Op-Ed: Arctic subsea cables: Knowns and unknowns

Russia is preparing for the chairmanship in the Arctic Council starting from May 2021. While official Russia's priorities have not been announced yet, the broad focus areas include sustainable development with human dimension priority, environment and sustainable economic growth.

Connectivity in the Arctic is undoubtedly one cornerstone of sustainable development which promotes business development, provides solutions for social challenges and enhances transport infrastructure development in the Arctic. 

The world's thirst for fast and reliable data transmission accelerated by the COVID-19 crisis is dependent on a well-functioning, global subsea cable ecosystem responsible for 99% of world data traffic. Over 2019–2021, more than 50 subsea cable projects have been proposed so far, worth a total investment of $7.2 billion.

The projects aim to increase capacity and reliability and reduce latency between Europe, Asia, and the United States.

The question that remains is what to expect in the next few years for the connectivity projects in the Arctic? 

The Arctic Connect project stretching 18,000 km along the Arctic aims to connect Nordic countries with Japan and potentially China. The project led by Finnish Cinia and Russian Megafon has been long in the making but still has to come to fruition.

The subsea cable will provide a capacity of between 10 to 24Tbs per-fibre-pair, with 6-8 fibre pairs and branching units to connect various landing points along its route. The first marine survey works for the project started in August 2020 and finished in November 2020.

In 2020, the Arctic Connect became more international with new partners joining from Japan, Norway and Finland. Estimated costs for Arctic Connect project lie in the region of 0.7-1.1 billion USD dependent on the complexity since it includes two design systems.

The Arctic Connect solution offers two completely separate cable systems, one system to serve the Russian society regionally, and the other system to provide the international community with a high capacity, low-latency, connection between Asia and Europe. Higher project costs arise from the need to protect the cable.

The projected increased shipping traffic levels and risks of ice scouring on the seabed require risk mitigations measures such as cable armouring and burial, horizontal drilling through rock surfaced seabed, that all add up to the costs.

Additionally, the lack of knowledge on how to land cables in the Arctic waters adds more uncertainty. So far the project has been granted marine survey permit, while no estimates are available on cable lay and cable operation permits.

The unknowns of the Arctic Connect project include non-transparent financial and cost structure, the degree of international investors' involvement, and changing geopolitical risks.

It is hard to make any predictions on the speed of project completion while financial commitments and political will decisions are not fully known for the Arctic Connect project.

To add to the complexity, Russia started its own state-led 0.86 billion USD worth, 12,000 km long subsea cable project from Murmansk to Vladivostok with landing lines to the largest ports and settlements along the Russian Arctic zone.

This subsea cable project referred by the Russian media as "Northern Digital Stream-1"  would offer a capacity of 52-104 Tbs. The availability of reliable connectivity solutions is crucial in the development of the Northern Sea Route infrastructure and providing Arctic residents with fast Internet.

The project is implemented by the Ministry of Transport of Russia, the Federal Agency for Sea and River Transport "Rosmorrechflot" and Federal State Unitary Enterprise "Rosmorport". The Federal State Unitary Enterprise" Morsvyazsputnik" has been identified as the operator of the cable.

According to CEO of Morsvyazsputnik Andrey Kuropyatnikov finances for the cable project will be provided by the state. Still, the amount does not take into account the possibility of international development and the construction of additional branches.

The maintenance and further development of the cable are expected to be financed by commercial customers. Notably, the project participants have already carried out marine and engineering surveys for more than half of the route, built a coastal station in Teriberka and began designing similar facilities in towns of Amderma and Dikson.

The first section of the cable from Teriberka to Amderma is planned to be launched in 2021. The project is estimated to be completed by 2026. The subsea cable will aid in boosting industrial activity such as production and transportation of hydrocarbons in the Arctic, solving geological exploration problems, and providing an alternative to satellite communications for northern latitudes.

The announcement of the Russian state-initiated subsea cable goes hand in hand with a proposal by Digital Economy Development Council at Federation Council to develop data centres in the Russian Arctic.

It is expected that the development of the data centres in the Russian Arctic would require separate state support, including administrative and tax measures. Hence, the subsea cable solution is essential for the realisation of this initiative.

What remains unknown is whether there is space for two Arctic cables (Arctic Connect and Russian-state led project) competing for the same domestic market in the Russian Arctic.

The Russian state-led cable has strong support via "Strategy for the development of the Arctic zone of the Russian Federation and ensuring national security for the period up to 2035" published in October 2020. The actors involved and finances needed are defined and known.

However, the opportunity for international involvement in the Russian-led project is not yet evident.

As it seems to be Arctic Connect becomes even more critical from the geopolitical point of view with providing Arctic connectivity route for international players and Arctic states. It can be used for boosting data centre development in the Nordic Arctic states that currently lack direct and fast connectivity solutions.

Hence, the Russian state-led subsea cables can be seen as predominantly serving the domestic market, and the Arctic Connect project serving the international market. Apart from these two widely discussed projects, the Russian state is laying a third subsea cable entirely for military needs stretching from Severomorsk to Petropavlovsk-Kamchatsky.

We should also look closely at the Arctic connectivity in the context of global connectivity development. Why don´t giants like Google and Amazon show any interest in supporting or developing Arctic subsea cables?

There are no official statements from them, but such aspects as safety, security, higher costs, weak business case value proposition and challenging geopolitical environment may impact their decision-making process. 

On the other hand, the traditional subsea route between Asia – Europe (Singapore – France) is gaining recent interest from investors as the political climate in the Middle East is thawing.

The recent recognition of Israel by an increasing number of Arab countries, and first trade agreements being signed makes long-sought routes that offer alternatives to bypass the Red Sea and the Egypt bottleneck to become geopolitically viable.

Combined with the fact that India pours large investments into new subsea cables, this creates interest for building new cable systems in areas that previously would have been off the chart.

An example of this budding opportunity offered by the Middle East is a Google-led Blue Raman system of cables offering a new Europe-Asia route that will connect India and Europe via Oman, Saudi Arabia, and Israel.

To conclude, after a quiet period, it seems like Arctic connectivity is again on the agenda with some viable projects in the making and scheduled completion dates announced.

However, too many unknowns remain regarding geopolitics of the connectivity solutions, finances and benefit of these cable projects for the broader Arctic community. On 27, November 2020 Norway presented its new High North White Paper.

Given geopolitical importance of the digital connectivity, it comes to a surprise that the White Paper does not mention subsea cables, Arctic connect project, data centers or connectivity as such for High North development in Norway.

The EU is currently updating its Arctic policy. Time will show if connectivity is included as part of the new EU Arctic Policy.  Furthermore, we are yet to see the stance the new US administration would take on the Arctic development and whether any new Arctic subsea cable initiatives emerge from the USA in the future.