Murmansk, The New Free Trade Capital City Of The Arctic
Arctic routes opening up new supply chains from Russia to Europe, Canada & Asia
Op/Ed by Chris Devonshire-Ellis
The biggest deep-sea port in the Arctic, Murmansk is also the largest city beyond the Arctic Circle. It has recently laid out ambitious plans to become the de facto Capital City of the Arctic region. The project “New Murmansk” was presented by acting regional governor Andrey Chibis in meetings with Russian President Putin late last year, and look as if they will come to fruition.
The sketches presented to the President show skyscrapers, five-star hotels, a large congress center and more than 40 large housing complexes.
“This would provide us with new impetus for growth, including for the economy and give us status as the capital of the Arctic” Chibis said. The new part of the city is projected to be built in Abram-Mys, an area on the western side of the Kola Bay.
New Murmansk City Plans
Murmansk is 108 km from the border with Norway, and 182 km from the border with Finland. Flight times between Murmansk and Moscow are 2.5 hours, while the journey by road takes 24 hours. The rail journey is 12 hours.
Benefiting from the warmer waters flowing in from the North Atlantic Current, Murmansk is similar to other Russian cities with well developed infrastructure. It has highway and railway access to the rest of Europe, and the northernmost trolleybus system in the world.
Murmansk’s connectivity contrasts to the isolation of Arctic ports such as Siberia’s Dikson on the Eastern Arctic Kara Sea, as well as Canada’s Iqaluit and Nunavut towns sited on Baffin Island. Murmansk’s climate is moderated by the generally ice-free waters around it. It is the largest city north of the Arctic Circle, with a population of 300,000 which is about 40% of the total population of Arctic dwelling peoples, including Europe, Canada and the rest of Russia.
Murmansk is also set to be the Russian terminus of the Arctic Bridge, a sea route linking it to the Canadian port of Churchill, in Manitoba. Although the passage has not been fully tested for commercial shipping yet, Russian interest in this project, along with the Northwest Passage is significant, as the route will serve as a major trade route between Russia, Europe, North America and Asia.
The Russian Federal Government and regional authorities of Murmansk region have determined that the project will take place, and this expected to begin this year. Covid-19 has put that on hold for now, however it has already been decided that Murmansk will become a free port. This was announced by Russian Deputy Prime Minister Yury Trutnev as part of an offsite meeting of the Presidium of the Russian State Commission for Arctic Development in Murmansk. The liberalized trade and investment regulations in the area of the port are expected to contribute to general socio-economic development of the region.
It is likely to be modeled on the successful operations at Vladivostok in the Russian Far East, which we discussed in the article Vladivostok And The Russian Far East To Be Developed As A Significant North-East Asian Resource And Trade Hub
If so, that means that companies, including foreign investors, will enjoy a free trade regime, easier administrative procedures, and a corporate income tax rate of about 7%. We discussed the merits of Russia’s Free Trade and Special Economic Zones here.
The initiative to implement Arctic Free Trade was gazetted and presented to the State Duma in April 2020. The bill passed the first reading and is likely to be adopted by the end of this year. This will expand the status of Free Port to the entire Arctic territories of Russia and create a preferential legal regime across the region.
Having free ports in Vladivostok and Murmansk is a step towards creating a belt of free ports along the Northern Sea Route. Cargo transport along the Northern Sea Route is increasing rapidly. The initiative to establish free ports along the Northern Sea Route can be expected to gain traction. The main arguments for the implementation of these routes is the shorter distance. Shipping through the Arctic from Rotterdam to Asian markets in Japan, Korea, and China is one third shorter than through Egypt, meaning ships can shave ten days off the arrival times.
The Russian Arctic, should the entire region and its Ports be granted Free Trade status, can be expected to boom. We examined the Ports along the Northern Sea Passage in the article Russia’s Developing Arctic Ports
Unlike many other regions, which often have just a single super port, the Arctic region contains dozens of potentially successful, large-sized ports (Kirkenes, Vardø, Arkhangelsk, Belomorsk, Murmansk, Tiksi, Churchill, and others). The Arctic network of free ports will make it easier and more cost-effective for businesses to set up operations away from major seaports which already exist. Opening new shipping routes through the network of free ports will optimize the business processes of shipping companies. Murmansk is set to be the European and Canadian part of this massive Northern chain.
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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at firstname.lastname@example.org for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.