ARCTIC BUSINESS FORUM ARCTIC BUSINESS FORUM Yearbook 2014 Yearbook 2014

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ARCTIC BUSINESS FORUM ARCTIC BUSINESS www.arcticbusinessforum.com FORUM Yearbook 2014 Yearbook 2014

Publisher: Lapland Chamber of Commerce

ARCTIC BUSINESS FORUM YEARBOOK 2014

March 2014

Compiled and edited by Timo Rautajoki © Lapland Chamber of Commerce, 2014

3 Airport ARCTIC SEA

Harbour

Railway Lakselv

Andenes

Svolvaer Narvik Leknes

Bodø Pajala Mo I Rana Gällivare

Arvidsjaur Brønnøysund Mosjøen

FINLAND

norway

sweden

4 ARCTIC SEA

BARENBARENTSTS

russrussiaia

5 TABLE OF CONTENTS

1. Foreword...... 8

2. ARCTIC COUNCIL, ARCTIC POLICIES AND ARCTIC BUSINESS. . . . . 10 2.1 Arctic Council...... 10 2.2 Arctic Economic Council...... 17 2.3 Report from World Economic Forum: “Demystifying the Arctic”...... 25 2.4 USA and Alaska...... 29 2.5 Crisis in Ukraine and the Arctic...... 38

3. NORTH OF FINLAND...... 40 3.1 Lapland...... 41 3.1.1 Investment Potential 2014–2025...... 63 3.1.2 Development of the Region 2015–2020...... 65 3.1.2.1 Investments expected to start first...... 69 3.1.2.2 Investments waiting for better times...... 70 3.1.2.3 Key investment project of Lapland ...... 72 3.2 oULU Region...... 74 3.2.1 Investment Potential 2014–2025...... 86 3.2.2 Development of the Region 2015–2020...... 91 3.2.2.1 Investments expected to start first...... 93 3.2.2.2 Investments waiting for better times...... 93 3.2.2.3 Key investment project of Oulu Region...... 95 3.3 Kainuu Region...... 96 3.3.1 Investment Potential 2014–2025...... 100 3.3.2 Development of the Region 2015–2020...... 101 3.3.2.1 Investments expected to start first...... 102 3.3.2.2 Investments waiting for better times...... 103 3.3.2.3 Key investment project of Kainuu Region...... 103

4. NORTH OF SWEDEN...... 104 4.1 Norrbotten...... 105 4.1.1 Investment Potential 2014–2025...... 113

6 4.1.2 Development of the Region 2015–2020...... 114 4.1.2.1 Investments expected to start first...... 116 4.1.2.2 Investments waiting for better times...... 117 4.1.2.3 Key investment project of Norrbotten ...... 118 4.2 Västerbotten...... 120 4.2.1 Investment Potential 2014–2025...... 129 4.2.2 Development of the Region 2015–2020...... 130 4.2.2.1 Investments expected to start first...... 131 4.2.2.2 Investments waiting for better times...... 132 4.2.2.3 Key investment project of Västerbotten ...... 133

5. NORTH OF NORWAY...... 134 5.1 Finnmark, Troms, Nordland...... 135 5.1.1 Investment Potential 2014–2025...... 145 5.1.2 Development of the Region 2015–2020...... 148 5.1.2.1 Investments expected to start first...... 152 5.1.2.2 Investments waiting for better times...... 154 5.1.2.3 Key investment project of North of Norway...... 155

6. NORTHWEST RUSSIA...... 156 6.1 Murmansk Region...... 157 6.1.1 Investment Potential 2014–2025...... 170 6.1.2 Development of the Region 2015–2020...... 171 6.1.2.1 Investments expected to start first...... 176 6.1.2.2 Investments waiting for better times...... 177 6.1.2.3 Key investment project of Murmansk Region ...... 178 6.2 Arkhangelsk Region...... 180 6.2.1 Investment Potential 2014–2025...... 192 6.2.2 Development of the Region 2015–2020...... 194 6.1.2.1 Investments expected to start first...... 196 6.1.2.2 Investments waiting for better times...... 196 6.1.2.3 Key investment project of Arkhangels Region ...... 198

7. SUMMARY AND CONCLUSIONS...... 201

7 FOREWORD

You are holding the 6th overview on the European High North investments and business development published in association with the Arctic Business Forum. This time the name of the report is “Arctic Business Forum Yearbook 2014”. The leading idea of this Forum is to share information about the latest developments affecting the business in the Arctic and discuss the actions to be taken in order to overcome the known and foreseen barriers of business and trade.

According to studies carried out the past years by Lapland Chamber of Commerce the main obstacle of trade among the Finnish companies is still the lack of knowledge about the Regions in the High North and what kind of business possibilities they offer. The purpose of this book is to patch up part of this need. Information is the core element for all decision making processes in companies and governments. Understanding and continuing discussion on the Arctic evolution is important.

These six publications are not identical in nature as each year the report- ing manner has gained more or less a new approach. This year the new part is in the very beginning the introduction and overview on the arctic development in policies from the economic and business point of view. These structures, strategies and developments described are essential part of the current and future steps of the Arctic economy.

This year the regions are introduced from a broader perspective as the investments environment today is formed of many parts breathing with local, regional, national and global trends. The familiar part from previ- ous years are the individual, regional and sorted by industry investment projects. The time frame which to a stand is taken and investment potential evaluated is up to 2025. Additionally the future development of the regions is analyzed for the upcoming years until 2020 and the investment projects predicted to be started in this time frame are listed. In this part you may find new and exciting the view on the named “Key investment

8 project” within each region which would give a boost to some other projects and developments in the region and beyond. You also find the projects which are put aside to wait for the better times to come.

It may be and more likely it is that not all the investment projects are taken into account in this report. What has been required is at least a feasibil- ity plan or comparable description of a project. Mere visions, needs or demands have not met the criteria. Project plans need to have at least a tentative conception of extend, estimated cost and a tentative schedule. Still, there may be plans meeting the criterion and not mentioned in this catalogue. Essential is to enlighten the whole diversity of economical activity and business growth there is in the Arctic. We are still in the mission of trying to convince the companies and authorities, Finnish Government included, that the Arctic and the regions of North truly is a great new opportunity and should be dealt with the necessary severity.

March 12th, 2014 at Rovaniemi

Timo Rautajoki President and CEO Lapland Chamber of Commerce

9 2. Arctic Council, Arctic Policies AND Arctic Business

2.1 Arctic Council

The Arctic Council was formally established by Ottawa Declaration of 1996 as a high level intergovernmental forum to provide a means for promoting cooperation, coordination and interaction among the Arctic States, with the involvement of the Arctic Indigenous communities and other Arc- tic inhabitants on common Arctic issues, in particular issues of sustainable development and environmental protection in the Arctic.

Arctic Council Member States are Canada, Denmark (including Green- land and the Faroe Islands), Finland, Iceland, Norway, Russian Federa- tion, Sweden, and the United States of America.

In addition to the Member States, the Arctic Council has the category of Permanent Participants. Out of a total of 4 million inhabitants of the Arctic, approximately 500,000 belong to indigenous peoples. Indigenous peoples’ organizations have been granted Permanent Participants status in the Arctic Council. The Permanent Participants have full consultation rights in connection with the Council’s negotiations and decisions. The Permanent Participants represent a unique feature of the Arctic Council, and they make valuable contributions to its activities in all areas.

The following organizations are Permanent Participants of the Arctic Council: • Arctic Athabaskan Council (AAC) • Aleut International Association (AIA) • Gwich’in Council International (GCI) • Inuit Circumpolar Council (ICC) • Russian Association of Indigenous Peoples of the North (RAIPON) • Saami Council (SC)

10 This category is open equally to Arctic organizations of Indigenous peoples with a majority of Arctic Indigenous constituency representing: • a single Indigenous people resident in more than one Arctic State; or • more than one Arctic Indigenous people resident in a single Arctic State.

The Arctic Council has also observers. As set out in the Declaration on the Establishment of the Arctic Council and governed by the Arctic Coun- cil Rules of Procedure, observer status in the Arctic Council is open to non-Arctic States; inter-governmental and inter-parliamentary organizations, global and regional; and non-governmental organizations that the Council determines can contribute to its work.

In the determination by the Council of the general suitability of an appli- cant for observer status the Council will, inter alia, take into account the extent to which observers: • Accept and support the objectives of the Arctic Council defined in the Ottawa declaration. • Recognize Arctic States’ sovereignty, sovereign rights and jurisdic- tion in the Arctic. • Recognize that an extensive legal framework applies to the Arctic Ocean including, notably, the Law of the Sea, and that this framework provides a solid foundation for responsible management of this ocean. • Respect the values, interests, culture and traditions of Arctic indigenous peoples and other Arctic inhabitants. • Have demonstrated a political willingness as well as financial ability to contribute to the work of the Permanent Participants and other Arctic indigenous peoples. • Have demonstrated their Arctic interests and expertise relevant to the work of the Arctic Council. • Have demonstrated a concrete interest and ability to support the work of the Arctic Council, including through partnerships with member states and Permanent Participants bringing Arctic concerns to global decision making bodies.

11 Decisions at all levels in the Arctic Council are the exclusive right and responsibility of the eight Arctic States with the involvement of the Per- manent Participants. • Observers shall be invited to the meetings of the Arctic Council once observer status has been granted. • While the primary role of observers is to observe the work of the Arc- tic Council, observers should continue to make relevant contributions through their engagement in the Arctic Council primarily at the level of Working Groups. • Observers may propose projects through an Arctic State or a Per- manent Participant but financial contributions from observers to any given project may not exceed the financing from Arctic States, unless otherwise decided by the SAOs. • In meetings of the Council’s subsidiary bodies to which observers have been invited to participate, observers may, at the discretion of the Chair, make statements after Arctic states and Permanent Par- ticipants, present written statements, submit relevant documents and provide views on the issues under discussion. Observers may also submit written statements at Ministerial meetings.

At the Kiruna Ministerial Meeting in May 2013 an Arctic Council Observer Manual was formally adopted. Also in Kiruna the following 12 non-arctic countries have been admitted as observers to the Arctic Council: 1. France 2. Germany 3. The Netherlands 4. Poland 5. Spain 6. United Kingdom 7. People’s Republic of China 8. Italian Republic 9. State of Japan 10. Republic of Korea 11. Republic of Singapore 12. Republic of India

12 Also nine Intergovernmental and Inter-Parliamentary Organizations have been given observer status: 1. International Federation of Red Cross & Red Crescent Societies (IFRC) 2. International Union for the Conservation of Nature (IUCN) 3. Nordic Council of Ministers (NCM) 4. Nordic Environment Finance Corporation (NEFCO) 5. North Atlantic Marine Mammal Commission (NAMMCO) 6. Standing Committee of the Parliamentarians of the Arctic Region (SCPAR) 7. United Nations Economic Commission for Europe (UN-ECE) 8. United Nations Development Program (UNDP) 9. United Nations Environment Program (UNEP)

In addition, the The Arctic Council receives the application of the EU for observer status affirmatively, but defers a final decision on implementation until the Council ministers are agreed by consensus that the concerns of Council members, addressed by the President of the European Com- mission in his letter of 8 May are resolved, with the understanding that the EU may observe Council proceedings until such time as the Council acts on the letter’s proposals.

Eleven Non-government organizations are observers in the Arctic Council: 1. Advisory Committee on Protection of the Seas (ACOPS) 2. Arctic Cultural Gateway 3. Association of World Reindeer Herders (AWRH) 4. Circumpolar Conservation Union (CCU) 5. International Arctic Science Committee (IASC) 6. International Arctic Social Sciences Association (IASSA) 7. International Union for Circumpolar Health (IUCH) 8. International Work Group for Indigenous Affairs (IWGIA) 9. Northern Forum (NF) 10. University of the Arctic (UArctic) 11. World Wide Fund for Nature-Global Arctic Program (WWF)

13 The Council’s activities are conducted in six working groups. The working groups are composed of representatives at expert level from sectoral ministries, government agencies and researchers.Their work covers a broad field of subjects, from climate change to emergency response.

There are six Working Groups of the Arctic Council: 1. Arctic Contaminants Action Program (ACAP) 2. Arctic Monitoring and Assessment Programme (AMAP) 3. Conservation of Arctic Flora and Fauna (CAFF) 4. Emergency Prevention, Preparedness and Response (EPPR) 5. Protection of the Arctic Marine Environment (PAME) 6. Sustainable Development Working Group (SDWG)

Each Working Group has a specific mandate under which it operates. Also working groups have a Chair hand Management Board or Steering Committee, and is supported by a Secretariat.

Working Group Management Boards are typically comprised of representatives of national governmental agencies of the Arctic Council Mem- ber States, connected to the mandates of the Working Groups; and representatives of the Permanent Participants.

Observer States and Observer Organizations are likely to attend Working Group meetings and participate in specific projects. In addition, Working Groups regularly have invited guests, or experts attending their meetings.

It is the responsibility of the Working Groups to execute the programs and projects mandated by the Arctic Council Ministers. These mandates are stated in the Ministerial Declarations, the official documents that result from Ministerial Meetings.

Principle of Consensus: All decisions of the Arctic Council and its subsidiary bodies are by consensus of the eight Arctic Member States.

14 The Arctic Council Secretariat supports the Chair of the Arctic Council. In the past, the location of the Secretariat was rotated biennially with the Chairmanship of the Arctic Council. Prior to their consecutive chairmanship periods, Norway, Denmark, and Sweden made a joint agreement to share the Secretariat for the duration of their chairmanship periods. Nor- way held the chairmanship from 2006-spring 2009; Denmark from 2009- 2011; and Sweden from 2011-2013. During this period the temporary Secretariat was hosted by the Norwegian Polar Institute located at the Fram Centre, Tromsø, Norway. At the Nuuk Ministerial Meeting May 2011 Arctic Ministers decided to establish the Standing Arctic Council Secre- tariat at the Fram Centre in Tromsø. The Standing Secretariat became operational 1 June 2013. The Fram Centre houses many Arctic institutions and companies focusing on environmental research and cooperation in the Arctic.

Canada’s Arctic Council Chairmanship 2013–2015

At the Kiruna Ministerial Meeting on 15 May 2013, Canada assumed the two-year Chairmanship of the Arctic Council from Sweden. The Honour- able Leona Aglukkaq, an Inuk from Nunavut, is Canada’s Minister for the Arctic Council and Chair of the Council during Canada’s Chairmanship. Her appointment underlines the priority that the Government of Canada places on the Arctic as well as its commitment to ensure that the region’s future is in the hands of Northerners.

More than four million people, living in the eight Arctic states that make up the Arctic Council, call the Arctic region home. Canada’s chairmanship will put Northerners first. The theme of Canada’s chairmanship is “development for the people of the North,” with a focus on responsible Arctic resource development, safe Arctic shipping and sustainable circumpolar communities.

15 Since its inception, the Council has undertaken important work to address the unique challenges and opportunities facing the Arctic region. As these challenges evolve, so must the Arctic Council. Canada will work collaboratively with its Arctic Council partners to strengthen the Council. The aim is to enhance the capacity of the Permanent Participant organizations, improve the Council’s coordination and maximize efficiencies.

Responsible Arctic resource development

The Arctic Council is working to ensure that Arctic development takes place responsibly. Businesses in the Arctic will play a strong role in building a sustainable and economically vibrant future for the region.

Establishing a Circumpolar Business Forum will foster circumpolar economic development and provide opportunities for business to engage with the Arctic Council.

As activity in the region increases, Arctic states are cooperating to protect the marine environment and the livelihoods of Northern peoples.

In May 2013, the Arctic states signed an Agreement on Cooperation on Marine Oil Pollution Preparedness and Response in the Arctic. The Coun- cil has also begun work on oil-pollution prevention. This work will continue during Canada’s chairmanship. Effective action to prevent oil pollution is critical to ensuring the protection of the Arctic marine environment.

Safe Arctic shipping

Opportunities for tourism are growing in the Arctic. By establishing guidelines for sustainable tourism and cruise-ship operations, the Arctic Coun- cil will encourage the benefits that tourism will bring to communities while reducing the risks associated with increased activity.

Arctic Council states will also continue to work closely together to encourage the International Maritime Organization’s efforts to develop a manda- tory polar code for the Arctic Ocean.

16 2.2 Arctic Economic Council

The Circumpolar Business Forum initiative was worked out in special Task Force simply called:”Task Force to Facilitate the Circumpolar Busi- ness Forum” (TFCBF). The mandate of TFCBF has been to facilitate the creation of a Circumpolar Business Forum (CBF) which would provide a mechanism to allow business and industry to engage with the Arctic States and Permanent Participants. TFCBF had its first meeting in Sep- tember 2013 and gave a report to SAOs by the end of 2013. Canada is chairing the TFCBF in cooperation with Finland, Iceland and Russia.

The purpose of the proposed forum, as articulated in the Senior Arctic Officials’ Report to Ministers in Kiruna is to “provide a mechanism to allow business and industry to engage with the Arctic States and Permanent Participants. The CBF would provide a venue for businesses, industries and indigenous enterprises to advance Arctic-oriented interests, share best practices, forge partnerships and engage in deeper cooperation.”

The Task Force had its third face-to-face meeting in Helsinki on Decem- ber 4-5, 2013 to discuss the scope and mandate of the proposed body and how it would work with the Arctic Council. The meeting also included business participants from all of the Arctic States and a number of representatives from observers to the Arctic Council. The two-day meeting focused on reaching consensus on a framework document which outlines the Arctic Council’s expectations of the new business entity, as well as how the Arctic Council and the business entity will interact. The Task Force also reached tentative agreement on a new name for the circumpolar business forum, which will be called the “Arctic Economic Council”.

Fostering Circumpolar Business Partnerships

The Arctic Council recognizes the central role of business in the sustainable development of the Arctic. During Canada’s Chairmanship (2013- 15), the Arctic states and indigenous permanent participant organizations are facilitating the creation of a circumpolar business forum - the Arctic Economic Council.

17 In the Kiruna Declaration, signed at the eighth Arctic Council Ministe- rial Meeting in May, 2013, Ministers from the eight Arctic Council states “recognize[d] that Arctic economic endeavors are integral to sustainable development for peoples and communities in the region, desire[d] to further enhance the work of the Arctic Council to promote dynamic and sustainable Arctic economies and best practices, and decide[d] to establish a Task Force to facilitate the creation of a circumpolar business forum.”

The Task Force to Facilitate the Circumpolar Business Forum (TFCBF) is co-chaired by Canada, Finland, Iceland and Russia. Since May 2013, the task force has been meeting regularly to pave the way for the creation of this body. In December 2013, the Task Force proposed a new name for the circumpolar business forum, which Senior Arctic Officials approved in January 2014. The forum is now called the “Arctic Economic Council.”

The Arctic Economic Council will: • foster business development in the Arctic, • engage in deeper circumpolar cooperation, and • provide a business perspective to the work of the Arctic Council.

What is Arctic Economic Council

According to Ottawa media “The Globe and Mail” announced the formation and the idea of “Arctic Economic Council” in her speech in Northern Lights -conference and trade show in Ottawa on 28.1.2014:

“Canadians living in the Arctic should be looking to their counterparts in Russia or Norway to address their economic problems rather than southern businesses, federal Environment Minister Leona Aglukkaq said Tues- day as she announced the formation of an Arctic Economic Council.

Ms. Aglukkaq, who serves as chair of the eight-nation Arctic Council, said there has long been a gap in that group’s work: the lack of a regional forum that would allow northerners from all the countries to work together on common issues of economic development.

18 It will for the first time establish a forum that will bring [together] Arc- tic countries to deal with challenges in the North, share best practices around adaptation and climate, around energy development, shipping and so on,” she said.

The minister said she conducted a series of consultations with northern Canadian residents before taking over the chair of the council, and heard frequent concerns about a lack of communication among Arctic people from other countries. “It became clear there is a gap in Arctic-to-Arctic expertise; we tend to go south for solutions,” she said.

She will formally announce the new council on Wednesday at the Northern Lights trade show, a biennial event that promotes business and cultural initiatives in the North, from the mining industry to seal-skin clothing de- signers. The minister said northern Canadians often encounter problems with business development that are unknown in the South. For example, Arctic communities have installed windmills to reduce their reliance on expensive diesel fuel, but often the turbines do not work at temperatures of -50ºC. Meanwhile, windmills that can function in the extreme conditions have been installed in other Arctic countries.

She also noted that all countries are pursuing resource extraction in the Arctic region, including plans to drill for oil offshore in places such as Can- ada’s Beaufort Sea. The economic council will be a place where standards and best practices can be shared.

In a report issued last week in Davos, Switzerland by the World Economic Forum suggested Arctic people need new collaborative approaches to development that give them real partnership with global corporations and national governments. “Community-based approaches are thus a critical part of development, in addition to environmental protection and safety, in order to secure sustainable change in the Arctic,” the World Economic Forum said.

19 Governments from the Arctic council agreed to set up a business forum at a summit in Sweden last May, and have spent the past eight months con- sulting with northern businesses, governments and indigenous groups on how to structure it. The membership is open to northern businesses of any size, though individual countries will determine the kinds of businesses that will sit on the body.

Canada lags other countries, notably Norway and Russia, in northern economic development, said John Higginbotham, a senior fellow at Carleton University who focuses on Arctic research. The existing Arctic council has been more focused on research in environmental and cultural issues, and a business council would complement that work. But Mr. Higginbotham said success will be determined by how broad a mandate the economic group has, and whether it takes a “top down or bottom up approach.”

A business-only forum would be less likely to pursue sustainable economic strategies that would bring much-needed jobs while protecting the fragile environment and cultural diversity of the region, said Martin von Mirbach, an Arctic researcher with World Wildlife Fund Canada. He said it is important that the economic council have broad-based membership.”

Is the voice of Regional Business Community heard in the AEC?

The idea of Circumpolar Business Forum and the result of the work, Arctic Economic Council is good from the regional point of view. This initiative of circumpolar business cooperation has strong Canadian background from late 1990s. The name of the idea was then Circumpolar Chamber of Commerce (CCC) and it was launched in June 2000 included in the program “Northern Dimension of Canada´s Foreign Policy”. Aim of the Policy was to promote “the creation of a Circumpolar Chamber of Commerce, building upon those existing in the northern regions of Nordic countries and northwest Russia and on network of contacts within the Northern Forum.

20 First written plan was made by the Governments of Canada and Green- land in 2000–2001. This idea was also presented to World Chambers Federation (WCF) which is organisation under ICC- International Cham- ber of Commerce. According to the plan the idea of CCC would be one of the main issues in the World Chamber Congress in September 2003 organized in Quebec City, Canada.

Further on WCF published a preliminary report concerning Circumpolar Chamber of Commerce in March 2003. The report was written by Ca- nadian Dr. Sefton Mark Malone who had worked as a special advisor to prime minister Pierre Elliot Trudeau and had long career as diplomat on economic and development affairs in Canada and abroad. Dr. Malone had also been the head of North West Territories civil service during the 1980s and acted as deputy minister for petroleum and resources and as deputy minister for intergovernmental affairs. Malone was working then in the cabinet of Senator Charlie Watt, who also had been active in this issue.

This report was sent among others to at least some chambers in the Northern Region. Lapland Chamber of Commerce received it and announced that it is interested about the project. There was not enough chambers interested in creating the CCC, so the Quebec City World Chamber Congress didn´t speed the creation of Circumpolar Chamber.

Later on Lapland Chamber of Commerce CEO visited Ottawa in March 2004 and met the representatives of Canadian Chamber of Commerce to discuss the CCC initiative. After this meeting the need to have some kind of business forum in the High North existed, but it seemed to be very uncertain that CCC could be established on the base of the Circumpolar chamber network. The biggest problem seemed to be the differences between the Arctic region and the business communities in the region. Also there was a strong difference in the resources and activities of northern chambers. The Chambers like Lapland in Finland and Norrbotten in Swe- den had a lot of big industrial companies as members. Then the Chamber activities in Norway were totally different compared to the Swedish and

21 especially Finnish chamber systems. The main business in the Cana- dian Arctic was at the time done by very small handicrafts manufacturing companies owned by indigenous people. It seemed to be from chambers point of view that Canadian northern business should develop first more closer to the level of the European High North. The time seemed not to be right to start this kind of cooperation between the chambers. There was also existing chamber network in the Russian Arctic Region, but their resources to take part in this kind of international cooperation was rather small at that time.

Northern Forum (NF) is the other organisation which has made efforts to start regional business cooperation in the Arctic Region. The idea of creating an organization of northern regional governments was raised in 1974 by the government of Hokkaido, Japan, during the first of a series of international conferences on northern issues. The Northern Forum developed from a Northern Regions Conference held in 1990 in Anchorage, Alaska, attended by more than 600 delegates from 10 countries. The Forum was formally established in November 1991. Former Governor of Alaska, Walter Hickel was the driving force to establish the organisation. He was also chairing the Northern Forum for the first years of its existence.

During the chair of Ms. Hannele Pokka, Governor of Lapland, the business cooperation came to be part of the agenda of the Northern Forum. General Assembly of NF was organised in June 1999 in Rovaniemi. First Northern Business Conference organized by Lapland Chamber of Com- merce was included to the Assembly. This issue was first discussed in Harbin 2002 during the meeting of Regional Coordinators and in General Assembly of the Forum in St.Petersburg in 2003. Lapland Chamber of Commerce was the initiator of business cooperation. Efforts to establish business cooperation were not easy without necessary funding. The Northern Forum decided first to take business partners. Companies active in Arctic Region could join to the Forum as partners. According to the web pages of NF the amount of business partners is today is eight.

22 The final decision to start the business cooperation happened in the Regional Coordinators meeting in Akureyri in 2008 based on the model presented by Lapland Chamber of Commerce. General Assembly held in October 2007 in Khanty Mansiysk had given the authority to the Sec- retariat to start the implementation to form a working group for chambers of commerce and other business associations. The first meeting of the group was in Akureyri and the second one in Canada in 2009.

Global financial crisis was almost fatal for the Northern Forum. NF lost some of important member regions due to the problems in financing the cooperation. Sakha Republic (Yakutia) took over the NF and secretariat which had been from the very beginning in Anchorage, Alaska moved to Yakutsk. Since then the activity has returned and resurrection of the NF is today a fact. President of the Republic of Sakha has been determined leading the Northern Forum back to where it was and even beyond, when former members are coming back and new regions are joining to the NF. Also the Northern Forum business cooperation is starting and it could support the work of Arctic Economic Council, if member states and first of all the Chair of the Arctic Council understands the importance of regions in the work of AEC.

After 14 years the original idea born in Canada is going to be implemented. According to the official information The Arctic Economic Council will foster business development in the Arctic, engage in deeper circumpolar cooperation, and provide a business perspective to the work of the Arctic Council. These ideas are very easy to accept. So far there is no official information about the role of regions in the Arctic Council.

The work of the Arctic Council and without doubt also the Arctic Economic Council work is done at the level of member states. The Arctic Region itself has no mandate in this cooperation. Permanent Participants are not enough in all parts of the Arctic from the business cooperation point of view. Together with Lapland Norrbotten in Sweden and at least Mur- mansk Region from Russian Federation are totally different compared with other regions. The role of indigenous people is not so significant

23 in the business community so that the representatives form Permanent Participants could represent the business in the region.

Most probably the membership in the Arctic Economic Council is limited to 2–3 members from each member state and from the Permanent Participants. Also the observer countries get their representatives to the AEC. The biggest problem from the regional business community point of view is the role of regional SMEs in this cooperation process. When the member states are appointing their 2–3 representatives to the AEC, most probably the governments are eager to nominate the directors from national big companies like Statoil, Aker, Rosneft, Gazprom, Fortum, Wärt- silä, LKAB, etc or the directors from national confederations industry. On the other side of the table there are sitting the reindeer herders and micro entrepreneurs from the regions. The status of indigenous people is legal and important and there shouldn’t be any doubt that regional business communities don´t accept this.

Most likely the business from observer countries are invited to this same table. Only the regional business is in danger to stay outside. So once again people from the capitals of the Arctic States are making the decisions concerning what the regional SME´s can do and what they can not. The presence of the Permanent Participant creates an illusion of democracy in this decision making. So far we don’t have official information how the AEC process is really happening. But if the process goes like described above, we can say: “Ottawa, we have a problem”.

Why the regions are then so important? When a big investment project is coming to the region the approval of the society for the project is more and more important. This so called social license is necessary also for official decision making about the approval of other licenses and permits. The only way to get the social license from the local and regional society is that the members of the society get benefit of investment projects in the form of jobs and better circumstances and regional small and medium sized enterprises are strongly involved in the projects. If the decision making happens remote from this process, the results are getting all the time worse.

24 The new start of Northern Forum could help regions in this process. The continuation of the business cooperation can have in the future strong representation from the regions, if the regions see its importance. Only problem is that NF is creating in this case better conditions for cooperation than the Arctic Economic Council.

So far the official information of Arctic Economic Council is very limited. The purpose and aim of AEC is acceptable. The problem described above is only theoretical at this moment, when we don’t exactly know how the story really goes. Let´s all hope that this problem also stays theoretical. But it is very important that this point of view is noticed when you still can fix it. In spite of limited membership in the AEC the role of regional SME´s can be organized in national backup working groups or actions as such. Let´s strongly believe that Ottawa has solved all this.

2.3 Report from World Economic Forum: “Demystifying the Arctic”

In January 2014 World Economic Forum published a report “Demystifying the Arctic” authored by the Members of the World Economic Forum Glob- al Agenda Council on the Arctic. World Economic Forum (WEF) is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. Incorporated as a not-for-profit foundation in 1971, and headquartered in Geneva, Switzer- land, the Forum is tied to no political, partisan or national interests. The Forum is best known for its annual winter meeting in Davos, Switzerland, which has had a bit elitist atmosphere.

Global Agenda Council is one of the most important tools of the Forum. According to the website of WEF the role of Council is following: The Network of Global Agenda Councils is a unique, global community of over 1,500 premier thought leaders who are the foremost experts in their fields of academia, business, government, international organizations and society. Grouped in over 80 Councils, Global Agenda Council Members com- mit their extensive knowledge, expertise and passion to jointly shape the

25 global, regional and industry agenda. The Global Agenda Councils are committed to addressing the most pressing issues and opportunities of our time and aim to provide new thinking and solutions.

The Global Agenda Councils convene globally recognized expert communities to provide interdisciplinary thinking, stimulate dialogue, shape agendas and catalyse initiatives. Through ongoing collaboration and debate, as well as through findings, the Global Agenda Councils transform implications and recommendations into key deliverables such as the Outlook on the Global Agenda and Global Agenda Survey, as well as Council-specific projects and reports.

By continuing to build these premier communities and generating personal and professional value by virtue of the globally recognized agenda- setting role, Global Agenda Councils contribute to improving the state of the world individually and as a network.

Council Members meet annually at the Summit on the Global Agenda, the world’s largest brainstorming, which is hosted in partnership with the Government of the United Arab Emirates. At the Summit on the Global Agenda, over 800 Members of the Network engage in interactive work- shops and sessions to provide comprehensive insight into the global, industry and regional agendas. Recognizing the great transformations that businesses, economies and societies are currently undergoing, participants at this year’s Summit will focus on how to transform new models into collaborative, sustained processes, which drive solutions for a green- er and socially more inclusive world.

About the Global Agenda Council on the Arctic the web pages say: The complexities of transformations reshaping the region are profound, often lending themselves to misinterpretation and misplaced emotions.The natural starting point for the Council was to write a short booklet highlighting the five most prevalent myths, opportunities and challenges facing the region.

26 This booklet was presented to targeted participants at the World Eco- nomic Forum Annual Meeting 2013 in Davos – both in the public programme featuring a session entitled “Arctic Development” and in private meetings. Although it has not yet been published in its entirety, the main messages have been repackaged and featured on Thomson Reuters, strategy+business, the Global Economic Symposium and the Forum Blog.

Chairman of the Council is Mr. Per-Ola Karlsson, senior VP of Booz&Company, which is consultancy company from Sweden. Vice Chairs are Mr. Artem Volynets, CEO of Amur Capital Group who has a long career in aluminium business including high positions in Russian company, UC RUSAL and the Arctic Ambassador of Sweden, Mr. Gustaf Lind.

In spite of unpublished booklet the report was published in Davos winter meeting 2014. “Demystifying the Arctic” is very interesting to read representing such a famous and respected Forum. The report deals with the Arctic Issues in fairly general terms. Problems and possibilities in the region are well known. According to the report at least two important economic pressures will affect ongoing development in the region: Natural resources and Growing viability of seasonal shipping in Arctic waters.

The WEF Council on the Arctic finds four challenges in the development of the Arctic. They are: • The Arctic needs protection from environmental damage, resolution on certain global agreements, and new collaborative models to secure sustainable growth. • The Arctic needs investment. • The Arctic needs measures to better ensure human and environmental safety in the face of increased shipping and offshore activity. • The Arctic needs science.

27 The conclusions made by the Council are generally in line with other similar reports. Report avoids details, and it has been definitely wise, as is evident that there has not been sufficient knowledge about the region in spite of Swedish experts chairing the council. Evaluations like “Except for certain areas of Norway and the western Russian Federation, the region remains vastly underserved by transportation, port and other critical infrastructure” are a little bit annoying, when Norrbotten and Lapland are absolutely the best examples of good transport connections in the Arctic Region. Also council should know that not all land routes are destabilized by thawing permafrost or winter ice-road seasons are shortened everywhere in Arctic Region.

The report includes one interesting proposal about Arctic Investment Vehicle. According to the report “The resulting lack of Arctic investment could be overcome by establishing a cross-border financing institution, i.e. a Sustainable Arctic Investment Vehicle, designed much like (and possibly in cooperation with) one of the international development banks, for example the European Bank for Reconstruction and Development, the International Finance Corporation or the Nordic Investment Bank. This institution’s mandate would be to finance projects around the Arctic region, including cross-border infrastructure investments. Along the same lines, dedicated Arctic funds could help mobilize private equity in close cooperation with the above institutions.”

This is very interesting regarding e.g. the idea of Finnish Arctic Railway which is in some plans going from Finnish territory to Norway. Financing of this project is in Finland so big problem that it prevents the reasonable discussion about the needs for such a new transport connection.

In the end the report is highlighting some typical myths about the Arctic Region. According to the report these myths are: • The Arctic is an uninhabited, unclaimed frontier with no regulation or governance. • The region’s wealth of natural resources is readily available for development. • The Arctic will become immediately accessible as sea ice continues to disappear. 28 • The Arctic is tense with geopolitical disputes and is the next flash- point for conflict. • Climate changes in the Arctic are solely of local and regional importance.

Myths number 2 and 3 could anyhow be facts in European High North. Investments are going on in North Norway, North Sweden and Lapland. This region has also ready transport infrastructure for increasing transport from new sea routes. Myth number 4 was myth still in January, but now after the Ukraine crisis the situation has changed and tension has been increasing also in the High North.

2.4 USA and Alaska

United States of America is taking the Chair of Arctic Council after Can- ada in 2015. USA is also leading the work of Arctic Economic Council. Canada has established this new council and it is the duty of the USA to put it really in practice. This is why a closer look to American Arctic policies is more than reasonable.

The new National Strategy for the Arctic Region of the USA was published on May 10th 2013. President Barack Obama stated in the foreword of the Strategy ”We in the lower forty-eight and Hawaii join Alaska’s residents in recognizing one simple truth that the Arctic is an amazing place. The Arctic is one of our planet’s last great frontiers. Our pioneering spirit is naturally drawn to this region, for the economic opportunities it presents and in recognition of the need to protect and conserve this unique, valuable, and changing environment. As we consider how to make the most of the emerging economic opportunities in the region, we recognize that we must exercise responsible stewardship, using an integrated management approach and making decisions based on the best available information, with the aim of promoting healthy, sustainable, and resilient ecosystems over the long term. … Through the National Strategy for the Arctic Re- gion, we articulate our strategic priorities to position the United States to meet the challenges and opportunities that lie ahead. We will seek to prioritize and effectively integrate the work of Federal departments and

29 agencies with activities that are already underway in the State of Alaska and at the international level. And we will partner with the State of Alaska and Alaska Natives, as well as the international community and the private sector, to develop innovative solutions and new ways of operating. The Arctic is changing. We must proceed, cognizant of what we must do now, and consistent with our principles and goals for the future.”

USA had previously defined arctic policy on January 9th 2009 in National Security Presidential Directive and Homeland Security Presidential Direc- tive with subject “Arctic Region Policy”. This security and defense perspective was summoned up in special Arctic Strategy by Department of Defense which was published in November 2013. Secretary of Defense, Mr. Chuck Hagel described the relation with these two strategies in his foreword: “…Throughout the strategy, the President articulated clear link- ages between events in the Arctic and enduring U.S. national interests... As more countries operate in the Arctic, more opportunities – as well as more challenges will arise. The Department will seek to work with Arctic nations and other interested parties, focusing efforts where opportunities exist and action is needed, while also ensuring that our national security interests remain protected. As the President noted ‘The Arctic region is peaceful, stable, and free of conflict,’ and it is the role of the Department of Defense to ensure this observation remains true for future generations. But we cannot maintain the current Arctic security environment by acting alone. The Department will operate within the established framework of international law and collaborate with allies and partners as much as possible. The DoD Arctic Strategy also recognizes the role that the Arc- tic region will play in shaping the global security environment in the 21st century…”

Although national security has strong presence also in the new U.S. Arctic Strategy processing a special paper has been necessary for the Obama administration. The DoD Arctic Strategy is reconciling statement of policy taking in the account the existing contradiction between the fact that the Arctic region is peaceful and free of conflict and the essential role of the Department of Defense in global policies. Only the amendment by

30 Secretary Hagel in the end of his foreword to DoD Arctic strategy raises the role of the Arctic region in shaping the global security of this century is a clear sign that security policy gets at least a little bit more weight in Arctic cooperation than before.

The National Strategy of the Arctic Region sets forth the United States Government’s strategic priorities for the Arctic region. The strategy is built on three lines of effort:

1) Advance United States Security Interests – We will enable our vessels and aircraft to operate, consistent with international law, through, under, and over the airspace and waters of the Arctic, support lawful commerce, achieve a greater awareness of activity in the region, and intelligently evolve our Arctic infrastructure and capabilities, including ice-capable platforms as needed. U.S. security in the Arctic encompasses a broad spectrum of activities, ranging from those supporting safe commercial and scientific operations to national defense.

2) Pursue Responsible Arctic Region Stewardship – We will continue to protect the Arctic environment and conserve its resources; establish and institutionalize an integrated Arctic management framework; chart the Arctic region; and employ scientific research and traditional knowledge to increase understanding of the Arctic.

3) Strengthen International Cooperation – Working through bilateral relationships and multilateral bodies, including the Arctic Council, we will pursue arrangements that advance collective interests, promote shared Arctic state prosperity, protect the Arctic environment, and enhance regional security, and we will work toward U.S. accession to the United Nations Convention on the Law of the Sea (Law of the Sea Convention).

31 The approach will be informed by the following guiding principles: 1) Safeguard Peace and Stability – Seek to maintain and preserve the Arctic region as an area free of conflict, acting in concert with allies, partners, and other interested parties. Support and preserve: international legal principles of freedom of navigation and overflight and other uses of the sea and airspace related to these freedoms, unimpeded lawful commerce, and the peaceful resolution of disputes for all nations.

2) Make Decisions Using the Best Available Information – Across all lines of effort, decisions need to be based on the most current science and traditional knowledge.

3) Pursue Innovative Arrangements – Foster partnerships with the State of Alaska, Arctic states, other international partners, and the private sector to more efficiently develop, resource, and manage capabilities, where appropriate and feasible, to better advance our strategic priorities in this austere fiscal nts. Ultimately to develop new and improve existing public education and awareness programs that result in a more informed public who understand the multi-faceted programs and policies that regulate the conservation of Arctic biodiversity and sustainable use of biological resources.

According to the Preliminary Report Alaska and U.S: domestic Arctic policy must be coordinated and aligned to achieve key objectives for the benefit of Alaskans and the nation U.S. international Arctic policy should be a direct extension of sound domestic policy that has meaningful from, and is endorsed by, Alaskans. And about the Alaskans the Report defines also the Alaskan Arctic (U.S. Arctic) according to the definition set out in the Arctic Research and Policy Act (ARPA). To Alaskan Arctic are included area from Aleutians to the Canadian border, west and north of the Porcupine, Yukon and Kuskokwim rivers. This area is less than half of the total area of the State of Alaska. This definition is quite strict. From Euro- pean High North only Finnmark, Troms and half of Nordland from Norway, Lapland from Finland, Murmansk region and Nenets autonomous okrug are included to Arctic Region.

32 The comments of Alaska House Majority have been almost hostile regarding the future Chair of the USA in the Arctic Council. From Euro- pean point of view the Republican Party majority in Alaska vs. Democratic President administration in the West Wing could be the reason. Alaska Arctic Policy Commission Preliminary Report describes the relationship more softly. According to the Report the Commission was formed partially in response to efforts by the U.S. government to refine its Arctic policy. It is imperative that U.S. policy for the Arctic reflects the values and interests of Alaskans. The need for Alaska to influence national Arctic policy is about more than informed decision making. A top-down approach to U.S. Arctic policy that fails to build on the substantial knowledge and expertise of Alaskans would be counterproductive, inefficient, and lack legitimacy in the eyes of Alaskans.

Washington D.C. has heard this message. Secretary of State John Kerry announced on February 14th 2014 that USA is going to nominate Spe- cial Representative for the Arctic Region. According to Secretary Kerry this is going to happen soon. This Special Representative is going to be a high-level official of stature who will play a critical role in advancing American interests in the Arctic Region, particularly as we prepare efforts for the United States to Chair the Arctic Council in 2015. Secretary Kerry also mentioned the remarkable work of two U.S. Senators from Alaska, Mark Begich and Lisa Murkowski, in shaping the Arctic policy of the USA. A direct connection to the Preliminary Report of Alaska Arctic Policy Com- mission is in the end of the Press Statement by John Kerry, where he says that ” …I look forward to continuing to work closely with Alaska’s Congressional delegation to strengthen America’s engagement in Arctic issues.”

4) Consult and Coordinate with Alaska Natives – Engage in a consultation process with Alaska Natives, recognizing tribal governments’ unique legal relationship with the United States and providing for meaningful and timely opportunity to inform Federal policy affecting Alaskan Native communities.

33 This new Arctic strategy is more a guideline for authorities than action plan for business community. It gives more solid foundation to the future chair of the USA in the Arctic Council than former plans or policies. USA is taking over the chair from Canada already next year. There are going to be more open questions about the chairmanship program of the USA, because the next US presidential election and transition occurs at the same time. This is very interesting from Finnish point of view, because Finland is going to take the chair after USA in 2017.

The Arctic policy of Alaska

State of Alaska is well recognized in the new U.S. Arctic strategy. The state itself has also started to define own Arctic policies. Alaska State Legislature established the Alaska Arctic Policy Commission in April 2012. The aim of this commission is to develop an Arctic policy for Alaska and produce a strategy for the implementation of an Arctic policy. One of the goals for this Commission work is to be prepared for the United States Chair in the Arctic Council. The Alaska House Majority or Republi- can Party aligned in their statement that Alaska needs to take leadership role regarding the Nation´s Arctic policy and Alaska should be especially critical with United States chairing the Arctic Council from 2015–2017.

Alaska Arctic Policy Commission has 24 members and it is formed within Alaska Legislature. Commission consists of three state senators appointed by Senate President, three state representatives appointed by the House Speaker, one executive branch member appointed by the Governor, 13 members jointly appointed by the Senate President and the House Speaker representing the federal government, tribal entity, the mining industry, the oil and gas industry, Alaskan university, fisheries, a local government, a coastal community, an international Arctic organisation, a conservation group, marine transportation industry, a native corporation and marine pilots and totally four alternates. The chairmanship of the Commission is shared by two Co-Chairs, Senator Lesil McGuire and Representative Bob Herron.

34 The Commission published Preliminary Report January 30th 2014. The goal is to have the Final Report ready in January 2015. Preliminary Re- port defined the outlines of Alaska’s Arctic Policy including The Alaskan Arctic Vision Statement. According to it the state of Alaska envisions an Arctic that values community sustainability and thriving cultures, advanc- es economic development and a healthy environment, ensures public safety and security and incorporates transparency and inclusion into decision making.

The Arctic policy of Alaska includes also to recognize and respect the values and perspectives of the region’s indigenous people, their cultures, and traditional ways of living both sustain current and develop new approaches for responding to a changing climate that increase community resilience, adaptability, and sustainability, as well as promote health and social well-being. Furthermore Alaska aims to manage Arctic fisheries and wildlife for abundance and sustained yield using a science-based, ecosystem approach that integrates local and traditional knowledge. Ca- pacity to conduct science and research and advanced innovation and technology should be built. Impacted communities should receive direct and indirect benefits from economic development, including employment and training opportunities. Disaster prevention should be strengthened both with emergency response capability by coordinating the necessary levels of public and private investment for infrastructure and equipment. The policy of Alaska is also to collaborate with industry, local government, and federal agencies, and consult with Arctic residents, to improve the efficiency of permitting and regulatory processes, as well as to foster a positive investment climate. Alaska strengthens cross-border relationships with Canada and Russia and supports international Arctic cooperation both pursues opportunities to participate as partner in development of federal and international Arctic policies. Also the state employs integrated, strategic planning and consults with Arctic residents for scientific, local and traditional knowledge to enhance Arctic decision making. Alaska wants to attract Arctic investments with a competitive business environment supported by strategic investment in Arctic communications, energy, maritime and aviation infrastructure both to establish, support and maintain national, state, community and personal security and safety.

35 Commissioner identified also strategic recommendations and they were included to the Preliminary Report. Strategies and recommendations will be further developed in 2014, prior to the final report´s delivery in 2015.

Recommendations regarding governance and indigenous perspectives are to continue to pursue, and actively expand, all avenues of participation in the Arctic Council, including involvement in Working Groups and by building partnerships with Permanent Participants. Then to develop, where lacking, and build upon existing programs to improve transparency and community inclusion in decision making through state coordination of multi-agency permits, state and federal coordination of permits and plans, and meaningful involvement of regional stakeholders in development activities or plans that affect them.

About science and research is stated to increase state funding to, and partnership with, the University of Alaska for Arctic research that aligns with state priorities and leverages the University´s exceptional facilities and academic capacity. Also state agencies should consider adapting successful models – such as the Alaska Department of Environmental Conservation and Yukon-Koyukuk Tribal Communications Protocol – to development agreements with local governments and tribes regarding the use of traditional knowledge and culturally sensitive practices in research and permitting programs.

Planning and infrastructure is also included to recommendations. First of them is to conduct a comprehensive Arctic region economic and infrastructure assessment and planning process that integrates local, regional, state and federal planning efforts. Second recommendation is to encourage the development of an inter-agency and intergovernmental working group tasked with working with multiple levels of stakeholders to develop and implement a prioritization, funding and implementation mechanism for constructing and maintaining infrastructure and economic development.

36 Recommendations regarding oil, gas and mineral resources are to implement regional planning efforts that allow local stakeholders to identify and communicate priorities such as education, infrastructure, and development, to state and federal agencies and both to develop mechanism for revenue sharing from resource extraction for impacted communities, developing perpetual trust funds (where lacking) to finance community needs beyond the life of non-renewable resources.

About security and defense is recommended, that due to the complexity and importance of National Arctic security issues the Commission decided that this area warrants more attention than they were able to give it. National Arctic security issues will be reviewed for the DOD agencies and the Coast Guard during 2014.

Regarding marine transportation is recommended to encourage development of appropriately integrated systems to monitor and communicate Arctic marine information, and continue state and federal support for programs such as the Alaska Marine Exchange.

Finally recommendations regarding response operations first to facilitate and secure public and private investment in support of critical aviation and maritime response infrastructure and economic development, to include consideration of direct state funding and public-private partnerships that address development of communications, deep draft ports, icebreakers, logistic hubs and WX C -130 size aircraft hangars. Then to encourage and advocate for more adequate funding so that the U.S. Coast Guard can carry out its assigned and emerging duties in the U.S. maritime Arctic without compromising its capacity to conduct all missions throughout Alaska. Further to expand and support Department of Envi- ronmental Conservation´s effort to involve communities through Sub-area Planning and provide local training to maintain limited supplies of oil spill response equipment and to ensure timely, effective and safe response and spill containment. And to support the Department of Environmental Conservation´s ongoing communication with the U.S. Coast Guard in re- viewing alternative compliance program development and applications.

37 Furthermore to develop stable long-term funding mechanisms for state weatherization and energy efficiency programs while continuing robust efforts to find long-term energy solutions. Then to develop assessment and monitoring program in support of strategies for fish and wildlife man- agements that enhances food security for Arctic reside.

2.5 Crisis in Ukraine and the Arctic

Russian Federation has increased activities in the European High North and is planning to reopen old military bases like Alakurtti near border between Russian Federation and Finland. Nato has reacted to these actions by organizing military training operations in North Norway near Russian border. The situation begins to resemble the Cold War period.

Tension between United States and Russia can have effects in the Arctic Cooperation. This situation is becoming more serious if the EU is joining to the sanctions against Russia and especially then if the sanctions are getting tougher.

Political crisis is different than financial crisis which has reduced strongly raw material world prices. Political global problems have usually opposite effects on them. During last weeks significant changes can be seen in the development of world prices of gold and nickel. Also other commodities have the same trend. It is impossible to say how long this is continuing and what happens when the Ukraine crisis is solved. Rise in the raw material prices can speed up some of the mining investment projects, but so far hard to say what and where.

In the Region of European High North this new situation can be very harmful in cross border cooperation. Kolarctic ENPI program was very difficult to launch in 2008 because the war in Georgia. Now in 2014 EU and Russian Federation are negotiating the new ENI Kolarctic- program that should be implemented before the end of 2020 and according to the information before Ukraine crisis the start should have been in 2015. If the crisis is not rapidly over the start is going to be postponed. EU sanc-

38 tions against Russia are just now regarding negotiations about visa freedom and new cooperation agenda. If Russia is not starting peace talks with Ukraine these negotiations are stopped. If the situation is dragging on for months, the reaction of Russia can be stopping the Cross border cooperation programs with the EU.

The situation is specifically difficult for Finland. All western sanctions are damaging the bilateral business between Finland and Russia. Total collapse of rouble is also very fatal from Finnish point of view. Shopping tourism has been extremely important for Helsinki and South-East Finland and the importance has been growing also in Lapland. In current economical situation Finland is in much bigger problems if the Ukraine crisis is continuing and if it is escalating. Everyone is hoping peaceful solution to the crisis, but next weeks are showing us what happens.

39 3. NORTH OF FINLAND - LAPLAND

Airport ARCTIC SEA Harbour Lakselv

Railway Andenes

Svolvaer Narvik Leknes

Bodø Pajala Mo I Rana Gällivare

Arvidsjaur Brønnøysund Mosjøen

FINLAND russia

norway

sweden

40 3.1 Lapland

Lapland is the northernmost county of Finland with about 183 000 inhabitants. About 4500 of inhabitants are indigenous Samí people. The total area of the county is 99 000 km2, which equals to 30% of the whole of Finland. Lapland is sharing borders with Sweden, Norway and Russia, altogether 1642 km. There are two international border crossings to Rus- sia, six to Sweden and six to Norway.

The six subregions of Kemi–Tornio, East Lapland, the Valley of Tornio, Northern Lapland, the Region of Rovaniemi and Fell Lapland form the region of Lapland.

Rovaniemi is the administrative capital of Lapland with appr. 60 900 inhabitants. The other cities in Lapland are Kemi appr. 22 300 inhabitants, Tornio appr. 22 500 inhabitants and Kemijärvi appr. 8 100 inhabitants.

Business in Lapland

Clean nature and abundant natural resources provide a unique, solid foundation for the business sector in Lapland. The cornerstones of the region’s economy are forest industry, metal industry, mining industry, forestry and tourism. The energy sector, too, will play an increasingly important role in the economy in future.

Economic uncertainty caused by Global financial crisis and continuing poor demand in export industry has reflected in the economic development of Lapland. The decline in international demand has had a negative impact especially in the export industry and building sector. Economic growth of Lapland has, however, been more positive than the national level growth. The strong growth in Tourism and mining industry have affected also to other branches of business, like trade and business to business services.

41 The total turnover of the all companies in Lapland has climbed 4% over the year 2008 level, when the financial crisis started. The export from Lapland has reached also the level of 2008. Business to Business services have made biggest growth compared with the 2008 level. Growth is more than 15%. Other growing branches of business are transport and logistics (growth 14%), tourism (growth 13%) and trade (growth 12%). Industry is still about 6% behind the year 2008 level with building and construction (-4%). Compared with other Finnish regions the development of Lapland has been almost unique.

Key economic figures of Lapland: • Population 182.800 • Jobs 73.300 • Total amount of companies 10.400 • Total turnover of all companies 10 bln. € • Value of industrial export 3.7 bln. € (No. 5 of regions in Finland)

Industry is the most important branch of business in Lapland. Total turnover of industry is 4.7 bln€ and it has about 8.000 employees. Number two business is trade with turnover of more than 2 bln€ and over 6.000 employees. Building sector is number three with 800 m€ turnover and over 4000 employees. Then is transport and logistics with 500 m€ turnover and almost 4000 employees. Tourism is next with 400 m€ turnover and 3.700 employees. Mining is smaller with 300 m€ turnover and 1.200 employees, but after recent openings of two mines and one mine expansion the numbers are rapidly rising.

The industrial strategy of Lapland provides guidelines for securing industrial growth and internationalisation, developing the operating environment and targeting public aid measures. The strategy assesses development prospects in the industrial sector over a long time span until 2030 and sets short and medium term objectives for promoting growth.

42 Industrial vision for Lapland in 2030:

Lapland grows by nature. The cornerstone of industry in Lapland is the sustainable refining of natural resources. • The industry and operating environment in Lapland have reached a level where Lapland attracts new companies and employees by nature. • Industrial actors in Lapland are internationally appreciated network partners. • Industrial growth in Lapland stems from innovativeness and arctic competence.

The following strategic objectives have been set for the industrial development: 1. Growth and vitality based on value added: Growth in the value added of industry in Lapland promotes vitality and well-being in Lapland. 2. Fast reaction capacity/agility: Early identification of changes in the operational environment, reacting to them and using them as a competitive asset. 3. Best available technology: Industrial companies in Lapland always apply and make use of the best available technology (BAT) in a competitive manner. 4. Strategic partners: Actors in Lapland develop new applications in collaboration with the world’s leading actors. 5. Growth in intellectual capital: The constant strengthening of intellectual capital is the key to increasing innovativeness, improving cost- effectiveness, strengthening global competitiveness and boosting economic growth. 6. Respecting people and nature: Natural resources are refined with a view to respecting people and nature, together with developing other means of living.

43 In the long term, sustainable industrial growth in Lapland relies on refining Lapland’s own natural resources into high-quality products that attract demand on the global market. In addition to metal, energy, extractive, forest, wood product, food and organic product industry, which are based on refining natural resources, growth opportunities are also available to machine and equipment manufacturers, maintenance service providers, logistics companies and industrial construction firms, which offer services to the above types of industry. By 2030, the sectors investigated in the industrial strategy for Lapland aim to reach a total turnover of EUR 9.8 billion and provide employment to 22 700 people.

Development measures are outlined in development programmes, which are targeted at developing companies, identifying growing markets, help- ing companies enter markets and building an operational environment that supports the development of companies and defines priority areas and measures for eliminating critical bottlenecks. Growth-impairing bottlenecks will be eliminated through concrete development projects.

Energy

The abundant energy resources of Lapland have long enabled it to produce energy for its own needs and for the rest of Finland, too. Lapland utilizes a plenty of hydropower, local wood fuels, peat and waste liquor from the forest industry. At present, Lapland’s self-sufficiency in electricity production is slightly more than it needs, and renewable energy accounts for over 90 % of electricity production. In industry, particularly, heat generated is used for its own production and in population centres it is supplied to the district heat networks.

The trend in future energy consumption is above all dependent on the development of industry and the service sector in the Lapland. Forecasted development such as the investments of the Tornio steel mill, mining projects and growing tourism will increase energy consumption significantly. More renewable and low-emission energy production, especially, is also needed in the whole of Finland, as a nation. On the other hand, energy efficiency and new technology solutions should be developed further.

44 Lapland’s large energy resources make it possible to increase production in a sustainable way and the northern conditions lay a good basis for development of new solutions and local know-how both in energy production and consumption.

Sustainability and self-sufficiency are Lapland’s commonly agreed energy visions. The objective is to utilize Lapland’s large energy resources so that Lappish knowledge and regional economy will develop and energy solutions support Lapland’s vitality. Lapland’s investments are channelled into competitive energy solutions, which also support means of livelihood and regional economy, making use of northern abilities and creativity. Energy resources are utilized respecting the environment and Lapland’s unique nature. Energy production in the future will also be more diverse based on several different production technologies and fuels so that all potential will be utilized. The objective is that Lapland’s own knowhow and business activities are supported so that in the future Lapland will be known for its role as a developer and user of energy production and saving solutions which are suitable for northern conditions.

To attain the agreed objectives the strategy outlines key projects which focus on increasing the use of local energy resources, especially, forest energy, peat, hydropower and wind power and in addition, on developing energy saving. To ensure the development of Lapland’s own knowledge and skill some key projects have been defined which support education and creation of innovations in schools, research institutes and companies. Developing networks of cooperation is particularly important. The implementation of the projects according to the energy strategy has a direct effect on regional economy by bringing to Lapland more income from real estate and other tax revenues and by increasing employment. The most significant sources of real estate tax income are hydro power and wind power (in future to a more extent). The increase in the combined real estate tax of the energy projects according to the energy strategy is estimated at approximately EUR 16-17 million provided that all projects are carried out. In Finland real estate tax money goes to the local municipalities. Remarkable employment and income effect will come due to the construction of the mentioned investment projects and construc-

45 tion, operation and fuel supply of a biofuel-based new power plants and a possible biodiesel refinery. The construction of these energy projects could increase employment in Lapland with a total of even 7 000–10 000 man-years. The effects on employment figures during the operation of the plants are also significant. According to the strategy, the use of local fuels, primarily forest chips and peat, could mean a direct increase in annual employment figures by 1000 man-years, in case a new big power plant in the city of Rovaniemi and a biodiesel refinery in the city of Kemi were implemented and the forest energy potential of Lapland were effectively utilized. In addition, the direct increase in employment figures during the operation of a nuclear power plant is estimated to be approximately 400- 500 man-years. Impacts on carbon dioxide emissions depend heavily on the quantity of forest energy which is used to replace peat and coal. Without a huge increase in the use of wood fuels, carbon emissions from power and heat production will grow in Lapland slightly from the current level by the year 2030. Efficient utilization of wood fuels can reduce emissions by about 30–40 % from the current level. Increasing the production of local renewable energy as specified in the energy strategy also supports significantly the achieving the objectives of Finland’s and the EU’s climate and renewable energy policy. It is important to notice, that already at the present situation, renewable energy accounts for over 90 % of all electricity produced in the region of Lapland.

Tourism

Total income of Lapland tourism business is about 700 million €. Tour- ism impact on employment is more than 5.200 man-years. In 2012 total turnover of all tourism companies (in Lapland 1.586) was 471 million €. Amount of registered tourists in year is 2.5 million. In 2013 amount of registered international tourists was first time in history over one million. Great Britain in number one nationality in Lapland international tourism, Russia, Germany, France and Norway are following. Biggest growth has been in tourist groups coming from Japan and China.

46 The most important strategic issues in Lapland’s tourism strategy include improved accessibility, growing international and all-year-round tourism demand through vigorous sales and marketing efforts. Lapland tourism will seek growth in international markets, and a major challenge is to generate more all-year-round demand for Lapland tourism products. A serious hindrance to the development of all-year-round service supply is the fact that Lapland has occasionally poor accessibility, especially outside the high seasons of Christmas and midwinter months. The tourism strategy seeks solutions to improve accessibility, but it is equally important to have an overall perspective on development measures. If international tourism demand could be guaranteed on an all-year-round basis, accessibility would improve automatically. In order to increase successfully all-year-round demand from international markets, stronger emphasis on sales and marketing measures will be necessary. Marketing development will require joint commitment, long-term cooperation and ample resources from municipalities and tourism industry.

One method to develop sales and marketing is e-commerce. Finland is regarded as high-technology country but in this field of business we lag behind, although Lapland has positive prospects to develop into a strong e-commerce actor. Intensive network cooperation between tourism industry, research and education, and other operators will be necessary, however.

The need for extensive, accurate, and multiple research data is essential for tourism development. When planning effective foreign marketing measures, for example, it will be necessary to secure the continuous supply of updated information on consumer behaviour, market situation, and future trends within the industry. Similarly, we need information about the development within tourism industry as well as the employment and revenue effects of the trade in order to direct public funding to suitable projects, and to make reliable evaluations of their results. The tourism research programme of Lapland will provide an extensive network of operators and create excellent conditions for producing high-quality research data to the industry. Within the present tourism boom, it will be obligatory to pay special attention to the standards of construction, planning, and

47 natural surroundings. In tourism development, the major distinctive attractions must be protected and the surroundings kept pleasant for both visitors and local inhabitants.

Transport system of Lapland

Major changes also requiring the development of the transport system have taken place in the international and national operational environment and in Lapland’s development prospects and development strategies. The most important changes are the strong development of mining and tourism and the increasingly prominent role of the Arctic Region. The concentration of population in the sub-regions of Rovaniemi and Kemi- Tornio, decrease in the number of population in sparsely populated areas and the simultaneous increase in the number of the elderly also impose growing challenges to the maintenance of Lapland’s transport system and to targeting development measures. At the same time, scarce financing is available to the transport system, and the implementation of large- scale investments is becoming more difficult.

The transport system should be capable of supporting the development prospects of the key business sectors in Lapland (the mining, metal and forest industry and tourism), the safe everyday mobility of people, and the accessibility of services in urban and sparsely populated areas. It is very important to improve the accessibility of the region and to utilise Lapland’s favourable transportation and logistics position as part of the broad, developing Arctic Region. There is also need to develop cooperation and unanimously promote major investments in the region.

The development strategy underlying Lapland’s transport system is based on national and regional goals and guidelines, verified development needs and the goals set for developing the system. The guidelines presented in the development strategy steer the defining of more specific measures, their prioritisation, and the choices to be made in the scarce financing and resourcing environment. The key point of departure is to secure daily operability and the organisation of moderately priced transport services, taking into consideration the special features of Lapland

48 and the new development prospects for mining, for instance, which call for large investments. Major investments are also important in view of the ability of Finland as a whole to profit maximally from the development of the Arctic Region and the opportunities offered by the opening up of the North-East Passage.

Major road and rail investments decided at the national level are of key importance to secure Lapland’s development prospects and the accessibility of Lapland in general. The increasingly prominent role of the north, with the new opportunities opening up in future, calls for large road and rail investments particularly in the long term. Investments in urban regions are also important with regard to combining transport and land use. Rail network investments benefit the business sector in particular, while opening up new opportunities to mobility among Lapland’s local inhabitants and tourists, for instance. Considering that Lapland is characterised by long distances, major road network investments are important for safe, fluent travel and for transport in the business sector.

Major spearhead investment projects in Lapland are the improvement of trunk road 4 at Rovaniemi and between Oulu and Kemi, of trunk road 21 between Palojoensuu and Kilpisjarvi, and of the service standard in the Seinajoki-Oulu rail connection, which lies outside Lapland but is important in view of Northern Finland as a whole.

Mining and the logistic position of Lapland; important projects in the future will be the electrification and renovation of the Kemi-Kolari rail connection, development of Ajos Port, which will include deepening the maritime access route and developing road and rail connections, and the provision of new rail and road connections required by new mines/ improvement of the existing connections. Connection alternatives important to mining, involving the Arctic Ocean port and utilisation of the North-East Passage; an exhaustive account should be drawn up of the various alternatives, and the results will be used as the basis of land use and transport planning in future.

49 Safe, fluent travel facilitates people’s everyday life. Fluent travel is also important to the business sector, including commuting and work-related travel in the region, tourism and the accessibility of the region.

Lapland’s external accessibility will be improved by developing air and rail traffic and the fluency of road traffic. Air traffic as a long-distance connection plays the most prominent role in view of accessibility.

In mobility within the region, account is taken of long distances and also of promoting the use of sustainable means of travel in cases where this is realistic. It is possible to improve the accessibility of places of work and services in urban regions and tourism centres by promoting public transport and pedestrian and bicycle traffic. In other parts of Lapland, however, long distances essentially require the use of private cars, and the special challenge there is to secure mobility among people who have no car and who live in sparsely populated areas. As for the accessibility of services, it is also important to improve electronic services and introduce services to sparsely populated areas through new means.

50 Key development guidelines for developing safe, fluent travel: • Developing long-distance travel chains to address the needs of tourists and local people. • Developing air traffic together with the tourism sector, Finavia and traffic operators. • Improving the competitiveness of public transport broadly in cases where sufficient demand is available. Securing the accessibility of the most important places of work through public transport. • Securing the basic service level in public transport in low-demand areas and mitigating the growth of transportation costs in the society as a whole. • Securing daily operability in vehicle traffic. • Targeting pedestrian and bicycle traffic development measures to potential areas. • Improving traffic safety and accessibility through prioritised means and by influencing attitudes more effectively. • Securing daily operability throughout the road and street network through maintenance activities. • Clarifying administrative responsibilities in off road traffic. • It is vital that telecommunications connections and electronic services are developed in the region, which is characterised by long distances.

Business sector transports and logistics place a wealth of requirements on the transport system. Large investments will have to be made in order to improve the cost efficiency of transports and to offer new development prospects in the long term, and work done largely at the regional and areal level to enhance the efficiency of the logistic system. All in all it is important to develop the logistic position and competitiveness of Lapland as a whole.

51 Key development guidelines for developing transports and logistics in the business sector: • Improving the cost efficiency of transports by prioritising the needs of mining and other heavy industry. In development efforts, attention is paid to the position of Kemi-Tornio sub-region as the hub of transport corridors and the increased importance of the Arctic Ocean as part of the development of the Arctic Region and the prominence of the North-East Passage. • From the point of view of cost-effective transports, it is important to secure the fluency of winter navigation and to maintain the road and street networks in good condition, in addition to large- scale road and rail investments. The effects of a stricter sulphur limit to be imposed on transports on the Baltic Sea should be minimised. The stricter limit is scheduled to enter into force in 2025, i.e. at the same time as in other sea areas. • Developing the hubs of the logistic system as a networked entity (ports, logistics centres, concentration of logistic operations, combined transports, roundwood terminals, terminal network). • Developing logistics services, expertise and cooperation systemati- cally (developing vocational logistics education and improving the attractiveness of the sector, developing regional logistics cooperation, combining transports in sparsely populated areas, developing procurement cooperation, introducing effective information systems, telecommunications connections and electronic services).

Developing cooperation and policies is an integral part of developing the transport system in the region. Through fluent cooperation, it is possible to react to quick changes in the operational environment and to support continuous, coordinated regional transport system development work. Regional cooperation also supports a shift from competition between sub-regions towards a regionally consistent overall approach. In addition, when financing is collaboratively targeted more effectively and based on users’ needs, it is possible to achieve better service standards with the existing, scarce resources.

52 Mitigating climate change and adapting to it will be taken into consideration as a precondition for all types of operation. However, it is important to make sure that the mitigation measures are realistic and to point out that the effects of measures concerning transport pricing, for instance, should be recognised at the national level.

Key cooperation and policy development guidelines: • Lapland should be active in cooperation forums in the Arctic Region. • Setting up a regional transport system working group in Lapland. The group will replace the current road transport working group and be responsible for coordinating regional transport system work in future. • Combining transport and land use planning and implementation at all levels. • Developing the operation of transport and land use working groups and eliminating overlapping work. • Taking active measures to contribute to transport system financing and increase of regional decision-making power. • Committing decision-makers to the guidelines presented in the plan. • Drawing up a regional letter of intent of the spearhead tasks for the next few years.

The Finnish Transport Agency published in 2013 working group report summary regarding the transport needs of Mining industry. According to the summary conclusion it is essential in the immediate and future development of transport infrastructure how the transport and travel needs of extractive industry and other industries develop, what is done in the neighbouring countries of Finland to develop transport routes, and, for example, to use the Arctic Sea connections, and how the transport equipment develops. The needs must be covered in planning, and that requires international co-operation. The transport needs become more specific based on individual mine decisions, and then more detailed planning and implementation needs can be programmed. In the near future, Northern and Eastern Finland mining transport between Europe and far-off countries will be implemented via the Bothnian Bay harbours, irrespective of the sulphur directive. Other transport needs of the industries in the area

53 do not alone significantly impact the mining transport and route selec- tions, but it is expedient to integrate those. In regional zoning, it is good to already take into account the future needs that are visible. The following presents the most significant needs for further actions based on this report.

Next 1–5 years

• Improvement measures (in total about 50 million euros) related to eliminating the bottlenecks of the existing services and transport networks of current mines will be planned and implemented. • Small improvements to transport services will be planned and implemented case by case when new mines are launched. • Further clarification and planning of current transport services will be started for the increasing mining transports that are within sight. They include e.g. - Highway 4 from Middle Lapland to Oulu and highway 21 - The capacity of the railway network in sections Ylivieska–Oulu– Kemi, Kemijarvi–Rovaniemi–Laurila, Vartius–Oulu and possible new freight transfer terminals - Kolari and Solki rail links after the mine decisions - Growing the capacity of the Bothnian Bay harbours (harbours’ own decisions) and deepening of sea routes based on the demand and the sea traffic strategy of Finland and project assessments. • The opportunities to use heavier than normal road transport and the impact on mining transport will be clarified. • A land use reservation will be made in the regional plan for a new railway line to Sodankyla.

Medium-term 5–15 years

• The track and road investments required by the Kolari and Sokli mines will be implemented, provided that the mines will be opened according to plans and the funding of the lines have been agreed upon between the different parties.

54 • After the possible Middle Lapland mine decisions, the further planning and building needs of the Sodankyla–Rovaniemi/Kemijarvi line will be clarified • Improvement measures required by the existing transport network will be implemented based on mining transport and the need for transport and travel needs of other industries.

Future after 15 years

The mining industry of the northern region will be in a lively development phase and will have great economic significance. In transport functions, the current transport network will have been used as basis. Fast changes of the transport network will not be possible. The development of new national transport connections may take years longer than starting mining activities. New ore deposits are constantly being found, and the utilisation of them is dependent on the transport possibilities. In this work it could be stated that mining industry and its transport needs are difficult to predict far into the future. For this reason, there should be continuous co-operation between mines and mining transport both nationally and internationally.

• Future needs will be forecast in collaboration with the neighbouring northern countries • The development of the Tornio–Haaparanta railway yard and freight terminal, as well as the development of the Narvik route will be investigated together with Swedish authorities • Increasing the possibilities to use the Vartius route in Finnish mining and Russian transit transport will be studied in co-operation with Rus- sian authorities • The planning and implementation will take into account the changing traffic needs and possibilities, including the North-East Passage • Hauling equipment will be developed and the opportunities they offer will be use

55 The results of this work will be used in the mining working group project ”Sustainable extractive industry - Energy, logistics and transport infrastructure” led by the Ministry of Employment and the Economy. Further- more, the transport and logistics working group of Northern Finland will do follow-up as part of the working group activities. The situation will be re-evaluated in 2015.

(Source: Regional Council of Lapland. The Finnish Transport Agency)

Education and Research

University of Lapland was founded on 1st of March in 1979 and it is located in Rovaniemi. University has four faculties: Art and Design, Education, Law and Social Sciences. Other Units of the University are: Arctic Centre, Education and Development Services, Open University, Central Adminis- tration. Lapland University Consortium shared units are: Multidimensional Tourism Institute, Institute for Northern Culture, Library, Support Service Centre (R&D Support Services, IT Services, Educational Support Ser- vices).

University of Lapland has 4.685 students and 647 staff members. The mission of the University of Lapland is to promote sustainable development, well-being and equality both regionally and internationally through its research, artistic activity and research-led teaching. The core values of the University are: creative and impactful involvement, critical and eman- cipatory perspectives, individual and community commitment.

In 2020 the University of Lapland will be an international actor in higher education with a distinctive profile in the arts and the sciences. The Uni- versity is an autonomous member of the Lapland University Consortium and contributes in its areas of strength to delivering the Consortium’s jointly agreed strategy. In international cooperation, the University’s key strategic partner will be the University of the Arctic, whose thematic networks will strengthen the expertise of the University in its focus areas.

56 The University of Lapland is the northernmost university in the European Union. The institution’s profile encompasses internationally recognised research on the people, communities and environment of the Arctic and the North, and the interaction of these elements. Another cornerstone of the University’s work is international tourism research, a focus valued for its potential regional impact.

The University’s strategic focuses are: service design, Northern well- being and the changing nature of work, sustainable development, law, and justice.These focus areas correspond to the strategic focuses of the Lapland University Consortium.

The changes occurring in the Arctic and the North, and the special social, cultural, and economic conditions in these regions, offer a unique environment for research in the focus areas.

Service design draws on the opportunities arising from the interaction between art and science in research and development in the areas of tourism, industrial products, electronic services, well-being services, and safe and accessible environments.

As an expert in service design, the University creates conditions condu- cive to producing competitive and sustainable services for the public and private sectors, as well as educational institutions. At the same time, it educates experts with the holistic perspective required for successfully managing the creative context of service design.

In the regional innovation programme of the Lapland University Consor- tium (LUC), service design is strongly linked to the Consortium’s strategic focus on creating a Lapland of tourism, culture, and experiences.

Global-level social, economic, and political changes and patterns of migration – developments attributable in part to climate change – are felt more acutely in Arctic and Northern regions, where they impact the well- being of the people there and the foundation on which that well-being rests.

57 To address these developments, the University is building up a strong multidisciplinary research effort on change, one thrust of which is to edu- cate experts on the changing nature of work. Special attention is paid to factors endemic in Northern regions that promote or reduce well-being. By investing in the research theme “The changing nature of work” the University strengthens its educational offerings geared to specific profes- sions.

One prominent research theme at the University is the social well-being and changing livelihoods of indigenous peoples. The institution bears a national responsibility for social-scientific research related to the Sámi people.

In the regional innovation programme of the Lapland University Consor- tium (LUC), Northern well-being and the changing nature of work form a research interest that closely serves the Consortium’s strategic focus on creating a Lapland of well-being.

Sustainable development, law, and justice comprise an area of multidisciplinary research. Analyses in this field focus on the interests of varied actors in relation to the conditions and regulations that apply in the environment in which they must work.

The research undertaken aims to generate information on future options for the Arctic and North that incorporate sustainable social, economic, ecological, judicial, and cultural development. Of particular interest are themes related to sustainable tourism and indigenous peoples. The Uni- versity bears a national responsibility for research on Sámi law.

In the innovation programme of the Lapland University Consortium (LUC), sustainable development, law, and justice are closely linked to the Con- sortium’s strategic focus on creating a Lapland of industry and a Lapland of natural resources.

The research problems addressed in the University’s research focuses are primarily related to Arctic and Northern research as well as tourism research. 58 In 2020 the University of Lapland will be an internationally attractive, creative, and multicultural academic and artistic community.

The University’s research and artistic activity in its stated strengths and focus areas will be recognised and influential at the regional, national, and international levels.

The University will continue to strengthen its Arctic and Northern research orientation. It will conduct high-calibre Arctic and Northern research through cooperation between the Arctic Centre and the faculties. The quality and impact of the research will be internationally assessed in 2013 and 2018.

The Multidimensional Tourism Institute will be a significant player in its field internationally, and its research will have a strong impact on the region. The scientific research conducted at the Institute will represent cutting-edge research internationally in the field of ecologically and socially sustainable tourism.

The University will direct its research efforts to its focus areas: service design; Northern well-being and the changing nature of work; and sustainable development, law, and justice.

The University will engage in scientific basic research and practice-oriented research side by side. Applied research attuned to the interests of the region will be conducted in cooperation with the Lapland University Con- sortium and will contribute to and draw on the University’s programme of basic research.

International networking will figure prominently in the research and artistic activity at the University. International research funding will constitute twenty-five per cent of the University’s outside funding.

The unique strength of the University will lie in the interaction between its research and artistic activity.

(Source: University of Lapland)

59 Arctic Centre

The Arctic Centre is internationally recognized for the quality and rele- vance of its multidisciplinary Arctic research, which is our key activity. Through this research, the Arctic Centre promotes increased knowledge, awareness and understanding of the Arctic both within and outside the region. This research supports decision-making and sustainable development in the Arctic.

Research projects: on-going and completed projects.

Global Change: The Arctic is particularly vulnerable to large-scale changes in the climate and economy occurring throughout the globe. This research group examines the effects of these changes and efforts to offset and adapt to them.

Sustainable Development studies how people, communities and institutions in the Arctic manage and cope with changing environmental, economic, social and cultural circumstances in order to promote a sustainable future.

Environmental and Minority Law: The Northern Institute for Environmen- tal and Minority Law (NIEM) has expertise in legal research in the Arctic and is specialized in the two branches of law that appear in its name - environmental law and human rights law.

The Arctic Centre has an International Scientific Advisory Board which meets once a year and has an advisory and supervisory role. Chair of the Board is Professor David Hik from the University of Alberta.

The Arctic Doctoral Programme Arktis is a multidisciplinary doctoral programme of the Academy of Finland. The one-year Arctic Studies program gives introduction to the issues that are relevant in the Circumpolar North.

60 The Arctic Centre’s science communications and library compiles, popularizes and communicates Arctic issues to increase the knowledge and understanding of the experts, decision makers and the general public on Arctic issues.

The Science Centre is in the Arktikum House together with the Provin- cial Museum of Lapland. Nearly 80 000 persons visit the Arktikum House every year, half of them tourists from abroad. Science Centre exhibitions display the results of Arctic research interactively and inform about the Arctic nature and people of the region.

Arctic Centre representatives serve as specialists in many international and national tasks. We have also very wide and active network of contacts around the world.

The Science Communications compiles, popularizes and communicates information on arctic issues to national and international experts, different target groups and the general public. Our goal is to increase the knowledge and understanding on arctic issues of the experts, decision makers and the general public by offering net services, theme portals and library services by utilizing the expertise of the staff and partners.

The Science Communications develops and maintains databases and portals on arctic research, northern environments and the Barents region. We have active cooperation with national and international partners. Arc- tic Expertise in Finland publication was compiled by the Science Com- munications for the Ministry for Foreign Affairs of Finland.

The Library at the Arktikum serves tourists, researchers, students and local people. It has a collection of literature dealing with natural phenom- ena, environment, expeditions, peoples, cultures, and livelihoods in the Northern regions, especially the Arctic. The collection also includes information on legislation and research related to these subjects.

61 The Science Communications has collaborated with organizations in other nations to develop a northern information services. The BarentsInfo.org portal was done together with Norwegian, Russian and Swedish parters. The newest cooperation project is the Barents Mediasphere where the aim is to improve the cross-border communications in the Barents region.

The University of the Arctic is a cooperative network with 90 universities, colleges, and other organizations committed to higher education and research in the North. The activities of the UArctic include e.g. the multidisciplinary Circumpolar Studies Program (BCS), north2north Mobility Pro- gram which is a mobility program for students, and Northern Research Forum that was started to activate dialogue between students, scientists and policy-makers.

The Arctic Centre actively participates in developing the operational con- tent of the University of the Arctic and in its mobility programs. The Arctic Studies Program (ASP) delivers U Arctic’s Circumpolar Studies.

European Union Arctic Information Centre initiative is the international network of 19 leading Arctic research and outreach institutions from the various European Union Members States, and the EEA countries.

The EUAIC initiative was made during years 2009–12 as the most experienced professional network of European institutions for information, outreach and insight into Arctic issues. The network’s objective is to provide the European Union, its citizens, institutions, companies and Mem- ber States with an Arctic information source and factual overview about the status and trends in the Arctic. The EUAIC initiative network aims to act as a ‘boundary organization’ of information that facilitates two-way communication between experts, decision makers, stakeholders and the public.

The initiative is organized using a network model to operate on the basis of existing expertise and infrastructures of its network members. The network initiative has its headquarters located at the Arctic Centre (Ro- vaniemi, Finland), currently there are nineteen partners in the network.

62 The European Commission selected the consortium to carry out an one million euro project to produce a “Strategic Environmental Impact Assess- ment of development of the Arctic”. The project will last eighteen months during 2013–2014.

The initiative follows the Arctic statements of the European Union (Com- mission 2008 and the Council 2009) that have high importance for sustainable development of the Arctic regions.

(Source: Arctic Centre)

3.1.1 Investment Potential 2014–2025

Industry: Outokumpu Oyj, finalizing postponed investments 400 m€ Manga LNG Oy, Tornio, LNG-terminal 300 m€ Stora Enso Oyj , Veitsiluoto Mill, recovery boiler 75 m€ Total: 775 m€

Mining industry: Agnico Eagle Finland Oy, Kittilä gold mine expansion phase 1 80 m€ Agnico Eagle Finland Oy, Kittilä gold mine expansion phase 2 200 m€ Yara Suomi Oy, Sokli mine 1.000 m€ First Quantum Minerals, Kevitsa mine expansion 300 m€ Gold Fields Arctic Platinum, Suhanko mine 1.500 m€ Northland Mines Oy, Hannukainen iron mine 600 m€ Anglo American, Sakatti nickel-copper mine, Sodankylä 3.000 m€ Mawson Resources, Rompas gold mine 300 m€ Total: 6.980 m€

Hydro power: Kemijoki Oy Sierilä power plant 135 m€

63 Wind power: Impax Asset Management, Kuolavaara-Keulakkopää 100 m€ Impax Asset Management, Joukhaisselkä 50 m€ Tuuliwatti Oy, Löylyvaara 15 m€ Tuuliwatti Oy, Kitkiäisvaara 48 m€ Tuulikolmio Oy, Rajakangas Tornio 90 m€ Tuulikolmio Oy, Pakisvaara Sodankylä 170 m€ Taaleritehdas Oy, Posio 125 m€ Innopower Oy, Ajos 320 m€ Rajakiiri Oy, Tornio 250 m€ Wpd Finland Oy, Kemijärvi 55 m€ Posio Aneenkumpu 30 m€ Total: 1.253 m€

Bio energy: Rovaniemen Energia Oy, Mustikkamaa bio energy plant 220 m€

Energy Transfer Networks: Fingrid Oyj, Sokli and Hannukainen lines 270 m€

Tourism: Laatumaa/Lapland Hotels Oy, Ylläs new resort 600 m€ Saariselkä expansion project 450 m€ Levi Summit-2 2 00 m€ Hotel Santa Claus, Rovaniemi, enlargement 30 m€ City Hotel Rovaniemi, enlargement 10 m€ Hotel Old Town Hall, Rovaniemi 10 m€ Lapland Hotels Oy, Pallas 20 m€ YIT, Kemi Sarius 120 m€ Total: 1.440 m€

64 Transport infrastructure: VT 4 Rovaniemi, Highway construction 25 m€ VT 4 Kemi-Pohjois-Ii, Highway construction 91 m€ Sokli mine-railway from Kemijärvi 425 m€ Kemi-Kolari railway upgrade 255 m€ Rovaniemi-Sodankylä railway 325 m€ Arctic Railway Finnish side 1.900 m€ Mining roads (Sokli, Suhanko) 40 m€ Kemi Deep water port 105 m€ Total: 3.166 m€ All total: 14.239 m€

3.1.2 Development of the Region 2015–2020

The fastest growing sector in Lapland has been the mining industry. The preconditions for the development of the mining industry in the region are sustainable solutions to environmental issues and a conflict-free existence alongside the tourism industry. After the Kevitsa Mine came in to production and the expansion of the Kemi Mine of Outokumpu was completed the start of new investments seemed to be very difficult to define. There was a long wait for the decision concerning the expansion of the Kittilä Gold Mine, but the realisation of its initial stage was announced in February 2012 and the expansion is under construction. Kevitsa mine is ready for expansion, but still waiting for environmental permits.

65 The decision on the Sokli Mine should be done before summer 2014, but that can be based on too positive expectations. According to the media discussions with authorities about the necessary railroad to the mine have been difficult. If the decision is negative, it is possible that Kovdorski GOK from Murmansk Region, which was a potential partner in the project, is taking over it.

The decision to open the Hannukainen Mine in Kolari is likely to be delayed due to financing problems. Also discussion about the conflict between tourism and mining has been arisen in Ylläs resort. The opposition has became stronger and voices louder against the mining project.

The next in line was expected to be the decision to implement the Su- hanko Palladium Mine in Ranua. Gold Fields Arctic Platinum company announced in 2013 that they are seeking financing to this 1.5 billion € project. Continuing financial crisis is not making this process easier.

66 The problems of Talvivaara mine have reflected to the mine permitting processes in Lapland. At the moment the situation with two projects is almost critical because some authorities like ELY Centre and Metsähal- litus have appealed about the decisions by TUKES to give exploration permits to Anglo American in Sakatti and Mawson Resources in Rompas area. This is strange because both authorities have been involving in the decision making process itself and after legal decision they appeal. Geological Survey of Finland is in the same situation in the Enontekiö with exploration permits. Business Community has discussed about this problem with the Prime Minister who promised to take measures to solve this situation.

As Outokumpu completed its new ferrochrome plant at its Tornio Mill, Lapland can probably expect more industrial investments. The company still holds a reserve of approximately 400 million euros of investments, which were announced before the financial crisis that hit in 2008. The expansion of the Kemi Mine and the construction of the second ferrochrome plant included in the investment plan are now to be implemented. These are expected to be initiated once the merger of Outokumpu and Inoxum is now finalised. In fact, with the potential new smelting plant, the investments in Tornio can rise in excess of a billion euros. Last year, Outokumpu and its partners also announced plans to construct the LNG terminal in connection with the Tornio Factory.

Outokumpu plc., Ruukki Metals ltd, Gasum ltd and EPV Energy ltd have established a development company called Manga LNG ltd. The purpose of Manga LNG ltd is to build an import terminal for liquefied natural gas (LNG) and to create an effective logistics chain to supply the LNG. The LNG terminal diversifies Finnish gas markets, since Finland does not have LNG import terminal at the moment. Swedish LKAB ltd (Luos- savaara Kiirunavaara Ltd) has been offered the possibility to become a shareholder later this year.

The use of LNG will improve the competitiveness of the participating companies, since the price of LNG has during the recent years been more stable and price development more moderate than prices of the fuels to

67 be replaced with LNG. LNG is also more environmental friendly than fossil fuels used currently in industry, maritime transport and energy production. LNG reduces carbon dioxide, nitrogen oxide and particulates emissions considerably.

The construction of the import terminal will also have a major job-creating effect. The estimated job-creating effect during the construction period is estimated to be 240 man years. The project is expected to be ready in 2017.

Manga LNG has signed a turnkey engineering, procurement and construction (EPC) contract to purchase a liquefied natural gas (LNG) receiving terminal to be built in Tornio, Northern Finland. The contract, valued at approximately EUR 100 million, has been made with Wärtsilä Corpora- tion, a global leader in complete lifecycle power solutions for the marine and energy markets. The contract is conditional on receipt of investment support and Manga LNG Oy’s contracts with other parties, including the gas suppliers.

The biodiesel plant planned for Kemi by the Vapo Group was granted EU support totalling nearly 100 million euros, if the project is implemented. The problem is finding a new partner for the project to replace Metsä Group which left the project some years ago. In January 2014 Vapo Group announced to abandon the project and close it due to the financing problems

The investments into tourism in Lapland were around a billion euros over the last decade, with most investments focused on the western Lapland, Levi and Ylläs districts. It was believed that the investment boom was over, but a positive boost in tourism following the financial crisis has turned things around. The investments will rise to another billion within next ten years if the projects are implemented. The biggest projects include the new centre for Äkäslompolo, the Saariselkä investment project and the Koutalaki expansion in Levi.

68 Wind power seems to be only energy projects to be started within the next five years. Process is slower than expected due to many appeals regarding the wind parks. Hydro power project in Sierilä is still alive, but appealing processes have been long and appealing court decided to restart the application process. Final building decision can be done sometimes after 2020.

Arctic Railway has been the most popular investment plan in Lapland. This railway has three main options, one in west, one in north and one in east. Eastern Lapland announced that Russia is now interested in building railway between Salla and Alakurtti. This would be according to them the cheapest alternative. City of Oulu has been active in Tromsö and announced that the only way to solve this problem is to build the railway from Kolari to Skibotn and from there to Tromsö. City of Oulu needs this connection, but this project from Kolari to Tromsö need financing 4-6 billion euro. The Government of Finland has been silent and the Ministry of Transport and Communication and the minister are not willing to discuss about the project.

3.1.2.1 Investments expected to start first

Also industrial investments are expected to start during next couple of years. Stora Enso has already decided to start recovery boiler project and LNG-terminal project is proceeding well. Mining projects look very possible and some wind power projects are also started. Smaller hotel invests look necessary especially in Rovaniemi. Road investment in Ro- vaniemi has starting decision and Kemi-Oulu road is expected to be next to be financed.

69 Projects: Manga LNG Oy, Tornio, LNG-terminal 300 m€ Stora Enso Oyj , Veitsiluoto Mill, recovery boiler 75 m€ Agnico Eagle Finland Oy, Kittilä gold mine expansion phase 1 80 m€ Agnico Eagle Finland Oy, Kittilä gold mine expansion phase 2 200m€ Yara Suomi Oy, Sokli mine 1.000 m€ First Quantum Minerals, Kevitsa mine expansion 300 m€ Impax Asset Management, Kuolavaara-Keulakkopää 100 m€ Impax Asset Management, Joukhaisselkä 50 m€ Tuuliwatti Oy, Löylyvaara 15 m€ Tuuliwatti Oy, Kitkiäisvaara 48 m€ Taaleritehdas Oy, Posio 125 m€ Hotel Santa Claus, Rovaniemi, enlargement 30 m€ City Hotel Rovaniemi, enlargement 10 m€ Hotel Old Town Hall, Rovaniemi 10 m€ Lapland Hotels Oy, Pallas 20 m€ VT 4 Rovaniemi, Highway construction 25 m€ VT 4 Kemi-Pohjois-Ii, Highway construction 91 m€ Total: 2.479 m€

3.1.2.2 Investments waiting for better times

The rest of the mining projects can be implemented after the financial crisis is over. Energy projects like Sierilä and Mustikkamaa are possible, but processes take time. Big tourism investments are depending on financing and the crisis must be over before they are starting. Transport infrastructure projects are very expensive and positive mine decisions are necessary in Sokli and Hannukainen.

70 Projects: Outokumpu Oyj, finalizing postponed investments 400 m€ Gold Fields Arctic Platinum, Suhanko mine 1.500 m€ Northland Mines Oy, Hannukainen iron mine 600 m€ Anglo American, Sakatti nickel-copper mine, Sodankylä 3.000 m€ Mawson Resources , Rompas gold mine 300 m€ Kemijoki Oy Sierilä power plant 135 m€ Rovaniemen Energia Oy, Mustikkamaa bio energy plant 220 m€ Tuulikolmio Oy, Rajakangas Tornio 90 m€ Tuulikolmio Oy, Pakisvaara Sodankylä 170 m€ Innopower Oy, Ajos 320 m€ Rajakiiri Oy, Tornio 250 m€ Wpd Finland Oy, Kemijärvi 55 m€ Posio Aneenkumpu 30 m€ Fingrid Oyj, Sokli and Hannukainen lines 270 m€ Laatumaa/Lapland Hotels Oy, Ylläs new resort 600 m€ Saariselkä expansion project 450 m€ Levi Summit-2 200 m€ YIT, Kemi Sarius 120 m€ Sokli mine-railway from Kemijärvi 425 m€ Kemi-Kolari railway upgrade 255 m€ Rovaniemi-Sodankylä railway 325 m€ Arctic Railway Finnish side 1.900 m€ Mining roads (Sokli, Suhanko) 40 m€ Kemi Deep water port 105 m€ Total: 11.760 m€

71 3.1.2.3 Key investment project of Lapland

Sokli Mine

Positive decision by Yara Suomi Oy to start the Sokli project would be very important both for Lapland and for the whole mining industry in Fin- land. After Talvivaara problems began mining industry has been in big need for positive investment decisions. Discussion about mining industry has been vivid in Finland, but mostly about problems. The connection between high class mining technology industry in Finland and the mines has not been largely noticed.

One of the most typical problems with junior mining companies in investment projects has been the underestimation of the real costs to build a mine. Yara company is big enough to be able to finance the project and also finish the started implementation.

Lapland has survived through the last five years in spite of the financial crisis. Economic development has been getting slower and the positive decision to start the Sokli mine project would boost the economy and al- lure new business to Lapland.

Projects that speed up with Sokli mine: Economic development in Lapland and all mining projects in Finland.

72 73 3.2 NORTH OF FINLAND - OULU REGION

Airport ARCTIC SEA Harbour Lakselv

Railway Andenes

Svolvaer Narvik Leknes

Bodø Pajala Mo I Rana Gällivare

Arvidsjaur Brønnøysund Mosjøen

FINLAND russia

norway

sweden

74 The Finnish region of Oulu (terms ‘North Ostrobothnia´ and ‘Northern Ostrobothnia´ used in some contexts are synonymous to Oulu region) extends across Finland from the Gulf of Bothnia coast to the Russian border and has an area of 37 000 km² and is about equal in size to the whole of Netherlands.

Oulu region is a growing and developing region that has a population of about 380 000 people (7,2% of the Finnish population) and 80% of whom live in built-up areas (2008). The population is well educated and has the lowest average age of any region in the country.

The total population of the City of Oulu and its surrounding districts is more 200 000. Five surrounding municipalities have joined to Oulu from the beginning of year 2013 and the population of the city is now 190 695. In contrast, the remaining parts of the region are sparsely populated. The average population density of the region falls down to about 10 inh/km2. The Oulu Region includes the City of Oulu and 6 surrounding municipalities: Hailuoto, Kempele, Liminka, Lumijoki, Muhos and Tyrnävä. Also the rest of the County of Northern Ostrobothnia is included in this report to Oulu region.

The Oulu Province belongs to a sub-Arctic climate. The City of Oulu has a moderate climate because of its maritime location. At Oulu’s latitude the average monthly temperatures range from -11°C in January to 16°C in July. The mean temperature in January is -16°C in the Northeast (Ou- lanka).

The Oulu region is an internationally recognised centre of technology and expertise where conscious efforts have been made to develop ideal conditions for new technology and practical cooperation between training, research and private enterprise. In addition to the electrical and information technology the Oulu region is also well known for its medical technology and biotechnology.

75 The few more densely populated centres in the area have significant industrial facilities specialized in the field of wood processing, steelworks, chemistry, and electronics industry.

Oulu is served by Oulu Airport, the second biggest airport in Finland by passenger volume. Port of Oulu is one of the busiest harbours within the Bothnian Bay. Port of Oulu includes four separate harbour areas: Vihreäsaari oil and bulk docks, Nuottasaari docks, Oritkari docks and the Toppila docks.

Business in Oulu Region

Oulu is the leading information and communications technology cluster in Northern Europe. In certain ICT fields, it is one of the most interesting clusters in the whole world. Oulu wants to be the leading and most agile ecosystem in Europe, and it will cover the whole value chain from the design of components and devices to producing end products and services. At the moment, Oulu’s key actors in the ICT field operate in product and device development of mobile networks, wireless information transfer and the design of wireless DTEs. As a cluster of wireless information transfer and radio technology, the region is in a class of its own, and world-class companies and research and educational institutions are working on product and device development in Oulu. One number says it all: over 7,000 experienced engineers work in the field’s research and development sector. In the future, ICT competence will also serve other business lines more comprehensively.

ICT competence will be applied in other growing fields such as life science, Cleantech and mining industries as well as nuclear power, logistics and commerce. Oulu therefore offers a diverse environment for the development of new products and services right at the intersection of different industries.

Oulu invests strongly in Life Sciences and connected health solutions, 3D Internet, printed intelligence, data security and games. New start- up companies are popping up all over the field. By 2020, Oulu will be a

76 world-class incubator of start-up companies that are planning to go international.

The key figures relating to the ICT field in Oulu: • About 270 companies • Total turnover approximately EUR 4 billion • Employs around 12,000 people

The growth engine behind the basic industry in Oulu is the large investments in Northern Finland and nearby regions. In total, they add up to tens of billions of euros. The most significant investments are intended for energy production and the mining industry. There are also various important infrastructure-related projects underway.

The biggest current investment is the nuclear power plant project in Pyhä- joki. In addition, more growth potential is gained from the construction of wind farms, bio-based fuel production plants and other renewable energy plants.

The mining industry in Northern Finland has increased considerably. New or reopened mines in Northern Finland are located in Talvivaara and Taivaljärvi in Sotkamo, in Laivakangas in the Raahe region and in Hitura in Nivala. In addition, investigations are being carried out regarding the reopening of the mines in Mustavaara in Taivalkoski, and Juomasuo in Kuusamo. Thanks to its stable and multifaceted industrial background, Oulu has great chances to seize the growth and investment opportunities offered by the major projects. Traditionally strong fields are the forest, metal, chemistry, wood product and food industries. The largest paper mill of its kind operates in Oulu, and the nearby cities of Raahe and Tornio have two large steel plants. Furthermore, the region is a leading production area for log houses and prefabricated homes.

The extensive network of education and services and the great logistic connections support the industrial sector’s growth. The varied technological competence and the educational institutions in the area offer opportunities for creating the new solutions of the future.

77 A significant share of industrial production in Oulu is exported. The export industry benefits from the city’s location at the intersection of transportation networks and the specialized production.

Key figures of the basic industry in Oulu: over 550 sites, turnover of over EUR 1.7 billion (in 200),nearly 5,300 employees.

Environmental technology, i.e. Cleantech is one of the most rapidly growing industries on a global scale. In Oulu, we invest heavily in the development of the Cleantech industry. Cleantech products from Oulu are used all over the world: for purifying exhaust fumes in Hong Kong and cleaning wastewaters in European beach resorts, for smart lighting solutions at gas stations in Finland, reducing greenhouse gas emissions in Hungary and for generating green energy in France.

Cleantech companies create solutions that help minimize detrimental environmental impacts and improve the state of the environment. These solutions may include technologies, products or services. Their goal is to lessen the impacts on environment, increase the energy efficiency and to improve the economic use of raw materials.

The strongest Cleantech competences in Oulu: • Emission control • Renewable energy and energy efficiency • Material efficiency • Cleantech ecosystem in Oulu

Oulu also aims to promote the use of Cleantech solutions and consider the economic use of energy and the environment.

The strong and comprehensive ICT competence in the region fuels the development of Cleantech in Oulu. Incorporating ICT and environmental competence creates a lot of promise. The utilization of wireless technology in particular enables the creation of completely new applications.

78 In addition to companies, the University of Oulu and the Oulu University of Applied Sciences also invest heavily in R&D work in the Cleantech industry.

Key figures for the Cleantech industry in Oulu: • Over 100 companies, most of them planning on going international • Turnover of approximately EUR 400 million • Employs about 1,500 people.

Nearly one thousand companies from creative industries are operating in Oulu. The diversity of creative industries covers architecture services and the communications sector as well as design and sports and adven- ture services. Oulu is known as an exceptionally enthusiastic newspaper- reading city, and during the last few years, games and online, mobile and SaaS services have started to emerge as new branches.

For example, Oulu has around one hundred architecture offices, the university is famous for its education in the field and Oulu-based architects are known for their skills in planning industrial buildings, holiday centers, public facilities and wooden buildings.

The creative industries are economically very significant to the Oulu region. They also offer new opportunities, perspectives and inspiration for other business sectors and to the community around them. In addition, creative industries have intrinsic value, as art and culture should not only be measured through economic figures. They have a great impact on the attractiveness of the cities and are major developers of urban culture and events. Some top international events are also organized in Oulu, such as the widely-known and very popular Air Guitar World Championship competition.

Key figures of the creative industries in Oulu: • Nearly 1,000 companies • Turnover of approximately EUR 200 million • Approximately 2,000 employees • About 100 new companies annually

79 Oulu Life Science consists of the companies in the bio, health and welfare fields of business. The sector includes both high-tech companies and health service companies. In Oulu, there are main focuses: the next generation health ecosystem and the emerging bioeconomy. In both fields, Oulu-based competence is among the best in the world.

The health ecosystem is a new kind of system of health and wellness services, constructed around people and using broadly various leading- edge expertise. In health ecosystem LifeScience meets ICT. It targets better and easy accessibility of services independent of time and place. It uses mobile and other eServices. It promotes fluent flow in information. It emphasizes disease prevention and early diagnosis and uses home diagnostic solutions as a part of health system. It combines genes and lifestyle to create novel personalized health solutions.

The bioeconomy, on the other hand, blends the life science, ICT and environmental sectors. The results can be seen for instance in cosmetics, biopharmaceuticals (biologics), biomaterials, biorefineries or in cleantech applications. It includes technologies to improve the development of production processes and downstream purification processes and real time on-line monitoring of the processes.

There are a couple of hundred Oulu-based LifeScience high-tech companies aiming for international markets and addressing global needs. If we include the companies offering health service providing companies, 1700+ companies are operating in this sector. The total revenue amounts to around €700 million.

Examples of innovations and products produced by the life science sector in Oulu include the world’s leading brand of heart rate monitors, the world’s first production method for recombinant collagen, products for faster development and scaling of biotech production processes, simple device for the detection of otitis at home or point of care, Smartscope camera from retinal and dermatoscopic imaging to otoscopic imaging, World´s smallest fully featured micromanipulator for medical research

80 and microinjections, Selection of diagnostic tests, real-time online meth- ods for improving food safety at point of production in food processing plants.

In recent decades, Oulu has built an extensive network of twinning, foster and partner cities. In total, Oulu has a cooperation relationship with 16 cities on four continents. In addition, Oulu has an official cooperation agreement with the Vienne region in France. During the last few years and thanks to new research and business relationships, Oulu has been able to extend its networks to San Jose in California, Sendai in Japan and Hangzhou in China, among others.

As the center of gravity of world economics is moving from the West towards BRIC countries (India, China, Brazil, Russia) and Eastern Europe and STAN countries, the internationalization process in Oulu is also looking for new directions.

The City of Oulu and several companies and research institutions have been working closely together with the biggest city in Silicon Valley, San Jose, since the beginning of 21st century. The model for the first Nordic technology village, Oulun Teknologiakylä, was taken from Silicon Valley during the 1970s. Over 6,300 technology companies are working in San Jose, including Adobe, Cisco, eBay and IBM.

Oulu took part in Finland’s section at Expo 2010 in Shanghai, China. This, together with the relationship between the University of Oulu and Zheji- ang University led to a cooperation agreement between Oulu and Hang- zhou, China. Concrete cooperation is to be developed in the education,

81 high-tech, energy and environment, and tourism and culture sectors. In 2008, Hangzhou was ranked the best investment environment and best commercial environment in China. The city has also been ranked high in studies comparing the quality of life in Chinese cities.

For several years now, Oulu and the City of Sendai in Japan have worked closely together in the well-being and nanotechnology sectors. The Uni- versity of Oulu and Tohoku University in Sendai have several cooperation projects. Sendai is a metropolis on the eastern coast of Japan. In March 2011, it was hit by the most powerful earthquake in Japanese history, fol- lowed by a massive tsunami. The City of Oulu donated EUR 100,000 to help the victims of the tsunami and aid the reconstruction of the city.

The newest opening in Japan is the cooperation agreement between Oulu and the City of Fujisawa. The cooperation focuses particularly on Living Lab activities.

In Manaus, Brazil, BusinessOulu cooperates with main local operators, such as Suframa. BusinessOulu has signed a valid Memorandum of Un- derstanding, which is the basis for constructing an “export bridge” to Bra- zil.

A very important part of internationalization for Oulu is the nearby cooperation area of the Nordic Countries and Russia. The actors in the Oulu region are networking increasingly with other actors in the Barents Re- gion. Among others, significant targets are:

• Mining and construction projects in Northern Sweden • Energy and construction projects in Northern Norway and North-west Russia • Energy and mining projects in Northern Finland and the improvement of their prerequisites • The logistics corridors of Barents Region: railway, road and shipping routes and flight connections

82 Cooperation in the Bothnian Arc area is developing significantly. Its active way of seizing new business opportunities is expanding over new business sectors such as ICT, well-being, services and environmental technology.

In the nearby northern regions, Oulu’s network includes Boden, Luleå and Umeå in Sweden, Alta in Norway and Arkhangelsk and Petrozavodsk in Russia.

Oulu also takes part in the cooperation network of Bothnian Arc, which includes seven municipalities from Sweden and five sub-regions and one province around the Bothnian Bay from Finland. The region has around 700,000 inhabitants. In Sweden, the arch starts from Skellefteå and in Finland from Kalajoki in Central Ostrobothnia. The Bothnian Arc is the northernmost European center of competence and industry, and its importance in terms of European and global development is constantly increasing. The Bothnian Arc cooperates with both the Torne Valley Council and the North Calotte Council.

Oulu participates in the extensive cooperation in the Barents Region launched in 1993 through the regional committee of the Barents Regional Council. The Barents strategy, endorsed when Oulu acted as the chair of the committee in 2008–2009, will guide their work until 2015.

In the future, significant investments concerning energy, tourism and mining, for example, are expected to take place in Northern Finland and the Barents area. The cCompany networks enabling internationalization project aims to coach the companies in our region in order to secure their opportunities of gaining access to major national and international projects.

With the help of BusinessOulu, companies will receive a new opportunity to engage in cooperation activities in the nearby regions as the operations of Euregio Karelia will be extended from the political level to cooperation at the operational level.With the help of lobbying, Euregio Karelia promotes the infrastructure of border areas such as the efficiency of border stations and traffic connections

83 Transport

Oulu’s location, right in the middle of Northern Europe’s developing markets and its active business life, is excellent. All logistic connections – road, railways, sea or air – function well. Traffic and transport to and from Oulu works effortlessly. The city is the most significant logistics hub in Northern Scandinavia: it is a junction for all traffic.

Oulu Airport is the second busiest in Finland by some margin. The recently expanded and completely renewed airport serves over one million passengers annually. The regular domestic and international flights of several airlines connect Oulu with the rest of the world. Currently, Oulu Airport offers direct flights to Helsinki (Finnair, Norwegian) and Stockholm (SAS).

Oulu Port is one of the leading ports in the Bothnian Bay and 500–600 ships visit annually. The port has regular connections all over Europe. The annual amount of cargo shipped through Oulu is between 3 and 3.5 million tonnes. The most significant export product is paper, and the main import products are fuel and raw materials for the forest industry. Oulu Port is open all year round, and it is the biggest port in Northern Finland in terms of containers and unit traffic.

Railway transport of both goods and passengers between Oulu and everywhere in Finland functions efficiently. The modern Pendolino and Inter- City trains guarantee a pleasant and rapid journey. Oulu is also easy to access by road.

In addition, Oulu has a high quality and fully functional terminal for combined goods transport. It is located in the logistics center for road, railway and sea traffic in the Oritkari area.

84 Education and Research

Oulu is a research hub with a capital R: the local Technical Research Centre of Finland (VTT) is the largest organization in Northern Europe involved in applied research. Research is also conducted at the universities in Oulu, along with the diverse education provided in various disciplines. The educational offering is further complemented by vocational institutions and private education providers.

The University of Oulu is an international science university which creates innovation for the future, well-being, and knowledge through multidisciplinary research and education.

Future innovation is about seeking, utilizing and applying new knowledge. The University of Oulu researches people and culture in a changing living environment, as well as opportunities that new technology provides for improving the well-being of people and the environment. The University of Oulu is a multidisciplinary expert in Northerness.

Founded in 1958, the research and education community is 16 000 students and 3000 employees strong, and one of the biggest and the most multidisciplinary universities in Finland. The nine faculties, the many departments and the specialized research units of the University of Oulu create the foundation for multiscientific research, innovation and training of experts for demanding professional tasks.

The University of Oulu conducts scientific basic research in over 70 branches of science. Open-mindedly combining technical sciences, natural sciences and human sciences creates a unique foundation for new multidisciplinary research knowledge, innovation and education.

The research areas of strength include four focus areas and four development areas.

85 Focus areas: • Biosciences and health • Information technology • Cultural identity and interaction • Environment, natural resources and materials; • Development areas • Business and economy • Steel research • Research-based teacher education • Mining and mineral field

The research organizations of the focus and development areas are typically multidisciplinary, and they encourage researchers to make new scientific initiatives and discoveries. The University of Oulu conducts research in close cooperation with sector research institutions and corporations. Acting in the international scientific network is the foundation of renewal.

(Source: Business Oulu)

3.2.1 Investment Potential 2014–2025

Industry: Valio/Pohjolan Maito, Oulu dairy plant upgrade 40 m€ Stora Enso Oulu reducing environmental impact of Oulu mill 14 m€ Akzo Nobel/average investments 2 m€ per year 14 m€ Forest industry, pulp boiler 400 m€ Microsoft Data Center 500 m€ Total: 968 m€

Mining industry: Mustavaara iron mine reopening and smelter 450 m€ Dragon Mining Oy Kuusamo gold mine 40 m€ Total: 490 m€

86 Hydro power: Pohjolan Voima, Kollaja project 115 m€ Oulun Energia, Pyhäsalmi pumped storage station 200 m€ Total: 335 m€

Wind power: Wind energy onshore projects 1800–2800 MW, 700–900 turbines 2.500 m€ Merijärvi, Ristivuori Ii Olhava II Ii, Laitakari Raahe, Kopsa I-vaihe Raahe, satama I Ii, Myllykangas Ii, Olhava (Nyby) Pyhäjoki, Mäkikangas Siikajoki, Vartinoja I Kalajoki, Jokela Kalajoki, Tohkoja Lumijoki, Varjakka Merijärvi, Pyhäjoki, Pyhäkoski Raahe, Kopsa II-vaihe Siikajoki, Isoneva Siikajoki, Vartinoja II Alavieska, Kytölä Alavieska, Saarenkylä-Vieskanjärvi Kalajoki, Mustilankangas Lumijoki Nivala, Kukonaho Oulainen, Maaselänkangas Pudasjärvi, Tolpanvaaran - Jylhänvaara Pyhäjoki, Palkusmäri Pyhäjärvi, Vuohtomäki Raahe, Annankangas

87 Raahe, Ketunperä Siikajoki Suomussalmi ja Hyrynsalmi, Kivivaara-Peuravaara Ylivieska, Pajukoski Ylivieska, Tuomiperä Kajaani, Kokkosuo Kajaani, Piiparimäen-Lammaslammnkangas (Pyhäntä, Siikalatva, Kajaani, Vieremä) Paltamo, Teerivaara Pyhäjoki, Parhalahti Raahe, Haapajärvi, Rautiomäki, Piehinkin Sarvikangas Raahe, Hummastinvaara Raahe, Nikkarinkaarto Raahe, Pöllänperä Raahe, Somerokangas Raahe, Yhteinenkangas Raahe-Siikajoki Mastonkangas Hyrynsalmi, Iso Tuomivaara Hyrynsalmi, Lumivaara Hyrynsalmi, Lumivaara Kalajoki, Juurakko Lumijoki, Selkämatala tai Nälkämatala Raahe ja Siikajoki, Mastokangas Siikajoki, Kivivaara Haukipudas, Ketunmaankangas Kajaani, Luolakangas Raahe, Arkkukari Raahe, Hietakangas (Piehingin kylä Balkintien varressa) Pyhäjoki , Silovuori

Wind energy offshore 1400–2200 MW, 400–500 turbines 2.700 m€ Ii, Suurhiekka Haukipudas, Hoikka-Hiue / Luodeletto

88 Haukipudas, Nimettömänmatala Oulunsalo / Hailuoto Raahe, Maanahkiainen Raahe, Pertunmatala Raahe, Ulkonahkiainen Total: 5.200 m€

Bio energy: Oulun Energia, new power plant 300 m€ Biorefinening park 150 m€ Biotehdas/Biogas planf for recycling biowaste 8 m€ Total: 458 m€

Nuclear power: Fennovoima Oy, Pyhäjoki plant 6.000 m€

Energy Transfer Networks: Fingrid/Power lines and electrical stations 120 m€

Trade: Arina/Oulu city center 150 m€ Ritaportti Mall, Oulu 100 m€ Kaakkuri Mall expansion, Oulu 45 m€ Zatelliitti- Mall, Kempele 375 m€ Raahen Portti-mall/Raahe 150 m€ Other: Galleria, CUBE, Castrenin kulma,Voudinkrouvi, 130 m€ Mini-Ideapark, Pallas IKEA, Oulu 135 m€ Raksila Arena/Mall reconstruction, Oulu 150 m€ Total: 1.235 m€

89 Tourism: Nallikari Resort (hotel, theme park, holiday village etc) 70 m€ Other holiday villages and recreation resorts 10 m€ New hotel projects to City Centre 80 m€ Superpark indoor fun park 7 m€ OuluZone (motorsport-center) 2 m€ COR Group, Lipporanta Health City wellbeing center, Oulu 100 m€ Nallikari Resort continuing 35 m€ Hotel projects 50 m€ Other holiday and recreation investments 10 m€ Total: 364 m€

Transport infrastructure: Seinäjoki–Oulu, railway 654 m€ VT 4, Oulu–Kemi, highway 120 m€ VT 22 (45 m€), VT 8 ja VT 20 yht. 50 m€ Oulu railway yard 100 m€ Harbour area extension 2014 12 m€ Oulu Harbour, (aver. 3 m€/year) 2015–2020 14 m€ Oulu Harbour/ deep channel improvements 23 m€ Road and railway infrastructure/nuclear plant 150 m€ VT 4 Oulu-Jyväskylä highway 160 m€ Total: 1.283 m€

Public investments: Kastelli multi action center, Oulu 44 m€ Kivisydän underground parking, Oulu 74 m€ Oulu Zone- motorpark, 2nd phase 21 m€ Laguna Centre for Underground Physics, Pyhäsalmi 600 m€ Future hospital, Oulu 500 m€ Total: 1.239 m€ All total: 17.672 m€

90 3.2.2 Development of the Region 2015–2020

Oulu Region or Northern Ostrobothnia as it is sometimes called has experienced positive trends, despite the complicated ongoing structural changes in Oulu. The region is expecting almost 20 billion euros of investments within the next ten years, if all the planned projects are implemented.

The largest single project is the construction of Fennovoima Oy’s Pyhä- joki Nuclear Power Plant near Oulu. The project was expected to commence at the end of the decade, once the issue concerning the ultimate placement of nuclear waste had been resolved and the official construction permit had been granted. The project is of such a large scale that the positive impacts it will have will also ease the post-Nokia phase Oulu will be entering after a few years. The company has decided to establish its operative centre in Oulu.

However, this situation changed rather dramatically in the second half of 2012 when one of its main shareholders and the only real expert compe- tent in nuclear energy technologies, EON sold its share in Fennovoima Oy. The main reason for the sale was probably due to the energy policies of the German Government and a decision to stop using nuclear power.

The ongoing reactor supplier selection process became ready in 2013 when the company announced that the project is implemented as a smaller scale alternative, and Rosatom is the supplier.

A smaller reactor is expected to decrease the construction costs for the power plant. The problem with new partner could be solved so that Ro- satom could also become a major shareholder.

The decisions made and those pending are also affected by the delivery schedule, as there are conflicting views in Finnish Parliamentary cir- cles whether or not the project should be reconsidered by Parliament. In March 2014 Minister of Business and Employment of Finland, Jan Vapaa- vuori announced together with the company that Fennovoima submits

91 an application to supplement the valid Decision-in-Principle addressed to the Government to the Ministry of Employment and the Economy. Fen- novoima requests that the Government would make a decision to supplement the valid Decision-in-Principle granted in 2010 to the effect that the supplemented Decision-in-Principle would confirm that Fennovoima’s nuclear power plant project remains in line with the overall good of society in accordance with Section 11 of the Nuclear Energy Act.

The process in Finnish parliament is going to happen in autumn 2014. Process might be complicated and difficult but majority seems to be possible for accepting this procedure.

Oulu is receiving large commercial investments, the value of which could exceed a billion euros in the next few years. Expansive wind power parks worth over a billion euros have been planned for the coastal region of Northern Ostrobothnia, close to Oulu. The wait for the national decisions regarding use of wind power is hampering the implementation of these projects, not to mention a variety of discussions concerning locations with landowners and the air force alike.

Northern Ostrobothnia will also see new mines, although in a somewhat smaller scale to those of Lapland and Kainuu. The Laivakangas Gold Mine in Raahe has recently commenced operations, but has also been troubled with environmental issues and financing the production of gold. The Mustavaara Iron-Vanadium Mine in Taivalkoski is to be reopened, with ore concentrated in Raahe. The planned gold mines for the Kuusa- mo area have brought about a great deal of discussion among tourism enterprises. Some of the projects lie at such a distance from the Ruka Resort that implementation would be feasible. Discussions and conflicts are certain to continue for quite some time.

92 3.2.2.1 Investments expected to start first

Trade investments have already started in the city of Oulu. Biggest industrial investment is the upgrading of dairy plant by Valio in Oulu. Region has a lot of wind power projects. The need to increase domestic energy means that wind park projects are implemented. Mustavaara iron mine project is proceeding slowly, but the production start is expected to happen within next years especially when raw material prices are rising.

Projects: Fennovoima Oy, Pyhäjoki plant 6.000 m€ Valio/Pohjolan Maito, Oulu dairy plant upgrade 40 m€ Stora Enso Oulu reducing environmental impact of Oulu mill 14 m€ Akzo Nobel/average investments 2 m€ per year 14 m€ Arina/Oulu city center 150 m€ Kastelli multi action center, Oulu 44 m€ Kivisydän underground parking, Oulu 74 m€ Nallikari Resort (hotel, theme park, holiday village etc) 70 m€ Other holiday villages and recreation resorts 10 m€ Wind energy onshore projects 1800–2800 MW, 700–900 turbines 2.500 m€ Mustavaara iron mine reopening and smelter 450 m€ Microsoft Data Center 500 m€ Total: 9.866 m€

3.2.2.2 Investments waiting for better times

Euro crisis is going to disturb Finnish economy for many years. The growth is expected to be rather low during next 3–5 years. This means that many investments are postponed.

93 Projects: Forest industry, pulp boiler 400 m€ Dragon Mining Oy Kuusamo gold mine 40 m€ Pohjolan Voima, Kollaja project 115 m€ Oulun Energia, Pyhäsalmi Pumped storage station 200 m€ Wind energy offshore 1400-2200 MW, 400-500 turbines 2.700 m€ Oulun Energia, new power plant 300 m€ Biorefinening park 50 m€ Biotehdas/Biogas planf for recycling biowaste 8 m€ RitaporttiMall, Oulu 100 m€ Kaakkuri Mall expansion, Oulu 45 m€ Zatelliitti- Mall, Kempele 375 m€ Raahen Portti-mall/Raahe 150 m€

Other: Galleria, CUBE, Castrenin kulma, Voudinkrouvi, Mini-Ideapark Pallas 130 m€ IKEA, Oulu 135 m€ Raksila Arena/Mall reconstruction, Oulu 150 m€ New hotel projects to City Centre 80 m€ Superpark indoor fun park 7 m€ OuluZone (motorsport-center) 2 m€ COR Group, Lipporanta Health City wellbeing center, Oulu 100 m€ Nallikari Resort continuing 35 m€ Hotel projects 50 m€ Other holiday and recreation investments 10 m€ Seinäjoki-Oulu railway 654 m€ Oulu railway yard 100 m€ Harbour area extension 2014 12 m€ Oulu Harbour, (aver. 3 m€/year) 2015–2020 14 m€ Oulu Harbour/ deep channel improvements 23 m€ Road and railway infrastructure/nuclear plant 150 m€ VT 4Oulu-Jyväskylä highway 160 m€ Oulu Zone- motorpark, 2nd phase 21 m€

94 Laguna Centre for Underground Physics, Pyhäsalmi 600 m€ Future hospital, Oulu 500 m€ Total: 7.416 m€

3.2.2.3 Key investment project of Oulu Region

Fennovoima Oy Pyhäjoki nuclear plant

Pyhäjoki in Raahe, about 120 km south from Oulu is very important place in Finland. The nuclear power plant of Fennovoima Oy should be there ready in the first years of next decade. Project is very important for Finn- ish industry and importance is even bigger for Oulu Region. City of Oulu has long history of industry and it has been going through many structural changes. City was world famous center of Nokia more than 20 years. Now structures are changing again and Oulu is without any doubt finding a new route to success.

Pyhäjoki project is huge. Total value of this investment is about 6 billion €. If the company succeeds in the new application process and the supplement to the valid Decision-In -Principle is accepted and the final financing of the project is ready the project is going to boost all possible investment plans in the region. Final building permit to the nuclear power plant leads Oulu Region far ahead from all structural changes and problems.

Projects that speed up with Fennovoima: All investment plans in the region.

95 3.3 NORTH OF FINLAND - KAINUU REGION

Airport ARCTIC SEA Harbour Lakselv

Railway Andenes

Svolvaer Narvik Leknes

Bodø Pajala Mo I Rana Gällivare

Arvidsjaur Brønnøysund Mosjøen

FINLAND russia

norway

sweden

96 Kainuu is located in the Oulu province and it borders the regions of North- ern Ostrobothnia, North Karelia and Northern Savonia. In the East it also borders Russia.

The region consists of eight municipalities and two cities. The administrative capital is Kajaani. Municipalities of Kainuu: Hyrynsalmi, Kuhmo, Ka- jaani, Paltamo, Puolanka, Ristijärvi, Sotkamo, Suomussalmi, Vaala and Vuolijoki.

The total population of the region is 84 350, Kajaani being the biggest city with nearly 38 000 inhabitants. Land area is 24 452 km2 and population density 3,51 km2.

The Town of Kajaani was founded by Count Per Brahe in 1651. The River Kajaaninjoki and the ruins of the historical Kajaani Castle are situated in heart of the town. Kajaani Castle celebrated its 400th anniversary in 2004.

The turnover of companies within the technology industry of Finland has continued its growth during 2006. The same trend exists in the region of Kainuu. Currently there are more than 2,300 people employed in the regions ICT and metal industries.

The economical development in Kainuu Region was favourable in the first years of the new millenium. The beginning of global financial crisis in the last months of year 2008 changed rapidly the situation. Biggest impact of the new recession has been the total exit of forest industry from the county. UPM company decided to close the mills in Kajaani.

Kainuu Region started rapidly to prepare to this enormous structural change. Base from the new growth was found on new ideas. One of the most interesting projects have been the plans to establish data centers in the old premises of closed paper mill right in the center of Kajaani. Kajaani has been competing with two neighbors in the west: Luleå in Sweden and Oulu.

97 Kajaani is a location that has existing infrastructure perfectly positioned for Data Center business so much so that the Finnish Government chose to locate its new Super Computer Data Center on a UPM site that used to house a paper mill. The Super Computer project is due to establish the world’s 1st zero-emissions Super Computer, utilising the local environment in terms of 100% non-mechanical cooling (water and/or air resources). The Finnish government is working with the Green Grid and others to open up and share best practice of design, build and operation to maximise energy efficiency, adhering to similar objectives as the Open Compute program.

The transformation of use to a Data Centre has brought significant benefits to further investors to the region by establishing local expertise and easy routes to develop and commission data centers. The site benefits from the availability of significant power capacity (120MW on site renewable & 400MW diverse grid connectivity) and immediately available zoned greenfield land adjacent to the ex-paper mill site. The very secure, sustainable and extremely commercially attractive power and 50 hectares of zoned land ’spade ready in 4 weeks’ means the site is available today for Data Center development. The power contracts can be fixed for at least 7 years, providing certainty for the most obnoxious cost elements of running data centers and it is Carbon Neutral ’Green’ generation to boot. Furthermore the area benefits from excellent diverse fibre connectivity to the European international exchanges and a unique untapped fibre connection direct from site to the Russian market.

As the world’s data requirements continue to increase in terms of volume, speed and frequency there is a natural progression for the increased demand for data centers to facilitate the delivery of these expanding information services.

The increase in demand is happening at the same time as the pressure on the World’s electricity capacity and pricing, which are decreasing and increasing respectively. Furthermore the pressure of lowering the Carbon

98 emissions from the electricity production is forcing organizations to look for sustainable renewable energy sources, ideally within geographically suitable areas for fiber connectivity to markets.

There is a plethora of locations around the world stating that they have all the major points covered for the high level criteria to facilitate commercially, politically and environmentally sustainable data centers. Given the technology is now available to create zero mechanical cooling in all countries in Northern Europe and the expertise of staffing is easily sourced, the key siting criteria for most Data Center operators and users is based on the following and can take anything up to 5 years to identify and clarify before a data centre goes live:

• Power – Secure, Available, Sustainable and competitively priced, preferably with long term contracts for TCO planning • Land – Available secure environmentally and geo-politically stable with planning approved • Fiber – Diverse routes within acceptable latency parameters to markets • Tax – Commercially and Politically sustainable combined with the ease of doing business

The main objective for the Kajaani Data Centre Cluster is to enable the operational environment for the knowledge-intensive data center cluster in Kajaani and to ensure the regional multiplier effect. The project cooperates and networks with companies and institutions in the information technology field, creating visibility for the Kajaani data center. Kajaani DC Cluster will provide the operational framework for new companies, spin- offs, R&D operations and companies that are placing their operations in the data center. Cooperation with the local educational institutes is help- ing to build a curriculum for data center-specific education within the area and thus ensuring a skilled data center workforce in the area.

99 Tourism is one of the key business areas determined in the regional programme. Kainuu already has plenty to offer for visitors: Vuokatti, Ukko- halla and Paljakka ski resorts, shimmering Lake Oulujärvi, the unspoilt nature of the whole region, various sports activities and cheerful cultural events, just to name a few attractions.

In the following years, tourism in Kainuu will be developed further for example by:

• Developing individual tourist centres • Drawing up tourist centre or tourist area-specific Master Plans • Cooperating in marketing, particularly on an international level • Increasing the level of know-how – education & training • Improving the accessibility of Kainuu – transport connections

(Source: Invest in Kainuu, Kainuun liitto)

3.3.1 Investment Potential 2014–2025

Mining industry: Talvivaara mine 280 m€ Sotkamo Silver Oy, Taivaljärvi siver mine 40 m€ Total: 320 m€

Wind Power: UPM Oyj, Hyrynsalmi Iso-Tuomivaara 45 m€ Metsähallitus, Kivivaara-Peuravaara 250 m€ EON Kainuu, Ristijärvi 5 m€ EON Kainuu, Kivesvaara 10 m€ Vaala, Manamansalo 45 m€ Kajaani, Luolakangas 115 m€ Sotkamo Munninmäki 35 m€ Total: 505 m€

100 Tourism: Vuokatti Holiday Club Resort Oy enlargement 45 m€ Sokos-Hotel, Vuokatti 20 m€ Ukkohalla Chalets 6 m€ Total: 71 m€

Transport infrastructure: VT 22 Oulu-Kajaani road construction 45 m€

All total: 941 m€

3.3.2 Development of the Region 2015–2020

The mining industry investments in Sotkamo gave ia powerful growth for Kainuu, although the current difficulties of the mining company Talvivaara Oy darken the future. The company must resolve its environmental issues in a sustainable manner, if the financing bodies and Finnish Gov- ernment allow such. Resolving these issues and restoring the reputation of nickel mines on the international markets is a vital prerequisite for implementation of the proposed expansion plans. The Talvivaara expansion “Overlord” would be worth over a billion euros. At this moment the expansion seems to be impossible, when the company is in enormous financial problems and the ability of company itself to solve the problems looks almost impossible. It is almost tragicomic that the financing which is crucial for a company to survive is also some kind of investment.

In addition to this massive survival project, the Taivaljärvi Silver Mine near Sotkamo is opening, which was listed on the Helsinki Stock Exchange in July 2012. By size, the project is significantly smaller than Talvivaara. The date of the implementation start is unknown.

101 Other sectors experiencing development in Kainuu are tourism and other forms of energy production. Resolving Talvivaara’s problems is also a key issue for tourism. Expansion investments exceeding 50 million euros are planned for Sotkamo. The focus for energy production is on wind power, and a number of wind power plans are in place for the region.

3.3.2.1 Investments expected to start first

Finnish Government has made decision to finance the road construction between Oulu and Kajaani. Tourism projects are also profitable and they are going to be implemented. Wind power projects could also start within next five years.

Projects: VT 22 Oulu-Kajaani road construction 45 m€ Vuokatti Holiday Club Resort Oy enlargement 45 m€ Sokos-Hotel, Vuokatti 20 m€ Ukkohalla Chalets 6 m€ UPM Oyj, Hyrynsalmi Iso-Tuomivaara 45 m€ Metsähallitus, Kivivaara-Peuravaara 250 m€ EON Kainuu, Ristijärvi 5 m€ EON Kainuu, Kivesvaara 10 m€ Vaala, Manamansalo 45 m€ Kajaani, Luolakangas 115 m€ Sotkamo Munninmäki 35 m€ Total: 621 m€

102 3.3.2.2 Investments waiting for better times

Mining is not popular in Kainuu today after the problems of Talvivaara. Before the main problems are solved and the worst damages repaired no new project seems to be possible. Only positive thing in this situation is the fact that all must happen within a couple of years. This gives hope to Taivaljärvi project.

Project: Sotkamo Silver Oy, Taivaljärvi silver mine 40 m€

3.3.2.3 Key investment project of Kainuu Region

Talvivaara mine If Talvivaara mine gets the badly needed financing and implements the necessary technology improvements and if the company gets more capital and all the licenses and permits, mining is still possible in Kainuu. This could mean that if company after some years is in better shape, the giant investment Overlord is possible.

Projects that speed up with Talvivaara mine: All mining projects in Kainuu and other parts of Finland

103 4. NORTH OF SWEDEN - NORRBOTTEN (SWEDISH LAPLAND)

Airport ARCTIC SEA Harbour Lakselv

Railway Andenes

Svolvaer Narvik Leknes

Bodø Pajala Mo I Rana Gällivare

Arvidsjaur Brønnøysund Mosjøen

FINLAND russia

norway

sweden

104 4.1 Norrbotten

Norrbotten County (Norrbottens län) is a county in the North of Sweden. It borders to Västerbotten County and the Gulf of Bothnia. It also borders the counties of Nordland and Troms in Norway, and Lapland Province in Finland.

Norrbotten has some 248 545 inhabitants, which represents three per cent of Sweden’s population. There were people in this part of the country as far back as the Stone Age, 9 000 years ago. Reindeer husbandry and the Sami culture are couple of thousand years old.

The mountain area in Norrbotten, which is part of the Scandinavian mountain chain, is a near 100 km wide zone running from North to South. All of Sweden’s mountains above 1800 meters are located in this area. Many of them are in the Sarek area and the Kebnekaise mountains, which are the two most extensive high mountain regions.

The county railway network, both in a north-south direction and to Finland and further on eastwards is a vital link, both for goods traffic and passenger traffic. The Ore Railway between Luleå and Narvik in Northern Nor- way is one of the country’s most important goods routes. Half Sweden’s tonnage of railway freight is transported from Kiruna to Riksgränsen and on to Narvik in Norway.

In Norrbotten County there are five airports with scheduled flights: Luleå Airport, the fifth busiest in Sweden, Arvidsjaur, Gällivare, Kiruna and Pa- jala. The county is crossed by a national road network, which links to Norway and Finland.

105 The roads in Norrbotten are important also to link together this vast county. Nine per cent of Sweden’s road network is in Norrbotten County, a region where the rate of car ownership is among the highest in Sweden. The harbour in Luleå is Sweden’s leading bulk goods terminal. An effective ice-breaker service enables the ports of Piteå and Luleå to remain open all year round for the intensive shipping. The Port of Kalix is open to shipping during the ice-free period.

Luleå University of Technology is Scandinavia’s northernmost technical university, with world-class research and education The university today has more than 12,000 students, 1,400 employees, and an annual turnover of more than 1,000 million SEK.

Cooperation with the surrounding community is one the university’s characteristics. Luleå University of Technology is now widely known as a ”business university”. Luleå University of Technology offers courses at basic, advanced and research level in engineering, business administration, social sciences, health, music, media, teaching and drama.

The university recruits students from both in and outside Sweden. The university’s regional remit includes cooperation with among others the municipalities in the region to offer customised education, not least through the campuses in Skellefteå, Piteå and Kiruna.

Research is carried out at the university in close cooperation with companies that include Shell, Ericsson, Ford/Volvo, LKAB, Airbus, Volvo Aero and IBM, and with international partners such as Monash University in Australia and Stanford University in the US. The university’s research has an annual turnover of more than 500 m SEK in six priority areas: mining technology and metallurgy, customised construction,mechanical engineering, process IT, product development and environmental engineering.

106 Production of raw materials may be the main driver of Norrbotten’s economy, but small and medium-sized enterprises are assuming a role of ever greater importance. The willingness of existing companies to invest has never been so high. LKAB mining is investing thousands of millions of SEK in Kiruna and Malmberget. Boliden AB mining is investing similar amounts in Aitik Copper Mine near Gällivare. The IKEA start-up in Haparanda is attracting retail chains to the area, and housing and hotels are under construction. Because of the geographical location, companies there have their customer base in both Sweden and Finland, and even in Norway and Russia.

Testing operations in the inland municipalities of Arjeplog, Arvidsjaur, Gällivare, Kiruna and Älvsbyn are constantly growing. Multinational companies here test car components, aircraft and missiles.

Polarbröd in Älvsbyn delivers frozen bread all over Sweden and also exports to European countries. Älvsbyhus is the largest manufacturer of prefabricated homes in the Nordic region. Polarica in Haparanda deals in berries and game meat for the European and world markets. Among Norrbotten companies, Polarica has been a pioneer in trade with Russia and the company has a production plant in Poland. Polaris Eyewear AB in Boden manufactures eyewear and has subsidiaries in England and Japan. Liko AB in Luleå is a world leader in patient lifts for the care sector.

Luleå is northern Europe’s main metallurgical development centre. SSAB is one of the world’s leading producers of steel. Gestamp Hardtech supplies the European and North American automotive industries with colli- sion protection components and Ferruform makes chassis components for trucks and buses.

Research and skills development are creating new industries in the county. At Luleå university’s School of Music in Piteå, the focus of the Acusti- cum Business Park is on music and media. Gällivare has concentrated on medical technology; Kalix and Pajala on computer technology and electronics. The basis of Boden’s local economy has shifted from the public to the private sector. International space and environmental research is carried out in Kiruna. 107 The Gross Regional Product (GRP) is the regional equivalent of the national yardstick - Gross National Product (GNP). GRP is the aggregate value of all goods and services produced in a region in a given year. GRP shows how great production is, reckoned in SEK. The average GRP for Sweden was 319,000 SEK per capita in 2006. This amount was given the index value 100. The index for Norrbotten County was 99, i.e. one per cent lower than the national average. The reason why Jokkmokk Munici- pality has such a high GRP is that some of Sweden’s largest hydropower plants are in the municipality while the municipality has few inhabitants.

The county has the second highest productivity after Stockholm County expressed as GRP per employee. In the years 2007–2009, industry annually invested an average of 6,800 SEK per inhabitant in Sweden. The biggest industrial investments were in Norrbotten County, at 36,000 SEK per inhabitant.

Norrbotten County has roughly 2,340 import companies and about 890 export companies. Most of the export and import companies in Norrbot- ten County trade with other EU States. The county has a smaller propor- tion of export companies trading within the Nordic region than the average for Sweden.

The harbours in Luleå and Piteå are open to shipping year round, thanks to the national icebreaker service, which assists vessels all along the coast of northern Sweden during the winter. In terms of tonnage, the port of Luleå is among Sweden’s five largest, largely thanks to its handling of raw materials for the mining and steel industries. Piteå is a shipping port for wood and paper. Both harbours handle petroleum product imports.

Forestry is of major economic importance to the development of Norrbot- ten County. Almost 40 per cent of the county is forested. More than half is owned by different forestry companies. In all, the forestry industry employs around 4,000 people in the county.

108 The county has three pulp and paper industries: Smurfit Kappa Kraftliner AB and SCA Packaging Munksund AB, both in Piteå and Billerud Karls- borg AB in Kalix. The plants in Piteå manufacture brown and bleached kraft liner. The plant in Kalix manufactures bleached sulphate pulp, sack paper and kraft sack paper.

The county’s five largest sawmills all produce more than 70,000 cu m sawn and processed wood products annually. They are located in Kalix, Luleå and Piteå.

There are 20 hydropower plants in Norrbotten County producing over 14 TWh of electricity. That represents 11 per cent of Sweden’s total electricity production. The biggest power plants are on the two rivers Lilla Luleälv and Stora Luleälv. The county is self-sufficient in electricity and half of the electricity produced here is transmitted to other parts of the country.

Investments in wind power have increased significantly in the county. In Piteå Municipality, major investments are being made in new plants which will produce approximately 12 TWh of electricity a year. The primary industries in the county are highly energyintensive and their energy consumption is 75 per cent of Norrbotten’s total consumption. About 42 per cent of the supplied energy in the county comes from fossil fuels, while renewable fuels constitute 38 per cent of the total energy supply. For 2006, energy consumption in the county amounted to around 31 TWh.

Luleå airport is Sweden’s fifth largest airport with 20 arrivals and 20 de- partures daily (weekdays). Domestic destinations are Göteborg, Kiruna, Pajala, Stockholm, Sundsvall, Umeå och Östersund. International flights to London. Geographic position, good service and high level of safety make Luleå Airport an attractive airport for air cargo. The strategic location in the Barents region makes Luleå Airport interesting for the world’s air freight carriers. Within the airport’s geographic market region are the

109 Norwegian fisheries and oil industry, world-leading engineering companies in northern Sweden and Finland, and enormous gas, oil and mineral reserves in northwestern Russia. Kallax Cargo develops air cargo services at Luleå Airport in cooperation with LFV, forwarders and logistics companies in the Barents region.

(Source: Facts about Norrbotten, Länstyrelsen i Norrbottens Län)

Future Development of Norrbotten

Business opportunities in Norrbotten are based on climate and raw material assets that are unique from an international standpoint. Great investments have already been made, but there is an enormous potential for business associated with investments that are also planned and secured for the next ten-year period.

The Node Pole region in northern Sweden, close to the Arctic Circle, as Norrbotten calls itself, holds a combination of ideal inherent qualities for major data centers and high-tech industry. In northern Sweden, the electricity grid has an extremely high redundancy and capacity, which is vital for powering for instance data centers. Among the lowest electricity prices in Europe, 100% renewable hydropower and a highly developed infrastructure are three other aspects that make The Node Pole unique.

The Node Pole is one of the most secure and stable places in the world – geologically, politically, socially and digitally. Sweden has not been to war since 1814, the seismic activity is extraordinarily low, and the country is ranked as number one in Europe regarding technology readiness, ICT use and broadband quality.

110 The region is well known for its higher education. Luleå University of Technology conducts research and innovation within diverse fields such as distance-spanning technology, long-term digital preservation and lower energy consumption of web technologies. In addition, Luleå Science Park, the University’s next-door neighbor, is one of Sweden’s fastest growing science parks. The region is already one of Scandinavia´s leading skill centers in ICT – Information and Communications Technology.

The Node Pole is at the same latitude as Fairbanks, Alaska, USA, and is the coldest region in Sweden. The climate enables fresh air cooling all year round. Read more about how nature’s combined forces can enable cost savings and more efficient cooling operations. Norbotten can also show results of promotion the Node Pole idea. Facebook has already opened first data center in Luleå and is preparing to build two more centers in the neighborhood.

Cold, dark and sparsely populated Norrbotten converts the natural advantages to competitive advantages. The region’s potential for cold climate testing, with strong collaboration between academia and industry. Main part of this activity is concentrating to Arvidsjaur region, west from Luleå.

Norrbotten can provide the market’s most energy-efficient solutions, and what’s more, they are 100% green. The lowest energy costs, free low temperatures, good communications, attractive start-up locations and well-qualified personnel are also what Norrbotten has to offer.

Svevind company is engaged in wind power in the north of Sweden, and its project in Markbygden, Piteå Municipality, has the potential to become one of the largest wind farm networks in Europe, and maybe even the world. Once fully developed in 2022, its accumulated production output is expected to reach 8–12 TWh. This is equivalent to one-third of Sweden’s total hydro power production, and involves investment in the region of EUR 80 million.

111 Several stakeholders have joined forces to realise the gigantic Mark- bygden wind power project in Piteå Municipality. A key player in the initiative is German company Enercon, which features among the world’s largest wind turbine manufacturers. Enercon currently employs 60 staff in Piteå, a figure which is set to climb as the project continues to expand.

Norrbotten is home to Europe’s largest iron ore production with more new mines waiting in the wings. LKAB’s underground mining operations are carried out using world beating technology. A century of high tech development has also led to a number of world beating products. Magnetite ore (the rock) is transformed into the worlds’ most eco-friendly iron ore pellets (the roll).

Just over 40 years of age, Luleå University of Technology – LTU – is one of Sweden’s youngest higher education institutions. The emergence and development of the university is closely linked with the region’s extensive mining and mineral industry – today, LTU is renowned as one of Europe’s most comprehensive universities in the field.

The mining sector is crucial for Norrbotten. LKAB has been carrying out mining operations in the region since the end of the 19th century. Accord- ing to a recent survey, both directly and indirectly, through subcontractors as well as related industries, LKAB has contributed towards the creation of 54,000 jobs in the Cap of the North.

SGU – has been mapping the geology of Sweden for over 150 years. The national drill core archive, in Malå, is one of the world’s largest, featuring over 3000 kilometres of drill cores from across the nation. The cores have been accumulated by the Government as well as private prospecting companies.

(Source: Invest in Norrbotten)

112 4.1.1 Investment Potential 2014–2025

Industry: SSAB Luleå, New Blast Furnace 200 m€ Facebook II, Porsön Luelå 500 m€ Facebook III, Porsön Luleå 500 m€ Total: 1.200 m€

Mining industry: LKAB investments up to 2018 3.500 m€ Hannans Reward/Kiruna Iron AB Rakkurijoki 700 m€ Hannans Reward Pahtohavare copper-gold 500 m€ Jokkmokk Iron Mines AB Kallak 700 m€ Boliden Laver, Älvsbyn copper mine 500 m€ Total: 5.900 m€

Hydro power: Vatttenfall AB Norrbotten powerplants capacity upgrade 1.500 m€

Wind energy: Markbygden, Piteå wind park 6.720 m€ WPD Luleå sea wind park 300 m€ Total: 7.020 m€

Energy transfer network: Norrbotten network 200 m€

Trade: Barents Center, Haparanda 120 m€

113 Tourism: Arjeplog Car testing climate hall 560 m€ Träkronan Hotell/Shopping, Piteå 35 m€ Spaceport Sweden, Kiruna 220 m€ Total: 815 m€

Transport infrastructure: Regional road investment plans 85 m€ Pajala-Svappavaara road 150 m€ Malmbanan Kiruna-Norwegian border 90 m€ Railway Pajala-Svappavaara 350 m€ Norrbotnia railway Umeå-Luleå 3.000 m€ Total: 3.675 m€ All total 20.430 m€

4.1.2 Development of the Region 2015–2020

The economic development in the northernmost Sweden has been very rapid during last five years. Norrbotten in particular has entered a new age, thanks to mining industry investments.

The investments for the next ten years are expected to be around 20 billion euros. The mining company LKAB alone is responsible for investments totalling more than three billion euros into Kiruna, Malmberget and Svappavaara. The company has decided to double its iron production from the current 19 million tons a year to approximately 37 million tons. Even the town centres of Kiruna and Malmberget will have to be relocated to make way for the expansion of the mine. The province will also have other large mines, including for the Pajala Municipality close to the Finn- ish border. Two iron mine projects are also ongoing in the neighbouring areas of Kiruna, one of which is located close to the town of Jokkmokk. Newest mining project is in Älvsby where Boliden has promising copper project.

114 Mining projects have been in problems also in Sweden. Northland Re- sources which has opened iron mine in Pajala has been in economical problems and is still practically under reconstruction. Whether Northland will continue, or if a new company will step in, only the future can tell. However, these problems will probably postpone the company’s plans for further investments, at least to some degree.

Jokkmokk iron mine project has been also in problems, but in a different way. The confrontation between mining project and reindeer herding es- calated in summer 2013 to small riots. Local Sami population states that mining is destroying the reindeer herding and mining company claims that both parties can live together. This kind of confrontation is rather new in Norrbotten and time will tell, if it has more serious impacts on mining projects.

The largest investment sector is nevertheless wind power. A massive wind power park with over 1100 wind turbines is currently under construction for the Markbygden area west of the town of Piteå in the inland regions of Norrbotten. Hydropower investments are seen in the province by increasing the efficiency of the power plants along the Norrbotten rivers at a cost of over one and a half billion euros. The electricity distribution network is also being greatly expanded.

Investments into the mining industry require functioning traffic connections. Together with the company, the requirements of LKAB have been met by updating the Kiruna track and rail yards. In the near future, the bypassing areas of the Kiruna – Narvik track will be improved and over the next few years, the construction of the second track is inevitable due to the increase in production.

The Swedish Government has made enormous investments into traffic for the mining industry. For instance, in September 2012, the government alliance decided on the construction of the Pajala – Svappavaara road and an increase in the junction points with the ore track. According to

115 the decision made, a massive 12.5 billion euros has been reserved for investing into the traffic requirements of the mining industry up to 2025. Most wanted railway project in the region, the Norrbotniabana- project is not yet listed to be financed and implemented.

The Norrbotten forest industry has also made smaller investments on a continual basis. Some kind of industry are also big data centers that are planned to be build in Luleå. First center for Facebook is ready and in full use. Facebook is going to start second center project latest in 2015.

The biggest expectations for the future of the province lie with tourism. The big increase in tourism to Lapland has been noticed in Norrbotten, which has led to substantial investments made into marketing Swedish Lapland. As a result of intense national investment, the main attractions of tourism in the province, the Jukkasjärvi ice hotel and Kiruna space centre are expected to make a big appearance on the markets.

4.1.2.1 Investments expected to start first

LKAB mining projects are proceeding as planned. Also Facebook is very satisfied with the first data center in Luleå and wants to have two more. Renewable energy was one reasons to Facebook to invest in Norrbot- ten. That is why the energy projects are all implemented. Markbygden is huge project and it is ready completely after 2020, but it is within a couple of years in full speed. Transport investments are decided in the national plan and tourism investments are increasing step by step. Norrbotten is important location for car testing. The plan to build climate hall in Arjeplog is realistic.

116 Projects: SSAB Luleå, New Blast Furnace 200 m€ Facebook II, Porsön Luelå 500 m€ Facebook III, Porsön Luleå 500 m€ LKAB investments up to 2018 3.500 m€ Vatttenfall AB Norrbotten powerplants capacity upgrade 1.500 m€ Markbygden, Piteå wind park 6.720 m€ WPD Luleå sea wind park 300 m€ Norrbotten network 200 m€ Barents Center, Haparanda 120 m€ Arjeplog Car testing climate hall 560 m€ Träkronan Hotell/Shopping, Piteå 35 m€ Regional road investment plans 85 m€ Pajala-Svappavaara road 150 m€ Malmbanan Kiruna-Norwegian border 90 m€ Total: 14.460 m€

4.1.2.2 Investments waiting for better times

New mining projects have met resistance in Norrbotten and the discussion has already prolonged the time to have licenses and permits. Also the rise of raw material market prices is needed before the implementation is profitable. Spaceport Sweden is an exciting idea, but the final decision needs first that the basic project by Virgin Galaxy is completely finished in the USA. Kiruna is also competing with the Emirates which Spaceport is done first.

117 Projects: Hannans Reward/Kiruna Iron AB Rakkurijoki 700 m€ Hannans Reward Pahtohavare copper-gold 500 m€ Jokkmokk Iron Mines AB Kallak 700 m€ Boliden Laver, Älvsbyn copper mine 500 m€ Spaceport Sweden, Kiruna 220 m€ Norrbotnia railway Umeå-Luleå 3.000 m€ Total: 5.620 m€

4.1.2.3 Key investment project of Västerbotten

Norrbotniabanan

The North Bothnia Line is a new railway between Umeå and Luleå. The 270 km stretch begins where the Bothnia Line ends, and completes the coastal railway along the coast of northern Sweden. The North Bothnia Line will be part of the Barents Link, connecting Europe by joining the Swedish and Finnish rail systems. Through the North Bothnia Line, the export-intensive industries skirting the Gulf of Bothnia will have considerably improved transport facilities at their disposal. The North Bothnia Line shortens distances, and increases capacity and speed, reducing transport costs. By shrinking the region through improved infrastructure, a larger market for labour and education is achieved. The system of rapid rail links will allow commuting between the coastal towns – while facilitating communications between the inland and coast.

Norrbotten has made several efforts to get the Norrbotniabanan- project to the investment lists of the Government but without any result. The destiny of this project is decided in the parliament election of Sweden in September 2014. Present government alliance has not accepted the plan to be financed. Norrbotten is strong supporting area for social democrat party so the hope is that after getting to power the present opposition is more positive for Norrbotniabanan.

118 This project could be first example of totally new type of investments. Present investments have been mostly based on mining and heavy transport. The period of LKAB expansion is over right after 2020. What´s next? Norrbotniabanan would show the way to the future.

Projects that speed up with Norrbotniabanan: New generation of investment projects

119 4.2 NORTH OF SWEDEN - västerbotten

Airport ARCTIC SEA Harbour Lakselv

Railway Andenes

Svolvaer Narvik Leknes

Bodø Pajala Mo I Rana Gällivare

Arvidsjaur Brønnøysund Mosjøen

FINLAND russia

norway

sweden

120 Västerbotten has a population of around 260 000 where 80% live along the coast and the remaining live in the sparsely populated interior and mountain areas. One can say that 70% of the population is concentrated to 20% of the total area. The population in the interior is concentrated to the chief city in each municipality and it has decreased significantly over the past 20 years. In sharp contrast, Umeå has been one of the most dynamic cities in Sweden with a population growth of 27% during the period of 1980–97. The other coastal municipalities have decreased in population.

Västerbotten is a productive region with strong and diverse business sectors. It is at the forefront of R&D, has abundant natural resources and is an attractive location as a gateway to Northern Scandinavia and the Barents region. Companies locating in Västerbotten benefit from a strong entrepreneurial tradition, competitive costs for personnel, operations and facilities, an excellent infrastructure and a reliable, well-educated work force. The region offers readily available land and premises at affordable costs. Companies establishing businesses in Västerbotten may also apply for financial and employment incentives from the government.

Västerbotten has experienced one of the highest GDP growth-rate of all Swedish provinces for the last six years, with an increase of 48% compared to the national average of 40%. A strong industrial culture, based on forestry, mining and pulp and paper, is making way for new high-tech industries, creative companies and a high-productivity manufacturing and processing sector. Since the region hosts most of Sweden’s energy resources, there is also an active development of eco-friendly power and heating solutions. Västerbotten has a collaborative spirit with many established networks and consortiums, business incubators and cross border research and development.

The region has three universities, Umeå University, including the world known Umeå Institute of Design, Luleå University of Technology and the Swedish University of Agricultural Sciences. The universities all offer inspiring environments for students, researches and scientists, whom are world leaders in many fields. The region’s universities are constantly

121 evolving and improving through regional, national and international cooperation with trade and industry, research institutes and authorities.

The region’s well-developed infrastructure with seven airports, deep sea ports, railroad communications, trucking service and an excellent road network with three European highways make it easy to travel and carry freight. Västerbotten also has a world-renowned development of both mobile and fiber-based broadband, and an extensive GSM and 3G network coverage. For example, Umeå has the fastest broadband connection in Europe.

In Västerbotten, life is family-friendly with very high standard of living at an affordable level, whether you choose the city life or the countryside calm. There are sunny summers and snowy winters. Beautiful and unex- ploited nature and wildlife are just around the corner, and the opportunities for sports, entertainment, outdoor activities and culture are endless. Västerbotten has the lowest crime rate in the country. Streets are safe, and people are honest and helpful.

More Västerbotten advantages: • Low corporate taxes • Lowest electricity prices in Sweden • Energy tax in the province is only 66% of the normal Swedish rate • Green and energy-saving solutions for a dependable power supply • Gateway to Northern Scandinavia and the Barents region • Access to world-class R&D • Highly educated and skilled work force • Low labour costs • Low absence due to illness • Most citizens speak fluent English • Advanced users of new technology • Highly sophisticated health care • Good schools • Snowy winters and sunny summers • Low living costs

122 Manufacturing industry

The manufacturing industry in Västerbotten is a wide-ranging network of innovative and flexible companies with a joint capacity for, and experience of, extensive supply contracts.

Based on the region’s long traditions and strong clusters in forestry, mining and pulp and paper, several major manufacturing companies have evolved and reached a global market. Among the subcontractors, there are a large number of small and medium size engineering companies characterized by advanced technologies and successful collaborations. Thanks to a low staff turnover, many of the companies have been able to build unparalleled levels of competency over a long period of time.

With a strong industrial culture and a strategic position as a gateway to Northern Europe and the Baltics, Västerbotten is a perfect place to start new manufacturing processes or find qualified partners, even for large- scale projects. Suppliers and subcontractors cooperate with a mutual interest in developing the region, and are prepared to make the investments and modifications necessary to take on new types of products. The opportunities to recruit staff locally are excellent thanks to the many courses available at secondary school and university levels developed in close cooperation with the local trade and industry sector. The region also has a well-developed infrastructure adapted to the needs of heavy industry, including railway, deep-water ports and excellent roads.

The roads have always played a significant role in the growth of the region and are still one of the most important means of transport for both goods and people. Västerbotten has a well-developed transport and communications infrastructure. Accessibility of the region by road is good. In fact, Västerbotten has Sweden’s longest road system–10,000 kilometres of public roads to which can be added an expansive network of private roads.

123 Forest industry

With a long forestry tradition and a strong supply of raw material – 3 041 000 hectares of productive forest – Västerbotten in north Sweden has generated exceptional craftsmanship as well as unrivaled know-how in large wooden constructions, solid wood frames and glulam products. World-class institutes like Luleå University of Technology, Umeå Institute of Design, the Swedish University of Agricultural Sciences and SP Trätek (the Swedish National Testing and Research Institute for wood technology) are constantly taking R&D to new heights in fields like wood and biofuel technology, wood physics, ultra structure, forest biotechnology and industrial design. Västerbotten also hosts the world’s densest cluster of forestry machine manufactures and developers, including the headquarters and production plant of Komatsu Forest in Umeå and an R&D center for intelligent off-road vehicles.

Umeå Plant Science Center (UPSC), a centre of experimental plant biology, is the world leader in forest biotechnology and attracts hundreds of international scientists. Companies like SweTreeTechnologies provide technologies for improved productivity and performance properties of trees and wood fibers, creating new business opportunities for forestry, paper- and pulp industries as well as packaging and textile.

With the forest biotechnology as an emerging market, Västerbotten offers an educated workforce and unique access to academic research through tech transfer establishment, as well as many forest research sites and strong links to the processed wood industry.

Mining industry

Sweden is by far the largest producer of iron ore and also number one for lead in the EU, the second largest silver, gold and zinc producer, and the third largest copper producer. Some of the most important ore deposits and interesting geological regions are found in the Skellefteå district in Västerbotten. Ever since the 1920’s, the mining and smelting company Boliden has been the major force behind the development of the mining

124 industry in the mineral rich Skellefteå field. Today, Boliden is the third largest copper supplier and the third largest zinc supplier in Europe. The processing plant Rönnskär is one of the most efficient copper and zinc smelters in the world. Rönnskär is also a specialist in the recovery of base and precious metals from electronic scrap.

Mining industry is growing rapidly. New mines open almost annually, and a significant number of new exploration permits have been granted. Yet, it is estimated that only 20% of the mineral assets in North Sweden have been exploited. Potential for new findings is still very good and there is a continuous establishment of new operators. Some of the current exploration and mining companies are New Boliden, Elgin Mining, Canada, Dragon Mining, Australia, Blackstone Ventures, Canada and Lapland Goldminers, Sweden.

Thanks to the dominating role mining has played in trade and industry for centuries, mining infrastructure is well developed, with highly advanced mining and metallurgy R&D. Sophisticated technology with a high level of automatisation makes our mines among the most efficient and profitable in the world.

The region is home to several competence centers and two universities with world-class research institutions. 90% of Sweden’s academic and vocational units related to mining, metallurgy and geology are located within a radius of 130 kilometers. Both the Geological Survey of Sweden (SGU) and the Mining Inspectorate of Sweden are located in the region. SGU assists mineral explorers with exploration-related information and data. The world’s largest collection of drill core, more than 3 500 000 m from all over Sweden, is available for research – free of charge!

There are also a number of specialized companies linked to the mining industry, such as world-class manufacturers of mining equipment and machinery, mining software developers and drilling services companies. With an ever-growing industry there is a high demand for technical con- sultants and environmental expertise.

125 As one of Europe’s largest concentrations of mining and mine related industries, we aim to expand even further. The prospects for a profitable business establishment in Västerbotten have never looked better!

Tourism

With four full seasons– each of them as beautiful as they are different – the potential for tourism business to grow in Västerbotten, North Sweden, is practically unlimited.

Travel and tourism is expected to double in Sweden by 2020 according to the Swedish National Strategy for Tourism – which indicates a bright future for the travel industry. The northern parts of Sweden already attract visitors from all over the world and the growing interest has led to an increased need for high-quality accommodation and activities.

In 2011, Sweden was ranked the 5th best country for tourism, according to the World Economic Forum 2011. The north of Sweden is of great interest to the global market and tourism is expected to grow by 100 percent by 2020, from SEK 252 billion to SEK 500 billion, according to Sweden’s National Strategy for Tourism.

The exotic north attracts visitors thanks to a unique blend of experiences and surroundings, beautiful and untouched nature, the northern lights and much more. Västerbotten, a central part of Northern Sweden, is experiencing rapidly growing international interest, and the opportunities to meet the demand are manifold. With investments in ski resort destinations, hotel and accommodation, real estate development, activity companies and medical tourism; anyone from large capital investors to small scale private companies can discover new markets and grow in Västerbotten.

126 Västerbotten has four distinct seasons, each one with its own exceptional features widening the potential of the region and providing an extra advantage. But the potential of Västerbotten also resides in the people who live and work here. With a service minded attitude, pleasant manners and good language skills, they make the difference.

But Västerbotten isn’t all about nature. The cities offer shopping, excellent restaurants and various cultural activities. A unique cultural feature of northern Sweden is one of the few remaining indigenous people in Eu- rope, the Sami. Their strong heritage influences the culture of the entire region of Västerbotten. Moreover, in 2014 Umeå will be the European Capital of Culture – an honour that further reveals the viability of the region.

Transport

The main axis runs along the coast (E4 motorway linking the South of Sweden and Finland). In an east-west direction the E 12 links the countries of Russia, Finland, Sweden and Norway. The main road in the western part, going in a north-south direction is the E45, starting in Gothen- burg and ending in Karesuando.

Rail services are well established. The Swedish National Railway’s main line to northern Sweden runs through Västerbotten, connecting the northern part of Sweden with Europe, along with several regional railway lines. Branch rail lines provide access to the main industrial sites. The Bothnia Line along the coast will significantly cut rail travel times, it will be opened for traffic in August 2010. The Bothnia Line is the biggest railway project of modern times in Sweden. It is a single-track railway being laid from the bridge over Ångermanälven, north of Kramfors airport, via Örnsköldsvik, Husum, Nordmaling, to Umeå.

127 The Bothnia Line will link together a highly productive region, where a series of significant industrial locations are all situated along the Swed- ish coastline. This new link will mean efficient transport of freight and the halving of travelling times for passengers. The Bothnia Line will be able to cope with speeds of up to 250 km/hour. Inlandsbanan (“the inland railway”) runs from Kristinehamn in the south to Gällivare in the north – a total distance of 1300 km.

Shipping is important to the existing companies and those looking to invest in northern Sweden, particularly for the forest and mining industry (export and import of raw materials and products). In the Västerbotten province there are industrial seaports in Umeå, Skellefteå and Rundvik, together with smaller ports all along the coastline. The continuity of service is a major goal and year round accessibility is guaranteed by efficient ice breaking during the winter.

Umeå Hamn is a year-round port which is located at the north of Swe- den’s fastest expanding part and is known for its high quality and a strong customer orientation with a high level of service. The port is located strategically at the natural shortest route across the northern Gulf of Both- nia. Geography provides the port with a natural harbour sheltered by the unique conditions in the winter. Despite being located far north in the northern Gulf of Bothnia’s narrowest part with mostly northern winds the Umeå port as well as the other seaports along the coast are open all year round.

The port of Skellefteå (Skellefteå Hamn) is one of the gateways for sea transport in Norrland. The port is located in Skelleftehamn, adjacent to the industries of Rönnskär and Kuusakoski. It is also strategically located close to sawmills, mines and engineering companies and acts as an important link between Norrland’s industry and its assets: minerals, forests and energy. Many years of working with the region’s industries have given Skellefteå Hamn a solid base of experience in the transportation of goods.

128 The port has all the resources to serve as a gateway to the rest of the world. Skellefteå Hamn has excellent links with other transport systems including the national road and rail networks and air services. Another key advantage of Skellefteå for mixed consignments is its proximity to ports in northern Finland.

Västerbotten has several airports–in Umeå, Skellefteå, Lycksele, Vil- helmina, Storuman Hemavan and Arvidsjaur. All the regional airports have regular connections with Stockholm airport (Arlanda). Hemavan in the mountains has an airstrip for taxi-, charter- and private aeroplanes.

(Source: Västerbotten Investment Agency)

4.2.1 Investment Potential 2014–2025

Industry: SCA Obbola new digester 60 m€ SCA Rundvik sawmill 5.0 m€ Fågens Sågverk AB sawmill 10.0 m€ Total: 75 m€

Mining industry: IGE Rönnböcken nickel mine, Storuman 1.600 m€ Lappland Goldminers, Fäboliden 200 m€ Tertiary Mining fluorspar mine, Storuman 40 m€ Total: 1.840 m€

Hydro Power: Vattenfall AB, Laxeden-Umeslupen turbines 60 m€ EON AB, Bålforsen, Betsele, Hällforsen upgrade 100 m€ Total: 160 m€

129 Wind Power: Sorsele-Storuman windpark 2.075 m€ Skogsmark windpark 900 m€ Blaiken windpark 450 m€ Fäboberget windpark 200 m€ Skellefteå windpark 50 m€ Nordmaling windpark 30 m€ Total: 3.705 m€

Energy Transfer networks: Svenska Kraftnät AB 300 m€

Tourism: Hemavan/Tärnaby expansion of the resort 340 m€

Transport infrastructure: E4/E12 Umeå 240 m€ E4 Djäkreboda-Bygdeå 15 m€ Storuman infrastructure (airport/terminals/railroad) 225 m€ Total: 480 m€ All total 6.900 m€

4.2.2 Development of the Region 2015–2020

The completion of the Botniabana track has, among other things, improved the transportation connection and logistic status of business. During the next years, construction of the coastline track is expected to continue to Luleå in Norrbotten as the Norrbotniabana project. The region has good logistical location and connections to Mo i Rana in Norway and Vaasa in Finland are increasing international transport in the future.

130 Industry in Västerbotten is upgrading technology in forestry and forest industry.

The biggest project for Västerbotten in recent years is the construction of the wind power park in the province. The construction of wind power parks is concentrated on Storuman municipality in the western part of the region.

The area also has a mining industry and the opening of new mines is also expected in the next few years. The largest and most interesting mining investment project is the Rönnbäcken nickel deposit located in the Storu- man municipality. The construction costs for the mine are estimated to increase to around 1.5 million euros. Sweden is traditional mining country, but today the discussion about nature, reindeers and mining has been increasing also in Västerbotten,

Tourism is a very important industry in the region. The Hemavan-Tärnaby downhill skiing centre is located in the western section of the province, mainly in the Storuman Municipality on the Norwegian border. This fell region resort has been constructed continuously over the past few years and it is expected to continue expansion.

4.2.2.1 Investments expected to start first

All technology upgrading projects in industry are implemented as soon as possible. There is no doubt that also the hydro power plant upgrad- ings are done. Wind power is important for the region and all projects are going to start. Also transport infrastructure projects are implemented as decided in the National Transport Plan.

131 Projects: SCA Obbola new digester 60 m€ SCA Rundvik sawmill 5 m€ Fågens Sågverk AB sawmill 10 m€ Vattenfall AB, Laxeden-Umeslupen turbines 60 m€ EON AB, Bålforsen, Betsele, Hällforsen upgrade 100 m€ Sorsele-Storuman windpark 2.075 m€ Skogsmark windpark 900 m€ Blaiken windpark 450 m€ Fäboberget windpark 200 m€ Skellefteå windpark 50 m€ Nordmaling windpark 30 m€ Svenska Kraftnät AB 300 m€ Hemavan/Tärnaby expansion of the resort 340 m€ E4/E12 Umeå 240 m€ E4 Djäkreboda-Bygdeå 15 m€ Storuman infrastructure (airport/terminals/railroad) 225 m€ Total: 5.060 m€

4.2.2.2 Investments waiting for better times

Mining industry in the Västerbotten region has not implemented any bigger projects for years. All three projects are possible to implement, but the profitability of projects is uncertain due to the low raw material market prices. Also the companies planning these investment are not in the best possible economic condition.

Projects: IGE Rönnböcken nickel mine, Storuman 1.600 m€ Lappland Goldminers, Fäboliden 200 m€ Tertiary Mining fluorspar mine, Storuman 40 m€ Total: 1.840 m€

132 4.2.2.3 Key investment project of Västerbotten

Rönnbäcken nickel mine

The implementation of IGE nickel mine project in Rönnbäcken near Sto- ruman is key project for all future mining projects in Västerbotten. Region itself has long tradition in mining industry. Boliden company started activity in the northern part of Västerbotten. New mine could also increase metal industry in the region. Boliden has big plant in the port of Skellefteå and new mines could need expansion also in the refining process.

Projects that speed up with Rönnbacken nickel mine: Other mining projects and industrial investments

133 5. NORTH OF NORWAY

Airport ARCTIC SEA Harbour Lakselv

Railway Andenes

Svolvaer Narvik Leknes

Bodø Pajala Mo I Rana Gällivare

Arvidsjaur Brønnøysund Mosjøen

FINLAND russia

norway

sweden

134 5.1 Finnmark, Troms, Nordland

The Norwegian High North consists of three counties: Finnmark, Troms and Nordland. Population of Finnmark is 75 207 and the total land area is 48.618 square kilometres. Most of the population live along the coast. However, the indigenous people (Sami), about 10% of the population - have a special status with its institutions and live mainly in the inland. 5% of the population in Finnmark is of recent foreign origin and mainly from Russia and Finland. The Sami people constitute the majority in Finn- mark’s interior parts, while the fjord areas have been ethnically mixed for a long time. The Finnic Kven residents of Finnmark are largely descend- ants of Finnish immigrants who arrived in the area during the 19th century or before from Finland, suffering from famine and war.

68º-70º North, Troms is a county in North Norway bordering Finnmark to the northeast and Nordland in the southwest. To the south is Norrbotten Län in Sweden and further southeast is a shorter border with Lapland Province in Finland. To the west is the Norwegian Sea (Atlantic Ocean). The entire county is located North of the Arctic Circle. The Gulf Stream running up the cost gives the county a temperate climate. Area is 25.877 square kilometres

Troms county has a total of around 158 000 inhabitants. Major cities and municipalities are Tromsø (71 295), Harstad (2640), Lenvik (11 345), Mål- selv (6 599) and Balsfjord (5 502). More than third of the county’s population lives in the City of Tromsø. In Troms, three different cultures meet: Norwegian, Sami and Kven cultures. Approximately 10% of the population is of Sami heredity.

Nordland is located along the northwestern coast of the Scandinavian peninsula and extends about 500 km from Nord-Trøndelag to Troms. From the county border in the North to the southern border the distance is about 600 kilometers. At the narrowest the county is only 6 kilometers wide from the coast to the Swedish border. Area is 38.456 square kilometers.

135 Population in Nordland is 238 124 which of 49 400 reside in Bodø and 18 473 in Narvik cities. Nordland has population of about 3000 Sami people, of whom 8% are engaged in reindeer herding.

Business in Finnmark

The economy of Finnmark grows about just as much as in the country as a whole. As a result of this growth there is a lack of workers, notably in the building industry. Problems are biggest in the western part of the county. Finnmark is a big exporter of seafood, minerals and LNG gas. The value of all export seen under one was according to figures given by The Con- federation of Norwegian Enterprise (NHO) of Finnmark 18 milliards of Norwegian crowns in 2010. Such figures put Finnmark at the first place in added value pr. county inhabitant.

Finnmark is geographically situated close to rich energy resources while prospecting activities for oil and gas in the Barents Sea are being stepped up. Local economic entrepreneurs and scores of subcontractors are involved in this. At the same time work goes on with the development and production of wind and water based power stations. An own company was recently founded with the purpose to build and operate wind and water based power stations in Finnmark in cooperation with local power producing companies and Finnmark Estate Agency which is owner of the ground.

Reindeer husbandry is intrinsic to Sámi culture and identity. In Finnmark more than 2.000 persons are somehow associated with reindeer husbandry. A number that has been stable for a while, although the number of units as well as the number of reindeer has decreased.

Finnmark is one of the most tantalizing destinations in Europe. After many years with a big flow of tourists during the summer season, winter tourism has increased after a lot of efforts were made by the tourism industry.

136 But also the competence industry, consisting of many different types of economic activity, is on the increase in Finnmark. Firms busy with this are different from other types of economic activities as their main input factors are not dependent on raw materials, energy, machines or equipment. In such competence based firms the main input factor is competence as such.

Living and working far north in our country has a lot of economic advantages. Some of these are aimed at private persons while other measures aim at companies in Finnmark or in the northern part of Troms county. The reason for this is that the Norwegian Parliament in 1990 ratified a special enterprise zone for Finnmark and North Troms.

The measures for companies provide good framework conditions for both companies which already exist and for new ones. Most types of companies are exempted from Employers’ National Insurance Contribution and there is no tax on used electricity. Measures aiming at individuals give inhabitants of Finnmark advantages such as lower income taxes and annual reductions of student loans. This last mentioned measure is often considered the best existing private economy support.

Annual reduction of one’s student loan is given with up to 25.000 Norwe- gian crowns a year. Calculations show that these different support measures taken together have a value of up to 100.000 Norwegian crowns a year for a 4 persons household.

Hammerfest

Hammerfest is the host municipality for Statoil’s LNG facility (Snøhvit) and ENI’s regional and local office and operating organisation for the Goliat field. As a result of the introduction of petroleum activities in the Barents Sea, both national and international suppliers have opened offices in the region, opening the door to a number of new and interesting jobs. Since the final decision was reached to develop Snøhvit and until the time of writing, the region of Hammerfest has gained more than 1,000 new jobs and the town’s population has risen by approx. 1,000 persons, with the

137 highest rate of growth identified within the age group of 19 to 39 years. Polar Base is the main hub for oil-and gas-related activities in the Barents sea is located in Hammerfest, in Rypefjord, 5 km from Hammerfest centre.The Polarbase area is a powerhouse in Finnmark with varied industry and other mercantile companies. The supply business for the oil and gas industry plus service companies for other businesses are localized in Po- lar Base. A small part of the area is reserved for the fishing industry, cold storage, fish-processing plants, etc.

Kirkenes

Kirkenes town has a population (2012) of 3,444. When the neighbouring suburban villages the urban area reaches a total population of almost 8,000 people.

138 The International Barents Secretariat is located in Kirkenes. One of its tasks is to create cross-border cultural, educational and business relations in the Barents Region. There is now substantial optimism in the town as a consequence of the increased petroleum-drilling activity in the Barents Sea. Kirkenes is the Norwegian Gateway to Russia. Border crossing station Storfjord/Borisogelbsk is just outside the town. Closest neighboring towns in Murmansk Region are industrial centers Nikel and Zapoljarnyi. Road to Murmansk is in excellent condition and the distance is only about 150 kilometers.

Kirkenes port is the center of business in the Norwegian High North. The port is an important center for passenger traffic and the end point of Hurti- gruten: regular, all-year traffic operations between Bergen and Kirkenes. Kirkenes port has ore transport (2,9 million tonnes), fish transport and service transport of oil and gas industry (total volume of other transport is 112 000 tonnes. Deep-water channel and all-year ice-free transport service , ready-made plans and ongoing investments exist for developing the port for unit load transport and already made 2–3 billion crown investments are the basic factors in the future development plans of Kirkenes port.

139 Business in Troms

Principal industries are fishing and fisheries, agriculture, services, tourism and public service industries. The county is rich in resources and the location offers particular advantages, especially in the fields of fisheries and aquaculture, extraction of mineral resources, energy production and tourism. With the University of Tromsø and the colleges in Tromsø and Harstad the county has a considerable number of jobs within education and research particularly in the fields of science and medicine, particularly telemedicine.

The Norwegian armed forces is a vital employer in Troms, having the seat of the 6th army division, Bardufoss Air Station, helicopter wings and radar stations in the county. The armed forces employ over 2,000 people in Central Troms.

Agriculture

In the south of the county there are areas with a long agricultural tradition. Farther north there are more and more instances of farms combining agriculture with other business activities. Much of Norway’s goat’s cheese is made from the milk of more than 20,000 dairy goats in the county. Traditional agriculture is being re-adjusted as farmers develop supplementary industries, such as tourism and the production of high- class niche products.

Fisheries

The population of Troms has harvested from the resources of the sea since time immemorial. A lot of the county’s trade is still related to the sea. The number of fishermen has been reduced, however, due to larger and more efficient fishing fleets. It is also evident that many consumers are willing to pay more for the highest quality seafood.

140 Industry

Troms industry is mainly tied to the fishing industry and related industries. Within the field of fisheries and aquaculture, development, research and an increase in competence will be large-scale areas of commitment in years to come.

New business

The research in Tromsø plays a major role in the development of new business opportunities in the county. Competence and research have provided a breeding ground for development within fields such as marine biotechnology, information and communication technology, earth observation, satellite monitoring and space research.

Marine biology is an area of commitment with a huge potential. Busi- ness and industry in Troms has gradually become more integrated within the global economy, due to the fact that these new industries are mostly export industries. Consequently, business and industry are ever more dependent on global markets and international business conditions.

Transport by land, sea and air is well developed with Tromsø as the central point of the county´s transport system. Troms is the main port to the Arctic waters.

The multitude of islands and deep fjords presents great communicational challenges. Previously, the boat was the only alternative. Today, bridges and tunnels provide an increasing number of mainland connections. However, the terrain still presents major challenges because of factors such as the volume of snow and danger from landslides. Express boats and small aircraft cut down travel time to a minimum.

Fast boats carry goods and passengers up and down the coast. The coastal steamer is also an important means of transport that links many coastal communities together. Hurtigruten line has become internationally very popular tourist attraction.

141 The road network is well developed throughout the county. The county has no railway system. The closest railway station is situated in Narvik. The largest airports, Evenes at Harstad, Bardufoss and Tromsø, connect the county with the rest of Norway and the world beyond. Tromsø airport has a direct service to Murmansk and Archangel in north-west Russia.

Tromsö is the biggest city in North Norway with over 71.000 inhabitants. It is famous tourism center and now also developing to one of the business centers of Norwegian High North offshore activities. Aker Solutions has opened engineering office in Tromsö in 2012 starting with 50 employees. Company has plans to expand the office up to 300 persons. The office will work with maintenance and modifications projects and field development projects in cooperation with other Aker Solutions offices in Norway. In future Aker Solutions office expansion is included in Nordområdesenter- project in the southern part of the city. Tromsö University, UIT The Arctic University of Norway is the northernmost university of the world. Its location on the edge of the Arctic implies a mission. The Arctic is of increasing global importance. Climate change, the exploitation of Arctic resources and environmental threats are topics of great public concern, and which the University of Tromsø takes special interest in.

Harstad is another town in Troms county which is developing as a Norwe- gian High North business center. Statoil has decided to locate the Barents Sea operations center in the town which has about 23.000 inhabitants. It´s location is about 300 km south from Tromsö. Town is also planning to build a new base for offshore business called Nordlysparken within next five years.

Business in Nordland

Nordland is one of the country’s largest export counties within raw materials and industry. Nordland is also the economic hub of Northern Nor- way. The industrial area of Helgeland – concentrated in particular around Mosjøen and Mo – is the main such area north of Dovre and the second biggest in Norway. The processing industries at Mo industrial park have a combined annual turnover of around 3 billion Norwegian kroner. In total,

142 Nordland’s processing industry encompasses close to 20 businesses. In 2004 these firms exported goods to a value of around 9 billion kroner.

The trade and industry in Nordland consist of metallurgical, cement and fertiliser industry, fisheries, fish-farming, agriculture, forestry and timber, services, tourism, assorted light industry and small shipyards. The sea also provides a living for the people of the region. Nordland has the country’s largest fishing industry with more than 3,000 active fishermen (2006). Large quantities of fish are brought ashore with an export value of close to four billion Norwegian kroner. The enormous growth in fish farming has been a major addition to the trade in local natural resources. Nordland is the country’s second biggest fish-farming region.

Nordland is Norway’s largest producer and supplier of electrical power. The development of the Svartisen hydroelectric facility in the 1980s and 90s was at that time the biggest in the country. The quantity of available energy attracted several major industries to the area. Elkem and Hydro all have large production facilities in Nordland.

Oil and gas have raised great expectations in Nordland. Reserves have been found in several fields that are still unopened to development. The oil industry brings together considerable knowledge and expertise.

Nordland is connected to international markets by a network of air, rail, and ferries. Bodø is a communications hub for aeroplanes, trains, buses, the coastal express boat and fast-going ferries.

Nordlanders are a people of ferries, and the famous Hurtigruten is also based in Nordland. Over the past few decades big investments have been made to improve infrastructure within the county. New roads and bridges bring people and the various parts of the county ever closer together. Twelve airports make Nordland still more accessible for those who live and work here.

143 City of Narvik in the northern part of Nordland County is one of the most important transport hubs in the High North. Iron ore products from LKAB are transported by train from Kiruna to Narvik and shipped via LKAB’s own port facilities at Narvik. In the port all handling of pellets is done in door in covered silos and ware houses.

The new logistics structure also includes complete modernization of the Narvik ore port (project SILA), which was completed in the autumn of 2009. This includes construction of a whole new storage and discharging facility with 11 underground silos in Narvik. The Narvik ore port is free of ice all year round. In 2012 LKAB shipped about 18,6 Mt from the port in Narvik.

New mining company Northland Resources is also shipping iron ore from the Narvik Port. Company uses already existing roads (150 km) and railway (226 km) from Kaunisvaara to the Port of Narvik. At the ice free Port of Narvik the Iron Ore Concentrate will be reloaded on Cape Size Ves- sels. On December 1, 2011 Northland received construction permit for a new iron ore terminal in Narvik, Norway. The terminal, which is expected to efficiently load vessels of up to 180,000 tonnes, will consist of a quay, an unloading facility for the railcars, a storage building and a ship loader. The first shipment from Port of Narvik took part 25 th of February 2013.

(Sources: finnmark.no, Hammerfest kommune, Kirkenes näringshan)

144 5.1.1 Investment Potential 2014–2025

Industry: Aluminum plant, Hammerfest 1.300 m€ DRI steel mill, Hammerfest 500 m€ Carbon black plant, Hammerfest 135 m€ Gas power plant, Hammerfest 270 m€ Elkem Salten 45 m€ Wasco Coating, Mo i Rana 30 m€ Vesterålens AS, Sortland 20 m€ Fishing industry, North Norway 10 m€ Total: 2.310 m€

Mining industry: Sydvaranger Gruve AS, iron mine expansion 280 m€ Rana Gruber AS 42 m€ Nussir AS Kvalsund copper mine 350 m€ Total: 672 m€

Oil and gas: Johan Castberg – oilfield 12.000 m€ Veidnes oil terminal, Honningsvåg 1.000 m€ Aasta Hansteen gas field, Nordland 5.000 m€ Skarv,Skuld, Goliat,etc –fields 6.720 m€ Kirkenes Oil Terminal 280 m€ Sandnessjön base, Nordland 150 m€ Bröndre base, Nordland 150 m€ Nordlysparken, Harstad 115 m€ Polarbase, Hammerfest 11 m€ Total: 25.426 m€

145 Hydro power: Finnmark 20 power plants and small power 2.970 m€ Nordland/Troms projects 950 m€ Total: 3.920 m€

Wind power: Statkraft Development AS 1.836 m€ Varanger Kraft AS 700 m€ Statoil ASA Offshore/Finnmark 840 m€ Norsk Miljökraft AS 1.078 m€ Vindkraft Nord AS 336 m€ Nordkraft Vind AS 200 m€ Finnmark Kraft AS 1.351 m€ Fred. Olsen Renewables AS 1.800 m€ Troms Kraft AS 2.824 m€ Nord-Norsk Vindkraft AS 1.476 m€ Nord-Norsk Havkraft 3.480 m€ Total: 15.921 m€

Energy transfer networks: Nordland, power line and transformers 315 m€ Ofoten – Hammerfest power line 360 m€ Finnmark, power lines and transformers 585 m€ Total: 1.260 m€

Tourism: Målselv Fjellandsby, Blånisseland 100 m€ Buchardt Hotell, Tromsö Sörbyen 100 m€ North Cape Turn around - project 10 m€ Total: 210 m€

146 Transport infrastructure: Nordkjosbotn-Kirkenes road 115 m€ Indre Nordnes – Skardalen road 60 m€ Alta western road 150 m€ Tromsö port 30 m€ Narvik port, Northland terminal 135 m€ Fagernes terminal 70 m€ Hålogaland bridge 280 m€ Fauske-Nordkjosbotten road 65 m€ Gimsöy airport 225 m€ Helgeland airport 225 m€ Mosjöen Toventunneln road 70 m€ Railway Narvik – Swedish border 1.200 m€ Grötnes airport, Hammerfest 300 m€ Kirkenes Industrial logistics area 50 m€ Arctic railway, Norwegian side 1.000 m€ Total: 3.975 m€

Public investments: Helse Nord, Nordland 340 m€ Helse Nord, Troms 785 m€ Helse Nord, Finnmark 205 m€ Nordområdesenter Tromsö 450 m€ Total: 1.780 m€ All total 55.474 m€

147 5.1.2 Development of the Region 2015–2020

Norway is still number one area in European High North regarding investment plans and projects. Total costs of planned investments is more than 55 bln€. Energy sector is constantly on the top of the investments list including offshore and onshore, wind power and hydro power. The fjords of the region are ideal for wind power, and hydropower, which is integral to the energy production framework for the entire nation, utilises the vast water resources of mountain lakes.

At present, the electricity transmission network of northern Norway does not facilitate use of energy produced today and in the future in its own region. Consequently, the construction of new transmission networks is currently being planned for all three counties.

There will also be substantial investments into the traffic network, as the terrain on North Norway is extremely challenging. The only form of transport that is problem-free is seaborne transport. The internal freight transport in the area is primarily handled by road.

The national railroad network only runs as far as Bodø in the north, the administrative centre of Nordland County, and the Swedish rail network travels along the Kiruna ore haulage track to Narvik, from which freight has to be transported by road. Flight connections are vital for passenger traffic. The State is significantly subsidising regional flight connections.

The previously closed iron mine in Kirkenes was reopened in 2009 and is working fine. Plans for expansion are evaluated and expected. The opening of a large copper mine is being planned for Kvalsund, close to Hammerfest, and at the same time preparations are being made for reopening of the former Finnish-owned Bidjovagge gold-copper mine near Kautokeino. The environmental impacts of the mining industry have also hit the headlines in North Norway, and the Sámi have questioned the opening of mines. Also the low price level of raw materials in the world market have been postponing the implementation of these projects.

148 Tourism in Norway has experienced a boom. The Hurtigruten cruises along Norway’s coastline have been particularly popular. The route is also significant for the logistics for its own region and the increase in foreign passengers has caused a few problems. North Norway is also popular destination for international cruise business. Tourist resorts are also being built. Målselv municipality close to the City of Tromsø has been constructing a Norwegian version of a fell resort with its own Santa Claus Land. This project has not been successful, because the main company of the project was bankrupted in 2013. Anyhow the project is continuing with a little bit lower ambition level.

Oil and gas projects have been the flagships of North Norway investment plans. In March 2014 ENI Norge is still finalizing the Goliat project, which has delayed from the original plan. The floating platform should arrive in summer 2014 to Polar Base in Hammerfest to be finalized. This happens about one year later that was planned.

149 Statoil announced in 2012 that two enormous projects will be implemented. The first to commence is the construction of the Aasta Hansteen gas field, located in the Norwegian Sea off the coast of Nordland. Gas is conducted southwards via a pipeline and further on to the network linking to Europe. This project is continuing as planned.

The other project which should have been implemented is Skrugard/ Havis oil field, which by scale should be nearly three times the size of the Goliat project. Statoil published details on the construction of the future field’s terminal for Veidnes, north of Honningsvåg and near the North Cape. A pipeline stretching 280 kilometres was planned to run from the field to the shore, where should be built big terminal with estimated to cost around 800 million euros. This enormous oilfield was renamed to Johan Castberg. Some months later in June 2013 Statoil announced to postpone this project. According to the announcement Statoil has continued to mature the resource base and development plans for the project. There are still uncertainties related to the resource estimate and investment level. Company named also decision of the Norwegian government to reduce uplift in the petroleum tax system, which reduces the attractiveness of future projects, particularly marginal fields and fields which require new infrastructure. This is why it is necessary to review the Johan Castberg project.

This announcement happened only a few months before the parliament election in Norway. Some specialists assumed that Statoil tried to push the Government and postponing was a political stunt. Success of the Government was very bad in the parliament election in September 2013. New government with winning parties started in October 2013. All the time everyone has been expecting decision from the new government to abolish the harmful legislative amendment that postponed Johan Cast- berg project. Nothing has so far happened and the discussion continues.

From Statoil point of view the biggest problem is that the possible pipeline from oilfield to Veidnes in Honningsvåg municipality is not anymore profitable. Statoil counted that government gives same size subsidies to

150 pipeline like in Snow white project in the beginning of the 2000s. Without this subsidy the whole plan is probably not profitable. Taking the oil from Johan Castberg directly from the platform or platforms requires new plans and extra costs.

Profitability of oil wells and gas in Barents Sea has become controver- sial after the success of shale gas and oil in the USA. It looks like every planned offshore project in the Arctic has been postponed. Shtokmanovs- koje is not realistic maybe for decades and the situation in North Norway begins to have resemblance with the Shtokman project. Representatives of Statoil have not given any dates in recent Arctic conferences when the planned projects like Johan Castberg could be implemented. Statoil directors confirm only that the company has come to the Arctic and they are going to stay there the next 40 years.

If the Norwegian offshore projects are postponed over 2020 the development in the region is going to slow down because they are the backbone of expected development programs like some made by SINTEF research institute has issued. In a preliminary strategy is described on how North Norway can be industrialised based on Barents Sea gas and raw materials from neighboring regions. If projects are not implemented the strategy is postponed to 2030 or even behind.

The significance of Hammerfest as an offshore centre has not suffered because of the aforementioned decisions. ENI Norge is establishing its own northern centre in the city and Aker Solutions continues to develop its service base activities in the city, as well as investing into the development of underwater technologies. Snow white gas field is still producing gas to Melköya LNG-plant. Probably Statoil is going to invest in Snow white to increase gas production. Pipeline is there ready and does not need any investments.

151

Other town that continues to grow is Kirkenes. Statoil has entered into agreement with Rosneft for further exploration of the so-called border agreement area. For the first time, this will shift the focus of offshore projects on a practical level in the direction of East Finnmark. Kirkenes is here natural base for actions and the Kirkenes Port has enormous development possibilities.

5.1.2.1 Investments expected to start first

In spite of the postponements in oil and gas project the economy of North- ern Norway continues to grow. Almost all projects regarding transport connections are going to be implemented. Decisions have already been made in the National Transport plan up to 2024. Energy grid is renewed and public hospitals are going to be built. Probably also Kirkens mine expansion is starting when the raw material prices are stabilizing on higher level. Small tourism projects are included in projects that will be starting before 2020. Wind energy projects are implemented especially in Nord- land.

152 Projects: Elkem Salten 45 m€ Wasco Coating, Mo i Rana 30 m€ Vesterålens AS, Sortland 20 m€ Fishing industry, North Norway 10 m€ Aasta Hansteen gas field, Nordland 5.000 m€ Kirkenes Oil Terminal 280 m€ Sandnessjön base, Nordland 150 m€ Bröndre base, Nordland 150 m€ Nordlysparken, Harstad 115 m€ Polarbase, Hammerfest 11 m€ Sydvaranger Gruve AS, iron mine expansion 280 m€ Rana Gruber AS 42 m€ Nordland, power line and transformers 315 m€ Ofoten – Hammerfest power line 360 m€ Finnmark, power lines and transformers 585 m€ Nordland/Troms hydro power projects 950 m€ Nord-Norsk Havkraft wind power 3.480 bln€ Nordkjosbotn-Kirkenes road 115 m€ Indre Nordnes – Skardalen road 60 m€ Alta western road 150 m€ Tromsö port 30 m€ Narvik port, Northland terminal 135 m€ Fagernes terminal 70 m€ Hålogaland bridge 280 m€ Fauske-Nordkjosbotten road 65 m€ Gimsöy airport 225 m€ Helgeland airport 225 m€ Mosjöen Toventunneln road 70 m€ Railway Narvik – Swedish border 1.200 m€ Kirkenes Industrial logistics area 50 m€ Målselv Fjellandsby, Blånisseland 100 m€ Buchardt Hotell, Tromsö Sörbyen 100 m€

153 North Cape Turn around- project 10 m€ Helse Nord, Nordland 340 m€ Helse Nord, Troms 785 m€ Helse Nord, Finnmark 205 m€ Nordområdesenter Tromsö 450 m€ Total: 16.338 m€

5.1.2.2 Investments waiting for better times

North Norway doesn´t have many projects that are postponed to unde- fined future. New mining projects like Kvalsund projects have to wait for higher raw material prices and also problems concerning Sami reindeer herding and mining must be solved. Huge investment project Finnish Arc- tic Railway is waiting for better days not because of Norwegian decision, but because of Finnish Transport policy. Norway has announced that it is ready for cooperation in cross border transport projects with Finland even regarding financing, but the initiative must come from Finland. So far Finns have even denied to start to discuss about this. Some big wind power and hydro power projects are postponed.

Projects: Arctic railway, Norwegian side 1.000 m€ Nussir AS Kvalsund copper mine 350 m€ Finnmark 20 power plants and small power 2.970 m€ Rest of the wind power 12.441 m€ Johan Castberg – oilfield 12.000 m€ Veidnes oil terminal, Honningsvåg 1.000 m€ Total: 29.761 m€

154 5.1.2.3 Key investment project of North of Norway

Johan Castberg oil field

The decision to start the implementation of Johan Castberg oil field is the key to all big investments in North Norway. Aasta Hansteen gasfield near Nordland and possible expansion of Snow white-1 are based on old projects and existing plans. Johan Castberg would be totally new oilfield project and it would show that offshore projects in Arctic Regions are still profitable in spite of all shale gas and oil plans.

One big player in this game is the political crisis in Ukraine and Crimea. Gazprom is providing a lot of energy to Central Europe and especially to Germany. If the crisis continues or the solution is not found to Ukraine/ Crimea the tension could stay between Russia and USA and also with EU. This could increase the need to get energy from the west.

The new energy policy of Germany is still making confusion on the Eu- ropean energy market. This can be seen in the unbelievably increasing demand of coal, when other energy is much more expensive.

If Johan Castberg decision is made soon and it is positive, and the terminal is going to be build to Veidnes also other similar projects are proceeding more rapidly than expected. Total value of the planned investments in North Norway could in that case be more than double compared with present numbers.

Projects that speed up with Johan Castberg oil field: Giant offshore projects in the Barents Sea.

155 6. NORTHWEST RUSSIA - MURMansk region

Airport ARCTIC SEA Harbour Lakselv

Railway Andenes

Svolvaer Narvik Leknes

Bodø Pajala Mo I Rana Gällivare

Arvidsjaur Brønnøysund Mosjøen

FINLAND russia

norway

sweden

156 6.1 Murmansk Region

Murmansk Region is situated in the North-West of European Russia and it is one of the strategic areas of the country in the North-Western Federal District. The Region borders with the Republic of Karelia in the southwest and with Finland and Norway in the west and north-west. The Mur- mansk Region is one of the few Russian regions to share the border with the European Union and NATO countries.

The strategic importance of the Murmansk Region is based on enormous raw material resources and also military political importance. The Region is the base for Northern Navy ensuring defence capacity of the northern frontier. Headquarters of the Navy is located in Severomorsk about 20 km north of Murmansk.

Murmansk port is open all year round and it is the biggest Russian port situated to the north of the Arctic Circle. The products of Kola Peninsula mining industry is shipped to the world market from Murmansk. Nuclear icebreakers have ensured year-round Arctic navigation.

The Region occupies an important geopolitical position in relation to regions with a developed industry connected to it with land, sea and air routes. The location close to the border, significant exporting capabilities and available transport links establish good conditions for enhanced cooperation with other countries. The Murmansk Region is an active member of the international Barents Euro-Arctic cooperation.

As of early 2012, the Region includes 12 urban okrugs (Murmansk is the regional capital), 5 municipal districts and 23 settlements, 13 of them urban and 10 of them rural.

Population of the Region has decreased in 20 years from 1.2 million inhabitants to less than 800.000 inhabitants. People have moved back to their home regions or to cities like St. Petersburg and Moscow. The population density is 5.4 / sq. km. Population has concentrated in cities where live almost 93% of the inhabitants. Rural areas have only 7% of

157 population. Nationalities are (2002): Russians are the majority in Mur- mansk Region with 85.%, Ukrainians 6.4% and other nationalities 8.4% are minority. Sami people are living in Lovozero area and total population of Sami is less than 2000 people.

The total amount of inhabitants in the Murmansk Region was in 2012 787 900. The biggest towns are Murmansk (305.000 inhabitants), Apa- tity (59.200 inhabitants), Severomorsk (50.000 inhabitants) and Monche- gorsk (44.600 inhabitants).

Business community

Mining industry is the backbone of Kola Peninsula economy. In the Mur- mansk Region, there are over 60 large deposits of various raw minerals where 30 types of useful minerals are extracted. Most deposits of the minerals are of national significance, and of international significance as far as apatite, nepheline and cyanide ores and rare metals are concerned. The economic specialisation of the region includes extraction and processing of ferrous and nonferrous metal ores, industrial production of copper, nickel, cobalt, semi-fabricated precious metals products, primary aluminium and apatite concentrate that is a raw product for phosphate fertilisers.

The share of the Kola land of the total Russian production is 45% in nickel, 11 % iron-ore concentrate and 7% of refined copper. The Region is the only producer of apatite, nepheline and baddeleyite concentrates (100% are produced in the Murmansk Region).

Main industrial companies

JSC “Kolskaya GMK” is a single complex for extraction of sulphide copper and JSC ores and production of precious metals. Company is a division of Norilsk Nickel located in the Murmansk Region. Most important mines of Kola GMK are in Zapoljarnyi, Pechenga area and smelters in Nikel and in Monchegorsk which is the headquarters of the company.

158 JSC “Apatit” extracts and processes apatite and nepheline ores of the Khibiny deposits which are part of the largest and richest deposits in the world as well as the basis of phosphorous raw materials in Russia. JSC Apatit is part of Fosagro company.

JSC “SZFK (North West Phosphorous Company)” is new industrial company in the Murmansk Region. It opened the first mine in Rutshij Olenij near the town of Kirovsk two years ago. The company belongs to Akron group.

JSC “Kovdorsky GOK” develops the Kovdor deposit and produces iron- ore, apatite and baddeleyite concentrates. It is part of EuroChem company. Kovdor is near Finnish border and the company has been interested about the Sokli mine deposit on Finnish side only 54 km from the town of Kovdor.

JSC “Olkon” extracts banded iron formations and sells high-quality iron- ore concentrate. It is a part of Severstal company which is the second biggest steel company in the world.

“KAZ-RUSAL”, a branch of United Company RUSAL, the biggest aluminium company in the world. KAZ smelts aluminium from aluminium oxide delivered there. The smelter and the plant are in the town of Kan- dalaksha.

The major production facilities were built decades ago, and the enterprises currently aim at deep-level mining and underground mineral extraction which requires upgrading and expanding the mining industrial infrastructure.

Change of policy in investment strategies

Shtokmanovskoje gas field project was prioritized in every development strategy of the Murmansk Region for over 10 years. In 2013 the imple-

159 mentation of the vast project seemed to been postponed to 2030 or later. This influenced to the policy of Regional Administration which decided to support the development of existing industrial companies.

Investment projects for replacement of decreasing yield at the existing deposits and for new regional production types are being currently implemented in the Murmansk Region. These are the projects of building mining and processing plants on the basis of the “Oleniy Ruchei” apatite and nepheline ore deposits, the “Fyodorova Tundra” platinoid deposits and the “Sopcheogorskoye” chromite deposit.

The construction project for the “Oleniy Ruchei” mining and processing plant is prioritised in the North-Western Federal District. A distinctive feature of the new mining and processing plant will be an integrated extraction of useful component from the ore.

The overall investment provides for RUB 30 bln and 3000 jobs. The capacity of the facility is one million tonnes of apatite concentrate a year after commissioning the 1st stage of the plant that took place in July last year and increasing the capacity of the processing factory to 2 m tonnes after commissioning the 2nd stage of the plant.

State-of-the-art energy-saving materials are used on the compound of the mining-and-processing plant which makes it possible to improve energy/ output ratio in the difficult conditions of the far north. In order to reduce adverse environmental impacts, modern waterworks have been built: the enterprise will use a closed water circulation technology to protect bodies of water from contamination. A storage facility for tailings using eco-friendly state-of-the-art pollution control is under construction. Over 60 contractors from various regions of the country are involved in the construction.

The project is being implemented within a public-private partnership including investment in social projects for reconstruction of the school, culture centre and residential buildings in the Koashva settlement in the amount of RUB 30 m.

160 Coordination board on development of investment and innovative activities in the Murmansk region (established on 05.11.2013) has assigned a strategic and priority status for the investment project «Construction of the ore-dressing and processing enterprise on the base of apatite- nepheline deposit «Oleniy ruchey» and adopted a decision to provide state measures for the project implementation.

On the 18th of November 2013 Governor of the Murmansk region and CJSC «North-West phosphorus company» have signed agreement on state support of the investment activity on the territory of the Murmansk region during the implementation of the strategy priority project «Con- struction of the ore-dressing and processing enterprise on the base of apatite-nepheline deposit «Oleniy ruchey». State support measures concern the tax concession on property, lowered rate on income tax during 5 years.

Industrial development of the apatite and stafellite ore deposit to replace the depleting amount of apatite concentrate is a priority task of the Kov- dor mining and processing plant modernisation. The project provides for reconstruction of the existing JSC “Kovdorsky GOK” industrial facilities on the basis of the complex for processing of technological deposit sands and the apatite and baddeleyite factory of the processing complex to build a new processing complex for apatite and stafellite ores.

The project implementation will ensure increased amount of iron-ore, apatite and baddeleyite concentrate production by more than 900 thousand tonnes a year. The amount of processed ores from the main open mine will increase by 2 m tonnes.

On the 18th of November 2013 Governor of the Murmansk region and CJSC «North-West phosphorus company» have signed agreements on state support of the investment activity on the territory of the Mur- mansk region during the implementation of the strategy priority projects «Modernization of production capacity of the JSC «Kovdorsky GOK»» and «Apatite-staffel ore-dressing complex». State support measures concern the tax concession on property, lowered rate on income tax during 3 years. 161 Fishing industry

Fishery is one of the traditional economic sectors of the Murmansk Re- gion and plays an important part in the socio economic specialisation of the region. Murmansk Region fishermen account for 16% of the overall Russian catch. About 90% of fish is processed immediately at sea.

The sector is based upon the fisheries fleet and the onshore complex that includes port facilities, onshore fish-processing enterprises and shipyard companies. Total of 141 organisations employing about 7.4 thousand people are active in fishing, fish farming, processing and tinning fish products and seafood in the Murmansk Region. 105 organisations are active in industrial and coastal fishing.

About 600 thousand tonnes of aquatic bioresources are harvested each year. The annual amount of fish production is 500 thousand tonnes, 60% of the production going to the Russian domestic market.

At the end of 2012, the Murmansk Region took the first place of all Rus- sian federal entities in the amount of shipped fish production – over RUB 30 bn.

The Strategy of Murmansk Region Socioeconomic Development until 2025 prioritises a comprehensive upgrade of fisheries and aquaculture sector development.

Tourism

There are 100 active tourism companies in the Murmansk region, 34 of the being orientated at domestic tourism. The main attractions of the Kola Peninsula are sport fishing, alpine skiing and cruises to the North Pole.

162 More than 20 companies are active in organising sport and amateur fishing. There are about a hundred of bodies of water allocated for use by those companies. 78 of these bodies of water are Atlantic salmon rivers. Atlantic salmon fishing traditionally takes place in the most popular rivers: Ponoi, Varzina, Rynda, Karlovka, Yokanga, Varzuga, Umba and Kola. An increasing number of smaller salmon rivers have become available for sport and amateur fishing. Wild Atlantic salmon has become a sort of “tourist brand name” of the Murmansk Region.

The town of Kirovsk is a centre for alpine skiing and other active outdoor tourism. There are three alpine skiing complexes in the town. The “Bolshoi Vudyavr” complex is the highest not only in the Khibiny Mountains but also for the whole north-western Russia. The elevation difference is 550 metres. A distinctive feature of the resort is its wide European-standard FIS-certified pistes suitable for both professional alpine skiers and begin- ners.

163 The Region is the only place where it is possible to go to the North Pole aboard a nuclear icebreaker. Two-week tours are very popular with en- thusiasts of exotic tourism worldwide. The most popular routes include tours to Svalbard and Franz Josef Land where one can see walruses, seals and whales, visit picturesque harbours with bird colonies and where polar bears sometimes come to the icebreaker surrounded with ice.

Transport

Murmansk is the only port in European Russia with an open access to major oceanic routes. Port of Murmansk has direct access to the North- ern Sea Route, that links the Atlantic to the Pacific through the arctic waters and provides access to natural resources of the Far North, Siberia and the Far East.

The Murmansk Region located at the junction of transnational routes and having reliable sea, railway, road and air links with industrial Russian regions can surely be called a northern gateway of Russia.

There are three seaports in the Murmansk Region. The main port of the Region is the Murmansk Port located in the Kola Bay. It is also the core port of the Arctic Basin as far as transporting goods to the Far North and far abroad is concerned.

The necessary infrastructure for receiving, servicing and repairing vessels is in place in the Murmansk port. It is a base for Russian shipping companies, the emergency and rescue fleet and the unique fleet of nuclear icebreakers which arrange piloting ships along the routes of the Northern Sea Route.

The Murmansk seaport is one of the ten biggest Russian ports in the amount of cargo transhipment. It is the only port in the country capable of receiving vessels of up to 300 thousand tonnes deadweight any time of the year due to non-freezing deep water area of the Kola inlet.

164 Cargoes going through the Murmansk port include general cargoes, liquid cargoes as well as containers, fish and fish products. The total cargo turnover is above 25 m tonnes a year.

Coal prevails in the overall amount of transhipped goods. The coal is handled in terminals of JSC ”Murmansk Commercial Seaport”, the biggest stevedore company of the Murmansk Region. The company also successfully handles apatite and iron-ore concentrates, non-ferrous metals, manganese ore, containers and other cargoes.

Two ports – Kandalaksha and Vitino – are located in the southern part of the Kola Peninsula in the water area of the Kandalaksha Bay. The Kan- dalaksha port specialises in transhipment of bulk and general cargoes, and the Vitino port is orientated at transhipment of oil products. The total cargo turnover of the Kandalaksha Bay ports is over 4.5 m tonnes.

The Murmansk Region is of significant interest for tourists from around the globe. The vessels of the FSUE ”Atomflot” icebreakers fleet provide tourist cruises to the North Pole, islands and archipelagos of the Central Arctic.

The Arctic Harbour project is being implemented in the framework of preparation to the 100-year anniversary of Murmansk in order to build the needed infrastructure for receiving and servicing cruise ship and ferries, create a regular ferry link with Norway and increase the number of foreign cruise vessels entering the port.

Development the regional port infrastructure is closely connected with development of the railway transport infrastructure. The general railway transport is a leading element of the regional transport system. It takes up a considerable share of the cargo and passenger transport market. Total length of railways in the Murmansk region is about 870 kilometres.

165 A reconstruction of passenger transport infrastructure facilities and creation of a single transfer complex uniting the sea, railway and bus passenger terminals are planned to be carried out in Murmansk in the future. There are two operational airports on the Kola Peninsula providing services for aircraft and passengers and handling of luggage, post and cargoes: in Murmansk and Apatity. There are also landing grounds for local airlines.

Up to 550 thousand passengers pass through the Murmansk Airport each year. The reconstruction of the runway, apron and lighting has been finalised by now. Reconstruction of the passenger terminal, cargo terminal and engineering networks of the maintenance zone is planned finalised by 2015.

Murmansk Transport Hub

The project of “Complex Development of the Murmansk Transport Hub” is the main transport infrastructure development project in the region.The project is being implemented within the sub-programme “Development of Transport Services Export” of the federal targeted programme “De- velopment of The Russian Transport System (2010–2020)” with the aim of increasing competitiveness and further development of the regional transport infrastructure.

In the project implementation, a year-round marine hub will be created for processing container liquid cargoes and transhipment of coal and mineral fertilisers. It will be integrated into the North–South international transport corridor.

The project provides for development of the Kola inlet water area, the sea, rail and road transport infrastructure development as well as logistics and warehouse infrastructure development.

166 In the framework of the new project, it is planned to build a new branch line and a cargo terminal on the western shore of the Kola Bay, recon- struct the existing coal terminal and build a container terminal, a logistics centre and a distribution zone on the eastern shore of the Kola Bay.

The project is being implemented in a private-public partnership, the total funding being over RUB 130 bn. The state funds the construction of an auxiliary utility infrastructure for investment projects to be implemented by private investors. The project, when implemented, will increase the Murmansk port cargo turnover to 70 m tonnes.

The Northern Sea Route underlies the Arctic transport system of Russia and the importance of Murmansk Transport Hub. It ensures economic integration of the Arctic territories both with developed areas of Russia and with other countries, gives access to major petroleum deposits and aquatic bioresources of the Arctic zone and to other strategic raw materials.

The presence of a powerful nuclear icebreakers fleet predetermines the use of the Northern Sea Route for transnational transit between the countries of North-West Europe and the Pacific areas (Japan, China, the USA and Canada) and its integration into the global transport system as an independent Eurasian transport corridor with year-round transport of export cargoes.

FSUE ”Atomflot” where an integrated icebreaker technology complex for the Russian federation civil nuclear fleet is based provides icebreaker pilotage for vessels along the Northern Sea Route, for exploration, scientific and research activities in the arctic seas and for emergency and rescue operations in the ice.

(Source: Murmansk Regional Government, Ministry of Economic Development of the Murmansk Region)

167 Future development of the Murmansk Region

Murmansk Regional Government has published a new forecast of the regional development to 2020–2030. According to the forecast for the period up to 2030 is projected to create new kinds of economic (industrial) activities, such as mining and quarrying of energy resources and oil refining; new form x s products: LPG, petroleum products, processing of chromite ore, platinum group metal ores; creation of a modern large transport and logistics center, including modernization of existing and creation of new port facilities to initiate the operation I special port economic zone, construction refinery and a plant to liquefy natural gas.

For transportation of goods for export, including production and refinery plant to liquefy natural gas will be used mainly by sea. Provides for the formation of active open space for international exchanges, tourism development, the use of transit potential of the Northern Sea Route, which will contribute to upgrade the nuclear icebreaker fleet.

Main investments of the region are following: • commissioning of the ore processing plant on the basis of deposits of apatite- nepheline ores ”Deer creek” (Rutshij Olenij, JSC SZFK); • implementation of integrated development of the Murmansk Trans- port Hub; • creating e transport hub based on train, bus arrangement with adjacent areas, airport network, road approaches to Marinas, • building on ore processing plant based on deposits of platinum group metals ”Fedorova-Tundra”; • building on ore processing plant on the basis of chromite deposits ”Sopcheozerskoe”; • building and on the modernization of the mining and mineral processing I production of vermiculite, phlogopite and pegmatite in Kovdor; • beginning of the active phase of implementation of integrated master- ing I Shtokman field, including the construction of a liquefied natural gas plant and pipeline;

168 • building on the Kola Nuclear Power Plant - 2; • building of the refinery on the Kola Peninsula; • construction of wind farms; • building and reconstruction of power grid energy system I Murmansk region (the ”National Rate” (modernization and construction of boilers in the Murmansk region); • building on North PES in Long Bay of the Barents Sea, the substation ”North” and the combined heat and power in Kovdor; • building on Ships nuclear icebreaker fleet • implementation of the project and the ”Russian Lapland”.

The forecast includes also the Shtokman Gas field which seems to be postponed up to 2020. There is also a plan to renew the power grid system of Murmansk Region. Especially the city of Murmansk has been suffering of the limited power transfer from Kola Nuclear Power Plant.

Cross regional product is going to increase from the level of October 2013 totally 2.1 times higher. GRP growth will be achieved mainly the growth of the economy conditioned m positive dynamics of investment and consumer demand, preserving state support areas of social and economic development. Industrial production is forecasted to grow in the same time frame totally 3.2 times higher. The mining industry is leading this production growth.

Implementation of major investment projects aimed at creating new jobs, diversify the economy, defining the growth of entrepreneurial activity, the development of social and infrastructure will create the foundation for the region to attract migrant workers, to keep out-migration of working age population and, accordingly, reduce the rate of decline in population of the region.

169 6.1.1 Investment Potential 2014–2025

Industry: Food industry, CJSC Rusky Losos, fishfarming plant 110 m€ Norilsk Nickel/KolaMMC Cobalt plant, Monchegorsk 50 m€ Monchegorsk industrial park 150 m€ Total: 310 m€

Mining industry: JSC Kovdorsky GOK, ore dressing 100 m€ JSC Kovdorsky GOK, technology upgrade 90 m€ OAO Pana/Barrick, Fedorova Tundra platinum project 1.000 m€ JSC Akron/JSC SZFK, Oleniy ruchej, Kirovsk, processing mill 700 m€ Norilsk Nickel, Yugo Vostochnaya Gremyakha titanium project 600 m€ Norilsk Nickel, Vuruchuaivench copper-nickel project 600 m€ Norilsk Nickel, Sopcheozerskoje chromium project 300 m€ OOO Apatit Vostostshny project 500 m€ Arcmineral Service Mining Company, Afrikanda titanium project 200 m€ Total: 4.090 m€

Oil and gas: CJSC Sintez Petroleum, oil refinery 800 m€

Hydro power: JSC Leningradskaya GAES/JSC Rusgidro, 160 m€ tidal power plant Dolgoya-Vostochnaya bay TGK-1, modernization Kola power plants 850 m€ Total: 1.010 m€

Wind power: Windlife-Energy BV, Murmansk-Tumanny 320 m€

170 Nuclear power: Rosatom, KAES-2, Polarnye Zori, two reactors 6.000 m€

Tourism: Winter sport centers, Kirovsk/Polarnye Zori 20 m€ Azimut/Hotel Arktika, Murmansk, reconstruction 50 m€ Russian Lapland, Revda 30 m€ Total: 100 m€

Transport infrastructure: Murmansk transport hub, Lavna 3.200 m€ Railway and bus stations, Murmansk 75 m€ Cruise terminal, Murmansk port 125 m€ KIP/MMPP Pechenga seaport project 1.500 m€ Total: 4.900 m€

Public investments: JSC Murmansk Heat Power plant 1.200 m€ Coal heat plants, Nikel, Motshegorsk, Zapoljarnyi 60 m€ Heat power transit pipleine, Apatity-Kirovsk 75 m€ Total: 1.335 m€ All total: 18.865 m€

6.1.2 Development of the Region 2015–2020

Murmansk Region has been during the last 30 years an area of giant investment plans and visions. Mikhail Gorbachev himself gave speed in October 1987 to all visions in his speech in the city of Murmansk. After that Soviet Union has collapsed and having suffered from negative migration for a couple of decades, the Murmansk region has gradually man- aged to balance its economy and the wellbeing of the area has improved.

171 The Kola Peninsula is strongly dependent on two factors: the non-ferrous metallurgy industry of the region and Military Forces of Russian Federa- tion. Metallurgy industry due to the global process of raw materials, has fared well over recent years. The salary levels of people living in the region have clearly increased in industry as well as with civil servants and soldiers. Also military section has had revival in the Region after hard times in the first decade after the collapse of the Soviet Union. Salaries have been raised according to federal policies. A raise in living standards can clearly be noticed in Lapland due to the dramatic increase in the border crossings by Russians at the Raja-Jooseppi and Salla border crossing points. The figures for the border crossings for 2013 were expected to have increased by over fifty percent from approximately two hundred thousand to somewhere between 300,000–450,000. On the national level, the number of border crossings is still minimal, but the increase from the just over one hundred thousand visitors in the early 2000s has been enormous.

Visa freedom belongs to the great expectations in the European High North. Negotiations between the EU and Russian Federation have pro- ceeded so well that year 2018 has been mentioned as the time when passengers don´t any more need visas in travelling between the Schengen area and Russian Federation. This would mean explosion in the border crossings also in the High North and would stimulate cross border business. Continuation of economic crisis in Russia has had effect on the exchange value of Russian currency, rouble. Serious political crisis in Ukraine has deepened the decline of rouble and made the situation in economic cooperation more serious. European union has decided to stop the visa freedom talks with Russia as one of the sanctions if Russia is not withdrawing from its political positions in Ukraine. This has brought much tension in all relations with the EU and Russia. The damage is not yet definitive, but the real solutions in solving the Ukraine crisis must be found soon.

Future expectations for the Murmansk region were set very high. Above all, the development boost provided by the commencement of the exploitation of the huge Shtokman gas field is still patiently awaited, despite

172 news reports rumouring that the project will be postponed until sometime in the future. Norwegian Statoil has left the project, and according to Nor- wegian sources, Gazprom has been evaluating abandoning the entire Shtokman project. Total, the third shareholder of the SDAG Company (Shtokman Development AG) established for the construction of the gas field, has announced its willingness to continue with the project. But not any time frame. In fact Shtokmanovskoje may be alive, but it has been probably postponed to the time after 2030 or even further. Shale gas has changed the situation in the USA and the same process is spreading all over the world changing the energy market.

The uncertainty regarding the fate of the Shtokman gas field also put pressures on the Murmansk regional administration. The realisation of the project is a significant matter for the region, but this is also associated with the renewal of the entire energy system of the Kola Peninsula to be based on natural gas. Now, even these plans were about to be totally reworked. Governor of the Murmansk Oblast, Marina Kovtun expressed her concerns on the matter to Vladimir Putin in October 2012. President Putin informed that the project has not been abandoned or shelved, but its realisation would commence before 2017. Obviously the Murmansk Regional Government is not relying any more on the Shtokman project. In the annual mining conference in Kirovsk the first deputy governor Alek- sey Tyukavin said that Shtokman has been a fairytale and further on the Region wants to develop existing mining and metallurgical industry. Also the new strategy of the Region states the same.

Anyhow Barents Sea is not totally forgotten. Gazprom finally opened the Prirazlomnye oil field to production. Rosneft has many agreements for cooperation in the Barents Sea. First with Statoil about the exploration of the new border area between the two nations. Rosneft has also agreed cooperation with the Italian ENI for working with oil and gas in the Barents Sea. A little bit further out in the Kara Sea, Rosneft is commencing cooperation with the American Exxon Mobil.

173 The other mega project of the Murmansk region is the Murmansk Trans- port Hub, which entails the renewal and expansion of the city harbour, and has already postponed its planned timetable. Now the Transport Hub is one of the key projects in the Region. Construction work is expected to start in practice this year, but we are still waiting for a final decision regarding the schedules. Last July, the Governor of the Murmansk Oblast, Marina Kovtun, signed a letter of intent for the commencement of planning procedures for the western coast of the Kola Fjord belonging to the traffic centre. The project includes the construction of a new coal terminal and new railway line of the Murmashi – Pechenga line. According to the news in the beginning of March 2014 Companies Stroygazkonsulting and Story-Trest have been approved to take part in a tender on the construction railway line along the western shore of the Kola Bay. Typically in Russia today both companies belong to oligarks. Stroygazkonsulting is controlled by billionaire Ziyad Manasir, the Story-Trest company is part of the business of Gennady Timchenko who was one of the main construc- tors of Sochi Olympics. He belongs to the friends of president Putin and has also Finnish citizenship.

Norilsk Nickel is the biggest taxpayer of the Kola Peninsula as well as being a key player. The company planned to renew the Monchegorsk smelting plant and start to refine nickel a little further. Today the plans are different. Norilsk Nickel is partner in a smelter project in Indonesia together with Indonesian Nusantara Smelting Corporation. Now this project is prioritized. The production of cobalt has also increased. The company concentrates its mining operations to the town of Zapolyarny located in the Pechengsky District. As far as concerns Pechenga, Norilsk Nickel also has plans to modify its smelting of nickel to refine metals recovered from the new Gremyakha Mine, e.g. titanium. The company is also involved in the planned chrome mine project to the west of Monchegorsk together with Severnaya Khromovaya Kompaniya.

The mining industry of Kola Peninsula has been making some substantial investments into the Murmansk region. The high prices for raw materials on the global markets did provide a welcome boost for these projects.

174 Companies expanding their operations include at least the Olenegorsk Mining and Concentration Works (OAO Olkon) owned by Severstal, and the fertiliser company SZFK owned by Akron that saw the inauguration of its million ton-producing Oleniy Ruchey apatite mine on 24 July 2012. Furthermore, the Apatite Group, which has recently resolved its long- standing contract dispute with Akron, is renewing step by step its technologies and planning to open a new mine in the Kirovsky District. The first international player is also entering the Kola Peninsula. The Canadian owned Barrick Gold Company has long time been planning the opening of its palladium/platinum mine together with Russian Investor company OAO Pana at Fedorova Tundra located in the centre of the region. Like- wise, the Kovdorslyuda mineral mine in the town of Kovdor has been expanding its production.

Finnish enterprises have also expressed an interest in the mining industry and its required technologies during last years. The Finnish companies already involved in the projects include at least Metso, Pöyry, Ahma In- sinöörit Oy, Firotec Oy and Paakkola Conveyors Oy. The Kovdor mining and processing facility owned by chemical industry giant Eurochem was interested in the Sokli Project of Yara Suomi Oy, but left the project in February 2013 for technological reasons. The company needs new raw materials for its operations during the course of this decade. Its plans are to reprocess the mine waste and potentially open a new mine at Vuorijärvi close to Alakurtti and the border of Finland which is a long perspective project.

The other industrial investments of the Murmansk region are experiencing difficulties. The long-awaited and prepared construction project for the new aluminium smelting plant for Kandalaksha appears to have been completely forgotten. The plans of oligarch Viktor Vekselberg’s company SUAL also interested UG RUSAL, with which the company later merged. The construction project was decisively postponed, as the company did not reach agreement for a sufficiently long-term electricity distribution contract. This project might rise again some day, because a major part of the raw materials used in aluminium process exist in Kola Peninsula.

175 Tourism has long been the focus of development schemes of the Mur- mansk Regional Administration. Despite efforts, breakthroughs have yet to be achieved. The region has a lack of sufficiently high standard accommodation facilities, and even though the Khibiny Mountains have the possibilities for the construction of a high standard ski resort, the projects have not really taken off.

Political crisis in Ukraine has already had impacts in the Murmansk Re- gion. The military forces have probably been in readiness during the escalation days of the crisis. Big military training operations have been happening in Kola Peninsula and according both to the media and other sources in Murmansk military forces are returning to Alakurtti base, about 70 km from the border between Russia and Finland. This time the base grows bigger than before. Helicopters are returning and also perhaps some parts of air force. A marine brigade from Northern fleet is also moving to Alakurtti.

It still appears likely that some investments for the Murmansk region will occur during the current decade, but the peak is sometimes after 2020. Nevertheless, the mining industry can be clear exception to this assump- tion.

6.1.2.1 Investments expected to start first

All projects related to mining industry technology upgrade have very good possibilities to be implemented within next years. Building of the ski centers in Khibiny mountains could be profitable after the Sochi building project is finished. Low value of ruble may boost domestic winter tourism. The city of Murmansk is celebrating 100 years in the beginning of Octo- ber 2016. Already now city has started several building and construction projects. Also some other projects like new railway and bus stations are going to be implemented. Murmansk Transport Hub has priority in the region and it is expected to start.

176 Probably also the need for energy in the Murmansk Region is speed- ing up plans to build new reactors to Polarnye Zori Nuclear power plant. Murmansk Region was planning a long time to get needed energy from Shtokmanovskoje, but change in implementation order is now necessary. Rosneft is also main partner in Finnish nuclear power project by Fenno- voima near the city of Oulu. Two similar projects not far away from each other could give synergy also to Russian side project in Kola Peninsula and make the implementation of KAES-2 project possible. This demands that the Parliament of Finland gives a new permit to Fennovoima project or accepts the changes in the existing permit.

Projects: Rosatom, KAES-2, Polarnye Zori, two reactors 6.000 m€ JSC Kovdorsky GOK, ore dressing 100 m€ JSC Kovdorsky GOK, technology upgrade 90 m€ Winter sport centers, Kirovsk/Polarnye Zori 20 m€ Azimut/Hotel Arktika, Murmansk, reconstruction 50 m€ Russian Lapland, Revda 30 m€ Railway and bus stations, Murmansk 75 m€ Murmansk transport hub, Lavna 3.200 m€ Total: 9.565 m€

6.1.2.2 Investments waiting for better times

Big industrial and energy projects demand better economic circumstances than today is available in Murmansk Region. Also public sector energy projects need better economy for Murmansk Region Government. This kind of projects have mainly been financed with the financing from international funds like EBRD and NEFCO. If political relations are freezing, these projects don´t proceed.

177 Projects: Food industry, CJSC Rusky Losos, fishfarming plant 110 m€ Norilsk Nickel/KolaMMC Cobalt plant, Monchegorsk 50 m€ Monchegorsk industrial park 150 m€ OAO Pana/Barrick, Fedorova Tundra platinum project 1.000m€ JSC Akron/JSC SZFK, Oleniy ruchej, Kirovsk, processing mill 700 m€ Norilsk Nickel, Yugo Vostochnaya Gremyakha titanium project 600 m€ Norilsk Nickel, Vuruchuaivench copper-nickel project 600 m€ Norilsk Nickel, Sopcheozerskoje chromium project 300 m€ OOO Apatit Vostostshny project 500 m€ Arcmineral Service Mining Company, Afrikanda titanium project 200 m€ CJSC Sintez Petroleum, oil refinery 800 m€ JSC Leningradskaya GAES/JSC Rusgidro, 160 m€ tidal power plant Dolgoya-Vostochnaya TGK-1, modernization Kola power plants 850 m€ Windlife-Energy BV, Murmansk-Tumanny 320 m€ Total: 6.340 m€

6.1.2.3 Key investment project of Murmansk Region

Murmansk Transport Hub

Most important planned project for the future development of Murmansk Region is Murmansk Transport Hub. The implementation of this 3.2 bln€ investment speeds up all other projects in the region and improves the economical activity. It confirms in practice that the visions of the Regional Government have been right. Transport Hub strengthens the position of Murmansk as a significant logistic center of Northern Sea Route.

The Murmansk Transport Hub project includes a deep-water logistics Hub – centre for handling of container and petroleum cargo, oil and mineral fertilizer transfer integrated into the North – South International Transport Corridor. According to the plan the implementation should happen before 2018, but the start has delayed.

178 Most of construction and reconstruction of new port infrastructure facilities on the coast of the Kola Bay, including construction of the coal, oil and petroleum products transfer terminals on the western coast opposite existing port. On eastern coast the plan consists of construction of a container terminal, reconstruction of a coal terminal, construction of storage and distribution areas connected to the container terminal.

Also new 28 km long railway is going to be built from existing Pech- enga railway, from Vykhodnoy to Lavna including new bridge over Tuloma river and construction of 10 railway stations and yards, reconstruction of track arrangement of 4 stations. Also roads must be built from Murmansk to the new port.

The ownership of Murmansk Commercial Sea Port-company was one of the reason to delay the start. EuroChem (Evrohim) -company which owns Kovdorski GOK- mining company bought the majority of the Sea Port in 2012. In December 2013 Russian oil giant Rosneft announced that it wanted to become a major shareholder in Murmansk Transport Hub with 75% of the stakes. This was absolutely a good sign, because after Gazprom seems to be withdrawing from Murmansk, Rosneft is ready to take place as the motor of investments and development in the region.

Projects that speed up with Murmansk Transport Hub:

OAO Pana/Barrick, Fedorova Tundra platinum project 1.000 m€ JSC Akron/JSC SZFK, Oleniy ruchej, Kirovsk, processing mill 700 m€ Norilsk Nickel, Yugo Vostochnaya Gremyakha titanium project 600 m€ Norilsk Nickel, Vuruchuaivench copper-nickel project 600 m€ Norilsk Nickel, Sopcheozerskoje chromium project 300 m€ OOO Apatit Vostostshny project 500 m€ Arcmineral Service Mining Company, Afrikanda titanium project 200 m€ Cruise terminal, Murmansk port 125 m€ Total: 4.025 m€ with Murmansk Transport Hub 7.225 m€

179 6.2 NORTHWEST RUSSIA - ARKHANGELSK REGION

Airport

Harbour ARCTIC SEA

Railway Lakselv

Andenes

Svolvaer Narvik Leknes

Bodø Pajala Mo I Rana Gällivare

Arvidsjaur Brønnøysund Mosjøen

FINLAND russia

norway

sweden

180 Arkhangelsk Region belongs to the northern part of North West Russia. It has 3000 km coast by the White Sea, Barents Sea and Kara Sea. The region includes the Nenets autonomous district, the Novaya Zemlya and the Franz Josef Archipelago. Total area of the region is 410.700 square kilometers.

Population in Arkhangelsk region is 1 230 000 which is 0.8% of Russia’s population. The population density is 2,2 per sq. km. and 74 % of the inhabitants live in cities and 26% live in rural areas. Ethnic groups are: Russian 94.2%, Ukrainians 2.tä1%, Nenets 0.6% and other nationalities 3.1%.

City of Arkhangelsk is the capital of the region and it has 356.000 inhabitants. Other bigger cities are Severodvinsk in the neighborhood of Arkhangelsk with 192.000 inhabitants, Kotlas with 60.500 inhabitants, Novodvinsk with 40.600 inhabitants, Koryazhma with 39.600 inhabitants and Onega with 21.300 inhabitants.

Industrial production

Industry is the key factor of Arkhangelsk Region economy. Main branches of business are forest industry and machine building industry. The Arkhangelsk region ranks eighth in Russia and second in the North-western Federal District in the volume of forest resources. Total square of commercial forests is 22 mln. hectares, timber reserves – 2,8 billions m3. Timber reserves of the Arkhangelsk region are recognized to be of high quality. Total forest reserves include 82% of coniferous forests and 18% - deciduous forests. Available cutting area is 48% of the total forest area.

The region produces 30% of Russia’s exported sawn material and 25% of paper and cellulose exports. Forestry, wood processing and pulp & paper are very important sectors of the economy-contributing over 40% to the regional production volume. Woodcutting in 2002 totaled 8 million cub meters (80 million cub feet), but 23 million cub meters can potentially be cut. According to regional administration, there are over 200 wood cutting enterprises in the region and some 30 wood processing companies.

181 According to expert estimates, regional enterprises produce 1.5–2 million cub meters of sawn timber, plywood, glued blanks, fireproof plywood slabs and other wood products, approximately half of volume being exported. There are also furniture manufactures. One of the most successful is Aquatechnika.

An impediment to increased production is poor road infrastructure, especially bad access to forests. Modernization and productivity enhance- ment on existing sawmills are the priorities for development of logging and wood processing sectors. Active processing and trading companies include Arkhangelsk Plywood Plant, Dvinosplav JSC, Primorsky Sawmill, Onega Sawmills, Solombala Sawing and Woodworking Combine, Timber Mill N3 and Timbex.

The three pulp & paper manufacturing facilities in the region are Kotlas (part of St. Petersburg-based Ilim Group), Arkhangelsk (part of Titan holding), and Solombala mills. In average, their output totals 728,000 tons of pulp, 320,000 tons of paper and 674,000 tons of cardboard. The mills have their own logging capabilities and cut a significant share of needed timber themselves. For example, Kotlas pulp & paper mill has 16 logging companies, which are using Timberjack logging machines. Products include sulfate pulp, cardboard, coniferous sulfite bleached cellulose, offset printing and bag paper, Kraftliner, foliage sulfate bleached cellulose etc. Arkhangelsk pulp & paper mill is part of Titan Holding with nearly 25,000 employees. Titan produces 35% of Russia’s cardboard. Its logging companies cut two million cub meters of timber every year (25% of logging in the region).

A strong machine-building industry has developed in the Arkhangelsk region and it is specialized in shipbuilding. Shipbuilding is an important part of the regional economics because of high competence and unique production assets. The largest enterprises of this sector are «Sevmash» and «Zvezdochka» which create near 90 % of proceeds of the sector.

182 These companies are constructing and repairing nuclear and diesel submarines, oil and gas platforms, ship vessels and others. The unique Rus- sian center for construction, repairing and utilization of nuclear power submarines was founded here. The enterprises have facilities and technologies for construction of oil and gas platforms and necessary unique competence for implementation of the project of construction of floating nuclear thermal power station.

There is an infrastructure for preparation of specialists for machine-building sector. Today in Arkhangelsk region there are two higher educational establishments which train such specialists: Arkhangelsk State Technical University and Sevmashvtuz which is a branch of the St.-Petersburg Ma- rine Technical University.

Sevmash has build an offshore ice-resistant platform for “Prirazlomnaya” oil field in the Pechora Sea. The total cost of the project was $1 billion. Sevmash is also a contractor of several oil companies to manufacture sea shelf platforms for oil and gas development in Sakhalin. Zvezdoy- chka has a contract from the Finnish shipbuilding company, Azipod, to supply screw propellers for civil ships. The company is also Norway’s contractor to build bearing structures for tidal electrical power stations. Zvezdyochka has experience in designing and manufacturing of floating bridge piers, pontoons, pontoon bridges of different length, ships, fishing trawlers, jack-up drilling rigs for exploration and exploitation of oil and gas offshore wells in the Russian Arctic. However, attraction of investment is difficult due to the fact that the enterprise is still government property and is engaged in Russian military programs.

Transport

Advantageous geographical position of the Arkhangelsk region gives important role in the transport system of the North-western Federal District and Russia. The region has a considerable transit potential. Arkhangelsk is the most optimal transport junction for cargo transfer between Europe and Asia. Nowadays two transport corridors go through Arkhangelsk:

183 Northern Sea Route and International Euro-Asian transport Corridor: North-South.

Sea transport plays the major role in international trade of Arkhangelsk Region, as well as in supplying some settlements along the seashore and on the islands. The main ports are located in Arkhangelsk—Narjan-Mar, Onega and Mezen’. The seaport in Arkhangelsk has 124 berths and is able to handle all types of cargo including timber, cellulose, containers, oil, metal, etc. Vessels with 9.2 meters depth can use the port. The port has also container terminal, the only in Russia’s European North (Rus- sia’s regions west of the Urals), where over 5.000 TEUs can be stored simultaneously. The owner of the Arkhangelsk Commercial Sea Port is Norilsk Nickel.

In case implementation of the project of construction of the railroad Syk- tyvkar-Perm (Belkomur) the Arkhangelsk region will get a shortest access to the regions of the Urals and the railroad Transsib which will open supplementary advantages for cargo transit.

The main railway goes from Arkhangelsk through Vologda and Yaroslavl to Moscow. There is a rail link between Arkhangelsk and Murmansk. No fast and short rail, river or road link exists between Arkhangelsk Region with eastern parts of Russia. East-West railway connection is problematic in Arkhangelsk Region. The Belkomur project is improving the situation, but the investment is very expensive. Only railroad connection from east to west runs in the south of the region, from Komi Republic through Kotlas in Arkhangelsk Region to Pudozh in Karelia Republic.

Talagi airport in the city of Arkhangelsk is the main civil airport. Also international flights to Tromsö, Norway are two times a week. There were also flights to Rovaniemi, Finland and Luleå Sweden, but they were ended about 10 years ago. There are regular flights to Moscow, St. Petersburg and some other Russian cities, carried out by Nordavia, local air company owned today by Norilsk Nickel. Other companies flying to Arkhangelsk are Aeroflot, Rossija and Utair. There are also small airports in many regional cities as well as several military airports. The flight time from St.

184 Petersburg to Arkhangelsk is 80 minutes. The flight time from Arkhan- gelsk to Moscow is slightly longer.

(Source: Arkhangelsk Region Administration)

Future Development of Arkhangelsk Region

The Government of the Arkhangelsk region has assumed some measures to increase investment attraction of the region.

1. The regional law «On state policy of the Arkhangelsk region in the sphere of the investment activity» has been adopted. This law will establish uniform standards and rules for organization of investment activity in the region. It is the basis of investment legislation of the region. 2. The regional law «On tax benefits for investment activity on the territory of the Arkhangelsk region» has been adopted. According to this law, new companies registered on the territory of the Arkhangelsk region in the form of legal entities are given corporate income tax benefits for that part of the tax, which goes to the regional budget, and property tax benefits in case of implementation of large investment projects. At present amendments simplifying the procedure of providing facilities to big investors are worked out and will be introduced in regional Assembly of deputies. 3. The Procedure of support of investment projects, implementing and planning for implementation on the territory of Arkhangelsk region has been adopted. It establishes uniform universal procedure of investors’ and applicants’ support with cooperation with executive authority of the Arkhangelsk region within implementation or preparation for implementation of investment projects. 4. Committee of investment policy under the Governor of Arkhangelsk region has been created and functions today. It is created for solving any problems of investors with which they meet during implementation of investment projects.

185 5. The investment portal of the Arkhangelsk region (www.dvinainvest. ru) has been created in Internet and it functions today. It is created to provide investors with on-line access to information about investment proposals and production areas which are perspective for implementation of projects.

The goal of the Regional Government: to construct a new deep-sea harbour to the North of Arkhangelsk with a direct and independent access to the World Ocean, to meet the demands of Russian and foreign shippers for extra harbour facilities. Location – north-eastern part of the Dry Sea bay in the Dvina gulf. The construction of a new deep-sea harbour in the port will make it possible to provide: • independent departure of large vessels to any foreign harbour of the world; • intensification of the economic activity in the northeastern region of the European part of Russia; • solutions for many challenges related to the oil and gas developments on the Arctic shelf, operation of production units, development of coastal shipping; • establishment of industrial facilities for the processing of hydrocar- bons in the North of Russia; • significant improvement of the investment attraction of the Arkhan- gelsk Region; • development of industrial, innovation, technical, living, entertaining, cultural and service facilities near the harbour; • 9000 new work places in the Arkhangelsk Region; • extra taxes to the federal budget – about 400 mln. rub., to the regional budget – about 800 mln. rub., to the local budget – about 280 mln. rub.

The project has been considered and approved by the Federal Agency «Rosmorrechflot» in the Ministry of Transport of the Russian Federation. There is a positive resolution from the FSU «Directorate of State Contract- ing Authority for Marine Transport Development Programs». The Ministry of Regional Development of the Russian Federation has included the pro-

186 ject in the Conception of long-term social and economic development of the Russian Federation: «to provide, among other things, operation of the Northern Sea Route and involve huge mineral and natural resources of the northern Russian areas».

The development of the deep-sea harbour in the Arkhangelsk sea port is in close connection with the implementation of the Belkomur project (the White Sea–Komi Republic–the Urals), i.e. construction of the railroad So- likamsk– Gajny–Syktyvkar–Arkhangelsk (1155 km long). The Belkomur project is included in the «Strategy of the Railroad Development of Rus- sia up to 2030», which is approved by the RF Government on June 17, 2008 and will be implemented on the basis of private and public partnership. The project goal is: • to get rid of infrastructural dead ends, to provide access to the mineral resources which are not in use at present, • to make a new short transit route connecting the Urals and Siberia with the northern Russian harbours. • Total length of the railroad – 1252 km

On August 7, 2009 Belkomur project was approved by the Investment Commission for selection of projects claiming to get budgetary alloca- tions from the Investment Fund of the Russian Federation. The Belkomur project and the Deep-sea harbour «Severny» in the Arkhangelsk sea port are included in the «Integrated program for industrial and infrastructural development of the Komi Republic, the Perm Krai and the Arkhangelsk Region». The Memorandum about joint implementation of the program was signed in June 2007 by the Heads of participating regions. However, the project is especially relevant for shippers only if it is implemented simultaneously with the construction of the new deep-sea harbour in the Arkhangelsk sea port, thus providing the best transshipment and logistic scheme (the shortest railroad, cheap and efficient modern harbour giving convenient access to the Northern Atlantic) aimed at the development of relations between the Russian Federation and its business partners in the European Union, Northern and Southern America, Central and South- eastern Asia.

187 Basic advantages of the Belkomur railroad construction are: • A shorter route for cargo delivery from the Urals to the Arkhangelsk and Murmansk harbours • A solution for the problem of dead-end railroad junctions on the territories of three regions of the Russian Federation • Involvement of unreachable natural resources in the economic life, development of uncultivated areas.

Arkhangelsk region has a developed machine-building complex with a great potential which creates attracting conditions for investments. The main engine of regional machine-building is shipbuilding enterprises. JSC “PO “Sevmash” is the largest shipbuilding complex in Russia. At present it is the only shipyard in Russia where nuclear submarines are built. The shipyard was founded in 1939 and it has 25 000 employees. The yard performs the following works: • construction of submarines and surface ships and vessels with nuclear power installations • construction of vessels, pontoons, barges, and other floating facilities of different classes and functions • construction of oil and gas offshore ice-resistant jack-up platforms • design, manufacturing and testing of the equipment for production, transportation and processing of oil and gas

JSC “SC “Zvezdochka” is a leading Russian shipyard specialized in repairing and re-equipping of submarines, surface vessels and ships of any class and function. In recent years the yard has mastered construction of vessels, fishing trawlers, jack-up drilling rigs for oil and gas production on the Russian Arctic shelf. The yard was founded in 1954 and it has 14 000 employees. The yard performs the following works: • repairing and upgrading of nuclear submarines and surface vessels • manufacturing of marine equipment and facilities for oil and gas production civil shipbuilding • manufacturing of industrial and technological products for mechanical engineering, metallurgical, oil and gas, and other industries • utilization of nuclear submarines and surface ships • manufacturing of propellers • faceting of diamonds, manufacturing of jewelry. 188 Arkhangelsk region is one of the leading timber-industrial regions in Rus- sia. Total area of forest land is 29.1 mln. hectares, including commercial forests – 21.6 mln. hectares (74%). Arkhangelsk region ranks second in the North-western Federal District of the Russian Federation in terms of timber reserves. Total reserves of forest forming species are 2.5 bln. cubic meters, including old-growth and over-mature forests – 1.7 bln. cubic meters (65,3 %), coniferous forest – 2.1 bln. cubic meters.

Timber reserves available for commercial use and processing are 1.8 bln. cubic meters. Coniferous trees in reserves – 83.0 % (of which fir-trees are 70 %), soft-wooded broadleaved – 17%. Annual allowable calculated cutting area in the region is 22 mln. cubic meters, including coniferous forest – 16.7 mln. cubic meters. Maximum possible volume of harvesting, with tending of forest, is 5.3 mln. cubic meters.

Vast timber reserves make possible to develop manufacturing of fiber- boards and furniture, as well as construction of wooden houses, manufacturing of different things of wood and wood wastes, including alternative fuels.

Key regional timber-industrial enterprises are: Pulp-and-Paper Mills: Filial of JSC “Ilim Group” in Koryazhma (Kotlas PPM) JSC “Arkhangelsk PPM” JSC “Solombala PPM”

Large Wood-working Factories: JSC “Timber Plant No25” JSC “Onega Wood-working Plant” JSC “Solombala Wood-working Plant” JSC “Timber Plant No 3” JSC “Timber Plant No2” JSC “Arkhangelsk Wood-working Plant No 3” JSC “Arkhangelsk Plywood Manufacturing Plant”

189 The priority Investment Projects for Development of Forests in the Arkhangelsk Region are: • Upgrade of manufacturing facilities for production of cardboard and white paper (Filial of JSC “Ilim Group” in Koryazhma). Volume of investments: 9900 mln. rubles. • Renovation of manufacturing facilities for production of cardboard at JSC “Arkhangelsk PPM”. Volume of investments: 5451.9 mln. rubles. • Upgrade of wood-working facilities owned by “Solombalales Hold- ing” and establishment of objects of forest infrastructure. Volume of investments: 2718 mln. rubles. • Construction a wood-working plant in Arkhangelsk with production capacity 95 thousand cubic meters of laminated veneer lumber and planed elements for carcass house-building per year (“KharviSever- Les” ltd.) Volume of investments: 1235.4 mln. rubles. • Establishment of a wood-working complex on the basis of “Ustjyan- sky Forestry Enterprise”. Volume of investments: 800 mln. rubles. • Establishment of manufacture of oriented strand boards (OSB). Vol- ume of investments: 7158,4 mln. rubles.

Regional construction complex is presented by construction, installation and specialized organizations, which are capable to provide whole range of construction and repair works, companies producing construction materials, engineering and survey organizations. The potential of the construction complex in the Arkhangelsk region is rather high. Construction companies have qualified personnel, high-capacity machines and equipment and can construct facilities of any complexity level: from multi-storey blocks of flats and industrial buildings to complex out-of-class bridges and hydro technical structures. Engineering organizations employ highly qualified specialists who use advanced technologies for design and up- to-date materials for construction.

There are factories in the region producing construction structures and materials. They manufacture whole range of steel and reinforced concrete structures for industrial and civil construction, supplying sufficient amount of them for all the regional construction projects. Their production capacities allow increasing the volume of manufactured construction materials more than three times. 190 The region has considerable mineral and raw material resources which make it possible to develop long-term strategic planning within this industrial sector. The development of the mineral resources complex of the Arkhangelsk region is firstly connected with such minerals as diamonds, bauxites, various building materials and underground waters. The largest diamond-field area in Europe is explored in the Arkhangelsk region (18% of reserves of Russian Federation). This is implication for development of faceting manufacture. On the territory of the region there are possibilities for developing of basalt extraction (reserves – near 4,6 bln. tones), and also manufacture of crushed chippings and paving tiles. On the territory of the region there are deposits of limestones, which is convenient for organization of cement plant with production capacity of more than 1,8 mln. tons. There are also clay deposits which give opportunity for creation of brick manufacture.

Arkhangelsk region has a potential for develop oil-and-gas fields on the shelf of the Arctic seas, including the greatest gas distillate deposit Shtok- man. The Arkhangelsk region can offer the following. Local companies can be involved as suppliers of materials, goods and services. Distribu- tion centre and integrated logistic base for the project development can be located on the territory of the region. Background: well-developed infrastructure of the Arkhangelskseaport, vacant production sites, reserves in energy supplying capacity and upcoming gasification, proximity to the large industrial centers of the country. Shipyards of Severodvinsk with their potential can construct offshore and subsea facilities: drilling rigs, supplier vessels on the “turn-key” basis, specialized oil and gas equipment. In cooperation with foreign partners these plants can manufacture templates, manifolds, subsea completion equipment, etc. Mobilization of local construction companies for participation in projects can be used. Local qualified personnel and potential of educational establishments can be used to train oil and gas specialists for the project. At present regional companies are already involved in servicing huge oil and gas projects in the Arctic and Siberia, and Arkhangelsk transportation hub is the largest transshipment base for such supplies.

(Source: Arkhangelsk Region Government, Economic and Investment potential)

191 6.2.1 Investment Potential 2014–2025

Industry: JSC Onezshki PPM, sawmill expansion 65 m€ JSC Arkhangelsk PPM, Novodvinsk,, pipeline from Niuksenitsa 10 m€ Sawmill 25, Arkhangelsk, wood pellet production 10 m€ JSC Arkhangelsk Plywood company, new shelling line 10 m€ LLC Titan Development company, business center 10 m€ JSC New Timbertechnologies, wood working plant 250 m€ JSC Velskaya poultry factory, food indusrty poultry plant 200 m€ OOO Veliskiy Kombikormoviy Zavod, Veliskiy, food industry 60 m€ ZAO Peterkom, aspen, spruce, pine, board plant, Karpogory 150 m€ OOO Fakel, brick factory, Velisky region 15 m€ Shipyard Krasnaya Kuzhetsa, Arkhangelsk 20 m€ JSC North timber processing association, sawmill, Arkhangelsk 20 m€ JSC Ustyanski wood processing plant, sawmill, Bereznik 30 m€ JSC HarviSeverLes, woodworking mill, Arkhangelsk 25 m€ Solombales, production technology upgrade 70 m€ Arkhangelsk PPM, Novodvinsk, reconstruction of cardboard mill 125 m€ Ilim Group, modernization of paper and cardboard production 300 m€ Furniture manufacturing plant, Savinski 35 m€ Total: 1.405 m€

Mining industry: JSC Severalmaz, Lomonosov diamond field 250 m€

Hydro power: JSC Malaya Mesen TEC/Rusgidro, tidal power plant Mezenskaya 200 m€

192 Bio energy: Ltd Forest Bioteks, autonomoys energy systems 15 m€ Ltd Forest Bioteks, Konosha pellet plant 10 m€ Arhbioenergy, wood pellet boilers 5 m€ JSC Biotech, Velski pellet plant 10 m€ JSC Ustyanskya, pellet plant Ustyanski 45 m€ JSC Arkhangelsk Plywood company, wood waste heat power 15 m€ JSC Club Wildlife, Letne-Zolotskie- project 30 m€ JSC Bionet, fuel pellets project 20 m€ JSC Arkhangelsk regional energy company, Leshukonskoe biofuel 20 m€ Municipal boiler houses for biofuel 110 m€ Total: 280 m€

Tourism: JSC Onega, Ski biathlon and sport center, Onezhki district 10 m€

Transport infrastructure: Belkomur- railway Solikamsk-Syktyvkar –Arkhangelsk 3.000 m€ Road Kyanda-Letnyyaya Zolotitza 100 m€ Onega sea port 3.200 m€ Arkhangelsk deep Sea port Severny 650 m€ JSC RZD, Arkahngelsk railway terminal and logistic center 300 m€ Total: 7250 m€

Public investments: Energy pipeline Niuksenitsa-Arkhangelsk 15 m€ Energy pipeline Niuksenitsa-Arkhangelsk, connection Kuloy 5 m€ Severodvnsk heat station -2 10 m€ Arkhangelsk heat stations 10 m€ Total: 40 m€ All total: 9.435 m€

193 6.2.2 Development of the Region 2015–2020

Located on the eastern edge of the European High North area, the Arkhangelsk region almost completely differs from the Murmansk region, even though it too is located along the Northeast Passage, or the North- ern Sea Route. Arkhangelsk is an old Russian town and all activities in the Region have much longer history than Murmansk Region which is mostly product of Soviet Union period. Arkhangelsk has an abundance of forestry industry and the oil industry is located in its northern part, in the Nenets Autonomous Okrug. Severodvinsk, close to the city of Arkhangel- sk, has shipbuilding yards and a mechanical engineering industry. Geo- graphically, the region is closer to Moscow than Murmansk.

The city of Arkhangelsk competes with Murmansk for which city will suc- ceed in becoming the operative centre of Russia’s Arctic and northern regions. Both are potential main port locations for the Northern Sea Route (Northeast Passage), although Murmansk has a year-round deep harbour and Arkhangelsk has not. However, in regard to the Northern Sea Route, the Russian Government decided that its administrative centres are located in Moscow and Arkhangelsk, so the competition continues. NSR Center in Arkhangelsk was officially opened in June 2013.

The Arkhangelsk region has a number of mega-class investment plans. The investments associated with the renewal of the forestry industry technology in the region appear to be the most probable to be implemented. There are also things happening in the mining industry, as the region has the Alrosa Diamond Mine, which is currently expanding its activities. Exact time schedule especially for bigger industrial investments is very hard to say.

However and without a doubt the main project in the region is the so- called Belkomur railway connection which, when completed, will connect the city of Perm in the Ural Mountains with the Komi Republic and the Arkhangelsk Port. The project has been under construction for quite some time, but the past few months have seen increased activity. It is an

194 enormous investment that includes the construction of a new track in the Arkhangelsk region from Karpogory to Vendinga in the Republic of Komi. This rail track will also assist with development in the forestry industry, as the region has expansive forest resources.

Designs are also underway for a new deep harbour in Arkhangelsk, which is planned for construction on the coast of the White Sea in the estuary of the northern Dvina River. The current port is located along the Dvina Riv- er, but shallow channel depths are its constant headache. Furthermore, the channels have to be continuously dredged due to the flow of the river. The port is owned by Norilsk Nickel, which according to experts only al- lows the use of the best piers for its own ships, thereby complicating the development of the existing port. A deep harbour would enhance the importance of Arkhangelsk along the Northern Sea Route, but icebreakers still will be needed to enable year-round functioning.

Arkhangelsk also has significant development plans for air traffic.The main airport for Nordavia that services Aeroflot’s northern routes is the Talagi Airport in Arkhangelsk. The airline also flies international routes from Arkhangelsk via Murmansk to Tromsø, and it used to operate services to Rovaniemi and Luleå. The airline is also owned by Norilsk Nickel.

There are intentions to develop Talagi Airport to become a type of northern hub for Russian air traffic, which would somewhat ease the immense pressure put on the Moscow airports of Sheremetyevo, Domodedovo and Vnukovo. European Union ENPI Kolarctic funding has also been sought for the renewal of the airport, but the project has suffered a setback due to the flyover conflicts between Russia and the EU. Future seems also here fuzzy due to the political problems between the EU and Russian federation.

195 6.2.2.1 Investments expected to start first

Forestry and forest industry are the most important factors in the economy of Arkhangelsk Region. The region has a huge potential in forestry and forest industry. Production technology and even the mills are old fash- ioned and need badly investments. Big projects like renovation of pulp or paper mills are not the first ones because of the large global structural changes in using paper. So it is expected that small investments to upgrade existing production technology in size of 10–20 millions are probably the first ones to be implemented even in the next couple of years. Also some other smaller investment could be proceeding, like sport sta- diums, etc. If recent fall of the rouble delays the projects remains to be seen. Belkomur project is also expected to start within the next five years.

Projects: JSC Arkhangelsk PPM, Novodvinsk, pipeline from Niuksenitsa 10 m€ Sawmill 25, Arkhangelsk, wood pellet production 10 m€ JSC Arkhangelsk Plywood company, new shelling line 10 m€ LLC Titan Development company, business center 10 m€ Shipyard Krasnaya Kuzhetsa, Arkhangelsk 20 m€ JSC North timber processing association, sawmill, Arkhangelsk 20 m€ JSC Ustyanski wood processing plant, sawmill, Bereznik 30 m€ JSC HarviSeverLes, woodworking mill, Arkhangelsk 25 m€ JSC Onega, Ski biathlon and sport center, Onezhki district 10 m€ Belkomur- railway Solikamsk-Syktyvkar –Arkhangelsk 3.000 m€ Total: 3.145 m€

6.2.2.2 Investments waiting for better times

In today’s economical situation which is stirred by political crisis between Russia and the western world, bigger industrial investments seem to be unlikely in Arkhangelsk Region. First possible point of time for bigger project implementation is after 2020. The Start of the Belkomur could expe- dite some projects like Arkhangelsk deep sea port.

196 Continuation of difficult time is not good even for smaller public energy projects. The list of bio energy projects in the region is magnificent compared with all other regions in the High North. This kind of projects have mainly been financed with the financing from international funds like EBRD and NEFCO. If political relations are freezing, these projects won’t proceed.

Projects: Ilim Group, modernization of paper and cardboard production 300 m€ JSC New Timbertechnologies, wood working plant 250 m€ JSC Velskaya poultry factory, food industry poultry plant 200 m€ ZAO Peterkom, aspen, spruce, pine, board plant, Karpogory 150 m€ Arkhangelsk PPM, Novodvinsk, reconstruction of cardboard mill 125 m€ Solombales, production technology upgrade 70 m€ JSC Onezshki PPM, sawmill expansion 65 m€ OOO Veliskiy Kombikormoviy Zavod, Veliskiy, food industry 60 m€ OOO Fakel, brick factory, Velisky region 15 m€ Furniture manufacturing plant, Savinski 35 m€ JSC Severalmaz, Lomonosov diamond field 250 m€ JSC Malaya Mesen TEC/Rusgidro, tidal power plant Mezenskaya 200 m€ Ltd Forest Bioteks, autonomous energy systems 15 m€ Ltd Forest Bioteks, Konosha pellet plant 10 m€ Arhbioenergy, wood pellet boilers 5 m€ JSC Biotech, Velski pellet plant 10 m€ JSC Ustyanskya, pellet plant Ustyanski 45 m€ JSC Arkhangelsk Plywood company, wood waste heat power 15 m€ JSC Club Wildlife, Letne-Zolotskie- project 30 m€ JSC Bionet, fuel pellets project 20 m€ JSC Arkhangelsk regional energy company, Leshukonskoe biofuel 20 m€ Municipal boiler houses for biofuel 110 m€ Road Kyanda-Letnyyaya Zolotitza 100 m€ Onega sea port 3.200 m€ Arkhangelsk deep Sea port Severny 650 m€

197 JSC RZD, Arkhangelsk railway terminal and logistic center 300 m€ Energy pipeline Niuksenitsa-Arkhangelsk 15 m€ Energy pipeline Niuksenitsa-Arkhangelsk, connection Kuloy 5 m€ Severodvnsk heat station -2 10 m€ Arkhangelsk heat stations 10 m€ Total: 6.290 m€

6.2.2.3 Key investment project of Arkhangelsk Region

Belkomur project

The start of Belkomur railway project is the key to the further development in the Arkhangelsk Region. The implementation of this 3 bln€ investment speeds up all other transport infrastructure projects in the region and improves the economical activity.

In the 20th century Russian railways development was based on a lati- tudinal approach (West-East connection). Because of that now there is a lack of meridional rail ways that has lead to a shortage of convenient communications between raw and industrial regions of the country and existence of dead-end industrial centers. A shortage of communications has been in the North for a long time. Railway construction in a planned Belkomur location began together with establishing Northern Coal and Metallurgy Industry in the middle of the 1930s. In 1944 rail way Kotlas- Vorkuta connected Pechora Coal Basin and Cherepovets metallurgical works. Railroad construction continued in Polar Russia further but due to a mass amnesty of the main work force GULAG prisoners it was stopped in 1953–1954.

The project came to life again in the 1990s. Belkomur had to integrate economically the Northern regions - Perm and Kirov regions, the Repub- lic of Komi and Komi-Perm Autonomous District.In 1995 a large scale meridional project was proposed - a railway connecting Arkhangelsk, Syktyvkar, Kudymkar and Perm with the name Belkomur (White Sea- Komi-Urals). 198 Priority is the construction and setting into use the railway Karpogory- Vendinga. Next step is reaching full capacity of the railway Karpogory- Vendinga. The link will connect idle and unprofitable dead-end lines Arkhangelsk-Karpogory and Syktyvkar-Vendinga. Thus a shorter way from the Republic of Komi to Arkhangelsk sea port will be created, as well as to Kola peninsula and Finland that will make possible to develop inter- regional and foreign relations of the Republic of Komi and Arkhangelsk region, minerals and wood resources.

At the moment railway cargo transportation between the Republic of Komi, Arkhangelsk region and other North-West regions is made by a circular track through Konosha station. A direct access from Arkhangelsk to Mikun-Syktyvkar begun to be built after the World War II was not completed, two dead-end lines were built from Arkhangelsk to the South to Karpogory 222 km and from Mikun to Vendinga 176 km. Previously these lines worked to transport significant volumes of wood. Now they are idle and unprofitable because harvesting was decreased.

A railway Karpogory-Vendinga will connect two dead-end stations mentioned above and give a direct way. Transportation distance will be reduced at 160–400 km and transportation costs at 20-65%, also there will be good possibilities for wood harvesting near the Pinega river. Today wood transportation from that remote place causes big problems and made by trucks by forest roads and a rail way combined which is as much as 3.5–4 times more expensive comparing to a railway transportation, sometimes it leads to losses. Because of that estimated annual cut is used only at 30–40%.

Second stage is construction and setting into use the rail way Sykty- vkar-Perm. Next stage is reaching full capacity of the railway Syktyvkar- Perm.The link gives a direct access to the main Transsiberian Rail Way Moscow-Vladivostok and reduce distance for cargoes from the Urals to Arkhangelsk, Murmansk and Finnish sea ports.

199 The Southern link is a second stage of the meridian rail way. The new rail way Syktyvkar-Kudymkar-Perm 580 km should be built which will connect Syktyvkar and Komi North shortly (800 km distance reduction) with a well developed railway network of the Urals near Perm. This will make possible to deliver Timan bauxites, chromium ores, Pechora coal, other Polar Urals minerals to the Urals processed industries.

The implementation start of Belkomur would have positive impact on several projects. First it would put speed on some other transport projects like Arkhangelsk deep sea port and to Arkhangelsk railroad terminal and logistic center. Onega sea port- project is estimated to cost more than Belkomur. Either question is of bigger transport infrastructure plan or it is over estimated. The implementation of Belkomur would probably not have positive influence on it. Most likely the project in that size is possible to be implemented in 2030 or something.

Belkomur is a gateway for Arkhangelsk Region forest industry to large forests and new raw material areas. So the real start of Belkomur would make even bigger forest industry investments profitable.

Projects that speed up with Belkomur:

Ilim Group, modernization of paper and cardboard production 300 m€ JSC New Timbertechnologies, wood working plant 250 m€ JSC Velskaya poultry factory, food indusrty poultry plant 200 m€ ZAO Peterkom, aspen, spruce, pine, board plant, Karpogory 150 m€ Arkhangelsk PPM, Novodvinsk, reconstruction of cardboard mill 125 m€ Solombales, production technology upgrade 70 m€ JSC Onezshki PPM, sawmill expansion 65 m€ Arkhangelsk deep Sea port Severny 650 m€ JSC RZD, Arkhangelsk railway terminal and logistic center 300 m€ Total: 2.110 m€ with Belkomur 5.110 m€

200 7. SUMMARY AND CONCLUSIONS

The global financial crisis has slowed down the investment projects in the European High North. Many projects are postponed and some are totally turned down. Energy sector is facing new challenges and changes. The role of US shale oil and gas is still unclear in global business. Decreasing industrial production due to financial crisis has decreased the demand of energy. These two factors have influenced to the Barents Sea. Shtok- manovskoje gas field project seems to be postponed for decades and also Norwegian investments are not proceeding.

Politics have also started to disturb the business in the High North. Crisis in Ukraine and Crimea have increased tension between Russian Federa- tion and the EU and most of all with the USA. Sanctions against Russia in case that the problems are not solved are reflecting directly to the investment plans. At the same time media is telling that military actions and bases in Arctic Regions are about to increase.

In situation like this the future seems a little bit fuzzy. The investment projects and the investors expect predictability in business. This predictability has been shortened by both financial and political crises. Old projects are strongly going on but new ones are not starting. The problem is same everywhere. Norway is leading with the largest amount of investment projects. Still nobody knows when the next big offshore investment is about to begin.

This book takes slightly a different approach and evaluation to the investment projects than before. Each region holds the named key investment project, the projects expected to start first and the projects in waiting line. The evaluation and analysis of these numbers gives a good picture about the current situation and the expectations for the next 4–5 years.

201 Investments expected to start first: Arkhangelsk Region 3.145 m€ Murmansk Region 9.565 m€ North of Norway 16.338 m€ Västerbotten 5.060 m€ Norrbotten 14.460 m€ Kainuu Region 621 m€ Oulu Region 9.866 m€ Lapland 2.479 m€ Total: 61.534 m€

Projects in waiting: Arkhangelsk Region 6.290 m€ Murmansk Region 6.340 m€ North of Norway 29.761 m€ Västerbotten 1.840 m€ Norrbotten 5.620 m€ Kainuu Region 40 m€ Oulu Region 7.416 m€ Lapland 11.760 m€ Total: 69.067 m€

In the evaluation made in 2013 the total amount of investments for the next five years was 80 bln€. Total amount in group one is a bit over 61 bln€, so the level is almost the same. It should be also noticed that in 2014 the time frame was not necessarily the same five years. It could be in some cases longer or shorter. Global changes and different crisis have not so big influence to investments.

Group two, the projects in waiting tells about investment potential in the region. Numbers are quite equal in Russian regions and in Northern Fin- land except Kainuu Region. Investment potential for 2020+ period seems to be almost nothing. Kainuu is of course an exception, the region is quite

202 small. If problems in Talvivaara mine could be solved, more than one billion euro investments can be realistic. But it is only one company in the region with population more than in Finnmark County in North Norway.

Situation in North Sweden looks interesting. The list of investment plans is almost exactly the same as last year. Investment boom is very strong just now and in the upcoming 5–7 years. But when the giant projects are over, what happens. There are too few new names on the list. It is sure too early to say that the chain of investments is going to continue much slimmer than on the 2010s. Situation in 2015 is going to show the real direction more concrete.

Northern Norway is still number one concerning investment plans. Total amount of the investments on 2010s is biggest of all regions and the potential is absolutely greatest. The fate of offshore investments is a little unclear, but maybe this development moderates the huge boom of investments that has been going on there for many years. Region begins to resemble Swedish and Finnish neighbors.

Conclusions on the regional development

Arkhangelsk Region has a lot of investment potential. There are good possibilities that the regional key project Belkomur is started before 2020. Longer delay could also be viable option. If this giant investment doesn´t start, development in the region continues on a normal level. Opening of the Northern Sea Route administration in Arkhangelsk was important for the region. That only doesn’t make the city the main port of the North West Russia for NSR. Port of Arkhangelsk is not deep and big enough for Hub development. Port investments seem to depend on what happens to Belkomur.

Forest industry in the region is ready even for bigger investment projects. Some of the mills are producing packaging paper, which has quite good demand worldwide. Large forests in the region ensures that the forest industry in Arkhangelsk Region can be competitive.

203 Murmansk Region seems to have lost the biggest investment project, the Shtokman gas field, or it is postponed far into the future. In spite of this the investment potential of the region is good. Biggest project is the nuclear power plant project with total value of about 6 billion euro. Invest- ment is huge, but Murmansk Region must have new sources of energy pretty soon. Metal industry needs huge amount of electric power in smelting processes. Shtokman has been postponed, so nuclear power is the only option and the reactors in Kolatom plant are all over 30 years old and the oldest two over 40 years old. Something must be done.

Murmansk Region Government has decided to support strongly the existing industry in the region. Mining investment plans look interesting and new mining and processing technology gives possibilities to reuse old tailings. Fedorova Tundra project is very interesting, because there is a foreign investor as a partner. Next years show if there is still a risk, political or financial for large foreign investments.

Murmansk Transport Hub is the key project in the region. A rapid and strong implementation could give a boom also to the other projects. The possibility of Murmansk to develop for international logistic center de- pends not only on the investments. Port of Murmansk is in the southern part of the Kola bay. The northern part belongs to Northern Fleet and is one of the biggest navy bases in the world. This could be an obstacle to develop Murmansk as one of the logistical centers of the Northern Sea Route.

North of Norway is developing rapidly. The region is not easy for foreign companies to start business. Companies are quite small in the High North of Norway and industrial production is concentrated to Nordland, the southern county of the Northern Norway. Huge offshore projects are not proceeding with the expected speed. Anyhow the region needs better infrastructure and these investments seem to be increasing. In the long run probably all investment plans are going to be realised.

204 Mining industry could be interesting branch of business for foreign companies. Kirkens mine needs a lot of suppliers, service and maintenance which can not be done by North Norwegian companies. This kind of services could be common with the mines in Norrbotten and Lapland.

Västerbotten has a lot investment potential. Projects are not as huge as in Norway or neighboring Norrbotten. Wind power projects are still big and the region has promising investment plans in mining. When present investments projects are concluded the region might face some problems. There has been no new project names on the lists since 2010.

Norrbotten was the region where the present investment boom started. Big state owned mining company LKAB has been the driving force in the region over 100 years. Company is leading the way to the 2020. There are also a long list of other mining companies wanting to invest in Norr- botten. They have anyhow met resistance from Sami community. It is likely that some of these projects are not going to be implemented.

Wind power projects are huge in Norrbotten. The region has avoided the problems of neighbour regions by concentrating all projects to one place in Markbygden near Piteå. Facebook project was a great world wide success for Norrbotten and the project continues.

Regional key project is the Norrbotniabana railway project. Present Gov- ernment is against it and has not yet given financing. Region has great expectations regarding parliament election in September 2014. If opposition wins, the new Government could be more positive and give financing.

Kainuu Region financing list is short. Talvivaara mine was a great success and driving force for the region until year 2012. After that the company has fighted to survive. Environmental problems have been huge and some of them are not yet solved. Development in Talvivaara shows also the future of the region.

205 Oulu Region has prominent investment potential. City of Oulu and the region is going through big structural changes after Nokia. City has been growing rapidly and the growth seems to continue. Oulu is the third biggest city in the European High North. Only Murmansk and Arkhangelsk are bigger, but in contrast to Oulu the amount of inhabitants is decreasing.

Oulu has a lot of trade center investment plans and one of the biggest is already under construction. Data centers are also coming to Oulu. Micro- soft has announced to open one center in Northern Finland and Oulu is probably the site of this investment.

Problems in ICT sector can be solved and the city is working hard with the project. Compared with last year the investment potential is Oulu Region is growing. Key investment project is Fennovoima Oy nuclear power plant project near Oulu. The start of this 6 billion euro project could boost all other investments and create a new start for new business.

Lapland has not faced the financial crisis like other regions in Finland. The mining boom has calmed up but the list of new projects is still long. Lapland has two new mines and the increased production can be seen in the mining municipalities in increasing taxes.

International tourism is increasing in Lapland. Total amount of international tourist is over one million and it is growing. Biggest problem seems to be the flight connections and the future of all airports in Lapland is unclear because of the new strategies of the Ministry of Transport and Commu- nication. One of the biggest problems in the region is that authorities in Helsinki don´t see the right role of Lapland as Arctic Region.

Key investment project of the region is Sokli mining project. The start of this investment project would be a positive sign for especially Eastern Lapland and also to the whole mining industry in Finland.

206 958 7043 7260 2150 1355 3361 4394 20542 26226 33924 12000 24774 143987 775 6980 0 135 1253 220 0 270 0 1451 3166 0 14250 Lapland Oulu Region 968 490 0 335 5200 458 6000 120 1235 364 1283 1239 17692 0 320 0 0 505 0 0 0 0 71 45 0 941 Kainuu Region Väster- botten 75 1840 0 160 3705 0 0 300 0 340 480 0 6900 1200 5900 0 1500 7020 0 0 200 120 815 3675 0 20430 Norr- botten 2310 672 25426 3920 15921 0 0 1260 0 210 3975 1780 55474 North of Norway 310 4090 800 1010 320 0 6000 0 0 100 4900 1335 18865 Murmansk Region 1405 250 0 200 0 280 0 0 0 10 7250 40 9435 Arkhangelsk

Region Industry Mining Industry Oil and Gas Hydro Power Wind Power Bio Energy Nuclear Power Networks Energy Transfer Trade Tourism Infrastructure Transport Public Investments European High North Investment Potential 2014–2025 Million €

207 References and sources of information

Arkhangelsk Region: en.dvinainvest.ru

Murmansk Region: Ministry of Economic Development of Murmansk Region

North of Norway: Konjukturbarometeret Nord

North of Sweden: NHO Norrbotten Invest in Norrbotten Västerbotten Investment Agency

Kainuu Region: Invest in Kainuu

Oulu Region: BusinessOulu Oulu Chamber of Commerce

Lapland: Lapland Chamber of Commerce

208 PROMOTING BUSINESS IN THE NEW NORTH

Lapland Chamber of Commerce (est. 1939) mission is to create success for its member companies and to business in Lapland.

Representing views and opinions of trade and industry the Chamber is working on better business environment, offering business related services and building networks in order to maintain and enhance business competitiveness.

International cooperation and networking plays an active role of the Chamber activities in the European High North not forgetting the worldwide context.

Members of the Chamber include a variety of companies from big industrial companies to SME’s from different industries and branches of business, municipalities and other business related services.

We are open for cooperation and see that each new contact is a chance of new business opportunities.

Please don’t hesitate to contact us for more information.

Lapland Chamber of Commerce Tietokatu 3, 94600 Kemi Maakuntakatu 29-31 B, 96200 Rovaniemi [email protected] www.lapland.chamber.fi

209 ARCTIC BUSINESS FORUM ARCTIC BUSINESS www.arcticbusinessforum.com FORUM Yearbook 2014 Yearbook 2014

Publisher: Lapland Chamber of Commerce