March 18, 2015, by editor
Sino-Russian collaboration on the Northern Sea Route development
Written by Svetlana Krivokhizh & Nadezhda Filimonova.
In recent years interest in commercial navigation through the Northern Sea Route (NSR) has grown significantly among Arctic and non-Arctic states alike. The main reason relates to the retreat of ice in the Arctic Sea, which creates opportunities for the use of a viable sea route for shipping and trade. In economic terms, navigation through the NSR reduces the length of customary sea route navigation through the Panama or Suez Canals and, therefore reduces costs and time. In terms of security interests, the NSR is free from high sea piracy and terrorism compared to the existing major shipping lanes; at least for now.
Over the last few decades China has demonstrated increasing interest in development of the passage. The first cargo vessel to sail from the port of Dalian to Rotterdam via this Arctic route was the Chinese Yongsheng in 2013. This event not only proved the viability of the route for commercial shipping but also marked China’s commitment to active participation in the Arctic projects. According to the forecast of China’s Polar Research Institute, by 2020 up to 15% of China’s international trade could be transferred via NSR.
China’s broader interests in the Arctic have provoked much discussion. Even though Beijing’s official stance remains quite cautious, China has already become an active participant in all kinds of Arctic forums, and has developed close ties with numerous Northern countries. It has even managed to secure permanent observer status in the Arctic Council. Cooperation with Russia on the NSR development can bring China almost all the benefits it seeks from involvement in Arctic affairs, namely access to raw materials, development of national ports (since a great volume of goods and resources would be transported through Chinese ports), diversification of it’s shipping routes (that could help to resolve so called “Malacca Strait dilemma”) and finally it will ensure China’s position as an active stakeholder in the region.
As for Russia, the Northern Sea Route has always been of a great strategic importance. First, due to its significance as a transport artery for supplying the Russian Arctic regions with provisions and equipment and second, for carrying mineral resources produced in the region to the other parts of the world. However, for a long period of time, because of the economic and political problems that followed the collapse of the Soviet Union, Russia paid little attention to development of the passage. In recent years the situation has started to change due to the overall increase of economic activity and launch of oil and gas exploration and production projects, in particular. For instance, development of Russia’s mega-project Yamal LNG is aimed at shipping gas to European and Asian markets, which in return will inevitably give impetus to the development of a national shipping fleet and infrastructure along the NSR. Russia’s Ministry of Transport forecasts that up to 25% of cargo between Europe and Asia could be shipped through the passage by 2030. At the same time Russia’s rebuilding military capacity in the High North has encouraged arguments for restoring of military bases and airfields and opening search and rescue centres along the route.
However, while developing the NSR, Russia faces a number of serious physical, legal and economic challenges. In particular, to guarantee safe navigation through the NSR, the Russian state needs to build search and rescue services, port infrastructure and a greater number of icebreakers. These arrangements naturally require huge investment. However, the falling oil prices (caused by the western sanctions relating to the Ukrainian crisis) and economic crisis have hindered implementation of the Arctic project, forcing the country to find new partners to replace its dependency on western technology and investment. In political and economic terms China could become an important partner for Russia, and current state of affairs pushes two countries to closer cooperation. Collaboration with China provides Russia with an opportunity to receive financial support for its Arctic projects and also to strengthen bilateral cooperation with China in general. Possible areas for cooperation could be, for instance, joint research related to ice conditions and meteorological forecast that goes in line with China’s Arctic scientific ambitions and joint exploration and shipping of natural resources ( in 2010 the Russian shipping company Sovcomflot and CNCP signed an agreement to establish cooperation in shipping natural resources from Russia to China, and in 2013 CNCP bought 20% shares of Yamal LNG project and annual supply of 3,5 tons of LNG to the country).
However, there are a number of challenges for a full-scale cooperation on the NSR development between the two countries. One of the main obstacles for China to invest in the Russian projects is the uncertainty about the economic profitability of navigation through the NSR and lack of important port infrastructure. Another issue is the legal status of the Northern Sea Route which is not recognized as Russian internal waters by several countries. China has not yet made any official statements concerning this issue, but with the possible increase of navigation through the route it is likely to take a more assertive position on the route’s legal status. Finally, Russia is quite cautious about China’s increasing involvement in Arctic affairs due to the traditional security concerns in the region.
Therefore, in the short-term, due to the existing uncertainties it is unlikely to expect large-scale cooperation between Russia and China on NSR development. However, in the long-term, one of the possible scenarios could be financial cooperation based on mutual benefits, which implies China’s investment in exchange for economic benefits, such as low tariffs for shipping.
Svetlana Krivokhizh is a researcher at the Saint-Petersburg State University. Nadezhda Filimonova is a head of World Meteorological Organization Relations Department, Russian State Hydrometeorological University. Image Credit: CC by NOAA Photo Library/Flickr.