Energy sanctions against Russia have helped Moscow achieve the second-ever sail of a crude tanker east through the Arctic Circle toward China, a route dubbed 'Arctic Silk Road,' that could one day revolutionize energy trade flows from Russia to Asia because it's about half the time versus Russia's Baltic ports through the Suez Canal.
Vessel tracking data compiled by Bloomberg shows the Vasily Dinkov, a specialized ice-breaking tanker, departed from Murmansk, a city in northwestern Russia, off the Barents Sea, hauling a cargo of crude. The vessel traversed Russia's northern coast between Oct. 27 - Nov. 4 and entered the Bering Strait, a strait between the Pacific and Arctic Oceans that separates Alaska and Russia, on Nov. 5.
"The journey is the shortest passage between Europe and east Asia, taking half the time to reach China from Russia's Baltic ports than the conventional route through the Suez Canal," Bloomberg said.
Even before the war in Ukraine and the resulting sanctions on Moscow, trade flows were already in the beginning stages of shifting towards the Northern Sea Route.
In 2017, we noted, "transit routes through the Arctic will assume a certain level of importance vis-à-vis the global geopolitics of Russia and China."
Visual Capitalist's Nicholas LePan published a map of all the critical routes and resources in the Arctic in 2019.
In early 2020, we detailed how Russia, owner of the world's largest fleet of icebreakers, can plow through Arctic waters, clearing the way for vessels to traverse the northern routes.
And last year, we cited Minister of National Resources and Environment Dmitry Kobylkin, who said cargo shipping in Russia's northernmost territorial waters would top 80MM tons as early as 2024.
However, there are significant logistical hurdles that rely entirely on weather conditions.
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Richard Matthews, head of research at E.A. Gibson Shipbrokers Ltd. in London, told Bloomberg that the Northern Sea Route is only viable in the warmer period of the year.
"It looks unlikely that any significant volumes could be shipped along this route until summer," Matthews said.
But Viktor Katona, a lead crude analyst at Kpler, said once spring arrives, the Northern Sea Route will be of "vital prevalence":
"Europe is already sealed off.
"If they're not buying, why circumnavigate the entire universe if you can use the Northern Sea Route to get to China in 20 days?" Katona said.
The first crude shipment across the Northern Sea Route took place in 2019. The second is currently underway. And as Western sanctions against Moscow rejigger global energy supply chains, Russia will have an advantage via the Arctic during warmer periods of the year in sending crude and crude products to Asia in an expedited fashion.
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However, the importance of this route is that first it addresses China’s energy security by bypassing both the geopolitically risky Hormuz Strait and the Strait of Malacca through which 80% of Chinese crude imports pass daily and second it cuts the journey time to china by half versus one from Russia's Baltic ports through the Suez Canal. This will revolutionize energy trade flows from Russia to Asia.
Russian Minister of National Resources and Environment Dmitry Kobylkin was quoted saying that Russian oil shipments via the (NSR) would top 80 million tons or 1.61 million barrels a day (mbd) by 2024.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert
You will recall how the hand-wringing and saber-rattling surrounding a looming heating oil shortage in Europe this winter as Putin turned the tap off suddenly became a non-issue with European supplies reported at 70% of normal/usual seasonal capacity.
Furthermore, it was reported that Xi Jinping only halted the sales and shipment of excess heating oil via "reverse pipelining" to Europe primarily out of concern re China's own winter heating needs.
Finally, with global warming, both arctic transit and development of oil reserves is already becoming a political/military focal point, with environmental concerns figuring prominently in the posturing.
I offer these recent "regional" transportation realities only as an offset to the larger oceanic transportation issues presented by Dr. Salameh above, and my depiction of the situation as I understood it may be missing some of the finer points as there are so many moving parts to be observed here.