The ‘Suez Jam’: A Window of Opportunity for Russia’s Northern Sea Route?

On March 23, the Suez Canal, one of the world’s busiest transport arteries, became blocked in both directions when the ultra-large Golden-class container ship Ever Given (operated by the firm Evergreen), en route from Malaysia to the Netherlands, ran aground cross-ways. For nearly a week, the massive vessels remained lodged along both embankments of the man-made waterway. According to various estimates, every day of blockage was costing the global economy approximately $9.6 billion (Lenta, March 25). Between 2015 and 2020, approximately 90,000 ships, carrying a total of 5.5 billion tons of cargo (approximately 12 percent of world trade), traversed the artery. Moreover, the Suez Canal serves as the main transportation route for hydrocarbons being shipped from the Middle East to the European Union and the United States (Finam.ru, March 25). The commodity data tracking company Kpler has noted that the obstruction by the Ever Given resulted in seven tankers (carrying 6.3 million barrel of oil) being stuck in the Canal, temporarily raising global oil prices and—more importantly—breeding uncertainty among investors (Rossiyskaya Gazeta, March 26). By the following Monday (March 29), the Egyptian authorities finally succeeded in freeing the container ship and moving it out of the way.

The dramatic episode triggered a wave of exhilaration inside Russia, amplifying voices and institutions that have long wanted to more aggressively promote the Northern Sea Route (NSR)—an east-west maritime passage along the country’s Arctic coast, connecting the Asia-Pacific and Europe. First to react was the Rosatom State Nuclear Energy Corporation, which launched a Twitter campaign mocking the Suez and praising the NSR as its alternative (Katehon.com, March 26). Simultaneously, Russia’s representative to the Arctic Council (Moscow will hold the chair of this international organization in 2021–2023), Nikolai Korchunov, contended that the incident at the Suez Canal reinforces the need to develop the NSR as a viable alternative so as to minimize “global trade and transportation risks” (News.ru, March 26).

And even though transportation via the Suez has been largely restored (Rossiyskaya Gazeta, March 29), the internal debate among Russian experts regarding the subsequent economic outlook for the NSR is unlikely to cease. Based on a survey of recent Russian-language sources discussing the incident, two main “camps” can be ascertained.

The first group (the mainstream) contends that the temporary shutdown of the Suez route opens up a window of opportunity for the NSR. As stated by the head of the Public Movement for the Support of Navy, Mikhail Nenashev, “[T]his is a signal for all major naval powers […] if alternative routes, like the NSR, are not developed, some huge economic losses are likely to occur in the future” (Riafan, March 24). The director of research on developing markets at the Skolkovo School of Management, Alexei Kalinin, emphasized that, as an alternative to Suez, the NSR could provide not only a geography-related comparative advantage but also superior ecological sustainability (Rossiyskaya Gazeta, March 25). Finally, the director of the Institute of Socio-Economic Research at the Financial University Under the Government of the Russian Federation, Alexei Zubets, has argued that although the Suez Canal has heretofore been the world’s most reliably transportation artery, its reputation has now been shaken, giving opportunities not only to the NSR but also Russia’s transcontinental railways (Regnum, March 26).

The second group of experts, on the other hand, expresses doubts that Russia will be able to seriously capitalize on the recent Suez logjam. For instance, economist Dmitry Adaminov proclaimed that last week’s impasse—though troublesome—would not have a fundamental impact on global transportation networks and/or the attitudes of international suppliers. Indeed, any increase to the overall role of the NSR as a major transportation artery remains hampered by fundamental questions and uncertainties related to the seasonal state of the northern polar icecap and the Arctic transit capabilities of shippers. The most serious question, however, lies in the realm of infrastructure in the Russian High North, which is—at least for now—not ready to meet such ambitions plans as profoundly challenging the Suez Canal. Thus, while the NSR is an important transportation artery, it is mainly vital to Russia as a means to develop its Arctic region (Rueconomics.ru, March 25). Russian media outlets have also argued that were global oil and natural gas supply chains to be seriously disrupted for an extended period, perhaps that would significantly increase Russia’s hopes of raising the NSR’s profile and attracting foreign transportation companies. For now, however, hydrocarbon delivery disruptions via the Suez have only ever been temporary; thus, the prospect of a tectonic shift in maritime shipping remains a vague and theoretical notion (Rossiyskaya Gazeta, March 26). Illustratively, the head of the transport-logistics holding company Sovfrakht, Dmitry Purim, asserted that for the NSR to become a real alternative to the Suez Canal, the entire Arctic icecap has to melt completely; until then, all such talk is “groundless” (RBC, March 24).

In the final analysis, four main takeaways are worth noting. First, compared to the Suez Canal, the Northern Sea Route does admittedly have several comparative advantages (not least that it is significantly less prone to becoming blocked), and global climate change gradually boosts its competitiveness. The Federal Service for Hydrometeorology and Environmental Monitoring of Russia (Rosgidromet) has reported that the year 2020 broke yet another record in terms of temperatures, and the Arctic icecap has decreased by five to seven times in comparison with the 1980s (RBC, July 4, 2020). Specifically, the area of ice coverage in the Arctic Ocean reportedly shrank to a record low of 26,000 square kilometers last year (Fishnews.ru, March 26, 2021). Russia, as the only country in the world at the moment with a relatively large fleet of icebreakers, can certainly try to capitalize on this climactic trend. Second, as noted by a great number of experts, the NSR will—assuming the first condition is fulfilled—become more economically attractive if the necessary funding for the development of local infrastructure is obtained (tens of billions of dollars, based on the most conservative calculations). Realistically, only China could help Russia with these means, yet it is doubtful that Beijing will allot the necessary funding (Ridl.io, May 8, 2020). Third, the melting of the permafrost in the High North could result in ecological tragedies—similar to the “Norilsk disaster” (see EDM, June 29, 2020 and July 7, 2020)—that would have damaging economic and reputational implications for Russia. Finally, if the EU and US expand their economic sanctions against Russia and/or the Bering Strait becomes a dangerous bottleneck, the commercial attractiveness of the NSR will markedly collapse.