China, India and the ASEAN block are looking to Northern Sea Routes with Russia as a hedge against the ongoing conflict in the Gaza Strip.
That is, according to the latest Silk Road Briefing, with the Suez Canal now “considered a risk, and with EU gas supplies dead, Asia is intent on taking up Russia’s supply chains.”
Humanitarian considerations aside, the Gaza conflict is threatening the security of sea routes from Asia to Europe and could escalate into a wider Middle Eastern conflict.
It includes the $1 trillion Suez Canal trade (30% of the world’s container traffic), the Straits of Hormuz and the Persian Gulf.
While the Suez Canal route between Europe and Asia is 21,000 km, the Silk Road Briefing reports that “the Northern Sea Route (NSR) cuts 8,000 km off the supply chain with a distance of 13,000 km, reducing sailing time from five-six weeks, to under three weeks between Russia’s European Ports and Asian ports such as Shanghai.”
A proposed Northern Sea Route would consolidate Russia’s European and Far Eastern ports and navigable river estuaries in Siberia into a single transport system. The route is 5,600 km from the Kara Strait in the European Arctic to Providence Bay in Asian Russia, on the Bering Sea opposite Alaska.
It comes as last month, Wood Central reported that China and Russia were collaborating on Northern sea routes for oil, gas and timber.
China is already Russia’s largest foreign investor in forest assets – taking advantage of the departure of Western Companies in the wake of the Ukraine War.
The interest is in Arctic Siberia, which has three navigable rivers that flow directly into the Arctic – including the Ob, Yenisey and Lena Ricers, to supply Russian-grown forest products to Asia’s hungry markets.
Siberia and Russia’s Far East have vast timber resources and, leading up to the Ukraine War, were the main suppliers of raw wood material in Europe.
However, it remains an under-utilised resource, with the FAO and Russian Government reporting a lack of technical investment and challenges with supply chain logistics.
But this could change, given Russia’s growing dependence on China – which takes 85% of Russian timber – and the Chinese expertise in operating global supply chains for manufactured forest products in Central Africa and the Asia Pacific.
The pivot away from the Middle East and towards the Northern Sea has been several years in the making, with COVID disruptions and human error increasing the spotlight on the Suez Canal.
In 2021, the container ship “Ever Given” got temporarily stuck in the Suez Canal with Lloyds list, the maritime insurers, reporting that the error led to a 12% delay in global trade – worth over US$9 billion a day, as other ships couldn’t use the route (many of these were carrying timber shipments).
“Just that one incident was equivalent to $400 million worth of trade per hour, $6.7 million per minute,” the Silk Road Briefing alleges. “Consider then if any future Suez closure is not for a few weeks, but months, or years, and the broader economic ramifications.”
According to AJin Qianzhong, director at the Institute of International Relations at the People’s University of China in Beijing, “Right now we only have a route from Malaysia to the Suez Canal, but that is very dangerous, especially as the Gaza crisis continues.”
“If the crisis in Gaza expands, it will be a great danger to the Suez Canal. So, of course, the Northern Sea Route will be increasingly viable.”
One of the principal objections to the Northern Sea Route is its seasonality, with Arctic sea ice restricting year-round use.
However, this will change next year, with Russian Deputy Prime Minister Alexander Novak announcing last week that year-round maritime navigation will commence next year.
As a result, the Russian Government is now looking to use its nuclear-powered icebreaker fleet, the only of its type anywhere in the world, to create a navigational path for its fleet of cargo ships for year-round trade.
It is already investing billions of Russian rubles to build supporting infrastructure, with Deputy Premier Novak announcing the development of a central hub for building large-capacity offshore structures to produce liquefied natural gas (LNG) in Murmansk.
In recent years, the Arctic has emerged as a ‘Cold War’ battleground, with Russia, China, the EU and the US all eying off new trade routes due to retreating ice caps.
In fact, according to a report published by Brown University last year, “the Arctic’s navigability will increase so greatly that it could yield new trade routes in international waters.”
“This not only reduces the shipping industries carbon footprint but also weakens Russia’s control over trade in the Arctic.”
Lead author Amanda Lynch said the time to think critically about the legal, environmental and geopolitical implications is now.
In Russia, the Kremlin now offers tax breaks and subsidies to businesses investing in ‘capacity building’ projects in the Arctic.
The 2020 legislation predates the Ukraine War, and the Suez Canal’s supply chain disruptions will see over US $300 billion invested in Arctic infrastructure over the next 15 years to make “the Arctic popular with Russian youth.”
The investment will see 200,000 jobs created in the region, focusing on LNG, petrochemical, mining and timber industries.
In the race to supply the world with timber products; expected to increase fourfold over the next 30 years, perhaps an unholy alliance between Russia, China, and the ASEAN region can help meet that demand.
