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Farouk al Kasim saved Norway from its oil (2014) (psmag.com)
127 points by DevOfNull on April 19, 2023 | hide | past | favorite | 69 comments



Two previous discussions from a 2009 ft.com article titled "The Iraqi who saved Norway from oil":

https://news.ycombinator.com/item?id=19594153 (347 points, 129 comments)

https://news.ycombinator.com/item?id=28780108 (115 points, 81 comments)

Original 2009 article:

http://archive.today/2022.06.15-104752/https://www.ft.com/co...


Stupid use of funds for the most part, it's not re-invested in the country, just the American stock market. It's not like they had to buy solid gold rolls royces, but there's no reinvestment internally other than oil and fish. Norway is a hedge fund with the F-35.


I suspect that the people arguing here that Norway should direct that huge volume of money internally are not Norwegian residents. Those of us who live in Norway, most of us anyway, recognize that doing that would be a disaster and would just fund short term spending and fuel inflation.

The UK and the Dutch just spent the money they got from the North Sea oil and at least the UK has little to show for it.

Anyway, the Norwegian economy is doing just fine without it, we bounced back from COVID faster than practically everywhere else and everywhere I look there are new commercial and industrial buildings going up.


There must be some way that a honest government can spend a lot of money improving a country.

The ideas that this decision can not be made in a hurry and that the spending can jump in size too quickly are reasonable. But the ones that there is absolutely nothing better to do with the money, and that most of it will be there in a large crisis when they need to withdraw are both ridiculous.


The larger your economy, the more of a financial cushion you should create and the longer your investment horizon needs to become. If you want to have a resilient society anyway. Political pressures though count against it and demagoguery can make it extremely appealing to reap short term benefits at the cost of long term investment in your own society.

It’s why I was really sad to see the Canadian government give up on its Crown corporations. Sure, they got tens of billions of dollars for it. But that wealth took a really long time to acquire in the first place and the market cap of having a complete monopoly can’t have been priced in correctly (otherwise the private market wouldn’t have been all lathered up at the opportunity to take over).


They're probably trying to avoid some of the economic mistakes made by the Dutch when they started producing natural gas: https://en.wikipedia.org/wiki/Dutch_disease


I wish my country would make "stupid" investments to the tune of $250,000 per citizen set aside for a rainy day (or decade).


It's better than the poke in the eye, that's for sure, I just don't think it's optimal and I'm tired of the way this story gets trotted out every now and then. I think there's a middle ground between solid gold rocket cars and rainy-day austerity. Norway is quite under developed in many ways, many services you'd think would be better just aren't, once the oil gets switched off they don't have much modern industry as an alternative, which wouldn't be the problem if they spent some of the money to diversify.


> many services you'd think would be better just aren't

Perhaps you could enlighten us about which services are lacking and how they are so much better in those countries that just spent the North Sea oil revenue internally?


Today, I'd pick Posten. It seems like you're a proud nationalist and I don't want to start a fight.


Posten is a mixed bag. Ease of access at places like grocery stores, and general service is great. But delivery can often be weirdly delayed. Sometimes we get notice of bills _after_ they're due. But overall, I prefer it to the US postal service I'm used to, so it doesn't feel like a slam dunk example to me.

Spend some of that money on training and paying more GPs, and you'd have my interest...


Maybe I'm just really unlucky, and I didn't really want to get into that guy about wait times at hospitals or whatever, but I find Posten to be just _spectacularly_ and often hilariously terrible.


Fair point, but why would you think that having a workable post service is a matter of money? Maybe they're simply incompetent and/or never bothered to fix it...


PostNord is about a million times worse for me.


Oil's far more likely to taper off. A trillion dollars in the bank will cushion that transition quite well.


Using it internally would not be a good idea, though. That amount of money fueled directly into the economy would make our inflation even worse than it is.


I think this really highlights the attitude - don't invest money because it might harm the money. Money is for putting in foreign assets, so that rather than a large amount of money now, you can have a small trickle of money later.


Rather so that you can have the "small trickle" perpetually.


Yeah, countries always have this, they're called taxpayers. If you invest in them, they can pay you more taxes than you put in. If you make their lives good, then people can even make _more_ people! Instead, Norway invests in American businesses in order to get that slow trickle, so instead of investing in their own people and industries, they have a slow trickle which can gives pension to a population in decline.


Maybe that's the real nub of the "resource curse"-- any effort to improve the lives of its citizens will be wrong and bad, so just invest in foreign assets and otherwise preserve things as they are.


Nasruddin was riding his donkey to the market, with his son walking along beside him.

As he passed a group of travelers going in the opposite direction, he overheard one of them saying "look at this cruel old man, riding in comfort while his son has to walk." Caring very much for the opinion of others, he got off of the donkey and told his son to ride.

He passed another group of travelers, and overheard one whisper "look at the silly old man, walking his life away while his young, strong son rides in comfort."

He tried riding behind his son, but overheard people criticizing his cruelty towards the overburdened beast. He tried having them both walk, and was criticized for not realizing that donkeys could be ridden.

Finally, in frustration, he ordered his son to help him carry the donkey. As they both struggled to lift the large and uncooperative beast, another group of travelers approached, staring at him in confusion. Before they could say anything, he shouted at them "Shut up, I don't want to hear it!"


This is a classic to remember if you get negative feedback on the internet. There's always a negative interpretation.


Investment within Norway is high enough that putting more in would drive inflation, at which point you might as well be burning the money, so it's a balancing act.

And the notion that improving living conditions - Norway is already at or near the top of nearly every quality of life measure - increases fertility is directly the opposite of real life global trends.


It's too exhausting to keep going. It's essentially a religious belief here, for some backwards reason a nation of mortgage holders is fervently obsessed with keeping inflation down and making money by investing in anybody but themselves. If you point out this might not be an optimal medium term strategy, somebody will pull out a list, point at somewhere near the top and say hey, we're doing better than Sweden.

It's good. I think it could _amazing_ if some of the political orthodoxy was reexamined.


I'm all for investment, but the problem is that there isn't an arbitrary amount of resources to invest in, nor an arbitrary supply of people to do the jobs you want to pay for with that extra money.

As such, if you pour money in you will inherently drive up prices, and inflation is effectively equivalent to applying an extra tax on everyone.

The notion that you can just pour money in and improve everything works at a household level, but is just an incredibly naive view in terms of a national economy.

It's a balancing act.

At the same time Norway, like every other country in the world is heading for a demographic time bomb nobody knows how to prevent, and so holding back money to be able to pay for that without e.g. drastically cutting back pensions and the like matters. Especially given that the "oil fund" is technically a pension fund.

With respect to mortgages, home ownership in Norway is very high in part because buying a house is affordable to the average Norwegian, in part because Norway is one of only a very small number of countries to let you deduct mortgage interest from taxable income.

But make them too cheap for supply of housing to keep up and all you do is drive up the prices and you're back to square one. Another way of saying that: Housing will "never" be cheap, because if house prices drops or interest drops or salaries go up, people buy bigger/better placed houses. We're nowhere near the housing quality where enough people go "oh, my house is big enough / in the most perfect location, I won't bother moving" if they suddenly find they can afford much more.


You seem to have a religious belief here too, that the average Norwegian resident can be arbitrarily improved by spending more money on them.


If there's will and ability to pay back.


Their economy is going fantastically. It's clearly working out for them.


21% of working-age population on various forms of welfare, 33% working in the public sector and a whooping 33% working in the private sector. Taxation rates among the highest in the world.

There's plenty to criticize about the Norwegian economy.

The taxation of the oil wealth is definitely a great success story, but how that money is used from year to year is very much a mixed bag. We have per-capita public expenditures approximately twice those of Sweden. Average household debt at 114% of income, third place globally. We don't build housing, same as California.

Oil money contributions to the national budget were approximately $6500 per capita in 2022, and on top of this we have a total taxation percentage on the order of 40% of income on average, if you do the honest calculation and look at all payments to the governments.

In addition we have an energy production infrastructure that's nominally almost 100% publicly owned, but now sell electricity to citizens at EU prices (~300% markup) with the surplus going into public budgets - this is additional taxation we're not talking about.

It could be worse and there are many things going right, but selling Norway as an unquestionable economic success story doesn't completely reflect reality.


Disclosure: I'm a Swede who previously worked in various primarily Norwegian-owned software companies for two decades. I'm mostly happy about how it went. I also got some insights about Norway along the way via the 100+ trips to Oslo during that last decade when I had an engineering management role. That travel schedule was exhausting.

My pet peeve about Norway and oil: How very few people ever call them out on being the Saudi Arabia of the north (well, minus the murders/various other kinds of oppressions).

They do so much (excellent!) PR that shows them being the ethical/environmental leaders.. that totally ignores the fact that they are the people making money on pumping old fossil remains out from their seabeds. If they really meant it, they could, like.. stop doing that? I mean, pick a lane.


I'm Norwegian, and I agree. We have deluded ourselves to believe our oil is "clean" and "green".

And while stopping the pumps would probably wreak havoc on our economy, we could at least stop looking for new fields while emptying the ones we have for some more years. So slowly wean off the oil tit. But every time that's suggested, the government says "develop, not stop". And use straw men like "we can't stop abruptly!!", even though that's not the suggestion on the table. And they've used the same excuse for a decade to not do anything. If we actually started transitioning away from oil a decade ago, we would be better off. And if we at least started now we would be better off. But that can just gets kicked down the road.


You mean to say Norwegians in general actually think the Norwegian oil is "clean" and "green" just because the operations to pump it up are? I mean, brain-washing can be effective, especially when there's a financial motive to believe it.


Norway's gas exports saved the EU from kneeling to Russia during 2021 and 2022. Our exports prevented Russia's invasion of Ukraine from becoming an unmitigated disaster to European autonomy. Now sitting at approximately 30% of total EU natural gas consumption.

Criticizing us for climate profiteering, or even war profiteering, as some European voices have done, is extremely intellectually dishonest coming from Sweden, which followed suit to Germany and shut down more than 1 GWh of nuclear energy generation capacity during an ongoing climate gas emission crisis.


I'm primarily criticizing Norway for hypocrisy. I don't think you missed that.


You probably missed my implication: It's a misplaced accusation of hypocrisy.


They should continue to produce it and explore for it until we (the world) don't need it.

The "starve the beast" strategy did not work for the Reagan tax cuts and it will not work for energy.


I agree, and have noticed that discrepancy, but I guess it is better than double dipping - profiting from environment-destroying products, and then investing those profits into environment-destroying products.

I can't really blame the Norwegians though - even if they care about the environment greatly, it would be hard for anyone to have a lifestyle based around their $250k income and to go back to a lifestyle based around having more normal $50k income.


Well, I blame them because they are very, very strongly (and competently) pushing the PR message that they are clean.

It's quite simple - they should pick one: stop pumping up old fossil remains to sell to keep up their luxurious lifestyle or stop bragging about how clean they are.


Disclosure, I'm a Norwegian. Saudi Arabia of the north. Well. Actually I think Sweden might be a top contender for that name.


Nah, as an outsider visitor to both countries, Norway is definitely Saudi Arabia. I would have called Sweden the Pakistan or Syria of the North, except there's no comparison to the situation currently there among its peers. Sweden is in the same spot as the native Americans of the Thirteen Colonies.

In my opinion, a lot of people in the comment section don't get that there is a somewhat real concern that the abundance of oil revenue has made Norwegians less ambitious and innovative in comparison to what they could have been with that kind of a world-class education system, in comparison to its neighbours. And the greenwashing of the Norwegian oil industry is actually a real thing too.


Please do elaborate your thoughts on immigration. We're listening.


What do you plan to use instead of fossil fuels today?


In Norway and Sweden (shared grid): Primarily electric hydro + nuclear power. Wind power adds to the mix when it's windy - and it often is.

(Here's the complete picture regarding the grid:

https://en.wikipedia.org/wiki/Synchronous_grid_of_Continenta...)

There are power cables between RG Nordic and RG Continental Europe/RG Baltic/RG GB but to my knowledge they are all via high voltage DC - so not AC phase synced.


IMO Sweden and Norway need to separate domestic and export electricity prices so that they can come back to having cheap energy as a genuine advantage for its industry.


Is that deployed infrastructure today to handle needs and scaling for the future? I know Germany was cutting back on nuclear.


I think we're getting a bit off-topic here, but in a nutshell: The current government of Sweden wants to build new nuclear power plants to scale up the power supply for the future.


That’s good to know. Thanks!!!


well today I learned something interesting: Norway and Sweden aren't on the big grid that covers most of Europe.


We (Norway) do have cables connecting us to UK and Europe. They've been a hot topic the last year with the high energy prices. We're making bank on selling our hydro power when gas got scarce. But that skyrocketed our own prices.

It's a difficult topic. It's probably a net win for Norway, as we can produce when price is high, and stop our hydro and import when prices are low. The problem is just that the benefit ends up making the government and the electric producers (again owned by government orgs mostly) rich, but us people have to pay more for our own energy use. So using that extra money earned to help the people is needed.


I would assume those cables aren't frequency synchronized however, they are either a HVDC cable or have DC interconnect somewhere so that the grids aren't frequency synced.


Here's a bonus: western half of Denmark is on the continental europe synchronous grid and the eastern half is on the Nordic grid.


at least the whole country is nominally ~220 VAC 50 Hz though right? Not like Japan with different frequency standards.


Right,the difference is basically invisible.

I wonder why RG Nordic is not linked up with continental Europe.


> without trashing the environment

without trashing the NORWEGIAN environment, but let's not whitewash over all of the CO2 they have unleashed on the world.

More generally, I think it will be interesting to see what happens next with Norway - while they have avoided the principle resource curse - what happens when all of these oil jobs disappear (10% of direct employment and probably up to 25% in an indirect sense)?


The intentional conflation of localized environmental pollution and the GHG damage to the global climate is something many Westerners do. That is how they have deluded themselves into thinking dirty streets in India is a bigger problem than Americans driving F150s.


Farouk certainly played a role, but I long to see an exposé on the backchannels between elites during this period. It seems the great powers of the Global North wouldn't dare attempt to destabilize and usurp one of their own sovereigns.

People are too quick to blame "state-owned monopolies" when the development and success of any producer is dependent on the gatekeepers of the global oil marketplace.


It really is amazing that there is a list as long as your arm of economies dominated by natural resource extraction for whom it has been a curse.

And then there's Norway. The sole exception.


Chile hasn't done half bad either. It's perhaps worth noting that Pinochet — neoliberal reputation notwithstanding — didn't undo Allende's nationalization of the country's copper mining industry:

https://en.wikipedia.org/wiki/Codelco


Canada and Australia seem to be doing fine.


Not sure what you mean. The Middle East is making out like bandits, it makes a sizeable percentage of the GDP in south and East Asia etc. it just feels like you’re putting Norway on a pedestal for no particular reason.


The difference is where the money goes. You can point to any country that scores high on corruption index and go "well actually, these people made out like bandits".


The Middle East is very rich with a very high standard of living. A lot of those countries have no income tax and basically free medical and utilities. Much better than what Norway offers.


Is the standard of living really much better in the Middle East than what Norway offers? I haven't seen any exposés on modern slavery in Norway like I have on the Middle East fiefdoms, but maybe those canny vikings are just better at hiding it?


I think importantly, the slave-like people in eg Qatar are not Qataris, they're Filipinos, Indians, Bangladeshis, etc.

But, one wonders why a very rich society would need to resort to enslaving people in order to save a buck.


Greed.

Also, I’m not sure how much has changed since I left that part of the world, but for decades the blue collar workers (Filipinos, Indians, Pakistanis, etc.) were considered lower tier class in rich Gulf countries. Probably easier to exploit those who one feels are less deserving.


Also it’s a fraction of the Indian/Pakistanis etc. that are in a slave like situation. Almost all business owners are also Indian.


I think the recently cancelled au pair system was as close as Norway got.


I wasn't aware of the issue but after reading some news articles, it fully aligns with my impression of Norwegian living standards.


The problem now is that the Norwegian sovereign wealth fund is deeply tied to the US economy.

I don't understand why we Europeans are so invested into the US economy when every American on twitter/reddit is saying the US dollar and economy is about to collapse. They might be wrong and are probably wrong but it is still incredibly stupid to invest in a country when its own citizens think it will collapse in a year or two.




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