- The Washington Times - Thursday, November 23, 2017

Russian lawmakers looking to boost the country’s energy and shipping industries are weighing a ban on foreign-flagged ships from the strategically critical Northern Sea Route across the Arctic.

During a recent shipbuilding conference, President Vladimir Putin discussed the proposal to grant only Russian vessels transport rights to the route, which is claimed by Russia.

“This step will increase the volume of shipping, will strengthen the position of domestic shipping companies, create additional opportunities to upgrade their fleet,” Mr. Putin said, according to the Russian news agency Tass. “The corresponding bill is now being considered by the State Duma, and I expect that it will be adopted soon.”

The protectionist rhetoric has alarmed international shipping and trade analysts, who argue that the plan could be illegal and counterproductive to stimulating long-term Arctic Sea oil and gas extraction.

The shortest shipping lane from Europe to the Pacific Ocean, the Northern Sea Route essentially traverses the top of the world through Russia’s Arctic and Far East regions.

Vessels sailing from Southeast Asia to Europe that take the route shave about nine days off each trip — almost half their sailing time — compared with navigating the traditional shipping lanes through the Suez and Panama canals.

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Arctic hydrocarbon reserves are also staggering, with an estimated billions of barrels of oil and trillions of cubic feet of natural gas — roughly 16 percent to 26 percent of the world’s undiscovered reserves — buried beneath the icy waters.

In the past decade, Russia has scrambled to assert its claim over the massive Arctic resource haul.

In 2007, a team of Moscow-backed explorers planted a symbolic Russian flag into the potentially oil- and gas-rich Arctic Ocean floor. Since then, Moscow has aggressively backed the construction of nuclear icebreakers while refurbishing its port and military facilities in the region.

According to Russian media, the infrastructure drive has led to a surge in Northern Sea Route cargo traffic, which last year reached 7.5 million tons. That figure exceeded a Soviet record when the route was used primarily to supply isolated Arctic settlements with basic goods.

Estimates regarding future cargo traffic range widely. The Russian Ministry of Transport has stated that Northern Sea Route traffic could increase to 65 million tons per year by 2020. Meanwhile, the Federal Agency for Maritime and River Transport has calculated 70 million tons a year by 2030.

But Moscow’s protectionist leanings — which appear aimed at creating a Russian monopoly on the transport of Arctic Sea-produced oil and gas — have shipping analysts distressed.

A monopoly could translate into quick profits for Russia, but analysts note that long-term regional development requires a massive amount of oil and gas to be mined and transported through the Russian Arctic. Limiting traffic in such a remote region, they warn, would be risky and could reduce the number of countries participating in the overall growth.

Investors also note that the region boasts only one operational project, Yamal LNG, with preparations underway for a second liquid natural gas facility, Arctic-LNG 2.

They say additional risk stems from the growing recognition that the era of high-priced hydrocarbons is generally considered over. Leading analysts argue that the willingness of energy firms to gamble on Arctic extraction, where costs are high, could be less than Moscow anticipates.

Monopolizing the Northern Sea Route also could present international trade complications.

Analysts point out that some countries — most prominently the U.S. — contest exclusive Russian jurisdiction over the Northern Sea Route. How that plays in debates over Russia’s World Trade Organization commitments is anyone’s guess, they say.

• Dan Boylan can be reached at dboylan@washingtontimes.com.

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