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Single Northern Delivery operator: Why do we need a new control center?

23 january 2023

Details of the upcoming law on Northern Delivery have been made public at the end of January 2023. As First Deputy Minister for the Development of the Russian Far East and Arctic Gadzhimagomed Huseynov has told Izvestia, a wide range of measures will be needed for the new regulations to come into force. For example, it will be necessary to create a unified Northern Delivery planning system, appoint a marine operator responsible for the delivery of goods, and set up a single control center. In other words, all the processes associated with goods deliveries to hard-to-reach areas in the Far North should soon be under unified state control. How will it change in the life of the Arctic?

A summer-long delivery

Northern Delivery is a set of measures to deliver goods to the Arctic regions of the Russian Federation. It is implemented in 25 regions of the country and covers the needs of three million people. According to the Ministry for the Development of the Russian Far East and Arctic, the budget allocates over RUB 87 bn annually to purchase and deliver three million tons of cargo.  Fuel accounts for about 70% of all delivered goods, with the rest made up of food, medicine, and machinery. Cargo is primarily shipped along rivers during the navigation period, in the months when the water is not covered by ice. For example, in 2022, ships started navigating the polar part of the Yenisei in late April and were withdrawn from the Arctic regions in early November.

Normal life in the Arctic is impossible without Northern Delivery. There are almost no railroads beyond the Arctic Circle, and the number of roads is also limited. The so-called winter roads, which are carved out of snow and ice during the cold season, are unfortunately not always reliable. If a vehicle breaks down past the Arctic Circle, it is often easier to abandon it than try to repair it, not to mention the possible need to evacuate the drivers. In summer, the permafrost often turns into a swamp: You can easily find pictures of trucks that have become part of the polar landscape on the Internet. The sparsely populated areas, vast distances, and extreme climate do not make the best conditions for a steady overland freight turnover. Of course, urgent issues can be solved by aviation, but it, too, depends on the weather, and it is not feasible to deliver several million tons of fuel by plane.

Meanwhile, fuel, medicine, food, and equipment are always needed. That is why the only working alternative is to stock up on cargo brought in by ships. Until 2022, when the Ministry for the Development of the Russian Far East initiated the creation of a single center to control and manage Northern Delivery, the regions had to solve the logistics problems themselves while the state only subsidized the delivery of goods. Today, when the North Sea Route is as vital for the Russian economy as the oil and gas industry — as the Minister for the Development of the Far East and Arctic Aleksey Chekunkov has told Izvestia — the load on the Arctic has increased many-fold, so it is only logical to unify the system responsible for the region's life support.

A logistician's dream

Once the State Duma approves the new law, the single Northern Delivery operator will independently collect applications for the necessary goods and control procurement. The government will also create a unified digital platform, thus significantly reducing decision-making time and allowing many new companies to participate in Northern Delivery. Moreover, bulk purchases significantly reduce costs and provide worthy suppliers with long-term contracts. Deliveries will be guaranteed by one or more state-accredited freight forwarding organizations. They will ensure the safety of transportation and provide information on the whereabouts of the cargo. All cargo will be divided into three categories: goods necessary for the functioning of the social infrastructure, energy, and utility sectors; goods for state and municipal needs; goods for personal needs and orders from businesses and individual entrepreneurs. According to the Ministry for the Development of the Russian Far East and Arctic, medium and small private businesses in the Arctic will also be able to use Northern Delivery.

A single maritime operator will transport cargo by sea. "It will be a state operator, which will ensure the delivery of goods by sea via the North Sea Route and in the Pacific Basin, " says TASS quoting Deputy Minister Huseynov. The system was successfully tested last year, with 8,500 tons of cargo delivered in two subsidized voyages, says PrimaMedia.

In 2023, the number of voyages will double, and the ships will be loaded to the maximum. Centralized control is expected to significantly reduce costs at all delivery stages, which should have a direct impact on the financial well-being of the inhabitants of the Arctic and the Far East. "The new law will contain several elements that will significantly reduce the cost of the supplied products, construction materials, and goods," says the Presidential Envoy to the Far Eastern Federal District, Yury Trutnev.

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