Andrei I. Fisenko

Admiral Nevelskoy Maritime State University, Vladivostok

Vladimir A. Lazarev

Admiral Nevelskoy Maritime State University, Vladivostok Economic Research Institute, Far Eastern Branch of the Russian Academy of Sciences, Khabarovsk

Abstract: The paper considers the composition and content of the main risks of organizing navigation and icebreaker support at the Northern Sea Route (NSR). The main attention is paid to the narrative aspect of the analysis of navigation risks from the point of view of the possibilities of providing safe and reliable cargo route in the Russian Arctic with the use of icebreaker fleet. Problems are stated, tasks are set, and possible directions of their solution in modern conditions of global political and economic changes and turbulence of economic situation in the world are indicated.

Keywords: Arctic; Northern Sea Route (NSR); risks of navigation organization; icebreakers; regulation in NSR

The reasons for the special attention to the most efficient transport routes in Asia and the Far East, as well as from Asia to Europe and back, were both global and regional economic, financial, geo- and military-political, scientific-technological, demographic and other factors. However, when solving this difficult task, numerous questions and limitations arise, which have an impact not only on the formulation of a number of problems, but also on their specific resolution. One of the most important problems is the risks arising from the organization of navigation in high latitudes.

This fully applies to the Northern Sea Route in the Russian Arctic. So what are the risks for shipping companies, both small and large, and for their customers in the current organization of shipping along the Northern Sea Route (NSR)? In our opinion, the main risks in this case are the following (the list of risks could have certainly be continued).

Systematic risks of Northern Sea Route

#1. Lack of an icebreaker escort schedule and coordinated vessel traffic management on the NSR.

Currently, icebreaking in the Russian Arctic is carried out by the nuclear icebreaking «Taimyr», «Vaigach», «Yamal» and «50 Let Pobedy». FSUE Rosatomoflot («Atomflot») (like the other fleet operators) has a repair and maintenance schedule for the icebreakers, as well as obligations to the state to carry out work specified in the Russian Icebreaker Fleet Allocation annually approved by the Federal Agency of the Sea and River Fleet (Rosmorrechflot). These are, at a minimum, the mouth and section of the Yenisei River up to Dudinka, the Gulf of Ob on approaches to the port of Sabetta, the deployment and evacuation of polar stations, and support for high-latitude scientific expeditions. All these activities are essential, approved by Rosmorrechflot, and they cannot be performed without nuclear icebreakers. Accordingly, the nuclear icebreakers can only start transiting these areas after the winter navigation period is over. All nuclear icebreakers are based in the western area of the NSR (Murmansk), and the first transit passage can only be made through the ice-flooded glade in late May or early June, taking into account actual ice conditions. This usually takes at least 20 days. Only vessels of high ice class with the possibility of being towed by a short tug («on whiskers») are accepted for pilotage. The return passage-westward is possible after the arrival of the caravan to the area of Pevek (Shelah station). In this case the waiting time at the caravan formation point can be up to 10-15 days.

Today, despite the fact that the Northern Sea Route Administration publishes daily ship and icebreaker positions in the NSR waters, there is no centralized schedule of fleet movements and proposed pilotage. In this case, the operator of the nuclear-powered vessels, Rosatom, has the final say. Obviously, under such conditions, it becomes very problematic to guarantee cargo owners regularity of the company’s container line and exact delivery dates.

At the same time, in our opinion, this task is quite feasible and can be entrusted, for example, to the SMP Administration (if it is given such authority).

#2. Development of NSR icebreaker escort traffic and their rational economic justification.

Despite opposing views on the direction of climate change in the Arctic and sometimes directly contradictory forecasts, issues related to the application of icebreaker escort tariffs in the NSR waters are a constant focus of the Northern Sea Route operator’s attention.

Indeed, on the one hand, climate change can, by the expert opinion, if the warming continues, ensure ice-free navigation in the Kara Sea by 2022-2024 for Arc7-class ships (with ice clearance up to 1.5 m). However, there are also opposite forecasts – in the next 5 years it will start to get colder and the regime characteristic of the end of last century, when in the Kara Sea icebreaking was required from December to May, will be restored. Accordingly, in the eastern sector of the NSR (the eastern sector of the Russian Arctic), the ice cover thickness will vary from 2 to 3 m in such forecasts, hence the requirements for icebreaker capacity will also change. Thus, both scientists and experts note that Arctic navigation of recent years showed that under current climatic conditions the navigation of cargo ships along the NSR to various ports in Southeast Asia, in comparison with navigation through the Suez Canal, reduces travel time from 7 to 22 days, which is one of the important economic advantages of this route (savings on fuel). However, it is true that the shippers nowadays do not care so much about delivery time, e.g. for a container. They even deliberately slow down their vessels to 15-17 mph at the maximum possible speed of 28 mph. This enables them to save on fuel considerably. From this point of view the NSR is not very profitable. Besides, commercial navigation at high latitudes is quite different speed than at southern latitudes, even if it is reduced by 40-47%.

However, the main part of the tariff depends on the actual pilotage distance, i.e. the number of ‘zones’ assigned by an icebreaker operator. When two or more escorts of the same vessel are carried out, charges apply for each escort. However, it is not possible to accurately calculate the cost in advance. Of course, it is important for the line operator to know their costs so that the total financials could be calculated (plus a 20% VAT charge regardless of the nationality of the service customer). But with the current billing system it is extremely difficult to make such a calculation because the operator cannot know the exact amount to be paid up to the point of actual wiring. Therefore, perhaps a fixed fee (tariff) for a through passage through the NSR depending only on the ice class of the vessel could solve the problem.

# 3. Degree of preparedness of the SMP infrastructure for the occurrence and neutralization of emergencies and emergency rescue (ERS) operations.

Every shipowner, cargo owner, icebreaker fleet operator and any participant in the shipping process must ensure the safety of their property, i.e. the vessel and cargo, as well as the safety of their crew. As of today, line icebreakers are on rescue duty in the Arctic (during the navigation period- on the basis of an agreement with the Marine Rescue Service of the Russian Rosmorrechflot). A team of specialists is based on the icebreaker, as well as a set of driving equipment and an oil spill response station. However, so far the legislation of the Russian Federation lacks an effective mechanism for compensating shipowners for salvage, and the value of salvaged property often does not cover the cost of providing it.

A separate issue is the capability of the RF Ministry of Emergency Situations’ aviation to evacuate casualties. It is known that the NSR water area is so vast that a number of areas are beyond the range of duty helicopters. Accordingly, the water area should be filled with specialized rescue vessels, equipped with onboard (ice- breaking) helicopters, capable of evacuating victims in the shortest possible time. In this regard, it would be advisable to consider in detail the possibility of establishing a specialized airline, for example, on the basis of (or with the participation of) Rosatom, as well as the construction of specialized rescue vessels (including, possibly, on the terms of state ownership) possibly on the basis of a public-private partnership, and to develop a legislative mechanism to compensate private ship owners for their expenses if they are involved in rescue operations. In our opinion, the Ministry of Transport of the Russian Federation and FGUP Rosatomflot could take the initiative in this matter.

#4. Reliability of hydrometeorological information, including air reconnaissance data.

Of great importance for the development of the NSR is navigational and hydrographic support (NHS), which is an integral part of navigation safety system. To date, 747 open nautical charts,19 navigation guides and manuals have already been published for the Arctic seas (see above).1,555 objects of various means if navigation equipment have been installed. Serious work is underway in this direction. In particular, deployment of a network of GLONASS/GPS control-correcting stations along traditional (main) NSR route, which ensure operation of the systems in differential mode, is to be largely completed in the near future.

However, the entire system of Arctic NHS requires modernization and, first and foremost, the updating of existing navigation and hydrographic information.

At present, such information in the NSR waters has insufficient reliability and limited accessibility for captains and ship owners (even from satellites). This is due to the difficult climatic conditions of high-latitude areas and the «shading» of the water surface in the Arctic by lower tier clouds. At the same time, aerial reconnaissance in the Arctic is currently not performed on a regular basis and/or is performed only on special order. Therefore, in order to ensure linear navigation on the NSR, regular aerial reconnaissance, or at least aerial reconnaissance of the zones of most intensive vessel traffic, which (zones) have residual ice cover, as well as in the early and late navigation periods, should be organized. This task may be assigned either to the SMP Administration or (depending on the format of other issues) to the icebreaker operator.

#5. The ability of the Arctic infrastructure to provide logistics, bunkering and ship resupply.

At present the infrastructure of the NSR does not allow the shipowner to provide any regular and reliable supply and bunkering services. In this regard, it seems necessary to identify key ports on the NSR coast, on the basis of which to create a kind of «footholds» for the maintenance of the fleet, both transiting and delivering goods to the Arctic. For example, Pevek, Tiksi, and Dikson could become such key ports, «anchor points», on the NSR route.

Pillars are peculiar centers of so-called «support zone» for development in Russia’s Arctic regions. «Pillar zone» is one of the key terms of the new national Arctic development strategy.

According to this strategy, the entire Arctic Zone (AS) to the Russian Federation is divided into 7 geographic segments-«support zones» (Kola,Arkhangelsk-Nenets,Yamalo-Nenets,Vorkuta,Taimyr- Turukhan,North Yakutia, Chukotka and – as a design option – Karelian, eighth),each to be treated as a separate large-scale project. Within these segments, it is planned to organize close cooperation between the government and business, form industrial clusters of raw materials and create scientific and production chains. In other words, the sectoral principle of Arctic development is to be replaced by the geographical principle of development.

In addition, the successful functioning of the NSR requires the comprehensive development of transport and logistics structure in the regions adjacent to the Arctic. Today, there is a state program for the development of ASR in the Russian Federation, the total funding for which amounted to about RUB 2 trillion for the period 2014-2020.The state program includes four subprograms : «Development of Priority Sectors of the Economy of the Arctic Zone of the Russian Federation», «Development of the Backbone Arctic Infrastructure», «Development of Local Arctic Life Support Infrastructure», «Ensuring the Implementation of the State Program». Obviously, the implementation of these subprograms and the development of the NSR as a whole are impossible without the modernization of its ports.

Arctic ports are of key importance in ensuring transport independence, defense capacity, foreign trade, cargo transportation, and the development and use of Russia’s transit potential. But they are still the weakest link in the NSR. Due to the owners’ lack of funds, there has been negligible modernization of the ports’ technical equipment since 1990.Berthing facilities in most Arctic ports require major repairs, reconstruction and dredging to accommodate modern vessels. Most port lack or are in critical condition facilities for reception and disposal of ship-generated waste and oil spill response equipment.

Restoring the functions and expanding the capacity of the NSR as he most promising highly efficient and safe transport corridor involves in the period 2020-2024 both the modernization of existing Arctic ports, such as the ports of Khatanga, Tiksi, Pevek, Dudinka and Dikson, and the creation of new port (or transport and logistics) complex and road shipping terminals, such as Indiga, Harasaway, Murmansk, Pechenga, Varandey and Sabetta.

The problem of shipping and establishing effective logistics in the Russian part of the Arctic, as mentioned above, also has a military dimension. The resurgence of the military camp system in the High North and the general increase in requirements for military security inevitably have an impact on the transport of military cargo. It is envisaged that their intensity will increase by 10-15% every year in Russia. The Russian Ministry of Defense does not have such a powerful auxiliary fleet in the North which would ensure necessary transportation. The problem is being solved, however, and in the future the Northern Fleet will be replenished with new auxiliary ships. However, it is a question of five or six years. In the meantime, the Ministry of Defense uses the services of the merchant fleet, chartering some 80 vessels of various classes.

#6. Insurance issues.

Today, insurance for vessels used on the NSR is provided by the Russian Mutual Insurance Pool (the Russian Nuclear Insurance Pool, established in 1997). It consists of 22 leading Russian insurance companies. The Pool’s liability is protected by a reinsurance agreement with three Western insurance companies. The pool, having its own network in 600 ports worldwide, can insure foreign vessels used on the NSR. The above-mentioned information on marine risks and insurance on the NSR is more objective than in the West and can be useful for foreign shipowners intending to send their vessels to the NSR.

However, the current “Rules of Navigation in the Northern Sea Route” contain only general requirements to insure the ship owner’s liability for pollution damage or other damage caused by the ship. The insurance of the ship itself, its machinery and equipment as well as the insurance of the cargo to be transported shall remain the responsibility of the parties to the transportation. However, liability limits, rules and insurance premiums of Russian insurance companies and foreign insurers differ considerably. Therefore, in order to organise regular navigation in the Arctic, the situation needs to be streamlined, for example (as an option) by establishing a joint insurance company that provides insurance services for navigation in the waters of the NSR with the participation of Russian and foreign insurers, as well as other participants in the process.

Payment of such insurance premium should be obligatory for all vessels entering the NSR water area. The proceeds from this activity could be used to maintain the icebreaker fleet or develop the NSR infrastructure.

#7. Subjective position of shipowners.

One of the important problems of shipping organization in the Arctic is also the subjective opinion of shipowners to navigation on the NSR as to navigation in the zone of special risk and the need to make relevant clauses in the charter contracts. Nowadays there are numerous cases of vessels’ idleness and even cancellation of NSR passage due to ship-owner’s unilateral (and not always justified) opinion on safety of this navigation, despite the fact that the chartered vessel had a valid permit and met the requirements for passage. In this connection, it is necessary, in our opinion, to strengthen the influence of the ‘Criteria for the Admission of Ships to the Northern Sea Route’ prescribed by the Navigation Rules on the terms of time-charter contracts. Perhaps the best solution to this would be to appeal to BIMCO, the Russian Chamber of Shipping or other recognized organizations to introduce this requirement as one of the recommended articles of the Regulations.

It is also known, for example, that many of the world’s largest carriers, including MSC, Hapag-Lloyd and CMA CGM, have ruled out the use of the NSR for the fear that it might be harmful to the environment. At the same time, some analysts believe that this decision was taken not so much from environmental and ecological perspectives (WWF and Greenpeace initiatives) as in favor of the current policy of economic sanctions against Russia, i.e. from geopolitical and economic perspectives, the latter of which may include possible competitive grounds.

A separate strategic issue for Arctic cargo traffic is the state of the Russian icebreaker fleet. It has (federally owned) six nuclear and five diesel-electric icebreakers. In particular, eight linear ice breakers are currently operating in the waters of the Northern Sea Route. Four of them are nuclear icebreakers: the “50 Let Pobedy”, Yamal, Taimyr and Vaigach, and another four are diesel-electric (“Admiral Makarov”, “Krasin”, “Captain Khlebnikov” and “Captain Dranitsyn”). It seems important to note the fact that over the past ten years – from 2010 to 2020 – the intensity of work on Russian nuclear-powered icebreakers in the Arctic has almost doubled – from 156 to 270 days a year (+73%).

Today, however, the age of the linear nuclear icebreakers is approaching critical. Almost all Russian nuclear icebreakers need to be replaced within the next 5-7 years. By 2022, the period of active development of the Russian Arctic shelf, only one nuclear-powered icebreaker, the “50 Let Pobedy”, may remain in service. Given that the latter has been under construction for almost 20 years under conditions of constant shortage of funds, one can understand the urgency of the problem. However, it is important to keep in mind that a double-trimmed icebreaker can cost up to $1bn, and a linear icebreaker – $1-2bn.

(End of introductory fragment)