China could build Russia’s Arctic tanker fleet

Moscow, Rusia (Ports Europe) July 29, 2024 – The only way for Western sanctions-hit Russia to transport oil, oil products and natural gas via its Arctic Northern Sea Route (NSR) is to ask China to build a tanker fleet. This was clear from the statement of the giant state-owned Rosneft corporation CEO Igor Sechin at the 6th Russian-Chinese Energy Business Forum. “The NSR will require a high-ice-class tanker fleet, which can be created in cooperation with Chinese shipbuilders and component suppliers", Sechin said. By 2030, a total of 160 vessels will be needed to meet the forecasted growing cargo flow along the NSR. The volume forecast is optimisitic. According to Rosatom's calculations, by 2030, Novatek projects will require 39 gas (LNG) carriers and tankers, Gazprom Neft - 7 tankers, Norilsk Nickel - 6 tankers and container ships, Severnaya Zvezda - 25 bulk carriers, Baimskaya GDK - 3 bulk carriers, Rosneft - 11 tankers, Rosatom - 9 container ships, as well as 10 universal vessels. In September 2023, Denis Manturov, then Russia’s Deputy Prime Minister and Minister of Industry and Trade, announced plans to build about 120 vessels at Russian shipyards by 2035 for the development of the NSR. This now translates into huge orders for vessels at China’s shipyards. Bombastic and unrealistic forecasts In August 2022, Russia’s government approved a plan for the development of the NSR until 2035, which included measures for the development of the cargo base, fleet, transport and security infrastructure. According to the very unrealistic plan, the annual cargo flow along the NSR has to reach 150 million tonnes in 2030, and 220 million tonnes in 2035. Russia’s bombastic forecasts for Northern Sea Route Struggling to justify its fixation on the Arctic NSR, Moscow is making increasingly bombastic figures and promises. However, the inflated promises do not match the current reality. Total cargo transportation along the NSR in 2023 was 36.25 million tonnes. Russia fixated on the Arctic Northern Sea Route The latest is the June “forecast” of Russia’s Minister for Development of the Far East and Arctic, Alexey Chekunkov, who said that the NSR will transport 2 billion tonnes of cargo in 12 years’ time (166 million tonnes per year on average) worth about 100 trillion rubles (1.04 trillion euro at the current state-controlled exchange rate) or 87 billion euro per year. “NSR’s dynamics is obvious to everyone – the growth over 12 years is 36 times,” Chekunkov said at the St. Petersburg International Economic Forum (SPIEF’24). “The plans of the companies producing the goods that will need to be shipped via the NSR, are for 2 billion tonnes in the next 12 years. This will generate 20 trillion rubles (207 billion euro) in tax revenues. Therefore, the development of the Arctic is a top priority”. He added that the Arctic plays a huge role in the economy: mineral resources - fertilisers, nickel, cobalt, platinum, copper; hydrocarbons - oil, gas, pulp and paper production; timber industry products; diamonds; and shipbuilding. There is a clear understanding that the NSR is a shorter road from Asia to Europe, and it is becoming a key transport corridor. Facts, figures and fiction There has been a flurry of announcements about Russia’s Arctic Northern Sea Route (NSR), indicating the urgency attached to this alternative transport route. Moscow sees the NSR as an alternative to traditional sea corridors via the Baltic and Black Seas and the Suez Canal, especially in view of the West's sanctions-driven redirection of its trade towards Asia. The total capacity of seaports in the waters of the Northern Sea Route (NSR) by 2030 should increase 2.7 times compared to 2024 and reach 127.5 million tonnes per year, Russian Transport Minister Roman Starovoyt said. He added that the cargo transported along the NSR should quadruple and reach 150 million tonnes in 2030. Starovoyt mentioned that the NSR allows cargo to be transported without passing through the Baltic or Black Sea straits, which could be blocked in the event of an escalation of tensions with NATO countries. A sample of recent Ports Europe NSR coverage DP World wants Russia’s Arctic Northern Sea Route Arkhangelsk port as China’s cargo transport hub Global Ports, Leningrad Region plan Ust-Luga expansion Russia’s strategic Korsakov port to be privatised Delo Group asked to build deep-water port in Arkhangelsk Russia plans a new Arctic deep-water port Vladimir Panov, special representative for Arctic development of the state corporation Rosatom and deputy chairman of the state commission for Arctic development went even further and said that the cargo volume along the NSR could increase 6.8 times by 2035 compared to 2024 and exceed 250 million tonnes. Rosatom company even proposed the concept of the “Great Northern Sea Route,” which would also cover ports that are entry and exit points to the NSR, such as St. Petersburg, Kaliningrad, Vladivostok. Northern Sea Route NSR is a 5,600 km long shipping route, defined by Russian legislation as running from the Karskaza Door to Novaya Zemlya straits in the west, along the Russian Arctic coast above Siberia through the Kara Sea, Laptev Sea, East Siberian Sea, and Chukchi Sea, to Cape Zhelaniya on the Bering Strait. Cargo traffic on Russia’s Northern Sea Route increases in 2023 The entire route lies in Arctic waters and within Russia’s exclusive economic zone (EEZ). It is included in what has been called the Northeast Passage. The NSR does not include the Barents Sea, and therefore does not reach the Atlantic. Russia’s Northern Sea Route only for Russia The NSR currently serves the Arctic ports and the major rivers of Siberia by importing fuel, equipment, food, and exporting timber and minerals. Some parts of the route are ice-free for only two months per year, but melting Arctic ice caps are likely to increase traffic and the commercial viability of the NSR. Reference – Russia’s Arctic and Far East ports projects For example, the distance from Murmansk (Russia) to Yokohama (Japan) through the Suez Canal is 12,840 nautical miles, but only 5,770 nautical miles through the NSR. For the corporate players in bulk shipping of relatively low-value raw materials, cost savings for fuel are a crucial driver to explore the NSR for commercial transits, more than delivery time, or environmental concerns. China is keen to “work with Moscow” in developing the route. Russia to dredge Northern Sea Route with Chinese help The transportation of the dredging fleet from Southeast Asia through the Suez Canal to the Northern Sea Route (NSR) and back costs half of the total NSR dredging project budget, Konstantin Stasiuk, Deputy Director of the NSR Project Department and Head of the NSR Infrastructure Department of the Rosatom, said in February. Stasiuk did not name the country from where the dredging fleet will come, but it has been reported earlier that Russia has no ships, barges and technology to complete the task and will rely on Chinese help. To reduce these costs, options are being explored for moving the dredging fleet via the Northern Sea Route itself. Among the projects on the NSR that require dredging, Stasiuk listed the reconstruction of the Sea Canal in the Gulf of Ob (Arctic LNG 2 project), the creation of a coal terminal for the Syradasay deposit (North Star project), the oil terminal Port Bay North (project Vostok Oil), construction of a marine terminal at Cape Nagleinyn in the port of Pevek (project GDK Baimskaya). In 2018, Rosatom became the infrastructure operator of the Northern Sea Route, and in October 2018, it created the International Container Logistics (ICL) company – a long-discussed joint venture with the port operator DP World from the United Arab Emirates (UAE). Rosatom own 51% of the JV. The ICL will carry out sea container transportation through the Northern Sea Route between the eastern and western parts of Eurasia. The pilot stage of the project should provide transportation at the level of 800,000 TEU per year, according to Rosatom. According to the Deputy Director of the Northern Sea Route Directorate of Rosatom, Maxim Kulinko, the Northern Sea Transport Corridor (NSTC) as a maritime highway, including the waters of the NSR, ports and shipping routes of the Barents, White and Pechora seas on the western flank and the Kara, Laptev, East Siberian, Chukchi and Bering seas on the eastern flank. Rosatom nationalised logistic groups Rosatom also intended to involve the Delo logistics group, FESCO and other major Russian logistics operators in the project. In Delo, Rosatom already owns a 49% stake. On November 8, 2023, Rosatom Business Development Director Ekaterina Lyakhova became the general director of Delo Management Company (the parent company of the group). She also retains her current position in Rosatom. In November 2023, Russian President Vladimir Putin issued a decree to transfer state-held shares in Far Eastern Shipping Company (FESCO), the flagship company of FESCO Transportation Group, to Rosatom. Rosatom takes over FESCO to create a shipping corridor along the Northern Sea Route Sanctions create issues for Rosatom In addition, Russian President Vladimir Putin instructed Rosatom to concentrate on competencies in the field of shipping, infrastructure development, maritime safety, as well as providing the necessary services within the framework of one infrastructure operator (Rosatom), assigning to it the functions of providing government services in the field of maritime activities and management of state property within the framework of the NSR. The most important thing is to ensure year-round and safe navigation, which is impossible without strengthening the existing nuclear icebreaker group. Under Western sanctions, prices for the construction of new nuclear icebreakers are being revised, which requires different approaches to financing the heavily subsidised icebreaking services. The lack of Western technology is also an issue. China’s increasing influence on the Northern Sea Route As Russia attempts to find ways to alleviate the impact of Western sanctions, and find alternative trading partners and trade routes, China has seized the opportunity and is increasingly asserting itself on the NSR, analysis by Risk Intelligence Northern Sea Route: The rising Chinese influence and Russia’s concessions says. In a further display of this growing influence, and in line with common Chinese policy of expanding existing maritime infrastructure, China has started constructing its own docks in five of the most significant ports along Russia’s Arctic shoreline – Murmansk, Sabetta, Arkhangelsk and Tiksi, Risk Intelligence said. Inequality of the Russian-Chinese relationship. The development, coupled with the construction of Chinese rail lines into the region, cements China’s physical presence in the NSR and its increasing control over crucial infrastructure. In sanctions-hit Russia: Comms, cranes, dredging, containers come from China In August 2022, under the heavy pressure of Western sanctions, Moscow approved a plan for the development of the NSR until 2035, with financing of about 1.8 trillion rubles (18.4 billion euro). According to this overambitious plan, the annual cargo flow along the NSR should be 80 million tonnes in 2024, 150 million tonnes in 2030 and 220 million tonnes in 2035. Northern Sea Transport Corridor – born by sanctions According to the Deputy Director of the Northern Sea Route Directorate of the State Corporation Rosatom Maxim Kulinko, a new Northern Sea Transport Corridor (NSTC) as a maritime highway, is being created. NSTC will include the waters of the NSR, the ports and shipping routes of the Barents, White and Pechora seas on the western flank and the Kara, Laptev, East Siberian, Chukchi and Bering seas on the eastern flank. Russia’s Vladivostok as a domestic Chinese port Risk Intelligence is a world leader in risk assessment and planning, specialising in threat analysis at sea, in port, and on land with a global risk alert system. More Ports Europe news about the NSR More Ports Europe news about Russia Copyright (C) Ports Europe. All Rights Reserved. 2024.

China could build Russia’s Arctic tanker fleet

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China could build Russia’s Arctic tanker fleet

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