Norway Decides to Drop Russia From $1.3 Trillion Wealth Fund

Lars Erik Taraldsen
Sun., February 27, 2022



(Bloomberg) -- Norway is starting a process to remove Russian assets from its $1.3 trillion sovereign wealth fund, in a rare case of politics steering investments for the country’s savings.

The government decided to freeze Russian holdings in the fund in response to the country’s invasion of Ukraine and plans to divest them in due course, Prime Minister Jonas Gahr Store told reporters in Oslo on Sunday. Norges Bank Investment Management held about 25 billion kroner ($2.8 billion) at the end of the year, Finance Minister Trygve Slagsvold Vedum said.

The Oslo-based fund is the world’s biggest owner of publicly traded companies with a portfolio of about 9,000 stocks. The government made its decision despite Chief Executive Officer Nicolai Tangen on Friday describing such a move as a “wrapped gift to the oligarchs” who would buy the shares.

Until now, Norway has been careful to avoid being seen as using the fund as a political tool. Previous attempts to impose political goals on the institution have been met with criticism that its overarching goal must be the highest possible return over time.

Norway’s decision comes after Russian markets slumped last week and follows U.S. plans with its European allies to ban transactions with the central bank in Moscow and cut off various Russian lenders from the critical SWIFT financial messaging system. In addition, BP Plc moved to dump its shares in oil giant Rosneft PJSC and could be forced to make $25 billion writedown.

The fund is now freezing its account holdings in Russia, which means that it will neither buy nor sell, Line Aaltvedt, a spokeswoman for the fund, said by phone. It will then make a plan to sell out of Russia in collaboration with the ministry, she said. No timeline for the exit was given.

Created in the 1990s to invest Norway’s oil and gas revenue abroad, the fund has followed strict ethical guidelines since 2004, including bans on certain weapons, tobacco and most exposure to coal.

Its biggest equity holdings in Russia at the end of 2020, the last time it disclosed its full portfolio, were in Sberbank of Russia PJSC, Gazprom PJSC and Lukoil PJSC, according to the Norges Bank Investment Management website. It will publish its 2021 holdings on Thursday.

“We want to give a very clear and unequivocal response that the type of abuse we have seen in recent times can not be accepted and it is therefore natural for Norway to withdraw its investments from the Russian market,” Vedum said on Sunday.

Norway also announced that it will enforce sanctions in cooperation with the European Union and will close its airspace to Russian flights. It will also increase humanitarian support related to the crisis to as much as 2 billion kroner.