Anatoly Baronin*: Arctic component of Russian expansionism
Since the mid-2000s, Russian politics began to take more and more signs of neo-imperialism, accompanied by direct and indirect expansionist steps in foreign policy. The analysis of the Russian politics and projects in the Arctic shows that its implementation has objectives other than officially declared on the strategic doctrinal level. Corruption, political, symbolic and demographic factors are more significant in the system of Russian expansionism in the Arctic zone than economic ones. Thus, the policy of the Russian Federation in the Arctic should be especially considered in the context of internal and external political positioning of military-political leadership, their access to resources, budget allocation and investment finance, and management of electoral preferences within the state.
Changing the situation at the world energy market, maintaining the trend of relatively low oil prices and the development of transport and logistics projects of the Suez and Panama canals while reducing risks to shipping in the Indian Ocean have questioned the economic viability of Arctic projects.
Continued Russian expansionism in the Arctic lies, from the economic point of view, in reserving potential resource base for the future and increasing the area by expanding claims on the continental shelf. At the same time, this strategy should be supported by reliable data that global prices for energy change. However, conservative bets on oil and gas fields look uncertain against the development of alternative energy sources and expert forecasts of the dynamics of oil prices. Most representatives of the oil and gas sector forecast of the USA and Europe consider that in the prospect of the next 2-3 years, the price of oil would unlikely exceed the mark of 100 dollars/barrel.
Energy Factor
The cost of extracting a barrel of oil in some areas of the Barents Sea is US$120-150. In the current situation with the world prices, it eliminates any economic feasibility of such projects. According to the Shell company, even though the price of oil will have doubled by 2030, its production in the Arctic is unprofitable because of the cost of works and licenses. Estimates of profitability of the Arctic deposits range from US$ 90 to US$150-250 per barrel.¹ A similar assessment is given by the Stockholm Environment Institute.² The Russian Ministry of Energy estimates the profitability of US$ 115 a barrel.³ Russian platform at Prirazlomnaya deposit is now producing oil with the cost of US$60 per barrel. But that price is not a market one and is formed through substantial tax rebate, government non-market investments into the infrastructure of the platform, leading to a shortage of return of 600 million dollars.⁴ The continued attempts of oil production from the part of Russia, with these indicators, apparently seeks roadshow attraction of the Arctic projects while looking for investments and "piercing" the sanctions regime.
In addition, Russia has only 20% of technologies for the organization of production of Arctic oil and gas.
The present expansion of the Russian Federation in the Arctic does not consider the current economic feasibility of oil and gas production. Thus, according to the MP of the State Duma Vladimir Gruzdev, “the primary issue is the belonging of the Arctic shelf with oil and gas fields, and the point of profitability of their development is secondary.” Thus, the situation proves that in the conditions of expansion in the Arctic region, Russia tries, primarily, to reserve natural resources for the future, without the task of making a profit today. This policy may be caused by forecasts of the exhaustion of oil and gas reserves in Russia. According to the head of Saving Bank Mr.German Gref, it will happen in the period of 2028-2032. Minister for Natural Resources and Ecology of the Russian Federation Mr. Sergei Donsky defines 2044 as the appropriate horizon in the case of preserving the current volume of proved reserves. Thus, the Arctic resources allow, provided the world demand for the energy changes, to ensure the growth of their stocks and avoid shortages. However, this scenario requires that the world oil prices change and the development of alternative energy sources stops.
NSR Factor
One of the strategic reasons for the development of the Arctic Russia sees in the Northern Sea Route (NSR), according to the estimates of Russia, it should reduce the time and therefore the cost of transporting goods from Asia to Europe. The route from Shanghai to Rotterdam, which is one of the most popular, is made almost 1.5 times shorter in distance, and accordingly, in time. However, the Arctic route needs to ensure unceasing spendings for the support of coastal infrastructure, support of icebreakers, and increased insurance costs due to high risks. According to calculations of Verny, Jerome and Grigentin, Christophe, thanks to that, the use of the NSR is more expensive than the route through the Suez Canal by 30%. For the present transport, low costs are more important than the speed of delivery. In particular, the decline in oil prices meant that the container vessels began to actively use the route around the African continent, instead of going via the Suez Canal, which reduces the time, but requires higher costs for use.⁵
According to the calculations of Cairo, the Suez Canal modernization will reduce the waiting time for passing it three times, transit time by 40%, increase capacity by half.
But despite the 30% discount proposed by the Suez Canal Authority, carriers preferred in 2016 to select the Panama Canal and the Cape of Good Hope instead of NSR as the alternative route. Thus, the NSR competitiveness will be achieved only under the following conditions:
intense melting of glaciers, which will extend navigation (expected by 2033).
establishing the system of support and maintenance of the route, including a sufficient number of icebreakers and rescue infrastructure.
creation of artificial obstacles at the traditional and potential (Silk Road) transportation routes.
development of raw material base at the Arctic region, which will increase demand for freight traffic on this route.
refusal of transit fee.
The NSR cannot become a significant player at the global freight market. This conclusion stems from the fact that it needs for this to control 2-4% of transit between main markets linked with this route - Europe and Southeast Asia. The market is worth US$2 billion per year and has optimistic long term forecasts. So to make this route economically justified, its transit capacity should reach the level of 50-70 million tons per year, i.e. increase 10 times in comparison with 2016 figures. In the current environment, this result is questionable in the prospects of the next 5 years.
The NSR cannot compete with the southern route through the logistics component. There are 14 out of the top 20 ports of the world at the latter route. Each of them carries out cargo transshipment for 200-700 million tons per year. More than half of the traffic is provided not by transportation across the whole route, but through some of its segments. In comparison, there are 71 formally working ports along the NSR, 66 out of them have a turnover of less than 100 thousand tons per year or are not functioning. The majority of global shipping companies have in more than 20 ports of the southern route their own mooring and maintenance facilities, not available at the NSR ports, and their construction and maintenance due to the delivery of materials and climatic conditions will not be economically feasible.
One of the problems of the NSR may become the position of China. Official Beijing considers the Indian Ocean as a priority and an important staid region for it, providing almost 50% of European-Asian trade. The Chinese capitals have full control over ports of Chittagong, Colombo, Gwadar, Djibouti, and Dammam. There is an active construction of railroads today from Yunnan, Sichuan, and Guizhou to Myanmar to the deep-water ports of Dawei and Karagota, being built by China. The completion of this corridor will make the route 3-3,5 thousand miles shorter.
As for the NSR, China is not going to use this route and pay fees. Beijing chooses neutral waters outside the 12-mile zone to transport cargo. Thus, this position of China limits the potential of the NSR with internal turnover of Russia and supplies from Russia. Taking into account the shortage of cargo ships with large deadweight under the flag of the Russian Federation, the choice of Chinese ships will determine the route and support at the northern routes.
Powerful shipping companies demonstrate the trend of decreasing the speed of traffic by 30-40%, which can provide fuel savings of 50%.
| Year |
Total |
Russia |
Singapore |
Finland |
Norway |
Germany |
Spain |
China |
Greece |
Hong Kong |
Sweden |
The Netherlands |
Other |
| 2011 |
41 |
26 |
4 |
2 |
2 |
1 |
1 |
Х |
X |
Х |
X |
X |
5 |
|
2012 |
46 |
18 |
Х |
6 |
5 |
Х |
Х |
2 |
Х |
Х |
X |
Х |
15 |
|
2013 |
71 |
46 |
Х |
2 |
2 |
Х |
Х |
Х |
2 |
1 |
Х |
Х |
18 |
|
2014 |
53 |
47 |
Х |
Х |
Х |
Х |
Х |
Х |
Х |
Х |
3 |
X |
3 |
|
2015 |
18 |
10 |
Х |
Х |
Х |
Х |
Х |
2 |
Х |
Х |
1 |
1 |
4 |
|
2016 |
18 |
7 |
X |
X |
Х |
1 |
Х |
Х |
Х |
2 |
Х |
X |
8 |
Tab.1. Number of transit voyages along the NSR under the flags of the countries in 2011-2016.
Analysis of the number of transits in 2011-2016 indicates the trend of reducing their number both under the flag of the Russian Federation, and under the flags of other countries. Despite the obvious link between the fall in the number of transits under the flags of non-residents of the Russian Federation and the introduction of sanctions against Russia in 2014, there is a corresponding reduction of the transit for the ships under the Russian flag as well. This casts doubt on the hypothesis of reducing utilized capacity of the NSR due to sanction pressure.
Diag.1. Number of transit voyages at the NSR in 2011-2016
However, the dynamics of cargo turnover at the NSR from 1960 to 2016 shows that while maintaining the growth of this indicator at the level of the past 15 years, access to the planned 64 million tons mark in 2020 is unrealistic. By preserving the dynamics of the last 3 years, the target level will be reached in 12-16 years.
|
Year |
Volume of cargo |
|
1960 |
1 |
|
1970 |
3 |
|
1980 |
5 |
|
1987 |
6,6 |
|
1992 |
3,9 |
|
1995 |
2,4 |
|
2000 |
1,8 |
|
2005 |
2 |
|
2011 |
2,6 |
|
2013 |
3,9 |
|
2014 |
4 |
|
2015 |
5,2 |
|
2016 |
6,9 |
Tab.2. Dynamics of cargo turnover at the NSR in 1960-2016, million tons.
Thus, calculations show that the NSR cannot compete with the traffic routes through the Suez and Panama canals and even through the Cape of Good Hope without complete abandonment of transit fees and tariffs on icebreaker support. Under such conditions, to achieve competitiveness of the NSR becomes not economically feasible project for Russia.
Infrastructure development, the need to build a sufficient number of icebreakers though create congestion in related sectors of the Russian economy and can be seen as a stimulus to the development of economy, in terms of required investment are economically unreasonable and cannot be compensated by operation of the NSR.
The results for 2014 NSR transit were 274 thousand tons, reducing in comparison with the 2013 figure 4.3 times. Calculations show that the expenses to bring the potential turnover through the NSR to 60 million tons per year, are eight times higher than the expenses of Egypt to increase the transit to 400 million tons a year. Considering the above arguments, the development of the NSR cannot be regarded as an essential goal of Russian expansion in the Arctic.
Military Factor
The Russian Federation carries out the militarization of the Arctic, accompanied by extension of claims to the territory in the region. Establishment of military bases is a power component that aims to support the process of territorial claims. At the same time, in case of conjuncture conditions for developing natural resources in the region, the Russian Federation may go against international law and seize them by power.
Militarization of the Arctic by the Russian Federation should be viewed in several ways:
Forming protection against missile attack.
Rapid deployment of navy in the world ocean.
Monitoring the NSR.
Forming protection against missile attack. Since the Cold War, the North Pole has been considered shortest route of approaching ICBMs and strategic bombers. In order to prevent the strike, Russia has established a continuous radar field in the Arctic since 2014. A unified system of monitoring air, surface and underwater conditions for all Arctic archipelagos and islands has started to be made. The combination of complexes S-300, Tor M2DT, and Pantsyr-SA in air defence units shows its attempts to cover up with ICBMs and cruise missiles the shortest route for missile attack against the European part of Russia from North America and the Barents Sea. However, the possibility of launching missiles from underwater carriers and simultaneous assault from several directions dispute the reliability of the system.
Rapid deployment in the world ocean. According to estimates of the Russian military command, the current geopolitical situation limits the ability of Russian navy for rapid deployment/sortie into the world ocean. It is limited by Danish islands in the Baltic area. As for the Black Sea area, it is limited by the Dardanelles and the Bosphorus followed by uncontrollable passages through the Suez Canal or Gibraltar. In the Pacific zone, there are limitations in the area of the Japanese isles. Using the northern route strategically follows the route of the Arctic convoys of the period of World War II.
The operational situation in the Arctic zone of the Russian Federation almost precludes potential enemy to capture and retain areas due to the absence of large settlements and the difficulties of transport and logistics support for such operations. The nature of the terrain, climatic conditions do not allow for continued military operations and to implement large-scale amphibious or air-borne operations with long-term maintenance of captured positions. Low population also reduces the efficiency of unconventional operations (hybrid type). Thus, the specificity of the Arctic zone allows to limit probable combat operations with capturing/destroying industrial infrastructure, carrying out sabotage raids, using the area to carry out a missile attack along the shortest trajectory of ICBM or cruise missiles flight, as well as organizing blockades of certain areas of shipping.
This causes limiting Russian Army group with two formed units:
• 80th separate motorized infantry brigade in Alakurtti (Murmansk province).
• 200th separate motorized infantry brigade in Pechenga-Luostari (Murmansk province).
In this case, both are stationed in the Murmansk province, despite the fact that the area of their responsibility covers the whole northern coast. However, together with their subordination to the Northern Fleet, it may be caused by the priority of the Northern Fleet infrastructure protection and low risk estimation by the command as for other areas.
Monitoring the NSR. Since 2014 an intensive recovery of airfields on the Novosibirsk Islands, Franz Josef Land, and modernization of northern airfields in Tiksi, Naryan-Mar, Avlykel, Amderma, Vorkuta, Anadyr, in the town of Rogachovo, and the frontier post Nagurskoye. According to the Chief of Defence Control Centre Lieutenant General Mikhail Mizintsev, it is envisaged to construct 14 airfields, 1 aviation ground ordnance yard, 10 technical positions of radar units, and aircraft guidance points.
Location of the airfields allows to draw conclusions about the tasks of the air covering of the eastern part of the NSR and control over the surrounding area, located westward of Chukotka and to the east of Taimyr.
The world political situation today does not allow the Kremlin to rely on territorial claims in the Arctic in the legal field. Thus, Russia can use military component to expand Arctic territories, leading to the aggravation of the military-political situation in the region.
In addition, analysis of the situation does not exclude the probability of hybrid operations against Finland, followed by partial or total occupation of the territory.
Demographic Factor
According to the data of the Northern (Arctic) Federal University in Arkhangelsk, the population of the Arctic regions of Russia decreased by half during the last 20 years. These include those subjects of the Russian Federation, which are part of the land area of the Arctic zone of the Russian Federation as a whole or in part: Komi and Sakha Republics, Krasnoyarsk Territory, Arkhangelsk and Murmansk provinces, Nenets, Yamalo-Nenets, and Chukotka Autonomous Districts.
Development of the North of Russia in the twentieth century occurred by means of forced and encouraging migration. The peak of forced migration was in 1930s-1950s. Since 1970s-1980s, the vector of migration has changed to the north-eastern territories, especially to the Yamalo-Nenets district.
Since 1990s, the transition to the market economy principles contributed to the implementation of the shift method of working, which led to a reduction in permanent population. Despite the fact that most subjects of the Arctic zone kept positive demographic dynamics, the total population declined in 1989-2002 from 9.4 mln. to 7.8 mln. Between 2002 and 2014 there was a decrease of the population by 3,000,000 more. The dynamics shows that the reduction of the population of the region is progressing.
Some territories, such as Ust-Jana district, lost 83.2% of the population from 1990 to 2016. A significant population decline has been observed in the Chukchi Autonomous Region (-69%), the Republic of Sakha (-68.9%), Nyzhnyekolymsk district (-68.6%), Bulun district (-52.3%). The main cause of the population decline is the closure of industrial enterprises and military bases in the 1990s. As of 1 January, 2016, 2.38 million people lived in the Arctic zone of the Russian Federation, or 1.6% of the population of the country.
According to the poll, which was conducted in 2013⁶, 40.1% of the population of the Kola Peninsula had the intention to leave the region. The following regularity could be observed: the larger is the settlement, the less attractive it is for its people to stay in it. Keeping to this trend raises the issue of density of the population of territories, supporting its infrastructure, communications, and accordingly economically unfounded budget expenditures.
So one of the tasks of the Russian expansion in the Arctic is to support the density of the population of the territories and forming policy, similar to the policy of forced and encouraging migration in 1930s-1980s.
Symbols Factor
The policy of the Russian Federation in the last 9 years, demonstrate the priority of symbolism. Despite the declarative economic and military motivations, goals of Russia in the Arctic are largely symbolic. The task is using the Arctic to restore the great-power status of the Russian Federation and provide a powerful post-imperial resentiment. The Arctic strategy is based on the goal to take revenge after the Cold War and compensate for the loss of image following the collapse of the Soviet Union. In this context, the Arctic is a tool that allows, according to military and political leadership of the Russian Federation, to demonstrate Russia’s return to geopolitics as a major player and powerful centre of influence.
The North traditionally played a mythological role in the Russian mass consciousness. It was a symbol of the territorial greatness, a source of inexhaustible resources, and an example of "heroic behaviour" according to the state propaganda in the context of education of youth. In addition, the North (Arctic) has always been a part of the Russian identity, as territoriality has always been an important part of political society of Russia and is considered by its population and elites, as a key marker of the Russian statehood. Thus, the symbolic importance of the Arctic in the context of neo-imperial ideology and future prospects of using its potential are much more important than the practical benefits of its use.
Russian expansion in the Arctic is another simulation of sovereignty, symbolic actions policy, militarization and territorial claims with a view to repel the threat from the enemy that does not exist. The Kremlin is trying to use the Arctic for a symbolic demonstration of sovereignty, where the artificial creation of the Russian identity is carried out through implementation of the national myth and legends of the sacrifice and grandeur of the nation. This policy enables the public focused on the achievements of the past, to consolidate and make the replacement of the current reality with the prospects of returning to the "past greatness." This goal, which is fixed at the level of state policy, has a significant effect on the population of the Russian Federation, as on the background of reality allows us to provide the incumbent authorities with time and to make concessions for attempts to restore the past in forms, values and symbols formed by the authorities and state propaganda.
In fact, the Kremlin uses a fairly complex but interesting technology of "reselling the past for the public". For the older generation, it is a unique chance to return green years through the imitation of the past today. For young people, it is a chance of getting what they have lost, which acquires value and greatness through propaganda. This is a chance to repeat the path of "the pioneers" who led the nation "to the world greatness," a chance to continue the deeds of mythologized heroes and thus also become one of them.
Returning to the past does not need moving forward. It does not require significant technological progress and modernization of social infrastructure. Hence, this policy is quite economical in terms of expenditures, it allows to achieve the goal mainly by operating with symbols. Installing the Russian flag on the ocean floor at the North Pole in 2007 was such a symbol, which was done under the guise of taking samples of soil during an expedition funded by international organizations.
Corruption Factor
Any large-scale infrastructure projects at the post-Soviet space are traditionally an element of corruption schemes. Analysis of the Russian policy in the Arctic allows to assume the presence of substantial corruption component in this project. Proposals such as the project by the Security Council of the Russian Federation as for profound development of the Arctic and the Far East by means of airships with the total value of US$ 240 billion confirms the version of the corruption component in the Arctic expansion.
None of the Arctic region countries carries out the infrastructure development of their Arctic territories. Implementation of all commercial projects as for developing deposits is carried out in shifts. With the collapse of the Soviet Union and the emergence of market economy principles in the Russian Federation, shift method in economic management began to develop rapidly in the northern regions. This is an indication that it is the best and economical in the current climatic conditions, taking into consideration logistics, social and infrastructure components. Return to the plans of developing the Arctic by military and political leadership of Russia contradicts the economic feasibility and the world practice. However, funding relevant projects in these conditions is a proof of their misuse.
Similar projects in the military sphere also have indirect evidence of corrupt disbursement of budget funds. One of the examples may be the theft of "Lukoil-Rezervnefteprodukt" diesel fuel in May, 2015 for US $ 1 bln., which was intended for military needs.
Budget financing of the programme of social and economic development of the Arctic until 2025 is 209.7 billion rubles. However, the total cost of development of the Arctic region is much higher. Thus, only the planned allocation for the construction of a new 170 km Bovanenkovo-Sabetta railway amount to 113 billion rubles. The right for implementing the project within the framework of public-private partnership was given to VIS Transstroy Ltd. The company belongs to Igor Snyegurov, a man from the environment of Gazprom CEO O.Miller. The company has repeatedly been noticed in the withdrawal of budget funds and those of public companies.⁷ A separate line of corrupt transactions is the government contractual order and construction of icebreakers.
Thus, corruption component is one of the determining factors of the Arctic development programmes both in infrastructure and in the military spheres, for it allows to distribute budget funds in a non-transparent manner and withdraw funds through programmes of governmental order without sufficient economic justification.
______________
*Information about the Author:
Anatoly Baronin – director, Da Vinci AG analytical group
The article is based on the presentation at the International Conference «Russian Activeness in the Arctic: goals, trends and security challenges»
References:
³http://www.ng.ru/economics/2017-03-30/1_6961_arktic.html
⁵http://www.cnbc.com/2016/02/26/cargo-ships-could-save-thousands-by-skipping-the-suez-canal.html
⁶http://www.iep.kolasc.net.ru/tezis2013.pdf
⁷http://www.kompromatural.ru/puteshestvie_iz_bovanenkovo_v_sabettu