China launches first regular Arctic shipping route

**Leanna Byrne** (0:01)
Could a new arctic shipping route solve the world's logistical problems? It's World Business Express from the BBC World Service. I'm Leanna Byrne. Falling water levels in the Rhine and Germany could split the river in two for cargo traffic, and thousands of protesters in India are demanding an overhaul of government recruitment exams.
Sea Legend, a Chinese container shipping company, is launching the first regular container service through the Arctic this week. The route will take ships from Ningbo on China's East Coast along Russia's northern coastline to Felixdoe in the UK, potentially cutting the usual journey time roughly in half and avoiding major shipping choke points such as the Red Sea. Sea Legend has branded it the Ice Silk Road. Michelle Visa-Bachman, senior maritime intelligence analyst at Windward, says it's a significant development.

**Michelle Wieser-Bochmann** (0:53)
This is the beginning of first regular commercial cargo services on the Northern Sea route. Even though some of those container ships will perhaps only have enough time to complete one voyage, I think it's still significant. And especially given the geopolitical underpinnings for seaborne trade, the fact that Russian oil and gas is going in increasing amounts through this route to bypass some of the problem areas is really interesting as well.

**Leanna Byrne** (1:22)
So when it comes to the shipping companies and their customers, is this going to make much of a difference for them?

**Michelle Wieser-Bochmann** (1:27)
These are one-off commercial services that have been established with Chinese ship owners to go via Europe to China. They have to go through Russian waters. So there's only a few ship owners that are in a position to be able to do that, given the current geopolitical climate.

**Leanna Byrne** (1:49)
So how reliable really can an Arctic route really be, if that's the case?

**Michelle Wieser-Bochmann** (1:53)
Well, at the moment, you're seeing increasing cooperation between China and Russia in the Arctic. And China declared itself a near-Arctic state back in 2018, I believe.
So the increase in commercial shipping usually has a China and Russia nexus. And of course, in addition to those container ship routes, you're also seeing oil and gas going from Russia from both their Baltic seaports, going around the Northern Sea route this summer, and also the LNG gas that has been shipped from the Arctic projects. They've been diverting that the long way around the Cape of Good Hope to China to avoid the Mediterranean after one of their LNG carriers was blown up. So this summer, they're now able to send their LNG carriers around there as well.

**Leanna Byrne** (2:43)
Well, one thing that we've definitely learned this year is that if you've got a shipping route in your waters, and you've got leverage, so could this potentially give Russia a new source of leverage over trade between China and Europe?

**Michelle Wieser-Bochmann** (2:55)
Well, only in the summer, and it depends on prevailing ice conditions. The Russians have nuclear ice breakers that are needed in order to often pilot and help ships get through. So the weather conditions often dictate, this is going to be the busiest season yet. You're talking container ships going from Rotterdam to Shanghai.
You're saving 3,500 miles and maybe 15 days.

**Leanna Byrne** (3:23)
That was Michelle Wieser-Bochmann from Windward. Now, sticking with shipping, a German shipping official is warning that falling water levels on the Rhine could effectively split the river in two for cargo traffic. Jens Schwanen from Germany's Federal Association of Inland Navigation says, levels at Kaub, a key point in the river, could fall below 10 centimeters this week. That would make parts of the Rhine too shallow for commercial ships and even some cruise boats to pass. Research led by Dr. Sherish Osman at the University of Mannheim, alongside economists at the European Central Bank, found that heat waves, droughts and floods last summer hit a quarter of EU regions, causing at least 49 billion dollars of losses in the short term. She says shipping companies and consumers will be hardest hit.

**Sarah Osmond** (4:06)
The water levels on the German rivers are running low, and this is because of the weeks of heat waves and droughts, the climate impact. The cargo traffic is badly constrained, and that threatens another blow to the struggling economy. So this is a typical example of a climate shock that transmits into the real economy.
And this is not through dramatic destruction, but rather through friction that raises costs across supply chains. In my previous research on regions hit by extreme weather events, we see that the damages linger, which means lower investments, firms relocating, even people moving away. So once these shocks become regular, they reshape where the economy grows.