A golden opportunity for Russia is buried under the ice caps, which are now melting
The climate crisis is gradually becoming a fact of life. Huge expanses of land around the globe are turning arid, human populations are being driven to migrate, entire species are becoming extinct and extreme natural phenomena are occurring with increasing frequency. Scientists and political leaders alike are deeply concerned about the danger looming for the continuation of life on Earth. But others have a different take on the developments. Every crisis is an opportunity, they believe, and indeed, for Russia the climate crisis constitutes a golden opportunity.
A decade ago, geologists estimated that 30 percent of the world’s natural gas reserves and 13 percent of its petroleum deposits were trapped beneath the ice floes of the Arctic Circle, along with rare minerals and other valuable resources. As the rising temperature melts the icebergs, not only will those resources become accessible but, as U.S. Secretary of State Mike Pompeo said in May, “Steady reductions in sea ice are opening new passageways and new opportunities for trade. This could potentially slash the time it takes to travel between Asia and the West by as much as 20 days. Arctic sea lanes could become the 21st century Suez and Panama Canals.”
A 2014 report by a UN committee found that about 80 percent of world trade is conducted via maritime shipping, and that the Suez Canal remains the chief maritime commercial route between Europe and East Asia. However, the widespread use of the northeastern route in the Arctic Ocean for shipping will reduce the distance between Europe and the Far East by one-third. Moreover, the northwestern route in the Arctic Ocean will shorten the distance between Asia and North America by almost 20 percent, creating an alternative to the Panama Canal. The primary beneficiaries of these developments will be the countries with ports on the North Sea and the Baltic Sea – in particular, Russia.
One study examined an extreme scenario – Arctic maritime routes operative year round. It predicted that about two-thirds of the trade that passes through the Suez Canal would be diverted to the new shipping routes. In any event, the melting of Arctic icebergs will increasingly open up commercial routes from Russia’s northern shores to East Asia, with vast implications for global trade. It’s easy to envision a large proportion of Chinese exports to Europe being shipped by way of Russia. This would also make it easier for Russia to ship its own goods, giving Moscow an advantage over Western competitors.
A boon for China
The icebergs are indeed melting. Last May, temperatures of 29 degrees Celsius were measured in the Arctic Ocean, 17 degrees higher than the summertime average in that region. June 2019 was the hottest month since the recording of temperatures began in 1880, before July arrived and broke that record, so the trend is clear: Earth’s climate is changing at the fastest pace since the dawn of humanity. Even if every country in the world made a complete shift to renewable energy, there would still be a temperature rise of 1.5 degrees. In light of this, many researchers believe that by 2024 the reduction in the quantity of ice in the Arctic Ocean will allow the free movement of ships carrying only light ice-breaking equipment.
It’s not surprising then that in May in Finland, at a meeting of the Arctic Council, an intergovernmental body of eight countries, Pompeo described the unfolding environmental disaster taking place near the North Pole as “an arena of global power and competition” over extensive resources including natural gas, oil, minerals and fish. It seems that everyone is casting covetous looks at the disappearing ocean of ice. Together with a mounting military presence in the region on the part of the United States, Canada and France, even the Chinese hope to get a foot in the Arctic door while creating their contemporary silk route, their Belt and Road Initiative – and their ships have been sighted in the region.
“We’ve seen that the ice in the Arctic Circle is melting, and commercial shipping is already using the northeastern passage,” says Arne Bardalen of the Norwegian Institute of Bioeconomy Research, an expert on agriculture, nutrition security and climate change who serves as a special adviser to various governmental committees.
“As climate change continues,” Bardalen notes, “it’s estimated that there will be increasing periods during which commercial shipping could go through that passage. China, for example, is very interested in these possibilities, which could open up new trade and transportation routes to European markets. I think this will have major consequences for global trade; transportation costs will be reduced and the availability – and thus competitiveness – of products from China, for example, will increase.”
That development, he adds, “will also have geopolitical impacts, of course, as more and more countries will look to be involved in the Arctic, something the members of the Arctic Council are following closely.”
Russia, with the North Pole in its backyard, is working to realize such a global trade scenario alongside the Chinese and in some cases in cooperation with them. In 2017, for the first time, a Russian tanker passed through the Arctic Ocean without a need for icebreakers. Russia has already beefed up its civilian presence in the region, and its military presence has reached a level not seen since the Cold War. Army bases abandoned after the collapse of the Soviet Union have been renovated and restaffed; according to Russia’s Defense Ministry, 475 new military facilities have been built in the area since 2012. Recently a new polar brigade was established, and last April the newspaper Izvestia reported that by the end of 2020, Russia’s most advanced air-defense system, the S-400 missile system, will be deployed both along the shores of the Arctic Ocean and on a number of islands in the region.
In April, a month before the Arctic Council convened, the International Arctic Forum – a Russian-dominated body comprised of representatives of various governments, scientists, business figures and international groups – met in St. Petersburg, with the prime ministers of Sweden and Norway and the presidents of Finland and Iceland in attendance. At the event, Russian President Vladimir Putin announced a new strategy for developing the region. Already this year, he announced the deployment of three nuclear-powered icebreakers there. According to official sources in Moscow, tax breaks will be offered to those who invest in the area, a new port will be built near the natural gas terminal at Sabetta, on the Russian shore of the Arctic Ocean, and a railway line will connect that port to the interior.
All this is part of a larger Russian scheme designed to challenge the global trade map as it is being drawn via policy decisions by the West, spearheaded by the United States. Putin doesn’t have the quantity of resources possessed by his superpower neighbor to the east, but the rabbit in his hat is global warming itself. Beyond the new trade routes that could open up, Russia will also profit in another way from the planet’s warming: accessibility to land for agricultural production.
A 2018 report by the UN Food and Agriculture Organization found that by 2050, agricultural production in Western Europe is liable to decrease by 2.9 percent and in India by 2.6 percent from 2018 levels. At the same time, the rise in temperatures is expected to boost agricultural output in Russia by 0.9 percent.
As George Rapsominikis of the UN Food and Agriculture Organization, and one of the report’s authors, puts it: “In temperate countries like Russia, and the regions where most developed countries are located, warmer weather may have a positive effect on crop yields.”
Sixty percent of the food energy throughout the world derives from one of three grains – maize, wheat and rice (which are also the three most widely cultivated crops) – while a fourth, soy, is the source of protein for about 65 percent of all farm animals on the planet, Rapsominikis explains. Because agricultural production in relatively “cool” countries, such as Russia, is projected to increase, trade centralization in the basic commodities is likely to become more acute. “We would expect that countries that are badly hit by climate change will have to step up their imports, and that might impact their economies,” he adds.
As Bardalen notes, “The risk in agricultural concentration is that the major exporters can use food and farming as a political and strategic tool in political conflicts and trade wars.”
Conquest by crops
In the meantime, Moscow is actively preparing the ground for the future. According to Stephen Wegren, an expert in Russian agriculture who teaches in the political science department at Southern Methodist University in Dallas, the Russians are now at a “critical juncture.” Their leadership claims that they have “reached food security and self-sufficiency: They don’t produce every food product they consume, but they are consuming more of their own food than ever. Now their policy has evolved to include food exports. They want to become one of the main food exporters in the world, an agricultural superpower.”
Ostensibly, with more than 1.2 million square kilometers of arable land, Russia should indeed be an “agricultural superpower.” In the early 20th century, for example, it was the world’s largest exporter of wheat. However, the attempts by several Soviet leaders to introduce widespread collective farming proved inefficient. The Soviet Union took pride in its food independence, but that was achieved despite low agricultural output and very little food diversity for the population. In the 1970s, farming failures forced the Soviet Union to import grains.
“I started going to the Soviet Union in the late 1980s,” recalls Prof. Wegren, “and at that time theory didn’t really meet reality. They minimized trade with the West, but that didn’t mean being completely self-sufficient. The poor performance of the agricultural sector, however, necessitated that they buy Western grain and corn.”
Following the collapse of the Soviet bloc, the amount of arable land used for agricultural purposes in Russian territory dropped from 900,000 square kilometers to slightly more than 730,000 square kilometers. The country’s new entrepreneurs preferred to invest their time and money in drilling for oil and gas. Soviet-era state-owned farms were dismantled, and few private landowners had enough capital to purchase modern equipment that would allow them to compete on the open market. Instead, many of them migrated to Moscow and other cities in search of new employment and a new way of life.
“It needs to be pointed out that no other country in the world tried to democratize and install capitalism at the same time. Russia was trying something very unique, and we can say that maybe they weren’t very successful,” Wegren says.
“Then Putin came on the scene. Starting in 2000, he recentralized the power of the federal government and the state. Oil prices starting going up, so he had money to do things, like offer subsidies and create a financial revitalization program that wrote off debts and fines for farms, which took a huge burden off their backs. He created an agricultural bank, a credit system. He wrote laws on mortgaging lands – as a way to raise capital – so, basically, he had a completely different economic environment to work in.”
Despite their government’s support, Russian farmers initially found it difficult to meet the new demands, and the economic embargo following the annexation of Crimea drove local inflation up further. But now it appeared that Putin’s gamble had paid off. Even though the Russian economy went into recession two years after the sanctions were imposed, the government slashed food imports by 40 percent between 2013 and 2015.
Just last month, at the Russia-Africa Economic Forum held in Sochi, Putin declared proudly that his country was exporting to Africa “more food than weapons.” Indeed, whereas in 2010 agricultural produce generated revenues of $9 billion, in 2018, the president announced, agricultural exports stood at $20 billion and this year would reach $25 billion.
“Putin has charged the agricultural sector with the task of reaching $45 billion in food exports by 2024. If they do achieve it, this would place them in the global top 10 exporters,” Wegren says. But even then, he notes, the gap between Russia and the United States, which tops the list, would remain substantial. He agrees that it is important, however, to consider the type of crops. Indeed, grains – wheat foremost – account for 60 percent of Russia’s agricultural export revenues. In 2017, Russia passed the United States to become the world’s biggest exporter of wheat, a title Russia retained last year as well.
Meanwhile, there is no indication that the Russians intend to rest on their laurels. This year Moscow allocated some 300 billion rubles ($4.74 billion) in government funding to agriculture, including 40 billion for the development of export markets. From 2019 to 2024, between 300 billion and 350 billion rubles is to be earmarked for projects that encourage such exports. As Russian farming continues to soar, fear of the repercussions is rising apace. As Wegren notes: “There’s absolutely no question that, as Russia’s agricultural production rises, and their status as an exporter increases, they will be more inclined to use food as an instrument of foreign policy, which means that they’ll use it in trying to coerce other states to do their bidding.”
According to official Russian data, in 2017 the state exported food and agricultural products to more than 159 countries around the world. In particular, Moscow has been setting its sights on markets in East Asia and the Middle East. Its agricultural enterprises ratcheted up soy production from 650,000 tons in 2007 to 3.6 million tons a year later. Agricultural trade agreements have been signed in the last few years not only with China but with countries including Japan, Vietnam and Mongolia. The latter imports more than 95 million tons of soy a year; the United States accounted for more than one-third of that before the recent onset of a trade war between the two countries. Moscow cannot supply that amount in full, but is pleased to help fill the vacuum, and even to lease extensive farmlands to Chinese corporations.
Not everything is coming up roses, though. Russia, which accepted the terms of the Paris Agreement on Climate Change only at the end of September, is actually becoming warmer 2.5 times faster than the world average – which naturally entails many disadvantages. A 2018 report by Russia’s Ministry of Natural Resources and Environment stated that the country faces a “climatic apocalypse.” There has already been a discernible rise in the number of fires, storms, drought and floods across much of the country.
“The opening of the Arctic sea routes could have short-term benefits, but once you have more frequent trade through those seas, it will warm the water up and ships passing through will generate gas emissions – shipping is actually a huge source of emissions – causing a great deal of air pollution,” says Elisa Lanzi from OECD headquarters in Paris. A senior economist in the organization, with over a decade experience at its environmental unit, Lanzi adds that even though Russia will have more land for farming, “the fact that there will be no snow on the ground can also mean that certain [previously frozen] viruses could spread again. Not everything that seems positive, even in the short term, is actually so.”
But even according to Lanzi and her OECD colleagues, we cannot ignore that global warming will lead to many changes in world trade. And as things look now, it’s very possible that Putin will be able to transform Russia back into a superpower just by selling wheat, without even needing to resort to military force.