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Breaking the ice

When will thousands of ships sail through the Northern Sea Route?

The prime minister of Russia Dmitry Medvedev approved a multipurpose project for the development of the Northern Sea Route (NSR), which will enable the use of the full potential of the North sea area for transit maritime and cargo shipment to the remote regions of the North It is difficult to underestimate the significance of the most northern transport route in terms of geopolitics and geostrategy: it’s the framework of the whole infrastructure of the Russian arctic zone. The development and exploration of the Arctic is a one of the priorities of the national strategy.

Breaking the ice

A year ago, President Vladimir Putin made that announcement during a session with the Security Council following corresponding government commissions. A combination of top priority measures was put forth by the development of the transport system task group of the Government Commmittee on the Development of the Arctic and ideas were also brought in by experts from specialized ministries and departments.


In the last years, the amount of sea shipments around the SMP has increased. The amount of the shipped cargo increased from 110 tons in 2010 (4 ships) to 1.26 million tons in two years when 46 ships came through. Currently more than 600 ship permits are approved annually and the amount of shipment has reached 4 million tons. According to the multipurpose project for the development of the Northern Sea Route signed by prime minister Dmitry Medvedev, an increase in the amount of shipment by 20 times, more than 80 million tons of cargo, is expected in the next few years.


The main users of this trans-port corridor are such companies as Norilsky Nikel, Gazprom, Lukoil, Rosneft, Rosshelf. Several Russian regions have an economic interest in the development of NSR, like Krasnoyarsky region, Yakutia, Chukotka. The advantages of the Northern Sea Route are evident: from Murmansk it leads straight to Kamchatka, Japan and China, whereas the traditional sea route lies through the Panama Canal and is three times as long. If the route from Murmansk to Yokohama (Japan) through the Suez Canal is 24 thou-sand kilometers, then it is less than 11 thousand kilometers through the Northern Sea Route. St.Petersburg to Vladivostok is 14 thousand kilometers through the Northern Sea Route, 23 thousand kilometers through the Suez Canal and almost 30 thousand kilometers around Africa. The global warm-ing actually acts as an advantage for Russia: even those sea areas that used to be closed off by 5 meter ice can now be used for year-round navigation. Experts predict that the shipments through NSR will be increasing with the exploration of oil fields in the Karsky and Pechorsky seas (for example, in the Prirazlomnoye and Novoportovsky fields at the most northern wellsite in Russia, Universitetskaya-1 and others).

Another important advantage associated with unpleasant realities is the fact that there are no pirates in the Arctic seas. Therefore, choosing between a constant risk of an attack and difficult geographical conditions in the rough climate, pragmatic businessmen prefer the cold and ice and security.

According to the UN Convention on the maritime law there is a special regime for navigating through the NSR that is determined by Russia.

It was already announced that Russia would not be charging for transit and can organize a convoy of nuclear icebreakers for commercial ships as a paid service. In 2010 the Sovkomflot company, which is one of the five largest freight carrier companies in the world dealing with tanker fleets, once again proved that its plans are based on considerable experience. The company conducted an experimental voyage on a large tanker SKF Baltica supported by a nuclear ice-breaker. The development of the ice-breaker fleet is one of the directions in the Arctic exploration program. There is a plan to build a nuclear icebreaker of the new generation by 2017 as part of the LK-60YA project, which will be named Arktika after the legendary soviet icebreaker. In the next 10 years, the Atomflot plans to construct three more icebreakers of the same type and also a series of diesel icebreakers of the LK-25 project for working in the White and Baltic seas. There is a 20.4 billion Ruble contract between Rosmorport and the United Shipbuilding Company that involves the construction of four icebreakers with a 16 to 25MW capacity.

A big interest in the SMP is expected to come from international partners, China in particular, which plans to transfer 1 percent of its outgoing cargo shipment to this route by 2020. China has already shipped more than 900 thousand tons of cargo through the NSR between 2010 and 2013. However, in order to attract international freights to this transport corridor the coastline infrastructure of such ports as Khatanga, Tiksi, Pevek, Dudinka and Dikson should be modernized and new ports should be built in the Kharasavey, Pechenga and Varandey villages. The decision to build an ice-free port Indiga on the Bering sea has already been made. Its capacity will reach 30 million tons of cargo a year. It is also necessary to create a modern system of cartographic and navigational services. According to the Deputy prime minister Arkady Dvorkovitch the work on forming a search-and-rescue system on the NSR has begun and by 2020 a network of arctic control-correcting GLONASS/GPS stations will be created.

The main downfalls of a global project is funding. Deputy prime minister of Russia Vladimir Rogozin announced that the arctic programs will receive 222 billion Rubles in the next few years, 160 billion of which will come from the federal budget. However, experts estimate that these goals need trillions of capital investment and not only a consistent flow of capital but also a major client base. The experts believe that the Northern Sea Route can become a real rival to the south routes by 2030.

Comment


General Director of the Far East Development Fund Alexey Chekunkov comments on the prospects for the Northern Sea Route (NSR).

Recently, the issue of NSR development and exploration of the Arctic has been actively discussed both in Russia and in the rest of the world. Leading experts in Russia and the Asia-Pacific Region believe that the NSR will form a basis for future development of the world’s maritime logistics and trade. Others express concern that existing natural constraints on the NSR can affect the competitiveness of the route com-pared to more predictable routes. Based on the established facts, climate change has caused a decrease in Arctic ice cover. The development of Arctic territories and waters to organize the production of hydrocarbons and metals requires the enhancement of freight logistics on the NSR. Leading ocean carriers have a practical interest in the NSR in view of the possibility of reducing the goods shipping arm from Asia to Europe and back. With efficient management of cargo traffic and the availability of icebreakers, the NSR can prove to be more competitive than traditional logistics routes. Be-sides, the demand for the NSR is stipulated by the geopolitical situation that is emerging in the Asia-Pacific Region. In the context of an excessive concentration of maritime traffic and international trade flows, already exceeding the carrying capacity of the Suez and Panama canals, as well as the aggravation of territorial disputes in the Asia-Pacific waters, it becomes urgent to develop a project to create a full-fledged alternative route. The NSR is a spare promising driving force for world maritime trade.

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Launching the Northern Sea Route may have a huge impact, which will spread to a wide range of industries – from shipping trade and shipbuilding to high-tech related, for example, to production of navigational equipment. The NSR is being already actively used by Russian companies that are implementing large-scale projects for exploration and development of mineral deposits in the Arctic zone (MMC Norilsk Nickel PJSC, the Yamal LNG, Gazprom Neft, Rosneft, and others). Hydrocarbon feed-stock and petroleum products account for 70 percent of cargo transportation on the NSR. Large-scale Arctic oil and gas projects are the first striking examples of activities on the NSR, which have given a powerful impetus, particularly, to the implementation of the nuclear-powered icebreaker fleet development program.

A significant part of the NSR extends over the Far East. Main directions of trade flows are in the Asia-Pacific Region, which is our target region for exports of goods and services produced in the East of Russia. To establish a logistics route of new quality on the basis of the NSR, it is necessary to create conditions for the development of container traffic and attract major international ship-owners and cargo owners, for which such factors as straight-line relation and predict-ability of route as well as security of supplies are important. Recently, there have been ever more cases when the world’s major carriers set up operational alliances seeking an optimal allocation of expenditures and reduction of transportation costs. And co-operation is one the formats of state-business interaction when implementing such a strategic project as commercialization of the NSR. Potential impetus to this process may come from carriers interested in using the NSR as an alternative route. We are already discussing with major port operators and international sea carriers the prospects for using the NSR for container transport, transportation of fish from the Far East to the European part of Russia, Europe, and Southeast Asia. However, a comprehensive approach to the development of the NSR involves fulfilling the performance potential of the waters not only for transit navigation but also for the delivery of goods within a country, the integration of the NSR with the Russian economy.

Currently, the NSR plays a modest role in global maritime traffic. Total transit cargo transported via the NSR in 2014 amounted to 4 mln tons. For comparison, an estimated 5,660 mln tons of cargo were transport-ed through the Strait of Malacca; 882 million tons of cargo, through the Suez Canal; and 222 mln tons, through the Panama Canal. However, with the increased availability of icebreakers and the creation of an efficient cargo management system, the NSR can become more efficient than the existing routes through the Suez Canal. We encourage consideration of the NSR as a commercial project, requiring a certain level of critical infrastructure. In particular, the route prospects directly depend on the pace of implementation of the Russian nuclear ice-breaker fleet development program – effective commercial exploitation of the NSR is hardly possible with the restricted icebreaking capacity. We already see some progress being made in this regard. Two new nuclear-powered icebreakers have been laid. Construction of the third icebreaker is planned to start soon. A draft design of a 50-meter nuclear leader-icebreaker with power of 110 MW has been developed. Ice passability of the icebreaker (4.5 m) is expected to enable year-round navigation along the NSR. Construction of new ice-class vessels and icebreakers can significantly reduce the cost of the transported goods. Expansion of the icebreaker fleet will make it possible to eliminate restrictions related to the unpredictability of the route and find a solution to a number of technical is-sues of second and the third priority in terms of pricing, establishment of the security system, attraction of operators, and marketing. Efficient performance of the NSR as a universal maritime logistics route also depends on the quality of the ground rail infra-structure. To ensure an uninterrupted delivery chain, northern seaports must be linked to the railroad network. However, there is only railroad access to ports in Murmansk and Arkhangelsk. Therefore, it is very important to facilitate the implementation of projects aimed at developing the transport infrastructure of the Russian North and the Arctic, for example, such as the Northern Latitudinal Route. The well-developed infra-structure can allow transportation of freight in the volumes we are targeting for.