[LINK] "Sovereign wealth funds: Political influence in an era of new money"

[rfmcdonald]

As Carl Mortished writes, sovereign wealth funds are being used to influence the course of nations. What's one notable offender? Norway.

They could be a menace, these sovereign wealth funds - too rich, too powerful and too political. Pumped up with their petrodollars, who knows how they will use their financial muscle to influence the running of our greatest companies.

Well, we now know because one of the biggest petro funds has just smacked Rio Tinto, the Anglo-Australian miner, but the surprise is the identity of the investor and the reason for its confrontation with Rio's management. Norway's Government Pension Fund has accused Rio of causing severe environmental damage in Indonesia through its 40-per-cent stake in the Grasberg copper and gold mine in West Papua. After failing to influence the company's investment in the mine, operated by the U.S. miner Freeport-McMoRan, the Norwegian fund decided in April to sell its Rio shares, a stake worth £500-million ($940-million).

This week, the Norwegian Finance Minister added insult to injury with a humiliating rebuke, publishing its findings that the Grasberg mine would cause "severe long-term environmental damage" in West Papua.

[. . .]

This is not the first time that Norway's sovereign wealth fund has jousted with corporations. Freeport was earlier excluded and the fund has excluded several arms manufacturers, notably British Aerospace, Lockheed Martin, Raytheon, France's Thales and EADS, the European aerospace company. Wal-Mart faced Norway's moral opprobrium over its labour practices in developing countries.

This is more than just snooty stock picking because the Norwegians seem to genuinely want to change company policy - and it gets very political.

Kerr-McGee, the American oil company, was excluded over its exploration efforts in Western Sahara. Following an invasion by Morocco, the territory has been locked in dispute for decades between the Moroccan military and the Polisario Front, the liberation army of the Saharawi people. The Norwegian fund decided that Kerr-McGee was in violation of international law for accepting Morocco's shilling but the oil company got the message, ended its exploration activity in Western Sahara and the Norwegians reinvested in Kerr-McGee.