is more than the value of all military and civilian support Ukraine has received from the United States and Germany combined from when the war started through October 2024. It is roughly one-third of the value of the Russian central-bank assets that are currently frozen in the West (and which Western governments have extensively debated channelling to Ukraine for defence and reconstruction).

But Norway has kept its windfall for itself, providing a measly three billion euros in aid to Ukraine in its 2025 budget, only slightly up from the previous year. This approach is simply wrong: Norway must transfer its recent super-profits, excess profits above the normal level, in full, directly to Ukraine. Unfortunately, Prime Minister Jonas Gahr Store and Finance Minister Trygve Slagsvold Vedum seem more interested in justifying their decision not to do so than in helping Ukraine, Europe or even future Norwegians.

Store and Vedum contend that the windfall gains were a normal result of the myriad market forces that determine gas prices. But this argument is disingenuous. While it is true that many factors shape energy prices, Norway’s excess profits overwhelmingly reflect one: in 2022–23, it had in Europe a captive market for its natural-gas exports. This was a direct result of the Ukraine war: Russia had cut its natural-gas supplies to Europe, but European gas importers had not yet managed to build liquefied natural gas terminals to offset the loss.

Store and Vedum do not stop at dismissing Norway’s war profits as good fortune; they claim that their government, and the oil companies operating in Norway, did our European neighbours a favour by stepping up gas supplies when Russian deliveries ceased. Europe should be thanking us, Vedum says. This ‘good Samaritan’ narrative smacks of hypocrisy, especially as Norway, while pocketing its lucky gains from the spike in gas prices, sends a pittance to the Ukrainians fighting and dying for their country’s survival and Europe’s security.

In fact, from the perspective of European gas consumers, the elevated gas prices were equivalent to a Norwegian war tax on them. The increased energy costs strained the budgets of households and companies, thereby reducing European governments’ room to raise taxes for supporting Ukraine’s war effort. And yet, many of these countries have still managed to provide far more support to Ukraine, as a share of GDP, than Norway has.

Store and Vedum say that, rather than use its windfall as a political instrument, the excess profits should go directly into the Government Pension Fund Global, Norway’s sovereign wealth fund, where they will be preserved for future generations of Norwegians. This position aligns with Norway’s longstanding commitment to safeguarding its long-term fiscal sustainability, exemplified by a rule that no more than three percent of the fund’s value can be transferred to the government budget each year.

But Store and Vedum’s position is short-sighted in the current context. After all, what could harm future generations of Norwegians more than the failure to preserve democracy, freedom, and the rule of law in Europe?

In any case, the fiscal rule was created to prevent domestic macroeconomic problems (such as exchange-rate appreciation and excessive inflation), which would not arise if the funds were transferred directly to Ukraine. The leaders responsible for establishing it—including former Norwegian prime minister and former NATO secretary-general Jens Stoltenberg—could not possibly have imagined that Norway’s government would one day use it to justify holding on to wartime rents.

Norway did provide critical energy supplies to Europe in a desperate moment. But in a purely fiscal sense, one can argue that the country did more to support Russia, as its captive market for gas (which it did nothing to create) limited its neighbours’ ability to raise wartime taxes, while Norway refrained from sending much aid to Ukraine. Meanwhile, Norway has enriched itself immensely, through the returns on the government’s direct investments in oil and gas fields, dividends from its ownership share in its parastatal oil company Equinor, and tax revenues from oil companies, which are subject to a 78 percent marginal rate on their profits.

Refusing to use this war windfall to support Ukraine’s defence and reconstruction reflects a myopic perspective that Norway’s government would do well to abandon. Despite our reluctance to join the European Union, we Norwegians are part of—and dependent on—the European community. Rather than focussing exclusively on narrow domestic interests, Norway’s government must start considering the well-being of all of Europe. Growing threats to liberal democracy—coming not only from our big neighbour to the East, but also from our big ally across the Atlantic—makes this shift all the more urgent.

Norway is a Ukraine War profiteer

When Russian President Vladimir Putin gave the order to invade Ukraine in February 2022, he surely did not expect that one of Russia’s neighbors would be the main beneficiary of his war. Yet as Russian hydrocarbon exports to Europe cratered in the wake of the invasion, Norway emerged as the continent’s largest supplier.

Owing to the steep increase in gas and oil prices that followed the outbreak of the war, Norway ultimately enjoyed a massive financial windfall. In 2022 and 2023, it reaped nearly 1.3 trillion kroner ($111 billion) in additional revenue from gas exports, according to recent estimates from the finance ministry.

Why, then, has Norway allocated only a little more than $3.1 billion for support to Ukraine in its 2025 budget? Combined with what it contributed in 2024, Norway’s support for Ukraine amounts to less than 5 percent of its two-year war windfall. For comparison, Germany, Europe’s largest single contributor, provided $16.3 billion in military, financial, and humanitarian support for Ukraine from January 2022 until the end of October 2024, and the United States has contributed $92 billion. But while Norway’s two-year windfall is larger than the US and German contributions combined, Norway’s support for Ukraine as a share of GDP, at 0.7 percent, ranks only ninth in Europe, far behind Denmark (2 percent) and Estonia (2.2 percent).

Not only does Norway have the capacity to be making far more of a difference to the outcome of the war and the subsequent civilian reconstruction; it has an obvious moral obligation to do so. Given that its excess revenues are a direct consequence of Russia’s war, surely a greater share of them should go to those fighting and dying on the front lines to keep their country free.

Instead, Norway’s government has effectively decided to be a war profiteer, clinging greedily to its lucky gains. To their credit, opposition parties have proposed higher levels of support for Ukraine, ultimately pushing up the sum that the government initially proposed. No party, however, has come anywhere close to suggesting a transfer of the total war windfall to Ukraine.

The Norwegian government’s position is puzzling, given that Norway shares a border with Russia and has long relied on its allies’ support for its defense. Its own national security would be jeopardised if Russia wins the war or is militarily emboldened by a peace agreement skewed in its favor.

Moreover, it is not as though Norway would be immiserated by transferring its war windfall to Ukraine. This windfall represents about 6 percent of its sovereign wealth fund, the world’s largest, with assets valued at $1.7 trillion—or $308,000 for every Norwegian.

True, Norway channels all government revenue from oil and gas production to its sovereign wealth fund, and no more than 3 percent of the value of the fund can be drawn down and transferred to the government budget each year. This rule helps limit the effects on inflation and the exchange rate, and ensures that the fund exists in perpetuity.

But as a macroeconomic and national savings instrument, the drawdown rule was not designed with wartime demands in mind. It therefore should not be seen as an obstacle for a larger transfer to Ukraine. Since such a transfer would not enter the Norwegian economy, it would have no domestic inflationary or other macroeconomic implications. (With the 2025 budget largely set, it would need to be an extrabudgetary measure justified by the wartime circumstances.)

This is not the first time that Norway’s hoarding of its war windfall has been an issue. But it is the first time that we have been given an official estimate of the windfall’s value. The finance ministry has assigned a number to natural-gas export revenues in excess of what they would have been had gas prices remained around their five-year pre-invasion average. Although such counterfactuals will always be subject to uncertainty and debate, the official estimate is the closest we will get to a value for Norway’s war windfall. In fact, the actual number is probably much higher, as the estimate does not include excess revenues resulting from higher oil prices following the invasion.

With Europeans wringing their hands about the implications of Donald Trump’s return to power, Norway’s government and parliament should transfer the windfall to Ukraine in the form of military and financial support. Norway has a powerful national-security interest in doing the right thing.