A Pipeline Mystery Has a $53 Million Solution

The hunt is on to find the perpetrator of the sabotage on the Balticconnector pipeline between Finland and Estonia—especially since the same perpetrator appears to have sabotaged two undersea cables between Finland and Estonia, and between Finland and Sweden as well. But one group is following the investigations more closely than anyone else: insurers. A lot is riding on the perpetrator’s identity, because if the sabotage was conducted or sponsored by a state it can count as an act of war, which means standard insurance won’t cover it. And today it’s harder than ever to determine what is, and isn’t, part of warfare.

Whodunit? NewNew Polar Bear, a Chinese-owned, Hong Kong-flagged container ship, appears to have been present when an undersea cable between Sweden and Estonia was damaged in the night between Oct. 7 and 8. It was definitely present when the nearby Balticconnector was damaged during the same night—and when undersea cable between Finland and Estonia was damaged.

Shortly afterward Finnish, Swedish, and Estonian authorities identified NewNew Polar Bear as a vessel of interest, and shortly thereafter the Finnish police discovered the anchor that appeared to have caused the damage. NewNew Polar Bear, it also turned out, was missing an anchor.

Is the ship linked to a foreign state—Russia or China, say? NewNew Polar Bear is certainly well-connected, because in the past three months she has completed a pioneering roundtrip journey, sailing between Russia’s Baltic Sea coast and China’s east coast using the Northern Sea Route along Russia’s Arctic coast, thereby establishing that the crucial route is indeed passable for container ships. She did so escorted by an icebreaker belonging to Russia’s state-owned Rosatom, though the ice was so thin that she turned out not to need icebreaking help.

Now NewNew Polar Bear is on her way back via the Northern Sea Route—and as the High North news site Barents Observer has discovered, the permission issued by the Northern Sea Route Administration (which operates under Rosatom) is no longer issued to the Chinese firm Hainan Xin Xin Yang Shipping Co. but to Torgmoll, a company registered in Russia with offices in Moscow and Shanghai. The company concerns itself with the implementation of China’s Belt and Road Initiative and is a partner of the Russian-Chinese Business Council. She’s also connected with two government-linked Russian transportation companies that have been sanctioned by Ukraine.

As I said, NewNew Polar Bear is well-connected to Russian and Chinese officialdom. But do her connections mean that she acted on behalf of the Russian state, the Chinese state, or both? If she turns out to be the culprit in the three acts of sabotage, her government links matter, and the same goes for any other vessel and individuals involved in the acts. The government links matter to the three countries’ governments, of course, and to the many eager online sleuths. But most urgently, they matter to the insurers of the Balticconnector and the two undersea cables. The Balticconnector, which cost 187 million euros to build, is insured for 50 million euros. Insurance works if it covers accidental damage and misfortune, not businesses pushed into a geopolitical battleground.

If it turns out that the perpetrator was, say, a rogue captain who wanted to spend the night between Oct. 7 and 8 harming some Baltic Sea infrastructure, the standard commercial insurance that all companies are required to have is likely to cover the damage. But if the investigators conclude beyond reasonable doubt that the perpetrator was NewNew Polar Bear and that she’s connected to the Russian state, the Chinese state, or both, that changes everything.

Consider NotPetya, the devastating cyberattack that brought down Ukrainian hospitals, banks, airports, and much else in 2017. After wreaking havoc on Ukrainian institutions, NotPetya crippled a string of Western multinationals including Mondelez (the snack giant known for Oreos and Doritos), Merck, and the Danish shipping giant A.P. Moller Maersk. A few months later, the United Kingdom, the United States, and a few other Western governments attributed the attack to Russia.

That attribution, and the fact that Western leaders have long talked about how the nature of war is changing, convinced some of the victims’ insurers that the attack was a hostile state attack and not covered by the victims’ standard business insurance. Because such insurance excludes “hostile or warlike action in time of peace or war,” the underwriters refused to pay.

Mondelez settled with its insurer, but Merck and its underwriters went to court, and earlier this year an appellate court in New Jersey sided with the pharmaceutical giant. “The exclusion of damages caused by hostile or warlike action by a government or sovereign power in times of war or peace requires the involvement of military action. The exclusion does not state the policy precluded coverage for damages arising out of a government action motivated by ill will,” the court ruled. It was not willing to refine war.

But some jurists criticized the court’s verdict. “The decision relies upon case law rendered before the Internet existed and before ‘cyber’ was a word. (We’re not joking.) The reasoning of this decision looks backward to a century past, and we believe it will not age well,” two partners at Kennedys Law noted in an article. Now two undersea cables and one pipeline in the Baltic Sea have delivered a similar dilemma for insurers, the affected companies, and possibly courts: If the sabotage was linked to a state, does it constitute an act of war?

A lot of money is at stake, not just this time but every time companies are attacked with non-military means. Last year an undersea cable connecting the Norwegian Arctic archipelago of Svalbard with Norway proper was damaged, and Norwegian authorities later established it was a case of “human involvement.” Earlier this year, two Chinese vessels severed the two undersea cables connecting the Matsu Islands with Taiwan proper. And last year, of course, saw the Nord Stream explosions, which Swedish and Danish authorities have concluded were acts of sabotage, but by whom remains unclear.

Attacks on companies will continue because they’re easier and cheaper than military aggression—and every time the companies and their insurers will face massive bills and the fundamental question of what constitutes an act of war. We’ll all continue searching for NewNew Polar Bear’s identity and state connections. And she won’t be the last mysterious suspect in a geopolitically motivated crime.