What is the real price of Russia’s Arctic dream?

Polar ice melt.
Polar ice melt.

Publish date: May 2, 2019

Translated by: Bellona

The Kremlin is approaching the Northern Sea Route on an almost war-like footing. New ice-class ships are under construction to help bear out the cargos of minerals, gas and oil said to reside along the Arctic’s icy shores. Led by a growing fleet of nuclear icebreakers, foreign shippers will pass from east to west along a water highway paved by Russian know-how, gladly paying tolls for their passage.

By Anna Kireeva and Charles Digges

The Kremlin is approaching the Northern Sea Route on an almost war-like footing. New ice-class ships are under construction to help bear out the cargos of minerals, gas and oil said to reside along the Arctic’s icy shores. Led by a growing fleet of nuclear icebreakers, foreign shippers will pass from east to west along a water highway paved by Russian know-how, gladly paying tolls for their passage.

But in the throes of such heady aspirations, one question has not been asked: Does Russia really need to increase foreign traffic through the Northern Sea Route? What is the benefit that the Kremlin sees?

Last week in St Petersburg, Russia’s movers and shakers sought to provide answers at a high profile conference called the “Arctic: Territory of Dialogue.”

The conference opened with an address from President Vladimir Putin himself, who reiterated his order of last year that cargo volumes passing through the Northern Sea Route must increase to 80 million tons by 2024.

On one level, the Kremlin’s goal is clear. Russia has a history with the Northern Sea Route that dates back to Peter the Great, who first mapped Russia’s 24,000-kilometer Arctic coastline. The Yermak, Russia’s first icebreaker, was built in 1898. The Lenin, Russia’s first nuclear-powered icebreaker, followed in 1957. The Arktika nuclear icebreaker was the first to reach the North Pole thirty years later.

Under Soviet rule, Moscow infused the Arctic with enormous resources. The Northern Fleet, based in and around Murmansk, was the largest in the Soviet Navy, and a string of Arctic military outposts refueled nuclear bombers. Moscow continued building icebreakers, creating the largest such fleet in the world.
But as the Soviet Union crumbled, the Arctic infrastructure fell into disrepair. Expensive to maintain and lacking a strategic rationale, Moscow shifted its focus away from the far north.

But climate change is changing that calculation. According to data from NASA, Arctic ice has shrunk by 12.8 percent a year on average since 1979. Last year’s ice cover was 42 percent lower than 1980 — turning Russia’s frozen northern border into a hotbed of commercial and industrial potential.

Chukchi_Sea ice Researchers aboard an icebreaker studying ice in the Chukchi Sea. Credit: NASA/Kathryn Hansen

Since last year, Russian government ministries and most of its biggest state industries have clamored to fulfill Putin’s Arctic cargo demands. To reach Putin’s goal of 80 million tons of traffic annually, Russia will have to quadruple the record volumes reached in 2018, and improve on Soviet-era traffic figures by a factor of 10.

The costs are expected to be significant. According to Russias Ministry of Natural Resources, some $160 billion in private investment in Russia’s arctic fossil fuel industry will be needed to meet Putin’s shipping target.

Rosatom, Russia’s state nuclear corporation, has been charged with developing port infrastructure along the Northern Sea Route — a huge project it expects to accomplish by building yet more nuclear icebreakers. Over the next three years, Rosatom says Atomflot —Russia’s nuclear icebreaker headquarters in Murmansk — will get three new nuclear-powered vessels, the Arktika, the Ural and the Sibir. Those will be followed by three so-called Leader class nuclear icebreakers in the years to follow.

Alexei Likhachev, Rosatom’s head, predicts that Putin’s cargo target will not only be fulfilled but surpassed.

“Life doesn’t end there,” he said at the Arctic conference, as quoted by the Financial Times. “We are aiming for 92.6 million tonnes in transit by 2024 rather than 80 million tonnes. And by 2030, we hope to add a significant part of international transit to that.”

But for all the enthusiasm Russia’s political and corporate elite has for carving a shipping artery through the Arctic, it is unclear how it will fulfill these lofty predictions. How did Putin establish his 80 million-ton goal, and why does that goal have to be reached so quickly? And what are the consequences if, for instance, only 75 million tons of cargo passes through the Northern Sea Route by, say, 2025?

In fact, some of Russia’s fossil fuel conglomerates, whose products are expected to fill the shipping gap, are nervous that they they won’t live up to the Kremlin’s demands.

By current estimates, the Yamal LNG project has a natural gas resource base of about 19 million tons. The Novy Port oil field, Gazpromneft’s project on the Yamal Peninsula, boasts 7 million tons of crude. And shipments of copper and nickel from Norilsk Nickel are expected to total around 1.5 million tons. The future Arctic LNG-2 project, also on the Yamal Peninsula, has promised some 20 million tons more of LNG.

salekhard Yamal LNG The town of Salekhard on the Yamal Peninsula, one of the cities revitalized by Russia's gas exploration. Credit: Anna Kireeva/Bellona

Still, when coal exports from the Taymyr Peninsula are accounted for, the Ministry of Natural Resources says that the Russia’s Arctic fossil fuel sector will supply only 77 million tons of cargo a year — three tons short of Putin’s demand. Despite Rosatom’s faith in the fossil fuel industry to come up with the weight, it’s likely that oil and coal drillers will be blamed for eventual failure.

But not all the activity to open the Northern Sea Route is on the water. A railroad line, called the Northern Sweep, is under construction to unite the Yamal-Nenets Autonomous Region with Sverdlovsk’s hub. The 2,000 kilometer line will help ship yet more cargo to Sabetta, the Yamal Peninsula’s main Northern Sea Route port.

The Murmansk transport hub is also being developed, and when complete, will be the largest shipping point in Northern Russia. How much cargo it will send off into the Northern Sea Route isn’t yet clear, but it will mark a new turn in shipping toward the east, instead of to Europe.

But while many of Russia’s current efforts on the Northern Sea Route are concentrated on getting it’s fossil fuel resources out, its intentions to use the Northern Sea Route as a major east-west corridor raises a different series of questions that should trouble Moscow.

Nuclear icebreaker The Russian nuclear icebreaker Yamal. Photo: - Credit: Wikimedia Commons

For now, Moscow assumes the Northern Sea Route will draw away some of the shipping traffic passing through the Suez Canal. Some experts have suggested that’s not unrealistic. Eastward shipments from Europe to China though the Arctic route are estimated to be about 40 percent faster than through the Suez — possibly lopping hundreds of thousands of dollars off shipping costs.

But whether this will really be cheaper for shippers is unclear, given Russia’s push to establish itself as a toll collector and icebreaker convoy service for freighters passing through the Arctic.

These plans may conflict with UN Law of the Sea principles, which make clear that any vessel properly equipped to handle icy waters is free to pass through the Northern Sea Route without any special permission.

But Moscow argues that much of the Arctic that is presently considered international waters actually constitutes a continuation of Russia’s own Arctic shelf. A case Moscow has before the UN Commission on the Limits of the Continental Shelf is seeking to claim the Lomonosov Ridge and the Mendeleev Rise and as Russian shelf territory.

This would not only put the North Pole in Moscow’s hands, but would give Kremlin far greater say over who could sail through the Northern Sea Route — and how much they would have to pay for the privilege.

Until then, however, the only real economic benefit Russia would get from increased foreign nautical traffic would come from foreign shippers voluntarily requesting icebreaker escorts and pilotage services.

It’s a subject that was on Putin’s mind at the Arctic conference.

“The fee for icebreaker escort should be competitive and reasonable,” Putin said. “Therefore, the state is investing in this area in order to minimize the tariff burden on carriers, on business. ”

But even this seems to minimize what can be gained by charging tolls. So again, the question of what Moscow stands to gain from its new Arctic focus remains largely unanswered.

Behind all of this is the environmental damage the Arctic stands to suffer from this industrial scale mobilization – and there has been little word from Moscow on how it would cope with oil spills, fuel pollution and other mishaps in the harsh Arctic environment. According to information on the website of Russia’s Emergency Services Ministry, the Arctic’s 11 rescue centers are woefully under equipped to handle the myriad misfortunes that can befall vessels in icy seas.

Looming over it all is the huge carbon footprint all of this activity will pass onto the future — not only by what flows from the smokestacks of more and more freighters, but from what those freighters bear to market, and that’s yet more fossil fuels.

Taken together, the cost of developing the Arctic is far too high, not only for Russia, but for the rest of the world. Moscow has yet to provide a justification for this price tag.