14.11.2016 Author: Dmitry Bokarev

The Northern Sea Route: New Prospects for the Pacific Rim

3423123123Twenty years ago, eight Arctic states established the Arctic Council (AC) to jointly develop the Arctic Region and preserve the environment and culture of the indigenous peoples. Initially, Denmark, Iceland, Canada, Norway, Russia, the United States, Finland and Sweden held memberships in the Council. Later, other states with interests in the Arctic Region joined the AC. India, China, Singapore, South Korea and Japan were granted the observer status by AC several years ago. Considering financial capacity and vast experience in the marine logistics of these countries, they can render valuable assistance to the AC member states. They all had to make strenuous effort to join the AC. Today they are doing their best to gain access to the Arctic resources and maritime routes.

The real treasure of the Eurasian sector of the Arctic Ocean is, of course, the Russian Northern Sea Route (NSR), running through the Arctic Ocean along the Russian Federation’s northern coast.

Lately, Russia has been devoting much attention to the development of this unique transport corridor. In his December 2015 address to the Federal Assembly, Russian President Vladimir Putin talked about the significance of the NSR. The NSR has been repeatedly referred to as the corner stone of economic growth and transport safety for the northern territories and Russia as a whole.

This is the shortest sea route from the European part of Russia to the Far East. In a broader sense, the NSR is a huge section of the shortest sea route connecting Europe and Asia and the Atlantic and the Pacific Oceans. Access to the NSR would mean for Asian states a major reduction of time and cost required to ship goods to Europe. Currently, almost all cargo is delivered to Europe via the Suez Canal, along the southern coast of Eurasia. Not only is this way much longer, but also riskier since there is a threat of pirate and terrorist attacks. In recent years, the risks associated with shipping goods along this route doubled because of tense situation in the Pacific Rim. Territorial disputes between China and other countries of the region, attempts of the US to retain its influence there might trigger a situation when someone decides to block the southern route for navigation. It would not be hard to do either since this route has several vulnerable areas that could be easily seized and controlled by relatively small groups of people. They are narrow passages, including the Suez Canal and the Strait of Malacca. If, God forbid, something like that happens, the NSR can become a life saver for the countries of the Asia Pacific region trading with Europe. It is worth mentioning that the NSR runs through Russian territorial waters, which means that the countries looking to use it have to build rapport with Russia. This circumstance might play an important role in the development of Russian international relations.

What is more, the states wishing to use the NSR would have to participate in its development, including as investors. It is a complicated and costly task to upkeep the NSR. Russia has to employ its icebreaker fleet, and more so in wintertime, which is very expensive, to support navigation. As of today, Russia uses the NSR mostly to ship cargo and deliver the goods manufactured by local industry from the Extreme North ports. One of the key users of the NSR is the Russian company Norilsk Nickel. It owns more than half of all goods shipped via the NSR. Since Norilsk Nickel owns icebreakers, the company is able to deliver its products year round. Gazprom and Rosneft are two other companies forwarding goods via the NSR.

The Russian Northern Territories development program implies engagement of foreign companies willing to participate in the maintenance of the NSR’s navigability. Japan is one of the countries showing a genuine interest in cooperation. At the beginning of 2016, Japan’s Arctic ambassador Kazuko Shiraishi made a curious statement. She said that Japan was willing to ship up to 40% of all cargo it currently delivers to Europe via the NSR. Japan, in turn, can render assistance in the monitoring of ice conditions.

China is another major potential user of the NSR. At first glance, it might seem rather odd since China is developing its Maritime Silk Road, which will connect Asia to Europe via the southern route mentioned above. Some experts predicted that the Maritime Silk Road and the Northern Sea Route would become rivals. However, it looks like China sees certain advantages in having a backup route understanding the volatility of situation in the Asia Pacific region.

For whatever reasons, the Chinese government has demonstrated its interest in the NSR on a number of occasions. In 2013, the first Chinese ship Yong Sheng sailed along the NSR. It began its journey in the port of Dalian (China) and arrived in Rotterdam (Netherlands).

However, much remains to be done for the NSR to become an adequate alternative for a longer southern sea route, including the development of a sophisticated infrastructure featuring marine terminals in different sections of the route for yearlong loading and unloading (currently, only one NSR port, Dudinka, can accommodate ships all year long). The Russian side is casting a hopeful eye on Chinese investors as prospective partners for this project. Apparently, the “Celestial Empire” is also committed to secure its foothold in the NSR. Currently, China is energetically participating in the development of the Arkhangelsk Region. For several centuries, Arkhangelsk has been the Russia’s strategic foothold in the Arctic Region. This is one of the key sections of the NSR with high concentration of industrial facilities and important seaports. Today as before, the Arkhangelsk Region is given high priority in the new “Socio-economic Development of Russian Arctic Region” project.

In October 2016, the Russian company Arctic Transportation and Industrial Hub “Archangelsk” signed a contract with the Chinese Poly International Holding Co. According to the document, the Chinese company will fund the construction of a deep-water port near the Madyug Island in the White Sea. This will be a weighty contribution to the development of the NSR. It is anticipated that by 2030 the new port’s turnover could exceed 30 million tons of goods.

China’s profound interest in the Arkhangelsk Region was demonstrated once again when a major Chinese company Huadian decided to invest funds in the region’s power sector. Last summer, the joint Russian-Chinese enterprise “Huadian-Arkhangelsk CHPP” bought out the only source of central heating in the region, the Arkhangelsk CHPP, by paying off its 2.7 billion rubles debt.

It is clear that China is really interested in gaining access to the Arctic territories of the Russian Federation.

The Northern Sea Route is a unique transport corridor with a potential of placing Russia among the most important transit countries in the world. Besides, the NSR can attract many major foreign investors. And Russia’s foremost task is to give them a warm welcome.

Dmitry Bokarev, expert politologist, exclusively for the online magazine “New Eastern Outlook.