Author: Karolina Pawlik

The debate about how to finance increased defence spending has been a topic of discussion in Norway too. However, Norwegians are in a far more favourable position than most of Europe, as they can rely on their sovereign wealth fund — the Norwegian Government Pension Fund Global — a financial reserve set aside precisely for challenging times.

The Norwegian Government Pension Fund Global (Statens Pensjonsfond Utland – SPU), commonly known as the Oljefondet,[i] is the world’s largest sovereign wealth fund, with investments spanning 70 countries. As of 2025, the fund is valued at $1.79 trillion, despite having recently lost around 10% of its value following market turbulence in early April 2025. The fund’s primary objective is to invest revenues from Norway’s oil and gas sector in a responsible manner, safeguarding the long-term prosperity of future Norwegian generations.

The fund operates under clear ethical guidelines that restrict certain types of investments. Since 2004,[ii] following a decision by the Norwegian parliament, the fund has been required to adhere to ethical standards that exclude investments in specific sectors. These include companies involved in tobacco production, coal mining, or the manufacture of certain types of weapons, such as cluster munitions or nuclear arms.

In light of growing geopolitical uncertainty, a debate has emerged in Norway over whether the State Pension Fund Global could play a role in strengthening the domestic defence spending. Opposition parties, notably the Conservative Party (Høyre) and the Progress Party (Fremskrittspartiet), have called for revisiting the fund’s investment framework to allow investments in the defence sector. Erna Solberg, former Prime Minister and current leader of Høyre, has recently argued  that profits from the fund should be channeled into Norwegian defence companies to scale up the production of weapons and ammunition for the Norwegian Armed Forces.[iii] On this basis, Høyre has presented a new defence strategy, and several of its MPs have introduced legislative proposals in the Norwegian Parliament (Stortinget) aimed at expanding Norway’s defence spending and industrial capacity.[iv]

As for the Progress Party (Fremskrittspartiet), three of its MPs have submitted a draft bill proposing to open the fund to investments in companies involved in producing components for nuclear weapons. [v]The debate over whether the profits from the State Pension Fund Global should be used to finance Norway’s defence build-up is still in its early stages. Traditionally, there has been broad political consensus in Norway on defence and security matters. Last year, all parties in the Parliament supported the Long-term Defence Plan, which foresees an additional NOK 600 billion (approximately PLN 215 billion) in defence spending by 2036.

However, the question of amending the rules governing the use of the fund’s profits remains more controversial. So far, the proposal has been met with resistance from the governing Labour Party (Arbeiderpartiet), which maintains that there are alternative means of financing increased defence expenditure without altering the fund’s ethical investment guidelines. Recently, Norway’s finance minister Jens Stoltenberg has unequivocally rejected the idea that Norway could finance EU’s rearmament investments.[vi]

Another dimension of the debate concerns Norway’s potential contribution to the rearmament efforts of the European Union. This discussion was sparked by an op-ed[vii] written by Trym Riksen, Head of Portfolio Management at Gabler, a Norwegian asset management firm. Riksen argued that, in light of the increasingly unstable geopolitical environment and the high debt levels of many EU member states, Norway should take on a greater responsibility in supporting its European partners’ defence spending. This debate has since gained further traction following an open letter[viii] signed by some of Norway’s most respected economists and academics — including a former CEO of the State Pension Fund Global — calling for increased financial support for Ukraine. They proposed that this extraordinary support should be financed through exceptional withdrawals from the fund. However, such a move would require bypassing or amending Norway’s fiscal rule (handlingsregelen),[ix] which currently limits the annual use of the Fund’s capital gains to 3% of its value.

The idea of using capital gains from the fund to support the EU’s rearmament is certainly an interesting and debate-provoking proposal. However, this discussion has so far remained largely confined to expert circles and media commentary, without translating into concrete political momentum. At this stage, there appears to be little political appetite to involve the Fund directly in financing EU defence efforts.

Given the context of the upcoming parliamentary elections scheduled for 8 September 2025, as well as the challenging economic conditions Norwegian households have faced in recent years,it appears unlikely that the State Pension Fund Global will be used as extensively for financing EU rearmament as some proposals suggest. As noted earlier, the recent market turmoil — triggered by the Trump administration’s decision to impose tariffs on several countries — has already resulted in the Fund losing around 10% of its value compared to January 2025. Neither Norway’s domestic political landscape nor its current economic context seem conducive to liberalising the rules governing the Fund’s use. However, this could change depending on the outcome of the upcoming elections. The main opposition parties — the Conservatives and the Progress Party — have been more open to the idea of utilising the Fund to increase domestic defence spending and liberalise the ethical guidelines.

Nonetheless, there should be room for dialogue and cooperation with Norway — a key partner of the EU in defence and security — to explore innovative financial solutions within the existing framework. The argument put forward by financial experts, economists, and academics is that the very purpose of the Fund is to safeguard the prosperity of future generations — and there may be no more effective way to secure that future than by investing in the security and stability of today.

Author: Karolina Pawlik, Senior Specialist, Energy and Resilience Programme, Casimir Pulaski Foundation

 

[i] Data from Oljefondet, https://www.nbim.no/no/

[ii]http://www.rorg.no/Aktuelt/2019_2020__Gjennomgang_av_de_etiske_retningslinjene_for_Oljefondet/index.html

[iii] B. Haugan & A. A. T. Brekke, «Erna Solberg vil ta av oljepengene for å forsvare Norge», VG

https://www.vg.no/nyheter/i/8q15q1/erna-solberg-vil-ta-av-oljepengene-for-aa-forsvare-norge

[iv] https://www.stortinget.no/no/Saker-og-publikasjoner/Saker/Sak/?p=102567

[v] https://www.stortinget.no/no/Saker-og-publikasjoner/Saker/Sak/?p=102353

[vi] O. Inge Aas «Stoltenberg til nytt toppmøte. På agendaen står en helt ny måte å bygge europeisk forsvar», Aftenposten https://www.aftenposten.no/norge/politikk/i/W0AvaL/stoltenberg-fikk-sjelden-invitasjon-til-toppmoete-skal-diskutere-et-europeisk-forsvarsfond

[vii] T. Riksen «Oljefondet kan finansiere Europas opprustning», Dagens Næringsliv https://www.dn.no/kronikk/sikkerhetspolitikk/finans/oljefondet/oljefondet-kan-finansiere-europas-opprustning/2-1-1781171

[viii] K.N. Kjær «Handlingsregelen må ikke stå i veien for en kraftig økning av Norges støtte til Ukraina», Aftenposten https://www.aftenposten.no/meninger/debatt/i/jQ1r70/handlingsregelen-maa-ikke-staa-i-veien-for-en-kraftig-oekning-av-norges-stoette-til-ukraina

[ix] https://www.regjeringen.no/no/tema/okonomi-og-budsjett/norsk_okonomi/bruk-av-oljepenger-/id449281/