Paul Goble
Staunton, Oct. 27 – Many like to
talk about “Siberianization” and “the mastering of Siberia,” Dmitry Verkhoturov
says; but most do so without considering the real costs involved in doing so
and thus overstate what one or another project will cost and what it will bring
in return.
To compensate for the overly
optimistic projections of such people, the Siberian economist says, it is worth
considering the development of just one portion of Siberia, the lands between
the Yenisei and Lena rivers, the site ofc enormous natural wealth and almost no
infrastructure (sibmix.com/?doc=23297).
If one calculates the costs involved
of developing the resources and then transporting them out for foreign sale,
one can easily see, Verkhoturov says, that “under prevailing conditions,”
development of that region “will not benefit investors either domestic who are
currently suffering under huge debts and losses or foreign ones either.
There are indeed enormous deposits
of natural resources in that region, he continues, including potash salts,
iron, copper, coal and other minerals as well. But for these to be economically
viable, mines must developed with populations brought in and housed to support
them and transportation infrastructure created where none now exists.
The transportation infrastructure
that will have to be built includes the construction of a railway and
connecting roads (about 4.8 trillion rubles), a pipeline costing 1.6 trillion
ruble with annual operating costs only adding to those totals. Building mining
and population infrastructure will require another 5.6 trillion rubles.
Moreover, Verkhoturov says, those
estimates are likely low given the extreme conditions of the Evenk region; and
so assessments of cost must begin at 15 trillion rubles and will likely to much
higher, and the maintenance of both the mine, human and transportation
infrastructure will add trillions more.
Assuming price stability, lack of
sales restrictions, and low inflation, Verkhoturov says, the mining industry from
that region would be about 900 billion rubles a year, leading the paying off of
the investment cost in 16.6 years. But if prices fall as China is pressing to
take place, it would take 46.8 years for the project to recover investment
costs.
The problems these costs imposed are
exacerbated by the difficulties of finding the necessary capital. If Moscow
borrowed the 15 trillion, it would have to pay three billion a year in interest
alone, something that by itself would make the project anything but profitable
for the foreseeable future.s
Foreign investors would like face
similar challenges and thus would make demands for the kind of side payments
that would make such a development even more unprofitable, the Siberian
economist says, adding that what he has described for one region of Siberia
would be multiplied many times for the entire space to be developed.