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Wednesday, April 24, 2024

Norway finally meeting NATO’s goals

NEWS ANALYSIS: Norwegian leaders will be able to hold their heads higher at NATO’s upcoming 75th anniversary meeting in a few weeks: Prime Minister Jonas Gahr Støre has finally announced a “considerable strengthening” of Norway’s defense budget, with enough funding to fulfill NATO’s demand for 2 percent of GNP.

Prime Minister Jonas Gahr Støre (center) met not only his new fellow NATO ally, Finland’s President Alexander Stubb (at left), but also the US Marine Corps when they recently visited NATO’s winter military exercises, Nordic Response in Alta, Northern Norway. Now Norway will be meeting NATO’s defense goals, too. PHOTO: Forsvaret/Kristian Kapelrud

Støre met on Thursday with his government’s support parties and the leaders of the other party delegations in Parliament. His mission was to announce his government’s proposal that many more billions of kroner be added to the defense portion when the revised state budget for 2024 is presented in May. It would allow Norway to satisfy NATO’s funding demands already this year, instead of in 2026 as earlier estimated.

Details will be released when the government presents its new long-term defense plan on April 5, the day after NATO marks its 75th anniversary in Brussels. It hasn’t been easy for an affluent country like Norway to face its fellow NATO members with defense spending under the 2 percent goal. Part of the problem has been Norway’s unusually large GNP (fueled by its oil and gas industry) in a country with a population of just 5.5 million.

Prime Minister Støre (second from left) was flanked by his finance minister, Trygve Slagsvold Vedum (left), and his defense minister Bjørn Arild Gram when they met with the leaders of Parliamentary delegations on Thursday to announce plans to “considerably strengthen” defense spending. PHOTO: Statsministerens kontor

Støre, fresh from his government’s budget conference in Hønefoss, told state broadcaster NRK Thursday morning  that “we have the economy to do it” (meet the 2 percent goal that Norway also endorsed back in 2014 during the former Solberg government). It’s a matter of priorities, and Russian President Vladimir Putin’s full-scale invasion of Ukraine two years ago perhaps unwittingly made both NATO and Norway’s own defense among the highest.

Many others agree that Norway has the money to pour into defense. Commentators, meanwhile, have noted that it’s been downright embarrassing that Norway has not met its NATO defense goals already, when many of Norway’s less-affluent allies already have. Denmark announced earlier this week that it was mounting its own defense build-up “to avoid war” but be prepared for it, given the “serious situation” the world is in. Denmark’s latest build-up will bring its defense spending up to 2.44 percent of GNP.

Oil Fund to the rescue
The as-yet-unspecified boost in Norwegian defense spending means the government will likely tap its huge sovereign wealth fund (known as the Oil Fund) that’s meant to ensure pensions for future generations. The idea of using Oil Fund money for defense improvements and even more aid to Ukraine has been growing in recent months, with several economists now claiming that it would be an investment in Norway’s own security, freedom and democracy. They’re suddenly not as worried that spending more of Norway’s oil revenues would overheat the economy.

Economist Knut Anton Mork thinks Norway should use Oil Fund money to boost its defense spending, and to further help Ukraine. PHOTO: NTNU

Among them is Knut Anton Mork, professor emeritus at NTNU in Trondheim and a macroeconomic adviser for Garantum Wealth Management Norge. He wrote in newspaper Dagens Næringsliv (DN) this week that with Norway’s Oil Fund now worth nearly 17,000 billion kroner, the rule limiting its use to no more than its expected returns of 3 percent per year can well be broken. He noted that other prominent Norwegian economists including Steinar Juel and Gisle Natvik agree.

“The argument is simple,” Mork wrote. “The war in Ukraine is an existential conflict between liberal democracy and dictatorship, between slavery and freedom. If Putin’s Russia gets what it wants with Ukraine, there’s all reason to expect that other European countries will be next.”

Mork further noted that “so far we are protected by NATO … but the most important NATO country, the USA, can be on its way to electing a president (Donald Trump) who doesn’t care about NATO and doesn’t hide his admiration for authoritarian leaders.” Mork further noted how Trump, from behind the scenes, has prodded Republicans in Congress to block economic support for Ukraine. “For them, it’s more important to damage (current US President Joe) Biden than to help a friend in need,” Mork wrote. “We can’t sit still and just watch that. We have the money that’s needed. Let’s use it.”

A pensive Støre at a summit on support for Ukraine in Paris last last month. More military support for Ukraine is urgently needed, and Norway has a huge sovereign wealth fund that could help. PHOTO: Ambassaden in Paris/Rune Bjåstad

Perhaps Prime Minister Støre and his coalition members read Mork’s column, or even dismiss warnings that tapping the Oil Fund to invest more in defense could boost inflation and interest rates, and reduce pensions for future generations. But if Norway or other countries in Europe fall into the hands of dictators, there won’t be much use for higher pensions.

Støre wouldn’t yet answer questions about how much money will be used to boost defense, how much may need to come from the Oil Fund or from cutting funding to other domestic programs. The bottom line is that defense has become a high priority, after being neglected for years. Large military bases in Northern Norway were all but idled, newspaper Aftenposten recently reported how Norway’s Home Guard (civil defense) lacks such basic items as boots, uniforms and weapons for those being called in for training, and NRK reported this week that the Norwegian Air Force lacks technicians needed to service its new fleet of F35 fighter jets. Researchers at the Norwegian foreign policy institute NUPI have determined there’s a big gap between what’s needed and resources allocated.

Members of the Parliament’s defense and foreign affairs committee also visited NATO’s Nordic Response exercises in Northern Norway this week. At far left, former defense- and foreign minister Ine Eriksen Søreide of the Conservative Party. The Conservatives generally support defense spending, but failed to meet NATO’s 2 percent spending goal while holding government power when the goal was set in 2014 and until they lost to the current Labour Center government in 2021. PHOTO: Stortinget/Sander Riis Eilertsen

Now Støre’s government seems to have recognized that current defense budgets don’t meet current needs, even after being boosted already. Major improvements are urgently needed for everything from defense against drone attacks, communications systems and training programs. It’s also important to strengthen Norway’s own defense contractors, with the EU already investing heavily in Europe’s defense industry. Some of that money may also be made available to Norway: Even though Norway is not a member of the EU, it’s a member of the European Economic Area and thus eligible for various funding initiatives.

“We will have more military ships sailing, more jets flying,” Støre told NRK on Thursday. “We will meet NATO’s 2 percent goal this year.” While he wouldn’t go into budget details yet, he said the new defense plan will be long-term in nature, over 12 years. “The security policy situation around Norway is serious, perhaps the most serious in many decades,” Støre said.

The public seems to have realized that, with a new survey showing that 29 percent of Norwegians polled think there’s a danger of a third world war in their lifetimes. Another 42 percent still think there isn’t much danger of that, according to the poll by research firm Opinion, while the remaining 27 percent was unsure.

Støre stressed, as he did in his New Year’s Day address to the nation, that Norway poses no threat to Russia and he doesn’t think Russia sees itself well-served by a conflict with a NATO member. His finance minister, Trygve Slagsvold Vedum, stressed that “creating security for folks in Norway is our most important job as a government.” He noted that defense budgets are already up 40 percent over the past two years, “but now we’re taking an even greater step to reach the 2 percent goal.”

“We must deal with a more dangerous and unpredictable neighbour,” Støre added. “Many countries are investing in a stronger defense and we’re doing that now.” Berglund



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