In August of 2019, Donald Trump made one of the most unforeseen foreign policy proposals by a sitting US President: Buying Greenland from its sovereign, Denmark. Then, he proceeded to tweet a picture of a Trump Tower on the island. The move seemed out of nowhere, and the idea was swiftly dismissed. Most commentators and news outlets were comfortable enough to tie the explanation to just erratic use of social media by the president, but actually, the motivation goes far deeper. Greenland is important in that controlling the island provides significant access to the Arctic Ocean, abundant in resources such as oil, natural gas, iron ore, copper and nickel. Emerging sea routes, due to the reduction of ice sheets, further increase the geopolitical capital of holding influence over the region. Add to that overlapping claims from 8 countries and it looks more and more like a recipe for conflict. While it was briefly an insignificant headline in 2019, expect to see the Arctic many more times on the news in your lifetime.
Why is it becoming a big deal now?
First of all, why was it not in the past? Although the existence of resources in the Arctic was widely known, interest in the region did not take off until mid to late 2000s. The reason for this is that exploration and extraction were too costly to make financial sense. Studies on the economics of onshore oil and natural gas projects in Alaska estimated costs to develop reserves in the region can be 50-100% more than similar projects undertaken in Texas, United States. Offshore oil projects would be even more expensive. This is due to a number of reasons such as the necessity of specially designed equipment to withstand extreme temperatures, long supply lines, limited transportation access from the world’s manufacturing centers, and the need for permanent housing for the entire operations team.
That is, until the effects of climate change became more and more observable and ice levels of the region decreased. This year, in 2020, the sea ice cover in the Arctic Ocean hit just 3.74 million square kilometers in September, which is the second lowest value behind 2012 since the data started to be collected by satellites. This is a reduction of almost 50% compared 40 years ago in late summer. This opened up more spaces to be explored, clearing the way for profitability. Shell, an Anglo-Dutch oil company, was the first to seek permits to drill in offshore Alaska. They started drilling in the July of 2015, with disappointing results. A drop in oil prices further hurt the profitability of the entire operation. The reputation of the company was also being damaged, as a global ‘Shell No’ campaign saw activists from all over the world boycott Shell and their affiliates. Eventually in the September of the same year, Shell announced it will cease operations in the Arctic with 7 billion dollars sunk into the project.
Following this incident, several other companies also got cold feet and either delayed or entirely cancelled their operations in the region. Currently, there are no offshore oil rigs in operation, but some companies are planning to try again in the future. Shell recently announced they will resume operations, which indicates the Arctic resources are once again looking feasible for the oil giant.
Another effect of the reduction in ice is the increasing availability of the region for shipping. The Northwestern passage (NWP), which goes through the waters of Canada, and the Northeastern passage (NEP) (also called Northern Sea Route) which goes through the north of Russia are the key paths for transporting goods between the Pacific and the Atlantic oceans. There is also the hypothetical Trans-polar route (TPR) which would travel directly across the Arctic Ocean, going through the pole. For this route to be possible, however, 100% of the ice sheet needs to disappear, which is unlikely to happen until 2050. Fellow writer Matteo Calderan dove deeper into the specific topic of the sea routes, it is worth the read.
3 million years ago, the last time the Arctic was as warm as it is today, the ice sheet did not exist at all. In fact, the climate was so warm that huge boreal forests grew deep inside the Arctic circle. Combined with abundant life of sea creatures like plankton and algae, the conditions were perfect for oil and gas creation. As the planet got colder, more and more ice formed in the Arctic. Continental crusts got heavier, and under the intensifying pressure, the organic material slowly transformed into oil and natural gas.
In 2008, the United States Geological survey made the most reliable research into the potentials of the Arctic. The assessment indicated that the region might contain 90 billion barrels of undiscovered oil, 1,669 trillion cubic feet of natural gas, and 44 billion barrels of undiscovered natural gas liquids. The Arctic is therefore estimated to account for about 13% of undiscovered oil, 30% of undiscovered natural gas, and 20% of undiscovered natural gas liquids in the world. This represents about 22% of all undiscovered, technically recoverable oil and gas resources. 84% of these resources are offshore and in undisputed Exclusive Economic Zones, which reduces the risk of conflict, but the remaining 16% is still quite a significant amount. Where and how much of these resources exist is demonstrated in the map and the table below.
Politics Behind the Matter
Currently, 8 countries have land and/or Exclusive Economic Zone within the Arctic Circle: United States (through Alaska), Denmark (through Greenland), Canada, Iceland, Norway, Sweden, Finland and the Russian Federation. Geopolitical activity has been relatively peaceful so far, but there are overlapping jurisdictional claims. (see map)
Russia certainly is the most aggressive force in the region. With 53% of the coast and at least 27 military installations north of the Arctic Circle; it goes without saying that Moscow takes the matter very seriously. In 2007, the Russian Navy sailed up to the North Pole and planted the tricolour flag in an obvious reference to Neil Armstrong planting the stars and stripes on the Moon’s surface.
Several treaties and international organizations have successfully prevented heightened tensions, however. The Arctic Council, established in 1996 in Canada, provides a medium of communication among the 8 countries and coordinates the engagement with the rest of the world. In 2008, the Ilulissat Declaration was signed by 5 coastal members of the Council (with the exclusion of Iceland, who only owns bodies of water in the Arctic, and Finland and Sweden, who own only land). One of the chief goals written into the declaration was blockage of any “new comprehensive international legal regime to govern the Arctic Ocean” signaling that outside influence from the likes of UN or IMO (International Maritime Organization) will not be welcome. As of 2020, states involved continue to cooperate in developing the governance mechanisms in the region as well as search and rescue operations.
Although similar conditions elsewhere usually led to armed conflict in the past, there is ground for optimism for the Arctic. The World is moving towards a carbon-free future and price of oil has not increased back to the old levels since it’s plunge in 2014, which diminishes the value of operations. The platforms for mediation are functional, and direct confrontation seems unlikely to benefit any party involved. The balance is still delicate, however, and there is no room for idleness.