Russian sanctions squeeze Norway

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NEWS ANALYSIS: Norway has a long history of going along with international sanctions, especially those initiated by the US and the EU. Those now looming against Russia, however, put the squeeze on longstanding, “special” and not least lucrative relations with an important and powerful neighbour.

After years of steadily improving relations with neighbouring Russia, Norway worries that things are changing during the second term of President Vladimir Putin. PHOTO: Utenriksdepartementet

Years of steadily improving relations and a rising pile of trade and border agreements with neighbouring Russia “will be destroyed overnight” if Norway goes along with tougher sanctions against Russia, claims one businessman in Kirkenes. Other argue that Russian President Vladimir Putin is to blame for destabilizing Ukraine and creating the political crisis that led to the sanctions in the first place. PHOTO: Utenriksdepartementet

Norwegian politicians face a major dilemma when deciding whether to go along with new, tougher sanctions imposed this week against Russia by both the EU and the US. The sanctions are aimed at punishing Russia for its involvement in the Ukraine crisis by hitting such key sectors of the Russian economy as energy and finance. Exports of energy-related equipment and technology to Russia will be restricted, exports of weapons will be halted and five major state-controlled Russian banks will be denied access to EU financial markets.

The Norwegian government has been as critical of Russian President Vladimir Putin’s sudden annexation of Crimea as most other European governments, and has accused Putin of failing to recognize the territorial integrity of Ukraine. Russia’s alleged support, directly or indirectly, of the Russian separatists in Ukraine accused of shooting down a civilian passenger jet has angered Norwegians as well, with many Norwegian politicians concerned that Russia is, at the very least, consciously contributing to the destabilization of Ukraine.

Now Norwegians are being asked to basically put their money where their mouths are, as the sanctions threaten everything from Norwegian salmon exports to hard-won cross-border trade agreements in the north and huge planned oil and gas investments in the Arctic. There’s more than just money involved, as Norway’s dilemma over Russia rears its head once again. The shared border, gratitude for help during World War II that’s not been forgotten and a unique history of cooperation and mutual respect, even during the height of the Cold War, make it especially difficult for Norway to impose the sanctions that its European and American allies have now put in place from August 1.

PHOTO: newsinenglish.no/Nina Berglund

The border crossing between Russia and Norway has been more open than ever before in recent years, but now business and political leaders fear the consequences of sanctions against Russia. PHOTO: newsinenglish.no/Nina Berglund

Norway’s potential loss of business with Russia has, not surprisingly, been generating the most headlines in Norway all week. Newspaper Aftenposten wrote on Thursday about how the sanctions against Russia will likely lead to a Russian boycott of Norwegian salmon if Norway goes along with them. Russia is already boycotting imports of fruit and vegetables from Poland, and researcher Jakub M Godzimirski at the Norwegian foreign policy institute NUPI told Aftenposten that Russia will likely resort to boycotts against products from other countries that agree to the sanctions, under the guise of protecting their own markets. On Friday, Russian news bureau Interfax reported that Russia was already threatening Norway with a complaint to the World Trade Organization (WTO) over alleged discrimination against Russian fishing crews, because of fees charged to sell fish in Norway. Fisheries Minister Elisabeth Aspaker told newspaper VG that all fishing boats, both foreign and Norwegian, must pay fees to offload fish in Norway.

Norway exported seafood valued at NOK 6.5 billion (USD 1 billion) to Russia last year, accounting for  76 percent of all Norwegian exports to Russia. Godzimirski said companies keen on doing business in the offshore supply branch can also be hit, along with locally important joint ventures in the border area around Kirkenes and elsewhere in Northern Norway. Norway’s largest company, Statoil, has long been concerned about how Russia’s controversial politics would affect its pending deals with Russian companies, and Norway’s huge oil and gas sector stands to lose business.

Seadrill struck before sanctions hit
Norwegian media also reported this week how shipping tycoon John Fredriksen’s Seadrill Ltd, the biggest oil rig company in the world, managed to seal a major new deal with Russia’s Rosneft just two days before the EU’s 28 member nations agreed on imposing the tougher sanctions. “We interpret the sanctions as applying from August 1, and that they won’t affect contracts agreed before that,” Seadrill’s finance director, Rune Magnus Lundetræ, told news service TDN Finans on Thursday. Tor Olav Trøim, still Fredriksen’s right-hand man at Seadrill despite their announcement of top management changes within the group, denied the timing of the contract was related to the sanctions and claimed Seadrill “follows international laws and regulations.”

Trøim indicated, though, that Fredriksen’s sprawling shipping and offshore empire wasn’t happy about the sanctions. “We understand what’s being done politically,” Trøim told Aftenposten, “but at the same time, I’ll say what I’ve said before: It is very difficult to live without the 10 million barrels of oil that Russia produces every day. Therefore the world can’t isolate them entirely.”

Russian President Dmitry Medvedev (left) and Prime Minister Jens Stoltenberg also met on Monday, at a seminar on business cooperation between Russia and Norway. PHOTO: Statsministerskontor/Per Thrana

There have been many smiling meetings between Russian and Norwegian leaders in recent years, like here when former Russian President Dmitry Medvedev (left) and former Norwegian Prime Minister Jens Stoltenberg met at a seminar on business cooperation between Russia and Norway in 2010. Now they’re both in different positions, and many in Europe hope that Stoltenberg may be better able to talk with both Medvedev and Russian President Vladimir Putin when Stoltenberg takes over as the new secretary general of NATO this autumn. PHOTO: Statsministerens kontor/Per Thrana

Gregers Mannsverk of the Kimek shipyard in Kirkenes, close to the border with Russia, told newspaper Dagens Næringsliv (DN) that the sanctions will ruin 30 years of trade relations with Russia. “Decades of good cooperation with Russia will be destroyed overnight” if Norway goes along with the sanctions, Mannsverk told DN. He thinks it will be wrong if Norwegian politicians impose a “carbon copy” of the EU’s sanctions: “We are very afraid that the sanctions are too hard. We are very vulnerable, especially up here in the far north.” Oil- and fishing-related businesses on both sides of the border are Kimek’s biggest customers.

Norwegian Foreign Minister Børge Brende of the Conservative Party, who’s made several trips to Ukraine over the past year and criticized Russia’s military intervention in and around Ukrainian territory, has said that Norway is likely to go along with the sanctions but that the government will first take up the issue in Parliament when it reconvenes in September. Jonas Gahr Støre, head of the opposition in Parliament as leader of the Labour Party, said he thinks that’s wise.

“We will listen to the details of how the foreign ministry and the government evaluate the situation,” Støre, a long-time foreign minister himself, told Aftenposten on Friday. He said his party’s overall approach is for Norway to be in line with its allies and main political partners in such matters, adding that Russia’s behaviour in and around Ukraine is “alarming” and “worthy of strong criticism.”

Støre noted, though, that despite Norway’s “tradition” of cooperating with its allies, Norway also has “special experience” with Russia over the years, “as neighbours and because we have developed a cooperation in the north that has been important for all of Europe.” Many countries that also share borders with Russia like Poland, whose foreign minister was in Oslo this week, are looking to Norwegian leaders and, not least, the incoming Norwegian secretary general of NATO, Jens Stoltenberg, because of their past ability to be able to talk with Russian leaders and cooperate on key issues when other can’t. Now, caught between allegiances to its neighbour to the east and allies in the west, Norway may need to do more talking than ever before, and hope the powers in Brussels, Washington and not least Moscow will listen.

newsinenglish.no/Nina Berglund