The Almost Nearly Perfect People Page 21
In early 1965, representatives from each of the three governments met to thrash out a deal to divide up the North Sea shelf, a deal that was agreed and ratified at some haste in March of that year – greatly, it would transpire, to the Norwegians’ advantage. If you ask Danes about these negotiations they will tell you, in all seriousness, that the Norwegians pulled a fast one. Press them on the point, and they will wave their hands vaguely as if to say, ‘You know what the Norwegians are like.’ Some will allude to the fact that the Danish foreign minister responsible for signing the treaty, Per Hækkerup, was a known alcoholic, and that he was drunk that day: ‘Look at the line they drew,’ they will say of the new North Sea bed’s territorial borders. ‘Notice how it suddenly drops down to take in the place where they found the oil!’
Having heard this rumour for many years from my Danish friends, I felt it was time I found out the facts, which are these: it is true that Hækkerup was an alcoholic, and, yes, that first massive Norwegian oil field, Ekofisk (which is still pumping the stuff out at quite a rate, and is predicted to continue to do so until 2050), was found right at the lower south-western corner of the Norwegians’ newly demarcated territory, agonisingly close to Danish waters. It is also true that Denmark did have a justifiable quibble about who had sovereignty over that part of the North Sea, based on a technical issue to do with the depth of the ocean floor. It is also true that, for some reason, the usual cooling-off period relating to such agreements was not implemented. So why did the Danes sign so readily? It is not as if they didn’t have ample historic precedents concerning the pitfalls of international border treaties.
The truth is, at that time no one really believed that there was oil in the North Sea, or that, if there was, it was extractable. Rather than argue the point, Denmark preferred not to risk annoying Norway with what it then deemed a petty argument about the sea bed: fishing rights were a far more pressing issue.
As for Hækkerup being drunk at the time he signed, there is no evidence for this but, well, alcoholics are not generally characterised by their sobriety during times of stress, are they?
‘It was a coup,’ Thomas Hylland Eriksen, admitted to me with barely disguised glee. ‘It was cunning how they managed to expand the continental shelf area to 200 nautical miles. It was a guy called Jens Evensen [a trade minister] who was the architect. The Norwegians got 70 per cent!’
Do the Danes perhaps regret having sent a possibly inebriated Social Democrat to negotiate their oil rights? One suspects they might well. Is this an issue between Norway and Denmark today? Absolutely not, at least not at any kind of political or diplomatic level. But the incident definitely features in the popular myth about the North Sea oil fields in Denmark, and continues to be recounted by older Danes as part of a narrative about being diddled out of their oil destiny by their country cousins, those tricksy Norwegians. It has also contributed to a slightly bitter, negative image of Norwegians among Danes as somehow having been rendered isolated and indolent by their misbegotten wealth; an image which also finds purchase among Swedes.
‘Ak, they’ve never worked,’ a male member of my Danish family, who wouldn’t thank me for naming him so I won’t, once told me. ‘They have enough in themselves, they don’t need anyone else.’ The Danes pounce on any evidence of Norwegian indolence. They love to hear stories of migrant workers from Sweden manning Norwegian fish-processing factories, for instance, or waiting in their restaurants. ‘I went to Oslo, and not once was I served by a Norwegian waiter!’ is a common refrain among returning Danes (there are 35,000 Swedes working in Norway, tempted by wages of up to £30 per hour for semi-skilled work in shops, and so forth). One story in particular which has gladdened many a Danish heart concerns a number of Swedes working in a Norwegian processing plant, where they were reported to be employed to peel bananas. And it’s true! I checked: the bananas are used in a popular Norwegian sandwich spread. Lazy Norwegians and exploited Swedes all in one joke. The Danes could hardly believe their good fortune.
In Sweden, meanwhile, resentment towards Norwegian high-handedness is growing. A recent sociological study questioned 3,800 Swedes about their neighbours, asking them, among other things, whether the Norwegians were bad at queueing (‘Yes, very’ said 59 per cent of Swedes – and I should point out, the Swedes queue for things with all the decorum of piglets jostling for a sow’s teat); whether the Norwegians knew how to drive around roundabouts (‘No’); and whether they ever parked in disabled parking spaces (‘All the time!’). ‘It is surprising how many negative things Swedes have to say about Norwegians,’ the author of the study was reported as saying. ‘They feel swamped by the Norwegians,’ she added, warning that there was the potential for relations to turn ugly in border areas.
Back to the North Sea negotiations. In truth, the Danes didn’t do too badly out of their own little patch of the sea bed. The so-called Dan Field began producing oil in 1972 and the country became self-sufficient in oil by 1991. At their output peak in 2004 the Danes were producing around 142 million barrels a year.
It is interesting to compare how the two countries differed in their handling of their respective oil bonanzas. The first barrels from the Norwegian Ekofisk field were produced in June 1971, and subsequent finds elsewhere in the newly delineated territory – some of the largest oil fields on earth at Statfjord, Oseberg, Gullfaks and Troll – came thick and fast, moving more northerly over the decade. By 1972 Norway had its own state oil company – the imaginatively named Statoil – which, by law, had to be a majority partner in any oil activities in the region (the law was later changed). The state took firm control over nationalised production and founded a wealth fund that it has since handled with remarkable self restraint. It has been able to ride out the global economic downturn and, in fact, the fund has increased by the equivalent of £30,000 per citizen since 2008.
The Danish oil field, on the other hand, became the sole preserve of one company, A. P. Møller–Maersk, the running of which was overseen until his recent death by Mærsk Mc-Kinney Møller, the son of its eponymous founder.
Quite how A. P. Møller–Mærsk won the sole concession rights to Danish hydrocarbon deposits for all eternity is rather opaque, but it seems to have involved a good few murky deals in smoke-filled rooms. Today, Mærsk is so central to the Danish economy – some estimates have it contributing over 10 per cent of GDP through its shipping and oil operations, as well as its supermarkets and various other activites – that one gets the sense that few politicians or journalists want to rock that particular boat, and the company has been able to renegotiate the terms by which it controls the Danish oil fields to its advantage ever since (most recently in 2012 when it extended the agreement until 2043) Some even claim the company effectively tells the Danish government how much tax it is going to pay each year, although – Mærsk lawyers please note – I don’t believe this for a minute.
While Danish oil production peaked years ago, Norway’s is still running at around 2 million barrels a day, or 730 million barrels a year. Statoil is the largest company of any kind in the Nordic region in terms of revenue and its current record profits. And, despite the perennial warnings that peak oil is imminent and that the Norwegians will soon find themselves on the slippery slope back to the fish-drying, sheep-shearing Dark Ages, they keep discovering massive new reserves: two gigantic puddles of the stuff containing up to a billion barrels-worth were found in the Barents Sea in 2011, and now, with the ice cap conveniently melting (I wonder how that happened?) the Norwegians also have the estimated 90 billion barrels of crude that lie beneath the Arctic in their beady sights. As if that wasn’t enough to keep them going through the long, dark winters, Norway is also now the fifth largest producer of gas in the world; gas is expected to make up more than half of Norwegian petroleum production within a couple of years.
If there is a God, then he certainly exhibited a mischievous sense of humour in doling out the bling to Farmer Eigil and his be-dirndled wife. Scandinavia’s much mocked litt
le brother has done well for himself. Following that first discovery in 1969, Norway rose fairly rapidly to the top of the Scandinavian – and indeed, global – wealth rankings. Today it is the Dubai of the North. Croesus in a cape. The country now has the second highest GDP per capita in the world after Luxembourg, and Luxembourg is hardly a proper country.
I was fascinated to find out what kind of impact this windfall had had on a people more used to hoarding meagre resources through long winters and making the most of a life lived amid arid mountains, icy pastures and harsh seas. What had been the effect of the lottery rollover to end all lottery rollovers on the Norwegians’ collective psyche, on the core of their character?
* * *
1 Okay, he was more likely called Jan, and it took a couple of years to begin extracting the oil, but let’s not slow the narrative.
Chapter 6
Dutch disease
THE OIL FUND is arguably modern Norway’s greatest single achievement – the ultimate expression of Nordic self-discipline and control, and a paragon of responsible fiscal stewardship. This brilliantly managed, tightly controlled wealth fund is the envy of every oil-producing nation – not to mention every non-oil-producing nation – in the world.
The man ultimately responsibility for how that gigantic pot of gold is distributed around the globe is the CEO of Norwegian Bank Investment Management (NBIM), Yngve Slyngstad. I went to see Slyngstad in his Master-of-the-Universe eyrie on the top floor of the Norwegian National Bank building in central Oslo (where, as a result, perhaps, of Breivik’s bomb, which was detonated just yards away, I noted they do actually have some security in the form of very natty individual, twin-door ‘air locks’ that make you feel like you are teleporting from the Starship Enterprise; every bank should have them).
‘The purpose of the fund is to defend the consumption basket,’ Slyngstad explained to me. My almost perfect ignorance of basic economic theory must have been writ large even at this early stage in our conversation, so he kindly explained what this meant. ‘We have sold oil and gas to other countries, and sooner or later we will have to buy something and what we want therefore is to have the possibility of purchasing something a few generations from now that is at least equal in value to what we could have purchased today. So if world growth is good, we need to have a good return on the fund to protect our purchasing power in the future.’
The fund owns shares in over eight thousand companies, which effectively means that Norwegians own over 1 per cent of the world’s listed companies, almost 2 per cent of Europe’s and 0.7 per cent of Asia’s.
I had read that the fund had recently begun to invest in what some analysts had seen as more risky propositions – property, for instance; they had bought some prestigious office buildings in Paris, for example. I leaned forwards, tapping the end of my pen on my chin. Why, I asked, was Norway taking a more risky approach with its pot of gold? (I didn’t call it a pot of gold.)
Slyngstad, a trim fifty-year-old with a clean-shaven head and light-brown goatee, smiled sympathetically and explained that the oil fund was originally projected to run only for about thirty years. That point had long passed and yet they continue to discover new fields and new methods of exploiting existing ones, which means that they are able to make longer-term and riskier investment decisions: ‘When the market was falling after 2008 we bought more than a thousand billion kroners worth of equities,’ he said, a brave move at a time when not just Norway’s investments, but all equities, were plummeting.
I wondered how Norwegians related to their fund. When it overtook Abu Dhabi’s to become the world’s largest, the Norwegian finance minister, Sigbjørn Johnsen, told a local newspaper that ‘even if it is not a goal in itself to be the biggest, it is always nice to record that the fund is growing.’ (I like to imagine him saying this while reclining in a jacuzzi, before downing the rest of his champagne and casting the flute over his shoulder.) Was all this money a cause for national pride, or was it considered vulgar to talk about it?
‘Of course, we have been blessed and fortunate to have these natural resources, but I wouldn’t say they we’re proud,’ said Slyngstad. ‘If you go back two generations they were cautious about taking up all this wealth.’
How had the Norwegians managed to resist the temptation to spend their oil revenue, as Mrs Thatcher’s government had in Britain in the 1980s, or some of the Arab states are doing so conspicuously at the moment?
‘Two things: first is that the founding fathers of the fund were very clear about avoiding the Dutch disease. We could easily destroy the economy; we need to have an export-orientated economy that is able to survive without the oil, because if you are destroying your possibility to compete in the world, you can’t be sure you will regain it later when the oil runs out.
‘Traditionally, we have been a very poor country with a frugal consumption pattern, people living around the coasts,’ he continued. ‘Norway was not really part of Europe, to the extent that there was no European-style feudal system, people lived independently, not in towns and villages. People are connected to nature rather than to culture. It is a different mentality, right?’
As we’ve seen, this is a fundamental characteristic of Norway, and how its people differ from those of Sweden and Denmark. The Norwegians are used to subsisting on the bare essentials. As Slyngstad puts it, ‘This is a country where, in the past, you didn’t have enough to eat in winter unless you had saved it.’ The Norwegians were mistrustful of indulgence or excess, ever-conscious of the need to save and hoard.
We talked a little about the current crisis in Europe. Slyngstad shared his surprisingly candid theory about how the other European nations had ended up in their respective economic quagmires. They were, he observed, simply fulfilling their own self-images.
‘You go to Iceland and you kind of wonder, “What actually happened when they got all this unlimited cash?” They used it to fulfill their self-image as marauding Vikings, going around the world and taking assets. Vikings version 2.0. Norwegians could have done that with the oil fund, but we didn’t because we perceived it as a wealth that was already there, therefore something to be protected. The Irish wanted to be English landlords, so they built these huge houses. And then you go to Greece and you ask, “What’s their self-image?” I used to study philosophy, and Aristotle said, “Philosophy, what is that? Well the first premise is that you are not working.” I am being a bit mean to the Greeks, but you shouldn’t blame them for not working, they are philosophers, they have to sit there and think about life!’
The Greeks are a rather extreme example of a nation corrupted by cheap money, but the truth is the Norwegians have been somewhat corrupted too. To depict them as paragons of parsimony, untainted by their fantastic windfall, like the lottery winner who returns to his factory job and his usual place at the bar unaffected by the millions in the bank, is slightly misleading.
In his excellent book, Petromania: A Journey Through the World’s Richest Oil Lands (unfortunately only available in Norwegian), the Norwegian author Simen Sætre documents how oil wealth rarely has a positive effect on any country in the long term. He does not believe his country has been immune to its corrupting influence either, pointing out that the Norwegians are working 23 per cent fewer hours per year than they were prior to the oil boom, taking more holidays (five weeks instead of four), and more sick leave (they top the European league in this), and retiring earlier (at 63.5 years). He quotes an OECD report on Norway which stated that the country’s oil wealth had ‘distorted the relationship between work and free time’.
Norway does seem to have been especially negligent of its capability to make things. It de-industrialised at a faster rate than most of its trading partners and today less than 10 per cent of its GDP is generated by manufacturing, compared with almost 20 per cent in Sweden. Oil and gas now make up over half the value of Norway’s exports, fish and arms constituting the largest chunks of the rest, which explains why it has probably been a while since you
bought anything branded ‘Made in Norway’.
The country currently languishes in fifteenth place on the World Economic Forum’s Global Competitiveness Index (the lowest of all the four main Nordic countries), but one statistic that stands out – even to an economic illiterate like me – as cause for special concern is the OECD’s figure for gross domestic expenditure on research and development which, when considered as a percentage of a country’s GDP, is a key indicator of future economic performance. Not only is Norway investing relatively little in its R&D – 1.71 per cent of GDP compared with 3.42 per cent in Sweden – but almost half the investment is coming from the government (compared with just over a quarter in Sweden). If these figures don’t reveal a people who are resting on their laurels, then I’m an economist.
Perhaps the most troubling aspect of Norway’s social structure is the fact that about a third of all Norwegians of working age do nothing at all. Over a million of them live on money from the State, the majority of them pensioners, but also a sizable number (340,000) on disability, unemployment or sickness benefits – proportionally the largest number in Europe. The picture is equally worrying for Norwegian children, who rank below the European average in terms of literacy, mathematics and sciences, with the trend worsening over the last ten years. With a striking lack of self-irony, the Norwegian media is often heard to complain that ‘all young people want to do these days is be something in the media’.