CESRAN Blog, Russia and Eurasia

Northern Sea Route: A Game Changer for Russia?

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Throughout the twentieth century, we see the growing importance of oil to the growth of the global economy. In the unlikely event of the discovery of a major feasible alternative energy source, it will continue to be the most valuable commodity in the world. Countries that are born lucky with significant oil wealth or major powers that control the strategic sea lanes of communication that convey the majority of oil trade (read United States) have long enjoyed a great say in world politics. But with the traditional sea routes along the Suez Canal and the Malacca straits clogging up with heavy traffic, there is increasing concern about terror threats and shipping accidents in these waters, and the environmental damage that would be the result of a possible oil spill. The recent collision of two trade vessels in the Suez Canal which resulted in extremely costly delays shows the importance of congestion free sea-lanes, and the necessity of developing alternative routes.

The Northern Sea Route offers a stable alternative to the tumultuous traditional routes. Linking the Atlantic and Pacific Oceans through waters Russia claims as its own territorial waters, the new route offers significant savings in cost and time for shipping when compared to the traditional Suez Canal Route connecting economically booming Asia to the developed countries of the West. While the route has been open to commercial shipping since Soviet disintegration, interest in the viability of the route developed after satellite imagery suggested the waters in mention were temporarily ice-free during the summer months of 2008. If utilized for regular trade, the NSR would ease traffic along the congested traditional routes along the volatile Middle East/Horn of Africa. This would benefit the economies of the world as it makes transit of larger tonnages of goods cheaper and quicker. Also, the possibilities of maritime piracy efforts emerging in the vast inhospitable terrains of the Tundra are dim and this is another major attraction that the route offers.

Heavily energy import dependent, rapidly developing nations of Asia have much to gain from the NSR, as it helps fuel high growth by providing an alternate trade route to North America and Europe. Some of these nations are dangerously over -dependent on the pirate infested, narrow Malacca straits for a link to energy rich Persian Gulf, which could possibly trigger future clashes over control of these sea lanes. Once the NSR opens up access to Polar oil and natural gas, dependency on the Malacca straits would be drastically reduced, which might relieve some of the tensions in the region. Taking security considerations into account, along with the lucrative time and fuel savings offered by the NSR in the future have prompted the Chinese to bid for offshore oil exploration in as far as Iceland and Norway.

There is increasing interest among the Asian giants, especially Japan, China, South Korea and (interestingly) Singapore in the Northern Sea Route. Chinese and Japanese ships are already using the route to transport oil and minerals from the high north. China has already developed the icebreaker, Xue Long (meaning Snow Dragon), a freakishly expensive seafaring vessel specially designed to navigate through ice-covered seas, which can be used to escort less powerful tankers and merchant vessels, following which South Korea developed its own icebreaker, RV Araon. It is interesting to note that a ship from the Russian port of Ust Luga carried tonnes of iron to Rason in North Korea, to assist building the port city, using the NSR. Rason is Asia’s northernmost ice-free port and once developed, could emerge as a logistical hub for ships traversing the NSR, like Busan in South Korea and Dalian in China.

The Russian economy has always been dependent on its vast oil and natural gas deposits. Russian oil production reached nearly 10,400 thousand barrels per day in 2013 and is a major contributor to its GDP. Once the NSR is up and running and the Russians take the lead in supplementing this with offshore oil, natural gas and mining infrastructure, the hitherto inaccessible Arctic (which is estimated to hold about 30% of the world’s untapped natural gas and 13% of its untapped oil resources) is unlocked. While Russia has been increasingly antagonistic towards Western countries in the recent past, it stands to gain much through co-operation. Russia does not have adequate expertise in offshore oil drilling in harsh weather conditions as in the Arctic and therefore needs to allow international participation in the sustainable exploitation of these resources. Ultimately, Russia’s role as a powerful actor in world politics will be much enhanced with the development of the NSR.

The perpetual presence of icebergs, heavy snowstorms and low visibility are the prime concern for ships traversing the polar route. However, reports suggest that volume of tonnage navigating the NSR has risen in the past few years. As a result, the Russians are increasingly focusing on developing Arctic ports. The Ust Luga is one such Arctic port that is being developed, and is expected to be the largest Russian port by 2020. But while Russia has plans to develop port infrastructure and has put in place efficient environmental safety measures, it still charges a very high amount for ice-breaker escorts. The lack of sufficient search and rescue mechanisms and badly mapped icy territories can be disincentives for shipping companies. Add to this low oil prices that can discourage further oil exploration efforts by companies not just in Russia, but in the region as a whole.

To conclude, despite all the hype about drastic shipping cost reductions and polar oil, one must understand that there are many hurdles to be overcome. Western sanctions against Russia have hampered Exxon Mobil’s oil exploration efforts in the Arctic. If the sanctions are prolonged, it can also prevent technology transfers in the field of offshore oil exploration that Russia so badly requires. Therefore, it would be prudent for Russia to try and get sanctions removed. One thing’s for certain: the Russians have vast plans for the development of Arctic shelf and therefore (oil or no oil), the NSR will find itself increasingly important in the near future.

Ajay Anil Cherian is currently pursuing his Masters degree in Diplomacy, Law and Business from the Jindal School of International Affairs, India. He specializes in International Security, Israeli Foreign Policy, Asia-Pacific, Arctic Governance and the Geopolitics of Energy.

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