Norway is one of the biggest winners of the Ukraine war – that’s why the country does not deliver cheaper gas to Germany

Norway is one of the biggest winners of the Ukraine war – that’s why the country does not deliver cheaper gas to Germany

Norway’s Energy Minister Terje Aasland avoided any triumph: “There are times when it’s not fun to make money,” he said in March. Shortly before that, Russia had invaded Ukraine and the West imposed sanctions on Russia. Gas and oil prices skyrocketed, and with them Norway’s profits from its offshore oil and gas fields.

Norway earns a lot of money. The fun is limited – especially for Norway’s customers, who urgently need to find a replacement for Russian gas before winter. “Should we pay Norway gigantic sums for gas – four or five times more than a year ago? That’s sick,” Polish Prime Minister Mateusz Morawiecki railed back in May, when prices hadn’t even peaked. The German Economics Minister Robert Habeck (Greens) has just criticized the fact that friendly countries are asking for “moon prices”.

But the “moon prices” are the market prices. Discount is not to be expected from Norway.

Norway is the ninth largest gas producer in the world. The country with only 5.4 million people and a lot of cheap electricity from hydropower needs little of it itself. That makes Norway the fourth largest gas exporter in the world. Norway is not in the European Union, but it is the EU’s most important energy supplier and Germany’s most important gas supplier since Russia’s failure as an importer. Norway, which is already wealthy, is benefiting twice from the Ukraine war: It is supplying larger quantities at significantly higher prices.

energy crisis? For Norway it is a gigantic boom. Export earnings jump from record to record. In August alone, the country sold natural gas abroad for almost 17 billion euros. That was around four times as much as a year earlier. Norway’s export surplus shot up to around 20 billion euros in August – in a single month.

For comparison: Germany’s foreign trade surplus shrank to almost zero in August – mainly because energy imports made imports extremely expensive. A gigantic redistribution of wealth is taking place in the direction of energy-rich countries. And while the rest of Europe faces a severe recession, Norway expects a boom in 2023 with 3.2 percent economic growth.

Even before the crisis boom, the country was taking in around 50 billion euros a year from the export of oil, gas and electricity from the many hydroelectric power plants. At the current volumes and prices, it would be a good 200 billion a year. That would be over 37,000 euros per capita for every Norwegian – from energy exports alone. The “Economist” calculates that this roughly corresponds to the entire average per capita gross domestic product in the EU. Even before the Ukraine war, Norway was one of the richest countries in Europe. “Now that the war and energy shortages drag on, the sums flowing north are becoming embarrassing,” writes the British business magazine.

This uneasiness is also expressed in Norway. After all, the Norwegian self-image is shaped by wanting to be one of the good guys in the concert of nations. The Greens are demanding that part of the “profits from the war” be given to Ukraine.

Norway’s Prime Minister Jonas Gahr Stoere never tires of emphasizing how important good and close relations with European countries are to him. Norway has adopted the EU sanctions against Russia. Norway has increased its supply volumes to the EU and even avoided a strike in its energy sector.

Stoere wants the best of both worlds: the fun should come back and the money-making should stay.

Gas price discounts for friendly countries are therefore not up for debate. Norway refers to its own problems as justification. The gigantic sovereign wealth fund, which receives most of the income from the energy business, has lost a lot of value due to the weakness of the financial markets. The losses are even higher than the gains from higher energy prices. On the other hand, the drought in Norway has reduced the production of electricity from hydropower. Here the prices rose for Norwegians who are used to cheap energy, especially cheap electricity.

However, Norway can also point out that the mostly state-controlled energy companies are obliged to sell oil, gas and electricity at market prices. German and European politicians have now also got the message: a hard price cap means the risk that Norway will sell less gas to Europe – because other countries are paying more.

The EU Commission therefore wants to take a different approach: As with the procurement of vaccines, the EU wants to pool the purchasing power of the 27 member states. A task force is to negotiate lower prices – first with Norway. The aim is to avoid the embarrassing mishap in Poland, which opened the long-awaited Baltic pipeline for gas from Norway in September, but had not negotiated any supply contracts.

Stoere has now also opened a door for a compromise: Norway can now lower the price for long-term contracts in order to secure stable, high profits in the future. Then earning money could be more fun again.

Melissa Galbraith
Melissa Galbraith is the World News reporter for Globe Live Media. She covers all the major events happening around the World. From Europe to Americas, from Asia to Antarctica, Melissa covers it all. Never miss another Major World Event by bookmarking her author page right here.