Comment: Ukraine crisis triggers new Cold War for shipping in the Arctic

Fallout for shipping from the Russian invasion of Ukraine has reached the Far North amid warnings of a new Cold War and an “Arctic with no rules”.

The imposition of US sanctions on the operator of Russian nuclear-powered icebreakers, FSEU Atomflot, is a bid to disrupt Moscow’s ambitions in the region.

The European Union had already put export bans on dealing with the company whose icebreakers are needed to help shipping use the Northern Sea Route (NSR).

Alexey Likhachev, the director general of Atomflot’s parent group Rosatom, claims Europe’s earlier and wider ban on Russian oil imports has opened up a “new era of opportunity” to serve Asian markets using the NSR.

He may need to check in with Nobel prize-winning economist, Joseph Stiglitz, who warned this week that carbon net zero goals meant by 2050 there won’t be a need for shipping fossil fuels.

Vladimir Putin recently pledged $22bn in support until 2035 for developing the route, which links the East and West via the roof of the world.

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The Russian leader believes the NSR, which can cut journey times in half compared with traditional East/West sea routes, will be navigable 12 months a year before long.

Putin seems aware that melting ice through global heating may help Arctic shipping but be calamitous through flooding elsewhere in the world.

He was quoted as saying in a government meeting: “We must think about the future. The Northern Sea Route is opening up, that is obvious. Colleagues just spoke about climate change. For better or worse, this is happening.”

The NSR is currently subject to heavy sea ice during the winter months, making it largely unusable, although ice-strengthened LNG carriers have operated in the region in winter.

Nobel Prize winner Joseph Stiglitz said there will be less shipping in the coming years. He spoke during Nor-Shipping’s Ocean Leadership Conference. Photo: World Economic Forum

Likhachev said he planned to launch “year-round navigation in the eastern part of the NSR early next year”.

East/West freight traffic along the coast of Siberia has grown from 4m tonnes in 2014 to 34m tonnes last year, according to the Ministry for Development of the Russian Far East and Arctic.

There have been reports that the Kremlin hopes to increase these numbers to at least 110m tonnes by 2030 — but these numbers keep changing.

The new money promised by Putin will be used to create or upgrade 14 ports and terminals — some for LNG shipments — between Murmansk and Vladivostok.

The Kremlin also claims it will build 153 new icebreaking and ice-class vessels, specifically for use on this northerly route.

Over the past three years, Atomflot has commissioned three new icebreakers of the LK-60 Arktika type needed especially for the region.

Two more are still being built and more are planned.

At the March summit with Chinese President Xi Jinping, Putin announced he was ready to start a joint working party on developing the NSR.

Moscow hopes that some of the new trade across the Arctic waterway will involve a major increase in Russian LNG exports to China.

No concrete deal for this has materialised yet, but it has been the aim of Gazprom to grow this way since Western (pipeline) markets have started to dry up in retaliation for Russia’s war in Ukraine.

China is itself building nuclear-powered icebreakers and in 2018 outlined plans for a Polar Silk Route in the Arctic.

Of particular interest to China are the abundant hydrocarbons, but rare earth mineral reserves are also believed to be there.

No rules

A Chinese mining company bought mining rights in Greenland and tried to buy an abandoned naval base, although the latter deal fell through amid alarm about security issues.

There have been increasing military manoeuvres in the far northc, with the Barents Observer reporting more Nato fighter jets above the Arctic Circle than at any time since the break up of the Soviet Union.

There are also fears that the multi-nation Arctic Council, which has worked hard to keep geopolitical pressures out of the region, could be splintering.

Russia and China could split off and make their own rival Arctic Council as Moscow has been effectively left out of decision-making over the war in Ukraine.

Finnish Foreign Minister Pekka Haavisto told the FT he feared any breakup would lead to “an Arctic with no rules”.