Yukonomist: A parallel Siberian universe

If you’ve watched Werner Herzog’s fascinating documentary Happy People: A Year in the Taiga, you’ll have enjoyed a glimpse into the strange parallel universe that is Siberia. The big landscape shots look just like the Yukon: small communities scattered across vast expanses of taiga and mountains, framed by big, broad rivers.

Then, when you get up close, you start to see that things are subtly different in Siberia. They have sable, we have marten. They have the black grouse and Siberian larch, we have the spruce grouse and the lodgepole pine. They drive Irbis snowmobiles while we have Ski-doo and Polaris sleds.

It’s when you look at Siberia through a geopolitical and economic lens, however, that things really start to look different.

Siberia is attracting increasing interest these days as it’s burgeoning natural gas exports support President Vladimir Putin’s regime, reshape geopolitics and provide a growing worry to climate change analysts.

Oil and gas, mostly from Siberia, provide around half of Russia’s federal budget. In contrast, oil and gas provides only around 10 percent of revenues for Canada’s federal and provincial governments. Siberian energy revenues are critical for sustaining Russia’s revived great-power ambitions, from Crimea and Syria to the new hypersonic missile technologies Russia recently unveiled.

Siberian gas has also enabled a geopolitical shift, with Russia and China strengthening their ties and improving their ability to shield their economies from American sanctions and trade wars. Putin and President Xi jointly opened the big Power of Siberia pipeline last month. The massive US$55 billion pipeline is part of a multi-decade, US$400 billion energy deal the two countries have signed.

The pipeline complements liquefied natural gas (LNG) exports from Russia’s Pacific islands and increasing volumes provided by ice-strengthened tankers from new fields in Yamal (more familiar to Yukoners as our friendly competitors in the Arctic Winter Games).

Combined, these three projects can move over 60 million tonnes of gas per year to Chinese and other Asian markets. To put the scale of these projects in perspective, they are equivalent to about half of Canada’s total gas production, which was built up over decades. The new LNG plant currently being built in Kitimat, considered by many Canadians to be massive, is a mere 14 million tonnes per year.

Meanwhile, climate change experts were worried by Putin’s remarks at his year-end press conference, in which he said that “nobody knows the origins of global climate change.” Russia’s climate change plan admits global warming is a problem, but also talks about how to “use the advantages” of warming through expanded northern farming and Arctic ocean shipping.

Russian natural gas can be helpful if it helps move China away from its heavy use of coal, which releases more carbon dioxide per unit of energy than gas. However, the opposite is true if plentiful Russian oil and gas end up causing Asian energy users to postpone switching to renewables.

From Yukoners’ point of view, the Siberian energy industry is so big that it flips our usual concept of a northern economy. The Yukon has no oil and gas industry and Siberians would consider our mines small. The Yukon government relies on Ottawa for 84 per cent of its revenue. When you add federal transfers to First Nations and municipal governments, plus direct federal spending here, the total spend vastly outweighs federal income from the Yukon.

You won’t have seen any news stories about Canada using surging resource revenue from the Yukon to develop its own hypersonic missile technology.

Siberia, on the other hand, produces so much cash for Russia that some experts think it is distorting the national economy. Massive revenues from Siberia reduce the need for Russia to reform the rest of its economy, and permit it to engage in foreign adventures that stoke geopolitical conflict rather than economic cooperation.

Some believe the Siberian issue is even more fundamental. Fiona Hill, who recently made headlines for her testimony during U.S. President Donald Trump’s impeachment hearings, is well known to economic development wonks for her 2003 book, The Siberian Curse. It argues that a legacy of Soviet gulag programs and centrally planned economic development schemes led to massive over-investment in Siberian projects with very shaky economic rationales.

While the new natural gas projects may be money spinners, Hill pointed out that “tens of millions of people and thousands of large-scale industrial enterprises languish in the cold and distant places communist planners put them––not where market forces or free choice would have placed them.” Modern oil and gas projects must subsidize not only the national government, but also faltering Soviet-era heavy industry and struggling cities elsewhere in Siberia.

The Washington Post’s photo essay on Norilsk last year underlined the 200,000 person mining city’s environmental, infrastructure and social problems. For example, life expectancy there is 10 years less than the Russian average, which in turn is significantly lower than Canada’s.

The Power of Siberia is undoubtedly not the last Siberian gas project we will be hearing about. While our northern landscapes will always be the same, the economic models of the Yukon and Siberia won’t be converging any time soon.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist and received the bronze for Outstanding Columnist in the 2019 Canadian Community Newspaper Awards.