Prospects for the Northern Sea Route development

In political and economic debate of the last decade the Northern Sea Route (NSR) has gained a lot of attention and is considered to be a promising initiative of the coming decades. On the one hand, officials of many countries have announced intentions to participate in its development. On the other hand, numerous studies aimed at measuring the economic viability of the NSR navigation indicate that the route has limited potential and is suitable only for a relatively small segment of shipping. This study is dedicated to solve this contradiction focusing on two different rationales of the NSR use: 1) current economic feasibility which is defined by the level of transportation costs in comparison to alternative transport routes; 2) long-term prospects of the NSR development determined by long-term trends and strategic interests of various countries. It is revealed that the NSR is commercially viable only for bulk cargo transportation in warmer months from and to ports located not far from the NSR. In the long term the effectiveness of the NSR can increase under conditions of further ice melting, development of Russian Arctic zone, in particular, the infrastructure along the NSR, and increasing political and other risks along the traditional trade routes between Europe and Asia. On the contrary, the slowdown in Asia-European trade and the suspension of some oil Sc gas projects in Russian Arctic worsen to some extent the NSR prospects.