Arctic energy: the new geopolitical hotspot?

The Arctic nations – Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the United States – have generally managed to overcome contentious issues amicably, thereby ensuring that the region remains largely peaceful. However, things may be changing now. In fact, according to the UK-based consultant group Polarisk, 2015 may see the Arctic emerging as a “geopolitical flashpoint”.

On December 26, 2014, Russian President Vladimir Putin signed a new military doctrine for the country. While focusing on the perceived threat emanating from the expansion of NATO, it also mentioned the need to strengthen ties with non-Western nations like China and India. More importantly, the doctrine also mentions the need for Russia to extend its influence in the Arctic region. To this end, Russia has embarked on a spate of port construction projects across the Arctic, and is upgrading its other military capabilities in the region. This includes construction of a year-round airbase in the New Siberian Islands archipelago, over and above 13 additional airfields and 10 air-defence radar stations.

A year earlier, Putin accused the U.S. attempting to change the strategic balance by pushing for NATO’s further eastward expansion, and had also referred to the danger of a militarisation of the Arctic.

However, it appears the claims of the Nordic states that havein turn galvanised Russia into furthering its claims on the Arctic. Putin announced that Moscow would soon submit an application to the UN Commission on the Limits of the Continental Shelf (CLCS) for an expansion of its Arctic borders by 1.2 million square kilometres in March 2015. It is ostensibly on the basis of the Russian research expedition, Arktica, in 2007 wherein Russian scientists were the first to descend to the seabed beneath the North Pole, after which they planted a Russian flag. The objective of the expedition was to strengthen Russia’s 2001 claim to the Mendeleev Ridge, Alpha Ridge and Lomonosov Ridge based on their supposed linkage to the Siberian shelf. Although the other Arctic nations objected strenuously to such claims, if it succeeds, Russia will be able to gain access to the natural gas and oil reserves therein, and position itself to take part in any future trade through the opening of the northern sea route.

This is a far cry from Moscow’s earlier cooperative stance in the Arctic. Despite being the strongest power in the Arctic, Russia was ready and willing to cooperate with other Arctic and non-Arctic states to develop the region’s vast energy resources. According to the U.S. Energy Information Administration (EIA), the Arctic comprises some 22% of the world’s undiscovered oil and natural gas reserves.

This follows a series of actions by its Arctic neighbours. In mid-December 2014 Denmark, together with Greenland filed a submission to the Arctic Commission on the Limits and the Continental Shelf (CLCS), claiming ownership of around 900,000 square kilometres of the continental shelf in the Arctic Ocean. In so doing, Denmark will become the first country to attempt to claim outright ownership of the North Pole. Canada too has made overlapping claims to the North Pole and large swathes of the territory. On the other hand, Canadian Prime Minister Stephen Harper is likely to use Denmark’s claim to reaffirm his stance on Arctic sovereignty in the run-up to the 2015 elections, while Russia too will be submitting its claims at the end of March. In fact, in December 2012, Canada, along with the U.S., signed two agreements that aim to expand bilateral military training, security and defence operations in the region. The intention is to jointly prepare for any real or perceived threats and to work towards establishing a North American Arctic foreign policy.

No doubt, the recent moves by several Arctic nations are in response to Russia’s Crimean adventure. However, given that much of the Arctic nations’ interest in the region is due to the vast energy potential therein, which according to the U.S. Energy Information Administration (EIA), holds some 22% of the world’s undiscovered oil and natural gas, the need to control the resources in what may be the last frontier of the traditional energy reserves may also have something to do with it.

Yet, over the last few months, with oil – and overall energy – prices, falling, will the Arctic energy riches be viable? After all, energy production in the region is the most expensive in the world, with production costs per barrel costing around $78 on average. And in fact, Russia’s former prime minister and current foreign minister Yevgeny Primakov was recently quoted as saying that the country should not rush to exploit Arctic offshore oil, as Russia has cheaper options to produce oil (presumably in Siberia). Some experts have even predicted a slowdown in exploration in the region.

However, Russia’s minister of Natural Resources and Environment of Russia Sergei Donskoy has said suspension of geological exploration on the Arctic Shelf will have negative impact on the entire industry. According to him, if Russia suspends its exploratory work in the Arctic, it will impede the country’s technological developments, similar to the suspension of such work in the 1990s which set Russia back as an energy giant for several years.

Moreover, having signed a multi-billion dollar deal with China in 2014, as well as seeking to establish itself as a major supplier to other Asian countries, including India, Russia needs access to as much energy as it can. With the opening up of the Arctic due to global warming and the expected rush for competing claims, Russia needs to establish its claims on a region where it feels it has an advantage. With the U.S. soon taking over the chairmanship of the Arctic Council, and given that most of the other members of the Council are NATO members, Russia’s actions in the region may be seen as way of hedging its bets.