The route from the East to Europe via the Arctic is much shorter than the same route through the Suez Canal, but transporting goods is more expensive. To solve this problem, Russia is ready to reimburse part of the costs to the carriers.
The Russian authorities intend to create a state operator of containerized cargo in the Arctic and cover the carriers' transportation costs and all the risks associated with it. This is reported by Bloomberg with reference to Deputy Minister for the Development of the Far East and Arctic Alexander Krutikov.
As explained by Krutikov, the budget will take on itself only the costs directly related to transportation. Other expenses of the company should be borne by themselves. "The cost of transportation should be less than the transportation through the Suez Canal, at least at the initial stage," Krutikov explained. Thus, the Ministry for the Development of the Far East and Arctic plans to increase the popularity of this route among carriers.
However, as Krutikov noted, to make the Northern Sea Route more competitive, this scheme will have to work for at least ten years. "Carriers will get used to the infrastructure, become more interested, then we can stop covering costs and the way will become commercially viable," he explained.
As noted by Bloomberg, now the transportation of goods through the Arctic is more than a third (36%) more expensive than their transportation through the Suez Canal. This happens although the very path through the Arctic, which connects Europe and Asia, is much shorter than the same path through Africa. The length of the Northern Sea Route from St. Petersburg to Vladivostok is about 14 thousand km, while the route between these cities via Suez will be more than 23 thousand km.
The NOVATEK's gas carriers that built the LNG plant on the Yamal Peninsula may pass through the Northern Sea Route. Now, in winter, they run through the Suez Canal. Leonid Mikhelson, the chairman of the company, noted that the use of the Northern Sea Route in winter can also significantly reduce the time and cost of gas supplies to consumers - from 36 to 19 days, and the costs - from $2.49 to $1.65 per 1 million British thermal units (MMBTU).
At present, the Northern Sea Route is thousands times less busy than the alternative route: in 2017, 1.041 billion tons of cargo was transported through the Suez Canal, which is 5,000 times more (194,000 tons through the Northern Sea Route).
Several private companies are already experimenting with the possibility of delivery of cargoes through the Northern Sea Route, rather than along a longer route. In September 2018, for the first time, a test run of a container ship from the Danish company Maersk, one of the world's largest carriers, was successfully carried out along the Russian coast. At the same time, it faced problems on its way through due to poor infrastructure. The vessel was unable to load fish in the port because it did not have the necessary equipment.