The Writer holds an MSc in Eurasian Political Economy & Energy from King’s College London and also an MA in European Studies from Sabancı University.
Following the demise of the Soviet Union, Russia’s interest in the Arctic suffered many years of neglect until Vladimir Putin’s presidency. The revival of interest in the region has started with an increased military presence, enhanced economic activity and active participation in the Arctic Council. Russia’s strong comeback to the Arctic was portrayed as expansionist tactics by other littoral states when Russian scientists planted a flag on the seabed under the North Pole back in 2007.
To reflect Russia’s Arctic approach, the country’s security council wrote a document in 2008, which was later signed by former Russian President and current Prime Minister, Dmitry Medvedev. The document named the Principals of State Policy of the Russian Federation in the Arctic to 2020 And Beyond details Russia’s Arctic policy, which considers the region as a zone for peace and cooperation as well as a region of national interest with its vast natural resources. The document also refers to the Arctic’s unique geographical and ecological system with sensitivities towards the quality of life for indigenous people, the modernization of its social infrastructure, development of safe tourism, the abolition of pollution, and further research into the culture, economics, and history of the Arctic region.
However, the document’s most contested part, which has upset many other littoral states, namely: Canada, Norway, Denmark, and the U.S., relates to Russia’s right to defend its territory in the Arctic through the establishment of a military unit in the region. The document, however, makes no further comment on the size of the military unit. This plan has further escalated anxiety over Russia’s increasing military presence in the Arctic. Some countries, like Canada, have already reacted strongly against Russia’s military presence in the Arctic. Canada’s former Foreign Minister Lawrence Cannon, when speaking at the International Relations Council on Arctic Sovereignty in 2009 warned that “Canada will not be bullied by Russia.”
As part of the second phase of the program, Russia introduced yet another document in 2013 further elaborating on Russia’s plan in the Arctic. The document, The Strategy For The Development of the Arctic Zone of the Russian Federation and National Security For The Period Up To 2020, gives further particulars on Russia’s approach to the region as a future strategic resource base.
With regards to the Arctic’s potential for oil production, the Russian Energy Minister Alexander Novak said during the International Arctic forum that Russia produced 93 million tons of oil in the Arctic zone in 2016, representing 17 percent of total production. Forecasts suggest that Russia could increase its oil production by up to 2.2 million barrels per day by 2030.
Aside from the currently imposed heavy sanctions on Russia, the oil industry in the Arctic for Russia carries other difficulties that could potentially hamper any further development in oil extraction in the years ahead. Under the current Federal Law On Subsoil Resources, which was adopted in 2008, the Russian government expects oil companies to fund their geologic drilling explorations in the Arctic and have limited the number of companies working offshore. However, given Russia’s inexperience in offshore oil exploration, the overall costs for companies with no or little experience in offshore drilling would increase tremendously.
During the Soviet era, oil and gas extraction was carried out on land, and since the majority of consumers were neighboring countries, oil and gas were transported through land-based pipelines. Therefore, both infrastructure and equipment have been developed for operations based on land. Nonetheless, Russia’s vast experience on land cannot be applied to the offshore, which has its own unique challenges and requires different techniques and equipment. For the advanced technology required, Russian oil and gas companies need to collaborate with foreign oil and gas companies to work on the coast or at sea.
As sanctions become tougher on companies operating in the region, coupled with the drop in energy prices, a detrimental effect has been seen on the overall economy. To counteract this, Russia has chosen to strengthen relations with Asian countries, mainly China. With Russia’s ambitious plan to boost its economy and attract more investment and technology to the Arctic, and with China’s desire to diversify its marine trading routes and reap the fruits of the early discoveries in the Arctic, a cooperation agreement was signed in 2016. The long-term collaboration between Russia and China aims at enhancing their energy relationship and overcoming financial and technological hardships in the Arctic.
Monopoly rights over offshore exploration that were given exclusively to Rosneft and Gazprom remain a serious impediment to further progress in the Arctic. Currently, the Russian government is standing firm in its position on monopoly rights for offshore activities. Financial restraints along with western sanctions over advanced drilling equipment would potentially hinder any improvement in the region in the short to medium time.
Based on the fact that as much as 30 percent of the world’s undiscovered natural gas reserves are estimated to be in the Arctic zone, out of which two-thirds are located in the Russian Arctic, it could be said that the confrontation over resource ownership is not about oil, but is also about vast natural gas reserves.
Since a large chunk of the Arctic belongs to Russia, it is unsurprising that substantial volumes of reserves are found on the Russian coast. As a result, Russia is motivated to find new partners for the necessary financing and technology for further development in the Arctic. Although Russia’s goals, detailed in the strategy documents, are ambitious, given the financial obstacles and the lack of required technology and know-how for working offshore in such a harsh climate, Russia’s Arctic energy operations are unlikely to develop swiftly. In this regard, the Arctic’s overall impact on the world energy market will only be seen in the decades ahead.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.