Suez or the Arctic? The first shot in the future battle over global shipping routes was fired by Moscow

Evergreen’s super container ship was finally sent on its way yesterday, after having blocked the Suez Canal for five days, a route which carries 12 per cent of global shipping, with $3 – $9 billion worth of cargo passing through the canal every day. It had caused hundreds of cargo ships to be delayed, and many more to attempt the significantly longer and far costlier Cape route, where the risk of piracy and damage to vessels increases. For the average person, if the disruption had continued for much longer, a valid risk given those working on freeing the vessel said it could “take weeks” to clear, rising prices for commodities would have become noticeable. Especially as shipping costs have already soared due to a shortage of containers and cargo ships.

The fact one ship was able to block the Suez Canal, has very clearly highlighted the vulnerability of one of the main global trade and supply lines. Both in terms of its geography as a bottleneck, but also its fragility and lack of resilience in the face of future accidents, or even hybrid physical or cyber-attacks from state and non-state actors.

Attempting to find ways to alleviate this vulnerability in the global economy, by increasing the canals capacity, or looking to geographically diversify supply chains and routes in a cost-efficient manner will be on the minds of many governments and industries. Moscow has thrown its hat into the ring by utilizing the Suez incident to extoll the virtues of the Northern Sea Route (NSR) as a secure and competitive alternative. The NSR is an Arctic shipping route that has become ever more navigable, its summer sea-ice is expected to disappear in the 2030s completely courtesy of global warming and it shortens Asia to Europe shipping times by 44 per cent or 10-15 days, when compared to the current Suez route.  

In 2017 the first ship utilized the route unaided, and earlier this year two commercial ice-strengthened vessels for the first time successfully used the route during the Arctic winter, heralding the NSR as being open all year round. The NSR indeed has seen an increase in traffic of 54% between 2016 and 2019, with cargo volume increasing from 7.5 million tons to 31.5 million tons during that same period. However, most of this has been carried by European shipping transporting hydrocarbons, rather than global shipping carrying goods. It is clear Moscow now wants to advertise the route to this latter audience.

This would be commensurate with Russia’s Arctic aims. It has sunk a lot into developing its Arctic territories as of 2019 one-tenth of all Russia’s economic investments were in its Arctic region. Putin envisages the Arctic as providing “for the future of all Russia”, and is keen to increase maritime traffic as a key cornerstone of this.

However, realistically despite both the serious rhetoric and somewhat mocking jibes from Russia, Moscow’s promotion of the NSR is premature. It still presents significant challenges for potential users in four key areas. Firstly, despite easing conditions, the NSR is not a “clear” route just yet. Ice is still a risk at certain points of the year, and even as global warming removes it, new problems will arise as the Arctic’s currently changeable and difficult to forecast weather, becomes stormier with rougher seas. Secondly, and related, Shipping insurers currently lack understanding, experience and a clear framework for insuring Arctic shipping, meaning some dangers may not be covered ,or will be very costly until more data is gathered and certainties formed. Third, there is still the need for most ships on the NSR until later this century to have ice-reinforced hulls, or an icebreaker escort on hand. Currently Russia mandates ships on the NSR to pay for its services in potentially providing one. These three factors all contribute to increased costs for using the NSR when compared to more traditional routes, and for the near-future will continue to be a factor in looking at the cost-efficiency of the shorter travel time. When the latter offsets the former from the late 2030s and beyond, that is when the NSR will come into its own.

The fourth factor is the looming issue of an international dispute over Russia’s claim to own the NSR. The US, EU and UK among others claim that the NSR is an international shipping lane, and that Russia has no right to regulate who uses it, how, or charge for the use. Russia meanwhile claims sovereignty to do this based on its interpretation of the UNCLOS. Even then, it has been accused of abusing these powers to punish perceived rival states, most recently attempting to limit foreign tonnage, with allowances for Russian partners available. To back up its claim to ownership, Russia has heavily militarized the region, while the disputing powers like the UK and US have committed to freedom of navigation patrols along the route to contest Russia’s control.  

The unsteady political situation surrounding the route calls into question the viability of the NSR in the near-term for global trade. However, once a political rhythm is established, and providing tensions do not spill over into direct confrontation, the NSR could become no more politically unsound than Suez.

In this context, Moscow’s pitch should be viewed more as the sounding start of a coming wider push to raise awareness of the NSR, rather than an immediate grab at attracting global shipping. In the longer term the Suez Canal's position as the foremost transit route for Asia-Europe shipping is certainly assailable by the NSR.