This week brought major shakeups to Russian politics and policymaking, with by far the most significant being the declared constitutional changes which may allow President Vladimir Putin to remain in office past his previously-anticipated departure date in 2024, and keep him in power until possibly 2036. This announcement overshadowed another recent watershed Russian policy declaration, specifically the updating of Moscow’s Arctic strategies for the next decade.
The Arctic initiative, entitled ‘State Policy of the Russian Federation in the Arctic for the Period until 2035,’ was approved [in Russian] on 5 March by the President’s office, with the document [pdf, in Russian] outlining the priorities [in Russian] for defending Russian strategic interests in its Arctic lands while promoting enhanced economic initiatives in those regions. These initiatives included the ongoing development of the Northern Sea Route (NSR, Северный морской путь), and extraction of Arctic fossil fuels, over the next fifteen years.
This plan appears at a time when the Russian government has enhanced the role of its Arctic areas within both its domestic and foreign policy. For example, in February this year, the country’s Ministry for the Development of the Russian Far East was renamed the Ministry for the Development of the Russian Far East and the Arctic (Министерство Российской Федерации по развитию Дальнего Востока и Арктики), to further underscore this policy shift.
According to the Russian news service TASS, the priorities for Russian Arctic policy under the new plan include improving the livelihoods of Russian citizens, including Indigenous persons, in the Arctic, developing the Arctic region’s resources, including the NSR, for the betterment of the country, as well as protecting the local environment. Incentives are included in the strategy to both grow the Arctic population by encouraging Russians to relocate to the far north, and to foster business development, including in the energy sector via tax relief for regional oil firms.
The updated Arctic plan also comes in the wake of recent announcements [in Russian] by the Russian oil firm Rosneft (Роснeфть) that it was considering building a new pipeline along the Siberian coast, specifically in the Taymyr Peninsula region, to move oil from the Vankor oilfields to boost energy production and increase NSR sea traffic. According to the Russian Agency for the Development of Human Capital in the Far East and the Arctic, there are also preparations underway for the creation of 200,000 new jobs over the next five years in the country’s northern lands. The Russian Arctic, which has suffered from isolation and underdevelopment, has seen a marked drop [pdf] in population since the breakup of the Soviet Union almost thirty years ago, and Moscow is anxious to reverse this trend.
There is also a security dimension to the new plan, acknowledging the strategic challenges Moscow is facing as the Arctic gains international interest. While President Putin made the Arctic a greater security priority over the past few years, the new Arctic policies call for even further improvements to Russian air, sea and undersea defence monitoring in the Arctic to guard the country’s sovereignty. Complementing the ongoing military build-up of Russian military personnel in the country’s Arctic lands, including upgrades to Russia’s Siberian coastal defence, was a ‘general operation force’ announced for the region to further defend local assets and interests.
The document portrayed [in Russian] threats to Russian security in the region as numerous and growing, including a chronically low level of infrastructure development, particularly in communication and transportation, regional out-migration, and the growing military activities of other Arctic states. This month, next-door Norway had been holding its ‘Cold Response’ joint military manoeuvres, in cooperation with NATO members and partners, (including the United States), in its northern counties of Nordland and Troms og Finnmark. However, this week it was confirmed that the exercises would end early, due to concerns about the COVID-19 virus. Moscow has been critical of such operations close its northern borders, and last month the Russian military held a live-fire exercise, which included drones, in the Pechenga Valley close to the Norwegian border.
While Moscow’s Arctic development plans remain ambitious, they may be running directly into many geo-economic realities beyond its control. This week found the Russian energy industry squarely in the crosshairs of Saudi Arabia’s decision to increase its own petroleum production after the Putin government declined to support a proposed output reduction by Riyadh in response to the increasingly shaky global financial situation. The possibility of a full-on energy price war, along with ongoing global concerns about the COVID-19 pandemic, not only caused massive drops in the value of several international stock markets but also a plunge in petroleum values on 9 March, with prices for Brent Crude oil dropping below US$34 per barrel.
These oil price levels have not been seen since the start of the 1991 Gulf War and could result in a severe blow to Russia’s energy industry and a challenge for President Putin’s grand plans to turn the Russian Arctic into an energy powerhouse. Oil and gas development in Siberia had previously been affected both by the imposing of Western sanctions against the Putin government after the 2014 Ukraine crisis, as well as the previous sudden fall [pdf] in oil prices from previous highs of US$110 per barrel during the same year.
Since that time, much of Moscow’s oil and gas development plans in Siberia have been metaphorically defying gravity, with the industry pressing forward in the hopes that prices would return to levels seen a decade ago. By contrast, other oil-producing states in the Arctic, such as Norway, have soured on potential new sources of Arctic fossil fuels due to price reductions. Norway, along with Canada, were also hit hard this week financially by the decline in oil prices and the prospect of a subsequent trade war, and the US state of Alaska, also heavily dependent on oil sales, is facing another blow to its already weak finances. Russia’s path forward will greatly depend on whether Moscow and Riyadh can reach a truce which would stabilize any further oil market volatility, and failing such a truce, whether the Russian economy would have the ability to absorb reduced oil demands.
The short-term prospects of the Polar Silk Road, envisioned as a Sino-Russian joint initiative connecting Asian and European markets via the Russian Arctic, including via energy trade, also began to appear uncertain after the initial COVID-19 outbreak in China earlier this year. In late January, Moscow announced that it was sealing its land border with China, causing much sudden financial stress to adjacent Russian towns. The government of the city of Murmansk was also reportedly weighing the prospect, this week, of closing its border with Finland and Norway due to coronavirus concerns, (the whole of Russia has confirmed only approximately twenty cases of COVID-19 within the country, as of this week).
Along with the rest of the world, the economic situation in the Arctic is facing a very uncertain 2020, and one of the major players in the region, the Russian Federation, may find it more difficult to reconcile domestic politics with international uncertainties.