Maritime Transport Background Paper prepared by the Arctic Centre of the University of Lapland for the ‘Arctic Maritime Transport’ workshop, a part of the EU-Circumpolar Arctic Dialogue Seminar, Brussels, 29 November 2018

This background paper is meant to inspire discussion among participants. It constitutes a starting point rather than establishes the boundaries of dialogue within the workshop. This paper was drafted by the contractor in the EU Arctic Policy Assessment contract. As such, the ideas presented in this material do not necessarily represent the views of the European Union.

Photo: SCF

THIS WORKSHOP

The Arctic maritime transport workshop is dedicated to better understanding the current dynamics in Arctic maritime transport. A decade ago, some experts were predicting rapid expansion of Arctic shipping. While volumes of destinational shipping have been rising significantly in recent years, fueled primarily by exports of hydrocarbon resources from the Russian Arctic, transit shipping has been limited. The level of uncertainty and risk is high in Arctic shipping, notwithstanding technological and regulatory developments (primarily the Polar Code). This workshop will try to clarify the future prospects for Arctic shipping. Participants will discuss whether policymakers should take actions to make Arctic shipping more economically feasible, while at the same time enhancing the safety and environmental performance of Arctic maritime transport.

KEY QUESTIONS (depending on time and discussion dynamics, some questions may be unaddressed) • How can we best estimate future volumes and movements for different types of shipping (destinational and transit, container and bulk – energy and other goods)? • What are the tangible benefits of for ? How can Europe seize opportunities arising from the potential expansion of the Arctic shipping routes? • What is the current and future role of insurance companies in Arctic shipping developments? • What are the impacts of increased shipping volumes and infrastructural developments on Arctic Indigenous communities, and how can they benefit from the increased shipping activities? • Does the EU need an active policy on Arctic maritime transport, in view of possible future developments (including for example Chinese interests), or should the EU currently limit its actions to observing the situation and react only when the time comes? The key questions are proposed by the contractor (Arctic Centre), following the consultation with EU officials, and partly building on the issues and questions mentioned by participants upon registration. OVERVIEW Organization (IMO) has adopted numerous Different types of shipping activities in the Arctic convention and guidelines, including the MARPOL can be distinguished: (maritime pollution from ships), SOLAS (safety of • Transit shipping between Europe and ; life at sea) and STWC (training, certification and • Destinational Arctic shipping – exports of Arctic watch-keeping for seafarers) conventions. The resources to global markets and bringing of good to earlier voluntary Polar Code has been largely Arctic communities and projects. transposed into legally-binding rules under • Internal Arctic transport – traffic between Arctic MARPOL, SOLAS and the STWC. Currently, the IMO ports, e.g. cruise tourism operations and fisheries. discusses the use of heavy fuel oil (HFO) in the Arctic. Other international conventions are also There are three passages linking Pacific and relevant for the Arctic shipping, for example the Atlantic Oceans, which are often considered in the International Convention for the Control and assessment of future Arctic shipping: Management of Ships' Ballast Water and • / (NSR Sediments, which entered into force in 2017. extends between Novaya Zemlya and ) along Siberian coast. Due to climate and ice The and its Protection of Arctic conditions, the NSR is at present the most navigable Marine Environment working group (PAME) Arctic route. It was used extensively already during worked on the marine transport, including the 2009 the era. Some search and rescue (SAR) Arctic Marine Shipping Assessment (AMSA) and its infrastructure is available, with plans for further follow-up process. expansion. The shipping volumes in the NSR are RELEVANT EUROPEAN UNION (EU) POLICIES growing dynamically owing primarily to the exports of hydrocarbons from Yamal peninsula In its 2016 Joint Communication on an integrated (destinational shipping). promotes the NSR EU policy for the Arctic, the EU highlighted its commitment to contributing to the safety of Arctic as an international shipping route, although navigation, particularly through innovative recently there have been actions towards placing technologies and enhanced monitoring capabilities. restrictions on the movement of foreign vessels. The EU satellite programmes, in particular Galileo, • (NWP) crosses Canadian may play here a role. The EU declares its support for . Compared to the NSR, the NWP international efforts to implement the Polar Code has more challenging ice conditions. At present, and other relevant IMO conventions and guidelines. there are also limited economic activities that could The EU is also willing to share European best generate major destinational shipping volumes. practices, where applicable. • Central / Polar Route would cross The EU Joint Communication on international CAO international waters. This route will be ocean governance (JOIN(2016) 49 final), among operable, if the Arctic Ocean is largely ice-free. others, calls for promoting the establishment of marine protected areas in the Arctic. Challenges for shipping are multifaceted, including: • Difficult navigational, ice and weather The EU adopted an Integrated Maritime Policy conditions, despite diminishing sea ice cover. (IMP) in 2007, which considers the Arctic Ocean as • Insufficient infrastructure/communications. one of the sea basins of concern for the EU. • High costs of Arctic shipping, partly discounting The EU is not an IMO member, but the Commission gains in terms of distance and time compared to the and the European Maritime Safety Agency (EMSA) main southern shipping lanes. coordinate positions with the EU Member States. • Environmental impacts: emissions (CO2, NOx, The EU has developed SafeSeaNet and CleanSeaNet SOx, methane), discharges, accidents, invasive networks and given practical support to IMO species, wildlife disturbance. initiatives. The EU also operates the European Marine Observation and Data Network (EMODnet). Governance of Arctic shipping activities is done to a great extent at the international/global level. The As some of the vessels crossing Arctic waters call UN Convention on the Law of the Sea as well as the (and will in the future) at European ports, the EU legislation on port state control is of relevance also customary law of the sea establish a general for Arctic shipping. framework. The International Maritime Arctic Maritime Transport – Background Paper – Circumpolar Arctic Dialogue Seminar – 29.11.2018

ANNEX: decade, creating conditions for future shipping expansion. However, multiple constraints and EXTENDED BACKGROUND challenges make predictions of future shipping INFORMATION difficult.

Arctic passages

The interest in Arctic shipping arises from The Northeast Passage (NEP) links northern the impacts of climate change on the Arctic Europe and Asia via the Eurasian part of the Ocean ice cover, extent of which has been Arctic Ocean. The major part of its Russian diminishing, with thinner and younger sea ice section is referred to as the Northern Sea occurring across the Arctic Ocean. That Route (NSR) and is subject to special Russian translates to gradual extension of navigational legislative framework (2012 Law on the NSR). period and lower costs, for instance, for The NSR is the most used Arctic shipping route, icebreaking assistance. due to comparatively mild ice conditions and the longest navigable period. In 2017, almost The Arctic shipping routes may in the future 10 mln tonnes of cargo was shipped in the NSR prove potentially attractive alternatives to the (compared to 7,3 mln in 2016 and 5.4 mln in main shipping lanes via Suez and Panama 2015), with exports of Russian LNG the key canals, in particular between the northern factor in growth of volumes, while transit ports of East Asia and northern Europe. The shipping has had minor importance. 1 The Arctic shipping lanes can be also seen by states Russian government promotes the use of the and companies as security alternatives in case route and has been investing – albeit with the traffic on the main southern shipping lanes multiyear delays – in the search and rescue is disrupted, due to for instance military infrastructure (e.g. between 2013 and 2016, conflicts or piracy. However, so far the increase four SAR centres were opened in Murmansk, in volumes has been generated primarily by Arkhangelsk, Dudinka, and Naryan-Mar; new the export of Arctic hydrocarbon resources to SAR centres are planned in Pevek and Anadyr global markets. in Chukotka, as well as in Tuksi in Yakutia). However, at the same time, there are plans to The increase in Arctic shipping would translate restrict the access to the NSR to Russian- to demand for the construction of polar class flagged and Russian-built vessels from 2019, vessels, compliant with the standards with the aim to support Russian shipbuilding introduced by the Polar Code. and shipping companies. However, special Many northern ports and regions see the permits for foreign vessels and companies are development of Arctic shipping routes as an to be issued and some Russian companies opportunity for expansion, emergence as appear skeptical or critical of such regulatory transport hubs, and for establishing new development. 2 At the same time, there are transport corridors. plans to lower ice-class demands for certain sections of the NSR in 2019.3 Arctic maritime technology and governance framework have developed during the last

1 See, e.g. Russian Ministry of Transport at minister-supports-restrictions-on-northern-sea- http://www.morflot.ru/news/lenta/n3412.html, route/, accessed 14.11.2018. accessed 7 October 2018. 3 Realnoye Vremya, New Arctic shipping 2 SAFETY4SEA, Russian deputy Prime Minister regulations to increase traffic on the Northern Sea supports restrictions on Northern Sea Route Route, at https://safety4sea.com/russian-deputy-prime-

Page 3 of 8

Arctic Maritime Transport – Background Paper – Circumpolar Arctic Dialogue Seminar – 29.11.2018

severity of climate change impacts occurring at the point of the ice- free Central Arctic Ocean – affecting economies and other parameters of Arctic shipping – mean that any current predictions and planning may have limited feasibility.

Types of shipping in the Arctic

The Arctic shipping activities, building on the definitions proposed in the Arctic Council’s Arctic Marine Shipping Assessment (AMSA, 2009), can be differentiated into internal-Arctic, destinational and transit shipping.5 These different types of Figure 1. Arctic shipping routes, Sanders, Gunnar, and Norwegian Polar maritime transport face different Institute, 2015. challenges. The Northwest Passage (NWP) runs along the northern coast of , crossing the Transit or trans-Arctic shipping uses Arctic as a Canadian Arctic archipelago. As the ice in transport corridor between the Atlantic and western part of the Arctic Ocean is thicker and Pacific Oceans. While the transit shipping is older, the NWP is at the moment little used. often at the centre of discussion about Arctic maritime transport, it constitutes so far a Both the NWP and the NSR cross areas claimed minor part of shipping volumes, with negligible by respectively Canada and Russia as their rates of growth. Both bulk transport internal waters. At the same time, the vessels (resources, raw materials) and container go through the ice-covered exclusive economic shipping are possible, but container shipping zones (EEZs), where the art. 234 of UN can be considered more challenging. Recently, Convention of the Law of the Sea (UNCLOS) the first container transport by Maersk allows coastal states to introduce additional carrying Russian fish products and Korean non-discriminatory measures. Both Canada electronic crossed the NSR. Earlier, Chinese and Russia introduced corresponding COSCO shipping company announced opening legislation and introduced administrative of a seasonal shipping lane via the NSR with 4 measures within the portion of their EEZs. focus on bulk transport.

The Central Arctic Ocean route could become Destinational shipping refers to ships sailing to navigable in the future with the further retreat and from the Arctic. In particular, the export of of sea ice. Such a polar route would cross Arctic resources to global markets is the factor primarily international waters. However, the

https://realnoevremya.com/articles/3025-new- 5 This section is partly based on Sander, G. et al. (2016) arctic-shipping-regulations-to-increase-traffic-on- ‘Changes in Arctic Maritime Transport’, in A. Stępień, T. the-northern-sea-route, accessed 14.11.2018. Koivurova, and P. Kankaanpää (eds). The Changing Arctic 4 Russia: Federal Law 132-FZ, 2012 and the ; and the European Union. Leiden - Boston: Brill/Nijhoff, as well as AMSA (2009), Arctic Marine Shipping Canada: mandatory ship reporting and vessel Assessment. Protection of Arctic Marine Environment traffic service system NORDREG. working group.

Page 4 of 8

Arctic Maritime Transport – Background Paper – Circumpolar Arctic Dialogue Seminar – 29.11.2018

generating destinational traffic volumes. • The insufficient Arctic marine infrastructure Destinational shipping, especially in the NSR, for search and rescue, emergency and has been increasing in a dynamic manner, with environmental risk response remains a total volumes recently exceeding the NSR challenge. There is a need for better numbers in the late 1980s, before the collapse navigational aids, communication systems, of the Soviet Union. The recent growth is ship surveillance and reporting, improved primarily related to the transport of Russian meteorological and ice services, more and natural gas (Yamal LNG and Arctic LNG better equipped SAR facilities or capabilities. projects) to Asian markets. In the NWP, • As shipping routes pass through areas resupplying Arctic communities comprises an claimed by coastal states as internal waters important part of current traffic. and through their ice-covered EEZs, the Internal Arctic transport involves movement of operators need to notify, acquire permits, and vessels between Arctic ports, including for pay tariffs. instance cruise tourism, research, fisheries, • offshore hydrocarbon extraction. In particular, Costs for operators may be high, including: cruise tourism is on the increase, triggering crew training, Polar Code compliant concerns for the safety of large numbers of equipment, higher fuel consumption per the passengers. The voyages of Crystal Serenity in unit of distance, tariffs for using ice pilotage the NWP in 2016 and 2017 drew public and icebreaking services, or the need to attention to challenges arising from that type purchase polar class vessels. It may be the case of tourism. that despite shorted distances, the northern routes would not necessarily translate to Constraints and challenges for the shorter shipping times, lower costs and lower development of Arctic shipping: emissions.

• The Arctic Ocean sea ice is diminishing and There are various environmental impacts of there are predictions of ice-free Arctic Ocean shipping that need to be taken into account: within the next decades. However, the • carbon dioxide, nitrous oxides, sulphur presence of ice in winter months limits the oxides and methane emissions; commercially navigable season (some • operational discharges from vessels (to a resource exports excluding), and the great extent limited or banned under challenges of High Arctic weather remain MARPOL following Polar Code throughout the year (for example, icing). In ice- amendments); free conditions icebergs and ice flows still • pollution from accidents: bunker oil occur, with possibly increased unpredictability. (ship’s own fuel); Importantly, even within the diminishing trend • invasive alien species due to ballast water in ice cover, the conditions are bound to vary as well as from the cargo; from year to year, making it difficult for • disturbance to wildlife (noise, collisions, operators to plan for the next shipping season. human presence). In some years, also in the future, certain parts of the Arctic Ocean may be covered with ice Shipping activities - in particular cruise tourism throughout summer. and oil spills - may adversely impact traditional livelihoods of Indigenous Peoples. However, • Many Arctic straits are fairly shallow and shipping may also bring socio-economic would not allow passage of vessels with high benefits to local communities if managed in an tonnage volumes. appropriate, inclusive manner.

Page 5 of 8

Arctic Maritime Transport – Background Paper – Circumpolar Arctic Dialogue Seminar – 29.11.2018

Governance framework Arctic waters. The HFO ban is currently among policy actions most advocated by International shipping is governed by the law environmental NGOs and other actors with of the sea, mostly codified in UNCLOS, which regard to Arctic maritime transport regulation. sets the rights and obligations of flag states The Arctic Council’s Protection of Arctic Marine and coastal states and navigational rights in Environment (PAME) working group has also different maritime zones and in straits used for carried out work on the HFO in the Arctic. international navigation. Beyond the territorial sea, the freedom of navigation constitutes a In 2017, the International Convention for the general rule, while the innocent passage Control and Management of Ships' Ballast regime applies within the territorial sea – but Water and Sediments entered into force. not within internal waters such as bays, ports The Arctic Council and in particular its PAME and within baselines. In general, beyond working group have played an important role internal waters, the coastal states cannot in the deliberations on the Arctic maritime enforce requirements for construction, transport. The Arctic Marine Shipping equipment and manning of vessels beyond Assessment (AMSA) was published in 2009. generally accepted international rules and The implementation of AMSA standards (GAIRS). recommendations has been uniquely followed The International Maritime Organization (IMO) up by the Arctic Council. The Arctic Council was is responsible for setting rules for maritime also instrumental in assessing the Indigenous safety and environmental performance of Peoples’ uses of the Arctic waters and vessels. The Convention on Marine Pollution evaluating impacts of shipping on indigenous from Ships (MARPOL 73/78) and the livelihoods. Convention on the Safety of Life at Sea (SOLAS) Following the AMSA recommendations, the are the main pillars of shipping regulations. Arctic Council has facilitated negotiations of The international law on shipping includes legally-binding agreements between the eight hundreds of conventions and IMO guidelines. Arctic states. The 2011 Agreement on The implementation of international standards Aeronautical and Maritime Search and Rescue depends largely on actions of flag states and in the Arctic (SAR Agreement) and the 2013 port states. Port state agreements – especially Agreement on Cooperation on Marine Oil the and Memoranda of Pollution Preparedness and Response in the Understanding – play here an important role. Arctic (Oil Spills Agreement) enhance conditions for cooperation between Arctic The IMO adopted in 2002 and 2009 a set of states. Both agreements are based on the voluntary guidelines for Arctic and Polar relevant globally-applicable conventions. shipping. In 2017, many of the Polar Code standards were made legally-binding through The work on identifying areas of particular amendments to SOLAS and MARPOL biodiversity value (by CAFF and the Convention conventions, as well as to the 1978 on Biological Diversity) can be relevant for International Convention on Standards of Arctic shipping in the future if marine Training, Certification and Watchkeeping for protected areas or emission control areas are Seafarers (STCW). established or routing schemes introduced.

There has been long debate on mitigating the risks associated with the use and carriage of heavy fuel oil in the Arctic. The IMO is currently considering banning the use of the HFO in

Page 6 of 8

Arctic Maritime Transport – Background Paper – Circumpolar Arctic Dialogue Seminar – 29.11.2018

2016 ARCTIC JOINT COMMUNICATION6 • In 2016, a call under Horizon 2020 was POLICY RESPONSES launched with the aim of establishing a network for the Arctic and the Atlantic to cope The 2016 Joint Communication identified three with maritime security threats resulting from priority areas: the opening of the Northeast Passage. • Climate Change and Safeguarding the • The cooperation between the Arctic Coast Arctic Environment; Guard Forum and the European Coast Guard • Sustainable Development in and around Functions Forum was advocated. the Arctic; • The European Commission is to monitor • International Cooperation on Arctic developments in maritime tourism as an Issues. opportunity for sustainable economic Research, science and innovation play a key development in the Arctic. role across the EU’s Arctic-relevant policies • The northern Trans-European Network for and actions. Transport (TEN-T) ports are seen as important links between maritime and land transport. Among Joint Communication’s policy responses relevant for the Arctic maritime EXAMPLES OF EU POLICIES AND ACTIONS transport are: • The EU is committed to contributing to The EU is not a member of the International enhancing the safety of navigation, in Maritime Organization. However, due to particular through innovative technologies and extensive EU regulations on shipping-related enhanced monitoring capabilities. issues (in which areas the EU has pulled • The EU wants to support international competence from its Member States), the efforts to implement the Polar Code. European Commission and the European • Galileo – the European global navigation Maritime Safety Agency (EMSA) co-ordinate system – will improve the coverage of the with the Member States in the IMO Arctic region providing safe and reliable committees. This was the case for example navigation capabilities for maritime with regard to the Polar Code. The EU’s applications. Arctic needs could be considered influence is significant as this co-ordination in the possible proposals for the next involves 28 (soon 27) out of 170 members of generation of government satellite the IMO, representing considerable tonnage. communications. Some ships traversing Arctic sea lanes are • The EU had been long committed to either owned by companies based in Europe or promoting the ratification of the 2004 have European ports of departure or International Convention for the Control and destination. The EU has developed a Management of Ships Ballast Water and comprehensive regulatory framework Sediments (which eventually entered into regarding shipping safety and environmental force in 2017). standards. For instance, the EU directive on • The EU and its Member States’ experience vessel traffic monitoring and information with managing invasive species pathways can system (2002/59/EC) includes provisions on ice be shared with Arctic partners. information. The EU has also set a framework • The EU encourages the application of the for port state control (Directive 2009/16/EC), IMO’s Guidelines for the Control and building on the Paris MoU. Management of Ships' Biofouling.

6 European Commission and The High Representative, ‘An integrated European Union policy for the Arctic’, Joint Communication, JOIN(2016)21final (27 April 2016).

Page 7 of 8

Arctic Maritime Transport – Background Paper – Circumpolar Arctic Dialogue Seminar – 29.11.2018

European Maritime Safety Agency (EMSA) is The EU can have major contribution to Arctic the EU agency offering technical expertise and shipping safety and environmental operational assistance in maritime safety, performance via its satellite systems. The security and pollution prevention and Galileo satellite system – expected to be response. EMSA representatives have been completed by 2020 - has a dedicated search active contributors to the work of the Arctic and rescue function that will locate ships in Council’s PAME working group. distress more efficiently. The Galileo will increase the accuracy of satellite-based The EU adopted an Integrated Maritime Policy positioning in the Arctic, thereby making Arctic (IMP) in 2007. The IMP includes the Arctic navigation safer. The Copernicus earth Ocean as one of the sea basins of concern for observation programme has an operational the EU. service providing geo-spatial information The Arctic waters are also considered of worldwide in case of emergencies. The particular relevance in the 2014 EU Maritime Copernicus Maritime Surveillance (CMS) 7 Security Strategy (EUMSS). The EUMSS Action Service provides Earth Observation products to Plan (2014, revised 2016) includes as one of support a better monitoring of activities at sea, the envisaged actions fostering cooperation in within a wide range of operational functions the area of maritime polar capabilities. such as maritime safety and security, fisheries The EU Joint Communication on international control, customs, law enforcement, or marine ocean governance: an agenda for the future of environment monitoring. our oceans (JOIN(2016) 49 final) addresses a The EU has developed SafeSeaNet and number of issues relevant from the point of CleanSeaNet networks and given practical view of the Arctic maritime transport: support to IMO initiatives such as the • Technical cooperation with the IMO aimed Automatic Identification System (AIS) and the at bolstering and enforcement of IMO Long-Range Identification and Tracking. The instruments. satellite-based AIS is necessary for the Arctic • Enhancing the exchange of cross-sectoral marine areas where terrestrial AIS cannot maritime surveillance information between cover vast ocean areas. Member States, and with third countries, with EMSA involvement. The European Marine Observation and Data • Working to broaden maritime situational Network (EMODnet) allows researchers, public awareness on the basis of technological authorities, business and civil society to search developments in satellite communications for, view, download and use data on the and data analysis. bathymetry, geology, habitats, physics, • The EU agencies are to better cooperate in chemistry and marine life of the seas around supporting European coast guards to Europe. undertake multipurpose campaigns (including enforcement of MARPOL standards). • Promoting the establishment of marine protected areas (MPAs) in the Arctic.

7 European Union Maritime Security Strategy, 11205/14, adopted by the General Affairs Council on 24 June 2014

Page 8 of 8