Session of Presidium of State Commission for Development of Arctic Held in St. Petersburg

Deputy Prime Minister and Presidential Plenipotentiary Envoy to the Far Eastern Federal District Yury Trutnev held a session of the Presidium of the State Commission for Arctic Development at the International Arctic Forum.

“At the Arctic Forum session, Russian President Vladimir Putin identified development priorities for the Russian Arctic. What do we need to do to see that the Russian President’s instructions are carried out? First and foremost comes the goal of increasing the volume of freight traffic along the Northern Sea Route to 80 million tonnes. This will happen only if new production facilities appear in the Arctic to create the necessary cargo base”, Trutnev said.

According to the Deputy Prime Minister, projects aimed at increasing turnover on the Northern Sea Route – especially those related to Novatek – which have already been implemented could produce approximately 47 million tonnes. The remaining 33 million tonnes have not yet been provided for by projects waiting to be carried out. “There are a number of projects that are in one or another stage of preparation. It seems to me that they could very well be implemented, though for this to take place, it would be necessary to act in a serious way”, Trutnev said.

He stressed that the Russian Arctic had need of special measures for the support of investment activities. The order was given by the head of state. The corresponding documents must be submitted to the State Duma by 1 July 2019. This work falls under the purview of the Ministry of the Russian Federation for the Development of the Far East and the Arctic.

Minister of the Russian Federation for the Development of the Far East and the Arctic Alexander Kozlov reported on the development of draft laws providing for the creation of a new system of preferences for investment projects in the Russian Arctic. He said that a package of 4 bills was now ready in its initial basic edition. The Russian Ministry for the Development of the Far East and the Arctic has provided two types of tax incentives for residents of the Arctic. The first option sets an organization's profit tax, mineral extraction tax, property tax, and land tax at 0% for 10 years for projects up to RUB 100 billion and 15 years for projects of RUB 100 billion or more. The rate is 7.6% instead of 30% for the same period as the previous tax incentives. The second option provides for a significant tax reduction for the entire duration of the investment project with income tax at 7% instead of 20% (7% of the regional portion of the tax alone); mineral extraction tax falls under a preferential rate of 0.3; insurance premiums also come to 7.6%, with tax on the property of the organization and land tax at 0%. “We are talking about providing benefits only to new projects not currently in operation. Therefore, no loss of current budget revenues as a result of the adoption of bills will occur. Apart from insurance premiums, since we assume that new jobs will be replaced by workers who are already working elsewhere”, Kozlov said.

“Company representatives say that the second option is a little better. I think that it is better for the regions too because it provides an opportunity for the budget to receive funds from the very beginning of investment project implementation. Members of the commission also supported the second option”, Trutnev said.

The Deputy Prime Minister stressed that “the entire Arctic will turn into a preferential territory”. For the purpose of furthering support measures, projects have been conditionally divided

into four groups. The first group covers the extraction of hydrocarbons on the shelf, the second covers the extraction of hydrocarbons on the continent, the third covers the production of liquefied natural gas, and the fourth covers all projects not included in the first three groups. “Preferential packages will be developed for each of these groups. We asked the commission members to submit their proposals within a week. I think we will need another week for processing. And in two weeks we will determine which option we submit to the Government of the Russian Federation for consideration”, Trutnev said.

There is another area of work related to the development of the Northern Sea Route. According to the Deputy Prime Minister, measures aimed at ensuring navigational safety are necessary to create a competitive environment for the transport corridor. Corresponding port capacities must be provided for. The Northern Sea Route must have rescue equipment and high-quality navigation and medical support. Solutions must be thought out to reduce the cost of icebreaker escort. “Only after this can we hope for the transportation of investment goods from our own investment projects along with transit traffic,” Trutnev said. The Northern Sea Route must see an increase in the number of icebreakers. Construction of the Leader icebreaker is fundamentally important because it makes movement along the Northern Sea Route possible at a commercial speed. As the Deputy Prime Minister noted, the round table held on the 50 Years of Victory nuclear icebreaker led to the Ministry of Eastern Development, Rosatom, and the Ministry of Transport’s being instructed to prepare an economic development model for the Northern Sea Route. “We asked that this work be completed fairly quickly: within two to three months”, Trutnev said.

The second part of the meeting addressed issues related to implementing national projects. “The development of the Russian Arctic”, Trutnev stressed, “cannot be limited to the development of the Northern Sea Route or the creation of conditions for the implementation of investment projects. The development of the region itself and the improvement of people's living standards are of fundamental importance”. At the same time, the state of social affairs in the Russian Arctic is significantly worse than the average across the Russian Federation. Life expectancy in 16 of the 23 territories falls below the Russian average. In 15 out of 23 territories, the share of housing stock categorized as problematic or even dangerous is higher than the national average. The greater share of this is in the Turukhansky region of the Krasnoyarsk Territory (at 28.7%). The volume of new housing and density of roads is low. “Vladimir Putin has ordered that social development indicators in the Arctic equal those of the average Russian. In order to achieve this, significant work will have to be done. The order has just been given. We started work of this kind in the Far East before. We have analyzed each territory. No such analysis exists for the Arctic. We have exchanged positions and have come to an agreement that the ministry propose measures to fulfill the task set by the Russian President. In order to achieve this task, national and federal projects must first be set up”, the Deputy Prime Minister said.

It should be remembered that the Russian Arctic includes the territories of the Murmansk Region, the Nenets, Chukotka, and Yamalo-Nenets Autonomous Districts, the Komi Republic, several districts of the Sakha Republic (Yakutia), the city of Norilsk, two districts of the Krasnoyarsk Territory, and municipalities of the Arkhangelsk Region. The Russian Arctic zone also includes part of the islands and archipelagos of the Arctic Ocean.

The Arctic region is rich in a variety of minerals, including gas and oil. Approximately 22% of the world's undiscovered hydrocarbon resources are located in the Arctic, of which 13% is oil, 30% natural gas, and 20% gas condensate. 84% of the resources are located on the Arctic Ocean shelf and 16% within the land territory of the Arctic states.

Official Forum website: forumarctica.ru

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‘Arctic: Territory of Dialogue’ 5th International Arctic Forum

The ‘Arctic: Territory of Dialogue’ International Arctic Forum is one of the key platforms for the discussion, at a global level, of problems and prospects for the Arctic region. The Forum is an opportunity for members of the international community to pool their efforts to ensure the efficient development of the Arctic and higher living standards for populations living in Arctic territories. The ‘Arctic: Territory of Dialogue’ Forum was first held in 2010 and was devoted to contemporary problems of the Arctic region. The second forum was held in 2011 and focused on issues of developing transport systems in the Arctic. In 2013the key themes considered included environmental protection, while in 2017 the Forum’s theme was ‘People and the Arctic’. The key theme of the forthcoming 5th International Arctic Forum will be ‘The Arctic: An Ocean of Opportunity’. Three pillars will form the basis of the business programme: ‘Coastal Regions’, ‘The Open Ocean’, and ‘Sustainable Development’.

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