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April 6, 2015

Russia Proposes Superhighway To Alaska

Putin’s Russia is, if nothing else, ambitious.

At a recent meeting of the Russian Academy of Sciences, the head of Russian Railways, Vladimir Yakunin, put forth a bold plan for a massive trans-Siberian highway.

Graphic Source: Wall Sreet Daily

This superhighway project, called the Trans-Eurasian Belt Development, includes a major roadway to be built alongside the existing Trans-Siberian Railway. And alongside that, the plans include expansive energy infrastructure involving another railway, oil and gas pipelines, as well as electricity and water supply facilities.
If this project actually comes to fruition, it would be the largest infrastructure project ever undertaken.

Russian Route One

The Russian superhighway would link up with Europe’s existing roadway system in the west – a logical plan.
The audacious part of this scheme is the Russians’ proposal to build a connection across the Bering Sea between Russia’s Chukotka region and Alaska!
The distance between Russia’s western and eastern borders is about 6,200 miles. So just building the trans-Russian part of the road would be a monumental task. Especially when you consider the climatic conditions in Siberia.
But the Russians aren’t completely in the clouds. They admit the cost of completing this project would be trillions of dollars. In other words, it will never be built in its entirety.
But, that doesn’t mean it’s just a pipe dream…
After all, Russia did build the original Trans-Siberian Railway at a time when many thought it was an impossible task.
Plus, Russia is probably spurred by its neighbor, China, moving forward with its plans for a New Silk Road and Maritime Silk Road. This would tie China more closely with both Asia and Europe.
And while there are no specifics available on China’s plan, recent announcements offer clues to a grand scale. The country has announced that they have a $40-billion Silk Road Development Fund, $10 billion for roads and railways in Southeast Asia, $10 billion for railways and roads in Eastern Europe, and more than $50 billion in deals in Central Asia.
Late last year, China saw part of its dream come true. The first train carrying 82 containers of goods went from China to Madrid, Spain. The trek, over 13,000 kilometers, is longer than Russia’s Trans-Siberian Railway.
China’s actions are surely spurring Russia to do something grand.

Energy Infrastructure Still Possible

The state of Russia’s economy is another motivation for the superhighway – any massive infrastructure project is sure to put many of its citizens back to work.

And of course, energy is the main driver of Russia’s economy. Sales of oil, petroleum products, and natural gas accounted for 68% of the country’s total export revenue in 2013. The infrastructure proposed to go alongside the highway will boost sales.
Siberia is also an area that’s quite rich in all sorts of natural resources. Any infrastructure development there will help Russia exploit the riches held there.
Russia is already moving down that energy infrastructure road with massive natural gas deals with China.
The country signed two deals with China to ship up to 68 billion cubic meters (bcm) of natural gas per year. This will trump Russia’s current biggest customer, Germany, which buys about 40 bcm annually.
The first deal takes Siberian gas through an eastern route to China via the Power of Siberia pipeline. Construction there began in September. The second deal will take Russian gas from Siberia through a western route via the Altai pipeline.
It’s unlikely that the Russian superhighway will ever be built, but expanding infrastructure to tap Siberian resources is likely to accelerate in the years ahead.
Courtesy Tim Maverick, Commodities Correspondent, Wall Street Daily (Article Archive Here

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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