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Putting the Arctic Boom on Ice: Proceedings of RUSI Arctic Roundtable

Commentary, 11 May 2011
Americas, International Institutions, Europe
On 12 May 2011, foreign ministers from the eight Arctic countries will participate in the seventh summit of the Arctic Council, an organisation initially forged to secure agreed environmental standards for the region. Now, amid growing interest in the opportunities and challenges energy resources and sea lines of communication present, the Council must reform to meet the interests of global demand.

On 12 May 2011, foreign ministers from the eight Arctic countries will participate in the seventh summit of the Arctic Council, an organisation initially forged to secure agreed environmental standards for the region. Now, amid growing interest in the opportunities and challenges energy resources and sea lines of communication present, the Council must reform to meet the interests of global demand.

Ahead of the crucial meeting, RUSI organised a high-profile roundtable with experts and policy-makers with an interest in the region. This report of the proceedings serves as a primer on the issues for policy-leaders concerned with Arctic issues.

 Climate change Arctic

Introduction

The Arctic Council is the leading multilateral organisation for managing the development of the Far North. Questions concerning its role and the extent of its mandate are quickly coming into focus. Aware of the Arctic's massive potential for energy and international shipping, extra-regional governments and a wide array of non-state actors are striving to ensure their voices are heard. The Arctic states and others already face uncertain environmental conditions in the region, and they will need to strike a balance between economic and ecological imperatives as the potential opportunities and pitfalls of commercial activity become clearer. Constructive partnerships will be crucial, and some may even involve agreements to defer action. Though the region holds real economic potential, the so-called rush for resources is far slower than the headlines indicate. The future promises an expansion and diversification of existing activities, but according to parameters that are still being developed and agreed.

These issues were discussed at RUSI on 18 March 2011 by a select gathering of experts and policy-makers who focused on energy, maritime and governance questions. What follows is a selection of noteworthy arguments and considerations that emerged from the day's discussion.

Arctic Regional Dynamics

Multilateral forums, governments, industry and NGOs are laying groundwork which they hope will guide an anticipated surge in human activity in the Arctic. In many cases, they are struggling to understand the region they mean to harness, and unevenly distributed and often inadequate knowledge slows collective policy-making with both positive and negative implications. This reality is in tension with the dominant popular narrative, according to which an ostensibly imminent commercial and industrial boom triggered by rapid environmental change requires urgent action. In fact, the evidence on which sensationalistic predictions are based - regarding the anticipated surge in shipping, for instance - remains thin. Human activity in the Arctic ultimately depends on the rate at which states are willing to allow it to increase; so far, it has been tempered by caution.

Scholars often speak of multiple Arctics as way of emphasising the region's diversity and dynamism and the need for policy-makers to take both into account. Wide regional variation in average seasonal temperatures, ice properties and weather systems - to name but three environmental considerations - precludes 'blanket' policies for commercial interests as well as governments. Coordinated scientific research is the most reliable way of gaining the knowledge necessary for sound policy. The Norwegian government's 'research-led' approach to hydrocarbon production in the Barents Sea, for example, which aims to balance environmental conservation, wildlife husbandry and oil and gas production, is a valuable model. Science can also serve as a corrective to the over-simplification and hype in current popular discourse,[1] provided that journalists and opinion leaders seek out scientists' views. The Arctic Council's fostering of directed scientific research makes it a unique and valuable international organisation.

The Arctic states - and especially the Arctic Five [2] - have made a concerted effort to portray the Arctic as a unified and coherent region. As the Ilulissat Declaration continues to demonstrate, their commitment to establishing a common position includes a deliberate political discourse where co-operation, legal frameworks, common interests and shared values guide regional development. This discourse is understandable given the imperative of promoting stability and development, and it has already delivered results. Canada, the US and Denmark are co-operating to map their continental shelves, and Norway and Russia have settled their Barents Sea boundary dispute. Nevertheless, the discourse is problematic, too, in that it encourages the adoption of policy on the basis of 'aspirational' consensus rather than considered national interests. Premature commitments to collective goals will be challenged as newly acquired knowledge casts a brighter light on their political implications.

Natural Resources

Although the Arctic may contain up to 13 per cent of the world's undiscovered oil and 30 per cent of its undiscovered gas [3] the reality is that with few exceptions, no one has a clear idea of the hydrocarbons' location or concentration, and the focus on quantity has distracted attention from the more important question of accessibility. A wide range of considerations will affect accessibility, that is, the attractiveness of drilling. The future price of oil is just one of them. Others include extraction costs, technical and technological challenges, transport to processing facilities and to market, and the existence of cheaper or less risky alternatives. The feasibility of drilling in the Norwegian Barents differs from that in the North Sea, for instance, and the quantity of hydrocarbons in the Barents remains to be ascertained. Differences in extraction cost estimates also put the lie to facile generalisations. Off the coast of Western Greenland, estimates start at an affordable $50 per barrel. In the East Greenland Rift Basins, however, estimates range from $100 to $300 per barrel. Finally, tightened drilling regulations since the Gulf of Mexico disaster are unlikely to make extraction more enticing. To understand the region's real potential, we need a more discerning analysis of a wider range of factors affecting energy production in the Arctic.

Industrial pursuit of exploration licences in the Arctic continues nonetheless. It is first and foremost about securing access in anticipation of future demand.  Upbeat media coverage of industrial activities has created the impression of a build-up of steam that can only signify imminent extraction. In fact, acquiring a drilling licence does not automatically entail either exploration or extraction, but simply confers rights to do so. Exploratory drilling in the Barents Sea in the 1980s actually deflated interest in the region, while promising discoveries off the Alaskan and Canadian coasts in previous decades were nullified by a combination of native land claims, environmental suits and unfavourable oil prices. It is also worth noting that legal clarity - particularly as concerns territorial boundaries - is a prerequisite for commercial activity. The Beaufort Sea is the best-known (but not only) area where questions over national jurisdiction remain, and until those are settled, companies will stay away.

Decisions to exploit Arctic hydrocarbons have as much to do with government policy as commercial interests and technology. The Russian Government, for example, views its gas reserves as integral to its global power projection, while for the US, Alaskan oil would have little impact on energy security or overseas power. Greenland, meanwhile, sees resource exploitation as a path to independence and improved socio-economic conditions for its people. Norway relies on the energy sector for almost half the value of its exports, but while it intends to look into the oil potential of the Barents Sea boundary zone it has shelved plans for exploration off the coast of the Lofoten islands. The decision is motivated at least in part by environmental and resource husbandry considerations. Energy's relative importance in the coastal states' national strategies will be just as important as economics in determining the pace at which it is brought on-stream.

Maritime Activity

On the maritime front, high expectations surround the anticipated benefits of climate change, mainly relating to shortened sailing distances and lessened pressure on choke-points, but the future of Arctic shipping remains as uncertain as that of energy. Advantages of all three routes - the Northern Sea Route (NSR), Northwest Passage (NWP) and the transpolar route - have been exaggerated. Environmental realities will remain prohibitive for years and the required infrastructure is not there.

The fabled NWP has been likened to a back-country road in terms of its ability to accommodate traffic. The rotation of the ice cap and the tendency of the archipelagic channels to clog with impenetrable ice combine to make it unattractive for commercial interests for the foreseeable future. Not only are there virtually no viable berthing facilities for cargo ships, only about 10 percent of the waters have been adequately charted. The Arctic Marine Shipping Assessment outlook to 2020 argues the NWP offers very little potential as a trans-Arctic Route. The Northern Sea Route, on the other hand, was kept open year-round by Soviet icebreakers more than thirty years ago and freight volume reached 7 million tons annually in 1987. Since the collapse of the post-Soviet economy in the 1990s, however, the massive increase in activity which Russian analysts predicted has failed to materialise. Between 2003 and 2010, volumes increased a mere 11 per cent - from 8.1 to 9 million tons. Smaller-scale shipping in Russian waters will increase with the growth of the offshore hydrocarbon industry (the character of which is as yet also uncertain) but container traffic of the sort widely envisioned will not. Current commercial practices are well established and in uncertain conditions change will take time.

Established patterns of economic activity and inadequate infrastructure will likely militate against a rapid upsurge in maritime traffic even more than ice conditions. Most of the activity in the NSR, for example, has to do with regional exports or supplying industrial settlements. Meanwhile, studies suggest that sea transport is frequently less cost-effective than rail and pipeline, meaning an increase in by-sea export activities will depend above all on specific kinds of commerce.[4] The NSR may yet become an international shipping lane, but the Russian government will have to make it more attractive to prospective shipping powers. Transit fees will be one issue, but the (closely related) matter of infrastructure will be another. Unlike in the Canadian Arctic, where infrastructure has never existed, in the Russian Arctic, it often exists but requires major and costly upgrading. Infrastructure involves more than charts and port facilities; it includes search-and-rescue and pollution-response assets, icebreakers, salvage resources, and weather forecasting capabilities, as well as trained personnel.[5] The North Atlantic Coastguard Forum is one instance of multilateral co-operation aimed at filling a small part of the infrastructural vacuum but much more is required to reduce the risks of trans-Arctic shipping.

Even if reduced ice cover, improved infrastructure and stronger commercial appetite eventually stimulate shipping through the NSR or over the North Pole, the legalities may not be straightforward. While boundary disputes are unlikely to be the prime concern, the varying character of national jurisdictions over Exclusive Economic Zones could present complications. Freedom of navigation is enshrined, of course, but as the Canadian government's Arctic Waters Pollution Prevention Act demonstrates, there are numerous legitimate avenues by which countries can extend a degree of control beyond their territorial waters. While environmental protection will be among their primary motivations, it may not be their only one. Article 234 of UNCLOS recognises the unique aspects of ice-covered waters and human activities therein, and was specifically designed to give Arctic coastal states the necessary means to legislate for them. It is not clear how the Article's provisions or spirit will be applied as formerly ice-covered waters open up.

The Arctic Council

The Arctic Council was designed to promote and guide inter-state co-operation on issues of sustainable development and environmental protection. While its environmental focus remains essential, it is no longer sufficient if the Council is to remain the pre-eminent forum for regional stakeholders. It must demonstrate that it can adapt to the implications of globalisation by tackling emerging issues from a wider, more strategic and inclusive perspective. Thus, the new Search and Rescue instrument - the first legally-binding treaty ever negotiated by the Council - is a step in the right direction. Seven of the eight member-states have now released Arctic strategies, which is also important. That only two of them address globalisation specifically, however, suggests that members may view the Council as designed for the post-Cold War world and not the world we live in today.

Despite commitments to consensus decision-making, real tensions exist between Arctic Council members, coastal and non-coastal states, and members and observers. There is speculation that the Finnish government, in response to the Artic Five Ilulissat and Chelsea meetings of 2008 and 2010 respectively, will lay groundwork for a more inclusive Leaders' Summit than others might like, and the backing of Nordic states could fragment Arctic Five unity with repercussions for the Council. Iceland has also expressed dissatisfaction at not having been invited to the Chelsea meeting, and is likely to welcome the Finnish proposal as well. Moreover, with the patronage it appears to be gaining from the Chinese, it may have other reasons for not cleaving too tightly to an organisation that seems willing to leave it on the margins. Left unresolved, internal tensions may make a strategic, coherent and directed Arctic Council agenda difficult precisely when it is required.

Arctic Council reform will be a key agenda item at the May 2011 Ministerial. A more inclusive forum that engages other stakeholders with Arctic interests is essential for the Council - not least as concerns its legitimacy. At the same time, rapid expansion of membership and remit would invite institutional incoherence and so undermine its relevance. Rather, the Council needs deliberate strategic thinking to build a sound approach to its responsibilities, powers, limitations and membership. Membership criteria will be discussed and their establishment would make the Council more transparent. Criteria should be treated with care, however: they are liable to be shaped by the intentions and interests of their architects, despite everyone's best intentions. The effect could be to weaken the Council, both by sapping its legitimacy and by reducing members' room for manoeuvre in negotiations with candidates.

Conclusion

The Arctic has been the subject of much media hype, especially since 2007's record ice-cover recession. Much of the rhetoric is overblown. The Arctic will not be an overnight economic or commercial game-changer. There is no real scramble for the Arctic, nor does its transformation represent any conventional security threat to the polar states. There will be no 'boom' in natural resources or commercial shipping. Developments in these areas will take place slowly and are unlikely to develop in linear fashion, contingent as they are on a number of uncertain factors. Investment, regulation and legal frameworks will be prominent among them, as will scientific and technological progress and the strategies of state and non-state actors. Of course, environmental considerations, which are possibly the most unpredictable, will underpin all others. A responsive Arctic Council should remain the leading multilateral organ for the management of human activity in the high latitudes in the decades to come.

 

For further information on this roundtable, contact Dr Lisa Aronsson lisaa@rusi.org or Matthew Willis MatthewW@rusi.org

 

NOTES

[1] For an example of the popular discourse, see: Ewen MacAskill, 'Canada uses military might in Arctic scramble', The Guardian, 11 August 2007, http://www.guardian.co.uk/world/2007/aug/11/oil.arctic.

Scott G. Borgerson, 'Arctic Meltdown: the economic and security implications of global warming', Foreign Affairs, March/April 2008, http://www.foreignaffairs.com/articles/63222/scott-g-borgerson/arctic-meltdown.

Nick Meo, 'Russia leads scramble for the Arctic', The Daily Telegraph, 16 August 2008, http://www.telegraph.co.uk/news/worldnews/europe/russia/2570295/Russia-leads-scramble-for-Arctic.html.

Andrea Shalal-Esa, 'Exclusive: U.S. submarines show force amid race for Arctic riches', Reuters, 24 March 2011,

[2] 'Arctic Five' refers to the five coastal states: Canada, Denmark (Greenland), Norway, Russia and the United States.

[3] See the widely-cited US Geological Survey report of 2008. Donald Gautier, Kenneth J. Bird, Ronald R. Charpentier, Arthur Grantz, David W. Houseknecht, Timothy R. Klett, Thomas E. Moore, Janet K. Pitman, Christopher J. Schenk, John H. Schuenemeyer, Kai Sørensen, Marilyn E. Tennyson, Zenon C. Valin, and Craig J. Wandrey, 'Assessment of Undiscovered Oil and Gas in the Arctic,' Science, Vol. 324, No. 5931, 29 May 2009. pp. 1177-1178.

[4] See 'Opening of New Arctic Shipping Routes,' a briefing prepared for the European Parliament by Arild Moe and Oystein Jensen of the Fridtjof Nansen Institute, 31 August 2010 .

[5] Arctic Marine Shipping Assessment 2009 Report. Arctic Council, April 2009, second printing.

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