The Nobel Peace Prize is given out by a committee of five people chosen by the Norwegian Parliament, but it is not a political prize. The people are chosen from any and all political parties, and they are free to choose any of the nominees as the winner, without the Norwegian government having a say. No one except the committee (and 2-3 people that know it the day before to make arrangements) knows who will win. The committee can choose from a list of nominees. Only a few people in the world can nominate someone for the peace prize, mostly politicians, advisers, former members of the committee and professors.
The committee can also refuse to give the prize to anyone if they don’t find anyone that they see fit, or their preferred candidate that year died before they could announce their choice.
Sometimes it makes a huge impact when someone gets the peace prize (Muhammad Yunus 2006, for his micro loan initiative), sometimes it hardly makes any noise (Martti Ahtisaari 2008, for his lifetime of peace negotiations), sometimes it’s surprising beyond belief (Barak Obama 2009, who saw that one coming?) and sometimes it can be damaging for Norway (Liu Xiaobo 2010). The committee does not care about any damages Norway might suffer, either on the budget (the safety budget in Oslo in December 2009 was insane) or international relations between Norway and other countries (China did NOT appreciate the prize in 2010).