NewsArctic partnership with Russia. China's new pathway to counter Suez Canal and Malacca Strait complexities

Arctic partnership with Russia. China's new pathway to counter Suez Canal and Malacca Strait complexities

Xi Jinping
Xi Jinping
Images source: © Getty Images | © 2022 Bloomberg Finance LP
6:43 AM EST, December 31, 2023

The Suez Canal holds a crucial geopolitical significance, being one of the most strategic locations on the world map. Around 12% of global maritime trade between Europe and the Far East, primarily involving China, occurs through this canal. Any crisis in this area tends to pose a threat to global trade.

The restrictions put into action on December 1, 2023, have curtailed the service of ships traversing this route to 22 units daily. Further attacks from Yemen on commercial fleets have deeply endangered navigation through the Red Sea, leading to the paralysis of a crucial trade route.

All significant shipowners globally have halted navigation via the Suez Canal and the Red Sea. International powerhouses like the French firm CMA, Italian MSC, Germany’s Hapag-Lloyd, and Israeli ZIM, which together account for around 70% of the global sea transport capacity, are rerouting their ships through alternative routes, including the lengthy route via the Cape of Good Hope.

The Suez Canal is a paramount maritime gateway for China, forming a critical shipping route connecting China with the European market and the Middle East. The Chinese weekly "Global Times" reports in English that transporting goods to Europe around Africa will delay deliveries by another ten days.

The Suez Dilemma and "Malacca Predicament"

China's strategy to recreate, restrict, and gain control over global trade routes has been underway for years, but it continues to stumble upon geopolitical issues. For instance, actions from the Ukraine crisis have impacted the land-based New Silk Road, whereas the Gaza war and threats to trading fleets in the Red Sea have affected maritime routes.

Despite intermittent issues on the Suez Canal (such as blockades by trapped ships within narrow straits causing crises), this route remains the most economically viable sea route to Europe. However, it's not the Suez Canal that has been Beijing's primary concern; instead, the Malacca Strait, which separates Indonesia from Malaysia, is situated along this route. The region remains under American control due to sea bases such as Changi in Singapore, located near the eastern boundary of the Malacca Strait. Military power in this area also resides with India, which could potentially block this strait during escalating tensions with China.

If this were to happen, it would pose severe problems for China, given its reliance on energy resources (gas and crude oil) imported from the Middle East, predominantly through the Gulf of Oman through the Malacca Strait. Conversely, goods exported from China to the EU market and beyond through the Arabian Sea, the Red Sea, and the Suez Canal make the same stopover.

This issue isn't a recent one, though. Roughly two decades ago, the then-Chinese leader Hu Jintao termed it the "Malacca Dilemma." Since then, China has been unable to find a practical solution, with any other route around the problematic strait lengthening transit time and substantially hiking transportation costs.

Opportunities Lie in Cooperation with Putin

China is striving to navigate the increasingly complex international situation by scaling up investments as part of the Belt and Road Initiative and paving ways for new resource routes, such as the gas pipeline from Turkmenistan through Uzbekistan and Kazakhstan and investments in Pakistan (including financing port expansion).

China's efforts also smartly intertwine Moscow's and Beijing's interests in energy cooperation while avoiding any action that could expose China to direct Western sanctions.

The complications associated with the Southern Straits' capacity have turned China's attention to the far north, where assistance from Russia might be essential. In the fall of 2022, Putin tried new nuclear-powered icebreakers, aiming to clear the Arctic route for China.

As the "Global Times" stated, China must foster a relationship with Russia to develop new shipping corridors in the Arctic, considering its long-term strategic interests.

China's Arctic plans crystallized in 2018 when the Polar Silk Road plan was announced. The strategy proposed the creation of new trade routes linking Europe and Asia via the Northeast and Northwest Arctic Straits.

Joanna Nawrotkiewicz, a sinologist at the Academy of War Art, discussed with, "Plans from 2018 envisaged large-scale trade and infrastructure projects along the 'Polar Silk Road,' as China describes the Arctic shipping route linking Europe and Asia. However, since that time, global circumstances have changed. The growing tendency among Western countries to adopt a risk-avoidance policy undermines the feasibility of this project."

Nevertheless, China is steadily pursuing its goals and has, for several years, been referring to itself as an "Arctic adjacent" country. A new route to Europe via the Arctic would not only offer an attempt to bypass the problematic Malacca Strait or Suez Canal but could also realistically reduce the journey for Chinese goods to the EU market and beyond to the USA.

Analysts from PISM opine that a maritime connection through the Arctic could cut the distance from Asia to Europe by 30% compared to the southern sea route via the Suez Canal. The northern route would make the journey from the Chinese port of Dalian to Rotterdam roughly 5000 nautical miles shorter than traversing the Suez Canal.

Walking on Thin Ice

However, the route through the Arctic comes with challenges due to its seasonality. Winter's freezing waters make navigation problematic. Nevertheless, climate changes and melting ice are unsealing more opportunities for development in this direction.

Furthermore, China's engagement with Russia on the Lunxun 2 and Yamal LNG projects has established a foothold for Chinese expansion into the icy lands. The Zarubino port, situated southwest of Vladivostok near the Chinese border, is undergoing enlargement to serve the Arctic route initiative.

This year, in July, the Russians tested the transport of crude oil through the Arctic Ocean to the port of Rizhao in the eastern Chinese province of Shandong.

Russian Rosatom is working with shipyards to increase the Russian fleet of nuclear icebreakers. The ship Ural was launched at the end of last year, and Yakutia is scheduled for the following year. Additional ships, Arktika and Sibir, are being prepared, and the fifth icebreaker, Chukotka, is expected to be ready by 2027, states the "Global Times".

Putin envisions broader collaboration between Russia and China, acknowledging Beijing's potential in shipbuilding. Nevertheless, Xi Jinping needs to tread cautiously.

Joanna Nawrotkiewicz notes, "China's presence in the Arctic would necessitate closer collaboration with Moscow, something Beijing is presently reluctant to do following Russia's invasion of Ukraine."

Despite these challenges, as reported by the Chinese "Global Times," in July, two Chinese companies inaugurated a new shipping line to transport containers on the northern sea route, with Russian state-owned Rosatom offering support in information and navigation.

However, the Academy of War Art analyst emphasizes that the current geopolitical situation severely restricts further expansion into the Arctic. The Arctic Council, an intergovernmental forum for regional governments and indigenous communities, has effectively been paralyzed, and efforts towards the development of the Arctic have come to a standstill.

Beijing's audacious deeds in the far north would receive an immediate reaction from the West, including the United States. "An increased Chinese presence in the Arctic could spark concerns among European nations and instigate disputes. Consequently, the Malacca Strait might only gain significance as a trade route," Joanna Nawrotkiewicz assesses.

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