Why is siberia important to russia

Wheat, barley, rye and potatoes are grown here in large numbers, and many sheep and cattle are raised in the region. But it was the development of Soviet industry in the latter half of the 20th century that made Siberia crucial to Russia's emergence as a major regional — and eventually global — power.

Siberia has some of the world's largest deposits of nickel, gold, lead, coal, molybdenum, gypsum, diamonds, diopside, silver and zinc and is a leading producer and exporter of these minerals. For example, Russia has about 40 percent of the world's known resources of nickel at the Norilsk deposit in Siberia, and Norilsk Nickel is Russia's largest mining company and the world's biggest producer of nickel and palladium.

Russia is also the fourth-ranked steel producer after China, Japan and the United States and was tied with Japan as the leading steel exporter in The production and export of these minerals makes up a major part of Russia's economy approximately percent of gross domestic product, or GDP , but Russia draws its real significance — economic and geopolitical — from its oil and natural gas resources.

Most of Russia's oil production The Sakhalin oil fields in the Far East also contribute to Russian oil production, in addition to other areas outside of Siberia Tatarstan, Bashkortostan and the North Caucasus. As of early , Russian oil exports were at a post-Soviet high of 5. Russia also boasts the world's largest natural gas reserves at 45 trillion cubic meters, which is about a quarter of the world's total proven reserves. The majority of these reserves are located in Siberia; the Yamburg, Urgengoy and Medvezh'ye fields alone account for about 45 percent of Russia's total reserves and are all licensed to Gazprom, Russia's state-run natural gas exploration and production company.

As for natural gas production, about 95 percent of Russia's is done in Siberia. Since the Soviet Union's collapse, Russia's natural resources have played a huge role in driving the country's economic growth.

From to , Russia's GDP averaged 7 percent growth. After a brief contraction during the global financial crisis, which severely affected the Russian economy because of its dependence on exports of raw materials, growth has returned since In , revenues from oil and natural gas exports made up 50 percent of Russia's budget. These resources, particularly oil and natural gas, are important not only as sources of revenue for the Russian state but also as levers in Russian foreign policy.

This is especially true with Europe, where Russia provides roughly a quarter of the energy supply. Natural gas is of particular importance because Russia dominates not only the supply but also the distribution network, especially in Central and Eastern Europe.

Russia has an extensive energy distribution and export pipeline network, the latter of which it began to develop in the s during the thaw in Soviet-Western relations. The Nord Stream pipeline, which avoids transit states bothersome to Russia, such as Ukraine, and traverses the Baltic Sea straight to Germany, has recently come online in Western Europe, and Russia is laying the groundwork to begin construction by the end of on another energy project, South Stream, which will traverse the Black Sea.

Many Central and Eastern Europeans are completely dependent on Russia for their natural gas consumption, but even some major players, such as Germany, Italy and Turkey, are quite dependent on Russian natural gas supplies. Russia has used this dependence to its advantage, whether establishing close commercial and political relationships with the likes of Germany and Italy or cutting supplies to gain political concessions as it did in Ukraine in and , Lithuania in and Belarus in These cutoffs are a reminder that Russia's interests must be considered on any strategic issues for instance, when Ukraine is friendly with the West , while Russia's energy position in Germany, Italy, France and other countries has created an opening for Moscow to be more active in European energy matters — and, by extension, political and security matters.

Between 75 and 85 percent of Russia's oil exports currently go to Europe, but exports of Russian oil to East Asia have begun to increase as well. And Moscow and Beijing in commissioned the Eastern Siberia-Pacific Ocean oil pipeline, which has a capacity of , barrels per day.

The development of energy ties with East Asia, such as developing untapped oil reserves in eastern Siberia and Sakhalin and natural gas reserves in central Siberia, appears to be increasingly important for Russia. This is especially true because consumption of minerals and energy resources in East Asia, especially in China, is growing.

Two trends in Europe have demonstrated to Russia the importance of building closer energy ties with East Asia. The first is that European energy consumption, for demographic and economic reasons, is reaching its peak. By the s the Soviet Union had urbanized its coldest regions to an extent far beyond that of any other country in the world. See box on page At precisely the time when people in North America and western Europe were moving to warmer regions of their countries, the Soviets were moving in the opposite direction.

In the s and early s, Siberia and the Russian Far East dominated Soviet regional development programs. Western Siberia, rich not only in oil but also in natural gas, was on its way to becoming the largest energy-producing region in the USSR, and grand long-term industrial projects were being planned for the whole of Siberia.

Western analysts were astounded by the magnitude of the projects and by the scale of investment necessary to carry them out. But the Soviet economic slowdown of the late s would put an end to such ambitions. By the s the massive investments in Siberia and the Far East were offering extremely low returns. Many huge construction projects were left incomplete or postponed indefinitely. At first, the troubles were blamed on disproportional and incoherent planning, ineffective management, and poor coordination.

But by the reformist era of the late s under Mikhail Gorbachev, the problem was seen to be Siberia itself as well as the efforts to develop it. Criticism of the giant outlays in Siberia became commonplace. Regional analysts and planners in Siberia mounted a fierce rearguard action. Still, by the industrialization of Siberia was beginning to seem a monumental mistake. For more than 50 years, Soviet planners built Siberian towns, industrial enterprises, and power stations—although often not roads—where they should never have been built.

Huge cities and industrial enterprises, widely spread and for the most part isolated, now dot the vast region. Not a single Siberian city can be considered economically self-sufficient. And pumping large subsidies into Siberia deprives the rest of Russia of the chance for economic growth. To become competitive economically and to achieve sustainable growth, Russia must modernize and connect its physically vast but misdeveloped economy.

Refurbishing and upgrading the existing systems of road, rail, and air transportation, for example, or adding new infrastructure and new means of communications would simply improve the connections between towns, cities, and enterprises that should never have been where they are. It would make places more livable where, from an economic point of view, most people should not live to begin with. It needs to focus its attention on redeveloping the regions that are potentially most productive, those in the western part of the country.

Even today, although the legal right to move is enshrined in the constitution, Russians are still not free to relocate wherever they would like to live and work. Residence restrictions in cities like Moscow, together with resource constraints, poorly developed job and housing markets, and the absence of social safety nets, obstruct personal mobility.

The government needs to remove such overt and hidden barriers so that people can move where they want. While many Russians will welcome the opportunity to move, for others the downsizing of Siberia will be painful. Many people who would like to move are too poor to do so, and the worse the economic situation becomes in the region, the less they are able to move. The Russian Federation is not rich enough to finance a mass relocation, and today few places in Russia can offer new jobs.

To the extent that it can, however, the government should help move people, especially younger and more productive people, out of Siberia to European Russia. It should offer housing relocation packages or lump-sum payments or bonuses to help them move. It could, for instance, finance migration through a special fund generated by revenues from Siberian national resource wealth. But Siberian mineral resources are located in closer proximity, Volynets noted.

Cargo transportation from Brazil to Shanghai by sea takes as long as 35 days, from South Africa it takes 20 days and from Australia it takes around 14 days — while from the Vanino Seaport in Siberia it takes only 4 days. With oil prices going higher and higher the transportation costs of commodities will increase too and this will make Siberian commodities more competitive in the long term," he said.

The region's wellbeing has always been critical for Moscow, but the problem for a long time is lack of vision and a roadmap as to how to turn the vast and largely inhospitable but resource-rich lands from being a simple raw material supplier into a key player in Russia's economy and further in Asia —Pacific," Gevorgyan told CNBC. She said a driving force was Russia's search for a prominent strategic and economic role in the Asia Pacific region as it seeks to diversify its energy markets away from Europe and its financial crisis.

The euro zone sovereign debt crisis as well as the changing nature of energy markets with the arrival of shale gas has prompted the Russian authorities to be more proactive in diversifying the country's energy export markets and also tapping into growing Asian markets. The construction of the East Siberia — Pacific Ocean pipeline is already helping Russia to achieve the goal of energy export route diversification," she added.

Neil Shearing, chief emerging markets economist at macro-economic research firm Capital Economics told CNBC that investment in Siberia belied the growing structural problems that Russia needed to tackle urgently. The Russian economy has slowed substantially over the last twelve months and its growth model has been propped up by oil prices.