When the resources of each of northern Russia's regions begin to be developed in a planned and orderly fashion, the value of the NSR will become apparent.
NSR shipping companies and their earnings structure
The management of the NSR is handled by the Northern Sea Route Administration, together with other structures within the Service of Marine Transport of the Ministry of Transport of the Russian Federation. Transportation is regulated by the following joint stock companies, although the understanding of what constitutes "public" and "private" enterprise in Russia differs greatly from the definitions of these concepts in Japan.
* Murmank Shipping Company (MSC) (Head office: Murmansk)
* The Northern Shipping Company (Head office: Arkhangelsk)
* The Arctic Shipping Company (Head office: Tiksi)
* The Far Eastern Shipping Company (FESCO) (Head office: Vladivostok)
* The Primorsk Shipping Company (Head office: Nakhodka)
Icebreakers are owned by the government, but their operation is entrusted to the above-mentioned shipping companies or to port management authorities. Therefore, the government should be responsible for financing the maintenance of the nuclear-powered icebreakers used by MSC, but in fact those payments are currently suspended. The shipping companies suffer from a significant and chronic shortfall between the shipping fees they receive, which are mandated by the federal government, and the costs they must pay out. Due to the fall of the ruble, these enterprises are drawn away from NSR shipping by the high profitability of hard-currency overseas shipping compared with the low return on NSR shipping. Their fixed costs in terms of icebreaker maintenance are also rising rapidly just as NSR shipping volumes are declining. According to (admittedly rather old) data from 1993, NSR revenues cover only 67% of expenses, as opposed to 240% in the case of overseas shipments. In other words, the more NSR shipping these companies do the greater their losses become, whereas overseas operations are irresistibly lucrative. Shipments abroard, comprising 26% of the total volume of shipments, brought in 63% of total revenues and 75% of total profit of the SMT transport fleet. This overseas profit is used to maintain icebreakers, conduct domestic shipping, pay crews' salaries and maintain fleets. Another revenue stream comes in the form of Arctic tourism, in which overseas travel companies charter icebreakers for sightseeing excursions.
4.4.3 Potential for Transit Traffic on the NSR
Appropriate commodities for the NSR transportation
In the shipping industry, reliability is more important than cost. It is insufficient for the NSR simply to be shorter and cheaper than the alternatives. Container shipping is ill suited to the NSR because of lack of regularity and punctuality of navigation, and luxury goods that are apt to deteriorate in extreme thermal conditions are similarly inappropriate. According to the analysis of many shipping firms, in the early days at least the NSR will be best used to ship low-value bulk cargoes.
Transit Cargo that can be Shifted to the NSR
NSR transit cargoes between Europe and Asia and between Europe and the west coast of North America without calling at any of the ports along the NSR coast-totaled no more than 100,000t in 1995. If the NSR could fulfill its potential as a reliable, low-cost shipping route, a considerable volume of traffic could be diverted from the Suez route. To analyze trends in transit cargo, the characteristics of the NSR shipping system and the potential volume and types of cargo must be carefully considered. Although cost-competitiveness is important in the selection of means of conveyance, reliability of delivery is a crucial criterion as well. As stated above, the NSR must be not only short and cheap but also reliable enough to satisfy shippers.
