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OPEC's Scandinavian partner

Published by Forbes on 1986-12-15

NORWAY, that picturesque nation of 4 million tucked away in the northern reaches of Europe, is an unlikely petropower, but petropower it is. In 1985 offshore petroleum accounted for nearly 20% of Norway's $ 66 billion gross national product. Because of falling oil prices, the government's income from taxes and royalties on oil production is expected to fall from $ 6.8 billion in 1985 to $ 2.5 billion in 1986. And that obviously hurts.

So, although Norway is not a member of OPEC, count its Social Democratic prime minister, Gro Harlem Brundtland, as a strong advocate of higher oil prices. Simple self-interest.

Norway is already helping OPEC. The Norwegian government is curbing exports by buying 10% of production in November and December. The official reason is to add to the country's strategic reserves, but everyone knows that this is Brundtland's way of trying to drive up international prices.

"We feel that it's in our interest to contribute to higher oil prices," Prime Minister Brundtland told FORBES. "My conviction is that it is dangerous for the world's economy to have such strong fluctuations in price and such unrealistic levels of production. The stabilization of prices at reasonable levels is necessary for sound economic planning."

Norway has a powerful interest in long-term stability of prices: For a small country with few other economic assets and an expensive welfare system to support, Norway is nearly as dependent on oil as any Third World country.

Properly managed, the oil can support the country in fine style for generations. Although Norway's daily oil production is only 850,000 barrels, it could easily double that output. In fact, says petroleum specialists, 60% of Norway's hydrocarbon reserves have not been tapped. By 1990 two new fields in the North Sea -- Gullfaks and Oseberg -- are scheduled to be opened. By then, daily production -- which is controlled by the state oil company, along with U.S., U.K., French and Italian firms -- is expected to climb to 1.3 million barrels. The government would not way to try to sell that extra output at giveaway prices. So, better a little sacrifice now than permanent impairment of the country's chief asset.

Low prices threaten Norwegian oil more painfully than they do many OPEC nations": While much OPEC oil is cheap to get out of the earth, Norwegian oil is high-cost. Virtually, all of the country's oil is lifted from deep-water installations in the turbulent and often icy North Sea. The high technology involved here means that it often costs up to $ 12 or $ 13 per barrel to produce oil.

Meanwhile, the Norwegian economy groans under one of the world's highest levels of social spending: In 1985 government spending absorbed 47% of the GNP, vs. 20% in the U.S. How to fill the revenue gap while waiting for higher oil prices and additional production? Prime Minister Brundtland is calling for higher taxes. She also has slightly trimmed government spending. But Norwegians, like people everywhere, want the largesse that a welfare state offers but don't want to pay for it. When oil prices are high, there is no problem: Oil-consuming foreigners foot a big part of the Norwegian welfare bill.

But now, threatened with higher taxes to support their semi socialist society and facing mild cutbacks, Norwegians grumble: Government giveaways are popular only when someone else pays. There has been a spate of critical articles and commentaries in many of Norway's 167 daily newspapers and 1,000 weeklies about the Brundtland government's economic policies. "I don't think that the Norwegian people are completely aware yet that we need to take stern decisions to tackle our long-term problems," the prime minister says. "We are still standing on the edge of a cliff. We had just too much growth and expansion in the last two years."

At 47, Gro Harlem Brundtland is the youngest of Europe's three female national leaders. One of her proudest decisions was to appoint seven women to her 18-person cabinet. "Why didn't I choose an outright majority of women ministers? Well, that might have provoked a backlash. After all, I selected the women ministers because of their professional qualifications. On the other hand, I was making a point and striking a blow for the cause of political equality between sexes." The eight ministers are young, as politicians go: four in their 30s, three -- including the prime minister -- in their 40s, and one in her 50s.

Gro Brundtland got started in politics while in high school, where she served on national Labor Party youth committees. At the University of Oslo she was deputy chairman of the Labor Party Students Union. She did postgraduate work in social medicine at Harvard and worked ten years in the Oslo municipal and national health services. During this period she wrote a number of scientific articles on child growth and development. A few years later she spoke out strongly in favor of liberalizing Norway's antiabortion laws and became nationally known.

Left of center domestically, where does Gro Brundtland stand on Soviet-U.S. relations? She opposes the Reagan Administration's strategic defense initiative program, but Norway is a member of NATO. Norway's relations with the superpowers are shaped by geography: How outspoken would anyone be, sharing a 122-mile frontier with the Soviet Union? Norway's northern areas are on the shortest line of flight between the U.S. and the Soviet Union. The Soviet Northern Fleet operates out of bases on the Kola Peninsula, which is adjacent to Norway.

"Our belief and commitment to NATO is high, but we also don't want big power confrontation here," Brundtland says, delicately skirting a delicate issue. "We don't think it is wise for the Western alliance to have U.S. bases or nuclear missiles on Norwegian soil. Norwegian territory must not be seen as a threat to its neighbors."

Brundtland sees Norway's role in NATO as one of influencing "the line of negotiation and agreement." That's less of a commitment to the Free World cause than most Americans would like but probably inevitable given Norway's geography and tiny military potential.

But if Gro Brundtland is a semi-neutralist in the big power struggle, she is militant on feminism. Brundtland's husband, Arne Olav, a political scientist, has been active in the opposition Conservative Party. As befits a good feminist, she can get irritable when asked whether political differences disturb her marriage. "Does anyone ever ask a man in politics how he can live with a spouse who doesn't espouse his views?" she says.


Pranay Gupte,
Senior Writer and Global-Affairs Columnist


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