After Russia launched its large-scale military invasion of Ukraine in February 2022, European nations rushed to find budgetary resources and borrowing options to aid Ukraine’s defense. This was not an easy task for most countries.
Following the invasion, Russia halted natural gas supplies to Europe, attempting to deter nations from supporting Ukraine. This move led to a surge in natural gas prices, causing significant financial stress for both businesses and households. For consumers, the rapid rise in energy costs felt similar to an abrupt and steep carbon tax.
While many European economies faced hardships, Norway emerged as a significant beneficiary. The country now has a responsibility to use this unexpected surplus for the continent’s greater good.
With Russia’s gas supplies cut off, Norway became Europe’s largest gas supplier, benefiting from what could have been funds directed towards supporting Ukraine. This led to an impressive €109 billion in excess natural gas revenue in 2022 and 2023, as noted by the Norwegian Ministry of Finance. The large profits were primarily funneled into Norway’s sovereign wealth fund.
Meanwhile, oil and gas firms in Norway responded to rising prices by boosting production, effectively wielding the market to allocate limited gas supplies to their best use. However, for roughly 18 months, the energy crisis largely favored just two nations: Norway, which enjoyed significant profits, and Russia, as high prices limited Europe’s ability to support Ukraine.
European governments had to bear substantial costs to ease energy burdens on their industries and citizens, and the capacity to raise taxes for Ukraine’s support was severely hampered by these high energy costs.
Norwegian gas exports have been crucial for maintaining Europe’s energy stability during these challenging times. Nonetheless, Norway’s government has not recognized these profits as war-related earnings. This year, it earmarked only a modest €3 billion for Ukraine’s urgent needs.
In terms of support relative to GDP, Norway’s contribution stands at only 0.7%, which is less than its Nordic and Baltic neighbors like Sweden and Denmark, who provide 0.9% and 2.2%, respectively. Norway is urged to enhance its military and humanitarian assistance to Ukraine, potentially through a series of payments or a lump sum that could help Ukraine finance its reconstruction.
Many expected a shift in Norway’s approach following Jens Stoltenberg’s recent appointment as minister of finance. During his tenure as NATO’s secretary-general, Stoltenberg encouraged member countries to boost their support for Ukraine. However, he has maintained Prime Minister Jonas Gahr Støre’s stance that excess gas profits should be reserved for future generations, adhering to a national rule that caps spending from the sovereign wealth fund.
In a recent interview, Stoltenberg dismissed accusations of Norway being a “war profiteer,” asserting that these profits are treated like regular oil and gas revenue. Yet, given the current unprecedented risk to European security and democracy, this argument holds less weight.
The value of Norway’s surplus revenue is nearly equivalent to all military and civilian aid provided to Ukraine by the United States thus far. With the US’s role in European security becoming less certain, Norway is encouraged to deploy its windfall resources effectively for the benefit of those in Europe who have supported it, especially by channeling funds toward Ukraine’s defense and reconstruction efforts.