DP World which stands for Dubai Ports International along with Rosatom the Russian Nuclear company operating the Russian Ice Breaking fleet have partnered up in a joint venture. DP World will be investing $2 billion as part of their 49% share holding, but gives them access and control to all the ports along the Northern Sea Route (NSR). The $2 billion buy in sounds pretty cheap compared to the upside which is bound to happen.
This joint venture between Rosatom and DP World was first announced back in 2021 and then October 2023 with nothing ever materializing. With more details of the deal this week being revealed it seems both parties are now ready to move forward. The Middle East conflict has created a shipping crisis and the NSR could be an alternative route.
The Northern Sea Route and it's expansion is the reason with this joint venture and will split the Russian container company FESCO 51% to 49%. FESCO stands for Far Eastern Shipping Company. Rosatom will give up it's current shareholding whilst DP World will inject the equivalent in cash depending on the market valuation of the Russian company. $2 billion is the projected number which will also help fund infrastructure purchases required to servicing containers. Russia choosing DP World over a Chinese company is kind of telling and definitely limiting Chinese involvement. This is the Russians protecting what they see as their route as the Chinese would love nothing else, but to be a joint partner.
This partnership is the biggest news for the Northern Sea Route we have seen thus far and one can expect to start to see some big upgrades and changes. DP World is a logistics and port operator based in 80 countries around the world and is a state owned company from the UAE.
The joint partnership is subject to government approval on foreign assets, but see no problem as Putin and co must be overjoyed. The goal aligns with the strategy of having a global logistics operator oversee and run the NSR. The Russians up to this point have not done much and needed help and assistance to grow the shipping volumes.
One has to understand the importance of this new partnership as DP World is responsible for 10% of all global trade using more than 560 business units operating in over 80 countries. The turn key solutions they offer are from factory to the end user using their network they have created.
DP World will be responsible for the development of port infrastructure in Russia whilst Rosatom will be responsible for handling the frozen waters and safety of the vessels. The sanctions Russia finds itself under will be less of a problem having DP's network helping bypass restrictions. The UAE was a temporary solution years ago when the Russian domestic commercial aero planes required Boeing and Airbus spares and it sounds like DP World may have been involved with providing this service. You often wonder how things happen and this sounds like there was already some type of relationship.
The circumventing of sanctions using DP World with the number of companies it has under it's control would help muddy the waters through far more complexed ownership chains when dealing with Russian trade. Russia giving up 49% of FESCO is more of a strategical move and not just about the Northern Sea Route and more about tapping in to global trade.
DP World will be given the task of finding new customers to use the NSR and grow the shipping volumes. With DP World on board and not solely Russian or Chinese companies there should be more trust shown moving forward. The only downside is DP World will open itself up to more regulatory scrutiny with the movement of goods mainly as the world kind of knows who is benefitting more from this joint venture.
