Although the development of the Arctic’s natural resources sounds very promising for Russian economics, the expansion of mining brings future risks for the regional well-being, affecting social, physical and economic spheres.
Gritsenko and Efimova discuss how the Arctic economics might struggle from being rich in resources. They refer to the idea of ‘resource curse’, a paradox that features the surprisingly poor performance of many resource-abundant economies. So, natural resources might be an economic curse rather than a blessing.
They looked at how mining industries affect local economics of seven regions included in Russia’s Arctic Zone. They compared the indicators of extractive income, subsidy, tax and non-tax income, and other economic indicators for each territory.
They found that the economies of the Arctic territories do not experience specially negative impacts of resource development. Although, potential urgent effects of mining include climate change acceleration, migration, and environmental pollution.
While resource extraction is a major part of the regional GDP, the regional economy at the same time struggles due to excessive taxes. For natural gas, oil and any shelf exploration, 100% of taxes are paid to the federal budget, and that explains why the state is so supportive in the development of these industries.
The Arctic’s natural wealth goes hand in hand with the inability to create modern industrial economic sectors due to extreme weather conditions, low population, and poor transportation.
Lastly, is the Russian Arctic only postponing the ‘resource curse’?
While this is yet unclear, local policymakers should prepare for future risks and focus on sustainable development.
Original source: Gritsenko, D., & Efimova, E. (2020). Is there an Arctic resource curse? Evidence from the Russian Arctic regions. Resources Policy, 65, 101547.
Front photo by Markus Trienke, Flickr/ CC BY-SA 2.0