The $31 Billion Plan to Make You Book Your Vacation in Siberia

(Bloomberg) -- The remote 780-mile-long Kamchatka peninsula in Russia’s far east is packed with craters, glaciers, volcanoes, thermal springs, bubbling geysers, big brown bears and unique flora and fauna. On the country’s western border with Finland and Norway are pristine snow fields and deep seas with rich aquatic life.   

Russian billionaires from Vladimir Potanin and Leonid Mikhelson to Andrey Guryev, Viktor Rashnikov and Viktor Vekselberg are trying to put sites like those on the global tourist map to show the world that there’s more to their country than the Red Square in Moscow and the Hermitage in St. Petersburg.

“We are interested in the development of Kamchatka,” Vekselberg, the U.S.-sanctioned chairman of investment group Renova and part owner of a company building an airport on the peninsula, said in an interview. “I love Kamchatka. It should be protected and promoted in a correct way and to best standards.”

The billionaires and their companies are joining the government in an estimated 2.3 trillion ruble ($31 billion), decade-long effort to build roads, airports, resorts and tourist villages to draw visitors to regions including the Siberian stretch in Russia’s icy north. Touted as a transformational plan to help change the composition of Russia’s economy, it shows the convergence of the interests of the government and the country’s deep-pocketed businessmen. 

President Vladimir Putin has long talked of weaning Russia of its reliance on oil and gas — which account for about 20% of its gross domestic product and about a third of the budget. For their part, the billionaires eye potential profits from the projects and see it as a way to bring more opportunities to remote areas where they have business interests. Russia’s private sector may invest about 1.7 trillion rubles in about 600 projects by 2030, said Sergey Sukhanov, head of state corporation Tourism.RF.  

“Tourism development can create a powerful point of economic and social growth in the regions,” Sukhanov said, adding that the federal government may invest 529 billion rubles in infrastructure, while regional authorities may add 72 billion rubles. “These are tens of thousands of new jobs, hundreds of billions of rubles to the budget from the hospitality sector as well as the growth of new medium and small businesses.”

Tourism, which accounts for about 4% of Russia’s GDP, could grow to 10% by 2035, said Tatyana Karavaeva, vice president of the state-backed Center for Strategic Research. The government is targeting a tourism market of 16.3 trillion rubles in 2035 from 3.16 trillion in 2019.

“Tourism means new jobs,” Karavaeva said. “It has a positive effect on the income of entrepreneurs and on tax revenues to regional and city budgets.”

Russian tycoons are among the biggest winners of the global commodities boom. As of Dec. 15, the combined fortunes of the top-20 Russian billionaires had jumped about 12%, or $37 billion, according to Bloomberg Billionaires Index data. Their rising wealth prompted Putin’s government to call on them to invest more at home. 

For many big industrial groups, tourism projects are a way to develop remote locations and retain staff. Siberia and Russia’s far east — with many commodity-production sites — have the largest population outflows, Rosstat data shows. 

The population of Norilsk — where mining nickel goes back to the days when Josef Stalin used gulag prisoners to build plants to source metals for the Soviet war effort — peaked around 2006. Potanin, Russia’s second-richest man and the biggest investor in Norilsk Nickel,  the world’s largest producer of high-grade nickel, wants to create a social and cultural environment to make people want to stay. The area is isolated, with Norilsk Nickel responsible for practically everything — from the airport and local airline to ships that bring food to the city. 

With an eye to broadening the economy and luring more people to the region, the company is developing a tourism project on the nearby Putorana Plateau — a UNESCO heritage site with lakes, rivers, canyons and reindeer. Nornickel plans to invest 20 billion rubles in the Zatundra project, building a tourist village for nature lovers. In another part of the Arctic — on the Kola peninsula close to the Finnish and Norwegian borders — where the company has its second major production cluster, it plans to invest about 28 billion rubles on a tourist village. Construction is set to begin in 2023 with the resort opening in 2026.

Potanin is not new to tourism. His company Interros was a major investor in the Roza Khutor resort in Sochi, built before the 2014 Winter Olympics and now the nation’s main ski venue. Interros plans one more 80 billion-ruble state co-financed project in Sochi. It has another 40 billion-ruble development on Kamchatka, as the anchor investor in the Three Volcanoes Park project —  with geothermal hotels, ski infrastructure and trails. 

“Russia has unique nature that’s not less exciting that Alaska or Iceland,” said Olga Zinovieva, deputy CEO at Interros. “Kamchatka is a tourist bomb, an untouched paradise, a mixture of Alaska and the Chilean Andes.” 

The peninsula’s Elizovo airport’s upgrade is being undertaken by billionaire Vekselberg’s Airports of Regions Holding, which is investing 17.5 billion rubles in the structure designed by Italian architect Claudio Silvestrin, known among other projects for Kayne West’s loft in Manhattan. 

Billionaire Guryev’s family, which owns fertilizer maker PhosAgro, is developing tourism in Kirovsk. The population of the area, where the company has major assets, has declined over 40% since the collapse of the Soviet Union. PhosAgro is developing the Bolshoy Vudyavr ski resort in the city and recently invested 5 billion rubles.

“This is an anchor investment that will give impetus to the development and diversification of Kirovsk’s economy,” said Andrey Guryev Jr, his heir and the company’s CEO. “It is important for Kirov residents, many of whom are keen on alpine skiing and snowboarding.” 

Petrochemicals company Sibur, which counts billionaire Mikhelson as a major shareholder, has invested in Tobolsk, the one-time capital of Siberia. With its monasteries and castles, Tobolsk was where Tzar Nikolai II and his family were briefly held under house arrest in 1917. Sibur has invested over 19 billion rubles to build a new airport and runway strip. 

“That should help to realize the impressive tourism potential of the city,” said Marina Medvedeva, a member of Sibur’s management board. “It is important for us not only to pay taxes and create jobs, but also to maintain sustainable growth in the regions in which we operate.” 

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