Introduction: The New Frontiers of Global Trade and Geopolitical Dynamics in the Arctic
In the context of global trade networks, despite the Silk and Spice Roads regaining importance through China’s Belt and Road Initiative over the past decade, the search for alternative routes continues. The Northern Sea Route (NSR) has emerged as a promising strategic pathway due to the melting glaciers caused by global warming in the polar regions. The melting glaciers have made sea routes in the area more navigable, reducing both transit time and transportation costs. Two major policymakers in the region are undoubtedly China and Russia, as the majority of the corridor lies along Russia’s coast. Russia has supported China’s investments in the area with favourable policies and tangible projects. Moreover, China, in its Arctic strategy, identifies itself as a ‘near-Arctic state’ committed to principles of respect, cooperation, and mutual benefit. However, interest in the region is not limited to just these two nations; the U.S. and NATO are also increasingly focusing on the Arctic. The NSR is seen as a potential alternative to the Suez Canal and Panama Canal and may address the “Malacca Dilemma” in Southeast Asia. The Arctic region, which has become a zone of geopolitical competition, is likely to become a source of major conflicts and new security challenges in the near future. China’s ambitions for the NSR are not only tied to expanding global trade networks within the Belt and Road Initiative but also to accessing and transporting the oil and gas reserves believed to exist in the region. China has openly expressed interest in exploiting raw materials from Russia’s Komi Republic and has initiated relevant projects. After Putin’s 2017 remark that the “Silk Road has reached the north,” China’s use of the NSR has steadily increased. This route, now referred to as the “Polar Silk Road,” has entered academic discourse and has become a focus of study. China has also launched projects aiming to dominate communication networks along this route. In this context, a submarine communication cable is planned to be constructed along the Arctic Circle. Unforeseen global developments, such as sanctions against Europe due to the Russia-Ukraine war, have indirectly aided China’s involvement in the region. As a result of these sanctions, Russia has redirected its oil supplies to China and India. This study will examine the increasing strategic importance of the NSR and the shifting dynamics of global trade. The growing interest in the region, particularly from the perspective of China’s Belt and Road Initiative and Polar Silk Road investments, will be evaluated. The study will also address the rising competition in the Arctic, with a specific focus on the NSR. The main goal is to assess the NSR not only from an economic perspective but also by considering strategic and geopolitical dynamics while evaluating China’s increasing influence in the region.
The Growing Impact and Geopolitical Importance of the Northern Sea Route
The Arctic encompasses the Arctic Ocean and the surrounding landmasses. There is no comprehensive treaty that governs the Arctic in international law. Instead, various legal frameworks apply, such as the United Nations Charter, the United Nations Convention on the Law of the Sea (UNCLOS), the Spitsbergen Treaty, and general international law, which regulates activities in the region. The Arctic land areas belong to Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the United States. The maritime zones in the Arctic Ocean fall under the jurisdiction of coastal states, but other nations also have certain rights. Non-Arctic states are entitled to engage in scientific research, fishing, and resource exploration within these areas.
The Arctic Circle is of key importance to many nations. In addition to natural resources and the fishing industry, scientific research drives many countries to focus on the region for financial, political, and social reasons. For a long time, sea routes have been used for global trade, but climate change and the resulting ice melt have introduced a new pathway to this network. Previously impassable due to thick ice, the Northern Sea Route (NSR) has gained attention as the Arctic ice recedes. The NSR directly connects North Asia to Northern Europe. When transporting goods between Asia and Europe, the NSR covers a distance of 8,000 miles, compared to 13,000 miles via the Suez Canal. This 5,000-mile difference significantly reduces both transit time and costs. On average, transport via the Suez Canal takes 48 days, while the NSR can shorten this to as little as 33 days. A 15-day advantage offers significant logistical benefits.
Many significant political developments have increased the importance of the Northern Sea Route. The first was undoubtedly the (I) Russia-Ukraine War. European countries were heavily dependent on Russia for oil and natural gas. As European buyers withdrew from the energy market, Russia redirected its resources to China and India. In light of these political changes, Russia prioritized transforming the Northern Sea Route into a key shipping route and utilizing the rich natural resource deposits in the Arctic as a national priority. Following the Nord Stream pipeline explosions on September 26, 2022, Russia cut off gas supplies to Europe. Putin highlighted the extensive damage to the pipeline, which would require both time and money to repair. Additionally, the disruption of gas supplies through Ukraine, due to the war, has pushed European states to focus more on LNG shipments via the Northern Sea Route. The five-year gas transit agreement between Russia and Ukraine is set to expire at the end of 2024. While the EU has explored alternatives, such as a gas transit agreement with Azerbaijan, it still faces uncertainties about its future energy supply.
(2) The growing interest in the Northern Sea and the Arctic has led to increased competition in the region. Russia’s expanding presence in the Baltic Sea and the Arctic, along with its territorial claims and utilization of the Northern Sea Route, has further enhanced the strategic importance of the area. In parallel, NATO has increased its military presence in the Northern Sea, conducting exercises in response. During the Cold War, the Arctic was a zone of competition and tension between the Soviet Union and the Western bloc. However, after the collapse of the Soviet Union, significant geopolitical competition in the region subsided until the mid-2000s. Russia’s recent development efforts in the north and NATO’s growing interest have once again made the Arctic a strategically critical area. Despite this renewed competition, it is important to note that until 2022, the policies of Russia and NATO regarding the Northern Sea were relatively stable, reflected in the saying “High North, Low Tension.” Even NATO’s expansions in 2004 and 2009, as well as Russia’s invasion of Georgia and annexation of Crimea, did not cause significant policy shifts. However, the onset of the Russia-Ukraine War in 2022 led to substantial changes, including Finland’s membership in NATO in 2023 and Sweden’s expected accession in 2024. These developments have caused major geopolitical shifts, particularly in the Arctic Council, where members announced a suspension of cooperation with Russia. With seven of the Arctic Council’s eight members also being NATO members, and the Council’s decision to continue projects without Russia, security tensions in the Arctic have escalated. Russia, in turn, has stated that it may withdraw from the Council if its activities do not align with its national interests. NATO’s Steadfast Defender 2024 exercise aims to showcase transatlantic unity and resolve in response to security challenges in Eastern Europe. Although it is NATO’s largest exercise since the Cold War, it is evident that NATO remains underprepared for potential military threats from Russia in the Arctic region.
The power struggle between NATO and Russia has facilitated China’s investment in the Arctic, supported by Russia, allowing China to pursue its economic goals in the region more easily.
(3) Another political development contributing to the strategic importance of the Northern Sea Route has been the attacks on trade ships in the Red Sea. The Iran-backed Houthi rebels in Yemen fired on trade vessels in the Red Sea, which caused nearly a 60% reduction in trade traffic. For Western ships that still dared to pass through the Red Sea, the insurance costs for crossing the Bab el-Mandeb Strait significantly increased. Moreover, the attacks occurred in an area that serves as the main route for Gulf oil, directly affecting the global oil market and creating an uncertain and unstable environment for supply security, particularly concerning oil shipments.
(4) European countries have turned to Norwegian natural resources as an alternative to Russian gas and oil. In fact, Norway has surpassed Russia to become Europe’s largest gas supplier. The increase in Norway’s energy exports to Europe has contributed to the growing strategic importance of the North Sea Route. The North Sea has become both a key storage hub for meeting Europe’s energy supply and a region where logistical activities have significantly intensified. Along the coasts encompassing the North Sea Route, maritime security, logistics, and sustainability have come to the forefront. To further meet Europe’s natural gas demand, efforts have been accelerated to secure the existing gas capacity in the Barents Sea and to conduct new exploration activities. Additionally, the construction of a new natural gas pipeline and its use for subsea gas transportation is planned.
China’s Polar Silk Road Strategy
China’s approach to the Arctic region evolved after the Cold War, particularly with efforts to de-securitize the region. In 1995, China sent a team of researchers to conduct scientific studies in the area. By 1996, China became a member of the International Arctic Science Committee (IASC). In 2004, China established the Arctic Yellow River Station. Between 1999 and 2017, China conducted eight Arctic Ocean expeditions, carrying out multidisciplinary research at the Yellow River Station. China’s official initiative in the Arctic began in 2013 when it was accepted as an observer member of the Arctic Council. Shortly before gaining this status (in 2013), China and Iceland signed a free trade agreement. Iceland became the first European state to sign a free trade agreement with China and supported China’s bid for observer membership in the Arctic Council. The observer status opened the way for China to develop international relations and cooperate with Arctic states. By 2018, the State Council of China published a white paper titled ‘China’s Arctic Policy. In this document, China positioned itself as a stakeholder in the Arctic. Following this white paper, the National Development and Reform Commission’s State Oceanic Administration also published a Vision document on Arctic routes under the BRI framework. As these details suggest, it is clear that China has a significant role and interest in the development of the Northern Sea Route. This role is connected to the formation of alternative maritime transport routes, the search for faster and safer routes, and, most importantly, the need for new energy sources. China states that its Arctic strategy is based on the principles of respect, cooperation, and mutual benefit.
The Polar Silk Road is a major example of the growing cooperation between China and Russia in the Arctic. During a ceremony in 2017, Putin expressed satisfaction with this cooperation in front of the Chinese transportation delegation, stating, ‘The Silk Road has reached the North. We will combine it with the Northern Sea Route.’ The China-Russia joint statement in February 2022 emphasized that the parties decided to intensify their cooperation in the sustainable development of the Arctic. This indicates that Beijing’s interests in the Arctic are now extending beyond scientific research to commercial activities as well. It is evident that China aims to open a new trade route to Europe via the Arctic through its “Polar Silk Road” initiative. This route is considered an extension of China’s Belt and Road Initiative. Although transit shipping on the Northern Sea Route was geographically diversified in 2013, Russia’s extensive cooperation with China in the region has accelerated transit shipping rates. Indeed, in 2014, the amount of cargo transported via the Northern Sea Route was 4 million tons annually. However, this figure rapidly increased to 34 million tons by 2022. In 2023, the total volume of shipments via the Northern Sea Route reached an all-time high of 36.254 million tons. Deliveries to and from China accounted for more than 95% of the route’s transit cargo in 2023. The Russian government is advancing with ambitious goals, planning to increase the cargo volume transported via this route to over 100 million tons by 2030. This target clearly demonstrates the strategic importance and future potential of the Northern Sea Route.
A detailed look at China’s investments in the region reveals that it has invested over $90 billion in infrastructure, assets, and other projects above the Arctic Circle. These investments are largely focused on the energy and mineral sectors. From 2012 to 2017, China invested $2 billion in Greenland, aiming to secure mining rights with a focus on the development of rare earth minerals. In 2018, the China-Iceland Observatory was completed, and scientific research began. By 2019, two subsidiaries of the Chinese Communist Party, CNOOC and CNPC, acquired a 20% stake in a Novatek natural gas mega-project in Russia’s Yamal Peninsula. Additionally, CNPC holds a 20% stake in another Novatek LNG facility in Yamal. Huawei Marine and Chinese state companies have collaborated with countries like Finland and Greenland on the construction of underwater communication cables along the Northern Sea Route. These cables enhance China’s data transfer security and strengthen its strategic surveillance capabilities in the Arctic. Additionally, China Communications Construction and China Railway Construction plan to conduct raw material mining in the Komi Republic, close to the Arctic Circle. This project includes a railway to transport materials to the coast and a deep-water port for loading onto ships operating on the Northern Sea Route.
Geopolitical Competition
The melting of Arctic Ocean glaciers due to climate change has accelerated the competition between Arctic states—namely the United States, Canada, Denmark, Finland, Iceland, Norway, Russia, and Sweden—and China, which defines itself as a ‘near-Arctic state.’ Russia, one of the key Arctic coastal states, views the Northern Sea not just as a source of income but as a region that enhances national pride and strategic importance. Even amidst the ongoing war with Ukraine, Russia has continued to increase its presence in the Arctic. The Russian Northern Fleet has a growing structure that includes radar stations, missile facilities, and nuclear submarines. Russia’s military presence in the Arctic is particularly notable in the Kola Peninsula, which is close to Norway and NATO member states Finland and Sweden. Russia is ahead in terms of military infrastructure, managing one-third more military bases in the Arctic Circle compared to all NATO members combined. Additionally, approximately 70% of the Arctic is under Russian control. This situation indicates that using the Northern Sea Route requires Russian permission and payment of transit fees to Russia. Considering the ongoing conflict, the advantage of transit permits and fee structures provides Russia with a significant edge over the other seven Arctic countries. On the other hand, Russia is redirecting its conventional defence investments in the Arctic towards the Ukraine War. Therefore, rather than limiting China’s northern interventions, Russia views China as a valuable investment partner to sustain its own military and economic presence in the Arctic. China-Russia cooperation in the Arctic is also reflected in the data. The most visible example of this, as detailed above, is China’s Polar Silk Road/Northern Sea Route. Russia has facilitated China’s trade routes, energy research, and various investments along the upper part of its mainland.
In July, the summit held in Washington on NATO’s 75th anniversary provided member countries with an opportunity to develop a strategy in response to the developments in the Arctic. On September 3rd, seven NATO members completed the annual Northern Viking exercise based in Iceland. This exercise aimed to defend underwater communication lines and maritime routes against conventional military threats and sabotage during North Atlantic transit. Two days before this exercise, Chinese Premier Li Qiang and Russian President Vladimir Putin met in Moscow to discuss strengthening bilateral relations. Following these meetings, the State Council of China issued a statement announcing the expansion of cooperation with Russia in the Arctic region on issues such as transportation development, navigation security, and polar ship technology and construction.
Conclusion
The Arctic is a region open to both regional and international cooperation opportunities as well as competition. In the interest of economic development and scientific progress, competition should give way to international cooperation, and the region should be protected from potential geopolitical disruptions. The Arctic is a region that can serve global trade and industry both in terms of its natural resources and the trade routes established. Due to the Russia-Ukraine War, Russia has faced both diplomatic and economic isolation. Russia aimed to carry out joint projects with China to sustain its military and economic presence in the Arctic. Before the Ukraine War, Russia opened up to Chinese investments in areas it previously avoided, increasing its dependency on China. As an Arctic state, Russia, along with China, should consider the national interests of all Arctic states and maintain balance in the region.
To address the energy crisis caused by the Russia-Ukraine War, LNG terminals in the region should be developed and protected. While Russia and China continue to develop energy, mineral resources, and shipping routes, NATO member Arctic states also have projects in this area and should continue to develop them. Additionally, strengthening international law is necessary to promote the sustainable and peaceful use of the Arctic.