Investments under Arctic preferential-terms projects are above $15 billion

Most big projects are outside populated areas, for example construction of a sea terminal and a road, connecting the Baimsky processing plant, Bilibino and Cape Nagleinyn and a floating nuclear power plant and a new grid line, located near the Pevek sea port

MOSCOW, October 11. /TASS/. The wider land borders of the Russian Arctic zone, which were formalized in 2020, and the offered incentives have attracted investors in the Far North. According to the presidential envoy to the Far Eastern Federal District, Deputy Prime Minister Yuri Trutnev, the contracted investments reach 1.1 trillion rubles ($15 billion).

In October, 2020, President Putin inked an order to expand the Russian Arctic zone’s land borders, including municipalities in the Krasnoyarsk Region (a part of Evenkia), in the Arkhangelsk, Karelia and Komi regions.

“Under the new Arctic preferential regimes, from 2020, began the implementation of first investment projects, which are 294 by now,” he told the Federation Council in a report on progress of the Arctic zone’s development strategy. “The amount of investments under the projects is 1.1 trillion rubles.”

Most big projects are outside populated areas, he continued, stressing the importance of state support. For example, development of the Baimskaya Ore Zone requires the construction of a sea terminal and a road, connecting the Baimsky processing plant, Bilibino and Cape Nagleinyn. A floating nuclear power plant and a new grid line will be located near the Pevek sea port.

“It is a big job, but this project will double Chukotka’s budget and will favor quality changes in its economy structure,” he said. “In fact, it will be different Chukotka.”

Big projects and Northern Sea Route plans

Under the Arctic LNG-2 project, the investor will make in the Murmansk Region a center for building large-tonnage offshore structures, which is unique for Russia. From the developing Syradasaysky deposit the coal will be transported along the Northern Sea Route – 7 million tonnes a year by 2026, and further on the transported amount will grow to 12 million tonnes a year, he said.

The development of the Northern Sea Route (NSR) is a system-level task for implementation of most projects in the Arctic. The route will be used to transport necessary construction materials and structures, as well as raw materials and products. It literally “stitches” the Russian North, and thus it is a strategic task to develop it into a new global transport line, the deputy prime minister said.

“As for the competition with the Suez Canal, I must say the Northern Sea Route is 40% shorter; at the same time NSR transports 33 million tonnes of cargo a year, while the Suez Canal – more than 1 billion tonnes a year, though the transportation flow along the Northern Sea Route has been growing steadily. For true competition with the Suez Canal, we must do a lot: build icebreakers, improve the transport infrastructures, provide satellite communication, the Internet, weather forecasts and ice radars, set a rescue system, build the fleet adapted to the Arctic conditions,” he said. “An important task is to improve the life of people in settlements along NSR.”

The ice-class bulk fleet will triple by 2030, and new 30 weather stations will be organized in the Russian Arctic zone by 2023. Rescue stations will locate in Pevek, Sabetta, Dikson and Tiksi, the necessary aviation equipment has been purchased already. For the rescue purposes, the government has allocated 37 billion rubles ($514 million) to 2026. The key objective is to guarantee all necessary assistance in any location along the entire Northern Sea Route.

Segezha District development

In October, 2020, Karelia’s Segezha District was included into the Russian Arctic zone. The city will have a new pulp and paper mill with the planned annual capacity of 1.5 million tonnes. Segezha Group plans investments of 178 billion rubles ($2.5 billion). The new plant will boost the city’s infrastructure and social development, the regional government said.

“Segezha Zapad (west) will be the first project to build a pulp and paper mill over recent 40 years,” the deputy prime minister said.

The regional ministry of economic development told TASS about the plans to build by 2022 a road to the hotel in Segezha and other transport infrastructures to the new mill: those would be new railway overpasses and renovated roads.

“This traffic infrastructure will be used not only by the plant, but also by people living in Segezha. Noteworthy, the Arctic zone’s residents, implementing major investment projects, participate actively in the Segezha District’s social sphere, including financial support for the local hospital during the pandemic and plans to improve heat supplies and to develop the comfortable urban environment,” the regional authority told TASS.

New jobs, tourism and hectares

The deputy prime minister continued by stressing it is impossible to develop a region exclusively with budget incentives. Development of the economy, construction of new enterprises, new jobs will boost improvements, and the government’s priority task is to offer conditions for comfortable life and work in the Arctic.

For example, Karelia implements projects in tourism, services, information technologies and aquaculture. The investments have made 2.3 billion rubles ($32 million). The projects offer 225 jobs. The total amount of planned investments is 97.7 billion rubles ($1.4 billion), and the number of new jobs would be 1,400.

The Arkhangelsk Region’s administration told TASS the Arctic zone’s residential status has been granted to 61 companies. The planned investments are more than 26 billion rubles ($361 million), the projects will offer more than 1,700 jobs. Komi’s Inta, Usinsk and the Ust-Tsilemsky District were included into the Russian Arctic zone a year earlier. My Business center, which supervises Arctic projects in Komi, told TASS over one year the region had registered seven new residents will the total announced investments of 1.454 trillion rubles ($20 billion). They will employ 411 people.

“Promising projects in tourism are underway practically in all the Russian regions, insided the Arctic zone,” the deputy prime minister said. “Those are the Lenskiye Stolby (Lena Pillars), Karelia, Murmansk, Krasnoyarsk – practically every region eyes tourism projects. This is very important, since the demand for tourism is very high now. Almost 1.5 million people visit the regions every year.”

Minister for Development of the Far East and Arctic Alexei Chekunov told TASS about the Arctic hectare program. From August 1, 2021, residents of the Arctic regions may apply to receive for free land plots of up to one hectare. For the first six months, the Arctic hectares will be allocated to local residents, and after February 1, 2022 – to all other Russian residents, as well as to those who participate in the state program to relocate compatriots from abroad. The authorities report 4,000 applications for the Arctic hectare. The leaders are the Murmansk, Arkhangelsk, Yamalo-Nenets and Karelia regions.

Traditional occupations

In the Russian Arctic zone presently live the North’s 19 low-numbered indigenous peoples.

“The preservation of their customs, traditions and lifestyles is a key aspect in this multi-national country,” Yuri Trutnev said. “Necessary financial means will be listed in the Russian Federation’s budget.”

When investors receive the status of the Arctic zone’s residents, they are legible for preferences and tax benefits. According to Vice President of the Association of the North, Siberia and Far East’s low-numbered indigenous peoples Artur Gayulsky, these options must be made equally available to local ethnic communities.

“The law on doing business in the Arctic has come into force, but it is applicable mostly to big companies or new businesses,” he said. “They enjoy incentives, tax benefits, and the population, which has been developing the Arctic since the 17th century and which lives there, is left out, they do not obtain the residential status.”

According to him, in order to solve the unemployment problem in the Far North, the local population must be involved in traditional occupations – hunting, fishing, deer breeding – in the real economy. “The task is as follows: we must return the traditional occupations into the real sector of the economy, and the ethnic communities (of the North’s low-numbered indigenous peoples) must obtain the status of businesses – in that case people working in those sectors will have legal relations with the state,” he said.

A recently organized working group has been drafting changes to the current legislation, he added.

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