Norway sovereign fund Russia – On the 27th of February, Norway’s sovereign fund announced that they were going to disinvest its Russian assets following the Russian invasion of Ukraine.
As soon as Russian President Vladimir Putin announced that they were going to initiate a special military operation against its neighbor Ukraine, many countries, including the United States, United Kingdom, and European Union, have announced several sanctions on Russians.
Experts are calling it a new era of Cold War where Russians are way more aggressive, and NATO and allied missions are on the back foot due to several reasons. The war between Russia and Ukraine is still going on, but Russia has already become one of the biggest countries with more sanctions than any other country in the world.
As per the media reports, Russia has surpassed Iran and North Korea in terms of world sanctions. More than 5000 sanctions have been announced on Russia by several countries, including the developed West.
Even after so much backlash, many countries, including China, India, Brazil, and South Africa, have not announced their stand, and they are going with a non-aligned policy.
Norway’s sovereign fund removed Russia from its Assets
Soon after President Putin announced war against its neighbor Ukraine, the European Union condemned the action and asked the Russians to stop the war and negotiate with diplomatic tools.
But as always, Russians did not listen to anyone, and they kept going ahead in the war, and it has been more than 12 days since they first started.
The United States and allied countries, which are also part of the European Union, have been announcing several sanctions on Russia, and in that List, Norway also joined the party and announced that they would remove Russian assets from its 1.3 trillion sovereign wealth fund.
The Prime Minister of Norway announced that they are going to disinvest its investment from Russia, including the Russian stock market and government bonds. Apart from that, the Prime Minister also mentioned that Norway condemned the invasion of Ukraine, and they do not want to have any relation with Russians now.
As per the experts, Norway was clearly tackling every political issue and Did not use the fund as a political tool to pressure the opposition. But now, the situation has changed, and Norwegians are also planning to cut their ties with Russians in response to their invasion.
Why Is Norway Removing Russia From Its Wealth Fund?
Russians have been banned from the Society for worldwide interbank financial telecommunication, also known as swift. Apart from that, major Western countries, including the United States, Canada have been putting so many sanctions on Russians, which make everything worse.
As per experts and as their Prime Minister has told the media, Norway does not want to continue its financial association with the Russian government. Norway does not want to go against the United States and allied groups.
Russia is not a big investment for Norway, but the number is significant as it crosses billions of dollars. By the year 2020 Norway based fund had exposure of $3 billion to Russians, including the Russian government and stock market.
The manager of the front thinks the whole disinvestment will be a wrapped gift for the Russian companies because the Stock Exchange has not been opened by Moscow.
Apart from that, the recently rushing government has also announced they are going to freeze all the foreign assets, and nobody will be able to disinvest, including government bonds and investment in Russian companies.
The Russian stock market has already tanked more than 30- 50% since the war started, and with those sanctions, financial experts believe it might take 75% or more from all-time highs.
How Will Russians React To The Disinvestment Of Norway?
Now after the Norwegians announced they are going to disinvest from Russia, including Russian companies and Russian government bonds, the big question which arises is, what could be the next reaction of Russia?
Aren’t Russians going to retaliate? Are they going to take any action against Norway? There are many questions like that, but till now, we can only assume because you don’t know what is going to happen next.
Yes, Russians are under pressure due to their miss judgment in Ukraine and so many sanctions by most of the developed countries in the world. Experts believe Russians might have thought about every possible outcome, including sanctions.
Until now, the Russian government has not reacted to the news. It’s been more than ten days since the Norwegians have announced the disinvestment. As per the financial experts who have a keen knowledge of Russian mattresses, this investment is like a gift for Russians, not any harm.
Russians have already announced so many restrictions on disinvestment, And in experts’ opinion, the disinvestment is not going to affect. The whole charade of disinvestment in Russia is going to hit back Norwegians only because they will have to lose billions of dollars.
Is it A Good Decision To Disinvest From Russia?
It will be very early to start thinking about the impact of disinvestment on any country. Many financial experts believe the impact will be minor on both Russia and Norway.
As per the reports, Norway’s sovereign fund has only $2 billion exposure in Russia out of $1.3 trillion in total. And most of the investment was in Russian companies.
The Russian stock market has been closed since the war broke out between Russia and Ukraine. And Norwegians might have to write off the whole investment as Russia has announced no disinvestment till further notice.
The Russian economy might not be as big as the United States or China, but it can handle two more billion as disinvestment along with so many sanctions on Moscow.
There is one thing which every expert pointed out how they are going to get foreign investments in the future because the Norway sovereign fund is one of the biggest funds in the world.
As per the data, they have on average 1.4% partnership in every listed company in the world. Even though you might think 1.4% is not a big number, when it comes to investment, nothing is small.
It is sure that Russian companies and startups are going to be in deep trouble when it comes to investment. But the clear impact of disinvestment will come out in a few months after the cease-fire.
Soon after the Russian President announced a special military operation on Ukraine, the country has been seeing so much pressure from the world in every field, including political and financial.
The United States and its allied nations, including the European Union and the United Kingdom, have announced several sanctions on Russia, and it has surpassed North Korea and Iran to become one of the biggest countries with sanctions.
In that list, Norway also joined a party as they announced the disinvestment of Norway’s sovereign fund from Russia. As per the experts, the number of investments is going to be around $2 billion.
The fund has not announced any date when they will do the whole process as the Russian stock market has been closed since the war started between Russia and Ukraine.
Apart from that, the Russian government has also announced several new rules, including no disinvestment till further notice. They have also instructed Russian residents to not indulge in any disinvestment.
Experts believe it is not going to hit Russia as the world might think because Russians might refuse to payout, and the Norwegian sovereign fund might have to write off the whole investment.
What is a Norway sovereign wealth fund?
Norway’s sovereign wealth fund is one of the largest funds in the world, with $1.3 trillion worth of assets. The fund was created in 1990 to invest in Norway’s oil and gas revenue abroad with a few restrictions, including overexposure to certain weapons, tobacco and coal. As of 2021, the Norwegian sovereign wealth fund has invested around $2.5 billion in the Russian market, including Russian companies and Russian government bonds.
When will Norway pull out investment from Russia completely?
The Norwegian central bank and its investment management have not announced any final date yet. Till now, they have only announced the next action, but the timeframe will depend on several factors, including the Russian stock market, which is currently closed due to the ongoing crisis.
Many financial experts believe The situation is not going to be clear in the near future because Russia has also announced several restrictions on foreign investments. As per the latest guidelines, Russian residents and foreigners are not allowed to cash out their investments made in Russian companies, including Russian government bonds.
Who will be in loss after Norway’s sovereign fund announces disinvestment from Russia?
Many financial experts believe the Norwegian sovereign fund is going to lose its 100% investment from Russia as they have announced this investment. There are so many sanctions on Russia that have been announced by several countries in the last few days, and the Russian government has also announced no disinvestment till further notice. The Norwegian sovereign fund has only exposure of two billion U.S. dollars in Russia out of 1.3 trillion total.