Authorities focus on the North

An issue of creation of a logistics infrastructure oriented to northern posts arises as more and more tankers and bulkers venture voyages on the Northern Sea Route, one after another successfully passing the Arctic trade lane. All this entails regional rivalry.

The nature of the Nordic

Russia, which enjoys a unique access to the Arctic, could control two directions of merchant shipping. The first direction is exports and transit shipments to Asia via the Northern Sea Route, which starts from the Kara Strait. The second one is export / import flows through the country’s ports to Europe (Northern Maritime Corridor). These two require creation of an appropriate infrastructure in the northern ports (particularly Murmansk and Arkhangelsk), and the access roads, primarily railways, to the ports. The key issue here is the cost of cargo transportation on the shipping lane.

The Russian State Duma has recently approved on first reading the bill on state regulation of merchant shipping across the country’s Arctic territorial waters. The bill includes also establishment of the NSR Administration.

The bill enactment will allow the country to charge tonnage dues for passage the Northern Sea Route, icebreakers assistance and pilotage dues regulated by the law of the Russian Federation on natural monopolies. The rates will depend on the capacity of vessels, ice-class, pilotage distance and the season of navigation. Other services provided by other companies the rates will be determined by bilateral contracts.

As Vladimir Kharlov, coordinator of the Northern Maritime Corridor project on Russia’s North-West told PortNews the Arctic shipping lane could be cost-effective for Sevmorput infrastructure business if annual traffic volume will be at least 4.5 million tons a year. Atomflot reported that merchant ships have carried on the shipping route 821,000 tons of transit cargo as of November 18 versus111,000 tons a year earlier and 2 million tons cargo of coastal trade. Overall, year-to-date there have been 34 trips along the NSR (only 4 – last year). Atomflot expects the numbers volume to increase by the end of the navigation season.

The development of the Northern Maritime Corridor project is supported by the European Union. The basic idea here is the increase in traffic between the hubs of the Netherlands, Norway and the ports Northern Russia (Murmansk, Arkhangelsk, Indiga). However, only a few vessels have transported so far cargo in the framework of the project.

Vladimir Harlov also said that the project sponsors are considering establishment of a port and logistics hub, which would include the Norwegian port of Kirkenes, Murmansk, Arkhangelsk and possibly Indiga. However, this will require the transshipment facilities upgrade, primarily in the port of Arkhangelsk. Another problem - too high port charges in Arkhangelsk port and the need for dredging of its bottom. Kharlov believes the Northern Maritime Corridor may be required for the transportation of hydrocarbons, timber, minerals, and even containerized cargo. The latter cargo will require building a container terminal. In addition, some cargoes could be shifted from Big Port St. Petersburg to the northern ports of Russia.

North-bound main line

Yet, it is not enough just to modernize the northern ports. There must be a developed network of rail tracks to the ports. The Belkomur project (White Sea – Republic of Komi - Urals) could be a solution to the problem. The project involves the construction of the rectified main line Arkhangelsk-Syktyvkar-Gainy-Solikamsk , of a deepwater port in Arkhangelsk and in the future - integration of Belcomur line with the transnational Barents-Link trunk line (railway route from Norway to India).
As we reported earlier, the Belcomur project is meaningless without harmonizing it with Murmansk Transport Hub project (Murmansk transshipment hub).

General Director of JSC Interregional Company “Belkomur” Elman Hudazarov said an agreement had been signed on creation of a working party that will focus on the projects of Murmansk transport hub and Belkomur.

The group that will include representatives of the Murmansk region will be in charge of infrastructure projects of the Murmansk region and Belkomur, coordinating the schedule of the projects execution, the distribution of cargo base, etc.

Mr. Hudazarov noted that Belkomur implementation will allow shifting freight flows both to the port of Arkhangelsk and the ports of Murmansk, Belomorsky and Ust-Luga.
It is clear that the state could barely handle the expensive Belkomur project by itself. So, the project is expected to be implemented through public-private funding, under the concession scheme. the Komi Republic head Vyacheslav Gaiser said. Now the work is underway to specify the project parameters.
"Since the project was approved by the Russian government and supported by Prime Minister Vladimir Putin, quite a lot has been done. We’ve completed preliminary financial and economic calculations and proposed a new concept of the project based on a public-private partnership concession model", the regional official said.
According to Russian Prime Minister Vladimir Putin the project value is estimated at no less than $ 12 billion or even $ 15 billion. The sum would be enough to construct, for example, 22 nuclear-powered icebreakers, which would be most welcomed at the ports of the Gulf of Finland. And some supporters of the expensive project believe that the Gulf ports "take away" those goods that could be handled in Arkhangelsk. Vladimir Putin does not share this opinion.

"... The point is that not only the road is important for maintaining the viability of the port, but its operation as well, rates for cargo handling and so on, a lot of issues. It is associated not only with the road. If other ports will provide higher quality services and at lower rates, then, of course, customers will leave. But what happens now in St. Petersburg, especially with the construction of new terminals, can not affect any how the Arkhangelsk port. It is likely to affect handling of cargo, helping to attract our cargoes now transshipped in the Baltic states ", said Mr. Putin.

The Russian ports of the Gulf of Finland would not be happy to loose their part of cargo flows with their northern neighbors. Very often, Big Port St. Petersburg suffers congestion mostly during winter season. Nevertheless, there are several large-scale investment projects being implemented there to expand existing facilities and creating new ones, for handling container and Ro-Ro cargo. For example, investors have commenced construction of the Bronka outer harbor outside the main port area. The project supporters plan to attract considerable freight flows. Let alone the port of Ust-Luga expansion project. There are also plans to boost traffic volume in other ports of the Gulf.

At the same time, the plans for development of northern logistics are still considered a rather exotic project. No one is able today to guarantee payback of large-scale investment in the infrastructure. So, we dare to predict that the state will try to minimize its participation in funding "the projects of the century” at least until the budget deficit persists, say, for quite a long time.

Vitaly Chernov.