The 17 Trillion Dollar Arctic Market

Chris Kiyaseh
Jul 15 · 14 min read

As our planet grows warmer and the true effects of climate change begin to melt the ice in the Arctic, we rapidly approach the inevitable reality of Arctic expansionism. Just as other lands have been colonized by world powers, the Arctic Ocean is no exception. It holds a treasure trove of vast resources and rare earth minerals. Moreover, the Arctic is home to two crucial passageways that connect East Asia, North America, and Europe. These passages are the famed Northwest Passage (NWP), which runs westward from the Atlantic Ocean to the Pacific Ocean and through the Canadian Arctic Archipelago, and the Northeast Passage (NEP), running through the Arctic and along the coasts of Scandinavia and Russia. The Arctic is filled with promise, yet the perils are just as much if not greater. In the coming years, we will see a mixture of conflict and cooperation among regional powers and just how valuable the Arctic is.

What is the Arctic?

The Arctic is a confusing and complex beast and has been defined in several ways, with each state tweaking the meaning to suit its own political agenda. This creates many disputes; most of them are ongoing debates and in the simplest form, consist of what belongs to whom. This can range from claiming different islands to continental shelves, and everything in between. Usually, these disputes fall under the diplomatic battleground of the United Nations (UN) or the Arctic Council. Yet, it is quite common to see nuclear submarines or naval destroyers sailing in and around the freezing waters. Creating an atmosphere that reminds us of a war that was a bit on the “colder” side. The Russian Federation is moving to place half of its Northern Fleet (60 per cent of its Navy) in the Arctic. An example of how the diplomatic atmosphere is

being disrupted would be the potential fallouts of relations with Scandinavian states and the fragile relationship with Washington.

Arctic Coast Guard Forum

One way to define the Arctic is to mark the border by 66° 33' North latitude, which is also the boundary of the “land of the midnight sun.” North of those coordinates, the sun stays up all day for a period during summer and then sets and stays down for the duration of the day for a period during winter. Climate wise, the Arctic region is classified by its freezing temperatures. The average for July remains below 10 degrees Celsius.

The Arctic land area covers about 14 million square kilometres, but in total encompasses a region of 30 million kilometres. It includes the territories of eight Arctic states: The United States (Alaska), Canada, Norway, Russia, Greenland (under the rule of Denmark), Iceland, Sweden, and Finland. The Russian Federation and Canada are responsible for about 80 per cent of the land, Nordic countries about 16 per cent, and the United States about 4

percent. The Arctic Ocean envelops the North Pole and is mostly frozen for a majority of the year, accounting for about one-third of the region. Areas like Greenland are covered with ice sheets, while others, like Alaska, contain a bit more life. These areas have large mammals, such as caribou, bears, foxes, and an assortment of vegetation.

As important as the arctic land area is, the maritime aspect is equally as important. This focuses on: Territorial Seas, internal waters, Exclusive Economic Zones (EEZ), Continental Shelves, Archipelagic Waters, and High Seas etc. The Arctic Ocean is the smallest out of the five ocean basins. It is about 5.4 million square miles (14,090,000 square km) and the temperatures vary from winter to summer. The current climate change situation has meant

that temperatures can and have reached above freezing at times which is extremely abnormal. The Arctic Ocean comes with its own set of complications; for example, Canada is seeking to take advantage of the melting ice and claim ownership of the NWP. This is constantly being debated by the Arctic states and the others claim that the NWP is international waters. Another conflict is over the Continental Shelves. The Alpha, Lomonosov, and Mendeleev ridges are claimed as Russian. These ridges stretch all the way to the North Pole. If these claims are scientifically validated, then Russia would assume ownership over most, if not all, of the Arctic. The Barents Sea also plays a strategic role, as it is located off the northern Russian and Norwegian coasts, separating the territorial waters between the two states. The Chukchi Sea, on the other hand, has Siberia to the east and Alaska to the west, it sits at the top of the Bering Strait. The Strait is a strategic route for the transportation of goods and is currently contested. The geography of the Arctic is difficult because like any other place, its constantly changing and, with that, the interests of states shift accordingly.

A detailed map depicting territories and contested waters

Why is the Arctic Important?

The Arctic contains an ample abundance of natural gas, petroleum, and mineral resources. Current production is estimated at about one-tenth of the world’s oil and a quarter of its natural gas. Russia’s Arctic accounts for about 80 per cent of this oil and a large portion of the natural gas. Arctic Canada, Alaska, and Norway are the other leading producers, but with the costs to produce outweighing the benefits, long term maintenance of Arctic oil may have to wait until energy prices are favourable. As of now, the energy prices are fairly low and that means the cost to operate and extract the resources would put the companies at a loss. 15 per cent of the worlds undiscovered oil, which totals to about 100 billion barrels, are projected to be in the Arctic. Furthermore, the Arctic also holds a large amount of natural gas. 30 per cent of the world's natural gas remains untouched: 1700 trillion cubic feet and 44 billion barrels of liquefied natural gas respectively (U.S. Geological Survey 2008). This has the energy giants like Shell, Exxon Mobil, and Gazprom competing for drilling licenses. Moreover, rare earth minerals in the Arctic are estimated to be about a trillion dollars’ worth, including Nickel, Gold, Zinc, Palladium, Cobalt, Lead, and Diamond. The American Arctic is estimated to contain at least 8 trillion dollars in resources, while the Russian Arctic is estimated to exceed 22 trillion dollars.

The exploitation of the oil began in the 1920s in the northwestern territories of Canada. In the 1960s, a plethora of hydrocarbon fields were discovered in the North Slope of the Brooks Range in Alaska, in Canada’s Mackenzie Delta, and in Russia’s Yamalo-Nenets. Within recent time, the Arctic territories of Norway, Alaska, Canada, and Russia have been responsible for producing billions of cubic meters of oil and gas. The states who are signatories to the United Nations Convention on the Law of the Sea (UNCLOS) are granted the legitimacy of an EEZ, which starts beyond the territorial waters and extends 370km from the shore. However, the claim can be extended up to 650km if it can prove the continental shelf extends beyond the standard deviation. This allows the state to claim and exploit any living or nonliving resources.

The Arctic is extremely valuable for its natural and nonrenewable resources, but it is equally as valuable to indigenous peoples for its biological resources. It contains about one-fifth of global freshwater and several species of plants and animals can be found there as well. Furthermore, the fishing industry is supported greatly by the Arctic and sub-Arctic waters. Fifty per cent of the U.S. fish stocks come from the 200 nautical mile exclusive zone off the coast of Alaska, making it crucial to the U.S. fishing industry. The resources mentioned above play a crucial part in the race for the Arctic. The quicker states are able to legitimize their claims, the more resources they can exploit. What is gained in the Arctic today will play a massive role in a future conflict.

Countries and Conflicts

Each state that has a stake in the Arctic has several claims over territories and continental shelves, all, of course, overlapping and contested. Some states have decided to use militaristic approaches, while others have decided to use diplomatic initiatives along with science and research to gain Arctic leverage. The following section will be instructive in outlining the strategies of each Arctic state.

Canadian Soldiers landing in the Arctic

Canada

The Canadian state has a strong Arctic identity. It is committed to protecting its claims and maintaining its Arctic sovereignty. Canada has more than 1.2 million square miles of Arctic territory and has the second largest area in the High North. The Canadian coastline is the longest in the world and 65 percent of the 25,760 kilometers (16,000 miles) is in the Arctic Ocean. This puts the Canadians in a premium position for Arctic initiatives. Canada is a formidable and faithful ally of the North Atlantic Treaty

Organization (NATO), but is wary of its allies when it comes to the competition of the Arctic. In fact, the Canadians are not in favour of any NATO presence in the Arctic at all, instead turning to the Arctic Council and its military committee. They see NATO in the Arctic as undermining their political agenda. Furthermore, the significant bias against military action and support for the indigenous population among the Canadian people has the public voicing caution to and through its government.

Moreover, Canada’s Arctic policy envisions a “stable, rules-based region with clearly defined boundaries.” This will certainly be a challenge as Ottawa deals with the several disputes surrounding its Arctic claims. There are disputes involving its southern neighbour, the United States. This encompasses a significant portion of the Beaufort Sea; this body of water sits to the north of the eastern Alaskan or western Canadian border. Although this dispute has not raised rifles, it certainly has raised eyebrows among the parties involved and looks to play a role in determining the way territorial disputes are settled in the future. Another dispute the Canadians have is with Denmark. This involves the boundaries of the Lincoln Sea. The key dispute, however, is over the famed NWP. Canada believes it has exclusive rights to the passage, as it lies within their “internal waters.” The rest of the international community disagrees and has labelled the passage as an “international strait.” Although the Canadian disputes do not threaten peace in the Arctic, they are all important and set an example of the complex High North.

NATO troops preparing for an exercise

Arctic States of Europe

The Arctic States of Europe all have their own disputes and political agendas that are just as complicated as the Canadians. In terms of Iceland, the Arctic was a place of peril and a constant state of stress during the Cold War. The island was dubbed the “unsinkable aircraft carrier” in the gap between Greenland and the United Kingdom. As we look at Iceland’s Arctic present and future, we see a state that favours cooperation and diplomacy over conflict. Reykjavik looks to become a beneficiary of the enhanced shipping routes and a main port for ships to dock. Iceland also hosts an annual conference called “The Arctic Circle,” this gives them a chance at playing an active role in advocating for peaceful relations and diplomatic dialogue between Arctic states.

Moving on to the Danish state, Denmark is the proud owner of Greenland and the Faroe Islands. Greenland is filled with unrest over Danish rule and is agitating to become an independent state. Greenland is a crucial point in the Arctic, as it has many military bases and installations along its coastline. It is used by NATO and the United States and both have established strategic air bases. In addition, the growing discoveries of oil and gas that dwell below its waters and the economic opportunities will encourage the dreams of indigenous Greenlandic people to become an independent state. This could destabilize affairs, as Denmark aims to maintain an iron grip on Greenland and will grant more freedoms to appease the citizens there while maintaining sovereignty over it.

Norwegian tanks in a winter exercise

Perhaps the most concerned state when it comes to losing peace in the Arctic is Norway. It holds an extensive area of land, coupled with a significant amount of resources. Yet a small population of 5 million makes it difficult to have a major impact in the Arctic. Nevertheless, Oslo must continue to keep a keen eye on the

Russian state. They have had a number of territorial disputes with Russia, some of which have been done and dusted, while others remain at an impasse with little chance of resolution. For example, the Norwegian island of Svalbard is key when it comes to securing the Barents Sea. With a NATO member in the High North and so close to the Russian Federation’s territories, it is certainly a challenge for Moscow to reach its full potential with the status quo. Oslo also must worry about resources, as the oil and natural gas that is along its southern coasts is slowly used up. Finally, the states of Finland and Sweden are possibly the most important when it comes to NATO mobilization against the Russian Federation, especially with the recent Russian aggression involving Ukraine and Crimea. Both of the former are non-NATO members, but they have closely worked together in recent times. Although both states have a small segment of their territory within the Arctic boundary, they will play an important role in keeping Moscow in check by continuing to assert themselves in the Arctic Council and continuing close partnership with NATO. They will undoubtedly prove valuable in the future.

75th U.S. Army Ranger Regiment

The United States of America

While the Russians are moving rapidly to claim the Arctic and its riches, American lawmakers are still debating whether climate change is a hoax. This says a lot about American Arctic policy and explains why Russia is virtually impossible to compete with in the Arctic. If it was not for Seward’s Folly, the Russians would still control Alaska and the American Arctic strategy would be nonexistent. The deal was one of the most important in all American history, allowing access to not only a strategic Arctic location, but a plethora of natural resources and minerals while keeping Russia out of America’s backyard.

Until recently, the United States was busy securing the Pacific and immediate continental lands, while the Arctic was left out of the equation. It had sat on the back-burner as an afterthought. This will come to bite the Americans in the rear when it comes to Arctic exploitation. In fact, there was absolutely no Arctic policy for Washington until 2009. The report was a very basic and minimal effort to address the current Arctic state. In 2013, the U.S. Coast Guard had also released an Arctic strategy with updated data, including budget limits for strategic planning and operations along with environmental and communication assessments. Overall, there is an alarming lack of American national effort concerning the Arctic and a realization of the role it plays in the geopolitical chessboard.

Moreover, the United States is lacking in equipment for the Arctic in terms of icebreakers. Six are currently operational and one is under construction, compared to the massive Russian fleet of 42 icebreakers with eight under construction. The U.S. is lagging far behind as it takes approximately ten years and over a billion dollars to manufacture one icebreaker. These icebreakers extend the time that ships are able to navigate through the frozen waters. This proves to be a valuable asset for states wanting to take advantage of the shipping routes. Going through the Arctic is 40 percent shorter than traversing the Panama Canal, emits less greenhouse gasses, and can accommodate larger cargo holds due to its depth. This makes operations more efficient on all aspects. Unfortunately for the United States, it is already too little, too late. If Washington were to order a fleet of icebreakers now, it would not be completed until 2028, at best. The main hope for the United States is to work with the Arctic Council and the UN to balance against Moscow’s militarization and domination of the Arctic. Another initiative the United States must bolster is the NATO presence in the Arctic, working especially close with their Scandinavian counterparts. Taking leadership in the Arctic Council will also prove to be important in order to be actively involved in the issues surrounding the Council. Washington must also look to improve relations with Moscow; this will ensure that the Arctic becomes a zone of cooperation not conflict.

The Russian Federation's Prime Minister Vladimir Putin speaking about Arctic Development

The Russian Federation

The Russian Federation has always been a prominent state in the Arctic, with most of its coastline above the Arctic Circle. This region of the world is seen as the focal point of the Russian geopolitical strategy and is home to over half of the total Arctic population. The Russians have essentially made a move over the Arctic similar to the Chinese in the South China Sea, making other states see no options to further spread their Arctic ambitions short of war. While other states have small Arctic task forces, Moscow has a fully operational Arctic army and continues to bolster its forces every day. As stated in The National Security Strategy of the Russian Federation in the Arctic Through 2020 and Beyond, Moscow wants to “widen the use of military infrastructure, particularly in the Arctic.” This should be of no surprise, as the Russian strategy looks to maintain their grip on their territories in the North, developing, particularly, the Northern Sea Route.

The route is currently quite dangerous and has very few refueling and repair stations. The Russians also look to settle their disputes, of which they have quite a few. The United States, Norway, and Canada all have conflicting claims with Moscow. For example,

Washington disagrees on the maritime boundary in the Bering Sea. Oslo continues to disagree with Moscow over the fishing rights in the Barents Sea. Finally, there are claims and counterclaims surrounding the continental shelves involving Denmark, Norway, Russia, and Canada. The Russian state wants to avoid military conflict at all costs like any other state, but when push comes to shove is willing to flex its Arctic muscles. The Russians are using a strategy that former American president Theodore Roosevelt had once used, “speak softly and carry a big stick.” Overall, the Russians are the most prepared Arctic state, making it nearly impossible for others to catch up, ensuring Arctic dominance.

The Arctic’s Future

With all of these conflicts, it is quite difficult to find satisfying solutions for all parties involved. Of course, the chief concern is to avoid any sort of armed conflict when addressing such fragile topics. Therefore, diplomatic and scientific initiatives are the best course to pursue for deciding the fate of the Arctic. This includes investing in research groups, encouraging bilateral cooperation between states, and enhanced dialogue in the Arctic Council and UN. Involving non-governmental organizations that are concerned with environmental issues will also further deescalate the situation and promote a comprehensive understanding of the Arctic’s issues. That way, we can learn to not only utilize but protect the Arctic and the life found within it. This will require all states to find equal ground at the table and think about what could benefit everyone without harming individual economic interests or infringing on state sovereignty. The eight Arctic states need to think of the region as a zone of cooperation and peace, rather than a zone of conflict and isolationism. Otherwise, it will soon be too late for meaningful solutions and the Arctic might be irresponsibly consumed while states continue to argue.

Reformer

An online platform for thought-provoking, critical, and contextual articles on politics, society, and policy.

Chris Kiyaseh

Written by

Political Science student and writer for the page Reformer. Florida, United States of America

Reformer

Reformer

An online platform for thought-provoking, critical, and contextual articles on politics, society, and policy.

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