The Strategic Value of the Arctic Route and South Korea’s Response Strategy: Not a “Shortcut,” but an “Alternative Path”

—Becoming a Trusted Partner in Arctic Shipping

Jang Ha-lyong

Senior Research Fellow

Busan Development Institute (BDI)

“When the sea opens up, a new path emerges; but the industries connected to it can flourish only when trust has been established.”

The 2,758-TEU container ship Panstar Acro, which departed from New Busan Port on August 22, arrived in Felixstowe, UK, on September 20, after completing a five-hour voyage through the Northeast Passage. According to South Korean government estimates, the voyage was approximately ten days shorter than the conventional route through the Suez Canal. After calling at Rotterdam and Gdańsk, the vessel returned to South Korea on October 11, completing the first round-trip voyage between Korea and Europe via the Arctic Route by a South Korean container ship.

Meanwhile, the traditional southern shipping route faced mounting disruptions. According to IMF PortWatch data, average daily traffic through the Suez Canal from January to September stood at just 55 percent of its 2023 level. Following the outbreak of armed conflict in late February, average traffic through the Strait of Hormuz from March to September also fell to less than one-tenth of its normal level. In contrast, by the end of September, the number of voyages through the Northeast Passage had reached 104, exceeding the previous year's total of 103, according to the Centre for High North Logistics.

Does this mean the Northern Sea Route is a shortcut that can replace the Suez Canal? My answer is no.

The strategic value of the Northern Sea Route lies not simply in reducing sailing distances or transit times, but in providing an alternative route when conventional maritime corridors are disrupted by geopolitical crises or other emergencies. The real market opportunity created by the opening of the Arctic Route lies in the broader ecosystem required to make regular and reliable shipping possible: vessels, ports, maritime data, insurance, and other supporting services.

South Korea's response strategy must begin with this broader understanding. The objective should not be merely to take advantage of a shorter route, but to help build the infrastructure, capabilities, and above all, the trust needed to make Arctic shipping viable and sustainable.

Geopolitics: An Opening Sea, a Dividing Order

Since 1979, the Arctic has warmed approximately four times faster than the global average, while the extent of sea ice in September has declined by about 12 percent per decade. Yet the development of a governance framework has failed to keep pace with the rapid opening of Arctic waters.

A study on neighboring countries conducted by the Busan Research Institute, in which I participated, identifies three distinct perspectives among the major powers. Russia is the “operator,” viewing the Northeast Passage as a national transportation network to be managed through permits, icebreaker escorts, and transit fees. The United States is the “steward,” seeking to uphold the rules-based order through freedom of navigation and its alliance network. China is the “user,” proclaiming itself a “near-Arctic state,” promoting its “Ice Silk Road” initiative, and asserting its right to participate in Arctic affairs.

As these competing perspectives have increasingly come into conflict, the Arctic has shifted from a potential arena of cooperation toward one of strategic competition and deterrence. Since 2022, high-level cooperation within the Arctic Council has effectively ground to a halt. Meanwhile, seven of the eight Arctic states—all except Russia—have become members of NATO.

The strategic implications extend beyond the Arctic itself. The Bering Strait connects the Arctic Ocean with the North Pacific, making the region a critical link between Arctic security and the security environment of Northeast Asia. China's and Russia's expanding joint coast guard and military activities in the Bering Sea have therefore added a new dimension to regional security concerns. The launch of the Trilateral Arctic-Pacific Partnership by South Korea, the United States, and Japan last September can also be understood in this broader strategic context.

As a result, Arctic shipping routes increasingly resemble “conditional corridors,” where passage depends on meeting a range of legal, regulatory, and geopolitical requirements, rather than “public corridors” freely accessible to all. Navigation through the Northeast Passage requires compliance with the International Maritime Organization's (IMO) Polar Code, which establishes mandatory safety and environmental standards for ships operating in polar waters. Operators must also navigate the legal framework governing navigation under the United Nations Convention on the Law of the Sea, meet applicable requirements imposed by coastal states, secure appropriate insurance, and comply with international sanctions and port state control regulations. Failure to satisfy even one of these requirements can disrupt or prevent a voyage.

In 2024, total cargo volume along the Northeast Passage reached a record 37.9 million metric tons, driven primarily by shipments of Russian natural resources. Nevertheless, amid international sanctions and related constraints, the volume remained below half of the Russian government's target of 80 million metric tons.

The strategic value of the Arctic Route, therefore, cannot be measured simply by whether the passage is physically open. It will be realized only when the legal, regulatory, commercial, and geopolitical conditions necessary for reliable and sustained use are in place.

The New Order of Maritime Transport: From the “Shortest Route” to the “Uninterrupted Route”

More than 80 percent of global trade by volume and 99.7 percent of South Korea's import and export cargo are transported by sea. As shipping through the Red Sea faces mounting disruptions and the Strait of Hormuz becomes increasingly vulnerable to closure, the priorities of maritime transport are shifting from efficiency alone toward resilience and continuity.

From January through September this year, an average of approximately 91 vessels per day passed around the Cape of Good Hope, nearly double the daily average of 49 recorded in 2023. According to South Korea's Ministry of Oceans and Fisheries, the Arctic route between Busan and Rotterdam is approximately 13,000 kilometers long, making it about 35 percent shorter than the conventional route through the Suez Canal. Yet only 103 voyages traversed the Northeast Passage last year. Even with traffic through the Suez Canal reduced this year, more vessels pass through it in just three days than completed the entire Northeast Passage transit in the previous year. Moreover, the navigable season remains limited to approximately four and a half months, from late June to mid-November.

The cost advantages of the Arctic Route also depend heavily on the basis of comparison. A study commissioned by the City of Busan found that the summer operating costs of a 4,300-TEU vessel using the Northern Sea Route were 21.7 percent lower than those of a comparable vessel operating via the Suez route. However, when compared with the per-container costs of large 20,000-TEU vessels using the Suez route, Arctic shipping costs were 55–93 percent higher. Experts also estimate that insurance premiums for Arctic voyages are four to five times higher than those for the Suez route.

The distance advantage is therefore offset not only by ice conditions but also by what might be called the “price of uncertainty”—the higher costs associated with smaller vessel capacity, unpredictable sea ice conditions, and the difficulty of ensuring reliable operations.

The Arctic Route should consequently be regarded not as a substitute for the Suez Canal but as a complement to existing maritime corridors. It can serve as a “third lane,” diversifying the Asia–Europe shipping network through seasonal scheduled services and expanding the options available when conventional routes are disrupted.

The emergence of this additional corridor is bringing about two important changes in the global maritime transport system.

The first is intensifying competition to become a regional shipping hub. As Arctic shipping expands, cargo movements between Northeast Asia and Europe that bypass the Strait of Malacca are likely to increase, potentially intensifying competition among Northeast Asian ports to become key departure and transshipment hubs for northern routes. The launch this summer by a Chinese shipping company of a seasonal liner service comprising eight voyages with a total capacity of 14,000TEU illustrates this emerging trend.

The second is a shift in where value is created across the maritime industry. Arctic navigation depends not only on vessels and ports but also on a wider range of specialized services, including sea ice information, polar navigation certification and crew training, environmentally sustainable fuels, and specialized insurance. The IMO introduced restrictions on the use and carriage of heavy fuel oil in Arctic waters in July 2024, with remaining exemptions scheduled to expire in July 2029. These requirements will further increase the importance of environmental compliance and specialized maritime services.

Ultimately, competitiveness in the era of Arctic shipping will depend not simply on the ability to transport cargo over shorter distances, but also on the capacity to assess, manage, and mitigate the risks associated with operating in a challenging and rapidly changing environment.

Opportunities for South Korea: Strengths and Gaps in Shipbuilding, Shipping, and Port Infrastructure

The economic opportunities created by the Gold Rush were not limited to mining gold; they also extended to supplying the pickaxes, tools, and clothing needed by the miners. In the era of the Northern Sea Route, the equivalent “pickaxes” include icebreakers, ice-class vessels, specialized polar equipment, sea ice data, and polar insurance.

South Korea has already established a strong competitive position in one of the most technologically demanding segments of this market: icebreaking vessels. South Korean shipyards built the world's first icebreaking LNG carrier of the Arc7 class within just three years of the contract signing and have since delivered all 15 vessels of this class. By comparison, it took a Russian shipyard more than six years from contract signing to delivery of its first vessel of the same class.

South Korea is also expanding its capabilities in polar research vessels. Construction of a next-generation icebreaking research vessel with a displacement of 16,560 metric tons began last September, with delivery scheduled for late 2029. These achievements demonstrate the country's advanced capabilities in designing and building specialized vessels for some of the world's most challenging maritime environments.

The strategic implications extend beyond commercial shipping. With the United States allocating approximately $8.6 billion last year for Coast Guard icebreakers alone, opportunities could emerge to extend South Korea–U.S. shipbuilding cooperation into the Arctic domain. Such cooperation could encompass not only vessel construction but also polar technologies, equipment, maintenance, and related industrial supply chains.

These opportunities, however, come with significant geopolitical and commercial risks. Six icebreaking LNG carriers built by South Korean shipyards for Arctic LNG projects remain undelivered because of international sanctions. This experience illustrates that technological superiority and manufacturing capacity alone do not guarantee commercial success in the Arctic market.

To sustain its competitiveness in polar shipbuilding, South Korea must therefore look beyond technological capabilities. It must also carefully navigate international sanctions, export controls, regulatory requirements, and the strategic commitments associated with its alliances. In the Arctic, the ability to build advanced vessels must be matched by the ability to operate within a complex and evolving geopolitical environment.

Significant opportunities also exist in ports and shipping. Last year, the Port of Busan handled 14.1 million TEU in transshipment cargo out of a total throughput of 24.88 million TEU, making it the world's second-largest transshipment port.

The South Korean government has designated the Arctic shipping route as a national policy priority and established the Arctic Shipping Route Promotion Headquarters in December 2025, coinciding with the relocation of the Ministry of Oceans and Fisheries to Busan. The Special Act on the Arctic Route was also passed in May 2026 with the unanimous support of all 167 lawmakers present at the National Assembly and is scheduled to take effect on December 17.

These developments could provide fresh momentum for realizing the vision of the Southern Maritime Capital Region. By linking Busan's international maritime business capabilities, Ulsan's eco-friendly energy industry, and South Gyeongsang Province's port logistics and manufacturing base with the shipbuilding centers of Ulsan and Geoje, the region could develop an integrated Arctic shipping ecosystem. Such an industrial network could encompass the entire value chain, from polar vessel construction and fuel supply to transshipment, maritime insurance, and ship repair.

At the same time, South Korean shipping companies must build a reliable operational track record by securing a balanced mix of cargo. This should include general container cargo, energy and project cargo that can help stabilize revenues through long-term contracts, and time-sensitive, high-value-added shipments. Japan's experience in transporting energy and bulk commodities, including LNG, through the Arctic Route offers a useful reference for diversifying cargo types and developing commercially sustainable operations.

Ultimately, South Korea's competitiveness in Arctic shipping will depend not only on its ability to build advanced vessels and develop port infrastructure, but also on its capacity to integrate shipping services, logistics, energy supply, and maritime finance into a commercially viable ecosystem.

The missing piece is “software”—the institutional, financial, and operational capabilities needed to make Arctic shipping commercially viable.

In a survey of 200 local companies conducted by the Busan Research Institute last April, 67.5 percent expressed an interest in entering the Arctic shipping market, but only 15.0 percent were actively preparing to enter or had concrete plans to do so. In the same study, experts identified legal and regulatory frameworks and access to finance as the areas in which capabilities were most deficient relative to their importance.

The challenges were also evident in the first pilot voyage. Export cargo volume reached only 737TEU, equivalent to 57 percent of the 1,300TEU projected in a demand survey conducted in June. The return voyage was also delayed by six days compared with the original schedule, highlighting persistent difficulties in securing sufficient cargo, maintaining schedule reliability, and managing operating costs.

These findings reveal a significant gap in South Korea's Arctic shipping readiness. While the country's maritime hardware—its ships, shipyards, and port infrastructure—is world-class, the supporting capabilities in finance, risk management, regulatory compliance, and commercial operations have yet to reach the same level of development. Closing this gap will be essential to translating South Korea's technological and industrial strengths into sustainable competitiveness in the Arctic shipping market.

Response Strategy: Becoming a “Facilitating Nation” That Enables Arctic Shipping

South Korea cannot independently operate Arctic shipping routes or determine the rules governing their use. Navigation through the Northeast Passage requires coordination with coastal states and compliance with applicable international sanctions and regulations. Nevertheless, South Korea can assume an important role as a “facilitating nation”—one that helps create the conditions necessary for safe, reliable, and commercially viable Arctic shipping.

This strategy should be guided by three principles.

First, diversify cooperation in accordance with international sanctions and norms.

South Korea cannot independently operate Arctic shipping routes or determine the rules governing their use. Navigation through the Northeast Passage requires coordination with coastal states and compliance with applicable international sanctions. Nevertheless, South Korea can play an important role as a “facilitator” of Arctic shipping by helping create the conditions necessary for its safe, reliable, and commercially viable operation. This approach should be guided by three principles.

Second, pursue phased investment based on demonstrated performance.

By 2029, South Korea should focus on demonstration projects, accumulating operational experience, and strengthening the necessary institutional frameworks. In the early 2030s, it could move toward regular shipping services and the deployment of larger vessels. Over the longer term, the goal should be to establish a self-sustaining domestic industrial ecosystem supporting Arctic shipping.

The pace of investment, however, must be aligned with actual commercial performance. Preparations that will be necessary regardless of how quickly Arctic shipping develops—including workforce training, professional certification, and maritime data capabilities—should begin immediately. By contrast, large-scale investments in infrastructure, such as hinterland logistics complexes and specialized fuel terminals, should be made only after regular operations have demonstrated commercial viability and the prevailing sanctions environment has been carefully assessed.

Third, redefine the criteria for measuring success.

Performance should not be evaluated primarily by the number of vessels transiting Arctic routes. More meaningful indicators would include the establishment of regular shipping services that comply with international sanctions, the schedule reliability of seasonal operations, and the domestic economic value generated through ship repair, maritime insurance, and the sale of specialized equipment and services.

Ultimately, South Korea's objective should not simply be to increase the number of vessels using the Arctic Route. It should be to build the institutional capacity, industrial expertise, and international trust that make reliable Arctic shipping possible. This is what it means to become a “facilitating nation.”

The South Korean government must take the lead in creating the necessary conditions and establishing clear guidelines for Arctic shipping. The first master plan under the Special Act should include measures to establish regular pilot voyages, train specialized polar seafarers, support the financing of ice-class vessels, and assist companies in complying with international sanctions. The government should also expedite the publication of an operational white paper covering six key indicators: distance, transit time, fuel consumption, operating costs, schedule reliability, and insurance.

Insurance premiums, in particular, reflect not only the physical risks of Arctic navigation but also the “cost of uncertainty” arising from insufficient data. To reduce this uncertainty and build international trust, South Korea should promote the sharing of sea ice and maritime safety information with the international community. At the same time, it should develop domestic capabilities to interpret, analyze, and process such information into commercially viable Korean maritime data services.

On the diplomatic front, South Korea should pursue the vision of an “open Arctic governed by rules.” To advance this objective, it should make effective use of its observer status in the Arctic Council, which it has held since 2013, its participation in the Agreement to Prevent Unregulated High Seas Fisheries in the Central Arctic Ocean, and the opportunity presented by the 2028 UN Ocean Conference in Busan, which it will co-host with Chile.

While deepening industrial cooperation with its allies, South Korea should also maintain channels for practical cooperation that transcend geopolitical divisions, particularly in scientific research, maritime safety, and environmental protection. Such an approach would help position South Korea not merely as a participant in Arctic shipping, but as a constructive international partner contributing to its responsible and sustainable development.

The private sector, too, must move beyond isolated corporate initiatives and adopt a more coordinated, collective approach.

Shippers should establish a joint shipper consortium and secure cargo for both outbound and return voyages through advance shipping commitments. Shipping companies, meanwhile, should diversify operational risks by combining seasonal Arctic services in summer with conventional routes through the Suez Canal in winter.

As the South Korean government seeks to achieve economies of scale by around 2035 through the deployment of larger vessels, shipyards and marine equipment manufacturers should begin accumulating practical experience in polar operations. This would help them prepare for future opportunities in the construction of large ice-class container ships and participation in the supply chains supporting icebreakers for allied countries.

Financial institutions, insurance companies, and maritime data providers should also develop specialized services, including polar insurance products and sea ice forecasting and risk assessment systems, drawing on data accumulated through actual Arctic operations.

International experience offers useful lessons. Finland has developed an integrated Arctic industrial ecosystem by bringing together vessel design, shipbuilding, and financing capabilities. Tromsø, Norway, provides another model, having established itself as a center for Arctic-related conferences, research, and investment. South Korea could draw on these examples to foster closer cooperation among businesses, financial institutions, research organizations, and public agencies, thereby building an integrated ecosystem capable of supporting the long-term development of Arctic shipping.

Researchers at the Busan Research Institute estimate that the global market for seven key industries associated with the Arctic shipping route could reach between KRW 165 trillion and KRW 370 trillion (approximately USD 111 billion to USD 249 billion) by 2050 under conservative and baseline scenarios. However, if full-scale market growth is delayed by five years, the median estimate could decline by approximately one-third. This underscores why “when” may matter more than “how much.”

With the government's target of establishing a regular shipping service between South Korea and Europe by 2030 approaching, time is becoming a critical factor. Yet the priority should not be the unconditional expansion of infrastructure, but rather the development of the institutional, financial, and technological capabilities needed to support the industry.

South Korea must now bring together its strengths in shipbuilding, shipping, and port operations with complementary capabilities in finance, maritime data, and institutional cooperation. Only by integrating these elements can the country foster not only the industries that will support Arctic shipping but also the international trust necessary to make “another route” commercially viable and sustainable.