The Ukraine War and the Future of the Arctic

The Arctic is celebrated internationally as a bastion of cooperation – one of the few remaining theatres in which fraught Russia–West tensions have yet to spoil the atmosphere. Of course, within a matter of days into this most recent iteration of the Ukraine–Russia war, warnings of Arctic ‘meltdowns’ and a looming crisis already began to emerge.

Arctic cooperation is facilitated through the Arctic Council, a forum for regional cooperation on all matters beyond the military-strategic realm. Tasked with managing much of the region are the ‘Arctic Five’ – those states with littoral Arctic Ocean proximity (Russia, the US, Canada, Denmark and Norway). Northern states with territory above the Arctic Circle (Finland, Sweden and Iceland) join the ‘Arctic Five’ to make the ‘Arctic Eight’. These eight states are the permanent members of the Arctic Council.

On 3 March, seven of the eight permanent member states – Canada, Denmark, Finland, Iceland, Norway, Sweden and the US – released a joint statement outlining their intention to ‘pause’ their participation in the Arctic Council and its affiliated bodies. While the statement noted their paused engagement would be temporary, it is likely this will continue until early 2023, when Russia hands the Arctic Council chairmanship to Norway. Russia’s response to this decision essentially underscored plans to refocus its chairmanship on domestic Arctic interests.

Arctic Spillover

As a result of Russia’s invasion of Ukraine, the West (primarily led by the US and the EU) has already enhanced its sanctions on Russia. They will certainly bite. Targeted industries already include Russia’s banking and financial sector, defence and technology, as well as Russia’s oil industry. Putin’s personal wealth and the finances of his inner circle are also under fire.

It is early days, of course, but we should expect further crippling of Western financial interests in Russia’s Arctic zone – primarily when it comes to Russia’s Arctic LNG mega-projects. At the time of publication, France’s TotalEnergies has not signalled plans to exit Russia’s energy sector. TotalEnergies’ stake in many of the hallmark Russian Arctic gas projects stems from a 19.4% stake in Russian private firm Novatek. Projects under threat include a 20% stake in Yamal LNG, a 10% stake in Arctic LNG-2, and a 10% stake in LNG transhipment hubs along the Northern Sea Route (NSR). The future of Ob LNG, also in the Gydan Arctic peninsula, is uncertain as well. Shell has already signalled plans to exit Russia’s energy market, which will hit Moscow’s immediate plans for the Gydan Arctic peninsula ventures with Russia’s GazpromNeft. The UK’s Beyond Petroleum (BP) has confirmed plans to exit its 19.75% stake in Russia’s oil major Rosneft. There will no doubt be implications for Rosneft’s famed Arctic Vostok Oil Project precinct.

There has been some discussion of hitting Russia’s energy sector with further sanctions; however, the latest iteration has explicitly protected Russian gas, at least for now. Questions arise with regards to the future of Germany’s Siemens, Italy’s Saipem, Turkey’s Renaissance Heavy Industries, the US’s Halliburton, and Germany’s BASF as key technological and capability stakeholders in Russia’s Arctic energy sphere. Of course, technological challenges for offshore Russian Arctic energy ventures are not a new problem for Moscow. Indeed, the commercial viability (let alone projected global demand) for offshore Arctic oil is itself on shaky ground.

While more sanctions – potentially with wider remits – might poke Russia in the eye, punishing Moscow in the Arctic will cause long-term strategic problems for the West. Likewise, the 3 March decision by seven of the eight Arctic Council permanent member states to cut cooperation and freeze the few remaining avenues for engagement with Russia will deliver only short-term gains for the West. Such virtue signalling will not protect the fine strategic balance of the Arctic.

However, limiting our collective focus on the ‘spillover’ of Russia–West tensions to Arctic Council activity misses the broader geopolitical implications: these matter.

Moscow Turns to Beijing – Right?

If only the situation was that simple. The long-term ripple effects of suspending or freezing out Moscow from the siloed Arctic status quo are worth examining closely. Sure, Western sanctions might yet drive Russia further towards Chinese capital and export markets for its Arctic LNG. But China is not the only non-Arctic state eyeing an isolated Russia in the Arctic. Plenty of others are waiting in the wings to enhance their footprint in the Arctic theatre. India, the United Arab Emirates (UAE) and many Southeast Asian states are looking for inroads into the Arctic.

India has long signalled its intent to deepen ties with Russia in the Arctic, specifically in energy projects. Offsetting Chinese investment in energy ventures on Russia’s Arctic Yamal Peninsula with Indian capital is a welcome development for Moscow. India is in talks to gain a 9.9% stake in Novatek’s Arctic LNG-2 venture. There are also murmurs of renewed Indian interest in getting the fabled ‘North-South corridor’ online. This corridor, a mixed rail and sea one, would run from Russia’s Vostok Arctic project zone south to the ports of the Indian Ocean.

The UAE has long eyed the potential of the NSR. Falling largely in the Russian Arctic Zone and hugging the Russian shoreline, the NSR has immense global transformative power when it comes to shipping. Cutting transit times between Asia and Europe by up to 40%, the NSR has the potential to reshape global shipping corridors. Indeed, the UAE’s logistics company DP World has already inked an agreement with Moscow’s Rosatom to operate a specialised fleet of container ships with ice-hardened hulls just for NSR purposes. Should TotalEnergies exit Russia’s gas market, we can expect the UAE to step in swiftly and snap up NSR transhipment hubs.

Southeast Asian states, collectively known as the ASEAN states, are also eyeing the Arctic. These 10 states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) are growing economic powerhouses. Specifically, in the LNG sphere, Bangladesh and Vietnam are key potential future import markets for Russia.

Bangladesh’s LNG demand is forecast to reach 36 million tons (mt) by 2050, a ninefold increase on current demand. Vietnam does not yet import any LNG; however, it is expected to import up to 15 mt a year by 2035. ASEAN states are also low-lying ones, with an increasing interest in climate change and better understanding how the Arctic shapes weather patterns. Of course, geographically, ASEAN states value a potential global transport corridor which is void of congestion and piracy concerns, akin to the region’s Malacca Strait.

Of course, interests are just interests, until opportunity comes along. Isolating Russia from the Arctic dialogue and central forums like the Arctic Council will have long-term implications. New players like the UAE and some ASEAN states will emerge, while states like China and India will solidify their Arctic stakes.

Just look to the 25 February United Nations Security Council (UNSC) vote to denounce Russian aggression on Ukraine. While 11 of the UNSC’s 15 members supported the resolution to ‘deplore’ Russian aggression in Ukraine, China, India and the UAE all abstained. These three emerging Arctic stakeholders signalled internationally where their priorities (and principles) lie. What is even more concerning for the future of Arctic ‘cohesion’ and cooperation is that of the draft resolution’s co-sponsors, only one of the 10 ASEAN states (Singapore) signed.

The results of the UNSC vote are damning for Arctic cohesion. As Table 1 illustrates, there is trouble among Arctic Observers. Of the Arctic Council’s 13 current Observers, four are currently serving on the UNSC. China, a permanent UNSC member, abstained from the resolution to denounce Russia, as did India (a non-permanent member on a two-year rotational basis).

Arctic cohesion and consensus at the UNSC are also missing at the Arctic Council Permanent Membership level, as Table 2 highlights. Of these eight Arctic Ocean-rim powers, three are currently serving on the UNSC. Russia was the only country that vetoed the resolution. Of note is the fact that Norway’s UNSC position as a non-permanent member ends at the end of 2022.

Work the System

The Arctic Council was crafted to explicitly cultivate Arctic cooperation and dialogue. It was evident to all parties this could only be achieved by sidestepping any discussion of, engagement with or debate over military-strategic concerns and affairs. So why change this now? Since 1996, the Arctic Council has struck a fine balance to ensure the region remains one of ‘low tension’ and ultimately one that is characterised by stability.

There are Arctic agreements which will necessitate Russian engagement too. The most pressing, given China’s enhanced capabilities in grey-zone warfare using its fishery flotillas, is the Central Arctic Ocean Fisheries Ban. With 15 years left on the clock for the ban, Arctic states will no doubt need Russian support for holding China accountable for likely violations. For now, no other Arctic state possesses the maritime capability in the polar zones to marshal Beijing.

Legally binding agreements negotiated under the auspices of the Arctic Council also remain, and they all require Russian engagement to successfully uphold. Ensuring maritime search and rescue capability when over 50% of the maritime space is ‘cut out’ of the dialogue seems self-defeating. The same applies to environmental and marine oil catastrophes, which are political ‘no-go’ zones. Likewise, Arctic scientific cooperation turns on international collaboration and has long-term significance for global security.

The notion that Russia might pick up its Ukrainian playbook and spark conflict on its northern flank, the Arctic, is nonsensical. Russia legitimately controls over 50% of the Arctic. The Russian Arctic Zone is an economic lifeline and Moscow’s resource base for the next century. Conflict on this frontier will stymie resource development plans by depriving the Kremlin of required international investment in energy projects and infrastructure. Of course, Arctic conflict will also undermine Russia’s supply security customer value proposition – a key requirement for any reliable and credible energy exporter.

Maintain the Course

The Arctic Council’s 2021 Strategic Plan was celebrated for its forward-thinking ambitions. Members envisioned the Arctic in 2030 to be a ‘region of peace, stability and constructive cooperation’. While Russian actions in Ukraine are at odds with liberal rules-based norms and interests, it is an unavoidable fact that the Arctic Council was crafted to leave politics at the door. For this ensures adequate operation and facilitation of collective Arctic stakeholder interests inside the zone. The 2021 Strategic Plan also spoke of the need to enhance the Council’s ability ‘to efficiently respond to emerging challenges and opportunities in the Arctic’. Cutting ties with a stakeholder controlling over half of the Arctic essentially suspends any capability to deal with any issue inside the Arctic.

The West has essentially pulled the pin on engagement and dialogue with Russia in the Arctic. But someone forgot to do the due diligence, and it is important to grasp exactly what the region is now in for. This is not an argument for re-establishing military ties via the Arctic Security Forces Roundtable, or rewarding Russia’s recent invasion of Ukraine with political dialogue. This is a case for maintaining the Arctic’s current status quo and atmosphere of low tensions facilitated by the Arctic Council.

This is not just about China. Arctic stakeholders – primarily the rest of the Arctic Eight – ought to be considering the implications of a vastly more crowded and competitive Arctic. India, the UAE and much of Southeast Asia have their sights set on the Arctic. Any short-term political gains achieved by freezing Russia out of the Arctic conversation will ultimately be offset by long-term strategic peril in the High North. The 3 March joint statement must be walked back. Hopefully, the rest of the permanent member states of the Arctic Council ‘show up’ for the next meeting of senior Arctic officials in Arkhangelsk, scheduled for May. If not, Russia clearly has plenty of other options in other states looking for a seat at the Arctic table.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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