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Oil-rich Norway says it will use the massive oil and gas profits it benefited from as a result of Russia’s war on Ukraine to help finance aid, including military assistance, for Kyiv.
Speaking from Oslo on Thursday, Norwegian Prime Minister Gahr Støre said it was in Norway’s “national interest” to ensure that Ukraine does not lose the war with Russia, and Norway is “in a situation where we have room for action due to extraordinary income from the petroleum sector.”
The prime minister was referring to Norway’s skyrocketing earnings, which saw the country enjoy a 200% year-on-year increase in estimated tax revenue from the oil and gas industry. For 2022, the Norwegian Tax Administration estimated that the government took in $89.3 billion, beating its last record by three times, Reuters reported.
In October, Norwegian oil and gas firm Equinor announced record third-quarter profits, achieving $24.3 billion in the July-September period, and over $9.77 billion in the same period of 2021. Equinor is scheduled to report Q4 earnings on February 8th.
These surging profits have led to criticism across Europe that the country has benefited from war profits while others are struggling.
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“Most European countries are getting poorer because of the war. Norway is getting richer — much richer,” Lars-Henrik Paarup Michelsen, director of the Norwegian Climate Foundation think tank, told CNBC.
Next week, the Norwegian government will provide more details on exactly how the country’s oil revenues will be used to aid Ukraine.
Norwegians will be concerned that spending oil revenues from the $1.3-trillion sovereign wealth fund on Ukraine could fuel higher inflation; however, the prime minister has assured his constituents that there will be no negative economic impact.
The announcement comes just days after Norway’s sovereign wealth fund reported a record loss of $164 billion for 2022 due to “very unusual” market conditions that resulted in losses in all sectors invested in outside of oil and gas.
The Labor-led government has sought to trim spending of the oil fund to avoid fueling price growth which remains near a three-decade high, and has raised taxes on the wealthy while also introducing new resource taxes on its fish-farming industry. The use of fossil-fuel wealth on the aid package will not stoke the Norwegian economy nor feed higher inflation in the country, according to the prime minister.
European officials have urged Norway to share its windfall export gains from higher fossil fuel prices.
The premier’s comments suggest the plan will not involve procurement from Norway’s defense companies that include Kongsberg Gruppen ASA and Nammo AS. The country, which also shares a border with Russia, last year provided military and civil aid totaling more than NOK 10bn (USD 1bn) to Ukraine.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com