Maps, guidebooks, tide tables, signals book,
PRACTICAL CONSIDERATIONS
and such can total 0 to 0 for the route;
Special vessel steerage can be required by
Social, economic, and political
local authorities in various ports of call for
Social, economic, and political instability are the
safety considerations; unstated local rates
fundamental obstacles to developing the NSR
probably apply;
(Franzen 1993, Granberg 1993a,b). When Boris
Bunker-filling fee is .30 per ton, and the
Yeltsin assumed the Russian presidency in 1991,
bunker itself is priced at "world market
he inherited an economy on the verge of wide-
rates";
spread collapse. The shortage of basic goods led to
Supply of fresh water en route ranges be-
social and political unrest that in turn produced
tween
||content||
.99 and .69 per ton, dependingfurther chaos in the supply system. Drastic emer-
on location and its quality.
gency reforms were instituted in 1992 to stem the
tide, but during the three previous years, virtually
The fees used for analysis in Wergeland (1993b)
every economic indicator was showing the strain.
are the same as those listed above, indicating that
In 1991 alone, the Russian gross national product
no new figures have been supplied to INSROP by
dropped 17% and retail prices increased by 189%.
FESCO and MSC since 1991.
Although salaries increased by 80% in response to
inflation, purchasing power fell an estimated two-
to threefold. The government's response to the
Marine insurance
Marine insurance is a significant issue for ship-
crisis has been to print more rubles, fueling infla-
ping along the NSR. The insurance premium pro-
tion. Granberg cites many examples of economic
tecting the shipowner is another cost factor to be
distress that may adversely affect NSR operations.
considered to determine whether a shipment can
The Russians declare that the Northern Sea
be accomplished profitably. There are three differ-
Route is now open and the obstacles of the past
ent components of a marine insurance policy: 1)
are disappearing. Actual experience appears to in-
hull, machinery, and equipment coverage on the
dicate otherwise. Total cargo figures, which
vessel itself, 2) protection and indemnity insur-
showed a steady annual increase to about 6,600,000
ance to cover damages caused to others by the
tons in 1987, dropped to 4,900,000 tons in 1991
vessel or its operator, and 3) damage coverage for
(Granberg 1992). The fact that both traffic and ton-
the cargo. Because there have been few voyages in
nage along the route have dramatically decreased
that area, there is presently no statistically based
since 1990 in the face of shortages testifies to the
assessment of the risk involved. Until there is, in-
current problems with moving freight in that area
surers will no doubt be conservative and charge
of the world. Reports of protests and labor strikes,
rates that reflect a higher than actual degree of
stemming from poor wages and living conditions,
risk. Regardless of the risk, the premiums will be
are common. With producer privatization mea-
custom tailored to the particular situation based
sures, the government is attempting to introduce
on the following factors:
profit incentives for its citizens. However, elimi-
nating the old way of doing business has severely
The gross tonnage of the vessel
disrupted the producers' industry-to-industry
The insured value
connections and their ability to bring goods to
The level of deductible damages
market. It will take time to re-establish these net-
Time of season and expected environmen-
works (Arikaynen 1991).
tal conditions
In addition to the overall national problems,
The client's past relationship with the in-
Arikaynen discusses numerous problems between
surer
the administrative and operations entities in car-
The competition between rival insurers.
rying out the Arctic maritime transportation plan.
While MSC and FESCO perform all icebreaking
This is a complex issue that is outside our sphere
tasks and move most of the cargo, they do not
of expertise, so we will not attempt to be more
appear to be working together to achieve an over-
specific on these costs. Instead we refer the inter-
all cargo transport plan. Together, they effectively
ested reader to Torrens (1994) and Arpiainen (1994),
make up the complete operations arm for the plan,
two publications that contain very recent insur-
and yet they have been forced to pursue their own
ance information specific to the Northern Sea
respective economic interests due to reduced sub-
Route.
sidies from Moscow.
55
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