Norway says oil fund reluctant to blacklist states

OSLO, June 18 (Reuters) - Norway's $400 billion sovereign wealth fund is unlikely to rule out investing in countries that abuse human rights unless such sanctions are adopted as foreign policy, the Norwegian finance minister said on Wednesday.

So far the Norwegian government and its wealth fund have banned investments in Myanmar, which is subject to extensive international sanctions.

Finance Minister Kristin Halvorsen said that further bans on entire countries were unlikely though she was open to discuss the matter in an ongoing review of the fund's ethical guidelines.

"We (the state) do not boycott Saudi Arabia or Israel or any other countries that we know are abusing human rights, so in the last round it was concluded that it would not be natural for the pension fund to do so either," Halvorsen told Reuters.

The Government Pension Fund -- Global, commonly known as the "oil fund", invests Norway's oil and gas wealth in foreign stocks and bonds to save for future generations when the black gold runs out.

The finance ministry has excluded some 25 companies from the fund for violating human rights, harming the environment or producing cluster bombs or nuclear weapons. It bases the exclusions on recommendations from an ethics council.

Human rights activists have criticised the fund for buying bonds of countries such as Saudi Arabia, Colombia and Sri Lanka, known for violating human rights, and say the same rules should apply to investing in countries as to investing in stocks.

This year the ministry of finance is carrying out an extensive review of the ethical guidelines adopted in 2004.

Part of the aim with the review is to get feedback on the ethical guidelines, but Halvorsen nevertheless signalled on the sidelines of the seminar that investments in countries that violate human rights would probably be upheld.

She said that there could not be a large gap between Norway's foreign policy and the policy of the fund.

"I would guess that the conclusion also in the next round will be that we cannot run a separate foreign policy for states through the pension fund -- but I believe that the debate is relevant," she said.

In March, the fund came under criticism for investing in the publisher of Playboy magazine, but officials said that as long as it is a legal product, the company cannot be blacklisted.

The fund, which grew 1.8 percent to 2.053 trillion Norwegian crowns ($395.2 billion) in May after a weaker first quarter when global stock valuations tumbled, has widely been seen as a model of transparency for other resource-rich countries to follow.

It is gradually raising the equity part of its portfolio to 60 percent from 40 percent. In March it held 48 percent in stocks and the rest in bonds, all abroad to avoid unwanted currency appreciation and overheating of the economy.