Today more and more attention is paid to transport potential of Northern Sea Route (NSR). In spite, at present its commercial significance is relatively low, with proper development it could become one of the main transport corridor between Asia and Europe, because of its advantages in front of traditional routes through Suez and Panama channels. The path through the NSR is 2440 nautical miles shorter than Suez route and reduces shipment time by 10 days, more than that it saves approximately 800 tons of fuel for per an average vessel.

It is assumed that, main players in the process of development of NSR could become China and Russia. Both countries can benefit from joint development of NSR. For China, as for the largest trading partner of Europe, the opportunity of using polar water path has a great significance, not only because of the distance reduction, but also because NSR creates an opportunity of diversification and improves the reliability of Chinese shipments. The opening of commercial navigation will provide additional impulse to export-oriented economy of PRC and will allow further diversification of energy resources supply routes to China, including resources from the arctic deposits. Also, China, as a major shipbuilding country, can benefit on building and maintaining the ice class cargo fleet for NSR. And Chinese north-eastern ports, for example Dalian, could play the role of hub-ports for polar path. For Russia, the increase of commercial use of  Northern Sea Route means not only regular revenue for vessel transit voyages, but also extends the opportunities to supply its northern territories, export mineral resources from arctic deposits and gives additional impulse for socio-economic growth for Russian polar regions.

Holding this in mind, Sino-Russian cooperation in the sphere of NSR development looks natural and organic. Huge Russian experience enforced with Chinese technological and scientific potential will give required bust to commercial shipments in polar waters, for all interested sides. This report will demonstrate main perspectives and problems of possible Sino-Russian cooperation in polar waters.

# Northern Sea Route, China, PRC, Russia, Yamal-LNG, Arctic, UN Convention on the Law of Sea, cooperation in the development of Northern Sea Route, navigation, shipments.

Introduction

Today Northern Sea Route (NSR) attracts more and more attention from all over the world. More and more countries and shipping companies, especially from Asia-Pacific Region and North-East Asia are looking forward to explore the possibilities of arctic maritime transportation. The amount of researching in this field during last few years rose dramatically. The problem of the NSR usage was an issue of all major arctic forums for past several years, including China-Nordic Arctic Cooperation Symposium, Arctic Frontiers, Arctic Circle, Arctic Council and etc. Frequency of conducting pilot transit commercial voyages by major Asian shipping companies is also rising.

In this article I will not go down to the discussion of advantages and disadvantages of the NSR such as shorter distance, fuel and time saving, expensive icebreaker escort, short navigation period, safety and so on. There are lots of talking about it in mass media and scientific society these days, so there is no need to mention it once again. The thing is that few people would argue that the NSR actually has a great potential. The thesis stated in the previous paragraph speaks in favor of it.

However, there is lots of work to be done to make an important commercial maritime transportation artery out of the NSR. First of all, there is a need in enhancing the infrastructure (transport infrastructure, port infrastructure, safe and rescue infrastructure, navigation infrastructure) in order to make the water way more attractive and reliable. This demands huge amount of investments, implementation of new technologies and experience. It is assumed that, main players in the process of development of the NSR could become China and Russia. Russian experience enforced with Chinese technological, scientific and fiscal potential will give required bust to commercial shipments in polar waters for all interested sides, will provide an example and stimulate the multilateral cooperation in arctic maritime transportation.

Significance of the NSR for China and Russia

At first we need to define the significance and, as it follows, the necessity of the NSR for both sides. For China, as for the largest trade partner of European Union and the USA, this waterway is a great alternative and supplement to traditional ways of shipping its goods to the largest world markets. Its usage will allow to diverse shipments and to rise their reliability. Not speaking about the possible economical effect because of the transportation cost reduction, but lets leave it to shipping companies to count the economical revenues. Also, the NSR allows China to reduce its dependence on the Strait of Malacca in terms of transporting energy resources. No harm, to mention that today China recognizes the need to diverse its transportation routes between Asia and Europe. The initiative «One belt – one route» refers to this problem. And the NSR could become a solution to this issue, especially in combination with the Silk Road.

Additionally, the NSR is the only way to deliver arctic resources to the country, including LNG from «Yamal project», in which China actively participates.

The meaning of the NSR for Russia is hard to overestimate. It is a transport artery of national significance. The life sustenance of the northern regions of Russia depends largely on operation of the NSR. Large part of shipments between the Far East and Central part of Russia implements through this Arctic waterway. The evolution of the NSR will give a burst to social-economic development of Russian Polar territories. In addition, do not forget about the direct revenues for the foreign transit vessels escort through the NSR. Also, the same as for China, the NSR plays a big role in organizing the transportation of Arctic resources for export and for home market.

The significance of the NSR as a national transport artery is underlined by the fact, that by 1990s 6,6 mln tons of non-transit Russian goods were shipped through this route per year. Unfortunately by 1999, because of the collapse of the Soviet Union and dramatic fell of Russian economy, this figure fell more than 4 times to 1,5 mln tons. Today the cargo turnover restores. In 2016 it reached 6,9 mln tons, and by 2020, according to the Ministry of economy of Russia Federation it should reach 50 mln tons per year.[1] Of course we should mention that the rise of cargo turnover is and will be achieved mostly by the means of Yamal project and other resource extracting projects in Russian Arctic zone. Main goods in arctic transportation are and will remain to be for several decades are natural resources, machinery and facilities for their extraction.

From the mentioned above we can see, that China and Russia both are interested in the development of the NSR. It means that there is a possibility to establish a win-win cooperation between countries on this issue. Of course, we have to admit that there are some disagreements on the issue of navigation through the NSR. Namely, it is differences in rendering the meaning of 234 article of the UN Convention on the Law of the Sea (UNCLOS), under which Russia implements its jurisdiction over the NSR and established the special regulations of navigation there. At the same time, we need to say, that China actually does not challenge this Russian right itself, but just considers that Russian demands, within special navigation regime, are oversized. Actually, in all the cases when Chinese vessels were crossing the NSR they strictly followed Russian rules[2].

Thus gives us a right to say, that existing disagreements are not irresistible collision, but a concrete problems, which can be resolved under the bilateral dialogue on the base of mutual trust and international maritime legislation. The world practice has some examples of such agreements. The USA and Canada, keeping differences in legal positions, still reached an «Agreement on cooperation in the Arctic» in 1988. According to it, American ice-class vessels are free to sail along the North-Western Passage, though Canada keeps the jurisdiction over it. Russian practice also has such facts of cooperation. In November of 2012 the «Rosatom» corporation signed long term contract with «Novatech» corporation on vessel escort through the NSR.

From this point of view, in order to establish a win-win cooperation in the NSR development it is necessary to find out a legal framework, which would satisfy both countries. It could be the establishment of consortium or an agreement on investment cooperation for the NSR development and usage. The sides of such arrangements could be the Administration of the NSR, «Rosatom» corporation and Chinese shipping, logistic and shipbuilding companies. The upholders – should be the Governments of China and Russia. The arrangements should respond the UN convention on the law of the sea, Rules of shipping in NSR and Russian Federal law about the NSR and provide special privileged terms for passing the NSR, including icebreaker escorts, for Chinese shipping companies upon the condition of regularity of transit arctic voyages and Chinese participation (investments, technologies, etc.) in the development of the route, especially in its infrastructure enhancement[3].

Main directions of Sino-Russian cooperation on the NSR development

First of all – it is the cooperation on the establishment of infrastructure, which will allow safe maritime traffic through the NSR, including building the navigational, meteorological and safety objects along the route. Today Russian side is already actively conducting such work, in particular on behalf of the Arctic search and rescue agreement of Arctic Council. Ministry for emergencies of Russian Federation established 10 save and rescue centers in Arctic region in the period of 2013 – 2015. Such centers were opened in Archangelsk, Narian-Mar (Nenets autonomous region), Murmansk, Tiksi (Republic of Yakutia), Anadyr, Pevek, Provedenia (all three – Chukchi autonomous region), Dudinka (Krasnoyarski kray), Nadym (Yamal region) and Vorkuta (Republic of Komi). They will provide the regime of permanent readiness and urgent response for any emergency in the NSR area. Centers crew size is 974 people. They are equipped with 14 aircrafts, 37 rescue vessels, 54 rovers and other search-and-rescue fire protection hardware. Additionally, Ministry for emergencies joint with «Rosatom» corporation developed the mechanism of using the heavy nuclear icebreakers in some large-scale rescue operations[4]. Implemented measures will allow to provide effective and immediate response to all kinds of emergencies with Arctic marine transportation along the NSR.

Simultaneously, Russian government pays attention to establishment of navigation system, system for monitoring and control of ice conditions and emergency prediction system. Thus, the navigation stations for global satellite positioning system GLONAS/GPS is unfolding alongside the NSR. Three stations on the Oleniy Island in Kara Sea, Sterligov cape and in inflow of Indigirka River are already put into operation. Several more objects on the Stolbovoi and Andrea islands in Laptev Sea are under reconstruction. By the end of 2020 the network of such navigation stations will be unfolded along all the NSR tracks. Also, new space satellite system for emergency prevention «Arctica» is in the process of implementation.

China with its IT technologies and resources in cooperation with Russian efforts can contribute a lot to raise the safety of NSR, which will further benefit to the extension of commercial shipments in Arctic region.

Serious disadvantage of any Arctic shipping route is the lack of the possibility of satellite trade. No ship goes straight from the starting point to the ending point. Cargo vessels are entering intermediate ports along their way to load and unload goods for cargo optimization and rise in profitability. In Arctic such opportunities are limited. That is why an important element of the NSR attractiveness is the development of its port infrastructure.

On this behalf, Russia is already conducting works for modernization of existing ports and building new ports alongside the Arctic route. Right now, the construction of Sabetta port with a transborder pass on the Yamal peninsula is in its final stage. In process the modernization of port facilities in Varandey and Indiga (Nenets region), Tiksi (Republic of Yakutia) and Dikson (Krasnoyarski krai). Planned – in the ports of Pevek (Chukchi autonomous region), Hatanga and Dudinka (Krasnoyarski krai) and Harasavey (Yamal region). The reconstruction of deep-water ports in Arkhangelsk and Murmansk is planned. This works are conducted under the federal program Development of Russian Transport System till 2020. As a result, by the end of 2020 Russia will have 11 new modern ports in high north territories along the NSR[5].

At the same time the fulfillment of all the plans mentioned above, both the port infrastructure and the save and rescue infrastructure, demands huge amount of investments and implementation of latest technologies. It is planned to spend $10 billion from the federal budget of RF till 2020, and to attract $20 billion of private investments[6]. The cooperation with China in this area can accelerate the construction of the infrastructure needed. It is symbolic that Chinese corporation Poly Group intends to take part in Archangelsk deep-water port reconstruction, Chinese companies are also interested in Sabetta port.

Also, the development of commercial navigation trough the NSR requires the extension and modernization of ice-class fleet, including icebreakers. According to estimates of Russian NSR Administration, by 2020 for year-round NSR tracks work and arctic ports maintenance there will be needed from 5 to 6 nuclear icebreakers with 60-110 megawatt power capacity, 6-8 nonnuclear – with 25-30 megawatt power capacity and 8-10 – with 16-18 megawatt power capacity[7]. Today Russian Federation has sufficient icebreaker fleet and two more nuclear powered icebreakers type LK-60 with changeable submersion (from 8,5 to 10,8 meters) are already in construction.

Totally, by the end of 2020 it is planned to build 3 icebreakers of this type: first of them should be put into exploitation by the end of December 2017. Of course, the process of their construction is not going smoothly, and there is a high possibility that delivery dates will be postponed. Because, after the collapse of Soviet Union there was no practice of building nuclear icebreakers. But, the process is going and it will be definitely accomplished. The building technology will be adjusted and experience of icebreaker construction will be gained. It will allow to implement such projects without significant complications and in shorter terms in future. Actually the construction process of 2^nd and 3^rd icebreaker is going a lot easier.

At the same time icebreaker fleet needs regular maintenance. In addition, the rising amount of commercial shipments through the NSR will push up the demand for ice-class cargo vessels. This gives China, as a major shipbuilding country, another opportunity to participate in the extension of NSR and arctic cooperation. Also, its role in the extension of navigation in Arctic waters could bring Chinese icebreaker «Xuelong» (Snow Dragon), and two Chinese vessels which right now are under construction on Chinese and Finish shipyards.

Additionally, for the extension of commercial navigation through the NSR it is significant to reduce transportation costs. It can be done by lowering the charge for escort of each single cargo vessel through the NSR by the means of forming the caravans of them. By organizing caravans, instead of single navigation, there also could be reached the reduction of insurance costs. To create such mechanism the long-term agreements with shipping companies from North East Asia should be reached. The main idea of such agreements should be the cooperation on organizing the caravans of cargo vessels one or several times a year according to the demand. In this case China, because of developed port infrastructure on its north-eastern coast, can play a major role. For instance the port of Dalian, which has needed infrastructure, climate conditions and location, can be used as a logistic hub for arctic route. Vessels from the whole North Eastern Asia can be formed into caravans in the port of Dalian.

Remarkable, that Japanese researchers are also speaking about the necessity of organizing a hub port for the NSR to extend the commercial shipping. In their opinion, the port Tomakomai on the Hokkaido Island is the most suitable for it. And in this case the Japanese shipping companies would play the most significant role in Arctic shipping[8].

This are the main issues of cooperation needed for the joint development of the NSR, though there are some other supplemental directions for the cooperation in arctic shipping:

1. Russia can provide the education of Chinese crews, including crews of icebreakers, to sail in high latitudes. Such step will also benefit the implementation of the Polar code, which establishes the terms not only for vessels, but for the crew skills as well. Russia collected huge and unique experience of navigation in the conditions of the NSR, including the experience of fighting and prevention of different emergency situations. This knowledge will be of a great use for Chinese shipping companies, which are willing to use the NSR.
2. To use the opportunities of internal Russian waterways to connect the traces of NSR with Central Asia and Silk Road Economic Belt. Rivers Ob, Irtysh and Lena provide such opportunity. For instance, Korean shipping and logistic companies «SLK Kubko» and «Pan Ocean» in 2016 organized the delivery of oversized large-tonnage facilities from Ulsan (Republic of Korea) and Shanghai to Kazakhstan through the NSR and rivers Ob and Irtysh[9]. In 1970-s and 1980-s there was a pattern of timber delivery to Japan from the Far East of Russia by the means of river Lena and the NSR. By the way, Russian rivers with addition to the NSR traces provide a great opportunity to supply an energy deficient Central Asian states with carbon resources from the Arctic deposits.

3. To attract third countries of North-Eastern Asia to the projects of the NSR development. Japan, Republic of Korea and Singapore shows the interest for commercial navigation through the NSR. For instance, Japanese companies («Tokyo-Mitsubishi», «Sumitomo», «Mitsui» and «Mizuho») are investing in Russian project «Arctic LNG-2» in Yamal peninsula. Thus, they will need the way to deliver the production and machinery by the means of NSR. Right now Japan discuses with Russia the possibilities to conduct some researches in the NSR zone to define the possibilities of its usage.

Representatives of Korean companies, which conducted the delivery of cargo through the NSR last year («SLK Kubko» and «Pan Ocean»), highly evaluated the perspectives of the route and enounced the intention to use the NSR in further logistic operations. In addition Korean corporations «HYUNDAI», «POSCO DAEWOO», «CS CONSTRUCTION», «HANJIN SHIPPING» and state owned «Export Import Bank» and «Korean Bank» show interest to the projects for NSRs infrastructure modernization. Korean specialists are examining the reasonability of participation of Korean companies in the projects of upgrading the port facilities in Sabetta on Yamal peninsula, modernization of the ship canal in the Gulf of Ob and construction the deep water ports in Arkhangels and Indiga (Nenets region)[10].

From this point of view, the Sino-Russian cooperation in the area of the NSR development could serve as a burst to organize the multilateral collaboration in this sphere.

 Conclusion

 There are lots of expert opinions that Chinese expansion into the NSR is a threat to Russian national interests. For instance some researchers, believe that when China will get several icebreakers of its own Beijing will not need Russian assistance anymore and will press Russia out of Arctic shipping. But, my opinion is that Chinese presence in the NSR means its revitalization and development. Holding in mind that the NSR is the route of national significance for Russia, Chinese participation means the revitalization and development of national transportation corridor, the transport artery which means live to its Northern territories and contributes a lot to their development. The exploration of the NSR, among other issues, will benefit the social-economic sustainability of the Arctic zone of Russia. And the development of Arctic zone is one of strategic goals of Russian government. That is why the NSR – is not an issue of confrontation between China and Russia, it is an issue – of win-win cooperation.

Alexandr Voronenko,
senior expert, Research Center for SCO and APR,
Khabarovsk State University of Economics and Law

 [1] RukshaV, SmirnovA, GolovinskiyS. Problems of Northern Sea Route. Arctic: ecology and economy, 2013(1): 81-82.

[2] Xu Guangmiao. Interests and policy of China in the Arctic: history, legal issues, implementation. International economy and foreign relations, 2016(2): 52-62.

[3] Bai Jiayu, Voronenko A. Lessons and prospects of Sino-Russian Arctic cooperation. Advances in Polar Science, 2016(3): 185-192.

[4] Ivakina M. Opening of Arctic Safe and Rescue Center in Naryan-Mar. http://www.n-mar.ru/news/5465-20-avgusta-2013-goda-v-naryan-mare-sostoitsya.html/,2013; Kondrashev V. Russian Emergency Ministry creates Arctic Safe and Rescue Centers. http://pro-arctic.ru/25/03/2014/news/7390/, 2014; Bulakov M. Russia will use nuclear fleet for rescue operations in Arctic.

[5] Bondar E. Borders of Sabbeta port are established by Russian Government. https://regnum.ru/news/1791017.html/, 2014.

[6] Decree of the Government of Russian Federation, About Federal Action Program of the Development the Transport System of Russian Federation. No 848,December 5,2001

[7] Polovinkin V. How many icebreakers does Russia need. Military-industrial courier, 2013(24): 17-22

[8] Zhuravel V. China, Republic of Korea and Japan in the Arctic: politics, economy, security. Arctic and North, 2016(26): 99-126.

[9] Guo Peiqing, Mei Chunqai. The Ob-Irtysh system: Another possible way of Eurasian integration. http://sco-khv.org/en/publication_180/, 2017.

Voronenko A. Project “Ob-Irtysh”. http://sco-khv.org/en/publication_161/, 2017.

[10] More South Korean shipping lines eye Northern Sea Route. http://fairplay.ihs.com/commerce/article/4271961/more-south-korean-shipping-lines-eye-northern-sea-route, 2016.