News
Publish date: June 5, 2024
Written by: Bellona
News
Ensuring complete and reliable access to environmental information in Russia has never been fully guaranteed. Following the Russian invasion of Ukraine on February 24, 2022, it became even more difficult. Some information ceased to be published altogether, such as daily oil production data and annual reports from certain industrial companies. Independent environmental organizations have been banned or closed.
The Arctic region plays a crucial role in comprehending the process of global climate change. Russia owns approximately one-third of its territory, including the exclusive economic zone of the Arctic Ocean. To understand and examine trends, we monitor new legislation, the plans of industry, the Northern Sea Route, international economic sanctions, accidents, and emergencies in the Russian Arctic, as well as provide commentary on the news.
Our previous monthly highlights for March can be found here.
ENVIRONMENTAL ISSUES IN THE ARCTIC
1. Air temperature on the Svalbard Archipelago rises three times faster than the Northern Hemisphere average
2. Yamal legislators propose mandate for administration to remove sunken ships
HEIGHTENED INDUSTRIAL ACTIVITY IN THE ARCTIC
3. Two more regions of the Komi Republic are being suggested for inclusion in the Arctic zone
4. Goldarktik Launches Gold Prospect Development in Chukotka
5. Norilsk Nickel plans to decrease sulfur emissions and bypass sanctions by transferring its copper plant from Norilsk to China
INTERNATIONAL SITUATION IN THE ARCTIC AND SANCTIONS AFFECTING RUSSIAN ACTIVITIES IN THE ARCTIC REGION
6. “Arctic LNG 2” has halted liquefied natural gas production due to sanctions pressure
7. Russian LNG exports to Europe increased in the first quarter of 2024
8. An Australian company is divesting its coal business in Chukotka after a court decision on sanctions violations
9. India is once again receiving oil from Russia on Sovcomflot tankers
NORTHERN SEA ROUTE AND SHIPPING
10. The target indicators for cargo transportation along the Northern Sea Route in 2024 have been halved
11. Belarus plans to join the development of the Northern Sea Route
ACCIDENTS, EMERGENCIES, AND VIOLATIONS OF ENVIRONMENTAL LEGISLATION IN THE RUSSIAN ARCTIC
12. The number of complaints about coal dust from the Murmansk Trade Port has increased in 15 times
Scientists from St. Petersburg State University and the Arctic and Antarctic Research Institute of Roshydromet have published a study in the journal Czech Polar Report, where they analyzed air temperature data over the past 120 years in the Svalbard Archipelago and surrounding waters.
The study identified two periods of cooling and two periods of warming. The current warming phase began in the 1980s and has intensified since then. In addition to the cyclical dynamics and the overall global warming caused by greenhouse gas emissions, the warming on Svalbard is further exacerbated by changes in atmospheric circulation patterns specific to the western sector of the Arctic.
Currently, the law mandates that the owner of a sunken ship must raise it. If the owner fails to take action, the administration of the inland waterways basin is responsible for removing the vessel, but only if it poses a threat to navigation or causes environmental damage. The new changes would obligate the administration to remove ships even if they do not obstruct navigation and have sunk near the shore.
According to the administration of the Ob-Irtysh Basin of Internal Waterways and local government authorities, there are about 270 sunken, abandoned, and ownerless vessels in Yamal. The main environmental risks associated with these ships include the leakage of oil products from fuel tanks and the contamination of water and bottom sediments with metals.
Media have been reporting the need to improve legislation and dispose of sunken and abandoned ships in Yamal since 2018.
In addition to sunken and abandoned ships, the Russian Arctic hosts a large number of other abandoned industrial facilities and residential settlements. The “Clean Arctic – Vostok-77” expedition, conducted in 2023, discovered 36 such sites in the Yamalo-Nenets Autonomous Okrug alone. Most of these sites are located along the Arctic coast and include abandoned villages, gas production bases, old tropospheric stations, and scientific facilities from the Soviet era.
The Komi leadership deems it advantageous to expand the Arctic zone of the Russian Federation (AZRF) by incorporating two additional territories of the republic. Komi Governor Vladimir Uyba made this announcement during a working meeting at the Days of the Komi Republic in the Federation Council. He specified that investors are willing to operate within the territories of two municipal districts – Izhemsky and Pechora, with the condition that Arctic benefits will be applicable to these areas.
Goldarktik, a gold mining company, has initiated the development of the Gigant gold deposit situated in the Providensky district of Chukotka. Preparations for production commencement are underway, with the construction of a rotational camp already in progress. Gold extraction operations are scheduled to commence in May 2024.
Geological assessments indicate that the Pepenveem area, where the deposit is located, holds an estimated total of 61 tons of gold and 2,860 tons of silver. This area falls under category P2, suggesting potential for the discovery of additional deposits.
Apart from the Gigant deposit, Goldarktik holds exploration and development rights for other sites in Chukotka. These include the Shumny stream deposit, containing 86 kg of placer gold, as well as the Rudny Log and Iultin Gora tin and tungsten deposits.
In April, Norilsk Nickel President Vladimir Potanin announced that the company is preparing to relocate the smelting operations of the Copper Plant to China. The plan involves establishing a collaborative production venture with a Chinese company and constructing facilities in China by mid-2027.
The company aims to transport two million tons of copper concentrate annually from the Norilsk concentrator to China using the Northern Sea Route (NSR). Consequently, Norilsk Nickel plans to invest in developing logistics infrastructure along the NSR
The decision to relocate the plant to China was influenced by sanctions on the import of non-ferrous metals imposed by the USA and the UK on April 12th. Additionally, even before this, Norilsk Nickel noted that while its products are not included in the sanction lists, there has been voluntary rejection of Russian goods in Europe, leading to a decrease in profits.
Potanin hopes that the finished copper products from the Chinese plant will be marketed as Chinese goods, making it harder to impose sanctions. Norilsk Nickel also anticipates that collaborating with China will provide the company access to battery material production technologies.
Potanin also notes that the resolution of environmental issues related to Norilsk Nickel’s production will also shift to China, where, according to him, there are more technologically advanced scenarios for this purpose. This will enable the company to implement its plan to reduce sulfur dioxide emissions (Sulfur Program), which has so far been hindered by issues with the supply of Western equipment and components. According to Norilsk Nickel reports, the Sulfur Program has only been initiated at the Nadezhda Metallurgical Plant, with no plans yet to start sulfur dioxide disposal at the Copper Plant.
It is reported that from the launch of the first line of the project in October 2023 until the end of March 2024, 40,000 tons of sulfur dioxide from exhaust gases were disposed of at the Nadezhda plant. By the end of 2024, the second and third technological lines of the Sulfur Program are expected to be launched. According to the plan, sulfur dioxide emissions in Norilsk should be reduced by 20% by the end of 2024.
«The trend of expanding the administrative boundaries of the Russian Arctic zone is noticeably continuing. The next two municipal districts, candidates for inclusion in the Russian Arctic, are situated in the subarctic climate zone. The primary motivation for their inclusion is economic and administrative incentives for businesses, typically those interested in developing mineral extraction. Consequently, industrial activity, especially in the extractive sectors, continues to grow in the Arctic and sub-Arctic regions of Russia, as evidenced by regular reports of plans to develop new deposits or expand existing ones.
Concern arises from the fact that, alongside economic incentives, companies residing in the AZRF receive relaxations in environmental controls, despite environmental protection being publicly declared as a priority at the state level, albeit one that is secondary to “socio-economic development of the Arctic.”
Against this backdrop, the statement by Norilsk Nickel President Vladimir Potanin regarding plans to relocate the copper production plant from Norilsk to China looks intriguing. In the face of escalating, albeit slowly, international sanctions against Russian export goods, Norilsk Nickel is attempting to devise ways to circumvent them in order to maintain market access and, consequently, revenue.
From this perspective, relocating production to China could complicate the traceability of copper origin for potential buyers and blur the streams of Chinese and Russian copper. Meanwhile, Norilsk Nickel’s extraction of copper ore will continue at existing deposits in Russia.
With the political will to trace the production chain and impose additional sanctions on copper smelted from Russian-origin ore, it is theoretically possible. The EU is developing a similar scheme for diamonds of Russian origin.
From the perspective of the socio-economic development of the Arctic, which is proclaimed in all of Russia’s strategic documents, relocating the copper smelting plant is more of a negative than a positive, because primary ore mining will stay in the Arctic, while the processing of raw materials and, consequently, a more valuable product, will be moved away. Tax revenues will decrease, and demand for more skilled labor will decrease as well. Russia will take a step back towards a resource-based economy.
Potanin’s promises to establish a modern production facility for printing parts using 3D printers at the location of the copper smelter appear to be a somewhat hastily made declaration with unclear parameters regarding volume, employment numbers, and other factors.
From an environmental perspective, the closure of the Copper Plant in Norilsk will have a positive impact on the air quality in the city. Russia had a similar experience in the 1990s when many inefficient, environmentally polluting enterprises closed down after the collapse of the USSR, significantly improving Russia’s industrial pollution and greenhouse gas emission indicators. However, this path will not bring prosperity to the region’s residents.
Against this backdrop, Norilsk Nickel is still trying to demonstrate the effectiveness of its Sulfur Program in reducing sulfur dioxide emissions at the Nadezhda plant near Norilsk. According to Potanin, the technology of sulfur dioxide capture, its conversion into sulfuric acid, neutralization into gypsum with subsequent long-term storage, is expensive and unprofitable. Therefore, due to international sanctions on Western equipment, the company plans to limit its use to the Nadezhda plant, and find another solution for the Copper Plant, such as closing it.
However, even at the Nadezhda plant, the targeted reduction in emissions by 20% by the end of 2024 is unlikely to be achieved. The first line of sulfur dioxide disposal, which has been launched, will only reduce emissions by 100,000 tons out of the required 360,000 tons. The second and third lines are expected to be operational by the end of the year but will not significantly impact emissions reduction this year»
According to Reuters on April 2, Novatek, Russia’s largest LNG producer, is suspending liquefied natural gas production at its “Arctic LNG 2”. This decision was prompted by sanctions, resulting in a lack of buyers and a shortage of specialized tankers required for LNG transportation.
On the same day, the Russian newspaper “Vedomosti” reported a significant reduction in natural gas production at the project due to delays in LNG shipments and a lack of storage space. Production figures dropped from 425 million cubic meters in December to 83 million cubic meters in February, with March production only sufficient to maintain the plant’s operational status.
Arctic LNG 2 was subjected to US sanctions on November 2, 2023, leading to a ban on all operations. Subsequently, on February 23, 2024, structures associated with Sovcomflot, the contractor responsible for constructing three gas carriers for the project, also faced sanctions.
In the first quarter of 2024, Russian LNG exports amounted to 8.7 million tons, marking a 4.3% increase compared to the same period in the previous year. However, there was a decline in shipments in March to 2.86 million tons, which is 1% less than in March 2023.
A significant portion of the exported LNG originates from the Arctic region of Russia. Shipments from the Yamal LNG project for the first quarter increased by 6.6%, reaching 5.4 million tons.
The main buyers remain EU countries: France, Spain, and Belgium, as well as Asian countries – Japan and China. While exports to the EU rose by 4% from January to March, shipments to Asia experienced a 7% decline compared to 2023.
According to the International Energy Agency (IEA) report, Russian LNG export supplies are anticipated to continue their growth trajectory in 2024. This growth is expected to be supported by the completion of extensive repairs at the Yamal LNG project. The IEA forecasts that even the challenges faced by the Arctic LNG 2 project will not hinder the growth of Russian LNG exports.
The Australian company Tigers Realm Coal (TIG) plans to sell its coal mining and transportation enterprises in the Chukotka Autonomous Okrug to the Russian company “APM-Invest” for $49 million. The deal includes three enterprises: the mining company “Beringpromugol,” the management company “Beringuolinvest,” and the exploration asset “North-Pacific Coal Company.” Along with them, the buyer will receive licenses for mineral extraction.
TIG has been mining coking and thermal coal in Chukotka since 2016. The company operates at the “Fandyushkinskoye Pole” deposit, located 37 km from the port of Beringovsky. Coal from there is mainly supplied to countries in the Asia-Pacific region. In 2023, the company produced 1.6 million tons of coal, with a net profit of 2.6 billion rubles ($29 million).
The reason for the sale is a violation of Australian sanctions on doing business with Russia found by the Australian federal court. In early April, TIG lost an appeal case brought against the Department of Foreign Affairs and Trade in an attempt to overturn the department’s finding that the company had breached Australian sanctions law. TIG claimed that its activities were exempt from sanctions because the coal was intended for export, but the federal court did not agree with the company’s arguments.
In our March digest, we reported that Indian oil refining companies had stopped importing oil transported on Sovcomflot tankers following the implementation of stricter U.S. sanctions. The sanctions list included 14 Sovcomflot tankers, some of which were renamed in an attempt to evade the sanctions.
However, by April, reports of resumed imports surfaced. Bloomberg tracked the oil tanker “Vladimir Tikhonov,” carrying Urals crude, heading towards the port of Paradip, where a major Indian Oil Corp. refinery is located. Earlier in April, another tanker associated with Sovcomflot, but not included in the list of 14 sanctioned vessels, “Baltika,” unloaded oil at the Indian port of Sikka.
According to Reuters, during a visit to India in early April, U.S. officials confirmed the sanctions on the 14 Sovcomflot vessels but also stated that Washington aims to maintain stability in global oil supplies and is not asking India to reduce its imports of Russian oil.
«European companies continue to buy and accept Russian LNG for transit, citing long-term contracts. The main buyers of Russian LNG in Europe are: the French company Total, with a contract to purchase around 4 million tons of LNG annually from the Yamal plant until 2038; the Spanish Naturgy Energy Group SA, also with a contract until 2038; and Belgian companies that provide transshipment and storage of LNG from Yamal in their ports under a contract until 2039, generating an annual income of about 50 million euros.
The ongoing purchases of Russian LNG by European companies indicate that without political will and government intervention (e.g., guarantees to assist companies with early contract termination), it will not be possible to stop imports from Russia.
When governments make more stringent decisions regarding doing business in and with Russia, as in the case of the Australian coal business in Chukotka, companies have to comply with the established legal restrictions.
The example of the changing decisions of Indian companies to limit and then restore the import of Russian oil transported on sanctioned Sovcomflot vessels shows how the behavior of companies in third countries depends on the political will and statements of economic leaders, such as the United States. Fearing secondary sanctions from the United States, Indian companies initially suspended the import of Russian oil, but then quickly resumed it after receiving signals from American officials about the need to maintain the stability of global oil supplies»
Russian Deputy Prime Minister Alexander Novak announced that the freight volume on the Northern Sea Route in 2024 is expected to be around 40 million tons, which is half of the initially planned amount. The main cargoes are to be oil and gas from Russia’s Arctic zone, copper-nickel concentrate from Norilsk Nickel, and other goods transported via the NSR from Murmansk to the east. The reduction in freight volumes is due to delays in launching major raw material projects, such as Arctic LNG 2.
This is not the first time the target figures have been reduced. The initial plan for the development of the NSR aimed for a cargo flow increase to 90 million tons by 2024. Then, according to a decree by Russian President Vladimir Putin, this volume was decreased to 80 million tons. In December 2023, Rosatom proposed lowering it to 60 million tons in 2024 due to revised forecasts for projects like Vostokcoal, Vostok Oil, and Novatek’s projects.
On April 22, the Governor of the Murmansk Region, Andrey Chibis, signed an agreement with a Belarusian company for the construction of a new port called “Arctic Gate” in Murmansk. The port is planned to be launched on the western shore of the Kola Bay in 2028. Through this port, Belarus will be able to export fertilizers and petroleum products to China. It is reported that the volume of Belarusian cargo transshipment should reach 25-30 million tons per year.
In addition to Murmansk, Belarus is considering the possibility of using the port of Arkhangelsk directly, bypassing St. Petersburg and Murmansk. President of Belarus Alexander Lukashenko discussed the prospects of such cooperation at a meeting with the Governor of the Arkhangelsk Region, Alexander Tsybulsky. Lukashenko called the construction of reinforced ice-class vessels an important task for the development of the Northern Sea Route.
«After four months of the year, it is evident that Russia will not be able to achieve its cargo turnover targets along the Northern Sea Route. They were overly ambitious even without considering international sanctions, and with the imposition of sanctions on “Arctic LNG 2,” shipbuilding and shipping companies, the plans for the development of the NSR seem even less feasible.
Russia will not be able to increase the use of the NSR alone since initially, the emphasis was placed on two types of transportation with the mandatory involvement of international partners: the export of Arctic resources to Europe and Asia and the transit of Asian cargo to Europe. Both types of transportation can be blocked by European and American economic sanctions, with the threat of secondary sanctions. Russia’s efforts to attract other partners, such as Belarus, for the development of the NSR will not make a significant contribution.»
In the February digest, we addressed the issue of coal dust pollution in Murmansk caused by coal transshipment in the Murmansk Commercial Port. The number of citizen complaints at the beginning of the year was 15 times higher than in the same period last year. During the inspection, the Transport Prosecutor’s Office found numerous violations at the Murmansk Commercial Port, including the lack of consistent use of equipment designed to reduce coal dust, failure to implement measures to reduce pollutant emissions, and operation of the transshipment complex without a positive conclusion from the state examination.
On April 9, due to the flooding of a ship that had been docked in Murmansk for several years, oil products spilled into the waters of the Kola Bay.
Norilsk Nickel, the Arctic mega-polluting metals group controlled by Russia’s richest man Vladimir Potanin, will move some copper smelting production from its home country to China, as western sanctions restrict access to key pieces of equipment and cut profitability, Potanin said in a recent interview.
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