Investments in Arctic Transitioning to New Areas Beyond Commodity Megaprojects

MOSCOW, July 1. /TASS/. Investments in the Arctic at the stage of a transition model where large commodity megaprojects remain dominant but new areas in logistics, services and processing are gradually emerging, Svetlana Lipina, Deputy Chairman of the Council for the Study of Productive Forces of the Russian Academy of Foreign Trade of the Ministry of Economic Development, told TASS.

"The situation is now mixed. In terms of capital, investments in the Russian Federation are still largely measured by large commodity megaprojects launched in previous years," the expert said. "A new investment paradigm is being formed, but so far in small steps. Capital-intensive raw materials projects remain dominant, and the ‘new economy’ - processing, services and technological localization, has not yet reached the scale to become the leading one," she noted.

The expert cited the Yamal-Nenets Autonomous District, where LNG and gas industry projects continue to play a major role in investment and production dynamics, as a key example. "Yamal is the classic one. Sabetta/Yamal LNG and Novatek's projects provide the main picture of investments and employment. These projects create inertia: big money, long-term contracts, and large-scale logistics," she said.

At the same time, new areas related to infrastructure and service development are gradually strengthening in the Arctic economy, according to the expert. "Stable vectors of localization and service infrastructure are emerging: port modernization in Murmansk, Sabetta and Pevek, the buildup of the fleet and icebreaker support, the development of ship repair facilities and logistics hubs," Lipina said.

The expert also noted limited yet growing development of processing and service segments, primarily in terms of servicing export chains and mining projects. "Hydrocarbon processing in the Arctic is still limited; export services are developing more rapidly - LNG transshipment, storage, icebreaker support, as well as partial local processing in mining chains," she added.

Lipina separately pointed out that external restrictions and the increase in the cost of capital affected the structure of project financing in the region. "Sanctions and rising capital costs prompted to mix sources of financing: more state participation, banking and Chinese partnerships," the expert said. This helps support the implementation of projects, but at the same time narrows the technological spectrum and slows down the implementation of more complex solutions, she added.