Russia’s invasion of Ukraine has increased inflationary pressures, including for energy, food and other commodities, and depressed economic growth prospects, says head of Ukraine’s largest sovereign wealth fund world.

Nicolai Tangen, managing director of Norway’s $1.3 billion oil fund, told the Financial Times that Russia’s war has heightened concerns about the two factors he believes could lower financial market returns in the future. course of the next decade.

“It amplifies the inflationary pressure that we see, through oil and energy, food inputs, fertilizer inputs and other materials. This makes the situation more problematic. It is also negative for economic growth,” he added.

Tangen warned in January in an interview with the Financial Times that investors face years of weak returns as high inflation becomes a permanent feature of the global economy, as the oil fund’s chief executive turned dubbed “team leader for permanent team” in the debate over whether the inflation spike is transitory or not.

Trond Grande, the fund’s deputy managing director, said the dramatic financial sanctions unveiled against Russia, such as cutting banks from the Swift payment system, were “a test of the resilience of the system”.

He continued: “The government bodies imposing these sanctions recognize that these are potentially somewhat blunt tools. You don’t really know the first, second, third, fourth order effects of how it affects everyone.

Tangen added that the sanctions could affect the global supply chain as well as food and energy supply.

Their comments came as the oil fund reported on Thursday that its Russian holdings were likely worthless as it said they had fallen 90% in the past two weeks.

Tangen said the fund had largely written off its Russian holdings after the Norwegian government ordered over the weekend that they be frozen and possibly sold.

The oil fund held 27 billion NKr ($3 billion) of Russian stocks at the end of 2021, and they were still worth more than 25 billion NKr two weeks ago, before plunging to around 2.5 billion. NKr Thursday. Tangen acknowledged that even that figure was highly uncertain.

Tangen said the fund held an investment meeting on Thursday – the day Russia invaded Ukraine – and decided not to change its holdings. He said in an interview on Friday that he did not want to sell his Russian shares because it would allow the oligarchs to grab them on the cheap.

But it was overthrown on Sunday by Norway‘s centre-left government, which reversed decades of policy that the fund was purely a financial investor and not a political tool by ordering it out of Russia.

“It wasn’t an investment decision, it was a political decision,” Tangen said. But he added that he did not believe the decision would lead to other countries viewing it as a political fund. “It’s an extraordinary situation right now,” he said.

The fund, which holds an average of 1.4% of all listed stocks globally, is down 6.1% since the start of the year, while its equity holdings are down around 8%.