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Melting ice pushes Norway closer to Asia

Published: 23 Jun 2013 10:15 GMT+02:00

Melting ice has opened up the Northern Sea Route along Russia's Arctic coastline, changing international trade patterns in profound ways -- even if so far it looks more like a sleepy county road than a busy, four-lane highway.

In a change of potentially revolutionary significance, the travel time between the Japanese port of Yokohama and Hamburg in Germany has been cut by 40 percent, while fuel expenditure is down by 20 percent.

"For the first time in history we are witnessing a new ocean opening up in the high north which will have a major impact on both trade and provision of energy," said Sturla Henriksen, the president of the Norwegian Shipowners' Association.

In 2012, when the ice reached its lowest extent on record, 3.4 million square kilometres, 46 ships used the new route, compared with only four in 2010, according to Rosatomflot, a Russian operator of icebreakers.

The traffic is still negligible compared with traditional routes. Ships transit the Panama Canal 15,000 times a year, while passing through the Suez 19,000 times. But the future looks promising.

The volume of goods transported along the Northern Sea Route is likely to grow strongly in the coming years, from 1.26 million tonnes last year to 50 million tonnes in 2020, according to the Norwegian Shipowners' Association.

Kirkenes, whose 3,400 inhabitants live in nearly uninterrupted darkness during the winter months, is suddenly preparing frantically for the expected boom.

The Tschudi Shipping Group plans to open a logistics hub measuring the equivalent of 200 football fields in a fjord nearby that is held ice-free all year by the warm Gulf Stream.

The port's location is extremely strategic. It is nine days' travel from both the Pacific and the Mediterranean, and close to major oil and gas deposits in the Arctic as well as mines in northern Sweden and Finland.

Twenty-six of the ships that traversed the Arctic Ocean between Europe and Asia last year were carrying hydrocarbons, while six were transporting iron ore or coal.

The new route also opens up an interesting market for liquefied natural gas (LNG) extracted in the Barents Sea, especially after North America, the customer that local companies initially had in mind, has turned away following a decision to use its own shale gas.

On the other hand, Asia's appetite for gas has increased after the Fukushima nuclear disaster in Japan in 2011, and prices there are significantly higher than in Europe.

Adding to the lucrative nature of the trade, each ship transporting LNG by the northern route can do it close to $7 million cheaper than vessels going through the Suez.

Traditional goods traffic, however, is not realistic in these latitudes, according to Tschudi Shipping.

"The big trading routes in dry bulk shipping are located too far South for the Northern Sea Route to become relevant," said Henrik Falck, the company's project manager for Eastern Europe.

And "we can forget about containers," he added, noting that owners preferred traditional routes with stops at densely populated cities along the way.

In a fragile ecosystem that is the source of immense concern among environmentalists, Russia plays a central role in assisting navigation with icebreakers.

It has also decided to establish 10 bases along its coast to redress the current abject lack of infrastructure.

Admitted last month as an observer in the Arctic Council, China also wants to be part of the game.

After the first transit of its icebreaker Snow Dragon last year, the world's second-largest economy now plans to send its first commercial shipment along the northern route this summer.

Between 5 and 15 percent of Chinese international trade could take this new road by 2020, the director of the Polar Research Institute of China, Yang Huigeng, was quoted as saying in the media.

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