Russia Intends to Build A "Super Railway" to Transport Arctic Oil & Gas

Russian media reported that Russia plans to build a super Railway "Siberian Meridian" connecting the Arctic, Siberia and Asia.

"Siberian Meridian" was first announced by Putin in October 2019. Putin explained that the main purpose of the project is to connect the major ports on the northern sea with the ports along the Pacific Ocean and the Indian Ocean, and free up the Siberian Railway to meet the needs of passenger transport.

Since the Crimea incident in 2014, Russia's economy has gradually evolved into today's "Fortress economy" due to Western sanctions.

If the "Siberian Meridian" is to be built, it means that Russia wants to focus its economic development on the east of Ural Mountain in the next 20 years.

Is this vast and cold land easy to develop?

130 years ago, the development of Siberian railway was full of iron and blood
Russia now has an east-west railway connecting the Eurasian territory, that is, the Siberian railway opened in the 1890s. The Siberian Railway starts from Petersburg in the West and Vladivostok in the East, with a total length of more than 9000 kilometers. So far, it is the longest railway in the world.

At that time, there was no development condition for Siberian underground resources, and the construction of Siberian railway was mainly for military strategic purposes, that is, to stabilize the new territory obtained by Tsarist Russia in Siberia, while coveting Northeast China. Later, Nicholas II, who was distressed, personally served as the director of the Siberian Railway Management Committee, which shows the importance attached to this railway.

Conditions in Siberia are bad. Although it was built in the south, it was full of tears and blood from the beginning. The situation of the Siberian exiles and the Chinese laborers in the newly conquered areas such as blagoveshinsk and Khabarovsk is conceivable.

Tsarist Russia expected that after the completion of Baikal Lake section of Siberian Railway and the completion of Lushun fortress, it would map Northeast China. This caused the dissatisfaction of Japan, who was forced to obtain Liaodong Peninsula in the Treaty of Shimonoseki. After forming an alliance with Britain, Japan chose to raid Lvshun in 1904 when the Siberian railway was not completed, and the Japanese Russian war broke out.

The construction of Siberian railway is full of iron and blood. After 130 years, the smoke of gunpowder disappeared, and the Siberian railway is still the main railway artery of Russia.

How does the Siberian meridian connect the Arctic and the two ocean ports？

The Siberian meridian planned by Russia is of course different from that 130 years ago. Its main purpose is to develop the Arctic and Siberia, and sell oil and gas at the same time. Choose the north pole as the starting point, more than 2400 kilometers away from Moscow, coupled with climate conditions, the construction seems to be no small difficulty.

The key is, how to connect the Pacific and Indian Ocean ports from the Arctic?

Russia has a 1097 kilometer long railway line in the Yamal peninsula in the Arctic Circle, and there are abundant oil and gas reserves here.

In recent years, the Yamal peninsula LNG project, with an estimated annual output of 16.5 million tons, has been basically booked out. Chinese, French and Russian capital invested in the project. While it is difficult to extract LNG in the Arctic, it also benefits from low cooling costs.

The Yamal peninsula also has a rare good port of Russia, the port of sabetta. In recent years, it is also expanding, with the goal of two LNG berths and six comprehensive berths.

Before Putin publicly proposed the Siberian meridian, the Russian government had already had the idea of connecting the port of sabetta with other oil and gas producing areas. Now it seems that the Siberian meridian is located outside the port of sabetta, the oil and gas producing area. It has an oblique route from Siberia to Dalian, China, and then ships from Dalian to connect ports in the Pacific Ocean and the Indian Ocean.

In fact, it's not just Russia that wants to build a railway in the Arctic. In 2018, Norway and Finland announced plans to build the Arctic railway, and the destination is China. According to the Arctic railway vision report released by relevant Norwegian and Finnish agencies, if the new corridor is built, "Finland will no longer be an island".

Where does $80 billion come from?

There is no doubt that the construction concept of Siberian meridian is very good, which is good for Russia's development and China's expansion of oil and gas supply channels and routes. But where $80 billion comes from is a big question.

As mentioned before, after 2014, Russia gradually became a "bastion economy", with slow economic growth. The total amount dropped from $2.23 trillion in 2013 to $1.69 trillion in 2019, slightly higher than that of California or Guangdong, China. Russia's GDP will fall by nearly 5% this year due to the drop in international oil prices and the impact of the epidemic, according to Kudrin, director of the Russian audit office.

Obviously, the conditions for starting the Siberian meridian at once are not mature enough. Of course, you can choose financing. But capital is unlikely to be active due to reduced global oil and gas demand.

In addition, among the sanctions imposed by the United States on Russia, financing transactions are expressly prohibited, and Rosneft and Gazprom are named to restrict their access to the U.S. debt market. Even if a financing party is found, it needs to go through sovereign credit and external evaluation of the project in strict accordance with market procedures.

The most feasible way is to trade oil and gas for financing. This requires a keen judgment on the long-term trend of international oil and gas prices.

The construction of the great Siberian Railway took about 28 years on and off due to the Japanese Russian war, the first World War and the great changes in Russia. The Siberian meridian is only 15 years from 2035. Whether it can be started as soon as possible needs further observation.