Russia poised to subsidize container shipping on the NSR

Ships transiting the Northern Sea Route. Credit: Shutterstock

The Russian government will subsidize part of the transport costs for container ships travelling on the Northern Sea Transit Corridor until shipping companies are convinced it can be used safely to deliver goods on time.

“We have begun elaborating on the establishment of a regular container line between Murmansk and Petropavlovsk-Kamchatsky, to which cargoes from Europe and Asia could be delivered by feeder vessels,” said Alexander Krutikov, deputy minister of the Ministry for the Development of the Russian Far East and Arctic. He explained that cargoes could be reloaded on Russian container carriers at these points, and transported farther under “certain financial guarantees” of the Russian government. He did not elaborate on what these financial guarantees would be.

A substantial part of the Northern Sea Transit Corridor should pass through the Northern Sea Route (NSR). The term Northern Sea Transit Corridor was introduced by Rosatom Cargo, Rosatom State Atomic Energy Corporation’s logistics subsidiary, on 27 November 2019, when the company ordered Russian scientists to develop a virtual model of “a trans-Arctic container line”. The project involves building and operating container ships and container terminals in Arctic seaports.

“We need to ensure regularity and predictability of cargo shipping. The cost of [cargo] transportation on the NSR with the state subsidies should be lower than that on the southern route, at least in the first years [of its active operation]. It is important to convince shipping companies and cargo owners that the NSR could be used to transport goods safely and in good time,” Krutikov added.

There is no clarity yet on where the eastern extreme of the NSR would be located and on what part of the route the Russian government would be ready to offer the proposed transport subsidies.

The NSR could be extended to Sakhalin Island, where a major cargo reload hub could be established, said Valery Limarenko, governor of Sakhalin Oblast.

“We are located at the crossroads of some business and tourist routes. Sakhalin could become a turning point of the NSR. Here, the cargoes could be reloaded and then transported further to the countries of the Southeast Asia,” Limarenko said.

Sakhalin Oblast is currently in negotiation with the Far East and Arctic development ministry to include the region in the NSR project, Limarenko added. Sakhalin is set to embark on a set of major investment projects to meet the demand in the growing cargo turnover on the NSR, with plans to build one or two high-capacity deepsea ports in the next few years. It will also establish 160,000 square metres of container storage in the Port of Korsakov, Limarenko said.

Rosatom previously announced plans in November 2019 to spend USD7 billion to become one of the world’s largest container shipping operators. In the same announcement, Rosatom revealed plans to invest heavily in the safety of shipping in the Arctic, including building new icebreakers, 55 ice-class container ships and to establish satellite monitoring throughout the region.