Norwegian Oil Fund Betted Against Icelandic Economy Skip to content

Norwegian Oil Fund Betted Against Icelandic Economy

In 2005 the Norwegian oil fund started to bet on the fall of the Icelandic financial system. According to Dagens Næringsliv, a Norwegian business daily, a manager at the fund claims that the fund was the first to hedge against the Icelandic banks Kaupthing and Landsbanki. The investments of the fund increased the financial costs on the Icelandic banks.

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The paper says the fund profited from the economic collapse in Iceland. The fund is made up from the profits from the huge oil reserves the Norway possesses.

Herleif Håvik, a broker with the fund says that his mission to sell the Icelandic banks short. He thinks that the market can’t be blamed for the collapse of the Icelandic economy. Icelandic economist Ásgeir Jónsson, author of a book on the collapse, Why Iceland?, says that Icelanders can only blame themselves for the downfall of the economy.

However, Jónsson says, the ethical question arises on whether the official fund of Norway should invest in a little regulated market against the financial system of a neighboring country.

Håvik’s investments for the oil fund lead to higher credit risk insurance payments for the Icelandic banks.

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