Arctic Economics: What is Missing? The Case of the Northern Sea Route

Abstract

Traffic on the Northern Sea Route has been growing steeply in later years with the completion of the Yamal LNG project. More LNG development is likely to take place within the next few years. It is now planned to send LNG directly to Asia all year going east on the NSR. Presently, parts of the NSR are for practical purpose unnavigable for several months each year. To use the whole sea route also in the coldest winter months will require presence of a series of new icebreakers. A construction program is being implemented. A comprehensive analysis of the costs vs. the benefits of opening a whole year route has not been published. The purpose of this paper is to review various cost estimates available from open sources and estimate what traffic volumes and tariffs would be required to cover operational as well as capital costs for the new icebreaker fleet.