PALILOV D.E. Political Aspects of the Transport and Logistics Northern Sea Route Project

D.E. PALILOV Postgraduate student, Financial University, under the Government of the Russian Federation Moscow, Russia

POLITICAL ASPECTS OF THE TRANSPORT AND LOGISTICS NORTHERN SEA ROUTE PROJECT

The article deals with the current problems and trends in the development of the transport and logistics Northern sea route project. It analyzes existing conditions due to which the rapid development of the Northern sea route began and its use as an important artery of international trade. The key political aspects and factors that have a direct and indirect impact on the active use of the Northern sea route are also studied. In particular, the author considers the issue of interaction between the Russian Federation and China and the role of the latter in the development of the domestic icebreaker fleet. In conclusion, the prospects for the development of the Northern sea route and mechanisms for accelerating this development are studied.

Key words: Northern sea route, political aspects, politics, political sciences, geopolitical factors, sanctions, international trade, foreign economic activity.

An increased national and international interest in the Northern sea route (Northern sea route, NSR) is due to both geopolitical processes (long-term trend towards the division of the Arctic) and the needs of the Russian Federation in the development of the Arctic zone .

In addition, the relevance of the scientific study of the influence of political aspects on the development of the Northern sea route is associated with the peculiarities of international trade between East Asia and Europe. To date, the main channel of trade is the Suez Canal, where Russia's interests are affected only indirectly. But at the same time, the influence on the activity of maritime traffic along the Northern sea route remains, and participation in it of the Chinese merchant fleet should be perceived as an increasing trend.

There is a growing interest in Arctic issues. And one of the key factors in the development of the Arctic is the Northern sea route project. A number of conditions that have developed over the past 30 years allow us to speak about the active stage of the use of this transport artery in international trade :

– beginning of legislative registration of territories and waters of the Arctic powers, including Russia, Canada, USA and Scandinavia;

– global warming, which leads to a decrease of the ice cover of the Arctic Ocean;

– search for optimal from an economic point of view transport and logistics routes of international trade;

– changing international political environment, including Russia – EU – US relations, that have worsened due to economic and political sanctions and counter-sanctions;

– emergence of new threats to international security, not only political and economic, but also environmental.

The Northern sea route is becoming an important factor in ensuring Russia's national security. This route is used to export resources from the Arctic regions, providing 12-15% of the country's GDP (picture 1). The NSR plays a key role in providing access to the world ocean for the Russian Navy. In addition, it is the most important transport artery, providing the needs of the population of the Far North and Siberia .

Picture 1

Northern sea route

Given the role of the Northern sea route in international trade, the emergence of conflict situations between the countries of the Arctic zone is not excluded. And it has a negative impact on the efficiency of the Northern sea route transport and logistics project.

The most significant political aspect of the development of the NSR is the interaction between Russia and China. As early as 2010, the Chinese shipping companies began their first expeditions through the water spaces of the Arctic. In 2012, Rosneft and the State Development Bank of China signed a general agreement on the exploration and production of oil on the shelf of the Arctic Ocean.

Due to the serious drop in profits of Chinese shipping companies in 2012-2013, it was decided to increase the volume of expeditions along the Northern sea route. At the same time, it is expected that by 2020 every seventh Chinese ship will be sent along this route. A major part of the transportation will be ensured by the icebreaker fleet of Russia.

Due to the ratification by Russia of the 1982 UN Convention on the law of the sea on March 12, 1997, Arctic waters became "no man's land". A foreign commercial vessel may pass through the area without being obstructed by the Russian Federation. But, despite the loss of monopoly on the possession of sea waters, the Russian side has a full right to dictate the following conditions :

– mode of insurance of ships;

– organization of rescue operations;

– unique proposals of icebreaking escorts.

Based on these conditions, the Chinese side cannot do without Russia in the development of its trade routes, which implies further mutually beneficial cooperation. If the Chinese shipping companies refuse to cooperate, it will lead to a significant rise in the cost of expeditions. First, they would have to attract other foreign icebreaking escorts. Second, it will reduce the likelihood of rescue operations in online mode, thus increasing staff costs, as sailors would require monetary compensation for the high level of risk.

As one of the arguments confirming the growing political interest of the PRC in the topic of the NSR, one can cite scientific research. Countries outside the Arctic zone may claim certain rights if they conduct active research in the region. China has confirmed its partnership in the research work of the Northern sea route project with countries such as Iceland and Norway. The latter support China's application for a permanent observer status in the Arctic Council . It is Iceland and Norway that are called potential partners of shipping companies from China, which provide cargo turnover with Europe.

The Arctic Council is an international forum for the protection of the unique nature of the North polar zone. It consists of eight countries, as well as observer states, including China. From 2021 to 2023 the duties of the Chairman of the forum will be transferred to the Russian Federation. Noting that this Council does not have a direct impact on the development of the Northern sea route, it should be said that when taking protective measures to ensure the integrity of the nature of the polar zone, certain prohibitions concerning the regime of passage of ships of the countries of the region are possible. Given the dominant role of the Russian Federation in the Northern sea route project, these measures may have a negative impact on Russia's political and economic interests in the Arctic.

In order to increase its influence in the framework of international trade in raw materials and finished products, Russia needs to intensify investment in the creation and improvement of transport infrastructure, in particular, railways leading to the main seaports of the Arctic zone. Here are some investment projects of strategic importance :

– Belkomur (Arkhangelsk region – Republic of Komi-Perm region);

– BAM-sea of Okhotsk (Berkakit-Yakutsk-Magadan);

– Polar TRANS-Siberian railway with its promising access to Petropavlovsk-Kamchatka and Chukotka.

These projects require investments of about 400 billion Russian rubles. As the result of these projects, the volume of cargo transportation on the Northern sea route is expected to increase to 35-40 million tons of cargo per year. At the same time, the income of the Russian icebreaker fleet for the support of one foreign vessel will start from 100 thousand us dollars.

Approximate calculations show that up to 15 ships can be sent on an expedition per day with a possible rate of payment for escort services from 100 to 500 thousand US dollars. It should be borne in mind that the cost of using the NSR as a transport artery is higher in winter by 25%, and lower in summer – by 35% than similar ones through the Suez Canal. This makes the Northern sea route, undoubtedly, a profitable transport and logistics project and a direct competitor to the southern direction of cargo delivery from East Asia .

Even if the freight rates of the NSR are set in excess of 4 times compared to the rates for expeditions through the Suez canal, the cost of transportation of goods using the Northern sea route will be comparable to the cost of transportation through the Suez with considerably shorter time periods. And the commissioning of high-latitude deep-water routes, which run north of the Novosibirsk Islands, will allow navigation of large-tonnage vessels with a draft of more than 15 meters .

Thus, conditions will be created for the passage of heavier ships that form the basis of the Chinese merchant fleet for transportation to Europe and the West coast of the United States. The cost of escort of such a vessel by the Russian icebreaker will be about 500 thousand US dollars. A maximum of 15 vessels can be escorted per day for a total amount of 7.5 million US dollars. During the year, the maximum economic effect of such expeditions will be more than 2.7 billion US dollars.

Prospects for further development of the Northern sea route suggest an increase in Russia's activity on the issue of international cooperation with other countries of the Arctic Council. Here, the Russian side has a number of advantages :

– geographic location;

– a large number of seaports;

– highly qualified personnel for maritime transport;

– railway tracks adjacent to the sea ports of the Arctic zone;

– icebreaker fleet (Russia has 40 vessels, Finland – 7, USA – 4, Sweden and Canada 5 each, etc.).

Based on the above, we expect a strengthening of cooperation between Russia and China, key partners in international trade in raw materials and finished products. It is important to identify the existing political risks associated with the increasing role of China in the Arctic Council. In addition, it is necessary to take into account an increase in the funding of the icebreaker fleet by the USA, Canada and the Scandinavian countries, the emergence of new and modernization of existing vessels and presence of direct competitors of the Russian side, resolution of political disputes with China is quite predictable, since China is not only geographically and historically connected with Russia, but also is its strategic ally within the framework of the Shanghai cooperation organization (SCO) and the BRICS.

It is important to stress that political prospects for the development of the Northern sea route in the Russian interests are ambiguous, at least until the legislative registration of the key provisions on the use of Arctic sea routes in the "Polar Code". The Arctic Council needs to play a more significant political role, in particular, to achieve the legislative consolidation of the mandatory implementation of its decisions for all participating countries.

The analysis of the current state of the transport and logistics project Northern sea route leads to the conclusion that infrastructure projects need larger financing as they contribute to the increasing role of the Arctic zone in the spatial and economic development of Russia, it is also necessary to focus on the advanced development of the NSR in the world cargo turnover as a serious competitor to the Suez Canal.

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