Publication: Eurasia Daily Monitor Volume: 4 Issue: 44

Moscow may spend trillions of rubles to develop the Russian Far East. While visiting Vladivostok on March 1, Prime Minister Mikhail Fradkov said it was too early to announce more concrete estimates, but he pledged to monitor the disbursement of federal funds. Fradkov also stated that the government had made no changes in its Eastern Siberia-Pacific pipeline plans. He said that some 500 kilometers of the pipeline had been already built and the destination point, Primor, has not changed (Interfax, March 1).

Although details of the government investments remained somewhat sketchy, officials indicated that disbursement of state money could start sooner rather than later.

Earlier this year, the Kremlin pledged to spend nearly $4 billion in government funding to boost the economic growth of the region. During a visit to Vladivostok on January 27, Russian President Vladimir Putin suggested spending 100 billion rubles ($3.8 billion) to build a resort area on Russky Island, off the Pacific port of Vladivostok, to host the APEC 2012 summit. Putin issued a special decree to establish a state commission on the socioeconomic development of Russia’s Far East, headed by Prime Minister Fradkov.

During his trip to Vladivostok, the administrative center of the Primor region, Fradkov said the new commission should convene before the end of March. He listed energy, transport, shipbuilding, fishery and port projects as priority programs (Interfax, March 1).

Vitaly Saveliev, deputy minister of economic development and trade, told meeting participants that the government would allocate 35 billion rubles ($1.34 billion) this year to develop the Far Eastern regions, including 15 billion ($573 million) for Vladivostok alone. He also said that hosting the APEC summit in 2021 in Vladivostok would require 30 billion ($1.15 billion) to build two new bridges, 20 billion ($764 million) to upgrade the road network, 12 billion ($458 million) to modernize the port of Vladivostok, and about 10 billion ($382 million) for a new airport. Saveliev said that more than 4 billion rubles ($153 million) would be needed to decommission military facilities on Russky Island (Interfax, March 1).

Last month, President Putin said that more should be done to crack down on endemic graft in the region. On February 28, a local court ordered Vladivostok mayor Vladimir Nikolayev removed from office on embezzlement charges. Nikolayev protested his ouster and alleged it was connected with plans to invest in Vladivostok’s development. Also known under his gang nickname “Vinnie the Pooh,” Nikolayev has a criminal record and was probably clouded the region’s reputation.

Developing Vladivostok is just the beginning. On March 2 Kamil Iskhakov, the presidential envoy to the Far East, indicated plans to raise the gross regional product by 12 times in 2020. He told a meeting in Khabarovsk that these plans involved building four refineries and petrochemical plants, four gas-chemical plants, as well as a steel plant in Yakutiya that can produce 10 million tons per year. Other potential projects include aluminum plants and a nuclear power plant.

However, Iskhakov made little secret that these plans also had a foreign policy dimension. Fradkov’s statement about planned massive investments in the Far Easy during his recent visit to Japan came as a complete surprise for the Japanese side, Iskhakov said. Now the Japanese are not so sure whether to continue to prioritize the territorial issue or to seize the opportunity to join profitable investment projects, he said (Interfax, March 2).

Along with Russia’s ambitious plans to develop the Far East, an old project to build an undersea tunnel to link Sakhalin Island and the mainland has resurfaced. Russia’s transportation ministry and Sakhalin are considering a plan to build a $3 billion tunnel to accommodate both a motorway and a rail link, the Sakhalin administration said in a statement. The project would be funded from the federal budget as part of an effort to improve communications between Sakhalin and the rest of Russia. The current Vanino-Kholmsk ferry link has become obsolete (Interfax, February 28).

Soviet dictator Joseph Stalin first ordered construction of the undersea railway tunnel on Russia’s east coast in 1950. The project envisaged the construction of an undersea tunnel 13-kilometers long and 70 meters deep to cross the Nevelsky Strait. It was known as “Project No. 6,” and the work was done mainly by some 8,000 Gulag prisoners. After Stalin’s death in 1953 the project was halted and criticized as wasteful.

In late 1990s government officials indicated plans to resume construction of the tunnel, which was then expected to take nine years and some $2 billion to build. In October 2001, the government tentatively approved a blueprint to build a bridge and rail link between the mainland Khabarovsk region and Sakhalin at an estimated cost of $4 billion. But critics questioned wisdom of the plans to build a bridge or a tunnel without knowing the link’s economic value.

Six years later, Russian government officials appear to yet again be rushing to announce ambitious goals to develop the Far East before proving the economic viability of these plans.