A Report from the 3rd Annual GeoNor Conference: Does the EU Need an Arctic Strategy?

By Kathrin Keil, Andreas Østhagen and Andreas Raspotnik As policy-makers, think tank representatives, and researchers met in Berlin for the third annual “Geopolitics in the High North” conference, the EU’s role in the Arctic was the main topic on the agenda. It was debated whether there is a need for an overarching EU Arctic strategy given the complexity and distinctiveness of many Arctic issue areas. How the EU is going to proceed in terms of its anticipated Arctic strategy remained rather vague.

Titled “The EU as an Arctic Actor? Interests and Governance Challenges”, the three day conference gathered numerous scholars and officials dealing with Arctic matters. The conference was arranged by the SWP in Berlin, with assistance of the GeoNor project leader from Norway, the Norwegian Institute for Defence Studies (IFS). The Arctic Institute was actively present, with members of the institute presenting and moderating during different parts of the conference.

Critical Arctic States

As always in the European debate, the Arctic states (during the conference represented by Norway and Denmark) emphasized their individual sovereignty and right to exploit natural resources accordingly.

Map from the European External Action Service,
highlighting the European member states in the Arctic [1]

Skepticism towards the role of the European Commission in the Arctic Council was expressed, should it obtain the observer status it seeks. It was asked if the Commission’s role would be to coordinate the EU-members positions internally in the Council (Denmark, Sweden, Finland and possible Iceland). Further, the EU’s application for permanent observer status is interlinked with the same application from China, which broadens and complicates the overall issue of more observers to the Arctic Council.

There was often-stated skepticism towards the EU’s tendency to interfere in the Arctic states’ internal economic affairs. One participant stated: “It is easy for those outside of the Arctic to talk about how we manage our own resources in the Arctic.” Naturally, the EU’s import ban on seal products was referenced, but also Greenland’s development of its offshore oil and gas resources was a part of the discourse.



EU-Arctic policy – for whom and for what?

In accordance with the Commission’s first Arctic Communication from 2008, the EU sees its Arctic role primarily in the issue areas climate change and research, and as an important market for Arctic products. Proponents of an active EU role in the Arctic made sure to mention that the EU does not want to interfere with the Arctic states’ interests, but that the EU can contribute to a better governance structure and sustainable resource development in the region. While the type of statements related to governance is what has caused some negative reactions amongst the Arctic littoral states before, the tone was at large very amenable from the EU level.

EU Arctic Footprint Study [2]

It is interesting to notice how much time at large the European Commission spends on legitimizing its involvement in the Arctic, ranging from climate change footprint studies to the fact that the EU also has policies for the Mediterranean and the Baltic Seas. It should, however, be highlighted that the EU has direct access to the Mediterranean and the Baltic Seas, while it has no such access to the Arctic Ocean. One participant also pointed out that the EU’s negative impact on Arctic climate should rather spur a more aggressive internal climate policy for the EU-member states instead of being used as an argument for EU engagement in the Arctic.

In other words, the EU discourse did not entail any new concepts, nor did it bring with it any new revelations on how the Commission will make their Arctic policy into something more tangible than mere policy statements on paper. The expected progress report from the Commission was also a hot topic amongst the conference participants, as it was expected to be released at the end of May. Delayed numerous times already, there is now talk about it not being released before summer 2012.

Later on in the conference the purpose of a holistic Arctic strategy was openly questioned, as individual policies should be sufficient to deal with the policy areas where the EU interacts with the Arctic region. The argument was that the EU is not involved in all Arctic issue areas to the same extent, and consequently does not need an overarching strategy for a region where it does not have primacy. Arctic specific policies for raw materials, energy, transport, fisheries, climate change and research should all be adequate to deal with the EU’s interests in the region.


Governance, Resources, Environment and Shipping

After drawing the overall picture, the conference moved on to concrete policy sections. In the section on Arctic governance, the importance of narratives or the way we discuss the Arctic was emphasized. The argument was that the way the Arctic is portrayed by media, policy-makers and scientist influences the actual decisions we take about the region. Additionally, the Arctic region as a whole is closely linked to the rest of the globe. Climatic changes in the Arctic will have decisive effects on regions further south, e.g. through rising sea levels due to continued melting of the Greenlandic ice sheet.

In the natural resources section, Andreas Østhagen from The Arctic Institute presented a study looking at factors driving and hindering the development of offshore oil and gas in the North American Arctic. Regional autonomy, commercial infrastructure and accessibility, and civic involvement all determine the pace of offshore development in Alaska, Canada and Greenland. The presentation made clear that it very often does not make sense to treat the Arctic as one, homogenous entity with one-size-fits-all solutions. Rather, the Arctic consists of very distinct countries and regions that need to be addressed according to their own special challenges, opportunities, needs and interests. Read more about the study here, and click here for the presentation.

Two prominent Arctic scholars discussed the EU’s Arctic environmental involvement by asking one decisive question: “Is there an Arctic need for additional European commitment and policy input?” It was emphasized that only little of the EU’s environmental legislation applies in the Arctic. Further, there is a fairly progressive international system regulating environmental issues already in place. Yet it was admitted that global environmental challenges do not only affect the Arctic region but can only be dealt with by incorporating all actors, including the European Union. In that regard, many Arctic problems need non-Arctic solutions. Consequently, the European Union could considerably raise the level of global environmental ambitions considering the Arctic region.

Andreas Raspotnik from The Arctic Institute participated as a discussant in the session on “Shipping and Transport: EU Interests and Governance Challenges”. He emphasized that prospects for Arctic shipping are often described by a rather simple formula: shorter distances allow for faster trips and consequently lead to lower costs. Yet the economic picture of Arctic shipping is much more complex. Another presentation outlined the EU’s legal governance challenges as an international actor in the regulation of merchant shipping in the Arctic Ocean. It was noted that EU Member States that are members of the Arctic Council could already actively engage in the Council in relation to the regulation of merchant shipping.

This was the last annual conference for the “Geopolitics in the High North”-project, as the project runs until 2013. Parts of next year’s Arctic Frontiers conference in Tromsø, from the 20th to the 25th of January, will be devoted to the final results of the project, where also The Arctic Institute will be present and participate. For more information, see this link: http://www.arcticfrontiers.com/


Academic Workshop

Subsequent to the conference, the SWP organized a Young Researchers Workshop on “Recent Development and Studies in European Arctic Research”, where two members of The Arctic Institute, Kathrin Keil and Andreas Raspotnik, participated. Kathrin Keil presented “The Arctic Infrastructure Survey” and Andreas Raspotnik a paper on “The Future of Arctic Shipping along the Transpolar Route”. The abstracts of both papers are below. Both presentations were found to highlight important knowledge gaps in Arctic studies. 


ABSTRACT: The Arctic Infrastructure Survey - Present Status and Future Outlook of Infrastructure in Arctic Littoral States

The Arctic Infrastructure Survey (AIS) provides an overview of key infrastructure in the six littoral Arctic States, which include the United States of America, Canada, Denmark/Greenland, Iceland, Norway, and Russia. This version of The Arctic Infrastructure Survey is an excerpt from a larger report (to be released by The Arctic Institute in October 2012) that will cover a wide variety of both “hard” infrastructure, defined as physical structures and networks, and “soft” infrastructure, defined as intangible systems, institutions, and organizations, that together dictate the fundamental parameters by which a nation functions.

Kathrin Keil presenting “The Arctic Infrastructure Survey”,
with workshop discussant Timo Koivurova

The paper focuses specifically on transport, maritime, and energy infrastructure. A summary of the present state of infrastructure in these three areas is presented for each of the six respective Arctic littoral countries. Although there are huge variations between the Arctic nations in the current status of their infrastructure, in all cases it can be argued that their transport, maritime, and energy infrastructure are areas that will hold an exceptionally prominent role in any Arctic activities in the coming decades. Within these three infrastructure issue areas, a further focus of this paper is how these interconnected capacities specifically relate to the challenges and opportunities inherent in oil and gas exploitation and the usage of Arctic sea routes.

Predicted increases in human activity will place new, more strenuous demands on the infrastructure required to provide emergency response capabilities, support safe shipping, protect the environment, as well as further sustainable development of the Arctic region. Major investment is required in infrastructure and surveillance to enable safe economic activity. In most areas in the Arctic, infrastructure is currently insufficient to meet the expected demands of economic development. It is likely that public/private cooperation, as well as continued international cooperation among the Arctic States, will be needed to provide and sustain this infrastructure.

The greatest unknown variable in surveying Arctic Infrastructure is climate change, which will undoubtedly bring about many challenges but also opportunities in the region. Given conditions of rapid change in the physical Arctic environment, all areas of Arctic infrastructure will need to adapt to a much wider range of potential environmental conditions over the course of a multi-decade life. This means that future infrastructure may have to conform to vastly different specifications, and may be more expensive or challenging to build and maintain. It also means that various elements of infrastructure will necessarily expand and contract in response to changing conditions in unpredictable ways. In the final section of the paper, the impact of climate change on infrastructure is examined through a case study concerning the predicted consequences for Iceland’s infrastructure.


ABSTRACT: The Future of Arctic Shipping along the Transpolar Route

Arctic sea ice is melting rapidly, and within the next decade polar warming may transform the High North from an inaccessible frozen desert into a seasonally navigable ocean. The debate over Arctic shipping routes routinely evolves around the Northwest Passage and the Northern Sea Route, but neglects to make mention of the Transpolar Sea Route (TSR). In the 20th century the use of Polar routes revolutionized international air travel. In similar fashion, the TSR bears the potential to transform the international commercial shipping industry in the 21st century. 

Andreas Raspotnik (right) presenting
“The Future of Arctic Shipping along the Transpolar Sea Route”

Malte Humpert and Andreas Raspotnik discuss the potential of the TSR as a future corridor of commercial shipping and conduct the first comprehensive analysis of the climatic, economic, and legal context. The article will examine the feasibility of the TSR with respect to the continued decline of Arctic sea ice and analyze the economic potential of the route and its compatibility with existing trade patterns for three types of commercial transport: Container Ships, Dry-Bulk Carriers, and Tankers. The authors will also discuss the TSR’s special status as the only Arctic shipping route outside of national territorial jurisdiction. Special emphasis will be given to China’s emerging interest in Arctic shipping and its growing economic relationship with Iceland, which stands to gain massively if it were to develop into a transpolar shipping hub. This multi-faceted and interdisciplinary study aims to outline and elaborate on a range of key issues and challenges related to the future of the TSR.

The article will be published in the forthcoming Arctic Yearbook 2012, edited by Lassi Heininen, Joël Plouffe and Heather Exner-Pirot: http://www.nrf.is/arctic-yearbook-2012

[1] Delegation of the European Union to Russia, http://eeas.europa.eu/delegations/russia/eu_russia/fields_cooperation/regional_issues/arctic_coop/index_en.htm

[2] The EU Arctic Footprint, http://arctic-footprint.eu/node/10

Part 5: The Future of the Northern Sea Route - A “Golden Waterway” or a Niche Trade Route

by Malte Humpert Part 4 of the series on the future of the Northern Sea Route (NSR) analyzed the potential for cost savings along the NSR and discussed how credible these claims are. The final part in this series will discuss China's future as an Arctic Maritime Nation and take a closer look at its influence on the development of the NSR.

China has been very cautious about formulating and propagating its interests in the Arctic and continues to quietly advocate for unobstructed access to the region. China’s advocacy for unimpeded access to the region for all states, while certainly economically and politically self-motivated, may help it to garner significant support from the international community, especially smaller export- and import-dependent countries who would benefit from liberal access to the Arctic’s shipping routes.

China’s rising economic power, especially its role as a growing exporter to Europe and the United States, may allow it to overcome its position of weakness in Arctic affairs. The country is neither an Arctic littoral state, nor an observing member to the Arctic Council. Chinese Arctic research remains focused on the environmental impact of climate change in the region; economic, political, and security implications, however, are increasingly being considered. China’s economic development is highly dependent on international shipping and foreign trade contributes 46 percent to the country’s GDP.

China's efforts to develop into an Arctic maritime nation and become a destination for Russia's Arctic hydrocarbon resources are well documented. In addition to commissioning a number of ice breakers, the country continues to invest in ice-strengthened bulk carriers and tankers with dual-directional technology which combine the fuel-efficient bow of a cargo ship on one end and with the hardened bow of an icebreaker on the other.

Until recently China appeared to be wary of Russia’s intentions in the Arctic, e.g. the planting of the Russian flag at the North Pole, but cooperation has increased as of late. China National Petroleum Corporation recently signed an agreement with Sovcomflot, the largest operator of Arctic shuttle tankers and ice-class LNG carriers, to" develop a long-term partnership in the sphere of seaborne energy solutions, with the SCF fleet serving the continually growing Chinese imports of hydrocarbons."

Chinese officials have repeatedly called the NSR the "Arctic Golden Waterway" and Bin Yang, a Professor at the Shanghai Maritime University, estimates cost savings between $60-120 billion per year if China makes extensive usage of Arctic shipping routes.[1] At the same time, Russia's GDP is closely tied to its Arctic natural resource development which in turn depends on the ability to deliver these resources to the global markets, e.g. via pipelines or the NSR. Russia is seeking to tap Asian demand for oil and gas to help justify developing remote deposits in the Arctic and eastern Siberia. Hence, Russia has a strong interest in developing the NSR into a commercially viable shipping route and ensuring access to one of the fastest growing consumer market for hydrocarbon resources: China and greater south-east Asia.

China's efforts to gain a foothold in Arctic shipping must be seen as an attempt to diversify the trade routes of its oil and natural gas supply and thus overcome its strategic weaknesses known as "Malacca dilemma." Currently 78 percent of China's hydrocarbon imports pass through the narrow 1.5 mile-wide channel at the Strait of Malacca.[2]

China's demand for crude oil is slated to grow from 8.2 million barrels per day (mbd) in 2008 to 17 mbd 2030. Over the same period the production deficit of Asia as a whole will increase from 15 mbd to 48 mbd.[3] China is not only attempting to secure access to Africa’s growing share of world petroleum exports, e.g. in Angola and Sudan, in order to satisfy its growing demand for hydrocarbon resources but also diversify the trade routes of its natural gas and oil imports. Becoming an Arctic maritime shipping nation represents an important step in China's goal to achieve long-term energy security.

The series on The Future of the Northern Sea Route looked at a number of factors which determine if the route will develop into a "Golden Waterway" or remain a niche trade route. The rate of climate change in the Arctic, world trade patterns and global trade dynamics, the economics of shipping lanes and the potential for cost savings, and China’s role as a potential key benefactor of Arctic shipping, are key variables to the development of the NSR as global shipping route. The entire article can be found here.

Sources:

[1] Michael Byers, "Asian juggernaut eyes our ‘golden’ waterways," August 29, 2011, http://m.theglobeandmail.com/news/opinions/opinion/asian-juggernaut-eyes-our-golden-waterways/article2144360/?service=mobile

[2] You Ji, "Dealing with the Malacca Strait Dilemma," April 12, 2007, http://www.eai.nus.edu.sg/BB329.pdf

[3] Based on projections by Ramón Espinasa from the class "Energy Security: Western Hemisphere" at Georgetown University

The Future of the Northern Sea Route - A “Golden Waterway” or a Niche Trade Route

by Malte Humpert With the beginning of fall just two days away, the sun at the North Pole is about to dip below the horizon for the next six months and the Arctic summer, which saw a new record low ice extent, is coming to a close. For the first time since the beginning of satellite measurements not only the Northern Sea Route (NSR) but also all channels along the Northwest Passage (NWP) appeared to be virtually ice free for an extended period of time.

"These waterways were of little interest to shipping companies when thick “multiyear” sea ice choked the waters along Canada and Russia’s northern coasts. But now, climate change is causing the ice to thin and recede. Since 2007, in late summer, both the Northwest Passage and Northern Sea Route have been temporarily ice-free. Within the next decade, the Arctic could experience a complete late-season melt-out – and, with that, a permanent loss of the multiyear ice." [1] 

Shipping traffic along the NSR is expected to double this year due to increases in the size and frequency of ships traveling along the route. In 2010 the Danish 40,000 ton MV Nordic Barents was the first non-Russian bulk carrier to use the NSR as a transit trade route. This year, the Japanese bulk carrier Sanko Odyssey, a ship almost twice its size, delivered iron ore from Murmansk, Russia to Xingang, China. Summer 2011 also saw the first supertanker, the 160,000 ton Suezmax-class Vladimir Tihkonov, using the shortcut from Europe to Asia. 

While sustained sailing speeds along the NSR do not yet rival those along the world's major shipping routes, they are likely to continue to increase as first year drift ice becomes less likely to present a serious obstacle during the summer months. The Vladimir Tihkonov maintained an average speed of 14 knots and sailed from Novaya Zemlya to the Bering Strait in seven and a half days surpassing the record set by the 74,000 ton Panamamax-class STI Heritage earlier this year.

Growing economic activity in the Arctic invites questions about the medium- and long-term prospects of shipping along the NSR. Do Arctic shipping routes, especially the NSR, represent a commercially viable alternative to traditional shipping routes? What are the crucial variables in predicting the future of Arctic shipping?

Shipping companies and supporters of increased traffic in the region cite significant cost savings for ships that have sailed along the NSR and predict a rapid growth of Arctic shipping. Bulk carrier tonnage may increase tenfold, from 2 million tons today to 20 million tons by 2020, and oil and gas volume is predicted to grow along similar lines to 40 million tons per year by the end of the decade.

Researchers and shipping experts, however, remain skeptical about the commercial viability of the NSR. Canadian and American maritime experts say two percent of global shipping could be diverted to the Arctic by 2030, reaching 5 percent by 2050. Experts cite a number of factors which may determine the future growth of shipping in the Arctic. This series about the Northern Sea Route will explore how global trade dynamics and world trade patterns, the severity and speed of ice decline, fuel cost savings and transit fees, Russia's Arctic natural resources development, and the emergence of China, South Korea and Japan as Arctic maritime nations, may influence the development of the NSR.

By examining the individual factors this series hopes to provide a framework for understanding whether the NSR will develop into a “Golden Waterway” or will remain a limited and seasonal trade route.

Global trade dynamics and World Trade Patterns

Growing economic activity in the Arctic invites questions about the medium- and long-term prospects of shipping along the Northern Sea Route (NSR). Do Arctic shipping routes, especially the NSR, represent a commercially viable alternative to traditional shipping routes? What are the crucial variables in predicting the future of Arctic shipping? Part 2 looks at global trade dynamics and explains if the NSR would be compatible with world trade patterns.

The NSR represents a shortcut for the transfer of goods between Europe and Asia and thus offers significant cost savings for shipping companies. In theory, distance savings along the NSR can be as high as 50% compared to the currently used shipping lanes via Suez or Panama. Whereas a voyage from Japan to Europe takes roughly 29 days via the Cape of Good Hope and 22 days via the Suez Canal, it takes just 10 days via the Arctic Ocean.[2] The actual sailing distance between Yokohama in Japan to Rotterdam in the Netherlands is roughly 20,000 kilometers passing through the Suez Canal, but less than 9,000 kilometers via the NSR.

Over the past decade, Asia has overtaken North America as the largest market for European exports and the doubling of world trade by 2020 will further increase the importance of shipping lanes.[3] The attractiveness of the NSR as a shorter connection between Europe and Asia may increase further as container ship operators adopt “super-slow steaming” in order to reduce fuel consumption and costs.[4]

The majority of cargo ships that ply the world’s oceans operate on regular schedules, called liner service. In total more than 6,000 ships, most of them container ships, follow a set route calling at a number of ports to load and unload cargo. The global maritime industry operates on just-in-time cargo deliveries. The ability to schedule journeys long-time in advance and to guarantee uninterrupted service are key for container ship operators.

The lack of schedule reliability along Arctic shipping routes represents a major obstacle to developing the NSR. The Arctic Ocean off the coast of Northern Russia may be ice free anywhere from late June until November. During some years the ice recedes early during the season and does not return until late into Fall, while in other years the ice-free period may be as short as six weeks. Simply put, there are no guarantees when ice-free conditions start or end. In addition, throughout the summer drift ice originating further north is likely to be pushed into the shipping lanes by wind and ocean currents. Even during the summer months Arctic weather remains unstable. Fog, poor visibility, and violent winds may interrupt the pace of regular liner services.

Between Murmansk and the Bering Strait the NSR passes along 2500 miles of nearly uninhabited Siberian tundra. The lack of infrastructure and suitable ports along the route renders ships unable to receive timely assistance in case of mechanical breakdowns or damage. Operating in such remote regions under harsh climatic conditions naturally translates into higher insurance premiums for cargo ship operators.

The world’s major container lines optimize their routes along a network of ports that offer developed communication lines into the hinterlands, e.g. river transport and railroads, to distribute goods to customers and consumers. As the NSR passes through mostly uninhabited territory no such stopovers are possible, strongly reducing the route’s attractiveness for regular liner service operators.

Bulk dry carriers, such as the iron ore carrier Sanko Odyssey, in contrast, follow less predictable schedules and their routes depend more on changing supply and demand of less time sensitive items. The NSR may also benefit from Russia’s oil and natural gas developments in the Arctic. As the tundra’s permafrost begins to thaw the construction of pipelines and railways will prove ever more challenging and hydrocarbon resources may increasingly be exported via the NSR.

The NSR offers significant distance savings between Europe and Asia, but scheduling uncertainty due to the Arctic environment and the lack of infrastructure in the hinterland, will prevent the route from becoming popular with liner services. For bulk dry carriers and wet carriers, in contrast, the route may increasingly represent an alternative to more traditional shipping routes.

Climate Change in the Arctic and the NSR

Part 2 of the series on the future of the Northern Sea Route discussed global trade dynamics and explained if the NSR would in fact be compatible with world trade patterns. Part 3 will take a closer look at climate change in the Arctic and its impact on the future of the NSR. How quickly do scientists expect the remaining summer ice to disappear and at what stage could year-round operations along the NSR commence?

The regional impact of global climate change has been most amplified in the Arctic, where the annual average temperature has increased at double the global rate over the last 100 years. The Arctic is now warmer than is has been at any time during the last 2,000 years.[5] The Arctic Ocean, which has had perennial ice cover for the past 700,000 years, is on a trajectory to a new, seasonally ice-free, state.

The Intergovernmental Panel on Climate Change (IPCC) estimates that over the next century, Arctic temperature increases will exceed the global annual mean by a factor of four and will range between 4.3 degrees Celsius (°C) and 11.4°C in the winter and 1.2°C and 5.3°C in the summer.[7] This temperature rise will continue to have dramatic effects on Arctic sea-ice extent, which has diminished 40 percent between 1979 and 2010.[8]

Over this same period, the Arctic sea ice has thinned considerably, experiencing a decline in average volume of 70 percent.[9] The reductions in both sea-ice extent and volume render the remaining ice more vulnerable to secondary risk factors, such as changing wind patterns, ocean circulation, and reduced sea-ice albedo.[10] As a general rule, first-year ice is more likely to melt during the summer months than multiyear ice, since ice that survives the summer is able to harden and become denser during the following winter. The Arctic has witnessed rapid loss in multiyear ice: whereas in 1988 the vast majority of ice was between four and 10 years old, by 2005 the majority of ice was less than four years old.

Studies differ widely in their predictions of when summer sea ice will melt completely. Current climate models tend to underestimate the rate of sea ice retreat.[11] Prior to the events of 2007, the IPCC forecasted an ice-free Arctic for the latter part of the twenty-first century.[12] The panel reported that "the projected reduction [in global sea ice cover] is accelerated in the Arctic, where some models suggest that summer sea ice cover could disappear entirely in the high-emission A2 scenario in the latter part of the 21st century."[12] 

Most studies published since the sea ice collapse of 2007 expect a dramatic reduction of summer ice by the mid-2020s. In an interview with National Geographic, Mark Serreze from the National Snow and ice Data Center (NSIDC) in Boulder, Colorado is on record saying the Arctic's summer sea ice will fully melt around 2030. Other scientists do not expect the summer ice to survive beyond 2017.[14]

The NSR cannot be thought of as one clearly defined linear route, but should instead be understood as the whole sea area north of Russia. Due to highly variable and difficult ice conditions along most of the NSR, the optimal route choice for vessels navigating the NSR will vary. These navigational challenges throughout the Arctic have prompted the American defense contractor and industrial corporation Raytheon, to develop an Arctic Monitoring and Prediction program (RAMP). RAMP provides “mechanisms to collect, analyze, predict, and rapidly share data [..] which provides operational users key information in real time on critical topics such as ocean currents, shortest and safest navigational routes, ice concentration, open shipping lanes, and natural resource locations.”

Thus far ships only travel along the coastal NSR and stay within 120 miles of the shore. They must also pass to the south of numerous islands in the Laptev and Kara Sea as ice continues to exist further north throughout the summer. In contrast to the transit NSR, the costal NSR has significant draught and beam restrictions. Hence, one of the often cited advantages of the NSR, the lack of size restrictions, will only materialize once areas to the north become ice free as well. Currently, ships that are too large to pass through the Panama and the Suez Canal, such as most Very Large (VLCC) and Ultra Large Crude Carrier (ULCC), as well as Capesize container ships, are also too large to travel the NSR.

A study on Arctic marine shipping commissioned by the Arctic Council estimates that the NSR will be navigational without the assistance of icebreakers for 90-100 days only by 2080.[15] Even then ships traveling along the route would still require ice-breaker assistance during the rest of the year and year-round operations cannot be guaranteed. This study may, however, underestimate the speed at which the route is opening up. The 2011 shipping season along the NSR is expected to last almost 4 months. Once ice free and light ice conditions can be more or less guaranteed for several months the route may become more attractive for shipping owners. Shipping companies are increasingly using moderately ice-strengthened vessels which can operate earlier during the summer and later into the fall. The use of ice-strengthened vessels may eventually prompt Russia to reduce its ice breaker fees or abolish the escorts all together. This would reduce costs and improve competitiveness for shipping along the NSR.

While shipping traffic along the NSR may soon be technically feasible year round, ice will continue to hamper large-scale operations over the coming decades. As long as the northern sections of the NSR remain  choked with ice VLCC, ULCC and Capesize ships will not venture into the Arctic, but instead continue to travel along the traditional shipping routes.

Cost Savings Along the NSR

Part 3 of the series on the future of the Northern Sea Route (NSR) took a closer look at climate change in the Arctic and its impact on the future of the shipping in the High North. Part 4 will analyze the potential for cost savings along the NSR and discusses how credible these claims are.

Reliable figures about actual cost savings along the NSR are limited since less than two dozen commercial vessels traversed the NSR since 2010. Cost savings along the NSR are closely linked to savings in fuel costs.  Shipping operators can achieve fuel cost savings in two ways:

A vessel traveling from Murmansk to Yokohama via the NSR will, on average, arrive at its destination seven days earlier than the same vessel sailing through the Suez Canal. Due to the shorter sailing distance the shipping operator realizes fuel cost savings. The operator also derives savings from the reduced number of days at sea which allows the the ship to make more return trips within a given time period resulting in increased revenue and potentially greater profits.

Instead of realizing time savings, operators can also adopt super-slow sailing which more than doubles fuel efficiency. Due to the shorter length of NSR, a ship going from Murmansk to Yokohama can reduce its speed by 40 percent and still arrive in Japan at the same time as a ship sailing at full speed traveling through the Suez Canal. Especially for bulk shipping operators transporting low-value raw materials, such as ore, the primary incentive to travel along the NSR may not be the reduced lead time, but fuel cost savings.

According to Christian Bonfils, CEO of Nordic Bulk Carriers, the operator of the MV Nordic Barents which in 2010 sailed along the NSR from Norway to China, fuel savings were in the range of $550,000 when compared to a journey around the Cape of Good Hope.[16] He further explained that the costs for ice-breaker services amounted to $210,000 which he  stated were comparable to transit fees for the Suez Canal. Sovcomflot's Deputy General Director Igor Pankov, in contrast, acknowledges that fees for the Suez Canal are less than ice-breaker assistance fees, but states that “when time and fuel savings are taken into account the picture changes." In addition he expects transit and ice-breaker fees to come down once more ships start sailing the NSR.

Thus far only small and specialized operators have achieved cost savings along the NSR. How likely is it that these cost savings will materialize for a greater range of operators in the future? 

Cost savings are closely linked to the origin-destination pair. While a trip from Murmansk to Yokohama is significantly shorter (by 7 days) along the NSR, a trip to Shanghai is not (2 days).[17] For some routes, e.g. from Rotterdam to Singapore or Hong Kong, it is actually shorter to sail through the Suez Canal.


View Shipping Routes in a larger map

As mentioned in Part 2, the world’s major container lines call on a number of ports and optimize their routes along ports that offer developed communication lines into the hinterlands, e.g. river transport and railroads, to distribute goods to customers and consumers. Since the NSR passes through mostly uninhabited territory no such stopovers are possible, strongly reducing the route’s attractiveness for regular liner service operators. In addition, more than 50 percent of trade between Europe and Far East passes through the port of Singapore, for which the NSR does not offer any time or distance savings.[17] Hence, only goods that are shipped from point to point, e.g. crude oil, natural gas, and ore, and along certain routes pairs will benefit from shorter distances.

In addition, the costs of using the NSR are frequently understated or ignored. Besides the frequently cited costs for ice-breaker escorts shipping companies also incur significant indirect costs. In order to sail the NSR operators have to file for a permit with the Administration of the NSR four months in advance. Few operators are able or willing to plan that far in advance and deal with the bureaucracy of obtaining a permit. In comparison, the process of sailing through the Suez Canal only requires a 48-hour advance notice.

Vessels are only allowed to sail along the NSR after they have been inspected for ice worthiness by either the Murmansk Shipping Company or the Far Eastern Shipping Company. The operator bears the logistical costs associated with that inspection. Furthermore, during the inspection and during the actual transit of the NSR, operators often need to hire interpreters as pilots and ice-breaker crews seldom speak English.[17]

Shipping operators also face significantly higher insurance premiums when sailing through the hostile Arctic environment. Navigating the NSR requires significant experience due to a dearth of accurate charts and the unavailability of the standard global positioning system (GPS) in high latitudes. In its place, a system called GLONASS, which is not compatible with some ships, is used along the NSR.

In sum these costs severely restrict the profit that can be materialized along the NSR. A recent study has shown that a 50 percent reduction in ice-breaker fees would be required to make liner service between Rotterdam and Yokohama profitable. Hence, profitability will for the foreseeable future be limited to a small number of specialized bulk carriers traveling along certain point to point routes.

China and the NSR

Part 4 of the series on the future of the Northern Sea Route (NSR) analyzed the potential for cost savings along the NSR and discussed how credible these claims are. The final part in this series will discuss China's future as an Arctic Maritime Nation and take a closer look at its influence on the development of the NSR.

China has been very cautious about formulating and propagating its interests in the Arctic and continues to quietly advocate for unobstructed access to the region. China’s advocacy for unimpeded access to the region for all states, while certainly economically and politically self-motivated, may help it to garner significant support from the international community, especially smaller export- and import-dependent countries who would benefit from liberal access to the Arctic’s shipping routes.

China’s rising economic power, especially its role as a growing exporter to Europe and the United States, may allow it to overcome its position of weakness in Arctic affairs. The country is neither an Arctic littoral state, nor an observing member to the Arctic Council. Chinese Arctic research remains focused on the environmental impact of climate change in the region; economic, political, and security implications, however, are increasingly being considered. China’s economic development is highly dependent on international shipping and foreign trade contributes 46 percent to the country’s GDP.

China's efforts to develop into an Arctic maritime nation and become a destination for Russia's Arctic hydrocarbon resources are well documented. In addition to commissioning a number of ice breakers, the country continues to invest in ice-strengthened bulk carriers and tankers with dual-directional technology which combine the fuel-efficient bow of a cargo ship on one end and with the hardened bow of an icebreaker on the other.

Until recently China appeared to be wary of Russia’s intentions in the Arctic, e.g. the planting of the Russian flag at the North Pole, but cooperation has increased as of late. China National Petroleum Corporation recently signed an agreement with Sovcomflot, the largest operator of Arctic shuttle tankers and ice-class LNG carriers, to" develop a long-term partnership in the sphere of seaborne energy solutions, with the SCF fleet serving the continually growing Chinese imports of hydrocarbons."

Chinese officials have repeatedly called the NSR the "Arctic Golden Waterway" and Bin Yang, a Professor at the Shanghai Maritime University, estimates cost savings between $60-120 billion per year if China makes extensive usage of Arctic shipping routes.[18] At the same time, Russia's GDP is closely tied to its Arctic natural resource development which in turn depends on the ability to deliver these resources to the global markets, e.g. via pipelines or the NSR. Russia is seeking to tap Asian demand for oil and gas to help justify developing remote deposits in the Arctic and eastern Siberia. Hence, Russia has a strong interest in developing the NSR into a commercially viable shipping route and ensuring access to one of the fastest growing consumer market for hydrocarbon resources: China and greater south-east Asia.

China's efforts to gain a foothold in Arctic shipping must be seen as an attempt to diversify the trade routes of its oil and natural gas supply and thus overcome its strategic weaknesses known as "Malacca dilemma." Currently 78 percent of China's hydrocarbon imports pass through the narrow 1.5 mile-wide channel at the Strait of Malacca.[19]

China's demand for crude oil is slated to grow from 8.2 million barrels per day (mbd) in 2008 to 17 mbd 2030. Over the same period the production deficit of Asia as a whole will increase from 15 mbd to 48 mbd.[20] China is not only attempting to secure access to Africa’s growing share of world petroleum exports, e.g. in Angola and Sudan, in order to satisfy its growing demand for hydrocarbon resources but also diversify the trade routes of its natural gas and oil imports. Becoming an Arctic maritime shipping nation represents an important step in China's goal to achieve long-term energy security.

The series on The Future of the Northern Sea Route looked at a number of factors which determine if the route will develop into a "Golden Waterway" or remain a niche trade route. The rate of climate change in the Arctic, world trade patterns and global trade dynamics, the economics of shipping lanes and the potential for cost savings, and China’s role as a potential key benefactor of Arctic shipping, are key variables to the development of the NSR as global shipping route. 

 Sources:
[1] Michael Byers, "Asian juggernaut eyes our ‘golden’ waterways," August 29, 2011, http://m.theglobeandmail.com/news/opinions/opinion/asian-juggernaut-eyes-our-golden-waterways/article2144360/?service=mobile
[2] Badari Narayana Srinath, “Arctic Shipping: Commercial Viability of Arctic Sea Routes” (MSc. Dissertation, City University of London, 2010), 24.
[3] United Nations Economic and Social Commission for Asia and the Pacific, Container Trade Growth, http://www.unescap.org/ttdw/publications/tfs_pubs/pub_2398/pub_2398_ch3.pdf
[4] John Vidal, “Modern Cargo Ships Slow to the Speed of the Sailing Clippers.” The Guardian, July 25, 2010, http://www.guardian.co.uk/environment/2010/jul/25/slow-ships-cut-greenhouse-emissions
[5] Nicola Jone, “Arctic Ocean Feels the Heat.” Nature, January 27, 2011, http://www.nature.com/news/2011/110127/full/news.2011.52.html
[6] Thomas Worsley and Yvonne Herman, “Episodic Ice-Free Arctic Ocean in Pliocene and Pleistocene Time: Calcareous Nannofossil Evidence.” Science 210, no. 4467 (1980): 323–25.
[7] IPCC, “Climate Change 2007: Working Group I: The Physical Science Basis,” http://www.ipcc.ch/publications_and_data/ar4/wg1/en/ch11s11-8-1-3-sea-ice.html
[8] National Snow and Ice Data Center, “State of the Cryosphere,” October 27, 2010, http://nsidc.org/sotc/sea_ice.html
[9] Polar Science Center, “Arctic Sea Ice Volume Anomaly,” http://psc.apl.washington.edu/ArcticSeaiceVolume/IceVolume.php
[10] Albedo is the reflecting power of a surface. It is measured on a scale from zero (no reflecting power) to one (perfect reflection). The Earth’s average albedo is 0.3. Sea ice has an albedo of 0.5–0.7, depending on how “dirty” and old the ice is. The water of the Arctic Ocean has an albedo of only 0.07 and thus absorbs the vast majority of the solar radiation instead of reflecting it back.
[11] Stroeve, J.; Holland, M. M.; Meier, W.; Scambos, T.; Serreze, M. (2007). "Arctic sea ice decline: Faster than forecast". Geophysical Research Letters 34 (9)
[12] IPCC, “Global Climate Projections,” http://www.ipcc.ch/pdf/assessment-report/ar4/wg1/ar4-wg1-chapter10.pdf
[13] Meehl, G.A., and others; Intergovernmental Panel on Climate Change Working Group I. (2007).
[14] John Roach, “Arctic Largely Ice Free in Summer Within Ten Years?” October 15, 2009, http://news.nationalgeographic.com/news/2009/10/091015-arctic-ice-free-gone-global-warming.html
[15] Honor Mahony, “Arctic shipping routes unlikely to be 'Suez of the north'” July 6, 2011, http://euobserver.com/882/32483
[16] Honor Mahony, “Arctic shipping routes unlikely to be 'Suez of the north'” July 6, 2011, http://euobserver.com/882/32483
[17] Joshua No, "Northern Sea Route may not be as viable as Russia claims" August 24, 2011, http://www.nationmultimedia.com/2011/08/24/opinion/Northern-Sea-route-may-not-be-as-viable-as-Russia--30163470.html

[18] Michael Byers, "Asian juggernaut eyes our ‘golden’ waterways," August 29, 2011, http://m.theglobeandmail.com/news/opinions/opinion/asian-juggernaut-eyes-our-golden-waterways/article2144360/?service=mobile

[19] You Ji, "Dealing with the Malacca Strait Dilemma," April 12, 2007, http://www.eai.nus.edu.sg/BB329.pdf

[20] Based on projections by Ramón Espinasa from the class "Energy Security: Western Hemisphere" at Georgetown University

Arctic Sea Ice Extent and Volume at New Record Low

by Malte Humpert The extent and volume of Arctic sea ice were the lowest on record for the month of July according to data from the National Snow and ice Data Center and the Polar Science Center. July air temperatures over the North Pole were 11-14 degrees Fahrenheit above average for the first part of the month. 

Arctic sea ice extent fluctuates seasonally. It typically starts declining at the end of March before recovering with the onset of Arctic winter in late September. 

The all-time low occurred in September 2007, however, 2011 is on pace to break that record. Average ice extent for July 2011 fell to 7.92 million sq km, more than 200,000 sq km below the previous record low from four years ago. Including 2011 ice has declined by 6.8% per decade since 1979. 

The decline of ice volume has progressed even faster. Mean sea ice volume since 1979 ranges from 28,700 cu km in April to 12,300 cu km in September. July 2011 set a new record low, 51% below the mean for that month and 62% below the maximum in 1979. New measurements show a rapid decline in oldest and thickest ice. The so-called multi-year ice which survives the melting of the summer months refreezes during the winter. 

Age and thickness matter to the overall stability of the ice. Older ice grows stronger over the years while newly formed first year ice is most vulnerable.

The loss of multi-year ice has allowed the Northern Sea Route (NSR) to open along the shores of Siberia and Eurasia. The first shipped, the tanker Perserverance, completed its voyage along the NSR on July 14th and the company plans to send at least seven more ships through the passage.

The Northwest Passage, along Canada's northern coast, remains choked with ice. According to the National Snow and ice Data Center, however, old ice, which had previously survived throughout the Canadian Archipelago, has declined at 16% between March and July.

The 2011 minimum sea ice extent is expected around September 23rd. Although coverage recovered slightly during the last 10 days of July, 2011 is forecasted to set a new record low.

Arctic Shipping Expected to Double in 2011

The Northwest Passage and the Northern Sea Route in comparison to 
traditional shipping routes through the Panama and Suez canals

by Malte Humpert Arctic shipping along the Northern Sea Route (NSR) commenced about 10 days for the season and is expected to continue until the end of October. Arctic sea ice extent declined at a rapid pace through the first half of July, and is now tracking below the year 2007, which saw the record minimum September extent. Hence, the use of Arctic shipping routes is expected to double this year.

The first ship to pass through the NSR was a Singaporean tanker en route to China's eastern seaboard to deliver gas condensate. The journey will take 22 days, about half the normal voyage time via the Suez Canal. Tschudi Arctic, a Hong Kong registered cargo shipping company, is planning to make extensive use of the route this year.

The trajectories of all cargo ships bigger than 10,000 GT

Oil and gas developments in northern Russia have resulted in a higher demand for shipping to and from that area. Russia's Rosatomflot, the operator of a fleet of ice-breakers, is slated to profit from increase traffic in the Arctic. The usage of ice-breakers as an escort remains mandatory and chargeable, but still offer a cost-effective alternative than the Suez option.

Sovcomflot, another Russian shipping company, is in the process of raising money via an IPO to expand its Arctic shipping fleet and provide capacity for the growing gas deliveries between Russia and China. Two german merchant ships, the MV Beluga Fraternity and MV Beluga Foresight, were one of the first non-Russian vessels to traverse the NSR in 2009.

NEW Report on EU Arctic Policy

Download the report

The Arctic sea ice is melting rapidly, and within the next decade polar warming may transform the High North from an inaccessible frozen desert into a seasonally navigable ocean. The prospects of exploiting the Arctic Ocean’s rich natural resources and gaining access to vital new shipping routes, particularly between Europe and Asia, have led to increased economic and political interest in the region. Rapid environmental change and the Arctic’s emergent economic potential may challenge the geo-strategic balance in a region where institutions, boundaries, rules, and customary norms have yet to be established or remain weak.                                        

The European Union, as the world’s largest exporter of goods and largest importer of fossil fuel resources, has significant economic and energy security interests in the region. Yet it has failed to respond adequately to the changing political environment. The existing regulatory and governance regime, the Arctic Council, has become inadequate, and given the pace of change it is difficult to see how the Arctic can be managed effectively within this regime.                                                                                                     
This memorandum explores possible alternatives, including developing a new international framework for the region. It also provides policy recommendations on how the EU can best secure its strategic economic and energy security interests—including by incorporating Arctic policy into bilateral treaties.