Norway should begin process of divesting Russian assets, central bank says (updated)

Evraz

04/12/2024 08:29

* 
      Finance ministry ordered divestments after Ukraine war 
    

        * 
      Fund unable to sell so far due sanctions
    

  
 (Adds detail in paragraphs 5-6 and 9, planned divestment in
Evraz in paragraphs 10-15, bullet points)
    By Terje Solsvik and Gwladys Fouche
       OSLO, Dec 4 (Reuters) - Norway's government should let
its huge sovereign wealth fund sell parts of its Russian
portfolio when possible, ending a general freeze in place since
2022 that has prevented divestment, the central bank, which
manages the fund, said.
    The Norwegian finance ministry ordered a halt to all
transactions in the fund's Russian assets shortly after Moscow's
full-scale invasion of Ukraine in February 2022 and said at the
time that the ultimate goal was to divest its holdings.
    Norway's $1.8 trillion sovereign wealth fund, which holds
the windfall generated by its oil and gas production, is the
biggest such fund in the world, holding 1.5% of global listed
shares in companies.
        The fund has so far been effectively barred from
offloading Russian assets because it is not permitted to sell to
counterparties under U.S. or EU sanctions. 
    While this means it is not possible to draw up a general
divestment plan, the fund should now be allowed to sell Russian
assets if and when opportunities arise, the central bank said in
an Aug. 25 letter to the finance ministry released on Wednesday.
    "Such an approach to seizing divestment opportunities would
mean an end to the general freeze on the fund's investments in
Russia," it said.
        "Sanctions against Russia and countermeasures from the
Russian authorities have escalated further in 2024," the bank
said in the letter, adding that "opportunities to sell Russian
securities are currently very limited".
  
        Moscow considers U.S. and EU sanctions a form of
economic warfare and says calls to divest Russian assets are
hostile acts of unfriendly states.
  
        The Norwegian fund follows ethics rules which can result
in decisions to divest that have wider consequences because of
its scale.
  
        The fund's Russian holdings were estimated at around $3
billion at the end of 2021, but the value has since dropped
precipitously following a global writedown of Russian assets
since the start of the Ukraine war.
  
        The value of the fund's Russian equity portfolio was
estimated at just 1.5 billion crowns ($135 million) at the end
of June this year, the central bank said in the letter to the
finance ministry. 
  
        It has investments across 49 Russian companies, fund
data showed, with the biggest holdings in Sberbank  SBER.MM ,
Lukoil  LKOH.MM  and Gazprom  GAZP.MM .
  
    In addition, the fund holds Russian roubles worth some 3.2
billion crowns in its custodian Citibank account with the
Russian National Settlement Depository (NSD), consisting of
dividends received in the period since Feb. 2022, it added.

        EVRAZ
  
        Separately, the board of the central bank has ordered
the fund to divest from London-listed Evraz  EVRE.L , upon
recommendation from the fund's ethics watchdog, because Evraz
produces steel in Russia.
  
        The watchdog's inquiries had shown Evraz "may be linked
to the Russian defence industry as a supplier of steel which
enables Russia to continue its unlawful war of aggression
against Ukraine", the watchdog said in a statement.
  
        Already, Evraz was among the companies identified for
divestment by the finance ministry. 
  
        "That means that we have not yet been able to sell the
company," said a fund spokesperson. 
  
        It was the first time the fund has announced a
divestment before it has carried it out. Typically, the fund
sells all its shares in a company before it says publicly it has
done so.  
  
        Evraz did not immediately reply to a request for
comment.
  
        Unrelated to Russia, the fund announced late on Tuesday
that it had sold all its shares in 
    Israeli telecoms company Bezeq
      BEZQ.TA  because the firm provides services in the
occupied West Bank.
  
    ($1 = 11.0531 Norwegian crowns)

 (Reporting by Terje Solsvik and Gwladys Fouche, editing by
Louise Rasmussen)
 ((terje.solsvik@thomsonreuters.com; +47 918 666 70;))