Interdependence, not sovereignty, is the key to the development of Russia’s Arctic region
It has been five years since Russia adopted its comprehensive Arctic policy setting ambitious goals for the exploitation of Arctic resources, shipping along the Northern Sea Route and strengthening security in the region. While acknowledging the need for international cooperation, the policy emphasizes Russian sovereignty as a basis for Arctic development. Although strengthening Russia's engagement in the Arctic may be a key building block in the development of the region, an over-emphasis on sovereignty issues risks overlooking the importance of economic and strategic developments beyond the region.
The future of Arctic resources is determined elsewhere
Russia’s Arctic policy is set out in a 2008 document entitled Foundations of the Russian Policy in the Arctic until 2020 and beyond. The Foundations set an ambitious goal of turning the Arctic into ‘Russia’s national resource base of the 21st century’. This goal has been supported at the highest levels of the Russian Government but progress in achieving it has been slow. For example, the Shtokman gas project has been shelved and the exploitation of the Prirazlomnoye oil deposit has been repeatedly delayed. The only relative success has been achieved on the Yamal peninsula, where in 2012 the Russian gas company Gazprom started developing the onshore Bovanenkovo gas field. However, offshore development elsewhere remains a distant prospect.
In fact, the development of Russia’s Arctic energy resources has actually been more profoundly affected by global energy markets. The emergence of technologies to exploit unconventional hydrocarbon resources has significantly undermined the potential profitability of untapped Arctic shelf resources and diminished their investment attractiveness. The recent shale gas revolution in the United States, which has been driven by these new technologies, has resulted in a significant fall in gas prices and the loss of a potential market for Russian gas, thereby removing the logic for developing the Shtokman project.
In addition, Western and Central European countries’ policies of reducing energy dependency on Russia has cast doubts on the future demand for Russian gas in Europe, thereby further undermining the prospects for the development of new deposits, including those on the Arctic shelf and the Yamal peninsula.
The potential of the Northern Sea Route remains unfulfilled
Russian officials aim to turn the Northern Sea Route (NSR) into ‘an international transport artery capable of competing with traditional sea routes in cost of services, safety and quality’. According to the Deputy Minister of Transport, Vladimir Olersky, by 2030 the traffic on the NSR will amount to 60–80 million tonnes per year (compared to the Suez Canal, where in 2012 the net tonnage was over 900 million tonnes). However, despite recent increases, the volume ofshipping along the NSR has still not reached the historical maximum volume, attained in 1987 (6.7 million tonnes), with 2012 figures amounting to just 60 per cent of this amount.
These figures belie claims that the NSR will constitute an alternative to the Suez Canal route, even in the medium term. Given that most cargo shipped along the NSR is hydrocarbon resources, the future of the NSR is closely connected to the development of Arctic oil and gas industries. Additionally, without the development of the oil and gas sectors it is difficult to imagine significant investment in the infrastructure that will be required to make the NSR fully functional for international traffic.
Multilateral frameworks can play a role in Arctic security
Strengthening regional security forces has been seen as a top priority of Russia’s Arctic policy, as it guarantees Russia’s sovereignty in the region. Recent military exercises near the Novosibirskiye Islands involved 10 warships and 4 nuclear-powered ice-breakers and the reopening of a Soviet-era military base. However, such efforts may be counterproductive, since they risk sending the wrong signals to Russia’s neighbours and raise questions about its commitment to Arctic cooperation.
Russian officials strongly oppose ‘the presence of military blocs in the region’ and see ‘increasing’ activity by the North Atlantic Treaty Organization (NATO) in the Arctic as an infringement of Russia’s sovereign interests. However, the Arctic security framework is not formed in a vacuum. The Arctic states are part of existing security frameworks. Four of them are members of NATO, and security arrangements and agreements between these states do not exclude the Arctic region.
While NATO is not likely to be a primary forum for addressing Arctic security issues, it is already a part of Arctic security governance. In this regard, it will be important for both NATO and Russia to ensure a constructive relationship between themselves and with other actors and work on confidence-building measures in the security area.
China is emerging as a key driver for Russian Arctic development
While European and North American interest in Russian energy resources has decreased, China’s interest is growing due to its own massive energy demands. Russian energy producers are therefore seeking to reorient some of their activities towards Chinese markets. Russian oil company Rosneft and China National Petroleum Corporation (CNPC) have signed a number of agreements on exploratory drills in the Barents and Pechora seas, the world’s largest unexplored oil areas. Russia’s leading private energy producer, Novatek, has also partnered with CNPC in the Yamal liquefied natural gas project.
Russia sees China as a potential investor in the infrastructure along the NSR, since it is unlikely to be able to generate the necessary levels of investment internally. During the Asia–Pacific Economic Cooperation (APEC) summit in Indonesia in 2013, Russian President Vladimir Putin invited Asian states, including China, to invest in the development of the NSR. In turn, China has expressed significant interest in the transit potential of the NSR as a means to deliver Arctic resources to Chinese industry and to ship finished goods to major markets in Europe and North America. The recently signed Free Trade Agreement between China and Iceland has added another dimension to China’s interests in the NSR, since the shortest route between Iceland and China is through the Arctic.
Together, these developments could potentially give a new impetus to Russia’s Arctic development. At the same time, while there have been important initial steps in the bilateral relationship, Russia remains cautious about the prospects of granting China access to the Russian Arctic, reflecting the growing asymmetry in their relations and influence.
Interdependence versus sovereignty
The international community’s increased focus on the Arctic in recent years has highlighted the fact that ownership of rich oil and gas resources—as well as transportation routes—is not sufficient to ensure their development. Progress in the economic development of Russia’s Arctic depends fundamentally on markets, investment and business actors based outside the Arctic and outside Russia.
The prospects for developing the Russian Arctic will thus ultimately rest on Russia’s willingness and ability to build partnerships with international consumers and investors. In this regard, the emerging interdependence of Russian and Chinese energy and transport interests could become a key driver for developing the Russian Arctic if this relationship can be effectively managed.
It has been five years since Russia adopted its comprehensive Arctic policy setting ambitious goals for the exploitation of Arctic resources, shipping along the Northern Sea Route and strengthening security in the region. While acknowledging the need for international cooperation, the policy emphasizes Russian sovereignty as a basis for Arctic development. Although strengthening Russia's engagement in the Arctic may be a key building block in the development of the region, an over-emphasis on sovereignty issues risks overlooking the importance of economic and strategic developments beyond the region.
The future of Arctic resources is determined elsewhere
Russia’s Arctic policy is set out in a 2008 document entitled Foundations of the Russian Policy in the Arctic until 2020 and beyond. The Foundations set an ambitious goal of turning the Arctic into ‘Russia’s national resource base of the 21st century’. This goal has been supported at the highest levels of the Russian Government but progress in achieving it has been slow. For example, the Shtokman gas project has been shelved and the exploitation of the Prirazlomnoye oil deposit has been repeatedly delayed. The only relative success has been achieved on the Yamal peninsula, where in 2012 the Russian gas company Gazprom started developing the onshore Bovanenkovo gas field. However, offshore development elsewhere remains a distant prospect.
In fact, the development of Russia’s Arctic energy resources has actually been more profoundly affected by global energy markets. The emergence of technologies to exploit unconventional hydrocarbon resources has significantly undermined the potential profitability of untapped Arctic shelf resources and diminished their investment attractiveness. The recent shale gas revolution in the United States, which has been driven by these new technologies, has resulted in a significant fall in gas prices and the loss of a potential market for Russian gas, thereby removing the logic for developing the Shtokman project.
In addition, Western and Central European countries’ policies of reducing energy dependency on Russia has cast doubts on the future demand for Russian gas in Europe, thereby further undermining the prospects for the development of new deposits, including those on the Arctic shelf and the Yamal peninsula.
The potential of the Northern Sea Route remains unfulfilled
Russian officials aim to turn the Northern Sea Route (NSR) into ‘an international transport artery capable of competing with traditional sea routes in cost of services, safety and quality’. According to the Deputy Minister of Transport, Vladimir Olersky, by 2030 the traffic on the NSR will amount to 60–80 million tonnes per year (compared to the Suez Canal, where in 2012 the net tonnage was over 900 million tonnes). However, despite recent increases, the volume of shipping along the NSR has still not reached the historical maximum volume, attained in 1987 (6.7 million tonnes), with 2012 figures amounting to just 60 per cent of this amount.
These figures belie claims that the NSR will constitute an alternative to the Suez Canal route, even in the medium term. Given that most cargo shipped along the NSR is hydrocarbon resources, the future of the NSR is closely connected to the development of Arctic oil and gas industries. Additionally, without the development of the oil and gas sectors it is difficult to imagine significant investment in the infrastructure that will be required to make the NSR fully functional for international traffic.
Multilateral frameworks can play a role in Arctic security
Strengthening regional security forces has been seen as a top priority of Russia’s Arctic policy, as it guarantees Russia’s sovereignty in the region. Recent military exercises near the Novosibirskiye Islands involved 10 warships and 4 nuclear-powered ice-breakers and the reopening of a Soviet-era military base. However, such efforts may be counterproductive, since they risk sending the wrong signals to Russia’s neighbours and raise questions about its commitment to Arctic cooperation.
Russian officials strongly oppose ‘the presence of military blocs in the region’ and see ‘increasing’ activity by the North Atlantic Treaty Organization (NATO) in the Arctic as an infringement of Russia’s sovereign interests. However, the Arctic security framework is not formed in a vacuum. The Arctic states are part of existing security frameworks. Four of them are members of NATO, and security arrangements and agreements between these states do not exclude the Arctic region.
While NATO is not likely to be a primary forum for addressing Arctic security issues, it is already a part of Arctic security governance. In this regard, it will be important for both NATO and Russia to ensure a constructive relationship between themselves and with other actors and work on confidence-building measures in the security area.
China is emerging as a key driver for Russian Arctic development
While European and North American interest in Russian energy resources has decreased, China’s interest is growing due to its own massive energy demands. Russian energy producers are therefore seeking to reorient some of their activities towards Chinese markets. Russian oil company Rosneft and China National Petroleum Corporation (CNPC) have signed a number of agreements on exploratory drills in the Barents and Pechora seas, the world’s largest unexplored oil areas. Russia’s leading private energy producer, Novatek, has also partnered with CNPC in the Yamal liquefied natural gas project.
Russia sees China as a potential investor in the infrastructure along the NSR, since it is unlikely to be able to generate the necessary levels of investment internally. During the Asia–Pacific Economic Cooperation (APEC) summit in Indonesia in 2013, Russian President Vladimir Putin invited Asian states, including China, to invest in the development of the NSR. In turn, China has expressed significant interest in the transit potential of the NSR as a means to deliver Arctic resources to Chinese industry and to ship finished goods to major markets in Europe and North America. The recently signed Free Trade Agreement between China and Iceland has added another dimension to China’s interests in the NSR, since the shortest route between Iceland and China is through the Arctic.
Together, these developments could potentially give a new impetus to Russia’s Arctic development. At the same time, while there have been important initial steps in the bilateral relationship, Russia remains cautious about the prospects of granting China access to the Russian Arctic, reflecting the growing asymmetry in their relations and influence.
Interdependence versus sovereignty
The international community’s increased focus on the Arctic in recent years has highlighted the fact that ownership of rich oil and gas resources—as well as transportation routes—is not sufficient to ensure their development. Progress in the economic development of Russia’s Arctic depends fundamentally on markets, investment and business actors based outside the Arctic and outside Russia.
The prospects for developing the Russian Arctic will thus ultimately rest on Russia’s willingness and ability to build partnerships with international consumers and investors. In this regard, the emerging interdependence of Russian and Chinese energy and transport interests could become a key driver for developing the Russian Arctic if this relationship can be effectively managed.