Norway drop Russia from $1.3 trillion wealth fund

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 $2.8 billion (25 billion kroner) at the end of the year, Finance Minister Trygve Slagsvold Vedum said.

Nicolai Tangen, CEO of Norges Bank Investment Management. Bloomberg photo by Fredrik Solstad

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 CEO 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. Norway’s biggest energy company Equinor, which is 67% state owned, said it would exit Russia where it had $1.2 billion in non-current assets. In addition, BP moved to dump its shares in oil giant Rosneft and could be forced to make $25 billion writedown.

The wealth 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 has been given so far, and the process could take some time to finalize. A decision by parliament back in 2015 to divest coal producers took months before stocks were sold. While there is obviously more urgency with Sunday’s decision, it’s still not clear how a selldown would be carried out with the number of potential buyers in the Russian market shrinking as sanctions take effect.

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.