MURMANSK, May 3. /TASS/. The current geopolitical situation in the Middle East and the increased military, transport and economic risks in cargo transportation through the Suez Canal may make the Northern Sea Route (NSR) a priority logistics channel for cargo deliveries from Europe to Asia, where the traffic may multiply in the future, Doctor of Economics, Deputy Chairman of the Public Council at St. Petersburg's Committee for Arctic Affairs, Alexey Fadeev told TASS.

"The current geopolitical situation in the Middle East creates significant military, economic and transport risks in the Red Sea, and in the eastern part of the Mediterranean Sea, that is, on both sides of the Suez Canal. While formerly the Northern Sea Route was eyed only as an alternative for shipments from Asia to Europe, nowadays it may become a priority route for the global logistics," he said.

Shipment costs

The Middle East conflict affects directly the global logistics flows, he continued. For example, the shipment cost through the Suez Canal - the shortest operating route from China to Europe - by March 2024 had increased to almost $7,000 per container, whereas before the crisis outbreak it was only $750.

"The route around Africa through the Cape of Good Hope, which has been used actively as an alternative, is longer and besides more expensive by about one and a half, or even twice more expensive than the Suez route," the expert said, adding the involvement of third countries in the conflict, for example of Egypt, threatens the general safe use of the Suez Canal.

The hydrocarbon market also depends on further developments of the situation in the Middle East. Iran-controlled Strait of Hormuz is another "bottleneck" for the global markets of logistics and liquefied natural gas. Some 25% of the world's LNG is transported through it. If Iran, being pulled in the conflict, closes this route, gas prices will soar many times, and the result is difficult to predict, the expert said.

The Northern Sea Route

"Unlike the Middle Eastern channels, the Northern Sea Route is free from military and logistical risks. While earlier estimations said NSR could claim 10-15% of the Suez Canal traffic, in light of the current geopolitical situation, this figure may grow at least twice," the scientist said.

As for the cost of sailing along NSR, it is currently impossible to calculate it, since we cannot say which vessels and with what amounts and types of cargo will use the Arctic logistics corridor. "What we can say now is that the Northern Sea Route from Asia to Europe is twice shorter than sailing through the Suez Canal, which means less consumed fuel, and less freight costs that depend directly on number of days. As the Russian Federation is building up its icebreaking fleet and is developing NSR infrastructures, the costs will decrease thus attracting even more shippers," the expert explained.

NSR: development and demand

China is a key foreign trade partner for about 140 UN member countries. Obviously, it is necessary to ensure regular and safe supplies of products from Asia to end consumers, which NSR can offer, the expert said. "Despite the current macroeconomic and foreign policy challenges, as many as 36.254 million tons were delivered through the Arctic seas in 2023, which is 250,000 tons ahead of the plan. Transit traffic on NSR also hit a new historical maximum in 2023 - 2,129 million tons of cargo," the expert noted.

The demand for the northern corridor and the interest of cargo carriers in it are confirmed by the data provided by Rosatom - NSR's infrastructure operator. In 2023, the operator issued 1,218 permits for sailing along NSR (in 2022 - 1,163), including 115 to foreign companies (in 2022 - 55).

"The interest in transit along NSR remains, and the successful experience of international transit proves effectiveness of maritime cargo transportation by large-tonnage vessels along NSR. In the autumn of 2023, the Newnew Polar Bear container carrier (Hong Kong) became the first foreign vessel in the Russian Federation's modern history to pass NSR. There's no end to politicizing Russian Arctic projects, but it is impossible to force foreign businesses to do something they do not want to do," the expert concluded.