Dear NSR Association Board, Management and Partners, Dear Mr. Chillingarov and Dear Mr. Kharlov,

First of all congratulations to the NSR association’s 20ieth Anniversary from Tschudi Shipping, the Centre for High North Logistics and myself!

The NSR Association plays an important role in gathering Russian and non-Russian partners around the joint interest in the development of the NSR.

The NSR has been at the core of much of my work for more than ten years and for that reason our paths have crossed many times! Not least with Capt. Mikhaylichenko who was an unwavering believer in the NSR even when very few others did! I really think of him with fond memories.

The Tschudi Group arranged the first shipment of  iron ore from Kirkenes in Norway to China via the NSR in September 2010 in close cooperation with Rosatomflot, the NSR Administration , not least Mr. Monko, and CHNL we also operate STS transhipment services for Russian oil and LNG in Northern Norway when required and delivery of large volumes of rock/aggregates for projects along the NSR. This illustrates how cross border cooperation benefits both nations, Russia and Norway.

In my capacity as the chairman of the Centre for High North Logistics under Nord University in Bodø which is analysing and studying the traffic on the NSR I have another view point to the incredible development of the activity in the NSR since 2010 as well.

The most important part of your activities in the NSR Association and in CHNL, is to provide factual information about the developments taking place. Raising the awareness of what is really happening in the Arctic is crucial. The development is hampered by lack of information which opens up for misinformation and misunderstandings!

As to the commercial aspects of the NSR which I was asked to say something about:

The collapse of the seaborne traffic due to the accident in the Suez Canal raised awareness of the  Northern Sea Route. Could it  become a real alternative for international carriers for cargo transportation between the northern part of the Atlantic and the northern part of the Pacific, an alternative, if the route via Suez is blocked for some reason.

We know one of the main arguments against the NSR is the potential for environmental damage

So what do we have to do to overcome that objection?

The NSR could become the most environmentally sound transportation route between East and West combining a shorter route with zero emissions. This is exactly the opposite of what is argued by those who want to boycott the route.

In our opinion the preferred fuel should be LNG with onboard carbon capture technology collecting all emissions including black carbon. This would in a way future proof LNG as fuel for ships against the counter-arguments being presented now. LNG has a natural advantage in the Arctic with an increasing number of production and potential bunkering sites along the NSR.

A system for how to dispose of the captured CO2 in environmentally approved and verifiable ways will have to be mandatory. LNG as fuel also means that there is no risk of oil pollution in connection with accidents.

To speed up this development the Russian government should introduce financial incentives ie. lower transit fees for low emission NSR transits and progressively higher cost for high emitters.

To reduce the perceived risk of a lack of SAR capacity the nuclear ice breakers should operate as large mobile search and rescue platforms safeguarding the passage when not operating as ice breakers.  

Following this, a precondition for overcoming the general lack of ice-class vessels is to encourage international shipping companies to invest in NSR suitable tonnage alongside Russian owners.  This can only be achieved by changing the Russian regulations giving cargo-preference to Russian flag and Russian built vessels for Russian Arctic cargoes. This will be necessary to generate the critical mass required for a competitive freight market to function. Over time this will lower transport cost benefitting Russian projects and cargo owners as well as all other arctic projects.[FT1] 

If there are more regular international users the NSR will  become accepted as an alternative international trade route. The best way to attract international investments is to show success stories involving non-Russian parties succeeding in the Russian Arctic including in the NSR.

There is now a unique window of opportunity to form the future of the NSR in a green direction. This has to happen  before a large  expensive fleet which is not up to the coming environmental requirements has been built. At that time the financial cost of making the shift could have become too large to be realised with detrimental effect on the NSR’s future.

Russia and its Arctic neighbours will have to take some bold decisions - together with the involved business and shipping communities - to allow the NSR to develop much faster as a sustainable transit route. The required decisions to make that happen must be taken very soon and the NSR Association together with all other positive forces inside and outside Russia, not least in Norway, should contribute to that.