With geopolitical tensions and their conflicts ratcheting higher on a seemingly rhythmic weekly basis, many are becoming reacquainted with the supply chain geography of our world. It is not surprising that much is still taken for granted. The old saying “If it isn’t broken, don’t fix it” does not confront the very real risks of active conflict shutting down trade routes, and their related supply chains. This is called pragmatic risk management.
One major potential trouble spot is the conflict in Gaza, with the real potential of expanding throughout the region. Humanitarian considerations aside, the conflict in the Gaza Strip threatens the security of sea routes from Asia to Europe. This includes the Suez Canal, the Straits of Hormuz and the Persian Gulf.
While the Suez Canal route between Europe and Asia is 21,000 km, the Northern Sea Route (NSR) cuts 8,000 km off the supply chain with a distance of 13,000 km, reducing sailing time from five-six weeks, to under three weeks between Russia’s European Ports and Asian ports such as Shanghai.
There have been problems in the Suez impacted Europe and Asia and led to significant delays and losses. In 2021 the container ship “Ever Given” got temporarily stuck in the Suez Canal, – due to human error rather than any conflict. According to the Lloyds list, the maritime insurers, that delayed 12% of global trade – some of it perishable – and held up deliveries worth over US$9 billion a day, as other ships couldn’t use the route. Just that one incident was equivalent to US$400 million worth of trade per hour, US$6.7 million per minute. Consider then if any future Suez closure is not for a few weeks, but months, or years, and the broader economic ramifications.
China is taking a reasonable step in betting on the increasing use of the Northern Sea Route (NSR) with Russia, not only because of the current conflict in the Gaza Strip, which threatens the security of other sea routes from Asia to Europe, especially transit through the Persian Gulf and the Suez Canal, but to guarantee the movement of free trade come what may. The same can be said of India and all the ASEAN and Shanghai Cooperation Organisation (SCO) countries.
Jin Qianzhong, a director of the Institute of International Relations at the People’s University of China in Beijing comments “As regards the Northern Sea Route, we hope that there will be a new connection between Europe, Russia, and East Asia. We wish to have a new channel. Right now we only have a route from Malaysia to the Suez Canal, but that is very dangerous, especially as the Gaza crisis continues. If the crisis in Gaza expands, it will be a great danger to the Suez Canal. So of course the Northern Sea Route will increasingly viable.”
Russia’s Ministry of Eastern Development has prepared together with commercial partners, models for the development of seagoing commercial traffic plus infrastructure in the Arctic zone (from Murmansk and the Western Arctic) and the NSR (from the Karskiye Vorota Strait to the Bering Strait) which allow for and take into account current, and possibly additional sanctions measures and other potential geopolitical restrictions on vital developments in the Arctic. Russia is planning ahead for additional sanctions disruptions and is well aware of how these could manifest themselves.
One of the principal objections to the NSR is its seasonality, with Arctic sea ice restricting year-round use, but this has changed. Year-round maritime navigation along the Northern Sea Route will commence from 2024 onward, according to Alexander Novak, the Russian Deputy Prime Minister when speaking a meeting of the Russian Federation Council last week.
However, full year-round use of the NSR requires icebreaker support. The entire nuclear icebreaker fleet is under the jurisdiction of the federal unitary enterprise Atomflot, part of the Rosatom state corporation, and is to be employed and available to make this happen. It is the only nuclear-powered icebreaker fleet in the world.
Supporting infrastructure is also being built. According to Novak, a central hub for building large-capacity offshore structures to produce liquefied natural gas (LNG) on a very large scale is underway based in Murmansk. Russia is active in boosting the production of sea-borne super-cooled gas as its pipeline gas exports to Europe, once a key source of revenue for Moscow, have plummeted amid the Western sanctions imposed over the conflict in Ukraine. Those resources are now being directed East, where consumer demand is far greater.
One of the major projects that has recently been targeted for sanctions treatment is the Arctic LNG-2. This is Russia’s third large-scale LNG project and is designed to help Russia achieve its goal of accounting for 20% of the global LNG market by 2035, up from around 8% currently. The NSR plays a key role in efficiently supplying the LNG needs of China and other Asian customers.
The Northern Sea Route is the main shipping route in the Russian Arctic sector. It stretches along the northern coasts of Russia across the seas of the Arctic Ocean (Barents, Kara, Laptev, East Siberian, Chukchi, and Bering seas). The route consolidates the European and Far Eastern ports of Russia and navigable river estuaries in Siberia into a single transport system. The route’s length is 5,600 km from the Kara Strait in the European Arctic to Providence Bay in Asian Russia, on the Bering Sea opposite Alaska. That is equivalent to about 12 days sailing.
From Providence Bay to Vladivostok is a further 4,106 km, (9 days) from Providence to Dalian (China) 4,984km (11 days) and Providence to Shanghai 5,716km (13 days) .
In addition to these routes, Arctic Siberia also has three major, navigable rivers flowing into the Arctic. These include the Ob, Yenisey, and Lena Rivers which will also play regional roles in getting Siberian sourced products to Asia’s hungry markets. Siberia has enormous resources, including coal, petroleum, natural gas, diamonds, iron ore, gold, silver, numerous other metal deposits including copper, aluminium, manganese, zinc, chromium, and tin, rare earths, as well as vast natural resources in timber and fresh water.
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