NSR

John Fafalios 10577106 FDSc Sept 12 1
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Since its recent increased accessibility what is the state
of affairs with the Northern Sea Route’s availability and
viability? What will this do for the shipping industry
and its feasibility?
By John Fafalios

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Introduction
Ever since 1869, when the Suez Canal officially opened in Egypt, the shipping
industry has tried to find ways to discover ever more efficient routes to transport
goods around the globe. Following on from the opening of the Suez Canal and again
under the supervision of the French and the US, the Panama Canal was opened in
1914. Both of these were landmark developments for the shipping industry, saving
not just time, but money for operators, as well as saving fuel, resulting in less
pollution. Once again, the maritime industry is at another landmark development,
which could change the shipping industry forever, and it is also a consequence of
global warming that the Arctic Circle is being made more accessible for navigation
with the opening of the Northern Sea Route.
The Northern Sea Route (henceforth NSR) is also known as the Northeast Passage.
The Russian definition of the route found in “The Regulations of Navigation on
Seaways of the Northern Sea Route” states that the NSR is a passage linking Novaya
Zemlya with the Bering Strait, which includes from west to east, the Kara Sea, Laptev
Sea, East Siberian Sea and Chukchi Sea1 (fig1). The NSR extends for about 4,800 km
(3,000 miles). The entire route lies in Arctic waters and parts of it are free of ice for
only two months of the year. At the moment, it has an annual navigational season,
typically the summer, from July to November. However, in the past 30 years the ice
has melted by a rate of 15-20% and is expected to accelerate2; if that were to increase
it would extend the annual navigational season further to the rest of the year. Of
course the actual voyage length taken by a vessel using the route will vary
depending upon the course selected, ice conditions, the draft of the transiting vessel
and other variants.
The melting of the ice combined with Russian investment also opens up
opportunities not just for ports in the northern regions of Russia, but as an export
passage for natural resources such as metals, timber, coal, oil and gas, as well as
other related enterprises like off-shore oil exploration, fisheries and even tourism.
History reveals that the opening of a single sea route can send shockwaves around
the world transforming the economic, social, legal and even political systems of the
countries affected3. So even relations between Russia and the rest of the world are
affected from the moment two non-Russian flag merchant ships circumnavigated the
NSR for the first time from Norway to China in 2010.
The economic feasibility of the NSR can be assessed through analysis: the most
frequently used method for evaluating the effectiveness of a new system4. As there
are many possibilities for research the focus will be primarily on a bulk carrier
undergoing the same route. Furthermore, using data collected on the above-
mentioned vessels using the NSR, a conclusion will be reached on whether the route
will be profitable in the long run. Drawing upon research, facts and figures, the
1 The northern sea route the shorter sea route linking East Asia and Europe,
Yoshi Kon (2001)
2 The possibilities of container transit shipping via the northern sea route L.P.
Lammers (2008)
3 The northern sea route the shorter sea route linking East Asia and Europe,
Yoshi Kon (2001)
4 Analysis and design methods seventh Edition Whitten, Bentley (2007)

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conclusion reached will be that the Northern Sea Route is not yet totally feasible but
in the future it may well be.
History
The Northern Sea Route had been used by the Russians to reach rivers such as the
Ob to trade but no one had circumnavigated the NSR. Foreign ships did attempt the
route before the late 20th century, in 1879 a Finnish Swedish explorer Adolf Erik
Nordenskjöld reached the Bering Strait from Europe. However, at the time the
conclusion was reached that the ice conditions were too much of a hindrance to
allow vessels to transit as the season was too short and it would take more than the
summer to reach the Bering Strait. The strategic importance of the NSR increased
after the Russian Japanese war of 1904; as a result of its use during that war a
hydrographic expedition began in 1909 5 . The NSR proved to be of strategic
importance for Russia during the Second World War, as waters of enemy countries
mainly surrounded them. They transferred several vessels from their Pacific fleet to
their Northern fleet by the Northern Sea Route and they also used it to transfer
materials from Eastern Russia to the Western front to combat the Germans. The first
offer to open the Northern Sea Route to international shipping was made early in
1967, when it was indicated that it could save thirteen days between Hamburg and
Yokohama as opposed to the conventional link via Suez, to prove the point Soviet
cargo carriers made three demonstration voyages from north European ports and
Japan. During the Cold War and the 1980s the NSR became one of the most active
and important areas for military operations.6 In 1987 the use of the NSR peaked
when 6.6 million tons of cargo were transported, however following the collapse of
the Soviet Union and its economy, the use of the route fell owing to deterioration of
its infrastructure.7
With more open relations between post-Soviet Russia and the rest of the world, there
were other significant developments in foreign shipping using the NSR, prior to
2010. In 1989 shipments between Western Europe and Japan were made in a new
generation of 20,000-dwt freighters; in addition the following year space was offered
to foreign shippers trading between Europe and Japan via the Arctic. The Northern
Sea Route was again declared open to foreign shipping in 1991, in that year alone,
there were fifteen such voyages with 210,000 tons of cargo8. Interestingly, for such
an important event, the opening of a new international sea route, the Russian
Ministry of Defense issued the initial regulations in a ‘Notice to Mariners’. These
specified compulsory pilotage and icebreaker service; charts and sailing directions
were made available9. The most significant voyages on the ‘newly opened’ NSR were
carried out by the MV Beluga Fraternity and the MV Beluga Foresight, delivering
various heavy-lift modules from Ulsan in South Korea to ports on the River Orb in
Siberia. The vessels continued the voyage, after leaving the Northeast Passage,
transporting Russian steel pipes from Arkhangelsk and delivering them to Nigeria.
Previously no other foreign merchant vessel had sailed the complete route for
commercial purposes. Niels Stolberg President and CEO of Beluga Shipping GmbH
5 History of the Northern Sea Route, Alexandrov et al. (n.d)
6 Young (1986)
7 The 21st-century turning point of the Northern sea route?, Ragner (2000)
8 Polar Record, XXV I, Granberg (1990)
9 Commercial Shipping on the Northern Sea Route, Jan Drent (1993)

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claimed at the time that about US $300,000 was saved per vessel, taking the NSR10.
One of the greatest exponents of using the NSR is Felix Tschudi, Chairman of
Norwegian shipping company Tschudi and founder of the Centre of High North
Logistics (CHNL) and one of the people at the forefront of research in the feasibility
of using the Arctic route. So finally in September 2010 the Nordic Barents
transported 41,000t of iron ore, from Kirkenes in Norway to China through the NSR.
This was the first time non-Russian cargo was carried on a non-Russian flagged
vessel between two non-Russian ports. The Northern Sea Route saved ten days off
the trip despite having to slow down for high ice concentration11.
Present/Future
The Russian government has announced its intention to transform the NSR and it is
improving safety and communication by building 10 new bases for search, rescue
and communication along the route. The growing concern for not only the Russians
but also shipping in the Arctic Circle is the availability of icebreakers, as many are
nearing the end of their cycle. Currently there are 10-15 icebreakers and only one is
under construction and this will not be available until 2018. The rest of the fleet
ranges from 19-25 year old vessels, which have been maintained so their lives can be
prolonged until they are 35 years old; this is a quick fix solution that will mean they
will have a retirement age of 2017. Investment is also needed in the ageing nuclear
icebreaker fleet. In October 2011, it was reported that construction would begin in
2012 on four new icebreakers, worth €18 billion, with two others planned - three of
the six will be nuclear powered12. Of the aforementioned four ice breakers under
construction, only one icebreaker is being built at present and this lack of forward
thinking from the Russians may delay the early transit operations across the NSR13.
Whilst Russia has been focusing on development of the NSR, The Arctic shipping
shortcut is only one option it is considering, in the same way that Arctic oil and gas
represent just one potential alternative energy source to Middle
Eastern hydrocarbons.
In 2013, Chinese president Xi Jinping announced the re-development of the Silk
Road. the following year he introduced the creation of the Silk Road Fund to the tune
of $40 billion towards building high-speed rail, freeways, and pipelines. By
comparison, in 2012, The Arctic Institute reported that the country planned to invest
a meagre 134 billion roubles ($2.6 billion) over the next ten years in developing
maritime traffic. But one thing is certain: Russia will be hard-pressed to come up
with an amount anywhere near China’s investments in the Silk Road given the
economic crisis it is facing currently.
US sanctions on the Kremlin over Russia’s activities in the Ukraine have caused a
severe loss in financing, denoted in both a drying up of US dollars to American
companies withdrawing from energy projects in Russia. ExxonMobil pulled out of its
joint project with Rosneft in the Kara Sea in October. Even projects that do not
directly involve American companies, like the Yamal liquefied natural gas (LNG)
project, are under pressure since financing is no longer available in US dollars. If
10 Beluga shipping masters first commercial transits of the Northeast passage
(2010)
11 Surveyor, ABS (Winter 2015)
12 Arctic Transit: NSR, E. Desmond (2012)
13 A Comparative Study of the Northern Sea Rout (NSR) in Commercial and Environmental

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Russia was worried about the future of transit shipping along the NSR, it should also
be concerned about the future of destination shipping, too.14
14 China’s silk road plans could challenge NSR (2015)

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15 CIA: The World Factbook

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Murmansk is the main port of the west side of the NSR, the majority of vessels must
stop there to gain permission to enter the NSR and be inspected16. The port has had
$6bn worth of investment to improve all infrastructures from railways to a container
terminal17. Arkhangelsk is a smaller port but is best equipped for transiting vessels.
The port of Igarka is the next most significant port, its importance being that it is one
of the only ports half way between the Bering Strait and Murmansk; it is also the
only one in the area open to foreign vessels. As well as being the only port open for
eastbound vessels till the Bering Strait.
With increased traffic on the Northern Sea Route comes the need for more onshore
safety infrastructure. In 2009, Russia allocated €20.6 million to build ten search and
rescue (SAR) centers from Murmansk in the west to Provideniya in the East. All
centers are planned to be operational by 2015. The first of the new SAR centres was
officially opened in Naryan-Mar on August 20 2013. The centre includes a fire
department and one for search and rescue operations with vehicles and boats, as
well as berth and training facilities. Similar rescue centres will open in Murmansk,
Arkhangelsk, Dudinka, Pevek, Vorkuta, Nadym, Anadyr, Tiksi
and Provideniye18. Search and Rescue operations and oil spill response on the NSR
are organized by Rosmorrechflot (the Ministry of Transport of the Russian
Federation) through the Marine Operations Headquarters. In the Western sector of
the Arctic is Federal State Unitary Enterprise "Atomflot". In the Eastern sector of the
Arctic is "Far Eastern Shipping Company". Marine Rescue Co-ordination Centre
(MRCC) Murmansk and MRCC Dikson organize the interaction of search and rescue
operations and oil spill response. MRCC and MRSC have the necessary equipment
designed to operate in harsh Arctic conditions and fully comply with the
International Convention on Maritime Search and Rescue at Sea, 1979, and the
International Aeronautical and Maritime Search and Rescue (IAMSAR) Manual.
MRCC Dikson will be organized all year round, with functions to coordinate search
and rescue of persons in distress at sea, and work on any oil spill elimination in the
Arctic zone of the Russian Federation (from the Kara Gate Strait to the Bering Strait).
Operation of MRSCs Tiksi and Pevek will be organized during the navigation season
on a rotational basis. The construction of three modern multi-functional rescue
vessels with the ice reinforcement class Icebreaker 6 or Arc 5 has been passed under
the Russian budget. Diving and oil spill response equipment was purchased for Port
Dickson, Tiksi, Pevek, Providence, as well as for posting on the icebreakers of
"Atomflot" and "Far Eastern Shipping Company" Ltd. Since the interest in the NSR
has increased the IMO have now published a Polar Code that covers the full range of
design, construction, training, minimum requirements and environmental issues for
ships operating in the polar regions; it also has its own way of classifying ice class
vessels which is expected to be implanted by January 201719.
16 Annex H Regulations of navigation of the NSR, Russian govt (n.d)
17 Economic feasibility of the NSR container shipping development, S.Chernova &
Anton Volkov (2010)
18 Russia opens first Arctic search and rescue center, Andrey Vokuev (2013)
19 http://www.arctic-lio.com/nsr_searchandrescue

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Logistics & Case Studies
The question posed is whether or not using the Northern Sea Route would be
feasible. The case studies will compare the following journeys.
Route One from Rotterdam to Yokohama taking: -
a) The Northern Sea Route
b) The Suez Canal
c) The Cape of Good Hope
Route Two from Rotterdam to Vancouver taking: -
a) The NSR and
b) The Panama Canal.
The ships carrying out these hypothetical scenarios will be based on ships that have
actually undertaken the Northern Sea Route: -
Tanker:-
Propontis
Aframax
Tonnage: 66,919 GT
117,055 DWT
Length: 249.9 m
Beam: 44 m
Draught: 15.42 m
Depth: 22.7 m
Ice class: BV ICE-1A
Speed: 15 knots20
Bulk Carrier: -
Nordic Orion/Nordic Odyssey
Panamax
Tonnage: 40,142 GT
75,603 DWT
Length: 225 m
Beam: 32.31 m
Draught: 14.089 m
Depth: 19.39 m
Ice class: DNV ICE-1A
Installed power: MAN 6S60MC-C
Propulsion: Single shaft; fixed pitch propeller
Speed: 12.9 knots 21
20 Tsakos Annual Report, Paul Durham 2014
21 "Nordic Orion (28927)". DNV Exchange. Det Norske Veritas. (2013)

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(fig1)
The days above include waiting times which have been kept to a maximum of two
days, as in most cases if enough notice is given vessels will on average wait 12 hours
at anchorage. Waiting times also take into account slow steaming when transiting
through ice and when in a convoy transiting the canals or waiting for the locks.
(fig2)
It can be seen that on average taking the NSR will save a vessel around 40%,
compared to the other alternatives. In some cases a vessel can save up to three times
as many days using the NSR despite having to slow down due to navigating through
ice. The large factor of saving time is what has attracted many shipping companies
who have ice classed vessels, as they can relocate there vessels from east to west or
vice versa in a fraction of the time, where in
The past they would not even consider a ballast journey via the Cape of Good Hope.
Using the NSR also means that a vessel could do two transits before it has completed
the same trip via the alternative routes of the Panama or Suez Canals.
For the vessels chosen in the study, the time saved is greater as they travel at
relatively slow speeds compared to some container ships that travels at 27 knots. In
the case of container ship it would not save as many days. The savings are bigger the
further north the port, whilst the further south from Rotterdam the saving is less;
and the same goes for ports around the same latitude as Hong Kong. For vessels that
can fit through the Suez or the Panama, who travel at faster speeds, there would not
be as much of saving; however for vessels that must take the Cape of Good Hope, the
saving cannot be ignored.
Rotterdam-Yokohama Total Sailing Days Time Saved
Tanker Bulk Tanker Bulk
NSR 22days 2hrs 25 days 5hrs ----- -----
Suez Canal 32 days 11hrs 37 days 15hrs 10 days 9hrs 12 days 10hrs
Cape of Good Hope 40 days 46 days 13hrs 17days 22hrs 21 days 8hrs
Rotterdam-Vancouver(CA)
NSR 20 days 21 hrs 23 days 19hrs ----- -----
Panama Canal 24 days 19 hrs 26 days 18hrs 3 days 22hrs 2 days 23hrs
Rotterdam-Yokohama Distance (nm) Distance Saved (%)
NSR (nm) 7,136 nm -----
Suez Canal (nm) 11,543 nm 38.2%
Cape of Good Hope 14,404 nm 50.5%
Rotterdam-Vancouver(CA)
NSR (nm) 6692 nm -----
Panama Canal (nm) 8827 nm 24.2%

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The Beluga vessels did not only transit the NSR they also discharged in Russia
meaning that they actually did two charters, as well as save days on a journey that
would have normally gone from Asia to Europe.
The NSR is open from 105 – 225 days22 a year at most; in this time frame the vessels
above could transit through the NSR 5-10 times.
However, all of the routes have their limitations. In recent years, the Panama Canal
has lost its competitiveness due to size restrictions, even though in 2010 over $5bn
has been invested to expand the canal to allow bigger vessels through. An example
of the Panama Canal losing out to the NSR in this instance is from 2013 when the
Nordic Orion made the journey from Pori, Finland to Vancouver, Canada not only
did the vessel travel 1,000nm less but it also was able to load 15,000 tons more cargo23
making the transit even more profitable. The Suez Canal does not have as much of a
problem in regards to size restrictions, as it allows vessels with a draught of 20m and
an air draught of 68m through. The main issue for the Suez Canal is piracy when
entering the Gulf of Aden, which can be very costly, owing to political unrest
between countries in the vicinity. In additional, piracy is a risk for both the Suez
Canal route and Cape route. The Malacca Strait, which is also prone to this problem.
The fact remains that Southeast Asia was the location of 41% of the world’s pirate
attacks between 1995 and 2013. The West Indian Ocean, which includes Somalia,
accounted for just 28%24. Once out of the Malacca Strait a vessel will have to tackle
one of the busiest sea passages in the world, the Singapore Strait, where it could be
prone to accidents. Clearing the Singapore Strait and depending on the season there
is also a chance of typhoons, which could cause further delays.
The disadvantage in using the NSR and a distinct feature of the Russian Arctic,
which is major hindrance to shipping along the route, are the shallow seas along the
way. Deep-draft ships are forced to choose a route far from the coast, making them
vulnerable to extreme ice conditions. This is especially true around the new Siberian
Island where the draft restrictions are 12.5 m in the Sannikov Strait and only 6.7 m in
the Dmitry Laptev Strait. In addition to shallow seas, many of the NSR ports are also
too shallow to accommodate ships with gross greater than 9m, making it impossible
for big ships to load/unload without the help of small vessel. This poses a greater
threat to larger vessel in need of shelter or repairs in emergency situations25.
It is hard to assess the monetary value on time saved taking the NSR because it really
depends what he ship does within the time saved, which in the current market might
mean that a ship is more than likely to be spending some time at anchorage.
There are many other variables in these case studies so the following assumptions
should be made: -
All values in the table are in USD
It is assumed that the ship will encounter ice there have been cases when there has
been no ice present but that can never be guaranteed Ice conditions should be
22 The economic feasibility of the NSR for shipping, Dr. Masahiko Furuichi
(2014)
23 Big freighter traverses Northwest Passage for 1st time, John Mcgarrity & Henning
Gloystein
24 The most dangerous waters in the world, Time, Adam Mccayley (2014)
25 Ragner (2000)

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expected for a 6 month season to be 300nm ice covered26, the remaining to be open
water.
There is to be minimal waiting times exercised on all routes
Ships are travelling at navigational full speed when in open sea
Ships travelling through the Suez Canal will take 14 hours and for the Panama Canal
9 hours.
The ice breaking speed to be 4 knots.
The transit to be from pilot station to pilot station.
Limitations
From the data collected it was found that the NSR is still regarded a very niche
market and the majority of companies are not willing to give out much information
with regards to costing of insurance even disclosing ice breaker fees.
All the figures below are based on primary sources such as OPCOST.
(fig3)
Lammers (2008)

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1. It is estimated that 24 crew will be onboard; some companies have put two captains
onboard for the purposes of experience. Includes victualing, safety equipment and
sundries, which are worked out as $4210.5 per day for the NSR and $3,329.7 per day
for all other routes.
2. IFO380 is 338$/mt (Rotterdam index) as of 28/04/1527. On average both ship will
consume 28 t/day.
3. NSR = 200$/day, non-NSR routes 192.5$/day.
4. Fees are both in-house management services and management contracted out to
third party are included. Management fees the technical management; crew
management and insurance arrangements are included.
5. NSR toll is 707 roubles/ton28, which as of 28/04/25 is $13.8. Both Suez & Panama
Canal tolls are as of 28/04/15.
6. The measures include extra equipment and armed guards.
7. Estimated to be 0.1% of the value of the vessel.
8. Estimated rates at the current market average.
27 www.bunkerindex.com
28 ANNEX to Federal Rates Service ORDER Dated June 07th 2011 №122-T/1
NSR Yok Suez
Canal
Cape of
Good
Hope
NSR Van Panama
Canal
Crew wages &
other (24)
105,263 126,529 156,496 101,052 89,902 1
Fuel (IFO380) 236,600 359,632 444,808 227,136 255,528 2
Lubes 5,000 7,113 9,240 4,800 5,198 3
Spare, Repairs
&
Maintenance
31,550 35,028 43,325 30,288 24,889
P&I, H&M
Insurance
28,438 27,881 34,484 27,300 19,810
Management 25,000 36,115 44,669 24,000 25,661 4
Stores 7,500 11,400 14,100 7,200 8,100
Sub-Total 439,351 603,698 747,122 421,776 429,088
Tolls 890,200 222,040 - 890,200 213,900 5
Anti-piracy
Measures
- 40,000 - - - 6
Piracy
Insurance
- 20,000 - - - 7
Ice certificate 25,000 - - 25,000 -
NSRA
permission
5,000 - - 5,000 -
NSR
Insurance
26,000 - - 26,000 -
Sub-Total 946,200 282,040 - 946,200 213,900
Total -1,385,551 -885,738 -747,122 -1,367,976 -642,988
Freight rate +325,000 +304,000 +376,000 +351,000 +216,000 8
Grand Total -1,060,551 -581,738 -371,122 -1,016,976 -426,988

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Analysis
As fig3 shows the NSR is in fact not as economically feasible as first assumed.
Despite the consuming less fuel and having a shorter transit time it is not worth it for
a bulk carrier to use the NSR on a one-off trip. Up until the relatively fixed costs from
crew wages to stores, the NSR is cheaper on a one per trip basis. When taking into
account the toll and the extra insurance costs that is where the big difference lies. In
the 1990s, the NSR tariff was increased by 50% because icebreaker operations became
unprofitable for the Russian state. Before 1990, the NSR fee rate was 2-4 USD per ton
of container cargo, which reached to 7.5 USD in late 1990s. When the Russian state
cut the subsidies on the icebreaker services in 2003, the NSR fee jumped dramatically
to 40 USD per ton of container cargo29 30 in 2010. Since the rouble has weakened
considerable now against the US dollar, it is still 707 roubles /ton but this is valued
at 13.8 USD per ton making it significantly cheaper.
Many companies using the route have claimed that the NSR fee seems negotiable
because back in 2009, Beluga shipping paid only 2.25 USD per dead weight for the
project cargo31. In future it is possible that a better fee could be negotiated if the
vessel is loading or discharging from Russia, as the vessel will be paying port
expenses and it is also a way for the Russians to boost trade in the few northern ports
they have. If $2.25 per dwt was used in the model for the Rotterdam trip instead the
fee would be around $170,000 making the grand total $340,351 which makes the NSR
more profitable than both routes by a small margin. The saving in fuel is one of the
main reasons why companies are choosing the NSR over other routes for the bulk
carrier in this model which on average consumes 28t/day, the saving is not as great
as other vessels, such as container vessels who consume from 50-100t/day and in
some cases more. In addition as recently as July of last year the price of IFO380 was
just over $600/mt, since then the price has fallen by almost half, meaning that the
saving on fuel compared to the other routes are considerably less.
It is also argued that the North Sea and the Baltic Sea are defined as SECAs in annex
V of MARPOL which logically would make the NSR a SECA and if not now, it will
join in the future. This would result in vessels having to use diesel oil in ice bound
areas and fuel oil when in open sea32.
On a one-off basis the trip is evidently not economically beneficial for a bulk carrier
especially at the “official” rate but if the rate were to fall and fuel prices were to rise
again the profitability for a bulk carrier would be more short term. Another major
cost is the ship itself; since a 1A ice classed vessel is going to be considerably more
expensive then a non-ice classed vessel. A 1A ice classed ship will need more
equipment to combat the adverse weather conditions. Firstly the propeller is going to
be thicker so it can endure damage from ice and in some cases even break ice. The
vessel will also be heavier by on average 500t due to the extra steel weight on the
bow of the ship. The ship will need a higher-grade coating or even a glass plate
coating, with a thicker and stronger paint coating on the ice belt of the vessel (this is
between the ballast draught and fully loaded draught) then a non ice classed ship.
29 Liu & Kronbak, 2010
30 Østreng et al, 2013.
31 A Comparative Study of the Northern Sea Rout (NSR) in Commercial and Environmental
Perspective with focus on LNG Shipping, Zeeshan Raza (2013)
32 Commercial Perspective of the NSR, Ueta Hiroshi & Goda Hiroyuki (2013)

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The vessel may also need an anti-icing system, better insulation and a stronger
boiler, which in turn will burn more. All these extras add up to higher costs, as well
as the mandatory ice classification certifications. Additionally depending on how far
the owner wants to go, they may want ABB Azipods double acting ships (DAS) in
total the extra expense will be around an added 35%, compared to the value of a non
ice classed vessel.
Taking the logistic and economical analyses for a bulk carrier the saving is simply
too long term in the current market conditions. There is certainly a saving to be made
for vessels, which consume more fuels and travel at faster speeds, as well as a
necessity for vessels, which are restricted to use the Panama and Suez Canals. The
location of the ports also plays a key role in time saving and in some cases the
distance and time saved does not match the monetary benefit. After four years of
increased use of the Northern Sea, 2014 saw a deep downturn, with the amount of
cargo transported in transit dropping 77% compared to last year. Only 274.000 tons
of cargo were shipped in transit along the NSR this sailing season - this is a steep
downturn compared to 2013, when a total of 1,355,897 tons was shipped along the
route. The exact numbers of vessels in transit along the NSR in 2014 is still somewhat
unclear, it had been estimated to be 23 vessels were used for cargo transport by the
end of November. Last year saw a 54% increase in the number of vessels compared
to 2012, with 71 vessels sailing the whole route in the course of the summer season
of 2013. Russia has high hopes that the amount of cargo transported through
the NSR will increase considerably within the next decade. “A figure around 10
million tons is absolutely normal, it may even be more”, said Prime Minister Dmitry
Medvedev.
The NSR is a less reliable alternative to the Suez Canal: the physical remoteness of
the area, lack of broadband communications, and limited SAR capabilities increase
the risk of Arctic operations. Shallow waters, limits in vessel size, poor general
knowledge of the area and ice movements lead to unpredictability of ships’
arrival times33. Coupled with the warning signs, beginning with the unclear opening
date of the NSR with conflicting news reports and lack of information from the
Northern Sea Route Administration, which made it difficult to find out if the actual
shipping route was open for business34. In the scheme of things, political unrest,
falling bunker prices, high tariffs, in addition to the sanctions placed on Russia by
the USA and very little investment in the grand project, an owner would probably
rather take the Suez or even the Cape of Good Hope.
Legal
Under international law, no country currently owns the North Pole or the region of
the Arctic Ocean surrounding it. The eight nations that border the Arctic Region are
limited to an exclusive economic zone (EEZ) of 200nm adjacent to their coasts. Each
one of these states has additional claims regarding territorial and maritime affairs,
and while there is widespread agreement among the Arctic States on many of these
claims, particularly the territorial claims, there still remains disagreement with
respect to certain maritime claims. Both Canada and the Russians claim formal
jurisdiction over their part of the Arctic. The Russians, claim of the NSR is based on
33
Northern Sea Route traffic plummeted, Barents Observer, Trude Patterson (2014)

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Article 234 of the UNCLOS, that states, Coastal States have the right to adopt and
enforce non-discriminatory laws and regulations for the prevention, reduction and
control of marine pollution from vessels in ice-covered areas within the limits of the
exclusive economic zone, where particularly severe climatic conditions and the
presence of ice covering such areas for most of the year create obstructions or
exceptional hazards to navigation, and pollution of the marine environment could
cause major harm to or irreversible disturbance of the ecological balance35.
Under this article, the Russian Northern Sea Route Administration composed a
directive in the year 1991 stating that all vessels wishing to enter the NSR and the
Russian 200nm EEZ should give notifications to the Russian authorities before. They
also implemented requirements that vessels have Russian navigation guides abroad,
pay a fee to use the route, and must buy the service of Russian icebreakers. They also
reserve the right to close the area, withdraw permissions, arrest lawbreakers and
even stipulate that all vessels are under the jurisdiction of Russian law, including
foreign research ships and military ships. A recent example of this was the case of
the Arctic Sunrise which was a vessel used by Greenpeace to protest against a
Gazprom oilrig.
Other countries have more or less accepted Russia’s definite control of these waters,
and have not challenged the regime Russia has put in place36. The reason to why
some countries dispute Russia’s control is mainly do to what comes with the NSR,
which is control of natural resources and also the right to collect tariffs. The Panama
Canal has annual revenues of around $1.4 billion and the Egyptian government
raised more than $5 billion dollars from ships passing through the Suez Canal. The
melting of ice does not just allow transits, but it is also a door to more opportunities
such as arctic oil drilling. In October 2014 Rosneft discovered a new oil field which
was compared to that of Saudi Arabia, this is was good news for the NSR as it
showed that interest to invest but the US have sanctioned partnerships in oil projects
and it has backed the project by a few $100m. The area constituting to the NSR is
believed to contain 20% of the world’s resources such as nickel, gold, uranium and
even diamonds. This has made the NSR potentially a very valuable area and the
problem presented is that many countries are now trying to claim that they deserve a
fair share of its profits either due to their geographical location or because of the
money they have invested in research and development in the area.
Environmental
The environmental issue can be argued two ways - on the one hand vessels burn less
fuel using the NSR. A study was done on an LNG carrier and the Co2 emission
savings per round voyage was 9,731t,which equates to a saving of 50%. As the vessel
will be travelling at slower speeds in Arctic waters, the fuel consumption will also
decrease; this method is called slow steaming. In the NSR’s case a vessel must travel
at slower speeds but sometimes it is used by vessel undertaking other routes. Marine
engine manufacturer Wärtsilä calculates that fuel consumption can be reduced by
59% by reducing cargo ship speed from 27 knots to 18 knots, at the cost of an
additional week's sailing time on Asia-Europe routes37. Even with this immense sea
traffic around the world and countless oilrigs it is believed that only 20% of sea
35 Article 234, UNCLOS
36 An Arctic Dream-The Opening of the Northern Sea Route: impact and possibilities for
Iceland, Sigurður Almar Ómarsson (2010)
37 Slow steaming – a viable long-term option?, Andreas Wiesmann (2010)

16
pollution comes from ships, rigs and other objects on the sea and 80% is from land38.
The function of the hull of ice class ships plays a role and it should meet very strict
requirements too. Due to the fact, that Arctic nature is very vulnerable, the double
hull should be used to decrease the risk of pollution of the area by fuel oil and other
oil-chemicals.
On the other hand, the flip side of the environmental argument is that it is still an
area effectively untouched by man and the side effects of using the NSR are still
unknown. The opening of the NSR does not only allow vessels to transit but it opens
up opportunity for research and development and this is where the greatest risk
comes. As the ice recedes it allows more of the seabed to be surveyed for natural
resources, gold and diamond reserves will be fairly harmless. However, if there were
to be an oil spill, similar to the one in the Gulf of Mexico, the lack of resources and
manpower could potentially devastate wildlife in the area. “Significant spills in high
northern latitudes ...suggest that the potential impacts of an Arctic spill are likely to
be severe for Arctic species and ecosystems.”39
Furthermore as the vessel creates sound pollution even underwater, it could lead to
wildlife avoiding the NSR, which could force them away from their usual
environment and into the habitat of another animal. This potentially creates a change
in the ecosystem and could lead to the death of the affected species. In these cases,
vessels are told to re-route to avoid wildlife areas and to travel at lower speeds40.
Conclusion
The future looks bright for the Northern Sea Route but under present conditions the
NSR will remain as a second choice ‘novelty’ route. Currently the charter rates are
very low and that is an important factor in economic feasibility. At the moment
vessels are barely breaking, even when going through the Suez and Panama Canals,
whose tariffs are considerably cheaper, if rates were to rise on those routes, then the
NSR would become more attractive. In addition, the NSR fees are too high for
operators and too low for icebreaker operators, so either equilibrium needs to be
found or the Russian government needs to find a way to subsidies.
The NSR has many problems, both natural and technological, but Russia needs to
take the route more seriously if they do not want to see a second year of decline, with
a decrease in use. This means they need to invest a lot more then they are at present:
from improving already existing ports, to search and rescue operations and the
situation regarding ice breakers. The downturn this year means this could be a
potential disaster, since there are severe issues with ice breaker availability and with
only one nuclear ice breaker being made with a waiting time of 10 years - the
Russians can only hope that the ice recedes faster to allow vessels to complete the
transit unimpeded by ice, thus not needing the use of ice breakers. The future is
much more promising on that score, as Arctic ice is declining at a rate of 3- 4% each
decade41. As per the predictions, when the ice does recede further, it will also cut the
time a vessel needs to slow steam, resulting in more days saved. Additionally, the
38 Umhverfisstofnun (n.d.). Varnir gegn mengun sjávar 
39 AMAP, (2008)
40 The Benefits of Voyaging Via The Northern Sea Route, NikolaosGiakoumatosetal
(2012)
41 The Benefits of Voyaging Via The Northern Sea Route, NikolaosGiakoumatosetal
(2012)

17
size of vessels on the route will no longer be limited by the 6.7m maximum draught
across certain straits meaning the NSR will reach a point where the economies of
scale it offers rivals those on alternative routes.
The environmental issues surrounding the NSR will also continue to be a concern for
the international community.
The lack of information disclosed by sources did not allow for further investigation
into the economic feasibility. It is difficult to determine whether or not the NSR is
profitable based on simply one transit but the findings do give the impression that
for a bulk carrier it would not be profitable now nor in the near future. The cost of
building an ice classed vessel for that market would be too costly, especially
factoring in high insurance and premiums. On the other hand if fuel prices were to
increase to the level they were a year ago and the NSR fee was reasonable the route,
could be feasible for a bulk carrier.
Presently LNG crude carriers and containers are the sector which would benefit from
the NSR as they travel at higher speed, burning more fuel and in some cases are too
big for the alternative routes. There are countries such as Germany, South Korea,
China and the Baltic States who want to invest in the route whether or not they have
ulterior motives (the as-yet untapped natural resources of the area) is another subject
altogether.
The NSR is still in its infancy, there is a lack of data and nobody is fully aware of the
potential it may hold in the future for shipping, but at this moment it is not living up
to its potential.
Bibliography
1 The northern sea route the shorter sea route linking East Asia and Europe, Yoshi
Kon (2001)
Lammers (2008)
3 The northern sea route the shorter sea route linking East Asia and Europe, Yoshi
Kon (2001)
4 Analysis and design methods seventh Edition Whitten, Bentley (2007)

18
5History of the Northern Sea Route, Alexandrov et al. (n.d)
6 Young (1986)
7 The 21st-century turning point of the Northern sea route?, Ragner(2000)
8 Polar Record, XXV I, Granberg (1990)
9 Commercial Shipping on the Northern Sea Route, Jan Drent(1993)
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11 Surveyor, ABS (Winter 2015)
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Environmental
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Anton Volkov (2010)
18Russia opens first Arctic search and rescue center, Andrey Vokuev (2013)
19 http://www.arctic-lio.com/nsr_searchandrescue
20 Tsakos Annual Report, Paul Durham 2014
21"Nordic Orion (28927)". DNVExchange.Det Norske Veritas. (2013)
22 The economic feasibility of the NSR for shipping, Dr. Masahiko Furuichi (2014)
23 Big freighter traverses Northwest Passage for 1st time, John Mcgarrity & Henning
Gloystein
24 The most dangerous waters in the world, Time, Adam Mccayley (2014)
25 Ragner (2000)
Lammers (2008)
27 www.bunkerindex.com
28 ANNEX to Federal Rates Service ORDER Dated June 07th 2011 №122-T/1
29 Liu & Kronbak, 2010
30 Østreng et al, 2013.
31 A Comparative Study of the Northern Sea Rout (NSR) in Commercial and
Environmental Perspective with focus on LNG Shipping, Zeeshan Raza (2013)
32 Commercial Perspective of the NSR, Ueta Hiroshi & Goda Hiroyuki (2013)
33 Northern Sea Route traffic plummeted, Barents Observer, Trude Patterson (2014)
35 Article 234, UNCLOS
36 An Arctic Dream-The Opening of the Northern Sea Route: impact and possibilities
for Iceland, Sigurður Almar Ómarsson (2010)
37 Slow steaming – a viable long-term option?, Andreas Wiesmann (2010)
38 Umhverfisstofnun (n.d.). Varnir gegn mengun sjávar 
39 AMAP, (2008)
40 The Benefits of Voyaging Via The Northern Sea Route, Nikolaos Giakoumatos et al
(2012)
41 The Benefits of Voyaging Via The Northern Sea Route, Nikolaos Giakoumatos et al
(2012)

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