(First published in Norwegian 19 Apr 2006)
By Pia Gaarder
European Aeronautics Defence and Space Company (EADS) has quietly sold its shares in the controversial cluster weapons producer TDA Armaments. These shares caused EADS to be excluded last autumn from the portfolio of the Government Pension Fund – Global, better known as the Norwegian Oil Fund.
On TDA Armaments’ web site the company is still listed as a joint venture between Thales and EADS. But a preliminary draft of EADS’s financial report for 2005, which Norwatch has had access to, reports that the company’s 50% ownership share in TDA Armaments was sold to Thales already on 30 November 2005 – that is, not long after the Oil Fund sold off its shares.
Alexander Reinhardt, public relations manager and vice president of EADS Defence & Security Systems, confirms to Norwatch that EADS has sold the controversial cluster weapons company. “We have definitely sold our shares in TDA to Thales. The reason for the sale is that TDA does not fit into our core activities,” says Reinhardt. He adds that EADS has informed Norges Bank (Bank of Norway) and the Oil Fund’s Advisory Council of Ethics of the of the sale of TDA.
Reinhardt denies that the Oil Fund’s decision to exclude EADS from its portfolio has affected their decision to sell TDA. But not everyone is equally convinced that exclusion from the Norwegian pension fund has been without effect.
For one thing, the Swiss military newsletter “Military Procurement International” refers to sources claiming that the true reason is completely different from the official one: “A large Norwegian pension fund that owned shares in both Thales and EADS discovered that TDA also produced cluster weapons, which is contrary to the fund’s ethical guidelines. Consequently, they sold off their shares in Thales and EADS. This, in turn, triggered EADS’ decision to sell TDA,” the article reports.
The basis for excluding one of the world’s 10 largest weapons producers, EADS, from the Pension Fund’s portfolio because of cluster weapon production has thereby ceased to apply: “The company has not been returned to the investment universe. But a decision will be made about this in the near future,” Henrik Syse, head of the Ownership Group in the Bank of Norway’s Investment Management, informs Norwatch.
The Ownership Group in the Bank of Norway works with active ownership execution and not with composition of the portfolio. Which companies are to be excluded, or, possibly, again included, in the portfolio of the Government Pension Fund – Global is decided by the Ministry of Finance on advice from the Advisory Council.
Runar Malkenes, public relations manager for the Ministry of Finance, confirms that the Advisory Council has as its task to consider whether excluded companies should be readmitted: “The Council keep track of excluded companies to see whether the basis for the exclusion from the Fund is still present. This is also part of the Council’s mandate. The Council can recommend that companies be readmitted if they consider that there are grounds for it,” says Malkenes.
He confirms that none of the companies excluded today has been readmitted to the investment universe but will not say anything definite about EADS. “Withdrawal from companies is announced after shares have been sold off, out of operational considerations, so that the fund will not suffer loss. Correspondingly, it is fair that operational considerations also be taken when companies are to be readmitted to a fund. To say anything definite about the company you mentioned is, in other words, out of the question now,” says Malkenes.
Even though EADS no longer is involved in the production of cluster weapons, it will remain excluded from the Fund – although for other reasons. According to the Advisory Council’s recommendation, sent to the Ministry of Finance in September 2005, it is known that EADS may also be involved in the production of important components for nuclear weapons.
The case is that EADS is included with BAE Systems Plc and Finmeccanica SpA in the joint venture company MBDA. The Advisory Council refers to the statement in the online news service Jane’s Air Launched Weapons that MBDA has a contract to develop and produce the ASMP-A missile for the French air force. ASMP-A is described as a “nuclear warhead air-to-surface missile.”
Both Finmeccanica and BAE Systems were excluded from the portfolio because of their shares in MBDA, and a new assessment of EADS must therefore give the same result.
The Advisory Council must consequently also solve the problem of the € 489 million investment in DaimlerChrysler, which is one of EADS’s largest owners. As previously reported by Norwatch, the Government Pension Fund – Global has invested € 213 million in shares in DaimlerChrysler and € 276 million in bonds issued by the same company.
Before Easter in 2006 Gro Nystuen, the Chair of the Advisory Council, told Norwatch that she could not comment on this specific case but that it is principally a question of where to draw the line. “Some funds and screening companies operate with a limit of 30% or 20% and accept ownership below this set limit. The Graver Committee did not, however, suggest such a minimum limit. It was assumed that any sort of participation would be unacceptable. It is therefore the question itself of what it takes for contribution to take place that is important. We must in every single case evaluate whether there exists what is called “an unacceptable risk of contributing”,” said Nystuen.
The problem arises when an investment is not made directly in a company that produces cluster weapons or nuclear weapons but in one of the owner companies. Nystuen emphasised that the question is how far back in succession one must go for the investment to create an unacceptable risk of contributing. According to Nystuen, a specific analysis is required of every single case.
On 31 December 2005 DaimlerChrysler owned a 29.89% share in EADS. On 4 April EADS gave notice that the two largest owners, DaimlerChrysler and the French Lagardère SCA, would reduce their shares by 7.5% each. Consequently, DaimlerChrysler will relatively soon own about 22.4% in EADS.
LATEST NEWS May 10 2006:
"EADS still excluded from the Government Pension Fund – Global."
Read more in English at the website of the Ministry of Finance