Transcript Norway has become increasingly closely tied to the

SP216 European Politics 2013
Week 5/Sept.30th
Norway: the politics and economics
of splendid isolation?
See: http://www.ft.com/intl/cms/s/0/1a1166d2-c46c-11e1-a98c-00144feabdc0.html#axzz282h8uEaQ
Core question for this class is to unlock the puzzle that is Norway...
1. How can they be apart from the rest of Europe and yet be very integrated?
(answer = by stealth and informal mechanisms and other institutions)
2. To what extent is their apparent economic success really based simply all on oil
and gas?
(answer = the role of state leadership and institutions has seemed central to their
success as much as the sheer luck of huge oil and gas deposits)
3. What does the Norwegian experience reveal of general significance for European
Politics?
(answer = that there are many forms of European political co-operation other than
the EU; the partly-in/partly out ambiguous ‘European integration’ is both more
common than is realized and may become more so in future-many British
commentators seize on Norway as a future model for their relationship with the
EU......and even for Ireland?)
Norway’s Politics has become
synonymous with the 2011 Killings….but
this is a mistake….uncharacteristic
extreme event
The distinctiveness of Norway’s politics?
Østerud (2005) argues Norway is losing its political distinctiveness but suggests that Norway stood out for the following
reasons:
(1) Stable egalitarian capitalist society dominated by state led economy and centre-left social democrats (between 1945 and
the late 1960s). Since then consensus has been maintained and even allows parliamentary minority government to become
normal.
(2) Norway’s foreign policy was slightly odd-refusal to join EEC/EU BUT integrated into Europe through other orgs. (NATO,
Council of Europe, EEA, OSCE, OCED), and Norway was very active in ethical foreign policy initiatives…Israel/Palestine
conflict, Sri Lanka, environmental leadership / Brundtland report (1985)
(3) One might add a third reason-because Norway’s economy is so much based on oil and gas-it has been argued Norway
provides a model in how to manage such natural resources (rely on the state a lot, and avoid overspending day to day
receipts from oil and gas) and avoid high levels of corruption and conflict (the resource curse).
Historically, Norway was a plaything of Denmark and later Sweden, although actual interference in local affairs was minimal.
However, nationalism has shaped modern Norway, but with a unique geographical twist: the rural coastal districts far from
the colonial capital in Oslo have always resented any form for central control and yet demand extensive subsidies for
fishing/farming and other activities-they were and remain an key historical constituency.
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Notice how long Norway is...almost covers a distance equivalent from Denmark
to Estonia..suggesting a fragmented polity
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Norway’s geography is also political-the rural coastal periphery on the question
of EU membership was (and remains) much more skeptical...they voted no
Norway as a 28th EU
member?
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Norway is NOT a member of the EU BUT is very involved in various other institutions...(photo above centre
is Knut Vollebaek a former Norwegian ambassador to the USA, who is now the OSCE High Commissioner
for Minorities photo far right is of Norwegian ex-Pm Jagland who is Secretary General of the Council of
Europe)...to such an extent that its relationship has been suggested to be on of quasi-membership
Moreover this reveals to us that the EU is NOT the ‘only show in town’ as regards how European states
co-operate!
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Notice here that Norway has full free trade access to the EU, and even operates within the Schengen
passport area (whereas Ireland and UK as full EU members do not!), but Norway is NOT a user of the
Euro, like full EU members Sweden and Denmark. Almost every state is a member of the Council of Europe
(except the Vatican and Belarus!).... the basic point of a graphic like this is to stress the multiplicity of
organizations and how there is a variety of overlapping memberships...European states are organized
together in a series of overarching flexible institutions....that provide multiple solutions and policies.....there
is actually a degree of competition between them...for now the EU is probably predominant but this graphic
reveals engagement in the EU is variable and complex from country to country........
Norway in Brussels?
(Below from left to right, the refurbished Norwegian embassy for the EU; negotiations on the EEA in 2010 with the Norwegian
ambassador; Statoil’s (lobbyist) man in in Brussels, Arne Thorvik.)
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Key point is that Norwegian party elites wanted full EU membership but voters, small parties and big party dissidents derailed this
during the referendums in 1972 and 1994.
Opposition to full EU membership has its roots in the coastal rural periphery who ideologically was opposed and whose key policy
areas (farming and fishing) being interfered with….but parties were divided…smaller parties opposed….BUT also within the large
Labor Party there was internal division……
Eliassen and Sitter (2003) speak of ‘quasi-membership’ of the EU via the ‘back-door’of EEA which gives access to the Single
Market But requires compliance with single market rules and standards….
Norway has got access BUT no formal vote or power…it can shape decisions …but not actually help take them….Norway must
accept new EU laws relevant for the Single Market (probably most laws) and simply apply these…..influence without power?
Enlargement and Treaty change has proceed ahead in the last decade but Norway has had little say in any of this….one might
argue that any small state has rather limited scope to have its say…
Norway has still had to make contributions to the EU for social and economic cohesion within Europe...some 347m Euro between
2009-2014......in return for market access.....
Norway’s participation in EU policymaking?
Integration by Stealth-democracy by fax?
“Norway has become increasingly closely tied to the EU. Cooperation has extended to more and
more areas, and today Norway’s agreements with the EU affect domestic law and politics
and the daily lives and operations of individual citizens and companies in numerous ways....
EU law has been incorporated to some extent into around 170 of a total of 600 Norwegian
statutes and approximately 1 000 Norwegian regulations... Today, Norway is far more
closely associated with the EU than most people realise. This also applies to many of those
who work with EU matters on a daily basis, such as politicians, civil servants, journalists and
researchers.... You could say that Norway is both outside the EU and in it at the same time.
Or you could say that Norway is neither completely outside nor fully inside. In principle, this
is a difficult arrangement, with inherent structural tensions and problems. In practice,
however, this form of association has worked, and far better than many expected.
Experience so far is that the problems with the EEA, Schengen and other agreements are
greater in principle than in practice... The most problematic aspect of Norway’s form of
association with the EU is the fact that Norway is in practice bound to adopt EU policies and
rules on a broad range of issues without being a member and without voting rights. This
raises democratic problems. Norway is not represented in decision-making processes that
have direct consequences for Norway, and neither do we have any significant influence on
them. Moreover, our form of association with the EU dampens political engagement and
debate in Norway and makes it difficult to monitor the Government and hold it accountable
in its European policy.”
From: “Outside and Inside Norway's agreements with the European Union”. Report by the EEA Review
Committee, appointed on 7 January 2010 Submitted to the Ministry of Foreign Affairs on 17 January 2012
(on Blackboard)
Norway and NATO-Atlanticist
visions of Europe?
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Norway has used its membership of NATO to compensate for non-EU membership....gives access to
American, Canadian and leading EU diplomats-meaning Norway is not at all isolated in the world of
diplomacy (although NATO does NOT do much by way of economic diplomacy and trade deals...)
Norway’s role in NATO Afghanistan mission has been extensive (and controversial)
Norway continues to face Russia as a long term strategic challenger in the exploitation of the Arctic-will
continue to want NATO as an ally......the question is whether NATO/US will back Norway in any future
clash with Russia?
This Atlanticist connection to Europe is a theme shared with political elites in the UK, Denmark especially,
but also the Netherlands.
Norway as a Petro-state?
A Norwegian North Sea Oil Rig in the Statfjord A, field developed in the 1980s and the Mongstad mega Refinery built 1975-1987, and
Statoil diversified into petrol stations thereby getting more value of the core product...instead or merely being wholesellers....
“Norway holds a unique position in producing and exporting oil and gas.Norway is Western Europe's second most
important source of natural gas after Russia and the world ’s third largest exporter of oil and gas after Saudi Arabia and
Russia. The oil and gas sectors constitute around 25% of Norway’s GDP and 52% of Norwegian exports
(35 times higher than the export value of fish). Norway has an annual oil production of nearly 3 million barrels per
day (bpd) and an annual gas production of 85 billion cubic metres. Approximately 80,000 people are employed in
the petroleum sector in Norway (2007). Early in the next decade, Norway’s gas exports – almost all to Europe – will increase
by 50% to an estimated 130 billion cubic metres, close to the level of Russia’s exports. Exports from Norway will account for
nearly a third of natural gas consumption. Norwegian gas exports account for approximately 15% of EU gas consumption
today, with nearly 100% of Norwegian exports going to the EU.” (Harbo 2008).
Norway’s Oil Fund-Oljefondet
Jens Stoltenberg, the Norwegian Labor Finance Minister who fixed the 4% rule on oil revenues in 2001
Worth almost $600 billion by 2012 BUT the government cannot dip into any more than 4% of its value in any one budgetary year-so maybe 20-24bn
dollars worth can be accessed-that is still a very useful revenue ‘cushion’!
In fact there are two separate funds....a Government pension fund and a so called Global fund
Put in place in 1990s after political debate on wasted oil revenues-and ‘welfarism’ or the ‘Dutch disease (that oil revenues increase the value of a
national currency to the point where domestic manufacturing becomes overpriced)...also by 2012 almost half the oil has been
extracted......and throughout the 1980s and 1990s oil prices varied wildly which meant it was hard to rely on oil revenues to fund recurrent and
capital spending.....the other problems was the high oil and gas revenues were pushing up inflation......
It is managed by state civil servants with commercial expertise.......
Crucially they were supposed to invest a significant share of these surplus funds in local firms and industries....but by 2009 about 60% has been
invested globally outside Norway.....mainly in international stock markets...which of course means a great loss of value has for the most part
occurred during the period 2008-2012....the smaller Government Pension does invest mostly domestically which of course means there is
more capital available for domestic industry and business and gives the state an indirect role in domestic business much larger than it
seems....
All about Oil?
Above: The Norwegian shipyard STX Florø, which was solid to Korean multi-national STX in 2008, which was quite traumatic.
Can be overstated-the economy is not totally dependent on Oil and Gas-they have other related niches...such as Fishing, Shipbuilding, etc.These
sectors are finding it hard to compete in a more globalized marketplace.......
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Probably what has mattered more is the state led brokering of the Oil industry following the Hydroelectric industry....most wells were
developed with 50% state involvement.....crucially they could build on years of maritime engineering expertise......
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Therefore Norway has been cited as a model for states who wish to avoid the ‘oil curse’.....(that an abundance of natural resources can
ruin a country by fueling corruption, waste and conflict...sometimes applied to countries like Nigeria, who have extensive oil.)
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What remains distinctive was the state ownership of much of the oil and gas business, but more generally state owned firms remain
important in the economy.....even today..... the state has developed a few publicaly owned ‘national champions’ in global
business.........but for how long can this remain? In 2001 Statoil was partly-privatized. This mixed economy model is more clear-cut in
Norway, but historically the same thing has been attempted to some extent in France, and other EU states. There is then a distinctive
model of European mixed capitalism, where the state retains a strong and proactive role. Ireland’s state has avoided this type of role.
Norway as a model for Ireland?
Not as simple as it seems.
This idea has an old history-Gladstone the British PM thought Irish home rule would work after a visit to
Norway....however, the Norwegian ‘recipe’...is different...they are not members of the EU rejecting membership twice
(1973,1994)...BUT they do end up participating in EU diplomacy...and are members of the EEA....but they are active
members of NATO.......whereas Ireland is NOT.......
Also while the base of the economy seems similar in fact its quite different...Norwegian oil and gas is a huge
boost/cushion....and built upon a successful Mercantile Marine economy....Norway has the 6th largest merchant
marine fleet...used to be bigger...this niche blended well with the offshore oil economy....Ireland have and had nothing
like that......
Importance of state owned ‘national champion’ firms seems to be a key lesson....Statoil. Norsk Hydro....compatible with
globalization...Norway appears to be a global niche mixed economy building on traditional strengths?
Norway Election 2013-more of the same
please?
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Social Democrats/Labour in power since 2005, LOST the September election to
a centre-right coalition.
Labour party still the largest in Parliament despite losing 9 seats.
Populist-Libertarian Right Wing Progress Party lost 12 seats as right wing voters
mostly switched to traditional conservatives.
“Iron” Erna Solberg to lead complex centre right multi-party coalition focusing on
traditional centre-right economic management issues…..
Conclusions?
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Norway’s ambiguous engagement with the EU appears to lead to
equally ambiguous results-they end up implementing many EU laws
and have only indirect influence....plus maybe more not less democratic
problems than full members of the EU!
Norway unlikely to join EU in near future (unlike perhaps Iceland), BUT
other EU states may become more like Norway?
Norway’s oil and gas based economy is running down-oil production
has peaked and is declining significantly.....in the long term Norway will
face competitive pressure as well.....
The critical political feature is a steady retreat from state/public
ownership and control...and a steady erosion of the distinctive industrial
base perhaps (such as Shipbuilding)....suggesting a difficult far
future.......
But in the short term there is much continuity......aside from dramatic
incidents....