Norwegian fund refuses to invest in Russia
In 2018, the sovereign fund of Norway decided to reduce investment in government bonds of the Russian Federation. According to the decision of the largest fund in the world, the amount of investments should be halved, to one billion dollars. This decision was prompted by the expectation of political and economic sanctions against Russia.
In its annual report, Government Pension Fund Global reported that in 2018 it was forced to reduce the amount of investment in the Russian economy by 45%. The Norwegian sovereign fund reports that investments were reduced from two billion dollars to one billion.
According to experts, this is a record fall since the investment in 2011. But the maximum amount of investment was reached by the Russian Federation in 2013. At that time the state owned an amount of $4.1 billion.
What is the Norwegian Foundation doing with OFZ now?
Now the Norwegian Fund is forced to sell the securities belonging to Russia. Experts noted that GPFG may still allow the shares to be redeemed without reinvestment. It is worth recalling that the fund’s portfolio also contains federal loan bonds in rubles (OFZ).
It all began with the fact that in 2018, U.S. senators began to raise the issue of sanctions against Russia under the program “Protecting American security from Kremlin aggression” (DASKA). This system was mainly aimed at limiting the sovereign debt of the Russian Federation. And in February this year, United States officials again raised the issue. At the same time, real sanctions, as experts assure, can have a much more painful effect, hitting oil and the sovereign debt of the country.
According to Anton Siluanov, Minister of Finance of the Russian Federation, highly professional experts have repeatedly stated that the country’s economy is ready to withstand restrictions on trade in government securities.
Thus, in 2018, foreign investors have reduced their presence in the OFZ market from 33.1 to 24.4%, or 440 billion rubles. (approximately $7 billion). A little over $1 billion was spent on sales/purchase of securities by the Norwegian fund.
From 2015 to 2017, the Government Pension Fund Global had $2 billion in its portfolio of Russian OFZ securities. This is despite the fact that at that time Russia had a negligible credit rating from most global agencies. Now the Norwegian Fund did not wait for the publication of the rating results. It began to get rid of them long before that.
Though, as experts mark, it was necessary to expect. Back in August 2018, the AKRA rating agency predicted that the Norwegian sovereign fund would leave the list of potential investors in Russia.