Putin’s Arctic ambitions hit the iceberg of sanctions, fleet shortages

Russia is building new transport corridors connecting Asia and Europe. The so-called Arctic Route is meant to help Russia mitigate the effects of sanctions and strengthen Moscow's pivot towards Asian powers—China and India. The problem is that Putin lacks the fleet to navigate the problematic corridor.

Russia lacks ships, including special icebreaker-class units. According to Kommersant, official reports confirm the lack of an adequate fleet to ensure cargo flow on the Northern Sea Route.

The current ship shortage is estimated at 53%, and by 2030 when the projected cargo traffic ranges between 58 and 165 million tonnes, it may increase to 55%. As experts cited by Kommersant add, current shipyard development plans do not meet the needs of the Northern Sea Route.

According to the document "Effective Transport System," from the end of June 2024, cargo traffic on the Northern Sea Route will require servicing at least 57 ships. Of this number, only 47% will be available.

As "Kommersant" notes, the gap between the available and needed fleet will widen in 2030. Of the 176 ships required to service the Arctic Route, only 45% are confirmed.

According to calculations, transport in this direction increased to 40 million tonnes in 2023 and 78 million tonnes by May 2024. However, the plans are much more ambitious. For 2030, the volume of cargo transported via the Northern Sea Route is estimated at 58–165 million tonnes and 242 million tonnes in 2035, the Russian Economy Daily indicates. The cost of developing the routes reaches CAD 10 billion.

According to statistics from Kommersant, 30 Russian units operated on the Arctic Route last year. Of these, 17 were Novatek's gas carriers and tankers, 7 were Gazprom Neft tankers, and 6 were Norilsk Nickel ships.

The fleet is expected to be supplemented in 2024 with 16 Novatek tankers, 9 bulk carriers for coal transport from Severnaya Zvezda, and 2 tankers for Vostok Oil.

However, Western sanctions could thwart these plans, which have already affected the largest Arctic LNG-2 project. Due to the threat of imposing sanctions on companies cooperating with Russia, more countries are withdrawing from projects and freezing cooperation.

Therefore, Novatek may not receive the six ships ordered from South Korea's Hanwha. As "Kommersant" recalls, of the 15 tankers being built for Novatek at the Zvezda shipyard, 5 were to be delivered to the company, but the delivery date has been repeatedly postponed. The same problem concerns cooperation with China.

Putin hoped for broad cooperation with China, which is also interested in developing routes through the Arctic. In the fall of 2022, he was already testing new nuclear-powered icebreakers designed to open the Arctic route to China.

In July 2023, the Russians tested oil transport through the Arctic Ocean to the port of Rizhao in Shandong Province, eastern China.

Russian Rosatom is cooperating with shipyards to expand Russia's fleet of nuclear icebreakers. The Ural ship was launched at the end of last year, and Yakutia is to set sail next year. According to Global Times, two more vessels, Arktika and Sibir, are upcoming, and the fifth icebreaker, Chukotka, is to be ready by 2027.

According to PISM analysts, a sea connection through the Arctic would shorten the route from Asia to Europe by 30% compared to the southern sea route through the Suez Canal. The route from the Chinese port of Dalian to Rotterdam via the northern route would be 5,750 miles shorter than the Suez Canal crossing.

As "Global Times" wrote, China must cooperate with Russia in developing new Arctic shipping routes due to its long-term strategic interests.

Putin would like to see broader cooperation between Russia and China, recognizing Beijing's potential in shipbuilding. However, Xi Jinping must tread carefully. Beijing's firm actions in the Far North would meet with an immediate reaction from the West, including the USA.