Part of illustration by Karin Sunvisson.

Peer-reviewed articles russia, infrastructure, and the baltic

Infrastructure forms a link between the open global economic space and the non-public Russian political space. The question of how to manage the most important trade flows and understand their social importance is not, of course, solely seen as a matter of Russian politics. The research on Russia is also connected to the recent debate on the importance of increasing globalization and the mutual dependence of societies.

Published in the printed edition of Baltic Worlds pages 21-25, 4 2011
Published on balticworlds.com on January 16, 2012

Introduction

To borrow a familiar image from Pushkin, in building the city of St. Petersburg at the mouth of the Neva River, Peter the Great opened a window to Europe for Russia. In his epic poem “The Bronze Horseman”, Pushkin in fact wrote of “cutting” or “hacking” (prorubit’) a window through to Europe, not simply “opening”. Applied to the present day, the difference is significant. Russia’s presence in the Baltic has demanded major investments in infrastructure, and will continue to do so in the future. Room has been made for new ports at the far end of the Gulf of Finland, the Baltic Sea floor is currently being excavated for new gas pipelines, and a new town of 35,000 people is under construction near the port of Ust-Luga.

In Russia, debate on Baltic transport infrastructure is framed in terms of a temporary “interruption”, as a result of which Russia lost direct control of income flows crucial to the national economy. The word “interruption” refers to the break-up of the Soviet Union and the subsequent state of affairs in which a significant part of Russia’s exports reached the West via the ports of the now independent Baltic countries. In this respect, “hacking” a window through to Europe is an attempt to escape the geostrategic dead end into which Russia was driven following the collapse of the Soviet Union.

But has all this “hacking” brought Russia any closer to Europe? Has it not rather been the case that infrastructure has become a cause of disagreement between the EU and Russia? The problematic nature of infrastructure projects is particularly evident in discussions of the importance of the Nord Stream gas pipeline to the security of the Baltic area. The construction of the gas pipeline undeniably increases the mutual economic dependence of the EU and Russia, and, at least in theory, their willingness to seek compromises on other issues. At the same time, however, it is important to bear in mind that the decision to build the Baltic gas pipeline was a result of Russia’s determination to reduce its dependence on the transit countries (the Baltic countries, Ukraine, and Belarus).¹ This also opens up an opportunity for a military build-up by Russia, justified by the need to safeguard critical infrastructure in the Baltic Sea area.

However, in the past two decades, the prevailing issue
in discussions about infrastructure in Russia has been its decay and the consequent gradual disintegration of Russia’s various regions and industrial sectors. In the years of strong economic growth from the start of the 21^st century up to 2008, infrastructure was seen mainly as a “bottleneck”, the deficiencies of which would, before long, lead to a slow-down in the rate of economic growth. A few years later, amid the economic crisis, the debate continues largely along the same lines, albeit under the heading of modernizing the economy. The focus of transport infrastructure development strategies approved at the start of the last decade is on developing roads, building ports and connections to and from the ports, and developing transport logistics.² Alongside these goals, in line with the major thrust of Russian economic policy — which emphasizes modernization and innovative growth — the strategies for developing the transport system include a number of measures aimed at tackling the decline of the more remote areas of Russia. One particular problem is deficient or even non-existent transport links between villages and towns.

From these plans and objectives, we gain a picture of a country that is made of parallel, even contradictory spaces. On the one hand, Russia is part of the global market with its associated flows of goods and other traffic. On the other hand, Russia partly exists on the outskirts of the global economy. Russia has not become an important transit country for transport between Asia and Europe, nor has the mobility of the population within the country increased significantly. Only very recently has more attention started to be paid to transport security and to those themes which, in Western discussions, are encompassed by the concept of critical infrastructure.

Russia’s interests in Baltic transport infrastructure will be examined as a fundamental part of Russia’s resource economy.3 The term “resource economy” refers primarily to the Russian economy’s dependence on fluctuations in prices in the global energy market. However, it is also used to describe the mechanisms through which the Russian economy and politics are intertwined. According to American economists Clifford Gaddy and Barry Ickes, the operating mechanisms of a resource economy are the key to understanding changes in Russia’s economic policy. The management of the income flows of the resource economy is centralized and takes place largely outside the public sphere through various unofficial networks.4

Richard Sakwa describes this world of official and unofficial political spaces as a “hybrid”, in which public debate has in practice lost its function of supporting decision-making.5 Russian researcher Simon Kordonskii has similarly put forward the idea of the Russian political sphere being divided into “estates” (pomestj’e). Estates are “owned” by oligarchs close to the current leadership and built on a regional or functional basis. What is important is that they are simultaneously connected to a “real” (v realnosti) official level of decision-making, and to an “actual” (na samom dele) political situation. The latter sphere is separate from the official one and operates through non-systematic personal networks.6 References to Russian politics as a “hybrid” or as an imitation of democracy indicate that the terms currently in use are insufficient to explain the dynamics of change in the Russian political system.7

Addressing the concept of infrastructure does not in itself resolve this problem. Research into the importance of infrastructure networks within Russian politics enables us, however, to approach this broader problem in a new way. Infrastructure forms a link between the open global economic space and the non-public Russian political space. The question of how to manage the most important trade flows and understand their social importance is not, of course, solely seen as a matter of Russian politics. The research on Russia is also connected to the recent debate on the importance of increasing globalization and the mutual dependence of societies.8

The concept of infrastructure

In the past two decades, the word “infrastructure” has become a natural part of political and everyday language. The concept itself is a new one and has been used in English only since the late 1920s. Originally, the word was used in a military sense. Although its semantic field has widened and diversified, references to its original meaning remain, particularly when talking about logistics.9 In everyday language, a distinction is often made between “hard” and “soft” infrastructure. The former is used to mean mainly physical networks such as the road network, the railway network, or the electricity network. “Soft” infrastructure, on the other hand, refers to non-physical institutions central to the functioning of society, from the financial system to the education system.

The development of container transport and the consequent reduction in transport costs is one of the factors influencing the global network economy. In the last couple of decades, the scale of infrastructure networks, along with the various data, goods, and passenger flows that use them, has gone from national to global. Another important factor has been the rapid development of information technology, as a result of which the relationship between technology and people’s everyday lives has changed radically. The combined effect of these two different lines of development is that the societies are connected to one another in more complex ways than before, partly via parallel networks and partly via layered networks. Societies have also become more vulnerable than before to disruptions to infrastructure networks, whether as a result of accidents, natural disaster, or terrorism. In this respect, infrastructure has become “critical”, and decision makers’ concern is to maintain the security of the telecommunications, transport, and energy flows that are essential to society.10

The debate surrounding critical infrastructures has evolved mainly within the framework of security studies, but increasingly also in the context of international political economy. Research in the latter framework is devoted to studying changing relationships between states and the global markets, and criticism of neoliberal economic policies in general. The notion of “supply chain security” refers to the increasing importance of transport logistics in the global economy. As noted by Deborah Cowen, “efforts to protect commodity flows have given rise to a whole new form and field of security”. The potential disruption of the cargo flows is subject to “national and supranational programs that aim to govern events and forces that may disrupt trade flows — labor actions, volcanic eruptions, acts of ‘piracy’, and even the national border”. In the logic of supply chain security, these events are, however, removed from the realm of political contestation and interpreted as problems of governance, a move that Cowen criticizes. 11

The challenge presented by Cowen to the underlying assumptions steering the development of infrastructure networks and particularly of logistics should be taken seriously. An interesting viewpoint on this discussion is offered by the concepts “pan-European transport corridors” and “trans-European network” created within the framework of the European Union. These concepts do not fundamentally operate within a frame of reference of national security. Instead, their meaning is delimited and defined by relations between the EU and Russia, and by economic integration. However, differences of opinion precisely on the meaning of integration have contributed to a result opposite to what one might expect: over the past ten years infrastructure has increasingly become subsumed under “national security”.

The political meaning of infrastructure linking Europe and Russia

Discussion of transport policy in the European Union emphasizes the frame of reference briefly described above; enhancing infrastructure is justified primarily by reference to the growth in trade between the EU and Russia.12 At the same time, the development of infrastructure networks is seen as one form of constructing, or reconstructing, a “common economic and political space”. This idea has been evident in the planning of EU-wide transport networks and in discussions of the eastward expansion of the Union. The Partnership and Cooperation Agreement between the EU and Russia of 1997 and subsequent separate declarations of cooperation also contain references to infrastructure as one of the tools of economic and more general social rapprochement.13

The “pan-European transport corridors” created by the EU in the 1990s and the “transport axes” later formed on the basis of these were originally planned to stimulate and steer cross-border cooperation between the EU and Russia. However, they have remained mainly a symbolic gesture towards Russia.14 Part of the reason is that the mechanisms and policies promoted by the EU on transport cooperation with Russia have undergone frequent, yet often merely semantic changes — for example, the replacement of the “pan-European transport corridors” with “trans-European transport axes”. These policy changes are driven by the EU’s internal developments, and Russia’s role has been largely to react to these de facto transformations. Russia’s official statements do not contain direct rejections of the EU’s view of the transport corridors as expressions of a trans-European space, but in its own transport policy, Russia has interpreted the transport corridors from a very different perspective.

In a Russian context, the transport corridors are part of a debate about Russia’s sovereignty and position in global politics.15 This refers to both the strengthening of a common economic space within the country and the improvement of Russia’s position in competition on the global transport markets and in the global economy in general. The statements of Russia’s authorities and the official programs for developing the country’s transport infrastructure also emphasize the idea of Russia’s space as “a resource” in jockeying for power and position in the international transport market. This spatial resource is actualized in the form of a policy whose aim is to make Russia a “bridge” between Europe and Asia. The most commonly used argument is a reference to the fact that this will open up the “shortest route” for goods transport from the factories of Asia to the markets of Europe. At the moment, however, only a very small amount of transport between Asia and Europe uses Russia as a transit route. To change this situation, Russia has launched the concept of an international transport corridor, within the scope of which funding from the state budget and private investors is steered to the infrastructure projects most important to Russian foreign trade and transit transport.16 Let us now turn to an examination of how these aims have been realized, as well as the associated interests connected with Russia’s ports in the Gulf of Finland and Ust-Luga in particular.

Transport infrastructure in the interface between the official and the unofficial spheres

Russia views the mutual dependence that goes hand in hand with different infrastructure systems very selectively. Besides bringing income to the state treasury, directing international goods transport through Russian space is also expected to strengthen Russia’s position in relation to its neighbors. Russia’s interests in the Baltic area reflect this general duality: on the one hand the aim is to reduce dependence on the transport infrastructure of its neighbors, on the other hand the country’s own infrastructure, particularly the ports, has been built primarily to serve these transport flows that are exposed to fluctuations in the global economy.

A statement by the President of Russian Railways Vladimir Yakunin in February 2010 describes the typical way the Russian elite analyzes this situation. Yakunin stated in an interview with the Estonian press that lack of trust between Estonia and Russia is forcing Russia to act to strengthen its own port capacity. The background to this statement appears to be a desire to emphasize Russia’s ability to quickly switch oil exports from Estonian ports to the port of Ust-Luga currently under construction. To support this goal, the Russian government had already decided to increase rail transport via Russia’s own ports.17 Transneft, which manages Russia’s pipeline network, has also taken part in these joint efforts. In 2002, the company cut off its oil exports using the pipeline via the Latvian port of Ventspils, after which transport switched to the railways.

It is true that northwest Russia’s share of Russian foreign trade transport has grown throughout the 21^st century. Currently three of Russia’s five most important ports for foreign trade are located in northwest Russia: the seaport of St. Petersburg, the Primorsk oil terminal, and the port of Murmansk on the Arctic Ocean. The total transport capacity of the ports of northwest Russia has grown almost 350 percent since the start of the 21^st century. According to the Russian Ministry of Transport, in 2001 the ports accounted for a total transport volume of 61.8 million tons. In 2008, a total of approximately 175 million tons of foreign trade transport passed through the ports.18 The growth in foreign trade flowing through Russia’s own ports is limited by poor connections between the ports and the main rail network.19 Russian Railways is planning an investment worth 670 million dollars to repair the rail links leading to the port of Ust-Luga.20

In autumn 2009 at the meeting of the Maritime Collegium in Kaliningrad, Transport Minister Igor Levitin stated that the total capacity of the ports of northwest Russia would double by 2015 to up to 440 million tons a year. This would be an extremely significant increase. In 2010, the total transport volume of Russian ports rose above half a billion tons for the first time, reaching a total of 520 million tons. Plans presented in the transport strategy from now to 2020 are more moderate. The strategy states that the total transport capacity of the northwest Russian ports will increase to an estimated 266 million tons by 2015 at the earliest. Whatever the figures, the aim is for Russia’s foreign trade goods to flow mainly through the country’s own ports in the future21.

The development of Russia’s ports is steered mainly by the transport development programs and strategies described above. In the spring of 2010, FGUP Rosmorport, the federal agency that oversees Russia’s ports, announced that it was starting to draw up a separate port development strategy. The preparation of the strategy is based on a need to re-examine the goals of the development of Russia’s ports and the measures that support them. According to Rosmorport’s General Director Igor Rusu, by the end of the year, the process of drawing up the strategy had reached the halfway mark. At the same time, preparations are underway for a change of status from an agency to a limited liability company. It will be interesting to see how this will affect the rules of play in the future concerning the involvement of private and possibly foreign investors in port development.22

In this context it is, however, worth remembering that in recent years the Transneft pipeline company has significantly increased its ownership of Russia’s most important seaports. In 2009, Transneft acquired the oil terminal being built at Ust-Luga, and in early 2011, the company became a major shareholder in the ports of Primorsk and Novorossiisk.23 Thus, via the company Transneft, the Russian state has in practice ensured total control of oil transport.

Russia’s decision to build new ports at the far end of the Gulf of Finland is charged with many commercial expectations and much symbolic importance. Russia’s re-emergence in the Baltic is expressed by the Orthodox church constructed in conjunction with the port of Ust-Luga. The church, which had been planned since 2003, has been completed with support organized by the Center of Russian National Glory (CRNG). The chairman of the board of directors of the Ust-Luga port, Valerii Izrailit, and the President of Russian Railways, Vladimir Yakunin, are both influential figures in the CRNG. The CRNG is an essential player in Russia’s “unofficial” foreign policy in the border areas, although the activities of the CRNG appear to have waned since the second half of the past decade.

Discussions about building new port complexes in the Gulf of Finland started immediately after the Baltic countries gained independence. In 1993, the Russian government passed a decision to construct three new ports, where Ust-Luga was planned to specialize in timber goods and container transport, Primorsk in crude oil and oil products, and a port to be built in Batareinaja Bay was to concentrate on oil products. However, the construction projects progressed slowly. To speed up development work, President Yeltsin confirmed in an order issued in April 1997 that Moscow was still interested in the projects being completed. Yeltsin’s order was part of the “St. Petersburg — Russia’s European Gateway” project launched by the city of St. Petersburg, the stated aim of which was to develop existing infrastructure, as well as infrastructure primarily aimed at foreign trade. The importance of building the ports was justified by a need to “secure Russia’s national and economic interests”, especially in “strategically important” oil and oil products.24

Of the planned ports, the Primorsk port complex was completed first, in 2001, and is the terminal for the Baltic Pipeline System (in Russian: BTS) and the Sever oil pipeline. In 2010, transport through the Sever oil pipeline was estimated to have grown to 7.5 million tons (80 percent of capacity). Now great interest is being focused on the port complex being built at Ust-Luga. Port CEO Maxim Shirokov estimated in April 2010 that in the following two years the port’s capacity would grow considerably. It is estimated that by 2015, Ust-Luga’s total volume will have risen to as much as 170 million tons. The terminal of the second Baltic Pipeline System (BTS-2) is being built at the port. According to the CEO of the oil company Transneft, Nikolay Tokarev, BTS-2 will be in use by the end of 2011. As far as oil products are concerned, it is estimated that a fifth of Russia’s exports will pass through Ust-Luga in the future.

An important role was also planned for the port in handling imported cars. In 2010, over 65,000 cars came through Ust-Luga, and the port is expected to have capacity for about 360,000 imported cars by 2013. Transport capacity for Russia’s traditional export product, coal, will increase from the current 7 or so million tons to up to 12 million tons by 2012. Ust-Luga has a planned container transport capacity of 3 million TEU. A liquid gas terminal will also be built at the port, with a capacity of 1.5 million tons upon completion. The terminal will begin operations at the end of 2012.

Nathaniel Trumbull and Oleg Bodrov’s 2009 article shows, among other things, how these Russian infrastructure projects, defined as strategic, were implemented without consulting local residents. A genuine public debate on the subject has proved to be virtually impossible. Public hearings have been organized almost without advance notice in small communities, and instead of public debate being carried out with independent environmental organizations, debate has taken place between the authorities and the organizations that support them25.

One essential factor in the lack of public debate is that 120 kilometers of the coastline of the Gulf of Finland, from Staryy Petergof south to the Estonian border, is a closed border area. The status of a closed border area provides the officials a means of restricting and regulating traffic in and out of the area. The status is also used in the legitimation of the state’s primary role in the development of the areas adjacent to the port. Thanks to this status, the state and bodies close to it have what is in practice a monopoly over the development of the area, write Trumbull and Bodrov. In protecting this monopoly position, the state has concentrated mainly on implementing the major infrastructure projects outlined above. Small and medium enterprises important to local residents have not been able to develop in the face of this situation, due mainly to the fact that such operations are not officially permitted in a border area.26 The current situation is very distant from the idea put forward in 1993 of the creation of a free trade area around the port of Ust-Luga. The lack of public debate about infrastructure and the underlying dominating position of unofficial networks epitomize the current situation of Russia’s political system.

 Finally: Partnership for Modernization between the EU and Russia

At the Stockholm summit in 2009, the EU and Russia announced the “Partnership for Modernization” initiative. The aim of the partnership is to promote the modernization of the Russian economy and to advance transfer of Western technology to Russia.²⁷ Along with this broader framework of EU-Russia relations, many EU countries have concluded bilateral partnership agreements with Russia. Often these agreements are linked to specific investment projects and ongoing cooperation. In the transport sphere, for example, there is the agreement between the German company Siemens and the Russian Railways Company on cooperation to build new rolling stock. The EU-Russia partnership agenda provides a general umbrella for bilateral discussion, yet the general hope expressed by the EU is that the partnership would also serve as a means of hastening the slow change in the economy and the political system in the target country itself.

Recent initiatives articulated by the Russian leadership have fostered expectations in this direction. In a speech to the Duma in April 2011, Prime Minister Putin emphasized that Russia “should” and in the immediate future “must” genuinely change into a competitive country, one of the five leading economic giants in the world. Throughout his four years in office, President Medvedev has emphasized importance of the economic modernization of Russia through the transfer of modern technologies and standards already in use in the EU countries. The priorities in the transport infrastructure sphere show, however, that Russia emphasizes projects related to “resource economy” and also those that are considered to increase Russia’s image as a major international power, such as the Sotchi Olympic Games in 2014 and the World Cup Finals in 2018.

At the same time, the Russian leadership has determinedly blocked any criticism of Russia’s current political system. The liberal opposition and liberally minded economists in Russia argue that long-term development cannot be facilitated or maintained unless the political confines of the economic system are changed. The crux of the criticism is that bureaucratic inefficiency and social inertia call for more complex analyses and remedies than simply blaming the “bad habits” of the population. Thus there is a risk that the trust and transfer of know-how that could be facilitated through projects carried out within the framework of partnership programs between the EU and Russia will be encapsulated in a separate world of its own, and would have no effect on Russia’s political reality. ≈

Katri Pynnöniemi