Putin Signs Law for Offshore Defense

By The Maritime Executive 04-26-2014 06:53:00

Mia Bennett, a PhD student in Geography at the University of California, Los Angeles (UCLA) under the supervision of Dr. Laurence Smith and Dr. John Agnew, reports on Russia’s move to defend its offshore assets:

On September 28, 2013, 28 Greenpeace activists and two journalists sailing on the non-profit organization’s icebreaker, Arctic Sunrise, boarded Russia’s Prirazlomnoye oil rig in the Pechora Sea, north of the Arctic Circle. The Russian Coast Guard swiftly arrested them and threw them in jail despite much international protest. In December, after more than three months in prison and just a week after the Prirazlomnoye field began producing oil, the so-called “Arctic 30” were released and sent home. While it’s unclear if the timing was deliberate, the fact that they were not released until after the oil started flowing exemplifies the helplessness of Greenpeace and other protestors against the might of the Russian hydrocarbon-industrial complex.

Now, seizing on the momentum of the first exports of oil last week from the Prirazlomnoye field, President Vladimir Putin signed into law an act “on the establishment of departmental security to ensure the safety of the fuel and energy complex.” Effectively, the law allows corporations to establish their own private security forces to defend their infrastructure, upping the stakes of oil production in the Russian Arctic while rendering protestors even more vulnerable.

On the same day that he signed this act into law, Putin also met with the Russian Security Council, where he went through the usual rhetoric of urging Russian strength in the Arctic. More importantly, he remarked, “Oil and gas production facilities, loading terminals and pipelines should be reliably protected from terrorists and other potential threats. Nothing can be treated as trivia here.” Since Putin concluded by calling the socioeconomic development of the Arctic a “matter of national security,” it is unsurprising that he wants corporations to arm themselves in the Arctic and elsewhere in Russia.

The Prirazlomnoye field began producing oil in December of last year. There are an estimated 71.96 million tons of recoverable oil in the offshore field, with a target of 300,000 tons to be produced this year and six million to be produced annually after 2020. Nick Cunningham, an analyst at oilprice.com, notes that if production only reaches 120,000 tons annually (the low end of Gazprom’s estimates, presumably), this would only add approximately 1 per cent to Russia’s production. So when CEO Alexey Miller triumphantly proclaimed in December, “Gazprom is Russia’s outpost in the Arctic. Last year we conquered Yamal, having created an unparalleled in the world, new onshore gas production center in the Arctic. And today we have pioneered the Russian Arctic shelf development. There is no doubt that Gazprom will continue advancing in the Arctic,” he may have been right. Russia has indeed pioneered offshore development in the Arctic. Yet this advance has come at a substantial cost to the state, which has provided numerous tax breaks in order for the project to move forward. Exporting oil from north of the Arctic Circle may therefore not come with any long-term economic benefits. But it is still an activity that Putin is seeking to defend at seemingly all costs.

Demonstrating the symbolic importance of Arctic oil exports to Russia, President Vladimir Putin was on hand to commemorate the first shipment of oil from the Prirazlomnoye field last week, which is being sent to an undisclosed customer in Europe. Branded “ARCO,” the crude blend is cheaper than Russia’s primary export, the Urals blend, which was priced at $105.47 a barrel in late March. Putin stated (translated from Russian),

“This, in fact, is the beginning of our country’s large-scale work in the Arctic for the extraction of mineral resources – oil – and I am especially pleased to note that this is due not only to oil production. Implementation of this and similar projects have significantly affected and will continue to positively influence the development of the Russian engineering and shipbuilding. Two large ice-class tankers will serve this platform almost year-round. And it says further positive steps in the development of the shipbuilding industry in the Russian Federation. This means that the entire project will have the most positive influence on the further expansion of the presence of the Russian Federation in world energy markets will strengthen the economy in general and our energy industry.”

Unlike the Yamal LNG Project, a joint venture project between Russia’s Novatek, France’s Total, and China National Petroleum Corporation, the Prirazlomnoye oil field is a more nationally-driven endeavor. In Russia, Arctic oil production is seen as necessary to offset declining reserves in West Siberia. Still, some foreign expertise has been involved in making the export of the first barrels of oil from north of the Arctic Circle possible. A ship designed by Finland’s Aker Arctic Technology is currently exporting the first shipment of ARCO blend from Prirazlomnoye. The vessel is en route to Rotterdam via the Barents Sea, and you can track its voyage on the Marine Traffic website.

Despite the pride in the Prirazlomnoye project expressed by President Putin and Gazprom CEO Miller, the passage of the new law reveals how a sense of vulnerability pervades below the surface of Arctic drilling. On the one hand, environmentalists are concerned about the threat of oil spills. Viktor Petrov, head of the Kola Center for the Defense of Wildlife, remarked in an interview with Bellona, “There is a more than likely chance of an oil spill resulting from the operation of the Prirazlomnaya platform. On the other hand, perhaps in light of the aggressive actions by Greenpeace, Putin is prioritizing the threats of militant activists and terrorists over the environmental risks of drilling.

Whereas many news articles are focusing on the potential for a “new cold war” between Arctic states, the real struggle in the Arctic and in other parts of Russia’s hinterlands may be between state and non-state actors, whether they are environmentalists or, in the eyes of Putin, terrorists. Such actors might seek to disrupt the “fuel and energy complex” for environmental or political reasons, thereby threatening Russia’s chief export and economic lifeblood. With Dmitry Yarosh, a Ukrainian presidential candidate and leader of the far-right group Right Sector, threatening last month to blow up the pipelines leading from Russia into Europe, Putin is clearly taking such threats seriously, going so far as to place Yarosh on an international terrorist list.

Upon her release from prison in December, Greenpeace activist Dima Litvinov expressed, “This is only the beginning. The oil companies are moving north, the world’s climate is changing, the biggest struggles still lie ahead of us.” Now, the possibility of paramilitary forces protecting Russia’s oil and gas infrastructure throws a whole new wrench into the Arctic energy race.

Mia Bennett, Blogger, http://www.cryopolitics.com