Consequences of Investments for National Security (COINS)

When actors wish to invest internationally, these investments have traditionally encountered few regulations or restrictions. In the period dominated by “the Washington consensus” –a set of free-market economic policies and prescriptions supported by international financial institutions, the USA, and the EU – foreign investments were considered beneficial, as they created jobs and triggered innovations, and secured access to capital and technology.

However, over the last decade or so, this has been changing. Foreign investments traditionally flowed between rich countries, or from rich to developing countries. Lately, we see a large increase in investment flows from unorthodox countries, with which many Western countries can have no security cooperation, like China and Russia. Some of these investors may also be state-sponsored.

The attention surrounding the security aspects of foreign direct investments has therefore increased. Some foreign investments may harm societal or national security, particularly if they are related to critical infrastructure, create unwanted dependencies, or give foreign actors access to sensitive information or technology. One may ask, who are really behind these investments? May they have other motives than making a profit? In many countries, foreign investments have become a central challenge for national security. The EU has implemented new regulations to control foreign investments. Also, the Nordic countries have strengthened their foreign investment control mechanisms – Norway, for one, has adopted new security law – and the intelligence services reference investments from China and Russia in their public security briefs. 

In Norway, these developments were thrown into relief in the public debate surrounding the potential Russian takeover of the company Bergen Engines.

With this, a new challenge arises: How can liberal societies reap the benefits of open economies, whilst at the same time protecting their legitimate security interests? In the project Consequences of Investments for National Security (COINS) we assess how liberal economies may attract foreign investments, whilst at the same time reduce and manage associated risks.

This balance between openness and security is challenging, and will depend on each country’s need for investments, risk tolerance, and capacity for control. Some states implement quite severe measures, whilst others are hesitant to control and limit foreign investments. Differences in control regimes may lead to international tensions, as seen in the disputes between the USA and the EU concerning Huawei’s bid to build new 5G infrastructure.

This is a challenge also because the meaning and extent of concepts like “security” or “critical infrastructure” is not a given. How broadly should these concepts be defined? It is quite clear that this would involve military installations and defence industry, and energy supply, internet cables, and similar infrastructure. But what about jobs, capacity for innovation, national competitiveness, airlines, railways, agriculture, the environment? Would investments in these areas be a security risk large enough for governments to potentially block them? How many wanted investments would one miss, then?

This dilemma becomes even more complex, as protectionism, economic nationalism and anti-globalization sentiments are one the rise in many countries. When the concept of security is stretched, it could be tempting for governments to deploy a security argument as a pretext to implement protectionist policies.

Yet, this is about more than protectionism – it is about power politics, and international relations in a global economy. The international economy and investments are turning into an arena for power politics, where national security may increasingly trump the collective interest in keeping the economy open within a liberal international order.

Norway, as a small to medium state, depends on a stable, multilateral system, and on the benefits of an open economy. We, as others, must take care of our national security. So, what do we do?

In COINS we will explore:

• How, under which conditions, and to what extent foreign investments represent a security challenge, and how to conceptualize, interpret, measure, mitigate and manage such risks, in an age of digitalization.
• We will develop a new dataset on FDIs enabling us to better understand the scale, scope and developments of investments.
• We will also conduct cross-national comparative studies of how different countries interpret and assesses risks and how they have designed legal and political instruments to mitigate such risks. We will also consider some of the pitfalls and possibilities of closer EU and European cooperation in managing FDIs.

The overall ambition of the project is to improve our understanding of the risks associated with foreign investments, theoretically, conceptually and empirically, as well as provide research-based knowledge that can help support decision making on how to best mitigate such risks.

See Morten S. Andersen, Hege Medin and Ulf Sverdrup from NUPI discuss Chinese Investments in Northern Europe, in a presentation of the COINS project at the 2nd China-Europe research highlights in CHERN's Online Series:

Other publications: 

Hafstad, C. (2023). "Weaponization" av eierskap og norske eierskapskontrollregler. Lov og Rett, 62(5), 303–324.

Hafstad, C. (2023). NOU 2023: 28 Investeringskontroll En åpen økonomi i usikre tider. Norwegian Ministry of Trade, Industry and Fisheries.

Roy, I., Eckhardt, J., Stroikos, D., & Davidescu, S. (Eds). (2024). Rising Power, Limited Influence: The Politics of Chinese Investments in Europe and the Liberal International Order. Oxford University Press.

Sverdrup-Thygeson, B., & Sverdrup, U. (2020). Introduksjon: Når geoøkonomi møter den nordiske modellen. Internasjonal Politikk, 78(1), 32–42.

Other podcast episodes: 

Hans Jørgen Gåsemyr. (2023) "Pengeland: Kina og skatteparadis". Tax Justice Norge. 

Other articles and op-eds:

Gåsemyr, H. J.. (2022). Finner vi en middelvei til Kina? NRK Ytring. 

Gåsemyr, H. J. & Medin, H. (2021). Innlegg: Hvem eier i Norge? Ofte må detektivarbeid til for å finne ut om eierne er norske eller utenlandske. Dagens Næringsliv. 

Jie, Y. (2022). China faces a new test of its economic statecraft. Financial Times. 

Jie, Y. (2023). China’s quest for self-reliance risks choking innovation. Financial Times. 

Jie, Y. (2022). Climate Justice with Chinese Characteristics? Project Syndicate. 

Jie, Y. & Sabatini, C. (2024). "What China Got Right in Latin America". Foreign Policy.