Putin’s masterstroke

Reading through a paper published by The Russia Briefing, I could not help but salute President Vladimir Putin for his brilliant post-war recovery plan. As early as now, the Russian strongman is setting the stage for a quick recovery of war-induced losses. The intention is for Russia to become a bona fide economic superpower by the year 2040.

It will be recalled that the US and her allies imposed a whopping 11,300 economic sanctions on Russia since 2022. Among these sanctions were restrictions on trade and investments in Crimea and Sevastopol; a freeze of Russia’s foreign reserves worth $300 billion; a ban from the global SWIFT system and the pull out of some 1,000 western companies from Russia, among many others.

The US hoped that the sanctions would push Russia into an economic depression (negative growth for more than four quarters), thereby starving it of funds to finance its war. In fact, it was widely believed that the Russian economy would lose 12 percent of its size. But buoyed by steep oil price hikes and massive war spending, the contraction of Russia’s economy was only two percent. It was a spectacular display of resilience on Russia’s part, considering the circumstances. Economists see Russia’s economy growing by 2.5 percent this year.

The economic sanctions imposed on Russia are certain to persist long after the Ukraine war is over – probably until the end of the decade. No doubt, this will carry considerable blowback on Russia’s development, moving forward.

Putin’s plan to off-set these sanctions?

Russia is using climate change to its advantage and setting its sights on the Arctic Ocean. It is building a new trade route that connects Europe to Asia. This route, called the Northern Trade Route, will be shorter, faster and more cost efficient than existing alternatives.

At present, the most efficient route that connects Asia to Europe is through the Suez Canal. Vessels traveling from China to England, for instance, have to travel down to Singapore, through the Strait of Malacca, sail across the Indian Ocean, through the Bab Al Mandab Straight, pass through the Suez Canal, onto the Strait of Gibraltar and up to England. The voyage is approximately 13,000 miles long and typically takes 28 days to navigate, assuming the vessel sails at an average speed of 20 knots.

The Suez route is where 12 percent of global trade and 30 percent of container traffic passes through.

The alternative route is through the Cape of Good Hope, below Africa. But this route is 5,500 miles further and takes some 40 days to traverse.

Russia’s Northern Trade Route is by far more efficient. From China, vessels will pass through the strait of Korea, through Russia’s eastern seaboard, across the Arctic Ocean and onwards to the west of Sweden and Norway before sailing down to England. The voyage is 5,000 miles less than the Suez route and 10,500 miles shorter than the Cape of Good Hope route. It will take just 16 days to navigate. It is estimated that shipping lines can generate savings of $16.4 million, per vessel, per year, using this route.

Temperatures in the Arctic have increased from -1.5 degrees Celsius in 1950 to +3 degrees Celsius today. The Barents Sea, located northwest of Russia’s mainland, is warming seven times faster than the world average. Ice in the arctic is melting so rapidly that 65 percent of icebergs in the Barents have already liquefied.

Russia has so far invested $298 billion to clear the nautical route of large masses of ice. It is using nuclear icebreakers to do this. It is also building a high-speed railway across the span of Russia’s northern territories to complement the nautical superhighway. All these are presently under construction while Russia modernizes its naval bases and maritime assets to secure the area. The new Northern Trade Route is seen to be operational by 2035.

The opening of the Northern Trade Route offers many advantages beyond savings of time and money. First, it relieves the world of over-dependence on the Suez Canal. We still recall how global supply chains were severely disrupted when an Evergreen vessel got stranded on the canal’s trench back in March 2021. Second, it insulates the world from the militarization of critical choke points, such as the Straits of Malacca, Gibraltar and Bab Al-Mandab. Third, vessels can now avoid Somalian, Yemenese and Djiboutian pirates who typically prey on vessels crossing the Bab Al-Mandab strait.

Benefits to Russia

The widespread use of the Northern Trade Route will turn Russia into a bona fide superpower. Not only can Russia generate billions in revenues through tolls, tariffs and taxes imposed on vessels and goods passing through, it also makes Russia a default transport and logistic hub. Too, it bestows upon Russia the ability to monitor the movement of goods, people and military equipment.

Diplomatically, having proprietorship over the trade route gives Russia leverage over nations who wish to utilize it.

The Arctic Ocean is among the world’s last frontiers. According to the US Energy Information Administration, beneath the arctic lie some 90 billion barrels of oil and 1.669 trillion cubic meters of natural gas, equivalent to 99 percent of Russia’s present cache. The amount of minerals is still undetermined but it is expected to be substantial. All these become Russian assets provided they fall within 200 nautical miles from Russia’s coast.

At present, the military assets of the United States in the Arctic Ocean are too small to derail Russia plans. So as the ice melts, Russia is destined to be the world’s new logistics, mineral and energy superpower.

This is how Putin plans to recover from the ravages of war and the shackles of American trade sanctions. I am not a Putin fan but I must admit, it is a masterstroke.

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Email: [email protected]. Follow him on Twitter @aj_masigan