The Northwest Region of Russia

The Northwest Region of Russia includes the Republics of Karelia and Komi, Nenets Autonomous Area, Arkhangelsk, Vologda, Kaliningrad, Kirov, Leningrad, Murmansk, Novgorod and Pskov Regions and St. Petersburg: all of these areas are linked for historical reasons. (For administrative reasons the Canadian Consulate General at St. Petersburg covers the following regions: St. Petersburg, Leningrad, Novgorod, Pskov, Arkhangelsk, Murmansk Regions, Republic of Karelia, Nenets Autonomous Area, Komi Republic).

These territories share a number of natural, geographical, climatic, historical and cultural particularities underlying the socio-economic development of their populations. The region lies in the northwest of Russia; in the north it is surrounded by the Barents, White and Karsk Seas, in the southwest, by the Baltic Sea. It borders on Norway, Finland, the Baltic countries and Poland.

The population of Russia's Northwest is about 17 million (11% of the population of Russia), more than three times higher than the population of neighbouring Finland. About 70% of this population is urban. The total area of the region is 1.8 million sq. km or 10.5% of the territory of Russia, an area larger than the five Scandinavian countries, Sweden, Finland, Norway, Iceland and Denmark - 1.6 million sq. km. Almost one-third of the population of Northwest Russia live in Saint Petersburg.

The climate is moderate continental, with warm humid summers and harsh winters with significant snow fall. The region includes several natural zones, from Arctic deserts to woods. The surface is mostly plain, with many rivers and lakes, the largest of which are Ladoga, Onega, Beloye and Ilmen. Many rivers are navigable and together form an integral water transport system providing direct commerce between Northern and Southern seas and other economic zones of Russia.

The basic natural riches are large deposits of coal, copper and nickel ores, apatite, bauxite, nepheline, manganese, oil, gas, oil shales and peat. North-West Russia contains 60% of the wood harvested in the European portion of the country.

The basic regional industries are: production of complex, precise machinery and instruments, metal processing, shipbuilding; metallurgy, pulp and paper industry, wood processing, chemistry, oil, gas and fuel extraction. In addition, consumer goods and electronics production is developed quite well. In the agricultural sector, cattle breeding, fur-farming, vegetable and flax growing prevail. The fishing industry is also well developed. As a result of the Soviet Union disintegration, further development of transport infrastructure, reconstruction of the St-Petersburg, Arkhangelsk, Murmansk and Kaliningrad ports and building of new ports on the Baltic Sea is essential to further economic grow.

One of the Russia’s most important scientific potentials is located in Northwest Russia, as a large network of middle and higher educational institutions as well as professional upgrade training centres are located here.

Today 20% of iron-ore, 18% of rolled black metal, 15% of steel, 17% of sulphuric acid, considerable amounts of oil and gas products is produced in the North-Western region, along with more than a quarter of the country's timber and 56% of newsprint. The region provides around 20% of fish and other seafood and 30% of industrial products are exported to more than 50 countries.

The economy of Northwest Russia is for the most part, based on its raw materials wealth: almost 72% of Russia’s reserves of apatite and nearly 100% of their production, about 77% of titanium reserves, 45% of bauxite reserves, 19% of mineral waters reserves and about 18% of the reserves of diamonds and nickel are concentrated in its territory. Oil and coal production also an increasingly important part of the Russian economy.

Northwest Russia houses well-established cultural centres, world-famous architectural, historical and cultural monuments. With its unique nature and climate, the region offers all possibilities for development of various kinds of tourism. Recent reforms are crucial for the economy of the region, which, in the Soviet period, had a state order orientation, military complex being the top priority. The experience of the past decade in the sphere of industrial reformation and private business development provides a basis for cooperation, investments in production and realization of projects.

Strong ties and contacts between Northwest Russia and other regions of the Russian Federation, as well as CIS and foreign countries, in the sphere of trade and industry provide a strong basis for successful market reforms.

The size of the potential market, the abundance and variety of natural resources, the highly qualified workforce, the well-developed scientific and technical base, together with benefits of the geographical position on the crossroads of world trading routes all work for the benefit of investment activity, contributing to a favourable investment climate.

The oil and gas resources of the Nenets area and the Barents Sea shelf are the most attractive for investment. Only their largest projects are estimated about US $25 bn in aggregate. According to expert forecasts, this district can become the country's second largest fuel producer. If the industrial production of the oil and gas reserves of the shelf begins, this will give a strong impetus to the development of coastal regions - local people will bee employed and defence industry enterprises, of which there are a great many in the territory, will receive orders connected with conversion.

According to regional authorities, as of today the top priorities for investment are the following: creation of high-technology productions, military complex conversion, development of new natural resources deposits, development of transport network, environmental protection, development of tourism and recreation infrastructure.

The activities of the regional administrative and legislative authorities, aimed at improving the investment climate, has resulted in Northwest Russia taking its place among Russian most attractive regions from the point of view of a potential investor.

St. Petersburg and the Leningrad Oblast rank among the Russian leaders in terms of the level of FDI and the Republic of Komi and Arkhangelsk Oblast - among the top 20 by this figure of the subjects of the Russian Federation. By the level of foreign direct investment, the North-West occupies second place, and is only behind the Central federal district.

Among foreign investors of Northwest Russia are major multinational companies, such as: General Electric, ABB, Siemens, JT-International, Philip Morris, Wrigley, Nestle, Coca-Cola and Pepsi-Cola, Conaco, Caterpillar, Procter and Gamble, ICN Pharmaceuticals, De Biers, etc. A traditional partner and a large investor of the Northwest is Finland. 80% of external investments from this country falls in Northwest Russia.

The business environment may be somewhat complex, but economic trends are positive for export sales from the West, with some 9,000 foreign joint ventures accounting for 40% of St. Petersburg’s economic output.

Naturally, investments in the extractive industry and the primary processing of its products will remain significant. Such successfully operating companies as Vologodskaya Severstal, Novgorodsky Acron, KomiTEK, Kolsky State Integrated Iron-and-Steel Works (Murmansk Oblast), Kotlasky Integrated Pulp-and-Paper Mill (Arkhangelsk Oblast) may be of great interest to investors.

The task related to the development and modernization of transport systems is of particular priority for Northwest Russia. There is only one large transit hub in the region now - St. Petersburg, where there are highways, railroads, water ways and a sea port. Now, this "conveyer" is malfunctioning more and more often, especially when handling cargoes at the port. The solution of the problem may be the formation of a network of specialized sea terminals, widening of "bottlenecks" at the other elements of the transport system.