Global Economics

Who Is Winning the Race for the Arctic?


Russia, Norway, Greenland, Canada, and the U.S. are scrambling to claim the North Pole's rich natural resources. So far, Russia is way ahead

In the game Monopoly, players try to amass as much property as possible. The course of the game quickly becomes clear—whoever owns Boardwalk is on a winning streak and whoever owns Baltic Avenue is sure to end up empty-handed. Money, meanwhile, is the sole means to reach the game's goal. In real life, however, things aren't always as simple as a board game.

In the case of the Arctic region, the major players use scientific data and the somewhat vague rules of international law. Increasing their territory means a gain in prestige for these countries, and serves to provide energy security as well. It's also a chance for them to take responsibility for the environmental risks in the region that will eventually affect all countries. But which of the nations around the polar region will emerge as the winner of this Arctic Monopoly game? Is there even such a thing as a winner here?

In any case, things are not looking particularly good for the United States. The country was too inactive in the region for too many years to now suddenly take a leading role. "If there's a five-nation race in the Arctic," warns Coast Guard Admiral Gene Brooks, "we're fifth." Although American explorer Robert Peary formally claimed the area around the North Pole for the United States 100 years ago, nothing happened for a long time afterward, especially after the fall of the Soviet Union. Now politicians in Washington are rubbing their eyes in disbelief as other countries set the agenda when it comes to the pole. "I believe it is a race," says Mead Treadwell, chair of the US Arctic Research Commission.

The US will remain on the sidelines of the polar race for a while yet. This may be a good thing in terms of political rhetoric in the region, which might be less charged without the United States involved. But it also means Washington is missing as a possible stabilizing factor in the Arctic.

Brilliant Rhetoric but Few Investments

Canada is just as conspicuously missing from the region, despite the fact that its prospects there look quite good. Climate change is allowing resources to be extracted from areas further and further north. Canada especially would stand to benefit if its infrastructure in the Arctic weren't so thin on the ground. For decades Canadian politicians have spun out brilliant rhetoric about the country's far north, yet hardly any actual investments have been made in the region.

Canadian Prime Minister Stephen Harper's statements following Russia's Arctic diving expedition in the summer of 2007 also seem to fall into this category, and the investments Ottawa promised then still haven't materialized. Even if those promises are eventually fulfilled—a new deep water harbor, a military training center, patrol boats or even a new icebreaker ship called the John G. Diefenbaker which the government wants to build—all these projects are still not enough. Canada will continue to be giving up much of its potential in the Arctic.

One particular example makes it easier to understand just how serious or not Canada's wish for effective sovereignty in its far north is. Alert, Canada's northernmost base, located on Ellesmere Island, is actually closer to Moscow than to Ottawa. That information alone may not sound particularly dramatic. But combined with the fact that this outpost for defending Canada's sovereignty was reported to have only five inhabitants in the 2006 census, it becomes clear that the Canadian government is going to have to put in some effort if it truly wants to position itself as an Arctic power. In the legal fight over the status of the Northwest Passage, now opening due to the shrinkage of Arctic ice, Canada's position looks likely to worsen in the long run.

Greenland, which is politically represented by Denmark, has mixed prospects. In fact Copenhagen's Arctic policy is somewhat contradictory. On the one hand, the country has already worked strongly for a political solution to the race in the far north.The Danish government convened a summit in Ilulissat, Greenland, which at least yielded a commitment from the Arctic Ocean coastal states to "remain committed" to the existing "legal framework and to the orderly settlement of any overlapping claims." On the other hand, Copenhagen is running a large-scale research program with the intent of making its territorial claims as extensive as possible. It's not yet clear whether Denmark's claim would actually encompass the North Pole. If so, it would lead to problems with Russia and potentially with Canada as well.

A Blessing and a Curse

For Greenland, the emerging boom in natural resources is both a blessing and a curse. On the one hand there is the threat of damage to the fragile environment, on the other is an opportunity for Greenland to attain complete autonomy after centuries of foreign rule. Some, however, caution against the dream of quick wealth: "If we destroy our environment in the name of independence, then the price is too high," warns Aqqaluk Lynge, head of Greenland's branch of the Inuit Circumpolar Council.

Aleqa Hammond, who was minister of finance and foreign affairs for Greenland's home rule government for many years, counters, "Some people think climate change is something bad. We Greenlanders say, if the ice retreats, we have to do something. We want to benefit from it."

In any case, Greenland's government has many social problems to solve, problems that could be exacerbated by an uncontrolled flood of income from oil. The low education standard of parts of the population and the high level of alcohol consumption are both problems that need to be addressed in the long term if the country wants to experience stable growth.

For Norway, much depends on Russia's future behavior. If Moscow acts peacefully and cooperatively, Norway also stands to win in the race for the Arctic's natural resources—at least as long as the boom doesn't come at the cost of great environmental catastrophes. Oslo is hoping for large quantities of oil and natural gas in the polar region, and for its current level of affluence to last another few years.

Fearing Russian Power Plays

In a politically stable Arctic region, Norway would be able to prepare and implement the expansion of its oil and gas production to the north, something it urgently needs in order to secure its own prosperity. Additionally, Norway's oil and offshore technology companies, with excellent technology at their disposal, would stand to benefit from a boom in Russia's Arctic regions as well. Currently, however, relations between Norway and Russia are strained by disputes over the demarcation of the two countries' shared border running through the Barents Sea, as well as differing interpretations of the Spitsbergen Treaty, which in 1920 set down certain stipulations to Norway's sovereignty over the Spitsbergen archipelago.

As long as these matters are not clarified, Oslo will still have to fear further Russian power plays. And if Russia were to pursue a hard-line, anti-Western course in its far north, Norway would probably be the country to suffer the most, with backing from NATO and the EU likely to be limited.

In the medium term, such conflicts would cause Norway to be dependent on imports, as well as causing high costs for fuels, since deposits in the northern Barents Sea couldn't be utilized if the country were locked in political conflicts with Russia. In any case, Norway has the problem that in the long term it needs to convert its economy entirely, moving away from dependence on oil and gas and turning to alternative revenue sources instead. Even the Arctic's resources are finite.

Meanwhile, Russia is holding all the trump cards, proving to be the key player in regard to the Arctic's fate. To a certain extent, Russia is well equipped for an Arctic race. The country has at its command not only its two Mir submersibles, but also a fleet of a half-dozen massive icebreakers, capable of setting off on patrols through the Arctic at any time. Russia also has plans to build three or four nuclear-powered ships in the coming years.

For Russia and for the other countries, climate change in the Arctic brings ambivalent consequences. Once the technical and financial problems have been solved, it will be possible for the country to mine natural resources that have so far lain unused. At the same time, there's danger precisely because so much of Russia's infrastructure lies north of the Arctic Circle, much of it threatened by climate change.

Territory and Prestige

One thing is clear—Moscow can only win in the far north if it can get foreign investors excited about large-scale projects like its Shtokman field. State-owned Russian companies like Rosneft (ROSN.RTS) and Gazprom (GAZP.RTS) have massive shortcomings in technology for natural gas and oil production. In addition, they now have problems with capital due to the international economic downturn. Outside investors, however, need legal security, and to know that the agreements they enter into won't suddenly lose their validity through the arbitrary behavior of Russian authorities.

Russia's government is playing with fire when it uses increased military activity in the far north to compensate for its lost position as a world power. More and more often, Russian jets graze past just outside NATO airspace. The Norwegian military registered 88 Russian flights along the Norwegian coast in 2007—in 2006 it was only 14. Russia has even carried out a mock bombing run on Bodø Air Base, Norway's most northern military command center.

All that may be perfectly legal, but it does constitute a breach of diplomatic etiquette. And the Russians themselves actually stand to lose the most if the Arctic heats up militarily. They wouldn't be able to simply continue mining for natural resources and marketing them internationally. Yet Moscow's renunciation of military means seems little more than half-hearted.

An important turning point may come this year when the United Nations reevaluates a Russian territorial claim to large areas of the Arctic, first submitted in 2001 and soon to be resubmitted with further evidence. It may prove difficult for the UN's experts to turn Russian diplomats away a second time, and political pressure is immense. Artur Chilingarov, a polar explorer and special representative for the Kremlin, has threatened that if Russia's claims aren't recognized this time, the country will leave the United Nations Convention on the Law of the Sea. Presumably the matter won't go that far, since Russia is expected to bring better data to the table this time around. Russia's chances of gaining territory—and thereby prestige—look good. What the leaders in the Kremlin will do next remains to be seen.


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