OCA #22 SUMMER 2016 WWW.OCAMAGAZINE.COM
In the modern world one of largest scale initiatives is abruptly changing the face of the world, forming a new paradigm of economic and geo-strategic development and is revitalizing a zone of the Silk Road by land and sea. The project has been named “One Belt One Way.” The intention is that more than 60 countries with a combined population of 4.4 billion people will participate in the project and more than 1 trillion US dollars has been devoted to its cause.
Participants of the Eurasian Economic Community (EAEC), which include Russia, have confirmed their involvement and support in the project and its plans to connect the Eurasian Economic Union and the Economic Zone of the Silk Road in a formal document, signed with China in May 2015. As President Vladimir Putin said, “In essence, in the long term we are talking about a new level of partnership, involving a common economic space on the entire Eurasian continent.”
One of the most serious and large-scale projects proposed by Russia in this regard is an intriguing project focused on the the Arctic zone of the Silk Road.
The Arctic region of Russia currently provides 90% of Russia’s production of nickel and cobalt, 60% of its copper, more than 96% of the platinum-group metals, 80% of the gas and 60% of oil production, with great potential for growth from new fields.
The Arctic Zone of the Silk Road is a multipurpose and multifunctional project. It consists of a number of relatively independent but closely related parts.
1. Transportation of goods along the Northern Sea Route (NSR).
2. Construction of infrastructure along the NSR.
3. Completion of the construction of Sabetta port (Yamal), including the construction of a terminal for the transshipment of bulk cargos.
4. Construction of railways between Bovanenkovo and Sabetta (including transport crossing over the river Ob).
5. The joint development of oil and gas fields along with construction of transport routes.
6. The creation of large oil and gas chemical complexes for processing of raw materials close to the fields.
The transport of goods to Europe via the Northern Sea Route has great interest for the Asian countries. It is shorter and, perhaps most importantly, a much safer route. If the distance travelled by ships from the port of Murmansk to Yokohama Port (Japan) through the Suez Canal is 12,840 sea miles, the Northern Sea Route is only 5,770 sea miles.
There are a lot of problems for transportation along the NSR, not least the fact that the season is only a few months long and requires special ice-class vessels to traverse safely. Recently, however, all these problems are being resolved gradually.
But, one of the major problems is the lack of infrastructure along the Northern Sea Route. Existing ports – Igarka, Dudinka, Dikson, Tiksi, Pevek, Provideniya are not fully equipped with modern facilities and need significant investment for renovation. And these ports serve not only the NSR, but also transshipment of cargos through the largest Siberian rivers. The length of navigable river routes adjoined to the NSR is about 37,000 km. Therefore the development of these ports will give a powerful impetus to evolve the economic circulation of the richest reserves of the whole of Siberia. Without the development of the NSR development, these reserves would not be extracted.
Some progress has been made with the construction and exploitation of Sabetta port on the north-eastern coast of the Yamal Island at the mouth of the Ob River. The first cargo ships moored at the port in October 2013. In this regard Yamal became the de facto centre of the Russian Arctic Zone. Sabetta has the largest airport in the Arctic, able to take a variety of Russian and international longrange aircraft.
However, there are problems. Sabetta Port is not connected by rail with the existing railways. A 173km railway section is to be built between Bovanenkovo and Sabetta as well as the Northern latitudinal route (which is over 700 km). All this will make it possible to provide efficient transportation of goods along the Northern Sea Route. It will create a global system of production, processing and transportation of raw materials and products. Ultimately it will lay the foundation for strategic cooperation between China and Russia in the Arctic region.
Chinese companies are already actively participating in Arctic projects. One of the largest Chinese companies, CNPC, entered the “Yamal LNG” project taking a share of 20%.
“We believe “Yamal LNG” is one of the most competitive LNG projects in the world and therefore we are interested in becoming its shareholders. We hope that our entry into the project will promote external funding for the project and the further development of Chinese-Russian cooperation in the energy sector”, said the president of the Silk Road Foundation, Wang Yangji.
The “Yamal LNG” project provides the construction of a gas liquefaction factory on the basis of the South Tambeysk field on Yamal Island. There are three LNG trains with the capacity to process 5.5 million tons per year. An important part of the project is the construction of Sabetta port, the operation of which is aimed at solving the logistical problems of the project. The first phase of the plant is expected to be launched in 2017 and the project is estimated to cost $26.9 billion. Its shareholders are Novatek (60%), France’s Total (20%) and China’s CNPC (20%).
On September 3rd 2015 an agreement between the Silk Road Foundation and the Novatek was signed to acquire 9.9% of the shares of this company. In additional the Foundation provided Novatek a loan of €730 million for 15 years.
Following the Chinese investment, other Chinese companies are expected to join in Arctic projects. China’s largest diversified company “Dalian Port” has already agreed to cooperate with Sabetta port, as well as generally to the Arctic projects.
Speaking about the construction of the Sabetta port President Putin commented, “It is very important, if such a huge terminal is built it will be great to make it multipurpose, so that apart from shipping liquefied natural gas production it will also ship a variety of other products”.