China with all its might is trying to change the game of shipping. It’s major focus is the North Sea Route (NSR) which connects Asia and Europe along the northern coastline of Russia. This has been a decade old dream of Russian policymakers which is gaining momentum thanks to PRC’s financial muscle and the interest of Chinese shipping companies, says a report published in JamesTown.
The proposed trade route would cut down 1,370 and 4,600 kilometers off the trip between ports in China and Western Europe (CASS, February 28), theoretically saving both time and money by bypassing the Suez Canal. It also has appeal for Chinese policymakers; as opening the NSR could secure access to natural resources and ease China’s “Malacca dilemma” (China Brief, April 12, 2006).
Treacherous Sailing
At the moment the NSR is passable by normal cargo ships for only a few weeks each year, and transit speeds are lower than the Suez route because of ice in the water (Finnish Transport Agency, March 9). If global CO2 emissions continue to rise at current rates, however, the “majority of the Arctic Ocean is expected to be open water for half the year” by the end of this century, according to a 2017 report by the UK Government Office for Science. A decrease in the extent of sea ice would vastly increase the usefulness of the NSR.
But the simple presence of open water does not a shipping route make, especially in the treacherous Arctic Ocean.
Writing in James town’s Eurasia Daily Monitor in 2016, Dr. Vladislav Inozemtsev was scathing about the route’s present economic viability: “There are no repair or fueling facilities suitable for modern ocean vessels anywhere along the entire route. Moreover, the icebreakers now in use are able to produce a 25-meter-wide ice-free passage, which means the NSR cannot be used by either Suezmax or Panamax container ships [which are nearly 50 meters wide] … To make it appealing to the world’s largest shipping companies, the Russian leadership will need to invest tens of billions of dollars in [a new generation of icebreakers] and local infrastructure upgrades. But to do this, transit tariffs will have to skyrocket, thus leaving the southern route [through the Suez Canal] as the best possible option for shippers. The NSR can function as an economical transit route only if foreign shippers are subsidized by the Russian government, which cannot be the case.”
High Insurance Rate
To all this must be added the fact that insurance rates are much higher for vessels operating in polar waters, and specially trained crews are needed to cope with the extreme conditions (UK Office for Science, July 2017). Shallow seabed at key points along the Russian coast also limits the size of ships that can pass (The Arctic Institute, November 2013).
China’s entry onto the scene could be a game-changer. Where Russia lacks the political will and financial muscle to make the scheme commercially viable, the PRC may have the deep pockets, and the economic and strategic rationales needed to see things through to completion.
Silk Road on Ice
In a July 2017 meeting with Russian Prime Minister Dmitry Medvedev, Chinese Communist Party (CCP) General Secretary Xi Jinping declared Russia and China should “develop their cooperation on arctic shipping routes, jointly building a ‘silk road on ice’” (People’s Daily, January 28). The PRC’s policymaking apparatus has responded to this signal from its top leader: China’s State Council issued the country’s first “Arctic White Paper” in January; PRC media coverage of the ice silk road has been positive and extensive; ministerial working groups from both countries are negotiating the outlines of potential cooperation; and PRC think tanks have been set to work expounding upon the potential benefits of the project.
The PRC analyses produced so far tend to frame new shipping routes as the most important outcome of Sino-Russian polar cooperation, followed closely by the potential for new natural resource extraction (CASS, February 28). They also mention the possibility that NSR shipping could help revitalize China’s economically moribund northeast provinces. Geographically these provinces are much better positioned to take advantage of the shorter routes to Europe the NSR could provide, since the time difference between the NSR and the Suez for goods shipped from southern ports like Shenzhen and Hong Kong is negligible.
Outside observers should take these initiatives seriously. The CCP clearly believes in the long-term gains that can be reaped from financing polar infrastructure projects that are otherwise economically unviable, particularly when strategic justifications exist, such as securing access to natural resources, or cargo routes that ease the Malacca dilemma. PRC financial institutions provided $12 billion of the $27 billion necessary to bring Russia’s massive new Yamal LNG project online. Prior to the PRC’s involvement, the project was floundering (Eurasia Daily Monitor, September 28, 2009). Likewise, in Alaska, Chinese financing rescued a 1,300 kilometer LNG pipeline connecting the North Bank with the Pacific. Western oil majors pulled out of the project because the gas would have been too expensive to extract at prevailing market rates, even though it was one of Alaska Governor Bill Walker’s signature initiatives (E&E News, April 17).
Things To Remember
Among the things to follow closely, observers wanting to gauge the progress of the Sino-Russian joint effort should keep an eye on three indicators:
- PRC investment in shipping infrastructure on Russia’s northern coast;
- PRC investment in Northern European transport infrastructure;
- Sino-Russian joint development of extra-wide next-generation icebreakers.
PRC media reports indicate that the first two are in the exploratory phase. The last is speculative, but not entirely implausible. Much like the rest of its Arctic agenda, it is unclear whether Russia can afford the $2 billion-per ship price tag of its recently announced Lider-Class icebreakers—which could open paths wide enough for Panamax cargo ships—without PRC financial assistance (Maritime Executive, January 3).
Thus, the Polar Northern Sea Route shows potential. With it we can witness a paradigm shift in the shipping industry.
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Source: James Town
