New Rail Infrastructure Plans As Russia Signs Off New Northern Sea Passage Developments

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Russia’s new development plan for the Northern Sea Route was signed off by Prime Minister Dmitri Medvedev on the 21st of December. Behind its development stands Rosatom, the nuclear power company with top responsibilities for the Northern Sea Route. The document builds on President Putin’s decrees from May 2018 and the request to boost annual shipments on the Northern Sea Route to 80 million tons by year 2024. The plan itself, known as Plan NSP, covers development goals until 2035.  It offers the most comprehensive vision yet of how Russia will harness the perceived economic benefits of the Arctic.

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First time the details of Moscow’s plan to build major infrastructure along the route in an effort to make the Arctic viable for commercial shipping and fossil fuel extraction.

Overall, the government foresees building at least 40 new Arctic vessels, including nuclear icebreakers; upgrading four polar region airports; constructing far northern railways and seaports, and initiating a massive exploitation of natural resources from the Arctic’s shores.

According to NASA data, ice cover around the North Pole has been retreating by more than 12 percent each year since 1979. Because of this the Arctic is absorbing more solar radiation, causing polar temperatures to rise twice as fast as anywhere else on earth.

While the Russian government acknowledges these impacts in its recently published climate change measure, it also aims to “use the advantages” of warming temperatures and to adapt its economy to the coming changes.

I travelled to the Arctic this New Year, including to Spitzbergen to see changes for myself. Fjords that had previously been iced over and were walkable from shore to shore in 1995 are now open sea with just a few chunks of ice. A keen Ornithologist, I spotted Little Auk, a small diving bird in the waters just last week.  Previously they would migrate to Greenland for the Arctic winter, which endures a Polar Night of darkness for three months. Now, these birds are staying put.

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A Little Auk in winter plumage diving for food among the ice in open water in Arctic Spitzbergen. These birds usually migrate further south for the Arctic Winter.

This obvious warming has made itself apparent in the new Plan NSP. Rosatom, Russia’s nuclear power operator, has been tasked with most of the 84 development strategies, while major developers of new arctic infrastructure will be Rosneft, Russia’s state oil company, Gazprom Neft, the natural gas monopoly’s oil extraction division, and Novatek, which oversees the massive Yamal LNG project.

Coal and mineral extractors like Vostok Coal, Norilsk Nickel and others also have portfolios within the new plan. An extensive geological mapping of Arctic natural resources will be complete by April of this year (2020), the document says.

Also critical to Northern Sea Route development are new railway lines. Under the new document, the government will weigh the decision to develop a rail line to Sabetta, the main seaport for the Yamal LNG project by June. Whether to build a railroad between Arkhangelsk on the Arctic coast to Syktyvkar and Perm in central Siberia will be decided in 2022. By 2024, the government will decide whether to extend the railways west, from Salekhard on the southern Yamal Peninsula to the town of Novy Urengoy in the Yamal-Nenets Autonomous Region.

Several Arctic airports, likewise, will get major upgrades. We discussed this in the article Russia Upgrades Arctic Airports & Ports As Part Of Northern Sea Passage Infrastructure.

Whether the Ob River in northern Siberia will be dredged to accommodate more shipping traffic will be decided in December 2021.

The Murmansk transport hub is also included in the plan, and when complete, will be the largest shipping point in Northern Russia. The Transport Hub project is key part of the Strategy for Transport System Development by 2030, a guiding document developed by the federal government. Along with the Sabetta Port in Yamal, it is the biggest infrastructure initiative in the Russian Arctic.

On the plan is the construction of a 28 km long railway line on the western side of the Kola Bay. The line will stretch from Murmansk, across the Tuloma River and to Lavna just to the West, and includes the building of a bridge across the Tuloma river. Lavna is being developed as a major sea deep sea port for coal handling, and a capacity of moving 18 million tonnes per annum. Phase 1 of Lavna’s development will see 50% of that capacity put into operation by December 2021.

How much cargo it will send off into the Northern Sea Route isn’t yet clear, but it will mark a new turn in shipping toward the east and to Asia, instead of Europe.

The Russian government is already targeting major increases in traffic along the northern sea route. In November, Rosatom released figures showing that cargo volumes in 2019 had already increased YoY by over 60 percent.

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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 russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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