UPDATED: It’s been a turbulent first-half of the year for Norway’s huge sovereign wealth fund known as the Oil Fund. Not only did it log negative returns in a Corona virus-plagued economy, drama continues to swirl around the man who’s keen to take over as its CEO but now has a majority in Parliament against him, while the finance minister’s hands are tied.
The investment management unit of Norges Bank, Norway’s central bank that’s responsible for the Oil Fund, reported negative returns of minus-3.4 percent on Tuesday, equal to NOK 188 billion. The fund itself, in which Norway’s offshore oil revenues have been stashed for the past 25 years, is still worth more than NOK 10,000 billion and remains one of the world’s largest pension funds, but it’s been battered over the past several months by huge swings in the stock market and lots of economic uncertainty. Politicians have also been withdrawing money from it to pay for Corona crisis packages and economic stimulus.
“The year started with optimism,” stated Trond Grande, deputy CEO of Norges Bank Investment Management (NBIM), “but the outlook of the equity market quickly turned when the Corona virus started to spread globally.” Grande noted how the “sharp” stock market declines during the first quarter were limited by “a massive monetary and financial policy response,” but “we are still witnessing considerable uncertainty.”
Management turmoil, too
The job of presenting the Oil Fund’s results fell to Grande as its management finds itself in the midst of uncertainty and turmoil as well. Grande was among candidates, even the top candidate, to take over for outgoing Oil Fund boss Yngve Slyngstad, but the central bank chief Øystein Olsen surprised everyone in March by announcing that expatriate Norwegian billionaire Nicolai Tangen had been chosen by the bank’s executive board to take over instead. Tangen’s candidacy had been kept secret, even from the country’s finance minister, and his huge personal wealth immediately raised concerns over potential conflicts of interest.
Controversy has swirled ever since, climaxing at a hearing conducted by the Parliament’s finance committee last week. The Parliament’s own organization that’s meant to monitor the central bank raised strong objections over Tangen’s appointment, pitting its leader Julie Brodtkorb against central bank boss Olsen. She testified that Olsen and the bank board may have even broken the law by failing to address key issues tied to the employment process around Tangen, while Olsen firmly defends Tangen’s hiring.
Now it appears that Tangen lacks majority support in Parliament, after all five opposition parties plus the Christian Democrats claimed they lack confidence in Tangen. They insist that he sell out of the AKO Capital firm he’s built up from London over the years, while Tangen has made it clear he doesn’t want to do that. Olsen insists that measures are in place to prevent any conflicts of interest between AKO’s investments and the Oil Fund’s investments.
Tangen is supposed to take over as Oil Fund boss from September 1 but now that’s unclear. The Parliament, standing by its supervisory committee, has been putting heavy pressure on Finance Minister Jan Tore Sanner to intervene “and tell Tangen he can’t have the job,” as MP Kari Elisabeth Kaski of the Socialist Left party (SV) told state broadcaster NRK on Tuesday. Several legal experts, however, contend that the autonomy of the central bank limits or even prevents the finance minister’s ability to “clean up,” as Kaski and other MPs demand.
“I haven’t seen anything that suggests Tangen’s employment is invalid,” Professor Eivind Smith at the University of Oslo’s law school told DN and news bureau NTB. “Unless Nicolai Tangen decides he doesn’t want to take on the job after all, Sanner in my view doesn’t have the power to overrule the central bank’s appointment.”
On Thursday, an external judicial evaluation of the dilemma concluded that neither Sanner nor his finance ministry can intervene or instruct the board of Norges Bank. The Arntzen de Besche law firm, in its independent evaluation, could find no legal foundation for such a move, declaring that the central bank’s board has “exclusive authority” that shields it from any “open or concealed instructions regarding the employment of a leader for NBIM (the Oil Fund).”
Sanner released the legal conclusion Tuesday afternoon, letting it be known that his hands are tied and the Parliament can’t expect him to keep Tangen from taking over at NBIM. Even that conclusion was met with criticism, however, with some law professors claiming Sanner should have consulted the government’s justice ministry or the state attorney’s office. The latter, however, is not impartial since Government Attorney Fredrik Sejersted is an old friend of Tangen’s.
The Parliament’s official position on Tangen as CEO of NBIM is expected later this week. Kaski still insists Sanner should fire Tangen before he begins, calling it “a political issue, not a legal issue” and thereby refusing to recognize the autonomy of the central bank.