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Yes, the cuts and resulting devastating impacts are probably legit, and mean the coming year will be one of the most tragic in the history of Longyearbyen.
But for those looking for a ray of hope, it’s not entirely out of the question Store Norske is trying to force the government’s hand about its pledge of ensuring a strong economic presence here.
If the company does eliminate all but 100 of its employees by next summer – a downsizing of about 75 percent from 2013 – it’s essentially bailing out on the town’s cornerstone industry since it was founded more than a century ago. It’ll keep Mine 7 going because it’s cheap and also the source for the city’s power plant, but if initial plans to double production there aren’t viable another 50 employees will likely be let go.
Either way, Longyearbyen could be facing the loss of about one-fourth of its 2,000 residents, depending on whose estimate you’re listening to.
The impacts for those laid off are just the start: the “survivors” will be forced to pay higher rates for everything the government provides (power, infrastructure, etc.) since fewer people will be sharing the burden. Other companies will be laying large numbers of people off or shutting down. Airlines may reduce their flight schedules since the “shift” workers (mainland folks working 14-days-on/14-days-off) are a huge part of their business. Folks like us, in the process of trying to sell their home in order to keep this publication alive, are likely to see the real estate market descend into a utter tailspin.
Numerous Longyearbyen politicians including Arlid Olsen, the union representative for Store Norske’s employees who is likely to become the town’s next mayor after this fall’s election, are expressing optimism about the future as other industries such as tourism and research attempt to replace the jobs lost by coal. Perhaps. But a report released by Statistics Norway this week shows what such a future might bring: a community where high-paying long-term industry jobs are replaced by lowering paying short-term (and often part-time) jobs in service industries such as tourism.
As Ronny Brunvoll, director of Visit Svalbard, observed when we interviewed him after Store Norske’s announcement, the odds of successfully moving up here with a family when your options for work are drastically reduced are not promising.
Which brings us to what may the deeper thinking behind this week’s announcement: one of the biggest goals of the Norwegian government when it comes to Svalbard is establishing it as a diverse family community instead of its historical role as an industrial “company town.” While that certainly means branching out into other industries, government officials have continued to insist during the past year that Store Norkse is a vital part of that community despite the crisis largely brought on by a collapse in coal prices that are showing no signs of rebounding.
So while the board’s actions were drastic, it’s also possible they’re trying to force the government to live up to that pledge, either in the form of ongoing financial assistance even if mining continues to lose money or some other form of help. The company hasn’t hesitated to resort to pressure tactics before: it told the government in 2013 to speed up its evaluation and approval of the Lunckefjell or there might be no choice to abandon the project and start shutting down all of the company’s mining. Sure enough, the company got its approval to proceed with the new mine that was hailed as its lifeline for the next several years when it opened early last year.
Another consideration is Svalbard’s strategic importance on the global stage. Norway has asserted for years its Arctic territory is its most important strategic asset and Svalbard is of special importance due to the large number of other countries with a presence here. Russia in particular has been aggressive in staking out its Arctic claims and, with that country investing heavily to ensure the settlements of Barentsburg and Pyramiden remain viable despite achieving nothing resembling profitability, Store Norske may be hoping such political concerns override economic ones.
That said, don’t think some brutal questions are coming from the government after Parliament approved a 500-million-kroner bailout package that was supposed to keep the company afloat until the end of 2016. Where is the money going, if indeed expenses have been reduced a third as claimed? And why are these drastic steps being announced now instead of early next year, when it was expected Store Norske would decide its future plans?
In short, it’s hard to accurate predict anything about what will happen in this community during the coming year, except that it will be a stressful and most likely unpleasant one. But, like a stock market collapse, the rewards will come to those who don’t panic. Store Norske is basically suspending its operations, meaning there could be a boom in hiring and production in 2019, or perhaps a bit later, if the coal market rebounds. By then it’s also possible some of the efforts to double science and tourism – as well as developing other new industries – are well underway. If that happens, this week’s announcement will essentially be a giant hiccup in the town’s overall history – a highly unpleasant moment, but one that ultimately didn’t hamper its emergence on the world stage.
I think this desicion is what one muse expect from a decent business management. They only act according to reality. Then it is up to the owner (Norwegian Government) what is next step.
Agreed