Merchant shipping is probably the oldest type of trade in the world and it is vitally important for global commerce. There is no other way to transport thousands, hundreds of thousands, million tons of cargo, containers and large quantities of crude oil, natural gas and petroleum products as efficiently and cheaply as ships do.
More than 88% of all physical goods in the world is transported via ships and the entire industrial production is deeply dependent on them.
If shipping wasn’t so well-structured and economically competitive, the costs of several commodities and raw materials used to build products would be much higher.
It is fair to say that shipping has no rival when it comes to large-scale transportation.
Air-freight is faster but it is orders of magnitude more expensive than shipping while wheeled and on-rail transportations are physically limited by the size of trucks and wagons which need to comply to road and rail physical limitations (like road width or rail width).
Ships can get big, massive, huge. In fact, they do.
Ships do not need roads and they do not need “to defy gravity” to move.
The great advantage of shipping is economy of scale. Massive ships can transport more cargo and tend to offer a cheaper service.
Nevertheless, despite offering a less expensive service, the costs of shipping commodities from one corner of the planet to the next are multiple and depend on several factors: fuel, route length, crew, maintenance, infrastructure, insurance, etc.
It goes without saying that shipping routes, other than fuels and operations, have a big impact on costs because a shorter trip can save days and hundreds of dollars worth of fuel so shipping companies always prefer shorter routes (unless they are forced to choose another path and that is usually because of safety reasons).
Traditional shipping routes, particularly those between Europe and Asia, go through the Indian Ocean, then get into the Mediterranean Sea and eventually go to Northern Europe.
However, climate change has opened up a completely new way to sail between Europe and Asia: the Arctic Ocean.
The melting of incredibly large amounts of ice has now created 2 entirely new shipping routes through the Arctic Ocean which are 4-5 days shorter than southern routes: the Northern Sea Route (NSR) and the North West Passage (NWP).
Source: www.thearcticinstitute.org
Nevertheless, despite the obvious chronological and economical advantages that come from shorter routes, there is much criticism regarding Arctic shipping and this fundamental research will try to summarize the pros and cons of sailing merchant ships through the Arctic Ocean.
Let’s start with saying that Arctic shipping is recent.
Shipping traffic only started between 2013 and 2014 and all merchant vessels had to be escorted by icebreaker ships. The traffic was far from intense because sailing through the Arctic Ocean was (and still is) a rather risky business.
The first merchant vessel to navigate through the Northern Sea Route (NSR) without the help of an icebreaker ship was the “Christophe de Margerie” on the 17th of August 2017. This ship managed to sail from Norway all the way to South Korea in just 6 days.
The Northern Sea Route was opened by the Soviet Union back in the 1930 but it was never really used much, until recent years, because of the intense concentration of ice.
As previously mentioned only a few ships sailed through the Arctic. In 2013, 71 ships managed to sail across the North Sea Route (that touches Russia ans Siberia’s northern coasts), but that number dropped to just 18 in 2015 because of severe weather conditions, while in 2014, just 17 went through the North West Passage (that touches Canadian national waters).
The risks involved in shipping through these cold waters are multiple and that is precisely why the present fundamental research will also try to answer the following question: is Arctic shipping really worth the risk?
The main risks that Arctic shipping entails are the following:
1. Environmental and Biological Risk
2. Geographical Risk
3. Meteorological and Structural Risk
4. Geopolitical Risk
The present research will analyze each risk individually trying to explain and expand as exhaustively as possible all aspects.
Environmental and Biological Risk
Arguably, the most hazardous and potentially catastrophic risk that Arctic shipping implies is the threat to the environment.
There are several organism and animals that live in the Arctic and they never encountered a ship before. A consistent traffic of magnificently large ships in this area can have serious consequences on the marine wildlife:
1. These massive ships make noise underwater (called anthropogenic noise) and this disorients some fish and it could cause them to die. In fact, places that normally lacks human interaction (the Arctic is considered to be the 2nd most remote area in the world after the Antarctic) thrive of marine wildlife which is not used to humans or ships and this could easily cause an osmotic shock which, in turn, might lead to the death of several marine species
2. The anthropogenic noise caused by the intense traffic of large ships might cause some marine wildlife species to change their migratory journey. The disruption of migratory route is very dangerous because it has a high probability of causing death and possibly even the extinction of such species
Source: www.worldwildlife.org
3. The Arctic region hosts some peculiar marine species which lives exclusively in that area of the world and the introduction of large-scale ship traffic has the potentiality to introduce invasive species in a very fragile marine ecosystem. The hulls of these large ships carry bacteria, algae, small crustaceans and other micro organisms, which could cause the extinction of some Arctic wildlife
4. Arctic shipping increases the probability of an oil spill disaster. This area of the world has never seen a severe oil spill (there was only one accident that happened back in 1989 to the ship Exxon Valdez, far in the south of the Arctic region) but an intense traffic of oil and petroleum product tankers could eventually lead to it. In this remote area of the world, an oil spill would have more disastrous consequences than elsewhere because of a lack of available equipment to limit the spill and clean up the polluted water. These technologies would have to be carried in the Arctic via other ships and it would take weeks for these other vessels to arrive (weather permitting, of course)
5. Arctic shipping increases the probability of collision with large marine mammals, which usually live in this area. Arctic waters are rich in marine wildlife and species like humpback whales, minke whales, bowhead whales, gray whales, beluga whales, narwhals, ringed seals, beaded seals, walruses, orcas and dolphins (just to mention a few) that all live in the Arctic Ocean
6. Even if there are no oil spills and no collisions with marine mammals, an intense traffic through the Arctic region would pollute the water. In fact, unless filtered, the carbon emissions produced by fuel oil/marine gasoil/LNG used to power the ships would act as a catalyst accelerating the melting of the Arctic ice sheet. Any environmental benefits coming from a reduction in fuel burning, thanks to the shorter route, would be totally offset by an acceleration in the melting of Arctic ice.
Arctic shipping surely offers enticing economic advantages. It has been estimated that shipping companies would save roughly $200,000 worth of fuel because of the shorter route and in the Arctic Ocean the probability of having problems with pirates is basically zero (as opposed to southern routes via the Indian Ocean and the Persian Gulf) but there are other risks that might offset all these benefits and the environmental hazards might have a catastrophic effect on the area.
Geographical Risk
Source: www.britannica.com
Some of the biggest limitations to Arctic shipping are actually geographical. Specifically, there are 2 major geographical challenges: one in the North West Passage and another one in the Northern Sea Route
The first limitation has to do with the fact that all ships going through the North West Passage will have to go through the Bering Strait, which separates the Russian Chukchi Peninsula from the Seward Peninsula in Alaska, USA.
Source: www.britannica.com
The Bering Strait is only 82 kilometres wide (51 miles) at its narrowest point and it is not famous for being particularly easy to navigate for a few reasons:
1. The Bering Strait is rather narrow which means that debris, garbage or anything that floats on the surface of the sea will likely accumulate in this area and potential impacts with floating objects could damage the ships
2. The Bering Strait, because of underwater currents, is populated by a certain amount of whales and other marine mammals. This would clearly increase the probability of collision of big ships with them
3. The narrowness of the Strait and the fact that it is very busy (there are quite a few fishermen in that area) are factors that would exponentially increase the probability of accidents between fishing vessels and large ships
The second geographical limitations, which is probably the biggest one, has to do with the Northern Sea Route because all ships navigating these waters will have to go through the Laptev Strait which is 60 kilometres wide (37.28 miles), and separates the Great Lyakhovsky island from the northern coast of mainland Russia; the strait also connects the Laptev Sea with the Siberian Sea.
Why is the Laptev Strait a major obstacle to Arctic shipping?
Source: www.worldatlas.com
Someone may point out the fact that it is even narrower than the Bering Strait (and they would be right) but there is something else that makes the Laptev Strait more challenging to sail through: its depth.
The Laptev Strait is particularly shallow with some areas being as shallow as 50 metres (164 feet) so there is a severe navigational constraint because massive ships cannot go through it.
In fact, the reduced depth of the Laptev Strait limits the transit to ships with a 12 metres draught (this size is now called Arcticmax).
An Arcticmax ship can only carry a cargo of up to 4,500 containers called twenty-equivalent units (TEU), which is an incredibly small number if compared to the behemoth ships capable of carrying 18,000 TEUs sailing through the Suez Canal and other cargo ships capable of transporting between 20,000 and 23,000 TEUs sailing through the southern routes.
This limitation alone could easily offset any economic advantage created by the shorter journey between Asia and Europe because the only way for Arctic shipping to be as competitive as the southern routes is to significantly increase the number of smaller ships going through it. Needless to say that the more ships will transit through the Arctic, the higher is the environmental impact that the shipping industry will have on the marine wildlife.
Meteorological and Structural Risk
There is another major risk: the weather.
The Arctic Ocean has never been particularly friendly when it comes to weather conditions but climate change exacerbated the problem in recent years. Temperatures in the Arctic region are rising at twice the global average rate destabilizing the normal flow of air and sea currents which, in turn, creates extreme weather conditions like abnormally low temperatures and very powerful storms.
One example is what happened in mid-January 2018 in Siberia, where the average surface temperature was as low as -63 Celsius (-81.4 Fahrenheit). Just for reference, it is interesting to note that, on average, the surface temperature on Mars is equivalent to -65 Celsius (-85 Fahrenheit).
Extreme weather conditions, combined with great scarcity of infrastructures and rescue equipment along the Russian (but also Canadian) northern coasts renders Arctic shipping even more dangerous not just for the ships but also for the crew itself. Extreme weather conditions (both very warm and very cold) increase the risk of collision with randomly drifting ice, which could cause damage to the ship infrastructure and potentially to the ship crew.
There is another consideration to make. In the Arctic region, the midnight sun sunsets in August and the entire area has no light for 6 months implying that sailing through the Arctic and avoiding drifting ice becomes even more challenging.
Structural damages to the ship infrastructure and/or the cargo itself, caused by the drifting ice, have been recorded even during the summer season. The accidents could be rather violent and records show that many ships reported severe damages to both hulls and propellers.
This means that a bigger structural risk translates into much bigger insurance premiums to pay.
In fact, the ship, the crew and the cargo have to be insured because anything can happen at sea but sailing through such a hostile environment could prove to be much more expensive as far as insurance premiums are concerned.
Despite all these risks, the shipping activity in the Arctic region grew by 25% in the period 2013 – 2019 while the number of goods that have been transported, even if we are still talking about a rather limited activity, increased from 5.4 million tons in 2013 to 33 million tons in 2020.
Although all the aforementioned risks are commonly “shared” by everyone, the regulation regarding the procedures to follow in the Arctic region is far from being exhaustive. The International Maritime Organization (IMO) tried to fill the void by adopting the Polar Code, which introduces minimum requirements and establish standards as far as crew safety and environmental protection are concerned but several details remain vague and open to interpretation.
Another milestone to standardize best practices in Arctic shipping was achieved with IMO 2020, which bans the use of heavy fuel oil when sailing in proximity of the coast and promotes the reduction in the density of carbon atoms in the fuel oil used while deep-sea shipping. Furthermore, the IMO is trying to establish standards to safeguard the marine wildlife, in fact, it actively promotes negotiations aimed at finding an agreement to reduce underwater noise pollution (these talks are still happening because an agreement is yet to be achieved by members).
Finally, there is another aspect worth mentioning: several ships entering the Arctic region travel under so-called “flag of convenience” whose crew safety standards and environmental regulations may change widely. This can easily create challenging situations in the case of an accident at sea.
The present research, so far, expanded several aspects like environmental and biological risk, geographical risk and meteorological and structural risk but now will focus on the last type which is, arguably, one of the most difficult challenges to solve as far as Arctic shipping is concerned: geopolitical risk.
Geopolitical Risks in Arctic Shipping
Source: www.arctic.noaa.gov
Geopolitical risk is always very complex and not particularly easy to analyze because it involves multiple countries whose political goals and alliances can easily change. Nevertheless, since shipping routes often go through several coastal seas that belong to politically unstable countries, a thorough geopolitical analysis becomes unavoidable to optimize costs while making sure each ship and its crew make it safely to the port.
A recent example of why geopolitical risk is so important is given by the so-called Red Sea Crises which started in October 2023. The Strait of Bab-el-Mandeb, the southern maritime gateway to the Suez Canal, is one of the most important maritime chockepoints in the whole world but because of the rebel group called Houthi, based in Yemen, it became also of one the worst chockepoints in the world as the Houthi started to attack several commercial vessels trying to pass through it. Needless to say that this caused the shipping traffic to drop by more than 60% as ships began avoiding the Red Sea and preferred circumnavigating the Cape of Good Hope to get to Northern Europe or sailing through the Strait of Gibraltar to get into the Mediterranean Sea.
Source: https://iari.site/
Geopolitical analysis is important to detect, and sometimes anticipates, these events which may easily translate, should an attack happen, in potential damages to the ships, to the crew and almost certainly in much higher insurance costs.
Geopolitical analysis is also useful in detecting frictions between multiple countries or countries which may have conflicting strategies.
In the case of Arctic shipping, the countries more often involved are USA, Russia, China and Canada.
In particular, Russian authorities have much control on the Northern Sea Route (NSR) which means almost 70% of the Arctic so ships that want to go through that route needs to pay transit fees to the local Russian authorities and of course needs to secure their permission. This sound like a fairly straightforward process if it wasn’t for the fact that relationships between several Western countries and Russia deteriorated significantly after the latter invaded Ukraine. This scenario could easily create challenges from a geopolitical standpoint in the Arctic region.
Russia has been developing quite a few ports in the Arctic equipped to service military vessels but also oil, LNG, gas and petrochemical tankers. Specifically, over the last few years Moscow managed to reopen something like 50 Soviet bases in the Arctic providing additional service to their tankers sailing through the Arctic region while sending a very powerful message to the international community.
On the other side, China is also particularly interested in shipping more vessels through the NSR because it wants to avoid the southern routes that pass through the Strait of Malacca, the Strait of Bab-el-Mandeb and other maritime chokepoints completely controlled by the US Navy.
The Chinese government, in its strategy to increase China’s maritime power, has already created a strategy to expand its military presence in the region and develop more infrastructures but all this activity may put the relationship between China and Russia to a test because Russia’s Northern Fleet in the Arctic is one of the most strategic fleet Moscow has and Russian presence in the Arctic is expected to grow.
A think tank based in the US, the Center for Strategic and International Studies, published a report in which it states that, in the Arctic region, Russia has at least 3 fully-equipped and well-developed military bases, 10 stations equipped with radars and 13 airfields. Furthermore, Russia’s Northern Fleet submarine base is located at Gadzhiyevo which is only 200 kilometres (125 miles) from the Finnish border and this might create some frictions with NATO members.
China might gain something from circumnavigating the Arctic in terms of geopolitical power but there are some operational problems connected to Arctic shipping that noticeably increase Chinese costs.
The most active Chinese ports in terms of exports, like Shanghai, Ningbo-Zhoushan, Shenzhen and Guangzhou harbour, are all located in the southern provinces which, of course, are ideally located to provide access to the southern routes that lead to the Suez Canal.
In other words, for China the southern routes are more convenient than the Northern Sea Route (NSR).
Source: www.dimerco.com
Chinese vessels aimed towards the ports of Piraeus (Greece), Gioia Tauro (Southern Italy), Valencia (Spain), Trieste (Northern Italy), Antwerp (Belgium) or Rotterdam (the Netherlands) would save fuel and days of sailing, if they sailed through the India Ocean and then through the Suez Canal rather than following the NSR.
Finally, the Arctic region without a common regulation risks to become prone to illegal activities (illicit trafficking, illegal fishing, etc) and unresolved disputes about the sovereignty over the Northern Sea Route (NSR) and the North West Passage (NWP) risks to exacerbate the geopolitical competition amongst the USA, Canada, China, and Russia.
Overall, the Russians already stated that the Northern Sea Route (NSR) lies within their territorial waters so they claimed their right to expand their presence there and patrol ships. However, the same has been claimed by the Canadians over the North West Passage (NWP): they state that the NWP is located in Canadian waters and therefore all the vessels going through it have to be subject to Canadian law and sovereignty.
Interestingly enough, Canada recognizes Russian sovereignty over the NSR and Russia recognizes Canadian sovereignty over the NWP.
Nevertheless, both the USA and the EU objected Canada’s decision stating that the NWP is actually an international strait implying no country can claim sovereignty over those waters.
All in all, there are geopolitical frictions (although of minor intensity) also among Western powers.
Arctic shipping is particularly challenging and it appears that the only real gain is of geopolitical nature as countries like Russia and China wants to avoid sailing through USA patrolled waters and shipping chokepoints.
Nevertheless, Arctic shipping seems more convenient for Moscow than for Beijing because of the great distance between the Arctic region and southern China which is where the major Chinese ports are located.
