Northern Sea Route requires reforms to be efficient, expert says

MOSCOW, November 10. /TASS/. The Northern Sea Route will not be able to become an efficient international transport route without comprehensive reforms and diversified cargo traffic, Deputy Chairperson of the Foreign Trade Academy's Productive Forces Studies Council at the Ministry of Economic Development, Deputy Chairperson of the Ministry of Natural Resources and Environment's Public Council, Adviser to the Director of the Ministry of Natural Resources and Environment's Ecology Research Institute Svetlana Lipina told TASS. "The Northern Sea Route has been using state support, and without a strong diversification policy it risks remaining a "corridor for deposits". Without major changes within coming years, it cannot develop into a self-supporting economy," she said. The route's current operational model is largely based on commodity exports and a large-scale government involvement, the expert continued. The supplies of liquefied natural gas, oil and ore are the main part of the cargo traffic, and they determine its economy. The state has been playing a key role in ensuring the Arctic logistics: it has been subsidizing the icebreaker services, port facilities, and it has been partly compensating for insurance and infrastructural risks, she stressed. Without these mechanisms, a significant part of transportation along the Northern Sea Route would have remained economically unprofitable. However, she continued, the route's commercial segment remains limited. The share of regular container shipments and transit services is small, and a number of factors have been hindering the development of a full-fledged market. "Risks, season-based operations, the uncertainty with crews, insurance, and port facilities are keeping the commercial premiums high," the expert noted. According to her, in the medium term - over ten to 20 years - the Northern Sea Route may approach greater stability only in case of meeting a set of conditions. These include the cargo traffic's expansion and diversification, the development of port and coastal infrastructures, the creation of an affordable fleet of high ice-class, as well as the formation of sustainable insurance and financial mechanisms that can cut risks of market participants.