Plenary session of the International Arctic Forum
Vladimir Putin attended the plenary session of 5th International Arctic Forum The Arctic: Territory of Dialogue.
The theme of the sessionis The Arctic: An Ocean of Opportunity. President of the Republic of Finland Sauli Niinistö, President of the Republic of Iceland Guðni Thorlacius Jóhannesson, Prime Minister of the Kingdom of Norway Erna Solberg and Prime Minister of the Kingdom of Sweden Stefan Löfven are taking part in the discussion.
The discussion is focused on the comprehensive development of Arctic territories, including the rational use of natural resources, environmental security, transport, protection of northern indigenous peoples’ interests and other aspects of sustainable growth in the Arctic region.
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Speech at the plenary session of 5th International Arctic Forum
President of Russia Vladimir Putin: Mr Niinistö, Mr Jóhannesson, Ms Solberg, Mr Löfven, ladies and gentlemen, friends,
I am happy to welcome you to St Petersburg, the northern capital of Russia whose history is closely connected with legendary Arctic expeditions, industrial exploration of this unique region and preservation of its nature and unique culture.
This is the fifth time that International Arctic Forum The Arctic: Territory of Dialogue becomes a platform for an open discussion of the Arctic agenda. We thank our foreign guests and representatives of the Arctic Council countries for their readiness to team up and their understanding of our shared responsibility for the future of the Arctic and its stable and sustainable development.
In 2021, Russia will assume presidency of the Arctic Council. We invite all participants of the Council and other states to cooperate in the Arctic. The priorities of our presidency are vital for the Arctic development: promotion of sustainable technologies in all areas, including industry, transport and energy.
Today we are carrying out our projects in the Arctic, including global ones, based on the latest environmental standards. It is enough to mention the Yamal LNG project and the development of the Bovanenkovskoye and Kharasaveyskoye gas fields. Today, the Arctic accounts for over 10 percent of all investment in the Russian Federation. I am convinced that the importance of the Arctic factor in the Russian economy will only grow further.
This year we are going to draft and adopt a new strategy for the development of the Russian Arctic up to 2035. It is to combine measures stipulated in our national projects and state programmes, the investment plans of infrastructure companies and programmes for developing Arctic regions and cities.
All Arctic regions should be brought to the level of at least the national average in key socioeconomic indicators and living standards. I would like to emphasise that this task should not only be clearly defined in the new strategy of Arctic development but should also serve as a guide for the work of all federal departments and regional authorities of Russia. It is absolutely necessary to take into account the specific nature of the problems facing the indigenous minorities of the North.
Special attention should be paid to the development of transport and other support infrastructure. We are well aware that this is a necessary foundation for future investment and business initiatives. The construction of theNorthern Latitudinal Railway is a key infrastructure project. This railway will make it possible to start effective development of the natural riches of the Polar Urals and Yamal, and in the long-term, the north of Krasnoyarsk Territory of the Russian Federation. And we will certainly continue developing the global transport corridor that includes the Northern Sea Route and which will be functioning without fail year round.
Our goal to significantly boost the freight traffic and bring it up to 80 million tonnes by 2025 on the Northern Sea Route alone was outlined in the 2018 Address to the Federal Assembly. Just 10 to 15 years ago, this figure looked absolutely out of reach, whereas today it is a realistic, carefully calculated and concrete goal. As of last year, the volume of traffic on the Northern Sea Route already reached 20 million tonnes. This is three times – I reiterate – three times more than the Soviet record set in 1987, when the Soviet Union transported 6.5 million tonnes using this route. Now, it is 20 million tonnes.
In order for this global transport corridor to operate at full capacity, we will develop the communication and coastal infrastructure, including port facilities, navigation, and meteorological aids, and ensure safe commercial navigation.
We encourage our foreign partners to join us in our efforts to create hub ports at the end points of the route. I mean the Murmansk transport hub and port infrastructure in Petropavlovsk-Kamchatsky. In addition, we plan to upgrade the Arctic coast harbours, including the river-sea traffic capabilities.
We will continue to update our icebreaker fleet and to increase the production of ice-class vessels. Three new nuclear-powered icebreakers, namely, the Arktika, the Sibir and the Ural, are being built here in St Petersburg, where we are now. By 2035, Russia's Arctic fleet will operate at least 13 heavy-duty linear icebreakers, including nine nuclear icebreakers.
To reiterate, our goal is to make the Northern Sea Route safe and lucrative for shippers, and appealing both in terms of the quality of services and price. In particular, the icebreaker escort fee must be competitive and reasonable. The state invests in this operation in order to minimise the tariff burden on carriers and other businesses.
Friends, we intend to use all of our investment support tools, including those that we have used successfully under programmes for the development of Russia’s Far Eastern regions, to launch new projects. These will include lower profit tax rates, reduced severance tax coefficients for mineral extraction, a notifying procedure for VAT refunds and a simplified procedure for providing land plots and invariable terms for implementing investment projects.
At the same time, with due consideration for the Arctic’s peculiarities, investors should and will receive more advanced and more stable preferences here.
I would now like to address our colleagues. The Government of Russia, as well as experts and the business community, have been instructed to draft a federal law on a special system of preferences for the Arctic zone’s investors. And I am asking you to do this quickly so Russia’s State Duma can pass the law during its fall session.
I would like to draw your attention to one more point. As you may know, the powers of the Ministry for the Development of Russia’s Far East have been expanded; now, the Arctic is also within its authority and is part of its responsibility. In this connection, it is logical to expand the work of Far Eastern development institutions to the Arctic as well. If necessary, we will expand the capitalisation of the Far East Development Fund for selective financing of Arctic projects.
Furthermore, we need a powerful research, HR and technological foundation for the region’s comprehensive development and for accomplishing unique and unconventional tasks in the high latitudes. We have begun establishing science and education centres in various Russian regions; they integrate the capabilities of universities, research institutes, the business community and the real economy. One of our Arctic regions will certainly receive such a centre that will ensure the development of fundamental research and will help address the applied and practical tasks of developing the Arctic.
We believe that the future belongs to active academic and university exchanges, international research teams and alliances of high-tech companies. We invite all our colleagues to take part in joint projects in shipbuilding, navigation safety, environmental protection, minerals production and bioresources harvesting.
The Arctic offers us immense challenges. And we can only respond effectively if we do it together. One such challenge, as I have told you, is to maintain balance between economic development and preservation of the Arctic environment, conservation of its unique and fragile ecosystems, and, of course, clean-up of the environmental damage accumulated through the economic activity in the past decades, which was extensive from time to time. We have been conducting a major clean-up of Arctic areas for a number of years. Starting in 2012, we have removed and utilised over 80,000 metric tonnes of waste.
In the coming years we will liquidate six major environmental damage sites in Arkhangelsk and Murmansk regions, in the Nenets Autonomous Area, Karelia and Yakutia as part of the Clean Country federal project. We are also to clean up over 200 square kilometres in the Kola Bay area.
We will also develop a system of specially protected natural territories and reserves. Above all, I mean the Russian Arctic national park. It is important to take additional measures to develop civilised ecotourism and build the required infrastructure there.
To conclude, I would like to thank all the participants and guests of our forum. I am certain that our constructive dialogue will help strengthen neighbourly relations and trust in the Arctic region, which means the peaceful and sustainable development of the Arctic.
John Fraher: Thank you very much, Prime Minister. So now I am delighted to open up the panel discussion, where we will touch on many of the issues that we’ve talked about in the opening speeches.
I would like to start with energy in the Arctic. And President Putin, you talked a lot about Russia expanding its energy infrastructure in the Arctic. Indeed, exploiting the Arctic reserves has been one of your grandest ambitions as president. And yet when you look at the global energy market and trends in the global energy market, we see that the world is moving towards renewable energy. The world is awash with US shale, and, as Rosneft has discovered, sanctions are making it much harder for Russia to do big offshore projects. I think it has been five years now since Rosneft struck oil in the Arctic.
So my question to you is, is there a risk that Russia has missed its chance here? That somehow this Arctic dream that you’ve had will end in disappointment?
Vladimir Putin: I would like to ask the moderator to give me two minutes for some comments on the speeches of my colleagues. Do you mind? Thank you very much.
First of all, we have discrepancies with Sauli [Niinistö] on data relating to warming in the Arctic. According to our data, the Arctic is warming four times faster than the rest of the world, and Russia is warming 2.5 times faster than the rest of the world. These may be different calculations, but both of these are really disturbing trends.
As for soot, I know this is a serious question, Sauli and I also discussed it. We also have different calculations concerning these emissions in different countries, including in Russia, the differences are dozens of times. But I gave him an example, told him that in the ancient sediments of ice, we can observe large inclusions of soot. It was in the Middle Ages, perhaps even earlier, when there were no industrial emissions. The fact is that a volcano may produce more emissions than humanity, whose emissions are associated with road transport. Nevertheless, this question is very important, and our experts are also working on it.
But what is extremely important, in my opinion, and here I fully agree with Sauli, is that if ships switch to more environmentally friendly types of fuel, and I mean primarily gas fuel, especially ships that navigate in the northern seas, in the Arctic zone, this is of course extremely important. It is absolutely obvious. And it would be necessary to encourage shipbuilding companies and carriers to use such types of transport and such fuel.
Now let us move on to your question: “Does Russia, as the region’s largest economy, do enough to ensure environmental security in the Arctic?” Sorry, but I must also correct you. Russia is not the largest economy in the Arctic region. According to the IMF, China ranks first in terms of purchasing power parity and economy. It significantly overtook the United States, 25 trillion already, if I am not mistaken.
John Fraher: But Mr President, is China an Arctic country? By your definition.
Vladimir Putin: I was patient, while you were saying all this, you too please bear with me.
The United States of America ranks second. And the United States of America, on a par with Canada, is a country in the Arctic zone. But unlike the United States, we signed and executed the Tokyo Agreement, and signed the Paris Agreement and are going to implement it. Moreover, Russia undertook to reduce emissions by 25–30 percent from the level of 1990. This is a large load. And as the President of Finland said, we are now planning the ratification; of course, we will do this after a comprehensive analysis of the consequences of the implementation of these decisions, but nevertheless we are moving in this direction.
Although I have already mentioned this, the causes of the warming are still unknown. We are not sure whether it is related to emissions or some other more global causes. This is the question. However, we cannot go wrong by reducing anthropogenic emissions, and Russia has undertaken such commitments. However, Russia is not the world’s largest economy. We rank sixth in terms of the volume of our economy and purchasing power parity. We come sixth after China, the United States, India, Japan and Germany. We will do our best to move up, of course.
Now, regarding “from here we will face a Swede, here the city will be laid, in spite of the arrogant neighbour” (A quote from Alexander Pushkin’s poem The Bronze Horseman, which the Prime Minister of Sweden Stefan Lofven quoted during his forum speech), I would like to mention another poem, Poltava. It has the following lines about the Battle of Poltava “Hurrah! The Swedes are broken…“ These lines come to mind when we watch the game between the Russian national football team and Tre Kronor. Unfortunately for our fans, we are unable to cite these lines too often now, because the brilliant Swedish hockey team is playing so well and thrills not only its own fans but ours as well and by the way everyone is united: sports unites our countries in a cultural sense. It would be nice, Mr Prime Minister, if a club of yours participated in the Continental Hockey League games. However, this is beside the point of our meeting today.
Now, regarding your question about whether Russia will miss something, or not, in terms of developing these resources. Of course, not.
First, the resources are truly enormous; they are of a global scale. According to preliminary estimates, we have about 13 billion tonnes of oil and 95 trillion cubic metres of natural gas. They represent colossal planetary reserves. We have already begun to develop them. Mr Mikhelson who is sitting across from me is in charge of the Yamal LNG project. This is an international project.
You mentioned restrictions. Yes, they do exist and they are harmful, of course, as well as sanctions, and everything else, but they cannot stop the process of Arctic development. To reiterate, no matter how the sanction tools work, the first shipment from Yamal LNG went to the United States. Funny, but true. And, I believe, trade continues uninterrupted as well. Because whenever our US partners and friends can benefit from something, they make whatever it is happen. If they find it is not lucrative, then they tend to tighten the screws. But only if they do not find it lucrative for themselves. They have not been paying much attention to the interests of other countries lately. Well, so, we will implement other projects, and we will expand this one as well.
How fast the humankind is moving towards replacing hydrocarbons with alternative sources is a different question. According to expert data, global energy consumption will increase in the coming decades, and the ratio between hydrocarbons and renewable sources, such as nuclear power and hydropower, will remain about the same.
Today (whether it is good or bad, but this is the case) this relationship between different sources remains unchanged. The total volume is up. Let us not forget that Russia is a vast country with hydropower capabilities, and we are expanding and will continue to expand nuclear energy. Nuclear power accounts for only 16 percent of energy generation. In France, it is already more than 90 percent, and we have only 16. We have to get to at least 25. Our neighbours, Finland, are going to build as well. And so on. So, we have not missed anything.
Now, with regard to whether the pressure of sanctions is getting in our way or not. Partly it is, but not in a critical way. To a certain extent, this even encourages us to actively develop our own technology.
Last year, we invested 600 billion rubles in import replacement (that is, to produce ourselves what we used to buy from abroad). (Addressing Maxim Oreshkin) How much was invested in import replacement last year? The Minister of Economic Development does not remember. About a billion rubles. This will continue, and we will continue to build up these efforts. Frankly, it has a positive effect. Of course, it would be better to do without any restrictions that distort the market and global trade and lead to a slowdown in the global economy. But the implementation of Russia’s plans to develop mineral resources will not get in the way of development, in general.
John Fraher: But do you not worry? Yes, you are right, the Yamal LNG story has been very successful to date, and no one doubts the fact that there are lots of deep oil and gas reserves in the Arctic, but getting them out of the sea is extremely expensive. Yes, it’s there, but do you think it is going to be economically viable for Russia to do this given the head… that we have talked about: sanctions, energy transition, etc.?
Vladimir Putin: I have told you that we do not see the transition. What we see is the man's efforts to develop alternative energy sources, but so far there is no critical transition from hydrocarbons to renewable sources – critical from the standpoint of those who produce oil, gas and coal. This is not even about oil, gas or residual oil. Currently, thermal power stations are using coal, not even residual oil, oil or gas. And gas, by the way, is the most eco-friendly type of fuel of all the hydrocarbon sources.
Coal is the most common fuel the world is burning today, and this is what we have to think about. And the volume of this remains the same. Some countries are reducing it, but overall it is not changing worldwide. This is the issue to consider. Basically, I do not see any threats here. By the way, here in Russia we are working to develop alternative energy sources as well; we are making an active effort and will continue to do so. But I do not see any threat here, there isn’t any.
Speaking of high costs, you mentioned oil production in, say, the United States. But we know how oil is extracted there – by hydraulic fracturing, the most environmentally hazardous method of extracting hydrocarbons. In certain US states, where oil is extracted using this method, people have dark sludge instead of clean tap water – you probably know this better than me. Efforts are probably made to rectify this, but it is a difficult task. The profitability of oil extracted using this method is much higher than extracting oil and gas in Russia in the most remote regions. That is why we feel confident in this regard.
What’s more, if oil falls below $40, oil production profitability and extraction growth will be questioned. Of course, technology is advancing, and the cost of such production will drop and fall below $40 a barrel; maybe it will be at $35–40 – but oil production costs are lower in Russia anyway, let alone gas; I won’t even cite figures so that I don’t scare anyone. It is much lower than in the United States or Europe, and even in certain oil-producing countries in the Middle East.
John Fraher: And one final question for you on the Arctic energy. Given that it is still quite expensive to get oil and gas out of the Arctic, and given these problems we have talked about, are there any tax breaks for Russian companies to make it all worthwhile? Can we expect more of them?
Vladimir Putin: I have already said that we are planning to create, are creating and will keep creating an environment that is beneficial for the companies working in the harsh Arctic conditions. This is not just about underdeveloped infrastructure, but about the need to invest in technology that would 100 percent ensure the conservation of nature. It is so fragile in the Arctic region; we all know that, every colleague of mine sitting here knows all about it. That is the first thing.
Second, when organising work like this, we have to think about the interests of the indigenous peoples of the North. Their interests are an additional burden on the companies, and the state must take on that burden to a large extent as well.
John Fraher: President Putin, do you want to get in on that? [John Fraher’s discussion with Norwegian Prime Minister, President of Iceland, Swedish Prime Minister and President of Finland].
Vladimir Putin: Yes, I do; actually, I am eager to.
Once again we return to sanctions, to Crimea and so forth. If I am not mistaken, Crimea is not part of the Arctic region, but I would like to say a few words nevertheless. We all came here to discuss issues related to the Artic region. We would not like to see the Arctic turn into something akin to Crimea and Crimea turn into a desert as a result of certain measures not being taken in time (and a crime, as is well known to lawyers, can either be an act of commission or an act of omission), as a result of our criminal omission. That is what all of us must think about today. That is what all of us are discussing today, too.
These are not just empty words, by the way; if you take a look at the sediments discovered in the Arctic, you will find the remains of tropical plants, tropical animals. This means, this happened before, some time in history. We must understand what is going on with the planet, and act together accordingly.
I will make another historical digression. A lot of time has passed since our reformer Peter the Great and romantic King Charles XII of Sweden fought against each other and divided the territories. Now there are problems that we are discussing today that can only be resolved through concerted effort. This is the reason we’re meeting here today. I think our meeting will be useful.
As for the EU and the exchange of sanction strikes, you are certainly aware of things. Bloomberg cannot fail to know this. Based on European Commission estimates, I think in 2015 or 2016 the European Union lost about 50 billion euros, while Russia lost about 25–26 billion euros. It is clear that the EU is losing more than us.
The German numbers, in the estimate of analysts from Germany, missed gains run as much as 56 billion, whereas ours are three times less. But we are not happy about losing less. No, I am saying that there are common losses and this means real damage.
Now, regarding the very character of the sanctions.
First, for any sanction to be legal it needs to be authorized by the UN Security Council. But this is not happening, so they are illegal. This is the first point.
And now the second point that I consider the most important one. For some reason nobody imposes sanctions for interfering in the domestic affairs of other countries, for disrupting internal political life or for shattering entire states. Nobody imposes sanctions against those who reduce countries to a position where they are compelled to take certain measures to protect their interests.
Let’s just return to the observance of the basic rules of international law and the UN Charter. Probably, in this case there will be no need to think about the aftermath of bombing Yugoslavia or other things linked to such flagrant violations of international law and their consequences.
Let’s simply return to normal political life and realise that the world is interdependent and that we should work together to achieve a common result.
John Fraher: Mr President, you are known everywhere as a realist, as a pragmatist; you might not feel like sanctions are fair, but a lot of European powers still feel strongly that they need to stay in place. What is your feeling on how long these sanctions are going to last? Are they going to last ten more years? Is this Russia’s future as far as the eye can see?
Vladimir Putin: Russia’s future does not depend on sanctions. Russia’s future only depends on how effectively we will be able to transform our political system, how democratic it will be, how well it will bring to the surface the healthiest forces in society and the creative energy of our citizens. On how effectively we will be able to harness it, how well we will be able to utilise the internal resources of the Russian economy.
I said that we invested over 600 billion last year (637, I think) in import replacement. And it has been effective. We have great science and education. We must keep it all in proper shape and move forward. And I am confident that we can do so, including when implementing the national projects.
Sanctions (if we want them to work) are a tool which must be in the sole possession of the United Nations Security Council. All other matters should be resolved through dialogue rather than imposing one’s own agenda on other countries. That is all there is to it.
Today, sanctions are being used not as a tool of geopolitical struggle but simply as an element of competition. Take Nord Stream 2, for example. Our US friends are fighting it. But it is definitely profitable for our European partners. “No, do not build it!” It is hard to work with the European Union as there are many countries there and nearly everything is decided by consensus.
We have already worked with Turkey to build TurkStream along the Black Sea bed. TurkStream will launch later this year. Yet we still cannot come to terms with the Europeans. Our US partners opposed, in exactly the same way, the “pipes for gas” project in the 1960s that we pursued with the Federal Republic of Germany. It was exactly the same.
It was the same with Nord Stream 1. What would global energy look like now if there were no Nord Stream 1? I can give you the answer. Prices would be even higher than they are now, simple as that. Do you want to buy mineral resources at higher prices? No.
I do not know what else should be done to pressure the European countries. Only to make up the difference between our natural gas and US LNG from their national budgets because it is impossible under market conditions to make customers buy 30 percent more expensive goods. It is impossible, they will just refuse to buy. Households will not simply pay up.
So what must be done to break even? To cover the difference with funds from the budget. But this is the height of cynicism. I think if things keep going like this, it will happen. But it is not our choice, it is our European partners’ choice.
How about demands to increase defence spending? What do you think this is connected with? Do you think it is connected with the overall deterioration of the international situation? No, it is just a pretext. The main motive is to fill up the US military-industrial complex with additional European money. This is where the main answers lie.
And for this not to happen, let us go back to abiding by the elementary norms of international law. We have spoken about that many times.
John Fraher: President Putin, with apologies to the rest of the panel, there are a few international topics that I’d just like to focus on for a moment. I know that the last time that we met in Moscow, a year and a half ago, you scolded me for monopolising too much of your time at the expense of your guests, but I promise I will get back to the Arctic, I will not monopolise you too much. But the first thing I would like to talk to you about is actually relevant to the conversation we’ve had here. You talked earlier about energy prices, and Russia is keeping the world guessing in terms of what it is going to do about production cuts. We have an OPEC meeting coming up in June. Can I first ask you, do you agree with your Energy Minister that oil prices, as they stand now, are broadly acceptable for Russia?
Vladimir Putin: I think the Russian Ministry of Energy should agree with my opinion. I would prioritise our work appropriately. And I must tell you that common practice in the Russian Government is to always keep in touch, always discuss these issues collectively, keeping in mind the interests of the Russian economy and its various sectors.
We do not advocate the uncontrolled growth of prices, because even though we aim to diversify the Russian economy, even now, it is not entirely dependent on oil and gas, but also on industrial production. But domestic industrial production is also affected by exorbitant price increases.
Therefore, we are balanced on the development of the global energy market. We are quite satisfied with today's prices, and we see production volumes in the United States growing. Yes, the United States consumes significantly more than we do. We produce 11.5 million barrels per day, but in the US, output is even higher now.
This situation suits us as it is today, but we closely watch the market of course, together with our partners, primarily the major oil producers like Saudi Arabia and the Gulf states. We agreed that if cooperation is required, we will meet and discuss it in the second half of the year.
In any case, we are ready to cooperate further with OPEC to work out common solutions. I would be that careful with wording. We will be ready to continue cooperating. As to whether that cooperation implies another decrease, or keeping production flat as it is now, I cannot say yet.
We have plans for our companies to develop new deposits, and we also approach this carefully. We understand that production should not stop, investment should flow into the industry, otherwise it can also create problems for us and for the global energy industry. So, we will find balanced solutions. But we will continue to cooperate with OPEC.
And I would still like to return to your previous question about these tensions. In reality, I do not see any particular military tensions here in the Arctic. They do not exist. The only thing is that NATO held the region’s largest exercises. This is true. We do not conduct such exercises in the region. We held large-scale exercises but very far from NATO’s zone of responsibility. It was in the East. This is the first point.
Second, I would like everyone to know that we