Support Russia Insider - Go Ad-Free!

Half a Trillion Tons of Oil Are Turning This Remote Russian Region From Rags to Riches

This post first appeared on Russia Insider

Long an economic backwater, the Republic of Bashkortostan is a federal subject (province) of Russia located just to the west of the Ural Mountains. The region is undergoing a boom, thanks to its half trillion tons of oil reserves, which have only begun to be exploited. 

China and the US had better watch out. As eastern Russian regions like Bashkortostan become more developed and populated, Russia has the potential to exploit the full power-building potential of the Eurasian heartland. MacKinder knew: He who controls the heartland can control the Earth.

A power based in the heartland that succeeds in bringing it under cultivation and linking it by road and rail would be an unstoppable geopolitical force.


Who brings planes to the sky?

We'll see for whom swamps are knee-deep and woods are shoulder-high, where chemicals for all occasions are produced, how food for your car is made, what they sow and what they reap, and on what floor we should exit after all.

The answers to these questions are here, in the Republic of Bashkortostan. It has recently celebrated its 100th anniversary, by the way.

What has happened over this period of time, and what is going on now? How is the economy developing? There are other questions but we'll tell you everything now.

We don't have to travel far to begin the story. We're at Ufa International Airport. They plan to include a 4 million ruble renovation of the republic's airport in the federal investment program. The international terminal has already changed. They built the runway. Now, it's the turn of domestic flights. Renovation is extremely necessary. Last year, passenger traffic increased by 8% and exceeded 3 million passengers. Freight traffic is also increasing. As the republic is at the border between Europe and Asia, transit is very high not only by air. There's access to five seas, two federal highways, and the Trans-Siberian Railway.

One shouldn't think that they only reap the benefits of economic flows here. Exports account for about 90% of the turnover. Let's have a look at Bashkiria's goods. Last year, the gross regional product was almost 1.5 trillion rubles ($24 billion). It's increased, although by 1%, but it's still increased. Foreign trade has increased by 6.5%. For the first time in 25 years, unemployment is under 5%.

- Could you tell us what tools are used to boost the economic growth in the republic?

Radiy Khabirov, Acting Head of the Republic of Bashkortostan: “In 2018, we had good indicators in machine building, first and foremost. The index is 3.4%. This is a very high index. It's higher than average Russian indices. Of course, it's thanks to our big enterprises.”

Investors invested about 270 billion rubles ($4.3 billion) in the Republic last year. But the potential is much higher. Radiy Khabirov thinks that special programs for business will boost growth further. They're lower taxes, benefits, and the development of infrastructure.

Radiy Khabirov: “In our republic, there are five territories outpacing others in social and economic development. We're now beginning to register residents there. As of now, we understand who they'll be and how it'll develop. In addition to that, we've begun to discuss the creation of a free economic zone with the Russian government. The first round of negotiations with the Ministry of Economic Development of Russia is over. We're now preparing to file the full application package with the Russian government.”

One of the main products of the republic is there, underground. It's rich in oil. There are 250 oil fields. The proven reserves are about half a trillion tons. They collected the black gold from the surface back in the 18th century. And in 1932, the oil gusher near the village of Ishimbaevo started commercial production.

- How much oil is produced now, comparing to the previous periods?

Vyacheslav Kozhevnikov, Deputy Executive of Bashneft: “We can say that over the last 10 years, the production level has increased. 10 years ago, we produced about 12 million tons per year. In 2018, we produced 16 million tons. Still, it's mainly work to increase the efficiency of geological prospecting and exploration for oil and measures to increase the efficiency of production at the current oil fields.”

Bashneft, a subsidiary of Rosneft, produces the biggest part of its oil in Bashkiria. It's about 80%. Its 174 oil fields have the deposits of about half a trillion tons. Production is half the battle, as they say. Processing is the other. The republic is the country's leader in oil processing. The company's oil processing complex consists of not one but three huge sites.

- This facility, which is shining in the sun, what's it for?

Ilya Glukhov, Senior Engineer of Bashneft-Ufaneftekhim:

- This facility is designed for the removal of H2S from sour oil. So that it could further be added to finished motor gasoline and the finished gasoline would comply with Euro-5 standards.

- In plain language, this facility makes Euro-5 out of Euro-2, right?

- You're absolutely right. We turn Euro-2 quality gasoline and below into Euro-5.

Moreover, they're the first company in Russia that began to produce next-generation gasoline - Euro-6. Rosneft specialists created it. In general, the depth of refining is almost 83%. It's higher than the average index in the country. It's clear that only modern equipment, including Russian-made equipment, can do this. Take the production management system behind the thick door. It's the biggest hydrogen producing facility in Europe. It produces 420 tons per day. So, the facility offers a wide range of products. In addition to fuel, it produces gases, aromatic hydrocarbons, paving asphalt, and motor oils.

Speaking of oil products, here's jet fuel. There are very strict quality standards so that a jet engine works at its highest, in every sense of the word.

And here's the engine. It'll be tested today. It'll be its second test, by the way. It'll be installed on a Su-27 fighter very soon. This enterprise was founded in 1925. They first assembled engines for combine harvesters and then unique engines for fighters. Those produced in the 70s are exhibited in the workshop. It's an improvised museum. They used thrust vectoring nozzles on a Su-30 for the first time. It enables it to perform acrobatic maneuvers. It was assembled in Ufa. And here's an engine for the modern Su-35. But it isn't the latest development. There's an engine for the state-of-the-art Su-57. Its characteristics are top secret for now.

Evgeny Semivelichenko, CEO of ODK-UMPO PJSC:

- In the foreseeable future, there must be at least two more engines.

- They'll be for fifth-generation aircraft.

- Yes, for fifth-generation aircraft.

Now, ODK-UMPO PJSC, which is a part of the United Engine Corporation of the Rostec group, carries out the complete production cycle; from the development in the development design office to tests. The tests are to begin now. The engine will be tuned up in every possible mode for about three days. They seem to have started. I'd better go. People aren't allowed to be here.

They don't just make engines for fighters at the plant. The enterprise makes the PD-14. It's a turbofan for the MC-21 Russian passenger airliner. There are ground engines to pump gas. And here's the Chief Operations Officer demonstrating a turbine for a helicopter engine.

- It all was foreign-made before you started making it.

Evgeny Semivelichenko: “It isn't a secret that it was made in Ukraine. It happened that after the USSR collapsed, the entire production of helicopter engines remained in Ukraine. I think that today, we've solved this issue in full. I mean the issue of providing Russian-made engines.”

The history of import substitution is a history of large-scale modernization. On this site, for example, they assembled engines for the Moskvitch sedan. The car became history, as did its former workshop. Last year, they launched a modern production line according to their area of expertise. They'll build another three lines near it. In the workshop where they assemble engines for helicopters, they use Russian-made equipment as well. They're made in the Moscow region and Lipetsk. This one is made in Perm. And this one is made in Bashkiria. Engine.

Where's the engine? Here? No. Let's keep looking. Here it is. It's a Russian-made electric motor. Other parts are also Russian-made, except for the bridges and batteries. This is a new trolleybus made in Bashkiria. It's also an electric bus. That is, it can travel 18 miles without being connected to the grid.

Denis Rassadnikov, CEO of the Ufa Tram and Trolleybus Plant: “Unlike modern buses, we save 30% on the propulsion engine and the converter. The induction motor allows us to use electric power economically. That's one point. Then, you're looking for other things to save more. There's an energy recovery system. So, when braking, electrical power is collected and returned to the grid.”

The trolleybus has everything that a modern vehicle should have. There's a low floor, a wheelchair lift, and wi-fi. There's even a passenger counter.

- Many people know how the interior looks like. But it's interesting to see how it looks like over there.

Denis Rassadnikov

- Please, have a look. You can sit down at the wheel of the trolleybus.

- It's a pleasure. When else will I have such a chance?

- If you were in an old trolleybus's cabin, you must have seen lots of various indicators which don't look modern. Here, all of the indicators are on one screen.

- And all of it is Russian-made?

- Yes, it all is Russian-made.

We can say that making trolleybuses is the new lease on the enterprise's life. Five years ago, the Bashkir Trolleybus Plant went bankrupt. Here's its depot. It looks terrible.

- I'm sorry, but it looks like it was bombed.

As a result, a private investor bought its assets, intellectual property, and retained its specialists. Now, together with Nefas, a company based in Bashkir, it relaunched production. After they receive the bodywork from Neftekamsk, a town in the Republic of Bashkortostan, they install the engine, the generators, the drive gear, and all of the electronics on it. It takes two weeks.

- These aren't test prototypes, right?

Denis Rassadnikov:

- No, these are commercial vehicles. You can see the signature "We like Almetyevsk" on them. We'll receive a vehicle from Ivanovo tomorrow. So, we have contracts for serial production for different Russian cities.

- How many do you make now? And how many do you plan to make?

- Now, we have to make 10 vehicles for Almetyevsk and 5 for Ivanovo. We plan to make 100 vehicles per year. We're ready to do it. It makes no emissions.

It's environmentally friendly.

7% of the republic's territory is a protected area. It's natural beauty. That's why they plan to develop tourism.

The lands of Bashkiria are rich in natural resources. There are over 17 million acres of agricultural lands. The republic produces more beef and kumis than any other region. It's the second biggest dairy producer. Its exports reached $55 million.

- We know that Bashkir honey is a brand, of course. It's exported to every part of the world. But you export not only honey.

Radiy Khabirov: “We have the biggest cattle stock and the largest number of horses in Russia. Our average potential is 3-4 million tons of grain. There are very few regions that are able to produce as much. I won't make a mistake if I say that we're one of the five biggest agricultural producers. We're shooting our report in spring.”

The bees are still hibernating. But it isn't an excuse to avoid telling you about Bashkir honey. It's the standard of taste, a national product, and a brand. It's exported to every part of the world. So, while the bees are preparing to go to work, we'll show other useful insects.

Why would a farm that grows tomatoes, cucumbers, peppers, and eggplants also grow tobacco leaves? What do you think? It's because useful insects grow well on those leaves. They're called insect eaters. They destroy pests.

Here are the small insect eaters in a tube. Otherwise, they'd have to use chemicals. Here are the houses of bumblebees. Corporate apartments, to be exact. What are they for? They're needed to pollinate plants. 7 houses like these are enough for a territory of 20,000 square feet. Since this farm has 106 acres of greenhouses alone, there'll be enough houses for bumblebee and bee cities. There's work for everyone. Of course, not all of the Cipollino characters need to be pollinated. Onion, potato, carrot, and other lettuce are resistant to Russian weather conditions. They're planted on outdoor beds. But eggplants, peppers, five varieties of cucumbers, and 12 varieties of tomatoes are to be planted in greenhouses. And they're insect-friendly.

Unlike cucumbers, tomatoes should be picked at different levels of maturity. If they're picked green, they'll transport them farther. They deliver them to Moscow, Tyumen, for example. And they'd spoil on the way if picked red and mature.

- Wow! Look at all those tomatoes!

Fanil Zagretdinov, Deputy CEO of the Alekseevsky farm: “On average, since 2016, the amount of vegetables grown has increased by 1,500-1,600 tons in greenhouses per year. Last year, we harvested over 15,000 tons of vegetables in greenhouses. And the trend is growing.”

Everything is increasing because they build new greenhouses. They already have 24 acres of those which are bigger, lighter, and warmer. It's always summer here, the harvest comes 7 times per year, and moreover, the night never comes here. After sunset, the lamps function as an electric sun. It's called photoculture technology.

- Compared to former greenhouses, how much more vegetables can you harvest from a square foot?

Fanil Zagretdinov:

- If we don't use artificial lighting, in our former greenhouses, we'd harvest 6-7 pounds from a square foot. In these modern greenhouses, we can harvest 11-13 pounds of cucumbers. If we use artificial lighting, it'll be 26-33 pounds. Let's say, it's really increased.

- Almost three-fold.

- Yes, it's almost three-fold.

It's clear that buyers pay for electricity. But a high crop yield keeps prices low. The farm plans to harvest 17,000 tons per year. There are a total of 60 farms using greenhouses in the republic. They harvest 94,000 of vegetables on their 500 acres. They're the second most efficient among the regions. Many of them, like this farm, have livestock, produce milk, grow corn, and make bread. They sell them in local stores.

Now, it's time to talk about another Bashkir product which you're sure to know well. It can be used to get rid of pests in one's vegetable garden and keep your plants healthy. As we say, it's a multi-purpose thing. It can be used to gargle one's throat with, clean bathroom fitments, and then some. This is baking soda. Bashkiria is its biggest producer in Russia.

Baking soda is a so-called product of victory. The thing is that the first batch was produced in March of 1945. 30 years later, they became the world's biggest producer. In the 80s, they even set a record of 2 million tons. After those so-called crises, the figure is lower. But it's increasing. And the Bashkir company is the biggest producer in Russia and Europe.

- How has your output of baking soda and washing soda changed recently?

Rail Fatkulin, Development Director of the Bashkir Soda Company: Over the last five years, the output of sodium carbonate has increased by 17% on a year-on-year basis. Roughly speaking, we increased from 1.5 million tons to 1.7 million tons over one year. The output of baking soda has also increased by 26%. We plan to increase its output to 200,000 tons.”

So, there are washing, baking soda, and sodium carbonate. Washing soda is used to make glass, detergents, and even to increase the production of oil. Baking soda is used to make bread, disinfect, and even to put out a fire. All this soda is produced here because the republic has all of the resources for it, such as limestone, solid sodium chloride, and water.

What is soda? I'll try to explain it in plain language. To produce soda, we need to mix limestone and a saline solution. The problem is that they can't be mixed. That's why we need to turn limestone into a gas, and mix the saline solution and ammonia solution. Then, we can do it. Here's how it all looks in practice. Everything is mixed up in a soda house. This is sodium bicarbonate, the future soda which they'll make baking soda out of. Then, sodium bicarbonate will go to the furnace. It'll be baked at a temperature of 302°F for two hours. After that, it'll be ready sodium carbonate. To produce more, there's a program of modernization worth almost 4 billion rubles ($64 million). This amount includes a low-interest 300 million ruble ($4,5 mil) loan from the Industrial Development Fund.

Rail Fatkulin: “According to the last project, almost 1.3 billion rubles ($20 mil) were invested in this production line. We've built a new filling line. We're standing on the site where the same packs were made but the old ones weren't sturdy. I guess everyone remembers how it spilled from the pack. Now, you can make sure that this pack... Let alone the fact that it's easy to open, it practically doesn't spill any soda.”

They supply it to all over Russia, the CIS and other foreign countries. But one shouldn't think that the company produces only soda. They offer a lot of products, such as soft cable compounds for isolation, and one of the most used plastics - PVC.

Let's go a bit further, shall we? Here, in Sterlitamak, there's another enterprise which is also doing its best for its products to be on the rise. Here we are. Thanks to video editing, it took a second to get to an elevator from the car. Not only that but this elevator isn't going anywhere. For now. It's because these recently made elevators are being waited for, and not just in the republic. They'll wait for them in Tatarstan, Chuvashia, Chelyabinsk Oblast, Sochi, and Moscow. Just five years ago, nobody even heard of elevators being made in Sterlitamak.

Filyus Galeev, CEO of Rusko Lift:

- We made 10 elevators in 2016. Last year, we replaced 65 elevators in Sterlitamak alone. In all, we installed about 165 elevators in 2018.

- How many elevators are you ready to make?

- Our company's capacity is 2,000 elevators per year.

Why do they buy elevators? Producers say that it's because they work, are better priced than the competitors' ones, they're economical, and they pay for themselves in 15 years. They're of South Korean quality. Yes, the technology originally came from Asia. Originally.

- Our viewers would say that Koreans produce everything, and they just assemble it here like a knock-down car kit or something. It isn't true?

Filyus Galeev:

- Of course, it isn't. Our main goal is to work here and not be dependent on anything like the fluctuations of the dollar, the fluctuations of political relations of any kind. Imports are what hangs heavy on us.

- What is the share of your local production already?

- The share of imported parts is about less than 20%. But we plan to phase out imports entirely by 2021.

Here's a fresh example of import substitution. Door opening motors are made in Udmurtia. How can one do without tests? They test the door opening system to destruction. It's to complete 3 million cycles. They plan to do all of the work here, from making the microchips and the main motors to painting. By the way, a line worth 100 million rubles is being installed. The total investments have already exceeded 350 million rubles ($5.4 million).

Now, you'll hear a powerful story about transporting people not vertically but horizontally from point A to point B with a guarantee because it doesn't matter what obstacles will be in the way.

“Off we go!”

There's a saying that the fancier an off-road vehicle is, the farther one has to go for a tractor. We can continue the phrase. The fancier the tractor is, the farther one has to go for a Bashkir off-roader. It's hard to imagine what one has to do for a Vityaz to get stuck. At a speed of 27 mph, its wide caterpillars don't sink down in snow and dirt. And they row like a prop in water. Yes, having a weight of 28 tons, it swims well. In addition to that, like an ant, it can carry loads weighing more than itself. The off-roader is a set of conjoined twins. The second link can't be separated because it's supposed to transport not only loads and people. Here's one of the unique features of the off-roader - a pivot and hooking device. In addition to controlling the tracks, it also makes it possible to pivot the vehicle however one wants. It can bend over if one wants. And it can "get on its hind legs" to overcome a 3-feet-high obstacle.

The plant in Ishimbay is the only plant in the country producing such off-roaders. It's been doing it since 1977. It doesn't mean that they make vehicles from the Soviet era. The equipment is being modernized.

- How much do you invest in modernization?

Mansur Kunakov, First Deputy CEO of the Vityaz Machine Building Company: In 2016, our plant became a part of the UralVagonZavod Corporation. Since then, with the support of our holding company, there were investments in the modernization of equipment, renovation of premises, and buildings. The investments exceeded 525 million ($8 million).”

In addition to that, 400 million rubles ($4.2 million) was invested in the most important thing - the staff. Young people come to work again, which means that there are good salaries and opportunities. The off-roaders have also changed. We saw the tests of this small one at a test field, for example. It can carry up to 3 tons. It can be used where bigger vehicles aren't needed. For their part, they're also being taught to do new work.

Mansur Kunakov:

- We've begun to produce some high-tech systems with various equipment installed on them which is in demand in the north. I'm talking about cranes, earth-moving machines, and tanks. For the military, we install various weapon systems on the same chassis.

- So, it can also be dangerous, as we say?

- It isn't dangerous. It protects us.

The buyers, and this isn't only the Defense Ministry, use off-roaders both in infernally cold and frosty weather. By the way, white Arctic colored Vityaz vehicles took part in the Victory Parade on Red Square.

The development of the Bashkir economy resembles those off-roaders: there are difficulties, sanctions, crises, they're like off-road conditions which require special vehicles to help overcome them.

- Can we say that you have to, dare I say it, sell the republic's opportunities personally in a good sense of the word?

Radiy Khabirov: “You're absolutely right. You know, it's hard to say precisely, but the work to create a favorable environment for business, the growth of production, attracting investment accounts for at least 50% of my work and the work of our prime minister because we all clearly understand that any social goals depend on the economy. If the economy develops well, there'll be roads, kindergartens, and decent salaries. That's why it's the main task.”

Support Russia Insider - Go Ad-Free!

The area of the republic is 35 million acres. It seemed much bigger to us. It turns out that the leaders in glass production, vitamin production, and concrete pumps work here. We wouldn't have enough time to tell you about all of them in detail. But we should mention them because they're the basis for economic development.

Having a basis is important. Take this monument to the national hero Salawat Yulayev. Having a weight of 40 tons, it has only three pillars. But it stands in a confident monumental way.

Support Russia Insider - Go Ad-Free!

This post first appeared on Russia Insider

Anyone is free to republish, copy, and redistribute the text in this content (but not the images or videos) in any medium or format, with the right to remix, transform, and build upon it, even commercially, as long as they provide a backlink and credit to Russia Insider. It is not necessary to notify Russia Insider. Licensed Creative Commons

Our commenting rules: You can say pretty much anything except the F word. If you are abusive, obscene, or a paid troll, we will ban you. Full statement from the Editor, Charles Bausman.