May 21, 2014

Ice Melts, Money Burns

Russia’s principal remaining natural resources are located in the Arctic. While the country’s ambitions to conquer the part of the region it does not already hold are great, there is no money to back these in reality—nor will any materialize in the future.

Marlène Laruelle, Russia’s Arctic Strategies and the Future of the Far North (Armonk, N.Y.: M.E. Sharpe Inc., 2014) 254 pp.
According to articles reviewing the Arctic’s political and economic future1 that appeared in the daily Postimees at the beginning of April after a topical seminar with a small company, Estonia’s foreign policy circles have their eyes on the North Pole. The keyword “Arctic” has featured regularly in Foreign Minister Urmas Paet’s public statements.  In these official statements, the last year has seen a significant shift of emphasis. While the earlier message was that the European Union was preparing a joint Arctic strategy and that Estonia was interested in reinforcing the EU’s status in the Arctic Council, Estonia now seems to be interested in independently gaining observer status at the Council.
The dream to get into the act when something great—and so far unattainable—is on offer has never been abandoned in Estonia’s contemporary foreign policy. This might even be the right attitude, if only one’s feet are kept on the ground and one’s capabilities, power, and knowledge are assessed realistically. We should not only assess ourselves correctly, but also aim to view partners, competitors, and opponents without distortion—something at which, as illustrated by this year’s events in Ukraine, we have not been particularly successful with regards to Russia. The fact that Russia’s own propaganda ascribes supernatural abilities to the territorially great power does not mean that those abilities are real.
The fashionable search for asymmetries should illustrate to policymakers that explanations for Russia’s stampede in the South do not necessarily lie in the steppes of the Don, but at least partly in the other direction. More precisely, as Russia decided geography—its greatest and only idea—to be its destiny half a millennium ago, it needs to assess how each geopolitical step will affect its situation at the other points of the compass. Not only was the collapse of the Soviet Union and resulting loss of territory the “greatest geopolitical catastrophe of the 20th century,” as Vladimir Putin  put it, but it  also carries the same weight on the scales of Russia’s history over the past five centuries. It was a true turning point that put an end to a period of continuous territorial expansion and set off a contraction whose extent  is still unclear.
At the moment, North is the only direction from which Russia does not have to pull back due to external powers, i.e. other states. It is thus precisely the North that has embodied the greatest hopes (or self-deceptions) of Russia’s revival during Putin’s reign. Throughout history, conquering the Far North has played a part in the invasion of Siberia, and settlements next to the Arctic Ocean also date from the 16th or 17th century. Despite the manner in which Moscow’s ideology treats the people indigenous to Northern Russia today (sometimes they exist and sometimes they do not), the North is an integralpart of Russian civilization (including Stalin’s Red Arctic and Gulag) and any outside claim to it offends Russia more than, for example, attempts to sever the North Caucasus from Moscow.
There has not been  much analytical literature on possible scenarios for the Arctic’s near future. Within the relatively small  selection that does exist, works addressing Russia are the scarcest. As such, Marlène Laruelle’s2 fresh analysis not only fills an important gap on the specialist shelf, but also adds real value by taking into account the impact of the global economic crisis on the strategies and political ambitions formulated in the early years of this century.
Among the Arctic Five—the states that have land boundaries and territorial waters in the Arctic Ocean—Russia is a complete exception.3 This does not mean that “all depends on Russia” or that it is the “superpower” of the Arctic. True, as an outcome of the Cold War, Russia remains a nuclear state, and the confrontation between Russia and NATO is at least as clear and sharp throughout the entire Arctic region as it is on the Narva River because, besides Russia, the Five include the US, Canada, Denmark and Norway—all members of NATO.
There are many spatial definitions of the Arctic, but according to all of them, Russia is the largest country by area, since  in Siberia and the Russian Far East the permafrost border reaches so far south that it allows even China to consider itself a sub-Arctic territory, with the concomitant interests and demands. Russia is the only northern country that has made a persistent effort to populate the Arctic territories; even now, with Russia’s polar cities having lost from a quarter to a half of their inhabitants,  three-quarters of all people within the Arctic Circle live in Russia. Russia accounts for 60 percent of the Arctic Ocean coastline and a very large share of known Arctic hydrocarbon reserves—75 percent for oil and 90 percent for gas respectively.. The Kola and Taymyr Peninsulas are full of precious metals, while the Barents and Bering Seas are fishing areas of global importance.
In the light of this, it is no wonder that, along with global climate change (the anthropogenic origins of which are typically not recognized in Russia’s official policies), Russia’s desire to conquer the North has also increased. A series of state programs foresee the establishment of the year-round Northern Sea Route, supplying it with battle, merchant & rescue fleets,  nuclear icebreakers, and a satellite-based communications network, as well as exploiting the energy deposits of nearby continental shelves and coastal waters. The logic is simple: as Russia’s budget depends predominantly on raw material sales, , the precondition for Russia’s further economic growth is the utilization of Arctic resources. As a  complementary nuance, it appears that the entire North has already been divided up among companies belonging to Putin’s confidants, so most of the future wealth will not reach the masses even if it is successfully generated.
Among the Arctic Five, Russia’s economy is the only one directly dependent on the riches of the North. It is the only -democratic country in the region, the  only one that is, on average, poor (i.e., lacking in technological and investment capabilities), as well as  the only one  sufferings from an acute demographic crisis, even in peacetime. Indeed, this last crisis had already begun long before the collapse of the Soviet Union, and there is still no light at the end of the tunnel.

1989 2010
Murmansk 468,039 307,257
Arkhangelsk 389,000 355,781
Naryan-Mar 20,182 21,658
Vorkuta 115,646 70,548
Salekhard 32,334 42,494
Dudinka 32,300 22,175
Norilsk 180,000 175,365
Tiksi 11,649 5,063
Anadyr 17,094 13,045
Magadan 151,600 95,925
Petropavlovsk-Kamchatsky 268,747 179,780

Table no. 1. Population of Russia’s important Arctic hubs in 1989 and 2010

Towns with more successful businesses have experienced a smaller decline in population, but these towns are more likely belong to single enterprises (such as Norilsk Nickel) than to the state or large administrative units. On the other hand, these towns have, rather than supporting traditional permanent settlements, have switched to using an external workforce, as happens in depopulated resource-rich areas in Canada and Australia. In Russia, however, an alien workforce primarily means immigrants from the North Caucasus, Azerbaijan and Central Asian countries, explaining the presence of the world’s northernmost mosque, towering over Norilsk. It is not unthinkable to ask how Russian these places really are (by some estimates, there are already more than 50,000 Muslim migrants in Norilsk—nearly a third of the population). The same workforce issue affects every oil and gas field development actually implemented. Unskilled workers are not hard to come by, but the technical engineering skills that the country essentially lost in the 1990s are nowhere to be found. This competence, just like the money needed for investment, resides in the West, in the hands of potential military opponents, or in Asia, where the largest economies combine their offers of investment  with increasing demands for rights in the Arctic.
Laruelle portrays Arctic Russia as a place where the need for international cooperation (workforce, know-how, and investment) finds itself in an unresolvable  conflict with the “Arctic meta-narrative” developed over the course of centuries, according to which the North has been Russia’s destiny since ancient times. The increasingly popular narrative, supported directly from the Kremlin by the image of Putin as a physically powerful and almighty man of nature, shifts the center of Russia’s identity towards the North. Laruelle writes “Public discourse (nurtured by both politicians and the media) on the ‘threats emanating from the south—including the instability of North Caucasus and the “yellow nuisance” of the Chinese in Siberia and the Far East—reinforces a spatial perception in Russia in which the “south” is the birthplace of danger, while the “North” is a shelter where the Russian nation can take refuge for self-preservation.” (p. 42)
It is clear that such a  cradle of identity cannot be shared with rivals or enemies. Greedy Western companies have a hard time understanding this mentality, as exemplified by the recent experiences of both BP and Shell. They are allowed to operate, and bring in knowledge and money—for a while, that is. Impaling foreign experts on a spear once they have done the work is a Russian tradition that dates back to Ivan the Terrible and Peter I, but is not very productive in terms of utilizing Arctic resources. Even if we take into account the West’s technological and financial support, exploiting Arctic oil and gas fields has by no means been shown to be economically viable (at least yet). The world received convincing evidence of this after what took place in the  relatively open waters of the Shtokman gas field (estimated to be one of the world’s largest), located in the climatically mildest area of the Arctic Ocean. Only four years after Norway’s Statoil launched a joint exploration venture with Gazprom and with Total of France Statoil wrote off its $1.5-billion (€1.1 billion) investment, citing Russia’s fickle behavior and changes in market conditions—and thus  leaving the French company at the mercy of the elements as well.
In essence, the same model can be observed in all conceivable fields of economic activity in Russia’s Far North. Moreover, the rule of the region is that the further east you go, the harsher the conditions get. Even if the Arctic becomes completely ice-free in the summer, as predicted by long-term climate forecasts, this does not mean that transportation and working conditions will compare favorably with those of temperate zones.  In winters, there would still be darkness as well as the danger posed by ice, storms, and extreme cold in winter, aspects that  from the viewpoint of insurers and merchants outweigh the benefits of the shorter trade routes to Asia, Europe and North America that the region offers.
One by one, Laruelle goes through all of Russia’s Arctic-related promises, strategies and realities. In her final conclusions, she crushes the better part of the optimistic images that Russia has painted for its near future in its aspiration to be a superpower once more. Fish would be nice, but there is no fleet; a fleet would be nice, but there are no longer any factories, docks or skills. And even if there were a fleet, there would not be any icebreakers; and even if there were icebreakers, there would be no control, communications, and rescue systems. At the end of the day, in order to secure regular Arctic sea traffic, most of  vessels currently navigating through the Suez Canal and the Strait of Malacca would need to opt for the Northern Sea Route, a choice that would only be made as a result of some catastrophe in these areas; and, even then, developing a sufficiently large merchant fleet equipped for the Arctic Ocean would take decades.
What should the West’s Arctic strategies be in these circumstances? Russia should not be economically (first and foremost in relation to hydrocarbons, but also in terms of metals, etc.) stimulated or helped with investments, as profitability is at best marginal and the environmental risks are at least immense. (It can already be anticipated how detrimental the melting of the permafrost would be to the North’s ground stability and thereby also to the condition of buildings and facilities). The West could, however, shift back to the Arctic the center of gravity of the military-security rivalry that Russia once again seeks. It is well known that Russia cannot handle several fronts at once and, if the question is how to quickly calm Russia down in the South and drain it of funds for aggression, the worst option from Estonia’s point of view would be to provoke war at our own gates (i.e. pleading for tanks and US bases to be moved into Estonia). An arms race or, to be more precise, a short sprint with a convincing finish in the depopulated North, would be the best option for the security of Europe as a whole. Once this competition is over, it will be possible to invest safely in the Arctic. Even in this, the smallest capable entity in the area would still be the European Union. Estonia has little capacity to invest independently in the Arctic, that is, in anything more than microscopic amounts (the start-up investment in the Shtokman gas field alone would be $30 billion(€22 billion); we have an equally limited capacity for political action. The Estonian foreign minister could spend his limited time on contributing to the EU’s Arctic ambitions, instead of dealing with Russian utopias. In his spare moments, however, reading books that deliver a reality check is recommended.
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1 Anna Tiido “Võidujooks Arktikale“ and Ahto Lobjakas “Eestlasedki unistavad Arktikast“, Postimees Opinion, 5 April 2014.
2 Marlène Laruelle (b. 1972), a French political scientist, is Research Professor of International Relations and Director of the Central Asia Program at The George Washington University in Washington, DC. On the topic of Russia, she has, among others., published the books Russian Eurasianism: An Ideology of Empire (2008) and In the Name of the Nation: Nationalism and Politics in Contemporary Russia” (2009).
3 There is a very comprehensive collection of policy papers on the Arctic Five and related topics on the web page of the Norwegian Institute for Defence Studies research program GeoPolitics in the High North: www.geopoliticsnorth.org/index.php?option=com_cont…,
All the main documents can also be found in the Arctic Council’s document archive: www.arctic-council.org/index.php/en/document-archi…

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