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Measuring Sustainability in the Russian Arctic: An Interdisciplinary Study

by Votrin, Valery, PhD


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like in many countries that do not have their own energy resources. If measured in terms of
energy consumption only, energy intensity in Russia would be underestimated.
Table 4.8. Energy use and electricity intensity per unit of GDP in Russia, 1994 to 2002, kg
of oil equivalent/rouble and kWt/hour
Indicator 1994 1995 1996 1997 1998 1999 2000 2001 2002
Energy use 2,3 2,3 2,3 2,3 2,1 2,1 2,1 2,1 1,9
As percentage to 1990 115,1 118,1 115,1 113,1 107,0 108,0 107,5 104,0 96,5
Energy production intensity 3,5 3,5 3,6 3,5 3,7 3,6 3,4 3,5 3,5
As percentage to 1990 119 122 125 121 127 125 119 119 122
Electricity intensity 2,1 2,1 2,0 1,9 1,9 1,9 2,0 1,9 1,8
As percentage to 1990 122,7 125,7 122,1 118,6 115,6 110,8 119,8 115,6 111,2
Source: Bobylev and Makeyenko (2002); Mastepanov (2004)
As shown in Table 4.8, the most environment damaging indicator of energy production
showed the most adverse trends as it has increased by 25 per cent in 1999 compared to 1990.
Energy use per unit of GDP tends to decrease but is still high. In fact, this trend is expected to
continue in the future. The only existing long-term energy strategy in Russia, Energy Strategy to
2020, focuses on the increase in coal extraction, including open pit mining, for domestic
consumption. Since gas is considered a clean fuel for which there will be a stable international
demand, its export abroad is planned to be continued. The strategy barely mentions
environmental or health impacts from increased domestic coal consumption, and limited
attention is given to renewable resources. This long-term policy document is in fact the
extension of current short-term unsustainable energy strategies into the future.
Yet the most indicative is the comparison of environmental pressure of Russia’s
economy and the economies of other countries. In Russia, energy use per unit of output is 2 or
3 times that in industrialised countries, as indicated in Table 4.9.
Table 4.9. Energy use indicators in Russia and industrialised countries

Country
Energy use
per unit of
GDP, toe/100

USD

SOx
emissions per
unit of GDP,
kg/1000 USD

CO2
emissions per
unit of GDP,
kg/1000 USD
Japan 0,17 0,3 0,42
Germany 0,21 1,1 0,52
France 0,21 0,9 0,31
Norway 0,22 0,3 0,32
UK 0,20 1,8 0,49
Canada 0,36 4,1 0,73
USA 0,28 2,3 0,72
OECD countries 0,24 2,1 0,58
Russia 0,61 6,0 1,54
Source: Bobylev and Makeyenko (2002)
Certainly, Russia is a northern country, and its energy consumption is supposed to be
significantly higher than the one in countries with moderate climate. But such gap in energy use
indicators cannot be explained just by geographical position; lag in technology plays much more
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considerable role here. Due to the outdated mining technologies, large amounts of oil and gas
are being lost during the extraction. According to one national expert (Sergei Bobylev), this is
“the ocean of energy being wasted every year”. The indicators of the Scandinavian countries
suggest huge potential for energy saving in Russia. The example of Norway is characteristic: it
is a northern country like Russia that has significant power resources and at the same time its
energy intensity is 3.3 times lower. Eastern European economies such as Poland and Hungary
have considerably lower energy intensity. The greatest progress in reducing GDP energy
intensity has been achieved in the USA, Germany and Hungary, which have cut the indicator to
about a third of its 1980 level. In most OECD countries, energy use per unit of GDP and per
capita consumption of such basic materials as steel, wood, and copper have stabilised, and in
some countries they have even decreased, while the efficiency of final output has risen. Energy
consumption per unit of industrial output decreased by 35 per cent in OECD countries from
1970 to 1990, with some countries, most of all Denmark, having had rapid economic growth
almost without increasing energy production. The rise in energy production intensity against the
plateauing in energy efficiency indicators and the unvaryingly high electricity intensity
demonstrate that energy production in Russia is currently at unsustainable level (Bobylev and
Makeyenko, 2002; Bobylev, 2004; Bobylev, 2005; Bobylev, 2006).
Table 4.10. Energy use indicators in the Russian Arctic in 2000 and 2001, tonnes of oil
equivalent/million rouble and kWt/hour
Region
Energy use per unit of GDP Electricity use per unit of GDP
2000 2001 2000 2001
Arkhangelsk 118,3 123,8 113,6 112,0
Murmansk 172,3 166,2 220,5 216,7
Tyumen 127,0 114,4 85,1 80,7
Krasnoyarsk 146,7 123,1 226,3 214,2
Sakha 101,0 100,4 84,0 82,4
Magadan 144,8 127,3 205,9 204,9
Russian Arctic average 135,0 125,9 155,9 151,8
Russian average 145,4 138,6 138,9 132,8
Source: Ministry of Energy (2003)
As Table 4.10 suggests, gross energy use indicators in most Russian Arctic regions but
Murmansk were below or close to the Russian average. Murmansk Oblast’s economy is
dominated by energy-intensive industries, with 74 per cent of total industrial output accounted
for largely by the fuel complex, metallurgy, and chemical and petrochemical plants. Despite
Murmansk has its own electric power plants, including Kola nuclear power plant (NPP) and is an
exporter of surplus energy to the neighbouring regions as well as to Finland and Norway,
domestic electricity consumption due to the industrial processes is as well very high and
exceeds the Russian average considerably. The region’s other two top energy consumers,

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Krasnoyarsk and Magadan, have shown considerable reduction in energy use per unit of GRP
with simultaneous high electricity consumption, mainly for industry and household needs.
Overall, gross energy indicators for the Russian Arctic tend to decrease slightly. In 2000 and
2001, the average energy use per unit of GRP for the Russian Arctic was 7.1 per cent and 9.2
per cent below the Russian average. In the same period, the average electricity use per unit of
GRP for the Russian Arctic was by 12.2 per cent and 14.3 per cent higher than the Russian
average.
As Bobylev and Makeyenko (2002) point out, the decrease in energy intensity for Russia
in general and for the Russian Arctic in particular may become the link in a chain that would
draw the region towards sustainable development. This might be achieved through positive
structural change in the economy, reduction of the share of nature-exploiting industries and the
growth of high-tech knowledge-driven sectors. The focus on the reduction of energy
consumption should facilitate energy efficiency programmes that are currently emerging in
Russia and that have enormous potential for the country. Energy resource saving and its
rational use will ensure to decrease the need for primary energy resources and facilitate to
reduce environmental pressure, particularly greenhouse gas emissions, that is vital first of all for
sustainable development in the Russian Arctic.
Regarding renewable energy sources, the most promising one for the Russian Arctic is
the wind energy, since those regions are located on the coast of the six seas, i.e. in a zone of
most intense winds blowing in Russia, with the mean annual wind velocity of 5 to 8 m/sec.
However, as wind-driven power stations cannot fully cover the power demand, they should be
used together with existing diesel power stations. Good practices of using wind power in the
Russian Arctic include the first wind power station with a capacity of 2.5 MW installed in 2003 in
Chukotka and consisting of 10 wind power units, a part of the Anadyr cogeneration plant.
Another wind power station is being built in Tiksi, in Sakha. A private company in Murmansk has
installed and maintains a wind power station with a capacity of 200 kW (Vasil’ev et al, 2005).
As Bobylev (2004) points out, the indicator of energy intensity is quantitatively defined in
documents and programmes of the federal government, but is not included in the Rosstat
reports. Since this indicator is the key to sustainable development, it is important for the Rosstat
to annually calculate and publish it.

4.2.5 Research & Development Expenditure – More Heaters for Scientists!
Expenditure on R&D, or R&D intensity indicates the level of the region’s scientific and
technological development and, in relation to sustainability, its knowledge capacity to meet the
needs of future generations. UNCSD (2003) particularly stresses the fact that adequate R&D
funding commensurate with economic growth and national income is necessary for ensuring
sustainable development.

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Expenditure on R&D as a proportion of Russian GDP was severely restrained as a result
of economic crisis during the 1990s. However, the change in the R&D intensity during that
period in Russia is represented differently in the literature, e.g. as shown in Table 4.11.
Table 4.11. Research & Development intensity in Russia, 1992 to 2001, % of GDP
Author 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Bobylev and
Makeyenko
(2002)
Oglobina et
al (2002)

0,50 0,41 0,39 0,29 0,27 0,36 0,23 0,26 0,25 -

0,74 0,77 0.84 0.79 0,90 0,99 0,92 1,01 1,09 1,16

According to the first reference, R&D expenditure decreased steadily between 1992 and
2000. The other one shows the opposite dynamics of growing R&D expenditure. The root of
controversy here lies in the source of data. While Bobylev and Makeyenko (2002) analyse
budget data, namely fund allocations from the federal budget for “fundamental studies and
promotion of scientific and technical development” (without space research), Oglobina et al
(2002) set out more accurate data on technical innovation expenditures as a percentage of
GDP that are synonymic to R&D expenditures and are available from Rosstat on a regular
basis. The two sets show two different trends: while fundamental study expenditures are shown
to decrease over the last 10 years from 0.5% in 1992 to 0.25% in 2000, overall R&D
expenditure is represented to be actually growing up to almost 0.5% from 1992 to 2001. The
latter seems to be more realistic and supported by the actual data from Rosstat (section
“Technical Innovation Expenditures”). Consequently, R&D expenditures in 2001 came close to
the 1990 amount of 2 per cent, i.e. similar to R&D expenditures in Italy (1.3%) and UK (2.2%) at
that time.
The promotion of innovation activities in the Russian Arctic from 1996 to 2002 has seen
its downfalls in the mid 1990s but general R&D expenditure as a percentage of aggregate GRP
has experienced an uneven growth that reached 1.5% in 2001, as suggested in Figure 4.3.

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Figure 4.3. Research & development expenditure as a percentage of gross regional
product in the Russian Arctic
1,6
1,4
1,2
1
0,8
0,6
0,4
0,2
0
1996 1997 1998 1999 2000 2001 2002

Source: author’s calculations based on Rosstat (2004)
The increase in R&D expenditure after 1998 seems to have coincided with the rapid
growth in GRP and regional investments in fixed assets. This indicates the region’s
considerable innovation capacity. As Oglobina et al (2002) mention, Russia inherited from the
Soviet Union one of the biggest R&D complexes the world has ever seen. Despite the problems
the Russian economy has been facing, the actual R&D potential is still able to contribute
significantly to the long-term economic growth on federal and regional levels. The region’s
innovation capacity depends essentially upon its infrastructure (e.g. resources allocated to
innovativeness), the environment in which economic agents operate (e.g. economic and social
policies), and the linkages between these two. The coupling of innovation activities and smart
economic growth in Russian regions, particularly in the Russian Arctic with its high-developed
research system requires a switch to a reliable and sustainability-orientated macroeconomic
policy as well as a policy orientated towards the effective use of national innovation resources
that might have a positive impact on regional development.
Depending on the specific conditions of the region, there arises a need for targeted
regional initiatives directed towards priority areas and bringing together regional players by
project-based and measure-based actions. Such programmes would take into account regional
needs or preferences and would increase, through shared financing from local budgets,
companies and other sources, the responsibilities of local administrators and researchers.
International R&D co-operation within the context of the programmes such as the EU Sixth
Framework Programme for Research and Technological Development (FP6) and participation in
its sub-priority programmes “Sustainable Energy Systems” and “Global Change and

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Ecosystems” can also strengthen the region’s innovation capacity and pave the way towards
sustainable development.

4.2.6 Gini Index – Liberty, Inequality, Fraternity
Income distribution is very important in achieving the goal of sustainable development of
a region. The most important poverty indicators used by the Russian official statistics are
income difference index, share of population living below poverty line (see subsection 4.2.7
below) and Gini Index. The latter started to be used since relatively recently and is an important
measure of income inequality used by the UNCSD sustainability indicator framework as well as
by the World Bank.
As Figure 4.4 shows, Gini Index for almost all Russian Arctic regions is close to or above
the Russian average which suggests that income inequality is growing, in particular in Yamal-
Nenets AO and Nenets AO, where Gini Index is significantly higher than in Russia.
Figure 4.4. Gini Index in Russia and Russian Arctic in 2003

0,450
0,400
0,350
0,300
0,250
0,200
0,150
0,100
0,050
0,000
Murmansk Nenets AO Yamal
Nenets Taimyr Sakha Chukotka Russia
Gini index 0,373 0,414 0,430 0,357 0,385 0,390 0,400

Source: Rosstat (2004)
In 2003, two of the Russian Arctic regions – Nenets and Yamal-Nenets – had income
inequality higher than in the whole Russia, and Gini index for the others was close to the
national average, indicating greater income inequality.
Compared to 0,398 in 2002, income difference in Russia in 2003 stabilised, indicating
that Russia had greater inequality than, for instance, most European nations that have Gini
coefficient between 0,24 and 0,36. This was mainly caused by intersectoral differences in
wages. The gap between the wages in gas production industry and light industry (the sectors
with the highest and lowest wages) was 8,8 times in 2003 compared to 8,3 times in 2002

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(Solntsev, 2004). Despite economic growth, income distribution process in Russia is
characterised by extreme unevenness. Income difference has increased almost tenfold between
1991 and 2002. The distribution of total income among the quintiles with different income levels
is changing towards the most prosperous group of the population (Bobylev and Makeyenko,
2002; Bobylev, 2004).
The steady rise of Gini coefficient in Russia was reported throughout the 1990s, from
0,260 in 1991 to 0,409 in 1994. It somewhat declined in the late 1990s but remained high at
0,379 in 1998 (Bogomolova and Tapilina, 2001). Regional inequality in Russia has increased
significantly during the 1990s (Fedorov, 2002). Kislitsyna (2003) agrees that for the period from
1991 to 2000, Gini Index in Russia virtually redoubled – from 0,26 to 0,40. The author argues
that inequality in Russia is now comparable to that observed in some of the most highly unequal
economies in Latin America. However, in contrast to Latin America where inequality has been
high yet fairly stable, the deterioration of the income distribution in Russia has occurred in only a
decade, with the decline of economy accompanied by the rise of inequality. In 1990-1995, GDP
decreased by 40%. Income inequality increased twofold. In the period of economic growth in
1999-2000, GDP has increased by 12%, and inequality became stable at 0.40 (according to
official data).
In Russia with its large regional differences, many poor regions, especially those with
high levels of inequality, could face poverty “trap” (poverty rates that respond very slowly to
growth) and become over time a “pocket of poverty” in an otherwise growing national economy
(Alam et al, 2005). Another recent study (Kolenikov and Shorrocks, 2005) found that inequality
is the greatest contributor to poverty. The concentration of income in the hands of the ‘happy
few’ throughout Russia means greater stratification of society. For the Russian Arctic, it implies
a larger gap between the poor and the rich who made their capital on natural resources. Given
relatively high income and relatively low unemployment rate in the region, it is justified to
assume that the shift towards the resource-based regional economy has created more
opportunities in the market for those working in the extraction and nature-exploiting industries to
double their income. The analysis of recent trends of Gini Index demonstrates the steady
increase in the index value which means the prospect of growing income inequality in Russia,
particularly in the Russian Arctic.

4.2.7 Below Poverty Line
As a number of authors (Clarke, 1999; Alam et al, 2005) argue, an unprecedented
collapse in output and income and an equally unprecedented increase in inequality implied a
catastrophic increase in the incidence of poverty during the 1990s.
Although some authors (Alam et al, 2005) argue that “after 1999 economic rebound was
both impressive and broad based across sectors and regions, leading to a dramatic reduction in
poverty… cutting poverty in half between 1999 and 2002, from about 40 per cent in 1999 to 20

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per cent in 2002, using a consistent national poverty standard”, official data as shown in Table
4.12 represent quite different dynamics in poverty rate which was recorded to start decreasing
after 2000 only and diminished to 22 per cent in 2003, i.e. by 7 per cent in three years. Revision
to the subsistence standard in 2000 also caused a spurious decline in reported poverty rates
(Bobylev and Makeyenko, 2002; Kolenikov and Shorrocks, 2005). Solntsev (2004) also reports
that poverty rate in Russia has diminished by 8 per cent between 1999 and 2003, from 28 per
cent in 1999 to 20 per cent in 2003. These results suggest that the Russian government was
not as successful in poverty eradication as some authors report.
Rural poor represent only between 25 and 40 per cent of all poor in Russia (Alam et al,
2005). However, O’Brien et al (2004) report that there is a higher incidence of poverty in rural
than in urban Russia. Yet their data show that just a relatively small proportion of those falling
under the official minimum subsistence level are desperately poor, the majority of the poor in
rural Russia falling under the description of the “working poor” who have found survival
strategies.
Regional differences in poverty are huge in Russia. The degree of regional disparity is
such that across the 78 main subregions prices and poverty rates vary by a factor of more than
4 (Kolenikov and Shorrocks, 2005). Another tendency the authors have discovered is that the
poorer regions are found in the south and east, and the less poor regions to cluster in the north,
despite their locational and climatic disadvantages. Of the Russian Arctic regions, poverty rate
for Magadan and Tyumen have been analysed and found to be among the lowest in Russia
(24.6 per cent and 19.2 per cent in 1995 respectively).
As demonstrated in Figure 4.5, share of population living below nationally defined
poverty line tended to decrease steadily in the Russian Arctic from 2000 to 2003 having
dropped from 33 per cent in 2000 to 21 per cent in 2003, or by 12 per cent.

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Figure 4.5. Population living below poverty line in the Russian Arctic
35
30
25
20
15
10
5
0
2000 2001 2002 2003

Source: author’s calculations based on Rosstat (2004)
With the tendency to decrease for the whole Russian Arctic, the regional poverty rates
show mixed trends. Table 4.15 compares the poverty rate in the Russian Arctic regions with
Russia.
Table 4.12. Population living below poverty line in the Russian Arctic and Russia, 2000 to
2003, as a percentage of total population
Region 2000 2001 2002 2003
Murmansk 26,1 23,5 24,1 22,3
Nenets AO 42,4 30,2 23,9 24,3
Yamal-Nenets AO 11,0 9,2 7,6 8,0
Taimyr 28,5 17,8 20,3 24,9
Sakha 31,1 28,6 22,7 20,4
Chukotka 59,4 39,6 35,2 28,4
Russian Arctic average 33,0 24,8 22,3 21,4
Russia 29,1 27,6 25,0 21,9
Source: Rosstat (2004)
The most striking was the progress in Chukotka where the new administration elected in
2000 has done much to boost employment and reduce poverty that resulted in a 31-percent
decrease in poverty rate between 2000 and 2003. The poverty rate in Nenets AO also
decreased considerably, from 42.4 per cent in 2000 to 24.3 per cent in 2003. Other regions
showed moderate progress and, in case of Yamal-Nenets AO and Taimyr, growing poverty rate
by 2003.
Most authors writing about the regional dimension of poverty in Russia note the
significant part natural resources play in poverty combating measures in Russia’s northern
regions. Dolinskaya (2002) found that the more successful Russian regions prospered largely
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on account of their natural resources endowments and favourable external environment.
Kolenikov and Shorrocks (2005) are of similar opinion, reporting that natural resources are
evidently influential in poverty reduction during the last years. Solntsev (2004) argues that the
main driver of poverty reduction in Russia is the rise in monetary income. Given that personal
income in the region under study comprises mostly wages and comparing the poverty rate
dynamics with employment structure and unemployment trends, it can be concluded that
regional poverty eradication policies depend directly upon natural resource exploitation in the
Russian Arctic.
4.3 Social Dimension
4.3.1 Population Growth or Population Loss?
The indicator of population growth reveals increase or decrease of the population in a
region over a certain period of time, reflecting demographic processes depending upon a
number of factors, namely the region’s level of socio-economic development, the environment,
public social policies, education, moral and religious values, etc. (Kozlovskaya, 2003).
The demographic situation in Russia over the recent decade has been seen as a
population disaster. Between 1990 and 2000, the population of Russia decreased dramatically,
with the change from population growth to population decline occurring between 1992 and
1995. By 2000, the population was the same size as it had been in 1987 (Anderson, 2002).
Some see a completely depopulated Russia on the longer run. The situation seems so serious
that in his annual state of the nation address on 10 May 2006 Russia’s President Vladimir Putin,
instead of focusing on foreign policy and other priorities, proposed the new demographic
initiatives to reverse Russia's drastic demographic decline, including the main innovation - a
one-time 250,000-ruble payment to the mothers who have a second child. Reducing mortality
rates and implementing an effective migration policy are two other important steps the state
must take now to rectify the problem.
Kashepov (2004) indicates that current population decline in Russia is viewed by many
in the light of the theory of “demographic transition” which assumes that Russia is making the
transition from the traditional type of population reproduction (high birth rate, high mortality rate,
low average life span) to the modern type of reproduction (low birth rate, low mortality rate, long
life span). According to this theory, all present-day difficulties affecting demographic
development have been conditioned by collectivisation, the purges, and war and have nothing
at all to do with the current socio-economic situation. Consequently, what is happening is a
global phenomenon, so little can be done about it. In contrast, the author argues that this
concept can be used only to account for the dynamics of the birth rate in Russia and the fact
that it is going down. In the developed countries, however, the birth rate has dropped over
several decades as living standards rose, and in Russia the birth rate fell precipitously in the
early 1990s as living standards declined drastically. Nor the theory explains why both the

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