-Professor Tone Bleie,

Norway

Resource curse, the very notion is associated with a wicked paradox: nature-gifted countries resource wise do far from always boost their economics. Often such a curse is not about inherent bad qualities of a particular resource as such, renewable or non-renewable. Curses are rather about inherent dysfunctions or ill-functioning system of governance often if not always marred with democratic deficiencies. Be it in public debates, development studies or university courses, those of us working on public policy and planning tend to highlight particularly illuminating contrasting cases.

Some countries have become wealthy although they are poorly endowed with natural resources. Other countries are blessed with for example oil or water in abundance, be it Venezuela or Nepal, but they perform rather poorly.

Another cherished topic is the complacent trap. Soaring incomes from extraction and export create enormous instant wealth, tempting the state to not claim a fuller share invested massively in public goods, industries, responsible fiscal policies, and taxation etc. For decades I happily lectured for interested audiences in Nepal, Bangladesh, and Thailand, apart from here at Norway’s Arctic University on Norway’s path of social and economic development since the nineteenth century. Decision makers, experts and students have shown a great deal of interest in Norway as a positive example. This small peripheral mountainous country avoided the curse through nationalization of key natural recourses, El-dependent industrialization, continued farming-sector support with decentralization dividends and a progressive tax regime, to mention some central factors.

Alas, currently I do not showcase Norway as “a winner” case. In fact, Norway is becoming an example of a very affluent country with a self-imposed resource curse. A ridiculously bad joke? Well, no. One of world’s most renewably energy secure “white-gold” nations is facing the possibility for rationing of electricity coming winter. Quite some of the Nepal Telegraph’s readers know of Norway’s paths towards prosperity in the late 19 th . – early and mid-20th hundreds. Quite many are aware Norway was not dirt-poor before we became an oil-rich nation with the Ecofisk discovery in 1968 and the establishment of Statoil in 1972. Oil became immediately a huge export, while hydropower-power produced energy was supplied and mostly used domestically. Electricity was until the early 1990s not a “commodity” but a renewable national “resource” to be distributed to the Norwegian people as the ultimate owners. In other words, quite a model of collective ownership, massive redistribution, and national investments, defying classical resource curse traps.

A flimsy focus on crisis and doling-out response:

Norwegian households and enterprises experienced a sharp rise in energy prices from the late autumn 2020 till 2021. It was well above 400 percent and has since not returned to former “normal” levels. Within month’s people in huge numbers joined Facebook groups under banners like “we demand cheaper electricity”. Measures to the price hike were debated in the parliament. The government responded by introducing efficiency measures and energy support compensation which reduced costs somewhat. Price hikes hit geographically extremely unevenly due to limited gird transfer capacity between Northern-Norway and the rest of the country. Household and company- El bills in the south were roughly 3-5 times higher than in the North. The price differences caused justified anger. Statsnett, still a monopolist power as system planner and gird owner, committed to increase gird capacity so prices will be reduced within few years. However, national gird integration is less of a panacea than one should think. Cheap El-price is a strategic asset for industrial development in a High-North facing depopulation, aging and a weaking tax collection base. Its rich fishery sector and extractive industries show semblances of resource colony traits. What is striking from our resource curse perspective is the debates crisis focus, sought explained with Russia’s invasion, boycott as a necessary geopolitical weapon, dry weather as cause for low magazine fillings and Germany’s energy squeeze quite dependent on Russian gas and having closed its nuclear power plants (now some reactors are decided reopened). This flimsy focus on crisis as price rises, moved the government to announce support subsidies, benefiting consumers in Southern and Central Norway. This predominant focus around proximate causes, has recently shifted somewhat to present ambitious long-term plans for a clean energy transition. Main pillars include continued trade in electricity and gas, on-and-offshore wind power, hydrogen and carbon capture and storage. What remains striking from resource curse perspective, is a rather striking disinterest in debating across the board ultimate causes, including fundamental changes in Norwegian energy politics since the early 1990s.

The swinging 1990s – market liberalization and its boomerang effect:

What is now being gradually shed light on in public debate and energy-fora are the current energy market’s origin in an Energy Law from 1991. The Law led to the establishment of an energy stock exchange and energy trade with Baltic and Nordic countries. This was the swinging 90s of rather wholesale ideological belief self-regulatory markets. Norway’s successful state-owned mobile company became a public corporation, and the telecom sector deregulated between 1994-1998. In the fishery sector a tradable quota system was introduced and gradually extended under lofty objectives of sustainability, efficiency, and employment. Statsnett AS was established as a state company, inviting in companies from the other countries as co-owners. The rationale made sense. Why not exchange power with good old and new neighbors? We buy some of their surplus at attractive prices and use own magazine capacity to save own power until later and sell at better prices? A transmission grid was built for this energy market integration. And it worked reasonably well for years with rather stable prices and no dire need for new hydropower development. Statsnett Market changed name to NordPool and established subsidiaries. NordPool became a strong advocate for an ambitious integration of the Nordic energy market into the European market. Following a rather heated political debate, the proposal was endorsed by simple majority vote. Statsnett began building transfer grids with taxpayers’ money via the Nord Sea to the UK, the Netherlands and Denmark and via Skagerrak (sea) to Denmark. The two newest high-exchange capacity cables led to increased net export, higher profit margins for energy companies and souring consumer prices in Norway, notably much like consumers in the UK and Germany had for years.

This energy stock exchange invite trade in energy as objects of speculation. International investors got attracted. NordPool with several daughter companies was in 2008 sold to the New York stock exchange, Nasdaq OMX. Unbelievably, this sale was not subject to parliamentary approval. It remains unclear in the public domain, which approving role the government and ministry of oil and energy had. The result is our current deregulated energy market. NASDAQ has become a leader in European energy market and owns subsidiaries in Norway which earn solid profit margins. Nasdaq lobbied for the building and expansion of the transfer gird to the European market. Following the establishment of the stock exchange market, dozens of intermediaries began operating in the value chain.

They are profitmaking sellers and not essential entities.

Two final decisive decisions completed Norway’s market adaptation. In 2018 a parliamentary majority, following a hefty debate on issues of energy sovereignty, consequences for energy dependent industries and private consumers approved Norway’s membership in the EU regulatory body ACER (Agency for the Cooperation of Energy Regulators). The following year Statsnett and partners sold most of the physical energy stock exchange to a Holland-based Euronext, which happen to own Oslo Stock Exchange. This sale was done without parliamentary approvement. These formative laws, deregulations, sales, and gird/exchange integrations are some of the fundamental causes why we face the current unnecessary self- imposed emerging energy curse situation. The electricity prices Norwegian customers (so far in South due to the gird bottleneck) are paying, reflect export/import at a high end, in the currently extra pressed European energy market, mostly produced on “brown” coal and oil, some unstable wind power and CO2 taxes added.

Are there real political answers to the current crisis of souring prices, accentuated with the war in Ukraine, the EU boycott and low magazine levels, mostly results of profit-driven sales? One may have to reign-in on major deregulation agreements, measures, and export/exchange levels. That would entail retake more control over the physical and financial energy stock exchange and renegotiate the energy exchange deals with EU and the high export levels to European markets. One should remove unnecessary intermediary sellers and introduce a transparent differentiated pricing system for Norwegian consumers. These measures have traits of a renationalization agenda. Currently, this is not on the table of the current Labor Party – Center Party coalition government, nor advocated across the parliamentary spectrum, except for the Red Party and smaller fractions within a handful of opposition parties. Interestingly, some EU countries are signaling plans for renationalization and restrictions on energy export to ensure own energy safety.

Citizen uproar, lobbyists, and the current government dispensation:

The uproar has been consumer rather than citizen focused. So far, unfairness and unacceptability of soaring piece levels, apart from regional price differences have become hot issues. If energy scarcity escalates in EU, Norwegian customers may have to pay extremely high prices coming winter and beyond 2023. This may take a real toil on health and wellbeing of low-income households and cause closures in heavy energy-independent business sub-sectors.

Now, two energy commissions are at work, one established by the government, favoring the current market-led EU-integration, and an alternative Energy Commission. The latter is an interesting initiative, with support from a number of major labor unions. But the road ahead might be rocky for the commissioners. They must counteract the dominance of a very vocal energy market lobby and a “green transition” compact. Many politicians and energy companies believe in Norway as “Europe’s green battery” in the energy transition. Lofty rhetoric of solidary holds appeal in the current situation of war in Europe and particularly Germany’s ongoing and possibly worsening energy squeeze.

Meanwhile the current Jonas Gahr Støre-led government continues a compensatory subsidizing policy. Our leading parliamentarians are not very keen debating the political choices of several earlier governments which brought us into the current entrenched speculative energy market. Which, and this is important, brings enormous profit to a range of companies which have the Norwegian state and counties as shareholders. The Norwegian state find themselves in a bizarre self-inflicted resource curse, facing of late boomerang effects of a self-driven marked liberalization of energy, which currently also benefits state energy enterprises, but punishes individual and commercial consumers and jeopardies Norway’s future energy sovereignty. The government has so far chosen to respond to a volatile market by compensatory doling-out schemes. The Norwegian state’s incomes from burnt oil and gas (with prices around 120 USD a barrel) to the export market have since 2020 reached unpreceded heights, further aided by a parliamentary endorsed oil tax stimulus package. This sadly testifies to a hollowness in Norway’ commitment to reduce omissions globally.

Are there signs that the consumer uproar morph into a citizen and labor union-based movement, which can establish an energy policy consensus in time for next general elections in 2025? Current poll swings show quite substantial flow of voters back to the Conservative Party, which together with the market-liberal majority of the Labor Party and other centrist parties were at the helm of last decades’ deregulation. In other words, the masses do not yet call for any structural policy-reorientation in the energy sector.

A resource-curse story yet to be canonized in the literature:

The story of front and back-stage energy policy the last 30-years is yet to be full researched and written. The current crisis has interestingly prompted couple of earlier executives from the sector and former top bureaucrats to come forward seeking to clarify a messy debate. A debate, they say, are marked by a measure of missing basic understanding, misinformation, and an underestimation (be that real or pretended) of our government’s room of maneuver as a major energy player to renegotiate the EU-agreements. We are left to ponder what new evidence with appear next that may fully explain Norway’s route to the current self-flagellation, including the role of “the complacent trap”. It seems quite evident that drift towards economic globalization as energy integration through deregulated market mechanisms, took hold at a time of seductively huge stable incomes from the oil and gas sector, coupled with an unrealistic belief in a peaceful Europe and indeed influence from Tony Blair and New Labour. Perhaps liberal market ideology and a feeble sense of the basics of what it took to build our country (in the 1990s few of the war and early post-WW2 generation were around as mentors), combined with unprecedented wealth from the petroleum sector, led many politicians astray. This may explain the longstanding consensus between the Labor Party and the Conservative Party and a striking negligence of due parliamentarian treatment of energy policy decisions and legislation of major national and constitutional importance.

# About the author: Tone Bleie is Professor of Public Policy and Cultural Understanding at UiT, Norway’s Arctic University. Bleie has worked for three decades as applied researcher, consultant and manager in and on Nepal, the Greater Himalayas and the Tibetan Plateau: Ed. Upadhyaya.
# Contact address of Professor Bleie: tone.bleie@uit.no

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