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KIMS Periscope

KIMS Periscope No. 303

The Northern Sea Route – business, security and implications for South Korea

Associate Professor Norwegian Defence University College
Paal Sigurd Hilde

Climate change has opened the Arctic in both a physical and political sense. While the physical opening has led to increased human activity, the political opening has brought international interest, but also global affairs into the region.

The ‘new Arctic’ that emerged in the mid-2000s garnered attention also in South Korea. It lead the country to seek observer status in the Arctic Council in 2008 – which was granted in 2013 – and to publish Arctic policy documents in 2013 and 2018. As one of the world’s largest shipping and shipbuilding countries, these themes featured prominently in the Korean ambitions. The Arctic represents not only an alternative and shorter route to the European market, but also an interesting market for the Korean shipbuilding industry.

This short article can offer no crystal ball vision of the future of Arctic shipping. It will, however, analyse business and security considerations that have been and will likely remain important in shaping its future prospects. Both today suggests that a significant growth in Arctic shipping is only likely in the medium to long term.

A changing Arctic

The mid-2000s saw a surge in international attention to the Arctic, initially spurred primarily by two factors. The first was the new assessment that the Arctic might contain a large share of global, undiscovered petroleum resources. The second was the signs of rapid climate change in the region, most evident in the shrinking of the Arctic ice cap. This fostered not only concern for the regional environmental consequences of global warming, but also interest in the opportunities afforded by the opening of new shipping routes in the Arctic Ocean.

In 2007, the initial emphasis on economic opportunities and environmental concerns was partly displaced by a more sinister perception. As relations between Russia and its Arctic neighbours deteriorated, the planting of a Russian flag on the sea floor at the North Pole in early August 2007, helped trigger the emergence of a notion of a ‘race’ or a ‘great game for the Arctic’.

For many reasons, ranging from misguided expectations to changing circumstances, neither the gloomy predictions for Arctic conflict, nor the predicted Klondike in petroleum extraction and shipping, have materialised. Cooperation rather than competition has marked regional relations. The absence of the petroleum bonanza many predicted was much due to the change in the international petroleum market with the advent of shale oil and gas production in the United States, and partly, from 2014, to sanctions limiting international investments in Russia.

The business of Arctic navigation

According to an estimate in a 2018 article in Polar Geography (1), the route from Busan in South Korea to Rotterdam in the Netherlands is 29 % shorter via the North-East Passage than that through the Suez Canal (7,667 vs. 10,744 nautical miles). In theory, the much shorter route means both lower costs and shorter transit times.

As figure 1 shows, the potential Arctic routes include the North-West and North-East passages along the North American and Eurasian coastlines respectively, as well as routes straight across the Arctic Ocean. The latter will become increasingly viable as the ice cap continues to shrink. The Northern Sea Route, which is the main topic of this article, is the part of the North-East Passage between the island Novaya Zemlya and the Bering Strait.

Figure 1 Predicted Arctic summer ice cap and shipping routes

Source: Adapted from Malte Humpert’s map: https://www.thearcticinstitute.org/wp-content/uploads/2016/07/Summer-Ice-Extent-1970-2100-high-res.jpg  Lines denoting shipping routes and explanatory text added by this author.

Russian promotion

Russia welcomed the optimistic predictions for Arctic shipping. It saw the potential for profiting from this, notably through the provision of Russian services such as icebreakers in the NSR area (figure 2). As Björn Gunnarsson and Arild Moe noted in Arctic Review on Law and Politics (2), Vladimir Putin made Russia’s ambition clear in 2011: ‘We are planning to turn [the NSR] into a key commercial route of global importance.’ Developing the NSR became a priority in Russian Arctic strategy.
To realise its goals, the Russian government embarked on an ambitious programme to enable navigation in the NSR. Most concretely, in December 2019, it adopted the Plan for the Development of the Northern Sea Route until 2035. As Atle Staalesen (3) observed: The plan ‘covers a wide range of priorities, from the development of needed infrastructure and building of new ships to the mapping of natural resources and launch of new satellites and meteorological equipment.’ Expanding Russia’s fleet of icebreakers and building new airfields and bases along the NSR, were key elements.

Figure 2: The Northern Sea Route area

Note: The numbers denote subareas. Source: https://nsr.rosatom.ru/en/official-information/boundaries-of-the-water-area-of-the-northern-sea-route

Challenges

The rapid expansion of Arctic shipping many predicted, has not materialised. Figure 2 shows the development since 2010, when the first international transit voyage took place. The growth is high in percentage terms, but from a very low level. Compared to the Suez and Panama canals, even at its peak in 2021, the annual number of NSR transits is vanishingly small; it represents less than three days of traffic in either canal.

Figure 3 – Northern Sea Route – transits

Note: Includes transits to and from Russian ports (cabotage) and destination shipping to and from Russian Arctic ports outside the NSR area. Based on data from Centre for High North Logistics (https://arctic-lio.com/category/statistics/)

There are several reasons why commercial interest in Arctic shipping has remained limited, despite Russia’s promotion efforts. I will briefly mention just a few. One is the still short, ice-free sailing season. As rerouting necessarily involves extra expense, a short season makes changing routes for regular traffic less profitable. Currently at about four months, from late July to early November, the season will, however, lengthen as the ice cap continues to shrink.

Even with less ice, unpredictable ice and weather conditions, seasonal darkness, and limited coverage for global, satellite-based navigational and communication systems, still make Arctic routes more unpredictable and riskier than using traditional routes – leading to higher insurance costs. Finally, the regulations of International Maritime Organisation’s Polar Code that came into force in 2017, make both the vessels themselves and crew training more expensive for polar navigation. The savings of a shorter Arctic route are thus partly eaten up by extra costs.

Security and Arctic shipping

In addition to its economic significance, the Arctic is important to Russia also for security reasons. Most significantly, the Northern Fleet based on the Kola Peninsula houses most of Russia’s missile-carrying strategic submarines (SSBNs). As Arild Moe emphasised in a 2020 article in The Polar Journal (4), security interests have influenced Russia’s approach to the NSR. This includes the construction of dual-purpose, military and civilian bases along the NSR – bases that enable both the protection of Russian sovereignty, and safer navigation.

After a French naval logistics vessel, the BSAH Rhône, sailed through the NSR in 2018, Russia renewed its traditional effort to limit the presence of foreign military vessels in the Russian Arctic. In December 2022, Putin signed an amended version of a law originally proposed in 2019. As Cornell Overfield (5) explains, Russia relies both in this law, and its regulation of navigation in the NSR area in general, on article 234 of the UN Convention on the Law of the Sea (UNCLOS). The article gives coastal states extended rights in ice-covered waters. The new Russian law requires foreign state vessels to seek permission to pass through what Russia defines as its internal waters in four straits along the NSR (see figure 4).

Figure 4 – Areas affected by the December 2022 Russian law

Source: Cornell Overfield, https://foreignpolicy.com/2022/12/20/russia-arctic-claims-territorial-internal-waters/

As with similar Canadian claims in the North-West Passage, the United States rejects Russian claims that UNCLOS allows it to limit navigation in the NSR, including in the straits along the route. As relations with Russia deteriorated sharply from 2014, when Russia attacked Ukraine and annexed the Crimean Peninsula, the United States started openly considering Freedom of Navigation Operations (FONOPs) in the Russian Arctic. A FONOP would underline the U.S.’ disagreement with Russian claims – as the United States signals China in the South China Sea. What effect the December 2022 Russian law will have on these plans remains to be seen. What is clear, is that the law highlights the security aspect of Arctic navigation.

The impact of the war in Ukraine

In 2014, many countries imposed punitive sanctions on Russia. Much due to this, interest in using the NSR suffered. Russia reacted partly by prioritising destination shipping, notably shipborne export of Liquified Natural Gas (LNG) from the Arctic, and partly by courting Chinese interest. As Gunnarsson and Moe (2) show, Chinese involvement grew after 2014. In the period from 2016-2019, Chinese COSCO conducted 45 % of all non-Russian NSR transits. China made the ‘Polar Silk Road’ part of its Belt and Road Initiative with the publication of its Arctic policy in early 2018.

When Russia redoubled its aggression against Ukraine in February 2022, further and stricter sanctions were imposed. These hit the NSR hard. As Malte Humpert (6) noted in September 2022, for ‘the first time in more than a decade the NSR will not see international transits as operators avoid Russia as a result of sanctions.’ The only remaining, foreign flagged vessels have been LNG carriers employed by the Russian company Novatek (most of which were built in South Korea).

Even Chinese companies have stayed away. As Humpert pointed out, while COSCO in 2021 ‘completed a record 26 voyages between Asia and Europe via the NSR’, in 2022 it did not send a single vessel. A likely explanation is that also Chinese companies avoid challenging the sanctions against Russia. Thus, at least in the short run, Russia’s ambitions for developing the NSR have been fatally undercut by its aggression against Ukraine.

Implications for South Korea

As noted, Arctic shipping attracted interest also in South Korea. Presidents Lee Myung-bak and Moon Jae-In both emphasised this, for instance when visiting Norway in 2012 and 2019 respectively. The first Korean company to navigate the NSR, Hyundai Glovis, did so in October 2017. Several more voyages followed in subsequent years. Korean involvement also included shipbuilding. Notably, in 2013 Daewoo Shipbuilding & Marine Engineering (DSME) won a contract to build 15 ice-breaking LNG carriers for Novatek.

In a 2019 study of Chinese, Japanese and Korean interests in and policies on Arctic shipping, Arild Moe and Olav Schram Stokke (7) found that among the three, ‘Korea has the greatest emphasis on business opportunities, highlighting shipbuilding and maritime transport’. The priority placed on the Arctic by the Korean government has, however, not been fully reflected among companies. Moe and Stokke found that business considerations related to the extra costs and complications of Arctic shipping – as well as other, unrelated business issues – limited their interest.

Shortly after the Russian invasion of Ukraine in February 2022, South Korea joined the international sanctions that punish Russia for its violation of international law and security. The sanctions not only put a stop to shipping to and from South Korea through the Arctic, but also to South Korean economic relations with Russia. Most significantly from an Arctic perspective, the DSME cancelled three Russian orders for LNG-carriers. South Korea has thus been hit quite hard by the impact of security issues in the Arctic.

How long the war in Ukraine and the related sanctions will last, is impossible to predict. As long as they do, fulfilling the ambitions South Korea has set itself for Arctic shipping, will be hard. The question then becomes: What to do? One answer is that South Korea should invest in science and technology that will allow it to take a leading role when in the medium to long term, Arctic shipping again becomes possible. After all, it is trans-Arctic routes straight through the Arctic Ocean, which are still not viable due to ice conditions, that hold the biggest promise for time and cost saving.

  • The author’s opinions expressed in this article are the author’s own and does not reflect the view of KIMS.

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