A special thanks to the research Team 4 Intesa Sanpaolo, SRM : Marco BIRAL , Credit Analyst, Technical Secretariat of the Presidency, Intesa Sanpaolo; Olimpia FERRARA , Senior Researcher, Maritime Economy, SRM. University of Antwerp : Gokce CELIK , Researcher; Jonas COELHO RIBEIRO DE RESENDE , Researcher; Edwin VAN HASSEL , Senior Researcher at the Faculty of Transport and Regional economics; Thierry VANELSLANDER , Professor at the Department of Transport and Regional Economics. Shanghai International Shipping Institute (SISI) : Jiadong FU , Researcher; Xiaoying GENG , Researcher; Yijie SU, Researcher; Shunyi WANG , Researcher; Kai XU , Department Manager of SISI and Senior Engineer of Shanghai Maritime University; Yushan ZHENG , Researcher . Research Coordinator : Alessandro PANARO , Head of Maritime & Energy Dept., SRM.
Agenda 5 Climate Change & Geostrategic Analysis Maritime and energy scenario Conclusions
Environmental and climatic framework 6 The full preservation of the Arctic environment Climate change poses some challenges to the A more flexible approach that combines economic Arctic Route: opportunities and respect for the ecosystem The Arctic region Difficult operating conditions presents Rapid increase in temperatures Northern Sea Route : 1) Reduces the time of navigation between Asia and Europe 2) Impacts the Arctic environment
Environmental and climatic framework 7 Global warming affects not only Onshore fossil resources extraction the environment, but also 3 main fields of economic activity: Offshore fossil resources extraction Shipping The Northern Sea Route can have both positive and negative effects for fisheries and local communities
Environmental and climatic framework 8 To preserve the Arctic, some mitigating initiatives have been taken: Arctic protection Polar Arctic Code Council 2009 1996 IMO Binding provisions Intergovernmental regional 2020 for the navigation forum in arctic waters site of negotiation for guidelines and legally binding treaties Limitation of sulphur content in heavy fuel for ships
Geostrategic aspects 9 The interest in the Arctic region increased… Huge estimated untapped energy resources New possibilities for trading routes A common ground for: scientific research environmental protection logistics … but will it become a field for competition or cooperation?
Geostrategic aspects: the logistic 10 advantage of Russia + - • Longest and most populated Arctic coastline • Inland logistics still insufficient to support • Relevant reserves of energy commodities and year-round traffic minerals • Port facilities need investments for upgrades • Big scale oil & gas operations (Yamal, Arctic • Outbound traffic vastly outweighs inbound one LNG 2) • Regional development plans lack integration • Several State-funded development projects in and synergy Siberia and Far East • Strenghtened partnership with Chinese companies Over time, will the expected capital flow from energy commodities exports finance the development of Russian infrastructure?
Geostrategic aspects: China’s need for 11 energy and new markets + - • Significant financial resources invested in • Investment plan focused more on selected SOE to operate in the Arctic energy projects than on container traffic • High complementarity with the Russian • Strict regulations to navigate the Northern Sea economy Route • State funded plans to improve logistics, • Long term goal to become an independent including the construction of icebreakers Arctic player regardless of the partnership with • Integration of the Northern Sea Route in the Russia Belt and Road Initiative • Observer status in the Arctic Council The marriage of convenience with Russia will last long enough?
Geostrategic aspects: the United States, 12 a watchful observer + - Implementing a containment strategy of • Severe lack of infrastructure and • both Russian and Chinese ambitions icebreaking capabilities • No urgency to invest heavily in the • Difficult / unfair competition with Chinese Northern Sea Route: the US is a net energy State conglomerates exporter through technology • Smaller construction capacity than Chinese • Interest in enforcing access and freedom counterparts of navigation in Russian Arctic • Unclear position on climate change Can the United States actually ignore the Arctic theater?
Geostrategic aspects: the European Union, 13 a hesitant player with prospects + - • Strong normative commitment towards • No direct involvement in the Arctic Arctic environmental protection Council • Efficient network of Northern ports that can • Lack of a specific economic policy for operate as gateways for NSR traffic the Arctic routes • Maritime gas supply chain consistent with its • Sanctions against Russia limit the decarbonization and logistics strategies cooperation on energy The Covid-19 pandemic has deeply affected the economic and political landscape Oil oversupply has Global slowdown lowered China’s reputation is challenged and worsened fossil fuels demand its project might face reduced support Will the European Union step in and promote the NSR with its rule-oriented approach?
Legal perspectives 15 Arctic waters are governed by an articulate system of norms: In some maritime zones set by UNCLOS lies United Nations Convention on the Law of the Sea potential conflict between (UNCLOS, 1994) Legislations. The coastal Arctic States: Customary Legally Canada international nonbinding Denmark laws rules Norway Article 234 UNCLOS Russia allows Russia to gain International Arctic USA more leverage to control Maritime Council the NSR. Organization
Legal perspectives 16 The European Union is trying to European Union Global Strategy and strike a balance between: Integrated Strategy for the Arctic (2016) preserving the arctic environment and integrating it with its logistic Trans European Transport Network (Ten-T) corridors. The European Union must act Further enhancement of its infrastructures both within and outside its boundaries. and ports through various policies and tools (like the Connecting Europe Facility). A possible extension of More elasticity of Negotiation with the Ten-T Corridors (Scandinavian – ports funding at State Arctic Council for Mediterranean and North Sea – Baltic). level. a better status.
The Arctic Maritime routes 18 There are three main routes along the Arctic: The Northern Sea Route (NSR), the North-West Passage Routes along the Arctic (NWP) and the Transpolar Sea Route (TSR). The NSR is the most promising one as it is the link between Europe and Asia and for its less harsh climate. In 2019, the NSR was open to transits for 30% of the year from July to the beginning of November. Source: SRM on Arctic Portal
The brilliant performance of the NSR 19 2011-2019: the NSR shows a dramatic Volume of Cargo 2011-2019 increase . In 2019, 31.5 million tons Total Cargo volumes (in million were handled. +134% 31,5 CAGR 2011-2019 The NSR is a regional route : 98% is SSS activity concentrated on the Russian tons) port of Sabetta (55%). 20,2 Transits (almost 700,000 tons) are only a part of the handling activity. 10,7 In 2018, Venta Maersk (3,600 Teus) 7,5 completed the 1 st containership transit 5,4 3,1 3,9 4,0 along the NSR (between S. Korea and 2011 2013 2014 2015 2016 2017 2018 2019 Germany). Source: SRM on CHNL information office Chinese COSCO is the most active Transits: shipper in the NSR (19% of transits only 697thousand tons in 2019).
…even in the period Jan-Apr 2020 (during the 20 Covid-19) NSR Traffic in January-April 2020 (N° of Voyages) 446 387 Source: SRM on CHNL information office Jan-Apr 2019 Jan-Apr 2020 Between January and April 2020 NSR activity did not stop (+15% on January- April 2019). this is happening also because shipowners are looking for new routes at lower costs as in the case of circumnavigation of the Cape of Good Hope.
The route is expected to grow even more 21 Russian government officials NSR cargo traffic (million of tons) predict cargo volumes on the NSR as high as 92.6 million tons by 2024 , and by The NSR is no t always an alternative to the 2030 they hope to add a Suez Route significant part of international transit to that . Russia expects shipping along the NSR to increase more than threefold by 2030 compared to 2019 levels. Source: SRM on rosscongras.org
An example of the NSR impact: route benefits 22 The figure shows examples of routes and the impact of the NSR Case studies on a panel of strings SUEZ NSR Trade Route Days Days 31 19 Yokohama-Rotterdam 22 29 Shanghai-Rotterdam 31 24 Shanghai-Genoa Convenient route Point of indifference: Ho Chi Minh C. (Rotterdam) & Yokohama (Genoa) Source: SRM elaboration
Different trade type along the NSR 23 Number of voyages for type of vessels on the NSR (%) Container The Other voyages of oil 5% Ice-breaker tankers and 13% LNG ships 11% covered 46% of market share General cargo Tanker 25% 35% LNG 11% Source: SRM on Business Index North Report 2019
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