Russia aims to create year-long cargo shipments via the Northern Sea Passage which links the Pacific Ocean to the Atlantic via Russian Arctic waters, thanks to receding ice coverage caused by climate change. Receding ice is also prompting the Russian government to extract fossil fuels from the Arctic.
The first plan is a challenge to the Suez Canal. The second can cause irreparable damage to pristine and untouched areas. Both will bring huge economic wealth to that European nation.
Shipping challenge issued
The icy conditions mean the aforementioned passage is not navigable year-round without the help of icebreakers. Towards this end, some $3.7 billion in state money will be invested in developing the route by 2024, according to an AFP report published in Digital Journal.
That’s because the rate of receding ice cover in the region means that Moscow is aiming to enable year-round cargo navigation through the passage by 2030, creating a much shorter route than through the Suez Canal.
The Ever Given cargo ship, which blocked the Suez Canal earlier this year, added to a couple of other blockage instances there, has given the Russian government reasons to tout the Northern Sea passage as a “viable alternative.”
According to the AFP report, Russia aims to boost traffic through the passage from approximately 33 million tons of cargo in 2020 to 80 million tons by 2024. It then aims to double this to 160 million tons by 2035. The Suez Canal allows the passage of 1 billion tons of cargo every year. Connecting Europe and Asia, the Suez Canal is one of the world’s most important trade routes. Around 19,000 ships passed through the canal in 2020, according to the SCA, which amounts to around 52 each day.
An infographic shows the Northern Sea Route compared with the Suez Canal route. (Infographic by Daily Sabah)
Russian state atomic energy corporation Rosatom will invest $10 bn into the development by 2024, 1/3rd or so of which will be state money. The company already has a fleet of five icebreakers and a container ship and is building four more nuclear-powered vessels within the next five years.
Each ship costs more than $400 million to build. Construction requires more than 1,000 people and takes 5 to 7 years. The ships are designed to resist extreme weather conditions, towering 52 meters (170 feet) high with a length of 173 meters (568 feet) and able to smash through ice up to 2.8 meters (9.2 feet) thick.
Shipping rates climbing
Shipping rates form a major portion of trade costs and container rates have an impact on global trade because nearly all manufactured goods, such as clothes, medicines, and processed food products, are shipped in containers, according to UNCTAD.
Sending one 40ft container from Asia to Europe costs $17,500, more than 10 times the price of a year ago, says George Griffiths, editor of global container markets at S&P Global Platts.
He adds that some shipping companies are now charging premium rates to guarantee delivery within a few weeks, for example, and that importers are also attempting to outbid one another, offering extra cash to snap up containers over their rivals.
The container shipping industry is “creaking” under the strain of high demand at the moment, says Rose George, author of Ninety Percent of Everything, a book about the shipping industry.
Arctic oil and gas development plans
Aside from developing the Northern Sea Passage, Russia also wants to tap the Arctic region for resources and made the development a strategic priority.
“The Arctic region has enormous potential,” Russian Deputy Prime Minister Alexander Novak explained recently. “In terms of resources, we’re talking about 15 billion tons of oil and 100 trillion cubic meters of gas. Enough for tens if not hundreds of years,” he added.
Environmental groups have slammed the race for hydrocarbons and the increased presence of nuclear reactors in the Arctic – an already fragile ecosystem dramatically affected by climate change.
Greenpeace has said that “the incident-ridden history of Russian nuclear icebreakers and submarines” should cause alarm.
“Of course, risks arise when implementing projects in such a fragile ecosystem,” Rosatom told AFP in a statement in response to environmental concerns. But, it said, the “economic opportunities for both the local population and global economy” of the NSR exceed environmental risks.