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16.06.2025
Identifying Russia’s innovative development priorities based on an analysis of multipliers
This study is based on the author’s diagram of the connectivity of key industries of the Russian economy with a focus on four key sectors: mechanical engineering, the automotive industry, the rocket and space industry, and the development of the Arctic. These sectors have the greatest multiplier effect since their development involves as many related industries as possible and they generate demand for high tech products, require constant improvements to science and technology, and aim to solve unconventional problems related to innovative development.
Innovative development priorities are selected directly based on the industries that generate the largest share of added value to GDP and create as many new jobs as possible in related sectors of the economy. Such industries primarily include machine tool manufacturing, instrument making, the aviation and space industry, and the production of large-tonnage ships. Since the source of added value is actual materialized labour, selecting this priority aims to predominantly encourage labour-intensive industries to the detriment of material- and capital-in tensive ones. On the one hand, this approach helps get rid of the most environ mentally hazardous industries and reduce the direct use of human capital, thus increasing the duration of its effective use, while, on the other hand, it pushes the country that applies this approach to the top of international value chains.
This concept prioritizes such a criterion as the share of added value in the overall cost structure of an industry’s products and the number of new jobs it creates. Jobs are created in the economy due to the multiplier effect. For example, the development of the Arctic requires expanded production in construction, the oil and gas industry, shipbuilding, and hence in mechanical engineering, science, and education. As the Russian minister of natural resources and former governor of the Yamal-Nenets Autonomous District rightly noted: “One job in the Arctic creates 14 jobs in Russia. Enterprises from 57 regions are already involved in the development of the Arctic in one way or another. The Arctic is a powerful driver of the entire country’s economy”.
We analysed the opinions of experts [1,2,4,5,6,7,8,9] who noted the enormous magnitude of this multiplier effect. Based on the data we obtained, we constructed a diagram of the connectivity of key industries of the Russian economy (see the figure at the end of this essay), from which we identified four key sectors: mechan ical engineering, the automotive industry, the rocket and space industry, and the development of the Arctic. These sectors have the greatest multiplier effect since their development involves as many related industries as possible and they gen erate demand for high-tech products, require constant improvements to science and technology, and aim to solve unconventional problems related to innovative development. This approach requires a focus on labour-intensive sectors with a large amount of initial capital investments. Let’s look at a specific example. To develop the Arctic, conditions need to be created for several thousand specialists to live normally beyond the Arctic cir cle, which in itself is a difficult task. There is no permanent population in simi lar regions of Canada, since this country mainly uses rotational work shifts in the subarctic zones. In terms of building cities in the Arctic, we can confidently say that Russia undoubtedly possesses competitive advantages and has accumulated extensive experience.
In this context, the Northern Sea Route appears to be one of the most import ant arteries that can ensure the proper functioning and progress of the Arctic region. The reconstruction of the Northern Sea Corridor system primarily involves modernizing nodes throughout the entire rail, sea, and river transport systems, ensuring regular supplies to these territories, as well as airports and airfields, the development of and improvements to intraregional highways, the use of new technologies to build common infrastructure systems for industrial complexes, the streamlining and expansion of energy supplies and utilities in all areas of activity, and the transition of energy consumers to centralized types of energy supply. But the most important thing is the modernization of the fleet, including the launch of new nuclear icebreakers, oil tankers, and lighter carriers.
A substantial increase in the volume of commercial transit cargo along the Northern Sea Route will help to drastically reduce insurance fees for vessels on this route, intensify its use for transit, and switch from per-tonne payments for the ice breaker escort of vessels to the usual fee that is charged on many sea canals. Rus sia’s Arctic region is also home to numerous mineral resources that have already been explored, including major gas deposits in the Pechora and Kara Seas, oil from the Vankor and Tugulskoye oil fields on the Yenisei River, nickel on the Taimyr Pen insula, apatite, copper, and aluminium on the Kola Peninsula, and gold and tin on the Chukotka Peninsula. This analysis of one of the key industries – the development of the Arctic – confirmed our conclusions: the concentration of state investment in the areas we identified will cause a multiplier effect, which will ultimately lead to the transformation of promising regions as well as progressive growth in the Russian economy as a whole. Deep structural changes in international economic relations, as well as the socioeconomic and geopolitical revival of Russia, are expanding prospects for utilizing previously unexplored opportunities. In this context, identifying priorities for innovative development in the Arctic and Northern Sea Route is consistent with the latest global trends.
Innovative development priorities are selected directly based on the industries that generate the largest share of added value to GDP and create as many new jobs as possible in related sectors of the economy. Such industries primarily include machine tool manufacturing, instrument making, the aviation and space industry, and the production of large-tonnage ships. Since the source of added value is actual materialized labour, selecting this priority aims to predominantly encourage labour-intensive industries to the detriment of material- and capital-in tensive ones. On the one hand, this approach helps get rid of the most environ mentally hazardous industries and reduce the direct use of human capital, thus increasing the duration of its effective use, while, on the other hand, it pushes the country that applies this approach to the top of international value chains.
This concept prioritizes such a criterion as the share of added value in the overall cost structure of an industry’s products and the number of new jobs it creates. Jobs are created in the economy due to the multiplier effect. For example, the development of the Arctic requires expanded production in construction, the oil and gas industry, shipbuilding, and hence in mechanical engineering, science, and education. As the Russian minister of natural resources and former governor of the Yamal-Nenets Autonomous District rightly noted: “One job in the Arctic creates 14 jobs in Russia. Enterprises from 57 regions are already involved in the development of the Arctic in one way or another. The Arctic is a powerful driver of the entire country’s economy”.
We analysed the opinions of experts [1,2,4,5,6,7,8,9] who noted the enormous magnitude of this multiplier effect. Based on the data we obtained, we constructed a diagram of the connectivity of key industries of the Russian economy (see the figure at the end of this essay), from which we identified four key sectors: mechan ical engineering, the automotive industry, the rocket and space industry, and the development of the Arctic. These sectors have the greatest multiplier effect since their development involves as many related industries as possible and they gen erate demand for high-tech products, require constant improvements to science and technology, and aim to solve unconventional problems related to innovative development. This approach requires a focus on labour-intensive sectors with a large amount of initial capital investments. Let’s look at a specific example. To develop the Arctic, conditions need to be created for several thousand specialists to live normally beyond the Arctic cir cle, which in itself is a difficult task. There is no permanent population in simi lar regions of Canada, since this country mainly uses rotational work shifts in the subarctic zones. In terms of building cities in the Arctic, we can confidently say that Russia undoubtedly possesses competitive advantages and has accumulated extensive experience.
In this context, the Northern Sea Route appears to be one of the most import ant arteries that can ensure the proper functioning and progress of the Arctic region. The reconstruction of the Northern Sea Corridor system primarily involves modernizing nodes throughout the entire rail, sea, and river transport systems, ensuring regular supplies to these territories, as well as airports and airfields, the development of and improvements to intraregional highways, the use of new technologies to build common infrastructure systems for industrial complexes, the streamlining and expansion of energy supplies and utilities in all areas of activity, and the transition of energy consumers to centralized types of energy supply. But the most important thing is the modernization of the fleet, including the launch of new nuclear icebreakers, oil tankers, and lighter carriers.
A substantial increase in the volume of commercial transit cargo along the Northern Sea Route will help to drastically reduce insurance fees for vessels on this route, intensify its use for transit, and switch from per-tonne payments for the ice breaker escort of vessels to the usual fee that is charged on many sea canals. Rus sia’s Arctic region is also home to numerous mineral resources that have already been explored, including major gas deposits in the Pechora and Kara Seas, oil from the Vankor and Tugulskoye oil fields on the Yenisei River, nickel on the Taimyr Pen insula, apatite, copper, and aluminium on the Kola Peninsula, and gold and tin on the Chukotka Peninsula. This analysis of one of the key industries – the development of the Arctic – confirmed our conclusions: the concentration of state investment in the areas we identified will cause a multiplier effect, which will ultimately lead to the transformation of promising regions as well as progressive growth in the Russian economy as a whole. Deep structural changes in international economic relations, as well as the socioeconomic and geopolitical revival of Russia, are expanding prospects for utilizing previously unexplored opportunities. In this context, identifying priorities for innovative development in the Arctic and Northern Sea Route is consistent with the latest global trends.
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