Researchers Present an Outlook for the Russian Arctic

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The Russian Arctic should be better connected – economically and logistically – to the country's other regions, according to researchers of the HSE Faculty of World Economy and International Affairs. If Arctic projects are to develop further, they must be supported by stronger horizontal connections involving regional authorities, civil society organisations, the expert community, and the indigenous peoples of the North. The study is published in Regional Research of Russia. 

Advancement of its Arctic regions is one of Russia's strategic priorities. In the spring of 2020, the country adopted the Foundations of the Russian Federation State Policy in the Arctic for the Period up to 2035, followed in the autumn of the same year by the Strategy for Developing the Russian Arctic Zone and Ensuring National Security.

Measures envisioned in the Arctic include large-scale resource extraction projects, such as the Arctic LNG 2, continued construction of the icebreaker fleet, including three new nuclear-powered icebreakers, and upgrading of the local infrastructure, in particular reconstructing the Arkhangelsk and Murmansk ports and building new railways. 

However, in the current policy context, the Arctic remains economically and logistically isolated from other Russian regions. While the Arctic projects are part of the broader national economy, a policy framework to stimulate cross-regional collaboration is lacking. This may lead to growing spatial and economic isolation of the Arctic and missed opportunities for unlocking the industrial, innovative and transport potential of Siberia and the Russian Far East. 

HSE researchers examined the Arctic development policy and the current infrastructure and energy projects, as well as related expert opinions and public discussion, to come up with recommendations on how the Arctic ‘self-isolation' may be overcome. 

The Arctic and northern resources have traditionally been of enormous importance to Russia's economy. The region produces 80% of the country’s natural gas, 17% of its oil, 90% of the nickel and cobalt, 60% of the copper, and almost 100% of its diamonds and rare earth metals, accounting for 10% of Russia's GDP and 20% of its exports. Total cargo volume on the Northern Sea Route has grown six-fold over the past five years and reached 30 million tons in 2019, while the route itself has seen major upgrades. Russia's capabilities in the Arctic by far exceed those of other countries. While the U.S. has five diesel-electric icebreakers and Canada has seven, Russia operates more than 40 icebreakers, of which five are nuclear-powered and three are expected to be replaced by new ones in the coming decade.

The region's harsh nature and climate, vast spaces and fragile ecosystems make working, living and doing business in the Arctic a tough challenge. The Arctic ecosystems still need more time to adapt to rapid warming and to anthropogenic pressure. The living conditions of local communities in the Arctic region are currently below the Russian average. Transport and communications are underdeveloped, and many people are migrating to other parts of the country. There have been delays in the construction of the Northern Sea Route infrastructure, including its icebreaker fleet. The region is affected by critical environmental problems such as air, groundwater and soil pollution. 

Compared to other parts of Russia, business and social projects in the Arctic often require a much larger investment of time and resources, making them less feasible in a market environment. For business to operate responsibly in the region, additional financial commitment is necessary to mitigate environmental risks by employing expensive technology and supporting local communities facing harsh living conditions by contributing towards the cost of social services.

HSE researchers argue that further development of the Arctic region's vast resource potential requires complementing the current programme by a 'regional superstructure' to facilitate collaboration of the Arctic with Siberia and the Russian Far East. 

Ilya Stepanov, Research Fellow at the HSE Faculty of World Economy and International Affairs

'Current Arctic projects largely fail to tap into the innovative economic and industrial potential of Siberia and the Far East. These projects could benefit from better integration into other regions' economic and transport systems. The Arctic is rich in natural resources, while Siberia enjoys technological innovation and human potential and the Far East is strong in transport and logistics, as well as providing access to the Asian markets. Cross-regional collaboration could help address the existing dependence on imported equipment, while the added value will be retained by the Russian regions'.

For example, a gas liquefaction project in Yamal imports 70% of its equipment from China. This expensive and sophisticated equipment requires highly qualified operators. According to the HSE researchers, manufacturing such equipment in Russia would enable the participating regions to retain the added value, increase demand for high-tech products, and create new highly-skilled jobs.

In today's world, the natural resource sector is no longer associated with less developed economies. Instead, it has become a field of innovation and technological advancement both in developed countries, such as Canada and Australia, and in developing economies, such as Chile, Brazil, and Malaysia. The Russian Arctic's natural wealth – mineral fuels, diamonds, non-ferrous, ferrous and rare earth metals, and more – could support broader modernisation of the country and drive a transition from extensive to intensive approaches to Arctic development.

The vastness of the Arctic territories, their harsh climate and challenging economic conditions all make it unlikely that the free market alone can ensure the region's advancement. According to the study’s authors, support from government is essential and could be provided by financing the construction of new infrastructure projects, offering tax incentives and subsidies, creating favourable public-private partnership regimes, and investing in better living and working conditions in the northern territories. At an institutional level, enabling conditions are needed for the integration of Arctic projects into high-tech spatial value chains which go far beyond the country's northern regions.