Why Does Israel Fear the Decision of the Norwegian Sovereign Wealth Fund?

Author: امطانس شحادة

The decision of the Norwegian Sovereign Wealth Fund, the largest sovereign investment fund in the world managing an investment portfolio of approximately $1.9 trillion, to withdraw its investments from Israeli companies - specifically selling its shares in 11 Israeli companies out of 61 it has stakes in - has shocked the Israeli economy, not only because of the scale and diversity of the investment but also because it may reflect the beginning of a new phase in Israel's global economic relations, especially with European countries. This decision may also signify a potential decline in foreign investments, particularly in the advanced technology (high-tech) and military and security industries, which are key drivers of growth and development for the Israeli economy, accounting for about 1.5% of the gross domestic product.

Among the prominent companies in which the Norwegian fund invests:

- Beit Shemesh Engines, established in 1968 on the outskirts of Beit Shemesh, which manufactures parts for jet engines, specializes in the production and repair of engine parts and provides maintenance and technical support services to customers. After five decades, Beit Shemesh Engines has become a leader in this field, supplying parts and services for turbine engines to a customer base worldwide, including the Israeli Ministry of Defense. The company also owns factories and companies outside of Israel, including in the United States and Serbia. In 2024, the company's sales volume reached approximately $260 million, according to its official financial report, with an operating profit of about $50 million.

- Next Vision, a company specializing in providing imaging solutions for drones. The share of the Norwegian sovereign wealth fund in it is approximately $16 million, and the company achieved a return of 186% in just the last year. According to fund reports, it has not yet sold its stake in this company.

- One Technologies, where the fund owned shares worth nearly $5 million until the end of 2024. The company is known for its activities in outsourcing with civilian companies but two years ago acquired a controlling stake in Wobex, which develops systems for data analysis, control, and security monitoring.

- The fund invests $1.2 million in Formula Systems, which owns TSG, playing a crucial role in the performance of Israel's air defense system.

- It holds a minor investment of $120,000 in AudioCodes, which provides enterprise communication solutions, integrating artificial intelligence technologies into its products, and supplying them to the security sector.

- Scopware, in which the fund invested $8 million, is a supplier to military industries such as the Israeli aerospace industry, which is a key part of the armaments system of the occupying army.

- Gilat Satellite Networks provides communication systems for the Israeli Ministry of Defense, and the fund held a small amount of $6,000 in it.

- The fund invests $5 million in Amos Luzon Group, which has a subsidiary called Rom for Gypsum, executing projects for security institutions. The fund also invests approximately $22 million in the semiconductor company Tower, which works with the U.S. Department of Defense as part of the support initiative to assist Israel in its war on Gaza.

- The fund invests around $360 million in Bank Hapoalim, which ostensibly seems unrelated to security. However, Israeli banks manage special programs for discharged and injured soldiers and have previously granted loans to the Ministry of Defense for its purchases.

In addition, the fund invests in a long list of Israeli companies, including: Azourim (construction and real estate); Delek Cars (car import agencies); El Al (airline); Energees (renewable energy); eToro (e-commerce in stock markets); Max Stock (retail of household goods); Levinstein Engineering (engineering, construction, and real estate); Brion (technology and electronic advertising services); Priortech (semiconductor manufacturing); Rami Levy (marketing and trading network); Reit 1 (investment fund in real estate); Retailers (importing and marketing clothing, footwear, and sports equipment); Scopware (metal and plastic trading); Sela for Real Estate (real estate investment); and Torbaz (specializes in the production of dietary supplements and foods).

Thus, the investments of the Norwegian wealth fund are not limited to a specific economic sector but are spread across most economic branches. Accordingly, the impact of the fund's decision does not confine itself to sectors directly related to the arms and security industry or contributing to the ongoing genocide in Gaza, but extends to encompass various economic sectors.

What is the "Norwegian Government Pension Fund Global – GPFG"?

It is the world's largest sovereign fund in terms of asset value in the markets. The fund was established in 1990 to invest the financial surpluses resulting from Norway's oil and gas exports. Its primary goal is to ensure the sustainability of the Norwegian economy in the long term, so that future generations benefit from oil revenues even after natural resources are depleted.

The fund manages assets exceeding $1.9 trillion (according to estimates for 2024). It holds stakes in over 9,000 companies worldwide and owns an average of about 1.5% of the total globally listed shares.

It has a strict investment policy that considers environmental, social, and governance standards, and excludes companies involved in the production and trade of prohibited weapons, human rights violations, or significant environmental damage.

The fund is managed by the Norwegian Central Bank through its investment arm and is subject to tight supervision from the Norwegian Parliament, with transparent reports published for the public.

Israeli Concerns Over Declining Foreign Investments

The issue of the Norwegian sovereign wealth fund withdrawing part of its investments from the Israeli market highlights the size and depth of foreign investments in Israeli companies, especially those operating in the security and military sectors. It is noteworthy that the Tel Aviv stock market includes 15 Israeli companies classified as directly working in the security-military field, in which foreign funds invest either through the stock market or through direct investment. These companies have made significant profits in recent years as a result of the genocide on Gaza, as well as the wars against Lebanon and Iran, in addition to the rising global demand for military and security equipment since the outbreak of the war between Russia and Ukraine. This data also reveals the size of the security and military industries and services market in Israel and its importance in enhancing the GDP and economic growth, as even companies classified as civilian are widely linked, whether directly or indirectly, to the military industries and providing services to the Ministry of Defense and the Israeli army.

Israel fears the expansion of divestment from investment funds from other countries in the Israeli market. Naturally, Israel will not announce or publicize this concern or fear but will attempt to mitigate the effects of the Norwegian wealth fund's decision, as well as the calls for boycotting Israeli military and security industries and others, as a result of the genocide on Gaza and the hunger policies.

Economic analyst Haggai Amit published a lengthy article (August 13) in the economic newspaper The Marker warning against the Norwegian fund's move, explaining that this unprecedented step announced by the Norwegian sovereign wealth fund should not be underestimated, as it could lead other sovereign funds to withdraw their investments from the Israeli economy, either partially or fully.

For example, the Norwegian pension fund (KLP) announced on Wednesday, August 12, that it is divesting its stakes in the Israeli company Next Vision as it supplies essential components for drones operating in Gaza. Last week, the Danish pension fund (PBU), which manages around €14 billion, announced that it sold its stakes in Booking, Airbnb, and Expedia due to their activities in the settlements in the West Bank.

In Australia, there is popular pressure on the state's Future Fund, which manages more than A$200 billion, to stop its investments in companies supporting Israeli settlements and arms companies. The same applies in New Zealand, where a similar fund manages a comparable amount.

These decisions are a source of concern for Israel and economic decision-makers, as they raise anxiety among businesses and the private sector, since they represent a central share of foreign investments in the Israeli economy. Direct foreign investments and international trade (import and export) have become significant parts of the Israeli GDP and crucial factors in economic growth, job creation, and increasing income.

According to a report by the Bank of Israel on "Foreign Direct Investments in Israel: Developments and Trends Over the Last Decade" (published in April 2025), the volume of foreign direct investment in Israel steadily increased between 2013 and 2019, driven by the boom in the high-tech sector and acquisitions of Israeli startups by multinational companies. Israel ranked highly globally in the ratio of foreign investment to GDP, with annual investment reaching $20 billion to $25 billion in some years.

The year 2021 was exceptional, as foreign direct investment exceeded $30 billion due to the global boom in the technology sector after the COVID-19 pandemic, increased merger and acquisition transactions, and substantial investments in cybersecurity, semiconductor, and renewable energy companies. Starting in the second half of 2022, foreign investments began to decline, and in 2023, according to the Bank of Israel, foreign direct investments decreased by about 60% compared to 2021, reaching approximately $10–12 billion. The war on Gaza and the subsequent security flare-ups negatively affected investment flows, as some global funds ceased or reduced their investments. The volume of foreign investment in 2023 was about $16 billion, and in 2024 about $19 billion.

Expectations for 2025 indicate a continued decline in foreign investments, especially in sectors related to the war effort or the settlements, despite significant deals witnessed in the high-tech sector, which involved American companies acquiring Israeli companies for very large amounts.

The results of unofficial and undisclosed European sanctions on the Israeli economy have not yet become clear, and the Israeli government is attempting to minimize the effect of these sanctions and ignore their causes and effects, especially regarding divestment and stopping industrial and academic cooperation. What has shielded the foreign investment situation until now, and prevented a severe decline in the volume of foreign investments has been the substantial investments made by American companies through the purchase of Israeli high-tech companies during this year, in addition to the continued Israeli military and security industries making deals with many countries around the world, including European nations.

However, Israel cannot continue to ignore the widening scope of boycotts and divestments or their cessation and the impact on the Israeli economy as a whole, as these developments are tied to the economy's core and its main drivers, particularly high-tech and modern industries, and military and security industries, which are paramount in the Israeli economy and crucial for raising GDP and wages, and a central source of government income through taxes.

What has begun with the Norwegian wealth fund could turn into a snowball effect leading to similar actions by other sovereign funds or private economic companies, which may impose additional pressures on the Israeli economy, the private sector, and the government, especially if it continues its genocide in the Gaza Strip and its policies of starvation.