ASSESSMENTS

Russia's Arctic Dreams Remain on Ice

Nov 6, 2019 | 10:30 GMT

This photo from Feb. 25, 2017, shows the construction site of the second mooring facility of the Yamal LNG plant in the village of Sabetta.

This photo from Feb. 25, 2017, shows the construction site of the second mooring facility of the Yamal LNG plant in the village of Sabetta. Russia's future prosperity depends in part of the Arctic's resources, but getting them to market will be easier said than done.

(SERGEI FADEICHEV/TASS via Getty Images)

Highlights

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  • Despite the Kremlin's encouragement, state-owned oil and gas enterprises are likely to remain hesitant to commit resources to the costly development of Arctic assets.
  • Moscow will try to reduce the financial burden of building Arctic infrastructure, but its proclivity to offer incentives on a case-by-case basis will hamper rapid development.
  • In the end, the output from the Arctic could fall short of government targets to ensure sustained oil production levels and overall economic growth. 
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The Russian Arctic is warming, but the Kremlin's dreams for the region remain in the deep freeze. Since planting its flag on the seafloor at the North Pole in 2007, Moscow has reinforced its territorial claims in the Arctic by increasing its military presence and bolstering its icebreaker fleet. But Russia's progress in making use of the Arctic's mineral and hydrocarbon resources and unlocking the rest of the region's economic potential is stalling. Strapped for cash, Moscow is putting the onus for developing Arctic infrastructure almost entirely on private and state-owned entities. Unsurprisingly, corporations have been reluctant to foot the bill for such large, upfront investments, meaning progress has become bogged down as the sides haggle over tax breaks or financial support. In the end, cost, feasibility and the like could well put paid to Russia's hopes of scoring an Arctic windfall. ...

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