The Arctic region is, first and foremost, a large volume of investment projects. Each project is essentially driven by Russia’s strategic objectives, including mitigating potential disruptions to shipping routes in the Baltic Sea, navigating international sanctions through alternative maritime practices, and establishing a reliable cargo flow for the Northern Sea Route (NSR) and Trans-Arctic Transport Corridor as part of Russia’s long-term vision for Arctic development and national security.
Financial institutions are increasingly recognising the potential of the Arctic and actively seeking to identify and finance projects that contribute to infrastructure development in this region. But, what does the Arctic mean to a financial institution?
Ildar Murtazin, Head of the Department for Structuring Infrastructure Projects and PPPs at Gazprombank, shared his opinion at the 15th Anniversary A.N. Chilingarov International Forum “The Arctic: Present and Future.”
If money is the lifeblood of the economy, then infrastructure is the vessels through which this blood flows. It is through infrastructure that cargo, services, investments, and human capital circulate. The state of these highways determines both the speed of economic growth and the country’s ability to adapt to external challenges.
“Infrastructure development contributes to country’s GDP—from the initial investment and construction phases to the project’s completion, when it becomes an independent driver of economic activity within its region.”
Ildar Murtazin emphasises the importance of strategic entry points for the successful operation of the Northern Sea Route (NSR). Currently, the transport hubs of Murmansk and Arkhangelsk serve as these critical gateways. Murmansk’s appeal lies in its ice-free waters, while Arkhangelsk offers a geopolitical advantage due to its minimal exposure to threats.
The initiation of any infrastructure project typically involves meticulous technical specifications, tax projections, and negotiations with diverse stakeholders including regional authorities, the federal government, investors, and project owners. However, the ultimate determinant of a project’s viability is its acceptability by financial institutions. Banks meticulously evaluate the project model, potential risks, and overall structure before extending financing.
Will the bank approve this project, considering its model, associated risks, and overall structure?
To ensure a “yes,” it is important to engage a financial partner early on, not after all the decisions have already been made.
“Gazprombank currently has over 150 promising projects with a total investment of over 5 trillion rubles.”
The Russian government has established a challenging yet attainable objective of achieving transport sovereignty. This goal necessitates the development of infrastructure that will facilitate the diversification of logistical pathways. Strategic projects include the North-South International Transport Corridor and the Trans-Arctic Transport Corridor.
These projects will involve the construction of maritime infrastructure and land-based logistics networks, encompassing roads and transshipment hubs. The implementation of these facilities must occur concurrently, as a seaport’s functionality is contingent upon the availability of ship repair facilities, access roads, and a dry port. Furthermore, there is a pressing need to modernise the dredging fleet.
The specifics of infrastructure projects is that they last for decades. Stages such as project development, cost estimation, investor attraction, and negotiations require considerable time. Thus, it is imperative to initiate new projects promptly. This urgency stems from the Russian Central Bank’s projection that the key interest rate could reach 7.5–8.5 per cent as early as 2027, potentially increasing the cost of capital for such undertakings.
“The project will enter the market in 2-3 years, in a different macroenvironment. The infrastructure that is structured now, once the money market stabilises, will attract the most significant amount of budget funding,” the expert explains.
The Arctic Century