How politically stable is Norway

Reference case 223 Special case Norway? Success model with foreign policy oil traces Enno Hark's country overview Norway, the inconspicuous country on the northern periphery of Europe with only 4.5 million inhabitants on an area the size of the Federal Republic, is - in the shadow of general attention - a major power on the global resource market. It is the third largest exporter of both crude oil (after Saudi Arabia and Russia) and natural gas (after Russia and Canada; in 2007 Norway is expected to rank second in the world ahead of Canada). Almost all oil and so far all gas exports flow to Europe. Norway is therefore the most important country of origin for Europe's oil and gas after Russia, with a clear lead over the next. This is particularly true of Germany, which in 2004 obtained around 30 percent of its gas and 20 percent of its crude oil imports from Norway.1 Norway's wealth of resources has a very clear impact on the country's economic structures. With a share of over 25 percent of GDP, the resource sector is the most important branch of the economy, and revenues from oil and gas exports, with 45–60 percent of total exports, are the most important source of foreign exchange.2 Due to the high relevance of the resource sector in the country and Norway's importance for the international raw material markets it clearly falls into the category of resource-rich states. But unlike almost all other countries in this category, Norway has succeeded in converting this wealth of resources into high social prosperity over the past three decades. Among the resource states, it has by far the highest per capita income (a good 70 percent higher than the next following resource country, Qatar) and is far in almost all indicators. 1 See OECD / IEA (ed.), Oil Information 2005 and Gas Information 2005, Paris 2005. 2 In order to take into account the fluctuations in the exchange rate and oil price, both figures relate to the annual average 2000–2003; see International Monetary Fund, Draft Guide on Resource Revenue Transparency, Washington, D.C. 2004, p. 64ff. Since the price of oil has risen significantly since then, it can be expected that the proportions mentioned will be significantly higher in 2006. 224 Table 1 Norway: Indicators GDP / capita in US dollars (PPP) a ............. 37 351 exports (% of world exports) e HDI (rank of 177) b .... .................................. 1 oil .............. ................................................. 6 , 7 Corruption Perception Index (rank of 158) c ....................................... ..8 Gas .............................................. ............. 11.4 Annual exports (% of total exports) f Government Effectiveness Index (rank of 209) d ................. ........................ 9 Oil / Gas ...................... ................................... 43 Annual income (% of the state budget) f Reserves (% of world reserves) e Oil / Gas .............................................. ........... 24 Oil ..................................... ........................... 1 gas ..................... ......................................... 1 Sources: a 2003; IEA Energy Balances (Edition 2005) b 2003; Human Development Index (HDI), UNDP 2005 c 2005; Rank 1 = lowest corruption worldwide; Transparency International Corruption Perceptions Index 2005 d 2004; D. Kaufmann, A. Kraay, M. Mastruzzi (2005): Governance Indicators for 1996–2004 e 2004; BP Statistical Review of World Energy 2005 f 2000-03; IMF Draft Guide on Resource Revenue Transparency 2004. front. Even compared to the industrialized nations of Europe, Norway is now a very rich country - in 2005, its income was a good 35 percent above the EU-15 average.3 Norway's history shows long phases of occupation and occupation by various powers. After the heyday of the Viking Age in the Middle Ages, it was occupied by Denmark for several centuries until it was closed to Sweden in the wake of the Napoleonic Wars in 1814. It did not gain independence until 1905, in an astonishingly peaceful dissolution of the forced union. Both occupying nations have left strong cultural, linguistic and political traces. The confrontation with the centuries-old occupation has created a strong national feeling and forms a constituent element of Norwegian foreign policy. In particular, Norway's pronounced emphasis on national sovereignty, often ironically described as a “union complex”, can be traced back to this. Norway has a long democratic tradition, the beginnings of which can be found in the early 19th century and in the resistance to the occupation. With independence in 1905, a constitutional parliamentary monarchy was established, the political institutions of which have since proven to be extremely stable. A 3 Calculated at purchasing power parities; nominally this difference was even a good 70%; see OECD, OECD in Figures, Paris 2005, pp. 12ff. 225 The peculiarity of the Norwegian political system is that it is clearly corporatist. This enables highly organized private (non-elected) interest groups to participate in the political-legislative process, and consensus is therefore also largely established outside parliament on important decisions.4 The country's society can be described as comparatively homogeneous in terms of values, attitudes towards life and the proportion of the population Migrants concerns. Protestant values ​​are widespread and there is a social consensus, so that Norway is sometimes described as an ideal country in the sense of Max Weber.5 An egalitarian economy and society has a high ideal value, as does the will to great influence of the state in economic life. Norway's most prominent foreign policy feature is its special position in the international system, which is particularly evident in the fact that it refused to join the EU twice. Domestic Constitution and Influence of Resources The Resource Sector History The structure of the resource sector and Norway's resource policy are exceptional in an international comparison. The national resource policy is exceptionally transparent, especially with regard to property relations and state revenues, is subject to democratic control by parliament and the public and is largely based on market economy principles. At the same time, however, a look at the development history of the sector shows that the latter in particular was by no means the case from the start. Rather, for many years this sector had essentially all the elements of a statist nationalist resource policy. Both aspects - on the one hand the initial emphasis on the national, on the other hand today's openness, paired with democratic control and transparency - are briefly presented below. You 4 At times this has been characterized by observers as an "anti-pluralistic" society; Hilmar Rommetvedt, among others, refers to this, “Resources Count But Votes Decide? From Neo-corporatist Representation to Neo-pluralist Parliamentarism ”, in: West European Politics (Abingdon), 28 (September 2005) 4, Special Issue: Norway: the Transformation of a Political System, pp. 740–763. However, this ability to involve all social groups has made a significant contribution to Norway's economic success. 5 Erling Røed Larsen, “Escaping the Resource Course and the Dutch Disease?”, Kongsvinger: Statistics Norway, Research Department, May 2004 (Discussion Paper 377), p Serving resources, they ultimately led to a previously unique economic success.6 When large amounts of natural gas were found in Dutch coastal waters towards the end of the 1950s, the systematic search for oil and gas in the North Sea began.7 In 1969, the American Phillips Petroleum struck Company in the Norwegian North Sea on (huge) oil reserves. The production was initially mainly carried out by American oil companies, because at the end of the 1960s there was neither an oil company in Norway nor the technology necessary for offshore production. As a result, the Norwegian parliament established a framework for future resource policy in the early 1970s, which was very clearly oriented towards sovereignty, national self-determination and the privileging of Norwegian interests. In parts it resembled the resource policies of some Middle Eastern countries: 8 The resources in the ground were declared inalienable national property; Control, control and management of resources remained with the Norwegian state; a state oil company was founded (Statoil). This was emphatically preferred and promoted by a state licensing policy, because it not only received a mandatory participation in all foreign projects of at least 50 percent, but also often the most attractive drilling sections.9 Furthermore, foreign oil companies were imposed very far-reaching regulations. These included rules for the transfer of technology and know-how to Norwegian (oil) companies as well as for research funding at and cooperation with Norwegian universities. They also included conditions for Norwegian suppliers to participate in order to encourage the establishment of an industrial base on land. In broad terms, this was the tenor of Norwegian resource policy until the early 1990s. Between a nationalistic industrial policy and a simultaneous cautious opening to international investment, this policy has proven to be exceptionally profitable, both for the macroeconomic and the 6 For the following remarks, see: Ministry of Petroleum and Energy (ed.), Facts 2006 - The Norwegian Petroleum Sector , Oslo 2006, pp. 13-49; OECD / IEA (ed.), Norway - 2005 Review, Paris 2005, pp. 19–118. 7 The sovereign division of the North Sea had not yet taken place at this point in time. However, it was carried out relatively quickly by the five neighbors in the mid-1960s. From an international perspective, this is a rare case, as disputes over sea area claims often block the extraction of resources and prevent the economic development of entire regions. 8 The outstanding difference lies in the fact that the resource sector is only partially, but fundamentally, opened up to international companies. See further explanations below. 9 Cf. Ole Gunnar Austvik / Marina Cygankova, “On the way to convergence? Norway and Russia as oil and gas producers ”, in: Osteuropa, 54 (2004) 9-10, pp. 301-317 (303f). 227 industrial and technological development. Norwegian oil and gas companies are now among the world's technological leaders.10 The clearly national orientation of the oil and gas sector changed in 1994 when Norway joined the European Economic Area (EEA) after the second negative referendum on EC accession.11 now most of the directives of the common EC / EU internal market also in Norway, in particular rules on access to the free market and restrictions on behavior that distort competition. Some essential directives relate directly to the European energy markets, such as the so-called licensing directive on the transparent granting of production licenses and the gas directive on competitive pricing and pipeline access. As a result, Norwegian resource policy has changed significantly in the last decade - not without some difficulties in abandoning the policy of national preference.12 In addition, various governments have privatized parts of the monolithic state-owned companies since the turn of the millennium (in particular 30 percent of Statoil and 56 Percent of the second largest energy company, Norsk Hydro). Current structure of the resource sector Today's resource sector in Norway is largely based on market economy principles. First of all, the parliament decides on the administrative opening of selected lake quadrants for funding. This decision on the number and size of the area to be released is extremely relevant for the consumer countries of the West, because it indirectly includes a decision on total national production. For the group of large exporting countries, this is the fundamental determinant of the global price of oil and thus also of gas. Consumer countries with an interest in expanding production and falling prices are dependent on the relevant specifications of the producer countries, but have practically no influence on them. Although these guidelines have considerable global economic relevance, the procedure for their creation is extremely difficult. 10 It should be noted that China's current industrial and international opening-up policy is very similar to the Norwegian industrial policy of the 1970s and 1980s, especially with regard to the successful state enforcement of joint ventures and technology transfer. 11 The EEA expanded the EU common market to include Norway, Iceland and Liechtenstein. 12 For example, since the mid-1980s Norway had organized the price-fixing of its gas exports through a state-organized monopoly to the exclusion of foreign companies. This regulation was classified as anti-competitive in 2001 by EU-based case law. As a result, the majority of the export contracts had to be renegotiated. In this way one of the last great cornerstones of a policy of national preference fell. 228 transparent. In almost all countries, such decisions are made in hermetically sealed circles of a small part of the national elite (especially in the OPEC countries of the Middle East). In Norway, on the other hand, the scope of national production is determined in the parliamentary framework; this process is also transparent and is publicly debated. This is a special case among the major oil-producing countries in the world.13 After the sea areas have been cleared by Parliament, the production licenses are tendered, in which national and international companies can participate. The Ministry of Oil issues a license to a consortium it has put together based on publicly known criteria. With this license, the selected group of companies acquires ownership of the amount of oil or gas extracted by it during the normal license period of 30 years. However, ownership of the resource in the ground in the relevant sea area remains with the state. The state-owned Statoil is no longer automatically (as a majority partner) involved in all licenses, but has to apply for the licenses it wants. By contrast, the state often holds significant shares in the advertised projects through its holding company SDFI.14 Access to the state's pension income from oil and gas The state's income from the resource sector comes from four sources: First of all, all companies are subject to corporate tax of 28 percent. In the oil and gas sector, due to the high profit margins, the state also levies a so-called "special tax" of 50 percent - both together thus result in a taxation of 78 percent of the profit after deduction of costs.15 Second, the state levies various smaller fees (for Licenses, etc.) and a CO2 tax. Thirdly, there is also income from dividends from the investments in state-owned companies (Statoil, Norsk Hydro). Fourthly, considerable funds flow in particular from the direct investments of the SDFI. For example, in the (high price) year 2005, of the 43.9 billion dollars came from 13. Nevertheless, the scope of funding in Norway was not based on the requirements of the market, but was dominated by a national discourse. On the one hand, the strict funding policy was intended to combat the "Dutch disease", on the other hand it should demonstrate to the international community the "national independence of Norway." Austvik / Cygankova, "On the way to convergence?" [See note 9], P. 303. 14 The “State Direct Financial Interest” participations are not of an operational nature, but of a purely financial nature: The state assumes part of the (investment and other) costs of a project and receives a corresponding profit share. 15 In fact, due to complex capital depreciation rules, it is a few percentage points less, but it remains in the order of over 75%. 229 State income from the oil and gas sector approx. 56 percent from direct taxes on energy companies, a good 39 percent from direct state investments (SDFI) in funding projects, almost 2 percent from fees and CO2 tax and 3 percent from (Statoil) dividends. 16 Resources and corruption, statehood, efficiency: a model state Norway had already proven itself to be a consolidated parliamentary democracy for over half a century when the wealth of resources was discovered.There was an independent judiciary as well as credible state institutions. A pronounced tendency towards consensus and egalitarian social ideals were widespread. The emerging abundance of resources at the beginning of the 1970s did not fundamentally change these social preconditions, but rather transformed them into social prosperity. The level of corruption typically associated with resource abundance is extremely low in Norway. According to Transparency International, the country ranks eighth on the global corruption index, 17, which is clearly ahead of countries such as the Federal Republic (16) or the USA (20). Norway's four Scandinavian neighbors are also among the eight least corrupt countries in the world.18 Norway scores just as well in the World Bank's study of national governance structures in 209 countries: attested in terms of efficient statehood, political stability, governance and the rule of law The World Bank Norway holds a top international position.19 Furthermore, per capita income is not only very high, but, unlike in other resource states, 20 has been converted into a very largely evenly distributed social wealth. The Human Development Index of the 16 See Ministry of Petroleum and Energy (ed.), Facts 2006 - The Norwegian Petroleum Sector [see note 6]. 17 This index ranks the countries examined in a ranking from 1st place, the least corrupt country (Iceland), to 163rd place (Haiti); see Corruption Perception Index 2006,