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South Korean Shipping Group Became First Non-Arctic Member of Arctic Economic Council

South Korea wants more Arctic shipments of export cargo and import cargo in international trade.

South Korean Shipping Group Became First Non-Arctic Member of Arctic Economic Council

A South Korean shipping association has become the first non-Arctic member of the Arctic Economic Council, underscoring Seoul’s efforts to establish an Arctic economic rim that would benefit the country’s shipping and energy interests.

The Korea Shipowners’ Association, a lobby group representing some 200 firms, was officially admitted to the group on Dec. 11, during the second annual Arctic Partnership Week in the port city of Busan.

Previously, the AEC had been made up exclusively of businesses from the eight Arctic Council member states. Some of its members include organizations from non-Arctic regions of these countries, but, by opening its ranks to members from non-Arctic states, the AEC is seeking to take advantage of a shift in global economic interest to northern regions.

“Linking the Arctic value chains to the global ones is important to the AEC. Therefore, our aim has been from the outset to include sub-Arctic partners in our word,” Tero Vauraste, the AEC chair, said in a statement.

Including the Korea Shipowners’ Association in the AEC, Vauraste said, adds a new dimension to the organization’s work. For South Korea, being granted a seat at the AEC table supports the efforts Seoul has made in recent months to strengthen economic ties with the region, as well as to establish its shipping interests on the Northern Sea Route, north of Russia.

Until now, South Korean interest in Arctic shipping has been overshadowed by a rapid increase in the number of Chinese ships sailing on the NSR. But Korea, which was granted observer status with the Arctic Council in 2013, has long had an interest in taking advantage of the shorter distance the northern route offers.

In previous years, South Korean ships have sailed cargo to and from Russian ports on its Arctic coast. And in 2013, the Stena Polaris, a Swedish-owned vessel was chartered by Hyundai Glovis, a shipper, to ship cargo to from Europe to South Korea on the NSR, but it was not until this year that a South Korean vessel did so.

The South Korean oceans and fisheries ministry described the 35-day voyage from St Petersburg to the southern port of Gwangyang as “a lesson” for the country’s shipping industry. The voyage, according to a ministry statement, showed the route itself has “a strong potential to grow into a huge cargo transport market” by cutting as many as 14 days off travel between Europe and Asia. But a lack of icebreakers – which added an extra five days to this summer’s voyage – and imbalances in cargo flows detracted from its potential in the near term.

Those comments echo the concerns expressed last year by Kim Chan-woo, South Korea’s former ambassador for Arctic affairs, who described disproportional trade flows as the major hindrance to the route becoming more widely used.

An increase in exports of Russian natural gas from newly opened Arctic facilities will result in an increase in the number of ships sailing the NSR, but they will do little to shift the imbalances.

Instead, Seoul is hoping to use its New Northern Policy, launched as a way to expand economic ties with its nearest neighbors, to push development of the NSR and gas reserves in the Russian north. In addition, Seoul has suggested establishing a free-trade area with the Eurasian Economic Union, a Russian-led group of former Soviet republics.

The idea, put forward last year and talked up as recently as November by Moon Jae-in, the South Korean president, is promoted as a way to give South Korea a “third route” for economic growth, in addition to its long-standing ties to the U.S. and Japan, and the more recently established connections with China.

For non-Arctic countries looking to do business in the North, location, it is increasingly turning out, is no object.

Kevin McGwin is a reporter for The Arctic Journal.

More shipments of export cargo and import cargo in international trade expected in Russian Arctic.

Shipping In Russia’s Arctic Could Quadruple By 2025

Shipping traffic through Russia’s Arctic waters will increase four-fold by 2025 on the back of a projected rise in exports of oil and gas to markets in Asia and Europe, Russian officials said during addresses to the Arctic Circle conference, held in Reykjavík, Iceland, this week.

The projected increase, to a volume of between 35 million and 40 million tons, comes as Russian and foreign investment along the country’s northern coast grows.

One project alone, the $26 million Yamal Natural Gas plant, is expected to reach full production capacity of 16.5 million tons next year. The gas is to be transported to markets in Europe and Asia by a fleet of 15 tankers, said Yuri Kostin, the deputy head of the Russian agency responsible for administering the Northern Sea Route.

Moscow’s projection also factors in exports from other natural resource extraction projects that are in various stages of development, including oil drilling, said two other shipping experts. Lawson Brigham, a University of Alaska Fairbanks professor and Nasuhiko Otsuka, of Hokkaido University’s Arctic Research Center, who were part of a panel with Kostin, said they consider the projections realistic, but cautioned that the volume of traffic is closely tied to the price of commodities, in particular oil.

Development of the Northern Sea Route is one of Russia’s economic priorities in its Arctic region, and Moscow is seeking to support its growth by investing in ports and infrastructure and building icebreakers.

Other focus areas include improving communication and the digitization of navigational charts. Currently, vessels on the Northern Sea Route must rely on paper navigational charts, said Sampo Viheriälehto, a master mariner and chartering manager for Finnish icebreaker operator Arctia, Ltd.

Much has been made of the Northern Sea Route as a shipping lane for cargo between Asia and Europe. But academics studying its viability suggest that several factors — including slower sailing speeds, regulations for navigating in polar waters and a lack of population centers that would make container traffic profitable — offset the benefit of a shorter sailing distance and limit the route’s attractiveness to specific types of cargo.

Vladimir Barbin, Moscow’s envoy for Arctic affairs, acknowledged that for the time being, most of the traffic on the Northern Sea Route was going to and from Russian ports, but expressed confidence that could change.

“There is enormous potential for increased transport between Europe and Asia,” he said.

Kevin McGwin is a reporter for The Arctic Journal.

Mixed signals on Arctic shipments of export cargo and import cargo in international trade.

Mixed Signals on the Future of Arctic Shipping

On March 8, “decision-makers” in the shipping industry will gather in Montréal for the 10th Arctic Shipping Summit. Despite this being only early March, there have been plenty of developments this year for them to go over, not all of them entirely positive.

Tops on the list, particularly for the “end-user” crowd the two-day gathering seeks to attract, will be the Polar Code, a set of mandatory guidelines for shippers that came into effect on January 1.

The emergence of the Polar Code underscores the increasing attention being given to Arctic shipping, but it also gives shippers new rules they must abide by, and some in the industry say doing so adds costs that make polar routes less economical. Those who sail there can expect more rules to come their way; even the Polar Code’s biggest supporters believe further updates will be necessary before it can live up to its goal of making shipping safer for the environment, passengers and crew members.

Conservation groups are pushing particularly hard for a second iteration to include a ban on heavy-fuel oils, which produce soot that is both a health hazard and may contribute to global warming. In the event of an accident, HFOs would also be particularly damaging to the environment. Some shipowners have expressed a willingness to change to cleaner fuels, but cost is an object to doing so voluntarily.

As far as the business of shipping goes, the news of late has been hit and miss. Transit traffic on the Northern Sea Route, north of Russia, was up by a third last year, with 19 ships, seven of them Russian, making the voyage, according to the Northern Sea Route Information Office, a Murmansk-based outfit that is maintained by Norwegian backers in the public and private sectors.

The total volume of traffic, local and transit, surpassed seven million tons, about half related to oil production in the region, according to the NSR Administration. Given the projected growth of oil, natural gas and coal production, the official expectation is that this can grow ten-fold by 2025.

Less encouraging, particularly for those who see the NSR as an emerging alternative to the Suez Canal, is the official outlook that transit volumes are unlikely to contribute much to this increase.

“I do not believe that in today’s environment there is any potential in terms of the transit, but if we talk about the delivery of goods from the Arctic zone to the Asia-Pacific region and back, well then, of course, there is,” Alexander Tsybulsky, the deputy economic-development minister, said during a public event this week, according to Port News, a Russian industry news site.

While discussions about the NSR tend to focus on how much traffic will grow, the question, when it comes to the Northwest Passages, running through Canadian territory, is more of when, or even whether it will happen. This, according to a paper, published in December, is with good reason.

Despite a few, heralded transits in recent years, most notably the Crystal Serenity, a luxury liner, this past summer, transit traffic remains relatively low; along the northern passage, where dangerous multi-year ice is common, it is mostly non-existent.

The finding was somewhat unexpected, but it suggests, according to the authors, that even though the northern route has become more navigable, particularly since 2007, traffic there is likely to remain low for the next few decades.

The good news in all of this is that shippers will at least have something to look forward to for many summits to come.

Kevin McGwin is a reporter for The Arctic Journal.

Russia's position in the Arctic can impact routes for shipments of export cargo and import cargo in international trade.

Norwegian Intelligence: Arctic Important to Russia, But Not Top Priority

Each year since 2002, Russia has gone to great lengths to establish Camp Barneo, a temporary base built on an ice floe as close to the North Pole as possible. Ostensibly, the point of the effort is to conduct scientific and military operations, as well as to earn hard cash by hosting tourists. The past few years, just as much effort has been put into making the maneuver as controversial as possible.

Most worrisome was the 2015 stunt, which saw Dmitry Rogozin drop in for a visit. Rogozin holds a number of titles: officially, he is deputy prime minister in charge of the defense industry and head of the Russian Arctic Commission. Unofficially, he was the brains behind Moscow’s annexation of Crimea.

For precisely this reason, Rogozin, during a row with Oslo that emerged at the time over his unannounced transit through Svalbard, a Norwegian-controlled territory that sanctions bar him from entering, knew the sort of reaction he would elicit when he sent out a tweet hinting that Moscow had similar plans for the Arctic.

Last year, to Oslo’s relief, Rogozin stayed away, but Moscow made sure the media paid attention to its presence there by bringing along Chechen paratroopers.

This year, getting there will be more of a challenge. After Norway temporarily grounded flights from Svalbard last year, it is expected the 2017 mission will embark from a Russian base. But the goal, and very likely the strategy, will be the same, reckons E-tjenesten, the Norwegian military-intelligence agency.

“2017 will see the base used as a symbol-laden arena for asserting Russia’s role as the leading Arctic power militarily as well as in terms of tourism and research,” the service writes in Fokus 2017, the latest edition of its national threat assessment.

Russia is one of three primary concerns for Norway’s spies (echoing other countries’ threat-assessments, the others are cybercrime and terrorism from militant Islamists), and Fokus 2017 provides an analysis of the Kremlin’s doings abroad as well as at home.

While Russian activities in the Arctic is the main area of concern for Oslo, it is further down on Moscow’s list, the report concludes.

“Russia’s primary foreign-policy goal continues to be to strengthen control over former Soviet republics, with Ukraine having priority,” the report said.

Nevertheless, the Arctic is of “particular” interest in Moscow, given the natural resources the region contains and its military significance.

“This has led to increased military activity in the North,” said the Norwegian intelligence report. “Primarily, this is defensive in nature, aimed at repelling threats to its northern region. At the same time, there is increased capacity to limit Norwegian and allied ability to operate in the Norwegian Sea, the Baltic Sea, the North Atlantic and the Black Sea.”

Despite Russian interest in exerting increased control over its Arctic territory, E-tjenesten expects that economic constraints mean it will have trouble completing many of the projects Moscow considers important.

“To compensate for the lack of progress in its long-term establishment, there will be an increase in the number of high-profile events that have major media appeal,” the report stated.

Writing in his introduction to the report, Lieutenant General Morten Haga Lunde, the head of E-tjenesten, underscores that its point is to help decision-makers better understand how Norway’s national security was affected by global developments.

When it came to Russia specifically, in today’s security climate, he writes, “isolated incidents can have serious repercussions that none of the parties involved either want nor need.”

Kevin McGwin is a reporter with The Arctic Journal.