Publication: Eurasia Daily Monitor Volume: 4 Issue: 71

On April 5 the Russian government disclosed the details of its pledge to spend billions in government funding to speed up development of the country’s Far East. In response, local leaders rushed to demand more money for their respective regions.

The government plans to allocate 30 billion rubles ($1.15 billion) by 2013 to develop the Magadan region’s infrastructure, Prime Minister Mikhail Fradkov announced at a meeting in Magadan on April 5. These projects should also serve as incentives for people to come to the region and stay there, he said. Fradkov also urged a reversal of the ongoing population exodus from the Far East. “The population of 168,000 is far too little” for Magadan region, he said (Interfax, RIA-Novosti, April 5).

Subsequently, Magadan regional governor Nikolai Dudov suggested that Moscow should finance some major projects. In particular, he urged the federal government to help build modern motorways, including the Kolyma-Omsukchan-Kubaka-Omolon-Komsomolsk-Anadyr federal highway and railways in Magadan region.

Out of 2,500 kilometers of roads in Magadan region, only 164 kilometers have a hard surface, Dudov pointed out. Magadan region has only 3 billion rubles for road construction through 2013, while the Omsukchan-Omolon road alone would take 26 billion rubles to build, he said.

The railway project sounded even more ambitious. The 2,000-kilometer railway would take 150 billion rubles ($5.8 billion) to build, Dudov said. However, Deputy Transportation Minister Alexander Mesharin suggested evaluating the economic viability of the planned railway. Initial estimates were done back in 1952-53 under Stalin, Mesharin pointed out (Interfax, Itar-Tass, April 5).

Magadan officials promised that the region would eventually become economically self-sufficient. Magadan region plans to mine 100 tons of gold a year by 2018, Dudov said. According to the governor, the Yano-Kolyma area has 14 gold deposits with estimated reserves of some 4,700 tons. However, a detailed exploration of these deposits would require at least 14 billion rubles ($538 million), while actual development would need 75 billion rubles ($2.9 billion), Dudov said.

Dudov also urged expedited preparation for tenders to develop the Magadan-1 and Magadan-2 blocs of the continental shelf, adding that the region’s off-shore reserves are estimated at 1.3 billion tons of oil and 1.2 trillion cubic meters of gas.

The Russian Natural Resources Ministry suggested prioritizing gold, silver, copper, and tin mining in the region, Deputy Minister Alexei Varlamov told the participants in the April 5 meeting. The ministry also advocated faster exploration of the Magadan shelf. Anyone who holds licenses to develop resources found to be shirking their obligations should be stripped of the licenses, Varlamov declared (Interfax, April 5).

In terms of catering to the region’s energy needs, Dudov suggested allocating 32 billion rubles ($1.2 billion) to complete construction of the Ust-Srednekansk hydropower plant. But the Russian Industry and Energy Ministry disagrees. By January 1, 2007, expenditures to build the plant had reached 8 billion rubles ($308 million) or nearly half of the project’s total cost, according to Deputy Minister Andrei Dementyev (Interfax, April 5).

Moscow’s plans for Kamchatka also prioritize infrastructure development. Kamchatka region is due to receive 35 billion rubles ($1.3 billion) in federal funding, more than any other Far Eastern region, Kamchatka governor Mikhail Mashkovtsev told a meeting in Petropavlovsk-Kamchatsky on April 4. Disbursement of funds should start in January 2008, as planned.

Fradkov urged the finalization of plans to build a gas pipeline in Kamchatka. This issue is linked to a number of economic and social problems in the region, including energy supplies at acceptable prices, he explained at the Petropavlovsk-Kamchatsky meeting.

Mashkovtsev told the audience that the pipeline to link Petropavlovsk-Kamchatsky with Kshuk and the Nizhne-Kvakchen gas fields, with estimated reserves of 50 billion cubic meters of gas, could be built in two years. The project would take 11.5 billion rubles ($442 million) to build, according to the Kamchatka administration (Interfax, Itar-Tass, April 4).

Moscow also pledged assistance to the country’s most isolated and remote region — Chukotka, Fradkov told a meeting in Anadyr on April 3. Fradkov also hailed the economic achievements directed by Chukotka regional administration, headed by Roman Abramovich, the well-known governor/commodity tycoon.

Chukotka deputy regional governor Andrei Gorodilov pledged to boost natural resources extraction in the region, thus raising average incomes three-fold by 2018. However, he added that the task would require 106 billion rubles in investment. In response, Fradkov suggested that the government and private business should fund the investment program on a parity basis (Interfax, RIA-Novosti, April 3).

In early March, Fradkov announced plans to spend trillions of rubles (tens of billion of dollars) to develop the country’s Far Eastern regions. Russian officials have also disclosed even more ambitious plans to raise the gross regional product twelve-fold by 2020.

The Kremlin’s program to revive the country’s Far East involves building refineries, metal plants as well as nuclear power facilities. Over the next six years, the government would allocate 358 billion rubles ($13.8 billion) to develop the Far Eastern regions, Economic Development and Trade Minister German Gref told a cabinet meeting in Moscow on March 28 (Interfax, March 28).

But as Fradkov’s recent trip revealed, any Russian government announcement of capital-intensive plans to develop Far Eastern regions triggers countless funding requests from regional leaders.