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Published on Jun 06, 2023
Russia’s and China’s attempt to explore alternative trade route by financing the Northern Sea route could open a new theatre of contestation
The Northern Sea route: A gamechanger or a road to hegemony? The six-day blockage of the Suez Canal in 2021 caused by the running aground of the ‘Ever Green’, a giant 250,000-ton container ship, led to daily damages of around US$10 billion to global trade. While Egypt’s annual earnings from the Suez Canal stand at US$8 billion, the incident caused by the 400-metre-long container vessel delayed product deliveries and led to an increase in oil and liquefied natural gas (LNG) prices and daily estimated losses between US$12 million to US$15 million. The incident highlighted the need for an alternative West-East transit route. It also shifted global attention to Russia’s attempts to develop a new trade route through the Arctic Ocean. Popularly labelled as ‘The Norther n Sea Route’, this possible alternative’s strategic significance has increased over the past two years due Russia’s work on building this alternate trade route.

The Advantages of the Northern Route

The Northern Sea Route (NSR), or the Northeast Passage (NEP), connects the eastern and western parts of the Arctic Ocean. While the Suez Canal route (depicted in blue in the image below) between Europe and Asia has a distance of 21,000 kilometres, the NSR (in red) has a distance of 13,000 kilometres, reducing the to and fro sailing time from one month to less than two weeks between Europe and Asia. Source: Nikkei Infographics With most of the NSR abutting its northern landmass, Russia has played a major role in its development. It approved a US$29 billion development plan for the NSR in August 2022, effective till 2035. Viewed as a main artery of the Russian Arctic, the plan envisions Russia gaining three specific geostrategic and geoeconomic benefits from the NSR.:
  • Become an international energy superhighway for hydrocarbons export and trade of other natural resources of the Russian Arctic;
  • Create robust supply chains to the Arctic Zone of the Russian Federation (AZRF) to ensure the unhindered supply of goods to the ports and new “points of economic growth”;
  • Gain centrality in international trade transit.
Heavily dependent on the Suez Canal route for its critical energy and rare minerals imports, China, too, has emerged as an active player in the NSR’s development. The Arctic Ocean is known for its thick icy layers or icebergs, which obstruct cargo-carrying vessels. Collision with an iceberg could lead to disastrous consequences. However, the shrinking of the ice cover due to global warming in recent years has presented opportunities for the Arctic countries to explore the NSR's potential as a new international trade route. However, despite several attempts, the NSR’s development as an alternative to the Suez Canal has remained limited to research because of the region’s harsh natural environment.
The shrinking of the ice cover due to global warming in recent years has presented opportunities for the Arctic countries to explore the NSR's potential as a new international trade route.
With global warming becoming more severe, the NSR could emerge as a cost- and time-effective alternative to the Suez Canal. According to Weathernews, the northern passage became navigable without entering the sea ice zone on 2 August 2021 and remained open for 88 days, the longest-ever recorded. Russia has also been building icebreaker ships filled with cargo to cut through the icy obstacles and avoid fatal collisions. 

Problems with the existing route

Since 1869, the Suez Canal Route has been the common route for international trade from West Asia to Europe and North America and in the opposite direction. However, it has primary choke points, which, if blocked, could disrupt world trade. Studies have defined ‘choke points’ as one having three characteristics:
  • It must occupy a strategically important location.
  • The location is controlled by a small number of countries or one country. For example, Egypt’s control of the Suez Canal.
  • A large number of countries rely on that passageway.
International cargo using the traditional Suez Canal route has to encounter three critical choke points between Europe and Asia. These include the Suez Canal and the Bab el-Mandeb, also called the ‘ Gate of Grief’, in West Asia and the Strait of Malacca in the Indo-Pacific. Source: Geopolitical Intelligence Services AG (GIS) The Strait of Bab el-Mandeb has been subject to many pirate attacks on ships since 2005. It is also threatened by naval mines placed by Houthi rebels in the Red Sea. From 2015 to 2018, the international coalition forces disarmed close to 90 naval mines in the Red Sea. Some cargo ships have struck these mines in the Red Sea, and they have also caused casualties among local fishermen. The Strait of Malacca, off the coast of Malaysia, is critically important for East-Asian countries such as China and Japan, as the majority of their energy supply comes through this Strait. Any blockage will affect 25 percent of world trade and 33 percent of oil trade. Maritime trade choke points in the Suez Canal route can disrupt global trade and trap commercial ships in vulnerable positions in narrow passageways. It is, therefore, imperative to develop an alternative route that minimises not only the distance and time of travel but also the risks of blockage. The NSR can provide an effective alternative.

Future strategic challenges

Like Russia's centuries-long quest to reach warm waters, China has also been searching for faster ways to reach the European market. Though not a member of the Arctic Council, China has shown great interest in the NSR, as it offers an effective solution to reduce its dependence on the Strait of Malacca, Asia’s primary choke point to the eastern end of the Suez Canal route. A blockage of the Strait of Malacca could hinder 90 percent of the overall Chinese trade and 80 percent of its crude oil imports.
Maritime trade choke points in the Suez Canal route can disrupt global trade and trap commercial ships in vulnerable positions in narrow passageways.
The NSR provides Russia and China with what they have commonly sought in the northeastern passage, and both are committed to pursuing its development. During the Second Belt and Road Forum for International Cooperation held in Beijing on 25 April 2019, President Vladimir Putin expressed Russia’s interest in evaluating the possibility of joining the NSR with China's Silk Road to create a global and competitive route connecting East Asia to Europe. These developments indicate the future possibility of Russia and China gaining collective influence over the NSR, bringing the majority of world trade under their control. Considering the growing ties between China and Russia, their likely influence over the NSR raises bigger concerns for the West about China’s growing global dominance and economic hegemony. The NSR development plan is also perceived as one of Russia’s strategies to bolster its economic performance despite Western sanctions. Coupled with de-dollarisation, controlling a significant trade route would enable Russia to earn tax revenue since the route passes through Moscow’s Exclusive Economic Zone (EEZ). The NSR is equally crucial for Japan and South Korea as it is for China and Russia. Both countries are the leading industrial nations of the East, increasingly using the northeastern passage. Despite the scepticism of Western shipping companies, Denmark-based shipping firm, A.P. Moller-Maersk, sent its first container ship along the passage in August 2018. According to expert predictions, the NSR will be ready for use at full capacity at around 2030, fetching much of the international trade quantum. The Suez Canal will continue to be used for maritime transport, especially between the Mediterranean basin, including Turkey and South and Southeast Asia. The Western response to the growing Chinese and Russian influence in the new route is yet to be seen. This ongoing strategic gameplay in a hitherto unexplored international trade passageway raises uncertainty about the future of world trade. It opens a new theatre of contestation between the traditional Western powers and Russia‑—the European outlier—and China’s rising global clout.
Kanishk Shetty is an intern with the Geoeconomics programme at the Observer Research Foundation
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