By: Paul Goble
Because oil and natural gas are Russia’s largest exports (Gks.ru, accessed April 3), it is entirely understandable that Moscow’s efforts to build pipelines to the West bypassing the three Baltic States and Ukraine continue to attract a great deal of attention. But much less attention has been given to Moscow’s new efforts to develop infrastructure intended to allow it to export coal to global markets by bypassing these same countries. If these Russian plans prove successful, they will deprive Ukraine and the Baltics of the transit fees they have long depended upon. Indeed, judging from the comments of Moscow officials, the Russian government is more interested in using such new routes to apply political leverage on at least some of these countries than it is in ensuring Russia’s economic interests.
Russia’s Transportation Minister Maksim Sokolov has announced the development of a new ice-free port on the Kola Peninsula and noted that it would allow Russia to dispense with its use of ports in the Baltic countries for the transfer of coal early in the next decade. Latvian commentators have suggested this could mark the end of their country’s still-lucrative transit trade and thus put the middle Baltic republic in a far more difficult position economically and geopolitically (Rubaltic.ru, March 30; Db.lv, March 29).
The Russian project will involve the construction of a port between the settlements of Mishukovo and Mezhdurechye, on the Kola gulf, a connecting rail line south, and a fleet of new ships to carry the coal westward. At the same time, Minister Sokolov said, it will link the region more fully with the Northern Sea Route to Asia and thus promote the development of the entire northwestern segment of the Russian Federation. Once operational—the first stage is scheduled for completion in 2020—the new ports will allow Moscow to dispense with the use not only of ports in the Baltic States but also in Ukraine and to export as much as 18 million tons of coal a year. That shift will inflict economic pain and open the way for additional Russian pressure on these three western neighbors as well (Rubaltic.ru, March 30).
This latest Russian announcement prompts three questions: Can Moscow open the new Kola Peninsula port on time? Will the redirection of coal away from the Baltic States and Ukraine have as negative an impact as Moscow hopes and some in these countries fear? And what can these countries and their friends do in response to allow them to flourish economically if and when Moscow is able to deprive them of this source of revenue?
With regard to the first question, Moscow is highly unlikely to be able to complete this port and, even more, to have sufficient shipping capacity developed to exploit it on time. Russia’s track record when it comes to developing coastal infrastructure—especially in more remote places—suggests that the new port, if it is completed at all, will not be serviceable until much later. Moreover, the regional rail line, which has been under construction in fits and starts since the 1930s, will not be ready by 2020 or even a decade later (see EDM, February 13). And finally, unless sanctions end soon, Russia will not be able to build the fleet of coal-transport ships the new facility will require. That means that Sokolov’s announcement may be more of a bluff than a real threat, unless Western countries or China step in to provide the shipping—and they may be less than willing to do so given the sanctions regime and also given that the United States is now interested in becoming a major coal exporter to Ukraine and Eastern Europe (Energy.gov, July 31, 2017).
With regard to the second question, if despite all this, Russia were able to redirect coal flows away from the three Baltic States and Ukraine, this would hurt them, but not all by the same amount and not fatally—economically or politically. Ukraine, Estonia and Lithuania would suffer small economic losses if Moscow succeeds with its plans. Latvia would suffer most, with perhaps around 10 percent of its transit trade earnings coming to an end (Atlas.media.mit.edu, accessed April 3). Given Riga’s current economic difficulties, that could hurt; and Moscow may be counted on to make use of this threat to try to force the Latvian government to bend to its will on issues like the status of ethnic Russians and the Russian language in that Baltic republic.
Finally, regarding the third question, the Baltic States and Ukraine have many alternative options, and this latest Russian declaration should be the occasion for taking action on one or more of them. Ukraine is in a de facto state of war with Russia following Putin’s annexation of Crimea and continuing intervention in Donbas, so it can hardly count on Russian economic “assistance.” Ukraine has been redirecting its trade and economy away from Russia as a result. The three Baltic States did much the same in the 1990s, but they continue to cooperate with Moscow and the Commonwealth of Independent States (CIS) countries on railway issues (Railwaypro.com, April 23, 2014). Moscow’s pursuit of other transit outlets may put such cooperation to the test.
More seriously, the Russian declaration signals just how important it is for the Baltic States to develop north-south rail links from Finland in the north to Poland and Europe in the south, to reduce to a minimum their dependence on Russian transit fees, and to develop their own economic capacity. The European Union and the West more generally can help in all three of these areas. If they do, Moscow’s latest threats about “bypassing” the Baltics and Ukraine will backfire, in fact helping these countries achieve genuine independence from Moscow and reducing still further Russian influ
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