International Ice Hockey Federation (IIHF) has stripped Belarus of the right to hold the World Championship this year
Russian opposition activist Alexei Navalny arrested on arrival as he returns home
LONG READ: The oligarch problem
COVID-19 and Trump’s indifference helped human rights abusers in 2020
Russian opposition activist Navalny calls for supporters to take to the streets this weekend
One of Russia’s biggest wood product companies, Segezha could be Sistema’s next IPO
Oligarchs trying to derail Ukraine’s privatisation programme, warns the head of Ukraine’s State Property Fund
New Ukrainian VC firm QPDigital aims to invest up to $100 million in digital startups
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Estonian premier quits after Tallinn development scandal
Czech Pirates and Mayors approve final coalition agreement for 2021 elections
OUTLOOK 2021 Czechia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
OUTLOOK 2021 Hungary
Hungarian government remains silent after Capitol riots
World Bank expects modest recovery for Europe and Central Asia in 2021
OUTLOOK 2021 Slovakia
FDI inflows to CEE down 58% in 1H20 but rebound expected
Slovakia to invest €1.2bn in digitisation
Corona-induced slump in global clothing sector dragged down Albania’s 2020 exports
BALKAN BLOG: The controversial recipe for building up Albania
Heavy flooding causes chaos in parts of Southeast Europe
Vodafone Albania plans €100mn infrastructure investments after AbCom merger
Turnover rose on Bosnia's two stock exchanges in 2020 while prices fell
Storming parliaments: New Europe's greatest hits
Kyiv accuses Bosnian President Dodik of lying about icon gifted to Russian foreign minister
Bulgaria’s government considers gradual easing of COVID-related restrictions
Sofia-based LAUNCHub Ventures holds first close of new fund on €44mn
ING THINK: Growth in the Balkans: from zero to hero again?
Labour demand down 28% y/y in Croatia in 2020
Zagreb Stock Exchange's Crobex10 index at highest level since March 5
EBRD investments reach record €11bn in pandemic-struck 2020
OUTLOOK 2021 Kosovo
Arrera Automobili aims to launch Albania’s first supercar
OUTLOOK 2021 Moldova
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Moldova’s PM resigns to prepare the ground for early elections
Montenegrins say state administration is most corrupt institution
75% of Montenegrins want EU membership
Montenegro’s new ruling coalition carves up top state jobs
North Macedonia's manufacturing confidence indicator down by 8.5 pp y/y in December
OUTLOOK 2021 North Macedonia
Transparency International warns of high corruption risk in CEE defence sectors
OUTLOOK 2021 Romania
Romania’s central bank cuts monetary policy rate by 25bp to 1.25%
Romanian construction companies' activity slows in November after intense 2020
OUTLOOK 2021 Serbia
Slovenia’s opposition files no-confidence motion against Jansa cabinet
Slovenia’s government to release funds to news agency STA after EU pressure
UK Moneyhub picks Slovenia for post-Brexit European base
Slovenia’s dire COVID-19 situation in 4Q20 caused second economic dip
Turkcell denies any affiliation with $1.6bn loan in default extended by Ziraat Bank to Virgin Islands company
BEYOND THE BOSPORUS: Let’s tentatively pencil in a date for Turkey’s hot money outflow
Armenia ‘to extend life of its 1970s Metsamor nuclear power plant after 2026’
OUTLOOK 2021 Armenia
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
Armenia’s PM cautions conflict with Azerbaijan “still not settled” after trilateral meeting with Putin
OUTLOOK 2021 Georgia
Georgia’s political kingpin Bidzina Ivanishvili quits politics
Modern-day “Robin Hood” inspires Georgians drowning in debt
Durov rejects Western funds’ offer to buy 5%-10% of Telegram with $30bn valuation
Iran’s navy conducts missile drill while analyst argues Trump even capable of nuclear strike in final days
TEHRAN BLOG: Who’s more credible? Johnson backing Trump’s Nobel chances or Iran applauding arrest warrant for US president?
Central Asia vaccination plans underwhelm, but governments look unruffled
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
OUTLOOK 2021 Kyrgyzstan
Mongolia's winter dzud set to be one of most extreme on record says Red Cross
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
OUTLOOK 2021 Tajikistan
China business briefing: Not happy with Kyrgyzstan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
Turkmenistan: The dammed united
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
OUTLOOK 2021 Uzbekistan
Download the pdf version
The frozen wastes of Russia’s interior are melting. That’s a big problem for Russia. And it could be an even bigger problem for the planet. A large share of Russia’s oil, gas, diamonds and metals are produced in cities that sit on the permafrost. And thousands of kilometres of roads, rails and pipelines could sink into a bog, while some of the buildings and processing plants will simply fall over if the ground melts.
The climate crisis arrived in Russia this year and is going faster than elsewhere. Temperatures in northeastern Russia are rising two and half times faster than in the rest of the world. Few people live there but if Russia’s permafrost melts the economic cost could be astronomical.
Russia has 24 regions that are permanently frozen but only nine of those contain extensive infrastructure and cities. However, these regions are key to Russia’s economy, producing the bulk of its raw materials that account for almost half of the country’s GDP.
The main issue is that because the ground is so hard everything is built on piles driven into the ice. Even in the brief summers, which only last a month, typically only the first half metre of top soil melts, which is why the pine trees that blanket much of the taiga are only a metre or so tall; their roots can’t get very deep before hitting the concrete-like layer of ice.
If the permafrost melts it will cause billions of dollars worth of damage. A recent study by Dmitry Streletskiy tried to assess the impact of climate change on the fixed assets in Russia’s permafrost regions that was published in Environmental Research Letters and goes into a lot of detail.
While the population density of everything east of the Ural mountains – the formal end of Europe – is thin, there has actually been a fair amount of building done in the Asian part of Russia, mostly by the Soviets.
The total value of all these fixed assets – buildings, factories, pipelines, roads, etc. – in just the nine most at risk regions is $1.29 trillion, or about 17% of Russia’s entire fixed assets, estimates Streletskiy.
Of these assets about a sixth are in immediate danger from the subsidence of the ground if it melts, or just over $250bn worth, or around 7.5% of Russia’s GDP. And the cities are in more danger than the pipelines: in the coming decades about a fifth of this infrastructure and up to half of the housing in the permafrost regions need to be upgraded or rebuilt entirely.
The bottom line is that the worst affected regions will have to spend between 4% and 5% of their gross regional product on repairs and upgrades and the permafrost meltdown will shave another 1%-2% off Russia’s economic growth for decades to come.
And that is just the problems the Soviet-era cities are getting ready to face. The far bigger problem which is still largely being ignored is that, according to academic estimates, there is some 1 trillion tonnes of CO2 locked up in the permafrost – rotting prehistoric vegetation that has been frozen since the time of the dinosaurs. If the ground temperature reaches zero degrees then all that CO2 gas could be released in one go in about 30 years, or sooner, causing an unpredictable climate catastrophe.
Currently the ground temperature is about -3C but it is rising by about one degree a decade. A climate-changing gas time bomb is ticking down and will go off sometime in 2050, causing cataclysmic and irreversible damage if nothing is done to reduce emissions.
Accidents and Artic heat wave
The problems of melting permafrost arrived in Russia this summer, which saw the biggest ecological disaster in the country’s history.
The Kremlin declared a spill of diesel fuel at the power plant of Norilsk Nickel metals major in the Krasnoyarsk region in May a federal emergency.
Melting permafrost caused the collapse of pipelines connecting the CPH-3 combined power and heat plant (CHPP) with the decompressed fuel tank that released over 20,000 tonnes of oil products into two adjacent rivers and the soil.
The spill seeped through into one of the largest lakes in the Pyasino region, linked to the Kara Sea, in an environmental catastrophe. The government fined Norilsk $2bn as a contribution to the costs of the clean-up that is anticipated to take at least a decade.
The second accident was less dramatic and didn't cause any damage, but it is nonetheless a sign of things to come.
The TGK-1 power station on the Far Northwest coast near Murmansk reported on June 9 that two of its hydropower units were flooded after a wave of melted snow hit the power station. No serious damage was done, although the company's personnel were put on high alert, but experts say the event was a once-in-a-1,000-year occurrence.
Snow at the nearby Lovozero lake suddenly melted as an Arctic heat wave hit northern Russia. There are no commercial or residential buildings in the region and the power plant was built in a remote area, but if it happens again then the plant that supplies the region could be in danger.
Temperatures in the Far North of Russia hit a new all-time high as experts say that 2020 could be one of the five hottest years in recorded history.
On June 20 the Weather and Climate weather portal recorded a temperature of 38C in Verkhoyansk in the Sakha Republic in the centre of Russia – the coldest town in the world. In some places inside the Arctic Circle temperatures temporarily spiked to an unheard of 45C on occasions, according to other reports.
The previous record of 37.8C for highest temperature ever inside the Arctic Circle was set in Fort Yukon, Alaska, in June 1915, a record it shares with Verkhoyansk. Verkhoyansk holds the record for being the coldest place on earth with an all-time low of -67.8C and also holds the Guinness World Record for the highest recorded temperature range of 105C.
2020 is on course to becoming one of the five hottest years in recorded history.
Some like it hot and some not
There are 24 regions with permafrost but most of them are devoid of people or plants. And the temperatures and the extent of permafrost vary widely between them. But counter-intuitively, the temperatures in many of these regions are rising more than twice as fast as in the rest of the world.
Currently average temperatures are 5.3С above the 1951-1980 average, and have surpassed the previous record by a "massive" 1.9C, Berkeley Earth project lead scientist Robert Rohde said, as cited by the Guardian.
Russia has just been through its warmest winter for 130 years, with the local Muscovites complaining there was no snow in December and the Ukrainian capital of Kyiv was likewise bare of snow until very late into the winter.
Another study in 2007 estimated that a 1.5°C increase in mean annual air temperature (MAAT) could lead to the deformation of almost all foundations in the city of Yakutsk in Republic of Sakha. More recent assessments found that there will be a 5-20% decrease in bearing capacity of permafrost foundations in a dozens of Russian cities by the middle of this century due to climatic changes.
“A widespread reduction in permafrost bearing capacity throughout Russia is expected by mid-21st century,” Streletskiy’s study found. “However, the economic impact remains unknown, as costs related to permafrost degradation have not been fully integrated into climate change impacts assessments for Russia.”
In the nine regions that are going to be most affected by melting permafrost about 19% of all infrastructure and 54% of buildings will be affected, according to Streletskiy.
The nine regions include: Nenets Autonomous Okrug (NAO), Yamalo-Nenets Autonomous Okrug (YNAO), Khanty-Mansi Autonomous Okrug (KMAO), Komi Republic, Chukotka Autonomous Okrug (CAO), Krasnoyarsk Krai and Sakha Republic (Yakutia).
“Permafrost occupies nearly 65% of the territory of the Russian Federation, and profoundly affects the natural environment, traditional and non-traditional sectors of the economy, and socio-economic conditions of the Russian Northern and Eastern regions,” Streletskiy says.
“Despite having limited extent in the European part of Russia, permafrost is a very common phenomenon east of the Ural Mountains. There are several large Russian administrative regions where permafrost underlies a significant portion of the regional territory,” he adds.
Several regions, such as Chukotka that used to be governed by Russian oligarch Roman Abramovich, and Republic of Sakha, which is home to the giant Mirny diamond mine among other things, are almost entirely located on permafrost, but the extent to which a region is frozen varies widely.
At the other end of the scale some 10% of the Arkhangelsk Oblast is permafrost, but the region contains mostly rural villages with traditional subsistence economies and lacks major infrastructure.
And many regions are simply empty. In Siberia the Altai Krai, Republics of Tuva, Kemerovo, Irkutsk Oblast, Buryat Republic, Zabaykale and Amur Oblast as well as the Far Eastern island of Sakhalin have no significant population or infrastructure, although their territories are almost entirely frozen.
Russia has invested a lot into building up a complex system of roads, rail, pipelines and airports in its permafrost regions over the last hundred years to tap the cornucopia of natural resources that is buried under the snow, almost all of which are located in, or travel through, permafrost zones.
The most populous and developed areas are mostly in the south and clustered along the two main railways built in Soviet times: the Trans-Siberian railway and the Baikal-Amur Railway (known in Russia simply as “BAM”) that was built in the 1970s-1980s to open the region up to exploitation.
Life on the thaw frontline
The two regions that are going to be worst affected are the Yamalo-Nenets Autonomous Okrug (YNAO) and the Khanty-Mansi Autonomous Okrug (KMAO) in the centre of Russia. Both are very large and both are home to major industrial developments.
“Temperatures in these regions have increased by 2C in the last 30 years, but some are already seeing a 1C rise per decade. That means about half of the structures in these regions are going to have load-bearing problems in between 2050 and 2059,” according to Streletskiy.
Millions of people are going to be affected. The total population of the Russian permafrost regions was 5.4mn, or about 4% of the total Russian population, in 2016 (the time of the last census), almost all of whom live in the nine worst affected regions. And four regions – Komi Republic, YNAO, KMAO, and the Republic of Sakha – account for four fifths of the permafrost population on their own.
The total value of all the assets in the nine permafrost regions is $1.29bn and that is heavily concentrated in critical infrastructure, which makes up $884.5bn, as well as $140.9bn of non-residential real estate and another $279.2bn worth of housing, according to the study.
The bulk of these facilities are concentrated in the traditional oil and mineral production cities of Western Siberia, and in the regions of YNAO and KMAO in particular.
“In YNAO and KMAO, [the] majority of expected costs (about 73% and 96%) will result from the deformation of infrastructure due to ground subsidence,” Streletskiy says.
“The widespread impacts of climate induced permafrost changes are expected to have a pronounced negative effect on infrastructure throughout the Russian permafrost region by the mid-21st century,” Streletskiy says.
“While the permafrost infrastructure in the North America and Scandinavia consists primarily of relatively small residential buildings and lightweight industrial facilities, the Russian Arctic is dominated by the massive, heavy-weight apartment buildings and structures. This might require development of unique and possibly more costly adaptation and mitigation strategies to address negative impacts of permafrost changes in the Russian context.”
This article is the cover story in this month's flagship
Read the whole magazine for free here
Sign up to receive the magazine each month by email for free here
here to continue reading this article
and 5 more for free or purchase
12 months full website access including
the bne Magazine for just $250/year.
Register to read the bne monthly magazine for
Password could contain only
and have 8-20 symbols length.
Please complete your registration by confirming your
A confirmation email has been sent to the email
address you provided.
can't be empty.
No user with
this email address.
Access recovery request has expired, or you are using
the wrong recovery token. Please, try again.
Access recover request has expired.
Please, try again.
To continue viewing our content you need to complete
the registration process.
Please look for an email that was sent to
with the subject line
"Confirmation bne IntelliNews access". This email will have
instructions on how to complete registration
process. Please check in your "Junk" folder in
case this communication was misdirected in your
If you have any questions please contact us at email@example.com
Sorry, but you have used all your free articles fro
this month for bne IntelliNews. Subscribe
to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free
digital weekly newspaper to subscribers to
the online package.
Click here for more subscription options,
including to the print version of our
flagship monthly magazine:
Take a trial to our premium daily news
service aimed at professional investors that
covers the 30 countries of emerging
For any other enquiries about our
products or corporate discounts please
contact us at
If you no longer wish to receive
Magazine annual print
Website & Archive
Combined package: web
access & magazine print
Take a trial to our premium daily news service
aimed at professional investors that
covers the 30 countries of emerging Europe: