SP216 European Politics 2013

1. SP216 European Politics 2013 Week 5/Sept.30th Norway: the politics and economics of splendid isolation?

2. 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?)

3. Norway’s Politics has become synonymous with the 2011 Killings….but this is a mistake….uncharacteristic extreme event

4. 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.

5. Notice how long Norway is...almost covers a distance equivalent from Denmark to Estonia..suggesting a fragmented polity

6. 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

7. Norway as a 28th EU member? • 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!

8. 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........

9. 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.) • 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.....

10. Norway’s participation in EU policy-making?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)

11. Norway and NATO-Atlanticist visions of Europe? • 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.

12. 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).

13. Norway’s Oil Fund-Oljefondet 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.... Jens Stoltenberg, the Norwegian Labor Finance Minister who fixed the 4% rule on oil revenues in 2001

14. 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....... • 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...... • 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.) • 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.

15. 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?

16. Norway Election 2013-more of the same please? Norway Election 2013-more of the same please? • 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…..

17. Conclusions? • 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....