Schaan, Liechtenstein (Ports Europe) September 17, 2024 – The missile attacks in the Red Sea are a reminder of the vulnerability of commercial shipping. The more sophisticated threat from Iran-backed Houthi terrorists has called for the deployment of serious naval assets, the GIS (Geopolitical Intelligence Services) think-tank wrote in August under the headline All eyes on Russia’s Northern Sea Route.
The mounting risks of prolonged disturbances at various choke points hurt shipping by increasing uncertainty and insurance costs. The combined impact of these developments shed new light on the Northern Sea Route (NSR), which links Europe with Asia via the Arctic Ocean.
While the distance from Rotterdam to Yokohama via the Suez Canal is about 21,500 km, it shrinks to only 11,900 km via the Northern Sea. The time of passage is reduced by close to half. Taking the NSR was long practically impossible due to the thick sea ice laced with impenetrable ridges. As climate change has caused the Arctic ice cover to recede, new opportunities have surfaced.
In 2021, the NSR was open for a record 88 days, from August 2 until October 28. The prior peak was in 2012 – 69 days.
NSR cargo is small and will remain small for years to come
Having never exceeded 5 million tonnes annually, the flow of cargo began to surge in 2015, reaching 33 million tonnes in 2020. In 2022, the traffic reached an all-time annual high of 34 million tonnes. In August 2022, the Russian government approved a $29 billion development plan for the NSR (an impossible task for the cash and technology-strapped Russian economy, which is under Western sanction for its full scale invasion of Ukraine in February 2022).
Rosatom on Russia’s Arctic Northern Sea Route
The plan envisioned 240 tonnes of cargo traffic by 2035. For 2024, the goal was 80 million tonnes. The war against Ukraine changed all this. As Western partners walked away, traffic took a nosedive.
Russia’s bombastic forecasts for Northern Sea Route
The core part of the NSR is along the Russian Arctic from Murmansk to the Bering Strait. The bulk traffic originates in Russia and is taken to either Europe or China. Although crude oil from Arctic fields does play a part, the primary source is LNG produced on the Yamal Peninsula by Russia’s private company Novatek.
Russia fixated on the Arctic Northern Sea Route
Russia’s Northern Sea Route to become “Great”
Reference – Russia’s Arctic and Far East ports projects
GIS scenarios
Two scenarios emerge. One assumes that the conflict in Ukraine is resolved before long and commercial interest in the Northern Sea Route returns, ramping up traffic. Avoiding the mounting risks at choke points along the Suez Canal route proves even more critical to shipping companies than saving time. The other script is based on the war carrying on indefinitely.
Russia’s Northern Sea Route only for Russia
Although the outlook suggests continued shrinkage of the ice cover, a long-term investment strategy will have to factor in the possibility of a reversal of this trend. Even if warming continues, Arctic weather will remain unpredictable, meaning that shipping schedules based on “just in time” demand will not be feasible. There is also the question of the high costs of vessels with proper ice class and infrastructure for sea rescue and other forms of support.
Ice-class tugs badly needed for Russia’s Northern Sea Route
If Western sanctions remain or are tightened, its companies, including those in Japan and South Korea, will stay away. The consequences for Russia are already being felt.
Under this most likely scenario, relations between Russia and China are strengthened by a shared interest in developing Arctic energy resources, and relations between India and China will continue growing closer, also driven by common interests. Like China, India is receiving large volumes of Russian oil at a heavy discount.
China and Russia create “Ice Silk Road” in the Arctic
A tighter alliance between Russia, China and India that is based on the latter two exploiting Russia as a secure source of cheap energy will have negative implications for security beyond the Arctic. An alliance between these three will also be a threat to global maritime rules and regulations.
GIS was founded in 2011 by Prince Michael of Liechtenstein. It provides business leaders, senior managers and policymakers with relevant geopolitical forecasts based on scenarios. Unlike journalistic or media products, GIS focuses on providing intelligence-driven services.
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