The North-West of Russia, owing to its production potential, developed infrastructure, including sea ports, profitable strategic position and the colossal reserves of the hydrocarbon raw materials of the shelf and coastal zones of the Arctic seas, plays more and more considerable role in the country’s economy. It is no accident that for the seven years of his presidency, Vladimir Putin has made four working visits to the Murmansk region, by the way, it was Murmansk he made his first visit to in the rank of the President of Russia. In the intervals between the trips of the head of the state, the Chairmen of the Governments of Russia worked here: in January 2003, it was Mikhail Kasianov and in October 2005 – Mikhail Fradkov.

The coastal regions and the shelf of the Arctic seas is that storeroom of mineral resources and hydrocarbon raw materials which will provide the needs of not only Russia, but also of the whole world community, for energy carriers, non-ferrous metals and timber, in the foreseeable future.

Only one figure: according to the estimations of the scientists, the reserves of oil, gas and gas condensate equal to 100 billionn ton ideal fuel, which under today’s level of consumption will be enough for the whole humanity for 30 years, are concentrated on the shelf of the Arctic seas. But not only. Here, 90 % of nickel and 65 % of copper are produced and exported. The North is that part of the Russian territory on which 12 % of Russians live. 40 % of the planet’s non-tropical woods, 40 % of the world’s reserves of nickel and platinoids, 42 % of natural gas and 12 % of oil are concentrated here. One fifth of the national income is brought into the treasury by Northerners, they also give 60 % of the country’s export, extracting 92 % of gas, about 80 % of oil, practically all gold, silver, tin, mercury, molybdenum, diamonds, half of business timber and apatite concentrates.

And the gates to these storerooms are a non-freezing deep-water port Murmansk, where the atomic ice-breaker fleet, dry cargo ships and tankers of a strengthened ice class are based, from where a direct way into the World Ocean and to the highways of the North Seaway opens. Without this port and the Arctic fleet, the development of the natural wealth of the Arctic region and the use of the transit potential of the North Seaway, connecting by the shortest way Europe and the countries of the Asian and Pacific region, are unthinkable. Its use can bring into the state’s treasury billion dollars.

The sitting of the Presidium of the State Council of Russia and the Sea Collegium of the Government of Russia, held under the chairmanship of Vladimir Putin, was devoted to the discussion of the problems of the development of the infrastructure of sea ports and the sea fleet of the country.

On 2 May 2007, the passenger ship “Polaris”, by which the President of Russia arrived, having made a way from Murmansk to the moorings of the FSUE (Federal State Unitary Enterprise) “Atomflot”, moors at the side of the atomic ice-breaker “50 let Pobedy” (“50 Years of Victory”). The trip around the Kola gulf was not an idle promenade. In the compressed time needed for overcoming that way, the Governor of the Murmansk region Yuriy Evdokimov spoke about the prospects of the development of the Murmansk transport junction, the updating of the port powers at the East coast of the Kola Gulf existing already and the construction of new terminals at its South coast.

Director General of the open stock company “Murmansk Shipping Company” Alexander Medvedev, informed the President of Russia of the measures taken by this leading arctic shipping company on the provision of the competent and confiding management of atomic ice-breakers and atomic technical service ships, of the renovation of the company’s dry cargo and tanker fleets, which will go under the Russian flag, of the transit potential of the NS. He also spoke of the work of the only underwater arctic shipment terminal in Russia for oil shipment on Varandey, belonging to a shipping company, and of the project of the re-shipment of the ice-class dry cargo vessel “”Ivan Papanin” into a bore ship for test works on the Arctic shelf.

First Vice-Premier Sergey Ivanov, the Minister of transport Igor Levitin, the minister of atomic power engineering Sergey Kirienko, the representatives of the ministries interested in it and departments, President of the “Russian Railways” company Yakunin, President of the “Russian Oil” company (“Rosneft”) Sergey Bogdanchikov, the Governors of the seaside regions, took part in the sitting of the Presidium of the State Council.

Reference: Logistics is a complex system of planning, control over and management of transportation, storage and other operations made in the process of bringing raw and other materials to a production enterprise, their in-plant processing and the delivery of finished commodity to the consumer, as well as the handing over, keeping and working up of the corresponding information and financial flows.The total turnover of the European market of logistics services amounts to over 600 billion euro. The potential of the Russian market of logistics services is estimated at 120 billion dollars.

With his speech, Vladimir Putin set the tone to the Presidium of the State Council of Russia and the Sea Collegium of the Government of Russia. Emphasizing the most important role of sea transport, he noticed that it implemented 90 % of all international goods transportations and over 62 % of foreign trade goods turnover. The sea transport is both ports and shipment complexes, and modern navigation security means. On the whole, the sea transport system is complicated and various. The coordinated development of all parts of the Russian sea transport, and first of all, the increase of its competitive ability, is of the greatest importance. In the Sea doctrine valid until 2020, this task is one of the priority ones. The effectiveness of Russia’s integration into the world’s transport system and the development of all Russian economy depend upon the level of the competitive ability of the sea transport. In the world, there are already some generally accepted criteria and parameters of the estimation of the competitive ability of the sea transport.

It is the availability of state ports of high capacity and a powerful transport fleet, as well as an effective work of auxiliary structures engaged in logistics, dispatching and the customs service of the adjacent kinds of transport.

Vladimir Vladimirovich noticed that the working group of the State Council of Russia, together with the Sea Collegium of the Government of Russia, had made a deep analysis of the state of affairs of the sea transport. The materials prepared contain a few concrete suggestions. He stopped at the key trends, having paid a special attention to the development of sea ports. Nowadays, 62 ports work in Russia. According to him, Russian goods traffic is still implemented through foreign ports. Why? The reasons are unknown. Our ports do not correspond to the modern requirements and needs of Russian economy. It also concerns the largest ports situated in the Baltic regions, in Novorossijsk, in the Far East and on the lines of the North Seaway.

President of Russia demanded from the Government to take immediately a complex of measures on the development of these ports, first of all, having worked out a program of concrete actions for each of them, not waiting for the laws to be passed, which have to be hastened, too. Proceeding from it, Vladimir Putin entrusted the Sea Collegium with the co-ordination of actions on the development of sea ports, having permitted to make changes into the federal target program of the updating of the transport system of Russia, having given priority to those ports which were included into the system of transport passages. Here, it is necessary to build new shipment complexes and to update those which already exist, increasing the transit potential of the country.

Reference: 8.8 million ton goods were exported through the Russian ports of the North-West region in 2000, 17 million tons – in 2006. Through the ports of the Baltic states – 39.2 and 58.5 million tons of Russian goods, correspondingly.

Vladimir Putin noticed it was necessary to develop railway and road structures at the near and far approaches to the ports, creating conditions so that goods are delivered in time and not at the expense of their quality. For carrying out this main task, one should also create powerful logistic centers.

Reference: Logistics is a complex system of planning, control over and management of transportation, storage and other operations made in the process of bringing raw and other materials to a production enterprise, their in-plant processing and the delivery of finished commodity to the consumer, as well as the handing over, keeping and working up of the corresponding information and financial flows.The total turnover of the European market of logistics services amounts to over 600 billion euro. The potential of the Russian market of logistics services is estimated at 120 billion dollars.

Such structures should meet all demands of both Russian and foreign users. There is the most urgent necessity for similar projects connected with the strategic planning and development of the ports. They can be realized only on the basis of the state and private partnership.

I consider it important, - said Vladimir Putin, - to create in the largest ports free economic zones with a privilege regime of taxation, on the basis of a corresponding law which should be passed without delay. All questions concerning land-tenure should already be solved in 2007. It is one of the key questions which hinders the development of the ports.

President of Russia mentioned the state and development of the sea fleet of the country as the most important problem. By now, Russia controls over more that 1500 ships at the total deadweight of 15 million tons. But 60.3 % of this tonnage work under the foreign flag “convenient” for Russian ship owners. In comparison with 1992, the number of Russian ships working under the “convenient foreign flag” has increased by 4 times. Their average age is 9 years, but the age of the ships going under the Russian flag is 24 years. The renovation of the fleet takes place due to the shipbuilding at the foreign shipyards. To change this situation for the better, there has been approved a decision on the creation of a large shipbuilding corporation. As the country’s fleet has reduced by 4.8 times for the last 15 years. The Baltic Shipping Company does not exist any more, and the fleet of the Far East Shipping Company has reduced by 66 %. It means that there has not been paid attention enough to the problems of the sea fleet.

Reference: factors influencing the competitive ability of Russian ports:- the specific features of the geographic position;- lack of correspondence of the regime and procedures of the work of control units to the world’s practice;- lack of correspondence to modern technological and logistical requirements;- lack of regulation of land and rent relationships in ports;- absence of tax and customs preferences approved in the world’s practice, including those for the creation of special port economic zones;- the majority of ports are situated at freezing seas, that is why there is a need for ice-breakers;- excessively high port dues (port dues in the St.Petersburg port, for example, together with the canal and ice-breaker due from tankers at the deadweight of 20 thousand tons amount to 30.8 thousand dollars, at the same time, in Hamburg (Germany) it is 7.2 thousand, in Karlshamn (Sweden) – 16.8, in Pori (Finland) – 17.5, in Ventspils (Latvia) – 17.9 thousand dollars.

Vladimir Putin required from the Government of Russia to take measures on the accelerated development of the fleet, for ships’ transfer under the Russian flag.

Being in Murmansk, President of Russia thought it necessary to consider the suggestions on the updating of the Arctic transport system. It concerns Arctic ports, the transport and ice fleets, the navigation and aviation provision of shipping by the NS. He drew a special attention to the importance of the sea transport in the opening up of the Arctic oil and gas deposits, its role in the transportation of hydrocarbon raw materials, the volumes of which are supposed to reach 40 million tons by 2015, in the strategic provision of Russia’s economic, defense and scientific interests in the Arctic.

The sitting of the Presidium of the State Council of Russia and the Sea Collegium of the Government of Russia was preceded by the work of the working group on the questions of the development of the sea transport created in January 2007. This group had prepared a packet of documents and a report the Governor of the Primorskij region Sergey Darkin made a speech with.

Reference: ship owners take their ships under “convenient” foreign flags in order to save money on registration dues, taxes, social fee payments, crew maintenance expenses, in order to avoid the interference of state officials into the affairs of shipping companies. 242 Russian ships at the deadweight of 9.5 million tons are under “convenient” foreign flags.

He noticed that the discussion and search of decisions on the problems of the development of the sea transport were of a great importance for Russia. For the last 10 years, there has been worked out a lot of documents directed at the development of transport. Some success has been reached, but the advancement to the goals set up takes place slower than these goals move away. The home sea transport is slow in comparison with the development of Russian economy. We have a task to reduce the prime costs of production at the expense of the reduction of the part of transport expenses in the cost of goods.

Nowadays, 15 % of the total world volume of sea goods are under the control of Russia, but only 5 % of ships under the Russian flag are used for their transportation. Russian transport infrastructure, ports and the Russian fleet have become not competitive. Russian transport business is behind technologically, in the quality and economy of the services provided. As a result, Russian goods go through foreign ports and are transported by foreign ships.

Reference: 8.8 million ton goods were exported through the Russian ports of the North-West region in 2000, 17 million tons – in 2006. Through the ports of the Baltic states – 39.2 and 58.5 million tons of Russian goods, correspondingly.

The lag in the development of the transport infrastructure of the ports restrains the development of the country’ economy. Among the problems restraining the development of the ports, Sergey Darkin mentioned the allotment and reservation of landed estates for the realization of the programs of their extension. He suggested that they should take into consideration the experience of the countries of the Asian and Pacific region. South Korea, for example, created modern ports to be managed by the State on budget means, with their further capitalization and sale to private business. For these countries, ports are not a source of profit, but a means for the reduction of the price of goods.

One should increase the part of the Russian fleet in the total volume of transported cargoes processed at Russian ports. For this, it is necessary to assign to Russian goods transporters not less than 50 % of the national goods base and 100 % of cabotage transportations. It will further the increase of the competitive ability of the Russian trade fleet. Consignors using ships under the Russian flag should be encouraged.

In order to transport not less than 50 % of home goods by Russian ships by 2020, it is necessary to have 350 ships at the total deadweight of 9 million tons. 90 of them – on the Far East basin, 35 – on the North basin, 35 – at the Black Sea, 115 – in the Baltic region and 5 – in the Caspian region. The realization of the program will cost 640 billion roubles.

Reference: to increase the competitive ability of Russian ports, it is necessary:- to compensate from the federal budget for the expenditures on the provision of secure navigation at ports and at the approaches to them;- to re-consider, in correspondence with the world’s practice, the procedures and schemes of the work of state control agencies;- to create a single body on the facilities construction and property management of control units through the state border at sea ports;- to improve the norm legal base on land and rent relations;- to create special port economic zones;- to provide the outstripping development of the railway and car road approaches to the ports, port infrastructure and logistics centers;- to establish tax rates on property for the whole port infrastructure 0 %;- to unify railway tariffs for 2-3 years.

Sergey Darkin suggested creating a Russian shipping company with the participation of the state and a sea cluster which will solve priority tasks connected with shipbuilding and repair, sea service and the increase of the quality of the training of specialists for the trade fleet. He also expressed his initiative to take a new federal target program “Development of the Russian Transport System” for 2010-2015, supposed to rise the competitive ability of the sea transport.

Minister of Transport of the RF Igor Levitin paid attention to the problems of the development of port infrastructure. In 2006, at 62 Russian ports, 420 million ton goods were worked up; it is more than in 1990 at all ports of the USSR. Nowadays, Russia takes the 8th place in the world in the total goods turnover of ports, but it is far behind foreign ports in the level of competitive ability.

Reference: factors influencing the competitive ability of Russian ports:- the specific features of the geographic position;- lack of correspondence of the regime and procedures of the work of control units to the world’s practice;- lack of correspondence to modern technological and logistical requirements;- lack of regulation of land and rent relationships in ports;- absence of tax and customs preferences approved in the world’s practice, including those for the creation of special port economic zones;- the majority of ports are situated at freezing seas, that is why there is a need for ice-breakers;- excessively high port dues (port dues in the St.Petersburg port, for example, together with the canal and ice-breaker due from tankers at the deadweight of 20 thousand tons amount to 30.8 thousand dollars, at the same time, in Hamburg (Germany) it is 7.2 thousand, in Karlshamn (Sweden) – 16.8, in Pori (Finland) – 17.5, in Ventspils (Latvia) – 17.9 thousand dollars.

Only one port in Russia (Vysotsk) has registered land borders. Most of the ports were built in 60-70-s and do not meet the modern demands.

Only the Murmansk and Nakhodka ports are capable of accepting ships at the deadweight of over 150 thousand tons and from 10 to 50 thousand tons.
The competitive ability of the ports is influenced by the existing tax system. The port authority puts tax duties into the rates brought forward to ship owners. As a result, goods go to contiguous countries.

Minister of Transport suggested establishing a zero tax rate for the whole port infrastructure.

Speaking about the prospects of the development of Russian ports, Igor Levitin said that by 2015, modern shipment complexes with terminals for ships at the deadweight of 70 thousand tons would have been created at the Murmansk and Kaliningrad ports, in Ust-Luga, at the East port and on Taman.

Reference: to increase the competitive ability of Russian ports, it is necessary:- to compensate from the federal budget for the expenditures on the provision of secure navigation at ports and at the approaches to them;- to re-consider, in correspondence with the world’s practice, the procedures and schemes of the work of state control agencies;- to create a single body on the facilities construction and property management of control units through the state border at sea ports;- to improve the norm legal base on land and rent relations;- to create special port economic zones;- to provide the outstripping development of the railway and car road approaches to the ports, port infrastructure and logistics centers;- to establish tax rates on property for the whole port infrastructure 0 %;- to unify railway tariffs for 2-3 years.

By 2015, the complex of measures on the development of ports taken will allow to increase their capacity up to 650 million tons per year and will turn goods from the ports of contiguous countries to the home ones.

Home ships going under “convenient” foreign flags have to be returned under the Russian flag.

Reference: ship owners take their ships under “convenient” foreign flags in order to save money on registration dues, taxes, social fee payments, crew maintenance expenses, in order to avoid the interference of state officials into the affairs of shipping companies. 242 Russian ships at the deadweight of 9.5 million tons are under “convenient” foreign flags.

In the process of making a speech by Igor Levitin, there was a remark on the part of Vladimir Putin, who noticed that port dues in Hamburg were twice lower than in Novorossijsk. If no conditions for the development of ports are created, the consignor will go to the ports of contiguous countries as he did before.

President of the open stock-company “Russian Railways” Vladimir Yakunin stopped at the necessity of the development of port infrastructure and the measures taken by railway workers. Only in 2003-2006, the “Russian Railways” company spent over 130 billion roubles on the updating of the approaches to the ports. 762 billion roubles more will have to be invested until 2015, including 284 billion roubles in the North-West of Russia for the doubling of the volumes of transshipped goods.

President of the “Rosneft” oil company Sergey Bogdanchikov noticed that by 2015, in correspondence with the power engineering strategy of our country, we were to increase oil extraction on the shelf by 5 times, up to 80-85 million tons. But today, open deposits are just a resource base. It takes 12 years from the moment of getting a license to the industrial extraction of oil. There is a need for a shelf development strategy, one has to define which company will deal with it, otherwise there will be none of this oil. 30 ice-class tankers at the deadweight of from 150 thousand tons and lower and drilling platforms to the sum of 223 billion roubles have to be built for the period from 2007 to 2015. But licenses are not issued, hence, no projecting and construction of the ships and drilling rigs are carried out. Companies working on the shelf need the same tax vacation as companies working in West Siberia do.

Vladimir Putin reacted immediately, not having excepted an opportunity of the distribution of the same privileges onto the shelf.

Governor of the Leningrad region Valerij Serdyukov suggested considering the questions of the construction of gas carrying ships at the Izhorskij shipbuilding plant and bore platforms at the Vyborgskij shipbuilding plant for work on the shelf. Nowadays, this plant builds platform foundations for Norway, which fits them out with modern equipment and sells to other countries.

All questions discussed here are incredibly familiar to us, - said First Vice-Premier Sergey Ivanov, starting his speech. – We have twice discussed the questions of the development of ports, as well as the problems of shipbuilding and paid attention to the Arctic region and railway transport. The list of errands that will be mentioned here, has been achieved through suffering by the Sea Collegium. There have already been taken decisions on giving some ports a status of free economic zones and on the creation of khab-ports. The main thing is to implement those economic and tax decisions which stimulate the development of the ports. Nowadays, they are destimulating factors that act. Let’s compare the work conditions of the Estonian Silamyae and Ust-Luga ports:

Sillamyae (Estonia) Ust-Luga
- value-added tax at the construction 0 % 18 %
of port objects and infrastructure
- property tax 0 % 2.2 %
- profit tax 0 % 24 %
- customs duties on port shipment equipment 0 % 6.5 %

What competition can we talk about? We plan to pass a new law on the special economic zones of the ports. According to the calculations of the Ministry of Transport, in case, this law is passed in Ust-Luga, profit tax will be not 24 %, but 15 %. Anyway, the terms of competition will not be equal. Naturally, the consignor will choose Estonia.

Unfortunately, there is no single strategic planning agency in Russia, up to now, that would be responsible for the development of the whole transport infrastructure. Sergey Ivanov suggested imposing these functions on the Ministry of Transport.

The needs of the Arctic navigation were estimated by Sergey Ivanov at 80 ice-class ships, 14 of them are ice-breakers. He announced that there was no need for aviation ice prospecting in the Arctic region any more. These tasks will be implemented by the space system GLONAS.
There was one more news of the realization of a large-scale project – the second thread of the Volga and Don canal with the building of a large remote port on Taman, at which ships of large capacity could moor.

As far as the construction of bore platforms is concerned, Sergey Ivanov suggested holding a contest to define where they would be built cheaper and more qualitatively.

Head of the Minatom Sergey Kirienko informed of the programme of the construction of flowing atomic power stations. The first one of them will be built in 2010 for Severodvinsk. Here, a technological line for the mass assembling of flowing atomic power stations (FAPS) is being created. He suggested building such a station to provide with electrical energy the summit of APEC, which would be held in the Far East in 2012. A new reactor power engineering station “RYTHM - 2” for atomic ice-breakers is created, the program of the prolongation of the resource of the atomic steam-producing stations of ice-breakers up to 175 thousand hours keeps being implemented.

Governor of the Murmansk region Yurij Evdokimov called the Murmansk port one of the most priority ports for Russia. It has direct exits to the sea and no one can make either a property or an economic or an ecological claim on us, - he said. Murmansk is not only the beginning of the North Seaway, but also a base for the development of the Arctic shelf.

Reference: at the international conference “International Power Engineering Policy, the Arctic Region and International Sea Law”, taken place in St.Peterburg on 23-26 June 2004, some countries expressed their wish to carry out the internationalization of the North Seaway, to introduce the freedom of navigation for trade and military ships of any countries.

Unfortunately, up to now, problems are considered separately, in themselves, without mutual connection, without co-ordination. He called upon the President to solve the question concerning the creation of a body which would head the work on the opening up of the shelf, the development of the North Seaway, the defense of the national interests of Russia in the Arctic region.

Reference: Russia lags behind in the creation and development of deep-water ports. By 2010, the turnover of goods of the countries of the Baltic Sea will have approached to 600 million tons. The powers of the Russian sea ports in the North-West will have risen up to 250-300 million toms. In these conditions, Denmark, following the example of Turkey, can increase the cost of pilotage and make the rules of ships’ going through the Baltic straits more severe. The development of the Murmansk transport junction can minimize possible negative consequences, it will increase the export possibilities of Russia and turn the North Seaway into a transit passage between Europe and the countries of the APR. The shortest distance between Murmansk and New York is 4190 miles. Murmansk has a real chance to be included into the international project NEW – the transport passage “East - West” – Boston (the USA) – Halifax (Canada) – Murmansk – Central Asia – China.The Murmansk sea port has the stable and high tempos of development. If in 2003 it transshipped 14 mln tons through six roadstead and coast terminals created here, then in 2006, it was 27.2 million tons, including 10.9 million tons of oil and oil products. In 2010, it is planned to export 14 million tons of oil and oil products, in 2015 – 23 million tons, in 2020 - 23 million tons.

After the reconstruction of the Murmansk transport junction, for which 60 billion roubles will be needed, in 2020, from 80 to 114 million tons of goods will be transshipped through it.

The conclusions of the sitting of the Presidium of the State Council of Russia and the Sea Collegium of the Government of Russia were made by the head of the State Vladimir Putin. He noticed it absolutely right that recently, the problems discussed had been talked about a lot, but little had been done. The economic state of not only the regions but of the whole Russia will depend upon the realization of the plans on the development of sea transport made. Vladimir Putin spoke with optimism of the finished working out of the program of the development of the shipbuilding branch and of the creation of a large Russian shipbuilding company, of the improvement of the infrastructure of sea transport and the reconstruction of sea ports. In the years of economic reforms, Russia practically went away from the Arctic region. This process is put an end to. The President of Russia took a decision on the creation of a national Arctic council under the chairmanship of the head of the Russian Government. This council will be given powers on the development of the state’s policy, directed at the consolidation of the interests of our country in this region and the development of business activity.

Vladimir Putin noticed that here, in Murmansk, there were ideal conditions for the creation of a large transport junction and it was necessary to give corresponding financial resources and administrative forces for the realization of this project.

The President of Russia set up a task to get down to the working out of the new target programme of the development of the transport system of the RF for the period from 2010 to 2015.

One wants to believe that the plans made at this meeting will not remain a declaration on intentions.

Yurij Banko

Banko Jury Timofeevich. 
Was born on July, 25, 1951.
Since 2003 on present time – the chief of an organizational department of Council of deputies of municipal formation Severomorsk. Member of the Union of journalists of Russia.
With 2000 for 2003 – own correspondent on Murmansk area of magazine «Oil of Russia».
Since 2003 – the special correspondent, an observer of national branch analytical magazine «Oil-and-gas vertical».
Since 1997 – the participant of international All-Russia competition Petroleum Energy Gas with article «The Best publication of year on problems of thermal power station of Russia» in a nomination «For a series of analytical and problem materials in press».
10 times became the winner of this competition, in 2002 it is awarded with the Big gold medal of competition.

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