As summer draws near and the Arctic ice melts, Russian ships will soon be able to travel along the Northern Sea Route, accessing the country’s northernmost cities and some of the natural resources lying below the Arctic seabed. Since 2008, Russia has increased its presence in the Arctic by multiplying its number of military facilities and drilling sites in the region. As one of the five Arctic coastal states (along with the US, Canada, Norway and Denmark), Russia’s policy in the Arctic is centred around three major objectives: securing access to the natural resources of its Arctic shelf, increasing its use of the Northern Sea Route, and establishing a permanent military presence in the region. However, the country’s economic crisis raises questions about the profitability and rationality of its current investments in the Arctic region.
Due to shrinking sea ice, the Arctic Ocean is slowly unveiling large deposits of natural resources on the continental shelves of its coastal states. According to a 2008 US Geological Survey report, the Arctic region contains approximately 13% of the world’s undiscovered oil and 30% of its undiscovered natural gas. Russia’s Arctic shelf is rich in oil and gas: it contains approximately 12.5% of the country’s total gas resources, and between 5% to 9% of its liquid hydrocarbon resources. By 2050, the deposits in the Arctic shelf are expected to provide between 20% and 30% of Russia’s total oil production, thus becoming the country’s most important source for hydrocarbons. With this abundance of natural resources, one of the primary objectives of Russia’s Arctic policy since 2008 has been to establish a “strategic resource base” in the region. This is particularly important, as Russia may soon have to compensate for the expected diminishing gas and oil production of the fields in Western Siberia.
Facing high investment costs, Russian companies Gazprom and Rosneft first cooperated with foreign companies like Total (France) and Statoil (Norway) to access hydrocarbon deposits in the Arctic. Rosneft also signed an agreement with the US multinational corporation Exxonmobil in 2011, to explore the deposits lying below the Kara Sea. However, following the EU-US sanctions on Russia in 2014, international joint ventures stopped, leaving Russia to increase investment on its own. As such, Rosneft recently started drilling Russia’s northernmost oil well in the Laptev Sea. With the drop in oil prices since 2014, this raises questions over the profitability of such investments — according to various estimates, the development of Arctic shelf oilfields is unprofitable for Russia as long as the price of oil remains below 70 USD per barrel. With the ongoing volatility of oil prices, it seems unlikely the price will rise above 70 USD anytime soon.
Northern Sea Route
Another key objective of Russia’s Arctic policy is to increase domestic and international traffic along the Northern Sea Route (NSR), which is under Russian jurisdiction. The NSR will give Russian ships easier access to the Arctic shelf’s resources and to some of Russia’s northernmost cities, while international vessels will be able to use the NSR as a rapid trade route to reach Asia from Europe. Stretching 3000 miles, the NSR runs through the Kara, Laptev, East Siberian, and Chukchi seas, and may be used to cross from the Atlantic to the Pacific Ocean.
However, the NSR is unlikely to become a major international trade route in the near future, capable of competing with the traditional route between Europe and Asia which runs through the Suez Canal. Yearly traffic is seriously hindered by sea ice, leaving the route open only a few months per year, from July to mid-November. Furthermore, depending on the transiting ship and the level of ice, vessels often need to have an ice-breaking pilot or escort, which augments the costs of using the NSR. The number of ships transiting through the NSR has thus steadily declined since 2013, and is today mainly used by Russian vessels. In 2016, only 19 ships used the NSR, compared to 71 in 2013. This traffic is unlikely to increase in coming years, as ordinary ships may have to wait until 2040 to be able to use the NSR profitably due to the route’s ice conditions.
Militarization and Economic Downturn
As part of the country’s plan to modernize and restructure the entire Russian armed forces which began in the late 2000s, Russia seeks to establish a permanent military presence in the Arctic. As the four other Arctic coastal states are members of NATO, Russia is left at a strategic disadvantage, leading Russian officials to stress the need to protect the country’s geopolitical interests in the region. This rhetoric has become increasingly popular in recent years due to the deteriorating relationship and growing distrust between the West and Russia since 2013. Military bases have been built on numerous islands, naval exercises and patrols in the region increased, and the strength of the Northern Fleet has been bolstered.
Despite Russia’s increase in military presence, however, many of the stationed forces are not intended to directly partake in Arctic operations. Consequently, Russia’s military presence in the Arctic should not be perceived as a threat to other Arctic coastal states and to their interests. Rather, the armed forces in the Arctic region ensure Russia’s capability to monitor and control its northern border and exclusive economic zone, along with the NSR. Russia’s deployments and investments in the region are likely motivated by the country’s desire to be recognised as a great international power, capable of investing and deploying forces in the Arctic’s harsh conditions. Indeed, Russia has little incentive in stirring conflict with other Arctic states in the region as this could endanger some of its still unresolved territorial claims, or even lead to increased economic sanctions, further hindering its ability to invest in the Arctic.
Due to the low price of oil today, it is unlikely that Russia’s investments in the Arctic will lift it from its current economic downturn. The high costs of investments and of military deployments in the region may instead put greater weight on the Russian economy and slow it further. Thus, it is unclear whether Russia will be capable of sustaining its Arctic policy in the long term, especially if its economic conditions do not improve in the coming months.
Disclaimer: Any views or opinions expressed in articles are solely those of the authors and do not necessarily represent the views of the NATO Association of Canada.