It has been two years since the grounding of the ‘MV Ever Given’ – a giant container ship – in the southern part of the Suez Canal brought the issue of alternative sea routes for global trade back to the fore. One of them is located in the arctic north of Russia.
Today, the war in Ukraine and Western sanctions seem to cast a heavy “shadow” on the one hand and to accelerate Moscow’s plans to develop the so-called Northern Sea Route (NSR). A shipping route between the Atlantic and the Pacific Ocean along the Russian coasts of Siberia and the Far East. Theoretically, it is the shortest sea route between Europe and Asia.
In light of the developments, however, for Moscow it now appears to be an imperative strategic choice to strengthen trade ties – especially in the energy sector – with its most important ally today: China.
“We consider cooperation with Chinese partners to develop the transport potential of the Northern Sea Route to be very promising,” Russian President Putin said during talks with Chinese President Xi Jinping in the Kremlin on Tuesday.
“As I have stated, we are ready to create a joint working body for its development,” he added, also mentioning the key role of transport infrastructure facilities, which “will reduce the cost and time of transporting goods between Russia and China, expand the geography of trade and will increase the volume of transit with the countries of the Asia-Pacific region”.
Carving partnership on ice
Of economic, but also geostrategic importance, the Northern Sea Route is a priority for Vladimir Putin. It is part of the country’s broader strategy for the Arctic: a region rich in natural resources and constantly shrinking ice cover due to climate change.
For years, the Russian president has restored a permanent naval presence there, reactivating bases abandoned with the collapse of the USSR.
He integrated militarization into the framework of achieving Moscow’s economic goals, entrusting Rosatom with the development of infrastructure along the shipping lane.
Among other things, the state-owned company maintains the world’s only fleet of nuclear-powered icebreakers, which Russia has now decided to strengthen.
In Moscow’s plans is to increase goods transported through the Northern Sea Route to 80 million tons per year in 2024 and to over 130 million tons by 2030.
In the midst of Western isolation following the Russian invasion of Ukraine, the Russian president appears willing to give an increased role to Beijing.
The exploitation of Arctic resources was on the agenda of the Chinese president’s meetings in the Kremlin.
Russian Prime Minister Mikhail Mishustin highlighted the “successful development” of Yamal LNG and Arctic LNG 2, two Arctic projects with Sino-Russian cooperation. The first has been in operation since the end of 2017, the second is expected to start producing liquefied natural gas at the end of this year.
At the same time, the state-owned oil giant Rosneft is “flirtating” with Chinese companies for their participation in the huge Arctic project of Vostok Oil.
Not coincidentally, Xi Jinping invited Vladimir Putin to the upcoming 3rd Belt and Road Initiative Conference.
An international investment and infrastructure development strategy, which has been a central element of China’s foreign policy since 2013 and now includes the “Polar Silk Road”.
Putin’s Arctic “bet”
Historically, the Northern Sea Route was covered by a thick layer of sea ice for most of the year.
But the effects of climate change are starting to become increasingly felt even in the northernmost part of the planet. The frozen Arctic landscape has already been altered by the gradual rise of the Earth’s average temperature.
During the past summer both shipping lanes – the Northern Sea Route on the one hand, the Northwest Passage through the Canadian Arctic Archipelago on the other – were practically open.
Even the amount of dense, perennial ice has declined in the wider region.
Despite the ominous situation for the entire planet, for the countries of the Arctic Council (USA, Canada, Russia, Denmark, Iceland, Norway, Sweden, Finland) this change potentially makes natural resource deposits more accessible and northern shipping economically viable streets.
Especially for Russia, the “bet” is even greater, against the background of Western sanctions.
Within the next decade, he estimates that up to 200 million tons of cargo could be moved through the Northern Sea Route annually, contributing more than $500 million to Russia’s GDP.
For now, Russia’s budget is increasingly burdened by the fallout from its invasion of Ukraine, while its economy’s dependence on ally China grows.
According to the latest data, Russia’s deficit rose to $34.19 billion in the first two months of the year, with forecasts for this year ranging between 2% and 3.5% of GDP.
The Russian Finance Ministry announced that the National Wealth Fund stood at $147.2 billion on March 1, up from $155.3 billion just the previous month. And the hopes for the end of the war, real and neo-Cold War, remain faint.
