Understanding the potential of the Northern Sea Route

Russia is seeking partners to develop the NSR, a maritime route in the Arctic Ocean, due to its infrastructure deficiencies and lack of ice-breaking ships, making India and China ideal partners

Introduction

Prime Minister Narendra Modi visited Russia on a state visit to attend the 22^nd India-Russia Bilateral Summit between 8-9 July 2024. This was his first visit to Russia, since 2019. Among the nine Memoranda of Understanding (MoUs) signed between the two countries, are the “India-Russia cooperation in trade, economic, and investment spheres in the Russian Far East for the period from 2024 to 2029” and the “Cooperation principles in the Arctic zone of the Russian Federation.” These MoUs details the partners’ vision and road map for developing the Northern Sea Route and the Russian Arctic region at large. The Northern Sea Route (NSR), a maritime route in the Arctic Ocean that connects the Pacific and Atlantic oceans through the Arctic, is piquing the interest of numerous nations—India, Russia, and China, in particular. It promises to reduce the distance between Asia and Europe by 10-14 days compared to the Suez Canal route. The Arctic ice’s thawing makes the passage increasingly viable.

Map 1: The Northern Sea Route

In this bid, Russia is seeking partners because the Arctic coast on Russia’s side is infrastructure deficient, lacking ports and connectivity infrastructure that can link the region to Russia’s industrial and commercial hubs. Moreover, the lack of ice-breaking ships in the global maritime fleet makes short-term usage untenable. As top importers of Russian energy, India and China are ideally placed to develop and operationalise the NSR on Russia’s coasts. This article analyses Chinese and Indian overtures for the NSR and delineates their geopolitical and geoeconomic ambitions for this route’s operationalisation.

The Northern Sea Route (NSR), a maritime route in the Arctic Ocean that connects the Pacific and Atlantic oceans through the Arctic, is piquing the interest of numerous nations—India, Russia, and China, in particular.

Polar Silk Road

China’s Arctic engagement hinges on several factors revolving around resource exploitation, energy security and greater international governance of the Arctic Circle, a global common, among others. Beijing’s Arctic policy found direction in 2014, when Chinese President Xi Jinping expounded on an ‘energy revolution,’ based on China’s green transition, for a nation that was heavily reliant on fossil fuels for its energy consumption—80 percent of which was imported. The Russian Arctic is a trove of unexplored energy and critical mineral reserves, strategic deposits for Beijing, and instrumental for future-proofing the Chinese economy from geopolitical shocks and energy supply disruptions.

Map 2: China’s Polar Silk Route

To that end, China commenced the Polar Silk Road (PSR) in 2017 and released an Arctic Policy Paper in 2018. The PSR aims to deepen cooperation between China, Russia, and the Arctic nations for developing the route as the northern wing of the Belt and Road Initiative (BRI), China’s premier transnational connectivity initiative. Chinese investments in the Russian Arctic amount to US$ 10 billion and include critical energy projects such as the Yamal LNG pipeline and the Arctic LNG 2 project. Chinese state company China National Petroleum Corporation (CNPC) owns a 20 percent stake in these projects. CNPC and China National Oil have already signed 20-year contracts with ROVATEK, the Russian partner of these projects, to buy Arctic LNG and oil emanating from these projects. According to these contracts, 50 percent of the production from these projects will be exported to China.

The Russian Arctic is a trove of unexplored energy and critical mineral reserves, strategic deposits for Beijing, and instrumental for future-proofing the Chinese economy from geopolitical shocks and energy supply disruptions.

Yet problems plague the PSR’s implementation. Russia is the only Arctic country to extend cooperation with China in developing this route. Chinese and Russian state agencies have a longstanding collaborative research programme on icebreaking ships and exploring the advancements therein. China is also involved in developing Russian Arctic assets for increased connectivity. More recently at the St. Petersburg Economic Forum, Chinese shipping company, Hainan Yangpu NewNew Shipping and Rosatom, a Russian nuclear state company, signed a contract for jointly operating NewNew’s Arctic icebreaker fleet and develop and build a new ice-class container ships for the NSR. Regionally, however, China’s BRI partnerships with Norway, Finland, Denmark, etc. have failed primarily because PSR-linked projects are beset with financial, sovereignty and security risks. Instances include a railway connection between northern Finland and Norway; uranium iron-ore and critical minerals mining in Greenland; gold mine purchases in Nunavut, among others. China’s failed partnerships in the Arctic have some common characteristics. All the countries in the region which have rejected Chinese development partnerships are liberal democracies, closely allied with the West, and have been pressured by the United States (US) to reject Chinese aid besides their fear of security and economic risks emanating from China’s dual-use infrastructure development in recipient nations and opaque and commercial loan clauses.

NSR for India: Relevance and opportunities

China’s expansionist ambitions have echoed worries in Moscow too. These worries are exacerbated by Beijing’s historical interest in Russia’s Far East. For Russia, balancing China’s economic footprint in the Far East is a strategic imperative. To that end, Moscow invited long-time partner, India, to invest in the NSR as well. During Modi’s visit to Moscow, he made a stop at Rosatom, the NSR infrastructure operator, and signed two MoUs which specifically addressed trade and logistics projects in Russia’s Far East and Arctic regions. These agreements are directly tied to the ambitious bilateral trade target of US$ 100 billion set for 2030. The NSR is expected to play a central role in achieving this target by serving as a key artery for transporting goods between Russia and India, reducing transit times and costs.

China’s BRI partnerships with Norway, Finland, Denmark, etc. have failed primarily because PSR-linked projects are beset with financial, sovereignty and security risks.

India’s interest in the NSR hinges on developing the Chennai-Vladivostok Eastern Maritime Corridor, which promises to reduce India-Europe travel time by two weeks. To that end, the partners agreed to establish a joint working body to advance corridor cooperation, building on the momentum from the Global Maritime India Summit 2023, wherein Russian officials invited Indian companies to explore the potential benefits of the Chennai-Vladivostok corridor and the larger NSR route, offering to train Indian seafarers in Polar and Arctic waters at the Russian Maritime Training Institute in Vladivostok.

Developing the NSR is as much of a strategic imperative as it is an economic one. The Indo-Russian NSR collaboration builds on Russia’s crucial role in India’s energy security matrix, as energy trade has emerged as a cornerstone of the partnership in the modern era, especially in recent times after Russia’s special military operations in Ukraine. Through the NSR, India also aims to deepen trade ties with the Russian Arctic region and the Far East region of Russia, which is a trove of unexplored gas, minerals and petroleum. The same region also hosts the Arctic LNG II pipeline and exploration project, in which Indian state company ONGC Videsh Oil has a 10 percent stake.

Another geopolitical aim for developing this corridor is to prevent Chinese domination over a route which may emerge as a critical energy supply artery for India.

Conclusion

However, the route is unlikely to be profitable in the short term due to the lack of ice-breaking fleets in major trading nations and the lack of port infrastructure in the Russian Arctic, which is a main proponent of the NSR. This reality necessitates tremendous investments in capacity building. Ice-breaker fleets will require constant repair, maintenance, and expansion to meet increasing demand. Additionally, the necessary connectivity infrastructure, such as ports and railway lines that would make the NSR effective, are still underdeveloped and, in some cases, not even fully planned. These challenges hinder an immediate transition to the NSR for many nations.

The Indo-Russian NSR collaboration builds on Russia’s crucial role in India’s energy security matrix, as energy trade has emerged as a cornerstone of the partnership in the modern era, especially in recent times after Russia’s special military operations in Ukraine.

The NSR is an increasingly compelling long-term investment today. It promises its stakeholders access, control, and potentially a monopoly over a sea route that could become an efficient and secure alternative to traditional pathways. The NSR’s appeal lies not only in its potential to reduce navigation distance between Asia and Europe by as much as 40 percent, but also in the development opportunities it presents for the abundant natural resources in Siberia and Russia’s Far East regions. For countries like China and India, the prospect of capitalising on these resources and gaining influence over a critical maritime corridor is driving their engagement with a sanctions-hit Moscow, eager to find reliable allies. For these reasons, the possibility of the NSR becoming a critical maritime route is closer than ever before, and the countries vying for influence over it recognise this potential.