This article is a follow-up on some conclusions and recommendations contained in the report by the Valdai International Discussion Club “Toward the Great Ocean-2, or Russia’s Breakthrough to Asia.” In addition, the authors used the results of the project “Theoretical and Applied Aspects of the Assessment of the Possibility of Integration of Siberia and the Russian Far East into Economic Processes in the Asia-Pacific Region,” undertaken as part of a fundamental research program in 2014.
The last decade saw a great surge of international interest in the Arctic region. Rising oil prices, technological development and the discovery of huge reserves of natural resources in the Arctic continental shelf made ??people speak of it as a region of enormous riches. It began to be seen as a new Klondike, which triggered a geopolitical struggle for the region and put it on the verge of militarization. Later, the situation calmed down as the Arctic countries engaged in peaceful and intensive cooperation (see Scott Borgerson. The Coming Arctic Boom. Foreign Affairs, July/August 2013). The recent deterioration of Russia-West relations has increased the risk of re-militarization again as the Arctic countries are planning to expand their military presence in the region.
The struggle for the Arctic resembles attempts to count one’s chickens before they are hatched – the development of Arctic hydrocarbon reserves has only begun, and their estimates are obviously speculative. If the military-political rivalry does not evolve into an open confrontation, it can even speed up the region’s development by fueling interest in it and mobilizing resources for infrastructure construction. But in the long term, intensive cooperation promises much more benefit to all Arctic countries, above all, transit opportunities emerging with the melting of the Arctic ice and the shifting of the center of economic power to Asia.
The development of the Northern Sea Route will open up new prospects for Russia. It should give up its post-Soviet practice of viewing the Arctic as as a territory that is economically irrelevant and burdensome because of the need to maintain a population there. The Northern Sea Route can make the Arctic a region of development.
The main condition for that would be the maintenance of peace and an atmosphere of cooperation in the region, and a well thought-out state policy for developing the route based on the principles of indisputability of state sovereignty over mainland and offshore areas, environmental security, and maximum use of international opportunities.
PROSPECTS OF THE NORTHERN SEA ROUTE
The Northern Sea Route is a shipping lane running along the Russian Arctic coast from Cape Zhelaniya (Novaya Zemlya) to the Bering Strait, where navigation is affected by ice cover. Depending on ice conditions, the fleet’s power, and characteristics of the escorted ships, the length of the route varies from 2,200 to 3,000 miles. The navigation of ships with deeper draft (over 11 meters) requires the route to be shifted farther north, into the high latitudes. This, in turn, sets higher technical requirements for escorting and may increase the travel time.
In 2010, four ships sailed along the Northern Sea Route. In 2012, their number increased to 46, and in 2013 to 71. In 2010, 111,000 tons of cargoes were transported by this route, and in 2013 the shipping traffic exceeded 1.4 million tons. In 2015, the volume of cargo carriage is expected to rise to four million tons, and there are plans to increase it further to 60-70 million tons by 2030. The bulk of the shipments will include energy resources, considering the planned development of the Arctic shelf and the growth of the liquefied natural gas market.
The traffic growth rates will depend on endogenous factors (efficiency of projects for the construction of LNG plants, the construction of infrastructure along the route, the development of adjacent regions, and the government’s tariff-setting policy) and exogenous factors (climate change, global regulation and environmental security trends , international partners’ expectations and their realization in projects to build vessels and redirect marine traffic to the Northern Sea Route).
Even under the best-case scenario, the Northern Sea Route will not become a key transit route of a global scale. Suffice it to mention that cargo shipments through the Suez Canal in 2012 amounted to almost 740 million tons. This is 10 to 12 times more than the Northern Sea Route’s projected capacity even in twenty years’ time. At present, the amount of cargo transported along the Northern Sea Route per year is less than daily cargo shipments through the Suez Canal.
The importance of the Northern Sea Route is not in trying to make it a new Suez Canal, but in giving a boost to the development of service industries (mainly high-tech industries) and adjacent regions, as well as in opening one more window of opportunity for Russia’s integration into the global world.
THE BENEFITS OF THE NORTHERN SEA ROUTE
In 2009, two foreign ships made the first international commercial transit via the Northern Sea Route. The ships, escorted by two Russian nuclear icebreakers in the Arctic waters, started their journey in the port of Masan, South Korea. On their way to the West, they entered Novy Port in the Yamburg region for unloading. It took the ships 21 days to reach Russia’s western sea border.
The Northern Sea Route essentially reduces the time needed for voyages between East Asia and Northern Europe. For example, a trip from Kobe, Japan, to Russia’s Murmansk via the Northern Sea Route will be almost 19 days shorter, and it will take 6.5 less days to go from Hamburg, Germany, to Ningbo, China. The precise figures depend on the port of departure/destination, the route taken by the ship (via the Suez Canal or around the Cape of Good Hope), and navigation conditions.
The period of ice-free navigation along the Northern Sea Route is about fifty days on average, and it tends to increase due to climate change. Using icebreakers extends this period substantially. Yet, even with icebreakers, only certain ice-class vessels can navigate Arctic waters all year round.
Shipping between Melkøya, Norway, and Yokohama, Japan, via the Northern Sea Route will save up to 21 days in one direction alone and $18 million to $20 million a year in freight payments and fuel (provided a ship sails three times a year). And $800,000 can be saved in fuel costs per one-way voyage.
Estimates for the route between Yokohama, Japan, and Hamburg, Germany, show that container shipment expenses along the Northern Sea Route in summer are 30 to 35 percent lower than the cost of shipment via the Suez Canal, while in winter, on the contrary, they are 25 to 27 percent higher. The cost of navigation in the Arctic will decrease as more experience is gained and as technological efficiency grows. The development of infrastructure would also help reduce the costs.
The Northern Sea Route has competitive advantages over alternative routes linking Northern Europe with Asia. These are almost zero risks of pirate attacks, as compared with the Gulf of Aden and the South China Sea; the absence of strict size and displacement limitations (although for large ships the voyage may be longer as they will have to take a more northern route); and the absence of bottlenecks, compared with other routes with high traffic flows.
The transit capacity of the Strait of Malacca has reached its limits. The number of ships going through the strait cannot increase due to natural limitations – the Singapore Strait which connects the Strait of Malacca and the South China Sea at its narrowest point is only 2.8 kilometers wide at best.
The capacity of the Suez Canal is limited by two factors. Firstly, it has only one shipping lane – ships pass in convoys and they use bypasses. As a result, only about 80 ships a day can transit the canal in both directions. Secondly, there are size limitations for ships: the canal allows the passage of ships of up to 20 meter draft or 240,000 deadweight tons and up to a height of 68 meters above water level and a maximum beam of 77.5 meters. Therefore large ships have to offload part of their cargo onto canal-owned boats before entering the canal.
The Panama Canal sets even stricter requirements for ships: draft of no more than 12 meters, and deadweight of 80,000 tons. Once the canal’s deepening is completed in 2014-2015, these figures will increase to 18 meters and 120,000 tons, respectively.
The realization of the competitive advantages of the Northern Sea Route requires additional efforts to explore the seabed, develop promising routes, and update maps. Hydrographic studies to ensure the safety and efficiency of navigation are needed, above all, near seaports, in the estuaries of the rivers Ob, Yenisei, Khatanga, and Kolyma, in navigable passages, and along a high-latitude stretch of the Northern Sea Route intended for large tankers.
Shorter voyages offered by the Northern Sea Route mean reduced fuel consumption and therefore reduced harmful emissions, including greenhouse gases. At present, transportation emissions are not taken into account in climate regulation policies, largely due to technical difficulties, even though everyone understands the need for that. It is very likely that when a new climate agreement is signed, freight transportation will come under regulation. In this case, the attractiveness of the Northern Sea Route will grow, compared to longer (and therefore more hydrocarbon-intensive) routes. Contrary to a popular belief, the Northern Sea Route is the most environmentally friendly of all sea routes connecting Europe and Asia.
THE DEVELOPMENT OF NORTHERN SEA ROUTE INFRASTRUCTURE
In his address to the Federal Assembly in 2012, Vladimir Putin said: “The most important development priority is regional aviation, as well as seaports, the Northern Sea Route, the Baikal-Amur Mainline, the Trans-Siberian Railroad, and other transit corridors. […] We have to ensure the unity of Russia’s entire territory, in the full sense of transport connectivity.” Several strategic documents have been adopted since then (Strategy for Developing Port Infrastructure until 2030, Strategy for Developing the Arctic Zone until 2020, and Transport Strategy until 2030), which pay increased attention to the Northern Sea Route. Also, the state program “Socio-Economic Development of the Arctic Zone of Russia for the Period until 2020” was adopted. Initially, the Ministry of Regional Development was put in charge of the program’s implementation. Later, however, the ministry was abolished, and its functions were delegated to the Ministry of Economic Development. It has been repeatedly proposed to establish a special government agency to oversee the region’s development. The aforesaid suggests that the government has ambitious plans concerning the development of the Arctic, but details of their implementation are often called into question.
The competitiveness of the Northern Sea Route is decreasing due to the underdevelopment of its physical infrastructure: it is required to modernize the existing port facilities and build new ones, along with rescue stations, to equip rescue vessels, and develop a network of training centers. Cargo turnover can hardly be increased without deepening river fairways and river ports. Another major obstacle is the weak development of multimodal systems along the Northern Sea Route, that is, infrastructure in points of junction of sea/river and sea/railway transport.
Apart from the physical infrastructure, the Northern Sea Route has information and intellectual infrastructure, including such mechanisms as the coordination of ship traffic, management, weather monitoring (analysis of incoming data and timely forecasting), communication, and alerting. The information infrastructure is also based on physical infrastructure, but it provides services that make transportation via the Northern Sea Route not just possible but attractive, safe and cost-effective. The safe use of the Northern Sea Route is an especially acute issue due to insufficient coordination among relevant agencies and institutions after the break-up of the Soviet Union, and the creation of private systems by interested companies to meet their own needs. They must be united into a single network.
Factors that have a negative impact on development prospects for the Northern Sea Route and extraction of mineral resources on the continental shelf include selective support during search and rescue operations at sea. Support must be provided along the entire Northern Sea Route for search and rescue efforts and for oil spill prevention and response measures primarily by investing in the modernization of life-saving equipment and increasing the efficiency of marine rescue sub-centers and coordination centers.
The speed of delivery is the cornerstone of the Northern Sea Route’s competitiveness. Therefore, the development of infrastructure should focus on how to ensure the predictability of travel time. The main emphasis should be placed on the development of not only port and navigation infrastructure, but also the icebreaker fleet. The importance of the latter is vividly illustrated by the opening of year-round navigation in the western stretch of the Northern Sea Route after powerful Arktika-class nuclear icebreakers were put into operation in 1978.
At present, six nuclear and nine diesel-electric icebreakers operate on the Northern Sea Route. This is not enough to significantly increase the turnover. According to modest forecasts, ten icebreakers are required to ensure the operation of the Dudinka-Murmansk leg alone. Growth in freight turnover will require more icebreakers: depending on the complexity of navigation in ice conditions, 10 to 12 additional icebreakers will be needed in the period until 2030 (considering the decommissioning of existing vessels).
Variable-draft LK-60Ya-class nuclear icebreakers with a far wider hull are a very special case. Three of them are scheduled to enter service in 2018, 2020 and 2021. They are capable of navigating both the Northern Sea Route and the estuaries of Siberian rivers. Compared to icebreakers built in the Soviet Union, they have a larger displacement and more powerful nuclear propulsion systems. The new icebreakers will escort Aframax ships with a displacement of less than 120,000 tons. Experts believe that, under favorable weather conditions, one icebreaker will be able to escort two ships. In this case, however, the Northern Sea Route, while offering the speed advantage, will lose in such a parameter as the maximum size of escorted ships, which is critical in the transit of containerized cargo.
Russia still has the world’s largest icebreaker fleet, and it is an essential prerequisite for receiving direct benefits from more intensive transit services. This potential should be preserved and increased to secure the country’s specialization in icebreaking services. These efforts may be impeded by a belief that icebreaking will become redundant in a few decades as the Russian segment of the Arctic will be free of ice by then. However, believing in such a scenario would be just as extreme as denying climate change. Secondly, even in the case of a hypothetical implementation of this scenario, the threat of ship collisions with icebergs will only increase, and icebreakers will be needed to counter this threat.
In addition to the development of the icebreaker fleet, the modernization of icebreaking services also requires the training of pilots, and the signing of agreements with interested parties (including foreign companies planning to use the Northern Sea Route for transit shipments) to determine proficiency requirements for pilots and captains qualified to navigate ships on ice-covered routes.
THE NORTHERN SEA ROUTE AND OTHER ARCTIC PROJECTS
The main regional project closely linked with the Northern Sea Route is the development of energy resources on the Yamal Peninsula, primarily as part of the framework of the Yamal LNG project. It is based on the South Tambey field with 1.3 trillion cubic meters of natural gas and 40-60 million tons of gas condensate. The project provides for the construction of the first LNG plant in the Russian Arctic. NOVATEK holds controlling interest in it, France’s Total and China’s CNPC each has bought 20 percent of shares, and the remaining 10 percent minus one share are to be sold to foreign investors as well.
The Yamal LNG project is expected to make a breakthrough in the Russian energy sector. Given the growing volatility of fuel prices, energy sales under long-term contracts are losing their appeal. The era of pipeline deliveries is giving way to an era of LNG, which better meets the new conditions. Russia’s geographical position, which enables it to quickly enter both European and Asian markets, potentially makes it the most flexible energy supplier in the world. But this will require Russia to build LNG plants intended for both Europe and Asia, with Arctic projects being in-between to allow the country to amend its regional priorities in response to changes in the energy market. It’s noteworthy that despite its overall orientation to Asian markets, Yamal LNG has announced the signing of a 25-year contract with Spain’s Gas Natural Fenosa for the supply of 2.5 million tons of gas a year. Since its implementation will take decades, it would be too early to say how much it can be affected by the crisis in Russia-West relations.
In the middle of 2012, a seaport was founded at Sabetta to open a window to the world for Yamal. Initially the port was planned to be highly specialized and to serve only Yamal LNG. However, since the end of 2012, the government has been discussing the possibility of building a multipurpose port which could also ship products of the timber and wood-working industries, mineral fertilizers, coal and other raw materials. Another option being considered is attracting cargoes from rival companies to the port:
- oil from Gazprom’s Novy Port field on Cape Kamenny. Otherwise, one more port will have to be built 400 kilometers south of Sabetta, along with a railway to connect Novy Port with the already built Obskaya-Bovanenkovo line?;
- natural gas from north-western fields of the Yamal Peninsula. The gas is planned to be exported not only via the Yamal-Europe pipeline but also via a future deep-water port at Kharasavey, to be built nearby.
The implementation of all the three competing projects (Sabetta port, Novy Port and Kharasavey port) will not only reduce the efficiency of allocated resources but will also eliminate the positive effect from consolidated financial and other investments by interested companies.
The development of maritime transport infrastructure should be viewed in conjunction with the development of infrastructure for other kinds of transport. It would be expedient to establish a transport/logistics cluster for the entire region, where the maritime part – the Northern Sea Route – will be the central (but not the only) component.
Increasing freight turnover and growing demand for Northern Sea Route services will lead to a more intensive use of Siberian rivers. Their integration into the Northern Sea Route system will require the creation of navigable conditions in their estuaries and dredging work on rivers accessible for sea-river ships.
The construction of a North-Siberian Railway (as a westward extension of the Baikal-Amur Mainline from Ust-Ilimsk to Surgut) and multimodal transport hubs where it will cross major rivers – Lena, Yenisei, Angara and Ob – will boost the potential of the regions, increase freight traffic, and promote further development of the transport network and deeper integration of Western Siberia and the Russian Far East into the network of Euro-Asian transport corridors.
In turn, the development of infrastructure must be closely linked with industrial growth to create transport/industrial complexes. For example, the government of the Republic of Sakha is planning to use the Northern Sea Route to deliver coal from the Zyryanka coal basin to Europe and Asia. For this purpose, work is underway to build barges and river-sea tugboats, renovate the Zelyony Mys seaport, and dredge the estuary fairway of the Kolyma River. At present, the river is not deep enough to transport cargoes to the port of Pevek without transshipment.
The fairway in the estuary of the Lena is also deformed and does not allow river-sea ships to safely pass to and from Arctic sea routes that link the Lena with the rivers Yana, Indigirka and Kolyma. To do so, their cargoes need to undergo double or even triple transshipment.
The integration of the Yenisei into the Northern Sea Route is of particular importance. Linking the route with mainland Central Siberia will help its regions, above all in the Angara-Yenisei area, improve their positioning in the world markets. It will also help to build facilities for maintaining the Northern Sea Route at the junction of its western and eastern sectors and, most importantly, it will remove the “curse” of Central Siberia – its continental location – which pegs the region solely to domestic markets and prevents its integration into global economic processes.
Another project that may have special significance for the Northern Sea Route’s development is the construction of the Northern Latitudinal Railway that will link Chum (Komi), Obskaya (Labytnangi village, Yamal-Nenets Autonomous District), Salekhard (on the opposite bank of the Ob river from Labytnangi), Nadym, Pangody, Korotchayevo (Novy Urengoy) and Igarka (Krasnoyarsk Territory) in one transpolar mainline. The existing sections of the future railway have to be reconstructed and new railway bridges built, particularly across the Ob and Nadym rivers. The railway is intended to be part of the infrastructure that will provide access to the Sabetta port on Yamal and significantly increase freight traffic going through the port. In addition, the link to Novy Urengoy will give access to Yamburg on the Taz Peninsula and to Surgut which, in turn, is connected by railways with Tobolsk and Nizhnevartovsk.
The considerable uncertainty about the future development of the Northern Sea Route and the high cost of many projects (for example, the construction of the Northern Latitudinal Railway will require an estimated 150 billion rubles) necessitate a strategic partnership between the state and the private sector, including foreign investors.
The state should create conditions that would make investment projects attractive to business. The state’s financial participation is required where private businesses either are unwilling or unable to invest, for example, in the development of infrastructure to ensure the safety of the Northern Sea Route.
The development of the Northern Sea Route can be assisted by an increased Russian military presence in the Arctic. In Soviet times, the route was largely intended for military purposes, while its infrastructure can still be used for both civilian and military purposes. It is important, however, that the growth of military presence not destabilize the region, for this would undermine the competitive positions of the Northern Sea Route. An atmosphere of cooperation is an essential condition for tapping the full transit potential of the Arctic.
The state should serve as the main coordination center between companies and regional authorities. It would be advisable to delegate such powers to the Northern Sea Route Administration and the Ministry for the Development of the Far East. The implementation of projects in a limited number of key locations would make it more attractive for private businesses to participate in the development of the Northern Sea Route infrastructure.
INTERNATIONAL COOPERATION IN DEVELOPING THE NORTHERN SEA ROUTE
The Northern Sea Route is of great interest to foreign partners. On the one hand, they need transit, port, information and other services that Russia is ready to provide them with in its Arctic waters. On the other hand, they can help Russia build and modernize infrastructure for the Northern Sea Route. Russia alone will not be able to ensure a sufficient level of infrastructure development, or it will cost it too much.
The main players are the leading Asian countries – Japan, China and South Korea. Norway is interested, too. The Northern Sea Route can transform Norway’s geopolitical position by giving it control over Asia-bound marine traffic from Northern Europe. In addition, the Northern Sea Route will open up new opportunities for Norway’s Statoil as regards offshore operations and exports to Asia. One of the underlying principles of Norway’s Northern Strategy is the expansion of its presence on Asian markets. The development of the Northern Sea Route is also important to Oslo because Russian Arctic hydrocarbon projects are oriented to Asian countries, which will reduce the level of competitive pressure on Norwegian gas supplies to Europe. Not surprisingly, a Norwegian company became Russia’s first foreign commercial partner to carry out a non-stop transit voyage along the Northern Sea Route in 2010. It delivered iron ore to China.
China is another country interested in the development of the Northern Sea Route. A Chinese icebreaker first sailed along the route ??in 2012. In the same year, Beijing announced plans to build another icebreaker (officially for research purposes) by 2015. On the one hand, China’s interest is explained by its participation in the development of oil and gas fields in the Russian Arctic, which will increase as the number of Russian-U.S. Arctic projects goes down. On the other hand, the Northern Sea Route offers obvious transit opportunities: according to some estimates, China may supply up to 15 percent of its exports via this route by 2020-2025. Most likely, these estimates are inflated, but the seriousness of Beijing’s plans to develop transit capacities of the region cannot be doubted. Its main motives include the possibility to save money and the desire to solve the Strait of Malacca problem. China is too dependent on the Strait as regards fuel imports and industrial exports. In addition, there are the risks of traffic congestion and piracy. In the long term, cooperation with Iceland is a major aspect of Beijing’s efforts to enhance its transit capabilities, and the development of polar navigation can turn Reykjavik into a world-class port.
The first Japanese vessel to navigate the Northern Sea Route in 2011 carried iron ore from the Kola Peninsula to China. In 2012, Russia’s Gazprom delivered its first shipment of LNG to Japan’s Tobata from the Norwegian port of Hammerfest . Tokyo’s interest in the Northern Sea Route is similar to Beijing’s. Both countries want to use the route for gaining access to resources, primarily energy resources. Politically, Japan is interested in maintaining security and stability in the region, and, in favorable conditions, for shipping companies.
In September 2013, South Korea’s Hyundai Glovis launched its first voyage via the Northern Sea Route from Russia’s Ust-Luga, using an oil tanker owned by Sweden’s Stena Bulk. In addition, Hyundai Heavy Industries back in 2011 began testing a new ice-class ship, the largest in the world and designed specially for operation in the Arctic.
South Korea is largely interested in providing transport services and building and maintaining vessels capable of operating in the Arctic. With the world’s largest shipbuilding industry that makes more LNG tankers than any other country, South Korea is undoubtedly the main potential supplier of vessels for operation in the Arctic.
India is one more country with interests in the Arctic. It is primarily seeking access to energy resources (until recently, Indian companies aspired to buy into the Yamal LNG project). At present, about 70 percent of India’s oil imports and 80 percent of its LNG purchases come from the Middle East, and the country is keenly interested in diversifying sources of supply. In addition, a presence in the Arctic is important to New Delhi for geopolitical reasons. India has joined in a race with China for energy resources in various regions of the world, and its movement to the Arctic is seen as a way to contain the rival. India has even announced plans to build an icebreaker worth about $166 million.
Singapore could also play a special role in the development of the Northern Sea Route, even despite the fact that an extensive use of the Arctic route would threaten the inviolability of its positions as a unique transport hub for most trade flows in the Asia-Pacific region. But the Singapore government understands that the development of the Northern Sea Route is inevitable and wants to keep the process under control by engaging in it directly – especially since the Arctic route cannot be rival to the Strait of Malacca even under the most optimistic scenario. Moreover, in the near future the Northern Sea Route will specialize only in bulk cargo transportation, whereas Singapore handles mainly container ships. Under certain circumstances, the development of the northern route may even be useful as it will help take part of the load off the Strait of Malacca.
Potentially, for Singapore the Arctic is one of the sources of oil supply for domestic consumption and, most importantly, for the oil refining industry which is one of the foundations of its economy. Finally, the country is determined to participate in the development of the Northern Sea Route infrastructure. Singapore may be a major candidate for that as it has ample experience in planning and building seaports, managing shipping processes, preventing oil spills and carrying out post-disaster rehabilitation operations.
Singapore also has the world’s best human resources management experience ( including the management of immigration flows) during the implementation of infrastructure projects, and can act as an arbiter in any disputes. It is perhaps the only country in the Asia-Pacific region (apart from Russia) to have no serious conflicts with all other important players.
If the current political contradictions subside, there will be opportunities for cooperation with the United States in the medium term, though Washington is less interested than other Asia-Pacific players in the development of the Northern Sea Route. The interests of Russia and the U.S. converge in the waters adjacent to the Bering Strait. If developed, the Northern Sea Route will acquire strategic importance, and joint control over it can serve as the basis for cooperation in the field of maritime and environmental safety (in extracting resources, transit, and fishing). It can also promote cooperation in areas not related to shipping, such as the rights of indigenous small-numbered peoples or regional economic cooperation between Alaska and Chukotka. Cooperation in the Bering Strait has, among other things, a powerful symbolic meaning – the International Date Line runs between the latter two regions. “Partnerships around the 180th meridian” can become a powerful brand.
It would be very advantageous for Russia to make maximum use of opportunities offered by joint projects. Norway’s Arctic navigation technologies, South Korea’s shipbuilding industry, and Singapore’s experience of infrastructure development – all of this would be useful within the framework of international partnerships. At the same time, in its relations with other countries, Russia should uphold its fundamental interests: absolute sovereign control over the Northern Sea Route, domination in providing icebreaking services, and linkage between the development of the Northern Sea Route and the development of adjacent territories.
Attracting foreign partners to develop the Northern Sea Route requires serious efforts from the state. The primary objective is to eliminate institutional barriers. These include excessive government regulation (especially in the infrastructure sector which is almost inaccessible for private businesses ), and red tape (for example, in order to receive a permit to use the Northern Sea Route from its administration, one must submit a request at least fifteen days before the ship enters Russia’s waters. For comparison, a request to transit the Suez Canal can be submitted 48 hours before the entry).
Special mechanisms of state guarantees are required, which implies a strict division of responsibilities between investors and the state. Given the relatively small number of potential foreign partners (large shipping, shipbuilding, logistics and engineering companies with experience of operation in Arctic waters), Russia should also attract investors in “manual mode.” The role of the leader should be assigned to the state and specifically to the Ministry for Development of the Far East. The Northern Sea Route Administration, which could also serve as an investment promotion agency, is now rather a bureaucratic barrier. Attracting even a few world-class players to develop the Arctic route’s infrastructure would boost freight shipments via the Arctic dramatically – as a rule, big shipping companies have a broad system of stable ties based on long-term contracts, and by branching out to the Northern Sea Route such a company would automatically attract capital of its partners from related industries.
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Public discussions about the Northern Sea Route are dominated by two extreme positions – excessive optimism and a desire to view the Northern Sea Route as a gold mine, on the one hand, and impregnable skepticism, on the other. Both positions are counterproductive. The Northern Sea Route is not a myth or utopia. It will bring great benefits to the country, but only if the government adopts a balanced policy for developing the route, which would be free of euphoria and a development-at-any-cost approach and which would be based on a comprehensive cost-benefit analysis. The state’s role should be not to provide exorbitant sums of money from the federal budget, but to remove barriers and build a system of incentives for interested parties, which would help develop the route with as little direct government involvement as possible. Given such an approach, the Northern Sea Route will be the key to Russia’s historical mission as a bridge between Europe and Asia, a mission with which our country has always associated itself but which it has not been fulfilling for a long time.
