Commodities, Emerging Markets, Energy, Stocks

Commodities: Is The Arctic Home To The “New Great Game”?

By Steven MacMillan

Arctic OilAs a resource-rich region which is home to copious amounts of oil, gas, gold, and an array of other metals, the Arctic will be a theatre of geopolitical competition between NATO and Russia in the coming decades, along with attempts by NATO to contain Russia.

The Arctic holds an estimated 13% (90 billion barrels) of the worlds undiscovered conventional oil resources and 30% of its undiscovered conventional natural gas resources, according to an assessment conducted by the U.S. Geological Survey (USGS). Canada, Russia, the U.S., Denmark (Greenland), and Norway are the five littoral Arctic states, with four of these states members of NATO, an organisation led by Norwegian born Jens Stoltenberg. The Arctic council is a “high-level intergovernmental forum” which consists of the five littoral states in addition to Iceland, Sweden and Finland.

Control of the territory is a hotly contested issue among Arctic states due to its economic treasures, with a significant portion of the Arctic outside the control of any nation at present. The ability and effectiveness of the Arctic states to cooperate and discuss issues related to the region will determine the nature of this competition.  The United Nations Convention on the Law of the Sea (UNCLOS) – which the U.S. hasn’t ratified – stipulates that each littoral Arctic state has sovereign rights over a maximum of 200 nautical-miles (or their exclusive economic zone) from their northern baseline. “In the exclusive economic zone, the coastal State has sovereign rights for the purpose of exploring and exploiting, conserving and managing the natural resources”, as stipulated by Article 56, section 1.(a), of the UNCLOS.

Russia, Canada and Denmark are leading the race regarding owning greater portions of the Arctic, with ownership of the Lomonosov Ridge a particular focus of the debate. In December 2014, Denmark filed a claim to the U.N. that the area around the North Pole is connected to the continental shelf of Greenland.  Russia planted a flag at the North Pole in 2007, and Moscow is expected to file a claim to the U.N. to enlarge its boundaries of its continental Arctic shelf by 1.2 million square kilometres by the end of March, according to the Russian Natural Resources Minister Sergey Donskoy. Canada is also set to lay claim to greater territory in the Arctic in the near future and has stated its interest in including the North Pole in this claim. Norway and Russia successfully resolved a 40-year dispute in 2010 which sets an encouraging precedent that quarrels can be solved peacefully and in accordance with international law. However, the strained relations that have developed between NATO and Russia since then may impede and reduce the effectiveness of cooperation on future disputes in the Arctic.

Strategic Importance of the Arctic

In 2008, Russian Prime Minister Dmitry Medvedev signed a strategy paper which stated that the polar region will become Russia’s “main strategic resource base” by 2020. “Virtually all aspects of national security, including the military-political, economic, technological, environmental, and resource spheres – are concentrated here,” was how Vladimir Putin described the importance of the Arctic region to Russia in an interview last year.

Canadian Foreign Minister John Baird has announced that the polar area is a “strategic priority” for Canada, adding that he would “protect and promote” the nation’s sovereignty in the area against what he believed was Russian military expansion:

“We obviously want to protect and promote Canadian sovereignty in the Arctic… It’s a strategic priority for us. With respect to the militarization, we’d prefer to de-escalate it, but Canadian sovereignty, it’s very important that we protect and promote it”. 

The territory has increasingly seen a greater military presence by both NATO and Russian forces in recent years. The U.S. Navy has been conducting training exercises with nuclear-powered submarines in the region for years, and in August 2014 reports emerged that a foreign submarine (thought to be of the U.S. Navy’s Virginia class) allegedly breached Russian boundary waters, but it was quickly “forced out” by the Northern Fleet. The Canadian Navy is building a fleet of Arctic patrol ships with limited military capabilities over the next few years, to enable the nation to have “a truly Arctic, rather than just northern, Navy,” as Royal Canadian Navy commander Vice Adm. Mark Norman stated. Russia has reopened a strategic base in the far-Northern New Siberian Islands which has been closed since 1993. A new Arctic command has recently been established by Russia which will focus its operations in areas above the Arctic Circle, with the Northern Fleet the backbone of this command. Nuclear units in the Russian Navy have also undertaken training exercises in the Arctic recently, thought to be in response to NATO’s latest military expansion in Eastern Europe. Russian Foreign Minister Sergey Lavrov has stressed however that Russia doesn’t want the “Arctic to be an arena of conflict”.

The competition between Canada and Russia in the future could be a pivotal relationship, as both countries consider the region a strategic priority. Relations between the two countries are a little frosty after the Canadian Prime Minister Steven Harper displayed great contempt towards Putin at the G20, reluctantly shaking hands with the Russian President and telling him to “get out of Ukraine”. Considering the fact that the West is the belligerent force in Ukraine (a fact even admitted by Foreign Affairs), and according to the Chief of Staff of Ukraine’s own Armed Forces, General Viktor Muzhenko, there is “no Russian troops” fighting in the separatist regions (formerly Ukraine), it was an incredibly arrogant and provocative comment.

Melting Ice Caps?

The volume of Arctic sea ice in the future will determine the ferocity of the competitiveness for the regions resources, as many of the territory’s riches are challenging and expensive to develop – major oil companies just pulled out of Greenland due to high exploration costs and the oil price being so low. Many geopolitical projections are based on questionable scientific predictions of the Arctic being ice-free in a matter of years. U.S. Secretary of State John Kerry famously wrote in a 2009 article that the Arctic would be ice-free by “the summer of 2013”, yet this prediction has by no means matched reality. Measurements from the European Space Agency (ESA) revealed that there was “about 9000 cubic km of sea ice” in October 2013 which meant“the volume of ice measured this autumn is about 50% higher compared to last year”, with ice levels remaining stable in 2014.

Satellite records of Arctic sea ice only began in the late 1970’s, and many scientists believe that atmospheric temperature in the Arctic is cyclical despite all the fear-mongering propagated by many around the world regarding man-made global warming and melting of the ice-caps. It is true that there is a downward trend in the volume of sea ice since records began, but these records so-often cited are only a matter of decades old and provide only a microscopic look at the earth’s environmental history.

If the Arctic does become ice-free in the coming decades however, it will of course alter the geopolitical balance in the world and further open up the region’s riches in addition to desirable shipping routes. As former U.S. National Security Advisor Zbigniew Brzezinski writes in Strategic Vision, a book Kerry described as a “must-read”, an extreme reduction in Arctic sea ice would “change the face of the international competition for important resources”:

“The slow thawing of the Arctic will also change the face of the international competition for important resources. With the Arctic becoming increasingly accessible to human endeavour, the five Arctic littoral states – the United States, Canada, Russia, Denmark (Greenland), and Norway – may rush to lay claim to its bounty of oil, gas, and metals. This run on the Arctic has to the potential to cause severe shifts in the geopolitical landscape, particularly to Russia’s advantage.”

Brzezinski continues:

“Russia has the most to gain from access to the Arctic while simultaneously being the target of far north containment by the other four Arctic states, all of which are members of NATO. In many respects this new great game will be determined by who moves first with the most legitimacy, since very few agreements on the Arctic exist.” (p.116 & p.117)

The Arctic will remain an arena of geopolitical rivalry into the future and be an important strategic region for many countries, but it may not be as crucial as many have asserted if sea ice levels stabilise and recover over the coming decades.

The statements, views, and opinions expressed in this article are solely those of the author and do not necessarily represent those of EMerging Equity.


Courtesy of New Eastern Outlook (NEO)
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The New Eastern Outlook provides a detailed analysis on the current state of affairs in the Middle Eastern and Asian countries.  For more information, please visit http://journal-neo.org/

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