INTERNATIONAL LOGISTICS - SEABORNE OIL TRANSPORTATION & CONTENDING TRADE ROUTES:

International energy markets depend on reliable transport routes. About 67 percent (112.5 million barrels per day) of the world’s oil production in 2019 moved on maritime routes. World chokepoints for maritime transit of oil are a critical part of global energy security.

Malacca dilemma:

The Strait of Hormuz, leading out of the Persian Gulf, and the Strait of Malacca, linking the Indian and Pacific Oceans, are the world’s most important strategic chokepoints measured by the volume of oil transit, accounting for a combined 77 Percent of all seaborne oil trade.

China fears that during a national security crisis ships carrying energy resources could be interdicted by hostile naval forces. China is heavily dependent on the use of the Malacca and Lombok/Makassar straits in Southeast Asia. Oil from the Persian Gulf and Africa is shipped to the PRC via the Malacca or Lombok/Makassar straits.

In November 2003 President Hu Jintao declared that “certain major powers” were bent on controlling the strait, and called for the adoption of new strategies to mitigate the perceived vulnerability. Thereafter, the Chinese press devoted considerable attention to the country’s “Malacca dilemma.”

China’s Silk Road:

When Chinese President Xi Jinping visited Central Asia and Southeast Asia in the autumn of 2013, he proposed a Silk Road Economic Belt and a 21st century Maritime Silk Road. Since then, the so-called “One Belt, One Road” (OBOR) initiative has been a controversial issue. The essence of ‘One Belt’ and ‘One Road’ (OBOR) is to promote regional and cross-continental connectivity between China and Eurasia. The ambitious vision aims to resurrect the ancient Silk Road as a modern transit, trade, and economic corridor from Shanghai to Berlin.

The Chinese government believes that the “One Belt, One Road” initiative is of great significance to its energy security strategy. The US “return to Asia” strategy has increased the risk of a blockade in relation to the Malacca Strait and the South China Sea, which are both key points for China on the energy transportation route.

Arctic shipping routes:

The Arctic is estimated to hold about 13 percent of the world’s undiscovered oil reserves and as much as 30 percent of the world’s undiscovered natural gas reserves. Russia is estimated to hold more than half of the total Arctic resources. Russia also holds the largest amount of natural gas resources, while the largest oil resources are in the US portion of the Arctic (Alaska).

Much of the Arctic waters are currently ice-covered for most of the year. The polar ice cap has been noticeably receding in recent years as a consequence of global climate change. Energy trade along the Northern Sea Route (NSR) in the Arctic will grow.

Currently, the NSR also known as the northeast passage is only navigable between June and November, when the Arctic sea ice thins and retreats. According to some projections, the Arctic could be completely free of sea ice all year round by 2050.

The NSR would soon rival the route between Europe and Asia via the Suez Canal across Egypt. Shipping activity along the NSR is growing quickly, though it remains far below the heights of the late 1980s.