The Race for Arctic Resources: American Ambivalence, Russian Rhetoric, and a Canadian Comeback

By Gene Puerta, Staff Writer

The layer of ice that covers the Arctic Circle is melting, causing the nations that border it (Canada, Russia, Norway, Denmark, United States, Iceland, Sweden and Finland; all members of the Arctic Council) to tap the Arctic’s natural resources. But there are other factors at play: For some, this race is partly fueled by national security concerns; and for others, a chance to stake long held territorial claims.  In a race for resources, all of these Arctic nations are doing their best to achieve the pole position by granting companies’ rights in territory already claimed, advancing scientific findings, or by conducting military operations in the Arctic Ocean region. Even China, a nation that does not even border the Arctic, wishes to participate in this race, arguing that the resources under the North Pole are “the inherited wealth of all humankind.”

The race begins. A recent search for “Winning the Arctic Race” on Google (as of 20 September, 2012) offered just over 68 million results.  Upon investigation, this plethora of search results indicates that there is a race for resources under way in the Arctic Ocean and that, depending on the nationality of the information source, Canada is either in the Arctic Race to win it (by annual displays of military strength) or lags behind Russia and the United States.  The articles vary widely on the state of the race for resources in the Arctic, with Der Spiegel (quoting a USCG Admiral) that the United States is dead last in the Arctic race; while other sources like Forbes's Matthew Hubert, think that the U.S. is in a better position than Russia because U.S. oil companies are “sitting pretty” when the time comes for natural resource extraction.  Moreover, various news articles report that even China, a non-Arctic nation, is clamoring for a spot before the starting gun goes off.

According to a 2011 report by the Wall Street Journal, Canada is warming up for an aggressive display of control over the Arctic Circle.  Canada’s Arctic push, propelled by displays of military capability, is feasible only as long as Canada can back up its intent with the considerable financial resources needed to build infrastructure in the Arctic’s remote and challenging environment.  The economic value of the Arctic Circle can be found by companies willing to venture into an area that requires not only a particular technical know-how, but extensive financial investment as well.  Companies that are willing to undertake such investment have a losing track record when it comes to extracting the various non-renewable resources under those cold waters (just ask Russia’s nationally-owned Gazprom or publicly-traded Shell Oil).  But the Arctic's harsh environment, which offers up polar ice caps that shift dramatically with the changing seasons, sheets of ice that drift along with the tides, and extreme operating temperatures, mean the costs of merely preparing to tap the Arctic's energy resources can go into the billions.  And then there are concerns over the region lacking the major seaports necessary to both spur further Arctic development and contain spills similar in scope to Deepwater Horizon (the most recent oil leak off the coast of Louisiana).

US takes the lead and stumbles.  As of September 2012 the current US efforts have been stalled by ice floes, fall whale hunts, and underwater dome repairs.  Shell Oil has invested a total of U.S. $4.5 billion into developing the Chukchi Sea region (just north of Alaska).  Shell's investment in the American Arctic shows that the United States plans to use corporate partners to take the lead in the Arctic race, even though not one drop of oil has been extracted.

The Russian and Canadian long game.  The view of the Russian Foreign Ministry, U.S. oil companies and the expanding domestic American shale oil market may be beating Russian nationally-owned corporations in the Arctic race.  But Russian claims to significant swaths of Arctic territory matter most, in the long run, to the success of Russia’s Arctic strategy. Russia believes that territorial claims are more valuable than a company exerting its economic actions over an area.  Canada seems to be, literally, left out in the cold with regards to its efforts to develop the Arctic’s remote and challenging climate, efforts which require major infrastructure upkeep costs.  But Canada is trying to make up for this through a beefed up military presence, a noticeable omission from a recent Forbes article written by Matthew Hulbert.  Mr. Hulbert concludes that because the big oil corporations (like Italy’s ENI making its presence known north of Norway) and nationally owned companies (owned primarily by China and Russia) are doing their best to position themselves in the Arctic, the U.S. has the gold, Europe the distant silver, and Asia the bronze in the Arctic race.  Russian claims to the Arctic and Russian Tu-95 bomber flights aside, it seems that Russia owning a bigger share of the circle will not be enough for Putin and Co. to compete in the Arctic race.  Though, in the long run, Canada and Russia may actually have the upper hand.  Russia's icebreakers and territorial claims will likely serve as a force multiplier.  And Canada’s increased military presence will protect any investments in their vast territory of Nunavut.

An uncertain Arctic finish.  There are several opinions (stretching back to 2009) that predict that the end result in the Arctic has already been decided:  big Arctic players (the United States, Canada, and Russia) have “agree[d] to disagree” about certain boundaries in the Northwest Passage, while the smaller players (Denmark, Norway, and economically, Russia) stake their continental shelve claims to the United Nation’s Convention on the Law of the Sea:

There is no ‘endgame’ in the Arctic. Cooperation – not conflict – is the more accurate paradigm. With the exception of Hans Island, there are no sovereignty disputes over land in the Arctic. The unresolved differences concern a) coastal state jurisdiction over shipping in the Northwest Passage, b) the delimitation of maritime boundaries in the Barents, Beaufort and Lincoln Seas, and c) the extent to which each of the five Arctic Ocean countries has sovereign rights over the continental shelf more than 200 nautical miles from its shore.

There is no great cause for concern. Canada and the US have “agreed to disagree” over the Northwest Passage while cooperating on maritime surveillance and pollution prevention. They – along with Denmark, Norway and Russia – have also agreed that overlapping continental shelf claims will be resolved according to the rules in the UN Convention on the Law of the Sea.

Canadian resolve pushes forth a militaristic footing.  Does Ottawa have what it takes to secure its Arctic claims?  Canadian Prime Minister Stephen Harper thinks so.  His three day “arctic sovereignty tour” is aimed at quelling any Russian claims in the Arctic Ocean.  And just last month, Canadian Foreign Minister Peter Mackay stated Canada's intent to placed in the Arctic race's pole position:

"There is no question over Canadian sovereignty in the Arctic. We have made that very clear. We have established, a long time ago, that these are Canadian waters and this is Canadian property," said Mackay. The Canadian prime minister's trip, which involves stops in half a dozen communities in Canada's far north, is intended to reinforce Ottawa's claim to more than 1.2 million square kilometers of Arctic seabed.

Prime Minister Harper does not intend to lose the Arctic race; rather, he intends to win the Arctic race by using a three prong approach:  (1) making territorial claims according to the UN Convention on the Law of the Sea, (2) highlighting scientific findings that find Canada’s continental shelf extends far into the Arctic Circle and (3) launching Canadian expeditions such as Operation Nanook.  Since 2010, Canada has been participating in annual “sovereignty operations” such as Operation Nanook in the Arctic to show the international community that Canada has an interest in maintaining control over the Arctic Circle, an interest Ottawa has also expressed by not placing a moratorium on oil exploration.

A lumbering start.  For an area of the world that is literally heating up, the marathon race for Arctic resources is off to a slow start.  With non-renewable energy sources becoming more scarce and subject to hikes due to war, demand, and natural disasters, the Arctic Circle has become a focal point for resource hungry nations.  However, the race for natural resources is not without projected environmental risk.  Furthermore, only the nations that are willing to put forth the considerable military, infrastructure, and other financial investments can hope to win the Arctic resources race.  The Russian and Canadian Arctic strategies seem to rest upon how far their continental shelf extends and how many military operations they can execute until they have the capital necessary to fortify their Arctic infrastructure.  This is especially true of Russia, where companies are either experiencing cost overruns or simply waiting to see how Shell performs north of Alaska.  Despite the setbacks experienced by Shell Oil, the U.S. is currently leading the way, albeit by nary a hair, for not one well has been tapped by the U.S.-based subsidiary in the cold waters of the Northwest Passage.