South Korea challenges China for Arctic sea route to Europe

{"text":[[{"start":10.1,"text":"The PanStar Acro container ship left the South Korean port of Busan last week, headed on a 45-day round-trip voyage to Europe. But in a break from past journeys, the ship sailed north, hugging Russia’s Arctic coast."}],[{"start":25.16,"text":"The voyage, which will take the PanStar Acro to Felixstowe, Rotterdam and Gdańsk, is a first South Korean commercial test of the Northern Sea Route (NSR), an Arctic shipping highway that governments, shipping lines and exporters hope will connect Asian manufacturers to European markets and reshape global trade as polar ice melts."}],[{"start":45.48,"text":"Seoul says the NSR could cut sailing time to Europe by about 10 days compared with the Suez Canal, reducing fuel and other operating costs in an industry in which every day at sea counts."}],[{"start":56.68,"text":"It could also open up an alternative to vulnerable choke points — which has become more pressing as the war in the Middle East has throttled trade flows through the Strait of Hormuz."}],[{"start":65.12,"text":"“If you look at the map, geographically, the NSR plan makes sense,” said Kim Saeme, a research fellow at the Asan Institute in Seoul. “It would shorten shipping distances between Korea and Europe, potentially reduce transportation time and costs and strengthen Busan’s position as a logistics and maritime hub connecting Northeast Asia with Europe.”"}],[{"start":86.6,"text":"South Korea is not the first to make the Arctic journey. China is racing ahead, operating seasonal container services through the Arctic since 2023. This month, it launched what it says is the first regular NSR service to Europe."}],[{"start":101.74,"text":"For Korea, the NSR offers the prize of cheaper, more competitive exports. It also fears China’s head start could allow it to seize market share from Busan if the NSR proves viable. Busan is the world’s second-largest transhipment port, with regional cargo shipments transferred to long-haul services."}],[{"start":120.88,"text":"In the Arctic, Korea saw “the need to compete with China”, said Ramón Pacheco Pardo, professor of international relations at King’s College London."}],[{"start":129.08,"text":"PanStar says it aims to “build a new logistics platform extending to Europe” based on its “existing network connecting Korea, Japan and China”. It added that it has already received enquiries and bookings for Chinese and Japanese cargo to be transhipped through Busan."}],[{"start":145.76,"text":"Russia has also promoted the NSR, but has been stymied by western sanctions over Moscow’s war in Ukraine."}],[{"start":152.24,"text":"That constitutes another obstacle for Korean shipping lines. The route is administered by Russia’s state-owned Rosatom and transits require Moscow’s permission, even though the Acro will not call at Russian ports or use Russian icebreakers."}],[{"start":166.48,"text":"South Korea is not bound by US or EU sanctions as with UN Security Council sanctions. But Korean companies could face US secondary sanctions, and intermediaries may be reluctant to facilitate Russia-related business — concerns Chinese rivals do not share."}],[{"start":182.32,"text":"“You can be technically capable of making the voyage, but if insurers won’t take the risk or banks won’t process the transaction, there is no commercial service,” said Moon Ye-chan at Yonsei University."}],[{"start":null,"text":"

"}],[{"start":195.04,"text":"South Korea’s voyage has also rankled western countries, with several Seoul-based diplomats expressing disappointment that a “like-minded” nation would be involved. One diplomat alleged that Seoul had paid a transit fee to Russia."}],[{"start":208.18,"text":"South Korea’s Ministry of Oceans and Fisheries denied the government had paid “any costs to Russian agencies in connection with the trial operation”."}],[{"start":215.84,"text":"It added: “We have fully explained the purpose and plan of this trial operation to key relevant countries and have also conducted consultations to ensure compliance with international norms."}],[{"start":227.28,"text":"“Korea is a committed partner on the war in Ukraine, and is also pursuing a narrower national interest on Arctic energy and shipping,” said Kim at the Asan Institute. “Europe finds [that] hard to reconcile.”"}],[{"start":239.72,"text":"The US appears to have offered tacit approval for the journey, agreeing not to pursue secondary sanctions against Korea, according to two people familiar with the situation."}],[{"start":249.16,"text":"But a South Korean official who requested anonymity said that Seoul had been warned that did not mean Washington would not take punitive action in the future."}],[{"start":null,"text":""}],[{"start":257.84,"text":"There are also the practical challenges of navigating unpredictable Arctic waters, which are only passable during warmer months."}],[{"start":264.2,"text":"“What matters in shipping is not simply distance, but schedule reliability, the ability to repeat voyages, access to insurance and finance, securing stable cargo, and predictable transit fees and regulations,” said Moon."}],[{"start":280.16,"text":"Hong Sung-won, director of the Institute of Arctic Logistics at Youngsan University in Busan, said that Korea’s trade-dependent economy — imports and exports contributed 85 per cent of GDP last year, according to the World Bank — made it particularly vulnerable to “supply-chain crises stemming from the Strait of Hormuz situation and the instability of Suez Canal shipping”."}],[{"start":302.8,"text":"But it was “difficult to definitively state that the Arctic route is more economically viable than the Suez route”, he added."}],[{"start":311.5,"text":"For policymakers, opening up the NSR could serve another goal: resuscitating South Korea’s second city."}],[{"start":317.92,"text":"Busan, on the south-eastern coast, once served as the country’s main export hub. But the city has suffered a decades-long decline as higher-end manufacturing moved closer to the capital Seoul and to China. Busan has lost 15 per cent of its population over the past 30 years, falling to the second-lowest GDP per capita of South Korea’s 17 major regions and cities."}],[{"start":341.44,"text":"“Busan is in crisis. Young people are leaving and industry is losing vitality,” Jeon Jae-soo, the city’s mayor, said on the campaign trail earlier this year. Jeon, who was previously national minister for oceans and fisheries, has championed NSR as a solution to Busan’s flagging economy."}],[{"start":359.72,"text":"Patrick Han, head of global business at SK Securities, said that Busan was well placed as a potential hub for Arctic shipping, which requires specialised technology and infrastructure to operate in extreme cold."}],[{"start":372.32,"text":"“Petrochemicals, steel, shipping, shipbuilding, logistics, transport, LNG tanker terminals — everything is in this small region,” he said."}],[{"start":381.84,"text":"He estimated that the NSR could contribute $10bn-$15bn annually to the Korean economy and create hundreds of thousands of new jobs."}],[{"start":391.1,"text":"That would be welcome news to Busan residents such as 30-year-old Cho Eun-jung. Only a handful of her school friends remain in the city, she said, while her old neighbourhood had “completely turned into a ‘silvertown’.”"}],[{"start":401.92,"text":"But Cho was optimistic about the NSR. “I have high expectations for it,” she said. “Busan needs to do something to save itself.”"}],[{"start":410.16,"text":"Additional reporting by Richard Milne in Oslo. Cartography by Steven Bernard in London. Data visualisation by Haohsiang Ko in Hong Kong"}],[{"start":423.62,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787737762_9110.mp3"}