A Scramble for the Arctic?

In a time when political tensions are escalating and countries are adopting more militaristic and confrontational geopolitical strategies, the Arctic is emerging as one of the main arenas in the showdown between the great powers.

Estimates of Undiscovered Oil and Gas North of the Arctic Circle by US Geological Survey / Public Domain

Russia and the US are engaging in a series of military exercises with the goal of proving that each side can be more of a challenge if the cold-weather confrontations become hot, while China is attempting to become a near-Arctic power with its own research and commercial expeditions in the region. Canada is geographically positioned in the middle of the three major Arctic powers, and itself claims a section of 1.2 million square kilometers of the north as its own.

Despite antagonistic appearances, a conventional arctic war seems unlikely due to the huge logistical and engineering problems that any combatant would have to face while venturing into the north.

Although the country is an underdog in global politics, Canada has a significant stake in the new scramble for the arctic. However, Canada’s Arctic strategy does not appear to have a vision beyond annual exercises and a meagre naval modernization plan. The robust Beaufort Sea program of the ‘70s and ‘80s withered away with low oil prices, and there has been nothing left to fill the economic void.

Militarily, the Canadian government leans heavily on the US and NATO allies for support against Russia, even though a conventional war in the north is nearly unthinkable. Canada’s massive Arctic territory and small population size means that it can’t go toe-to-toe with Russia or China with the resources it has. To compensate for the power imbalance, Canada has greenlit this year’s iteration of Operation Nanook with the US, France and Denmark – of which Greenland is an autonomous territory – to promote military cooperation in the high north. According to the National Observer’s interview with Rear Admiral Brian Santarpia, this  year’s exercises did not involve any conventional ground forces due to the risk of spreading Coronavirus to the locals. Santarpia believes that Operation Nanook is an important component of the Canadian Arctic strategy at a time where Canada’s rivals are expanding their military and economic influence in the region.

Operation Nanook has been ongoing since 2007, giving Russia ample time to create their response to these drills – Russia’s Franz Josef Land exercises earlier this year were likely aimed at countering the West’s naval drills in the region. Russia’s operation involved a cluster of remote and inhospitable islands in the Russian Arctic sea, onto which a group of special forces soldiers paradropped from a height of 10,000 meters from an Ilyushin-76 aircraft. Operating in a remote and inaccessible environment, they were equipped with state-of-the-art Arctic warfare gear designed to withstand the extreme cold and a low oxygen environment – and tasked with performing reconnaissance without outside support for three days before returning to base. While experts disagree on the exact nature of the message the exercise is intended to send, it is likely a warning to for foreign powers to stay away.

Michael Byers, a Political Science professor at the University of British Columbia and an expert on northern issues, explains to Radio Canada that Russia does not have an expansionist policy in the Arctic. He views these exercises as defensive, meant to project sovereignty into its Arctic territory – including the increasingly viable Northern Sea Route. Melting Arctic ice and increasing trade between Asia and Europe pulls the route into a more prominent position on the world stage, as the Northern Sea Route from China to Europe taking 40% less time compared to the Suez. Byers believes Russia’s cooperation with Canada in the Arctic region extends a far more important olive branch regarding the regional ambition: promoting a strategy of cooperation in the name of mutual gain.

Bob Heubert, a defence expert at the University of Calgary, takes a stronger position. While Canada and the West mostly exercise in the warm summer months with comfortable weather and easily navigable waterways, he argues, Russia uses the harsh conditions of the high north to show its will to deter incursions anywhere along its border, at any time of year and under any weather conditions. Bolstering these Arctic special forces units are an impressive array of army, air force and naval bases protected by anti-air radar stations and missile installations. The West has so far “laughed at Russians”, says Heubert, but “I don’t think we’re laughing any more.”

Despite the military posturing and fortification of shipping routes in the north, the main goal of this new scramble for the Arctic remains economic. Besides the highly profitable shipping lane, Russia also stands to gain a large share of the enormous energy and mineral deposits under the Arctic ice. Some estimates by the US Geological Survey in 2015 place the proven energy reserves at 240 billion barrels, around 10% of the world’s total. However, according to Bloomberg, the profitability of extraction remains questionable due to the unconventional nature of the Arctic hazards that would prevent safe extraction and transport of the raw materials to ports.

Russia’s strategy has been to prepare for the harsh environment of the Arctic in the past two decades with its Arctic modernization program and steady buildup of nuclear-powered icebreakers. More than any other country in the world, the Russian military forces and civilian fleet are positioning themselves as a predominant power in the region, with the ability to maintain a year-round presence under any conditions. Russia’s Project 10510 nuclear icebreaker design is scheduled for deployment by 2027, and will be the world’s most powerful icebreaking ship – and one of the few with a nuclear reactor, writes Ria Novosti.

Russia is currently the only nation with a nuclear icebreaking fleet, but other countries are attempting to catch up by designating design bureaus to research their own potential variants. The Soviet Union set the trend in 1957 with the nuclear icebreaker Lenin, which entered Arctic operations as the world’s first nuclear-powered surface and civilian ship. The Lenin was not bound by most logistical challenges that troubled conventional icebreaking ships, needing no fuel or conventional ship insulation due to its in-house nuclear reactors that generated both propulsion and heat throughout the ship. After a series of nuclear accidents led to the decommissioning of the Lenin in 1989, it was turned into a museum ship in Murmansk to inform the public about the benefits if a nuclear-powered civilian fleet. Since the Lenin, Russia has built a series of civilian and military nuclear icebreakers, all of which were inspired by the Lenin’s reactor design. The country currently owns 40 icebreaker ships, 27 of which are ocean-going vessels and 4 with nuclear technology.

Among the Arctic countries, Russia and Norway are the only ones with an active extraction presence in the region, and Norway seems to be scaling down its operations due to a green initiative. Overall, of the Arctic Council members, Russia is the only country positioned to be a dominant Arctic power.

Canada’s shipbuilding industry has also begun modernizing its Arctic Coast Guard fleet in an attempt to defend its status as an Arctic power with the upcoming launch of the Harry DeWolf Arctic patrol ship. The first of five commissioned for the Canadian Coast Guard, the ship is the largest Canadian vessel built in the past 50 years. The Navy is expected to receive 3 additional Harry DeWolf-class ships from the Irving Shipyards, as well as 12 more conventional vessels. Along with the Coronavirus pandemic, Irving Shipyards has faced numerous challenges while building “a new class of ship”, as expected when trying to “re-establish an entire industry in Canada”, explains Irving Shipbuilding President Kevin McCoy to CTV. However, McCoy expects the production speed to increase with subsequent projects, as $400 million in construction infrastructure has already been built and shipwrights have gained valuable experience from the first ship of the production line.

While Canada is currently lagging behind Russia in Arctic naval capacity and infrastructure, the country was a pioneer in the Arctic in the late 20th century with its Beaufort Sea exploration and extraction program. The effort facilitated the creation of a hundred wells between 1970 and 2000. However, the current economic climate has stalled further developments, and only one new well was drilled in the past 20 years. Major oil extractors announced in 2016 that Canadian oil exploration would be paused indefinitely while several companies would dissolve multi-billion-dollar Arctic infrastructure projects and shut down extraction sites.

The reduction of extraction efforts has also led to communities in the Beaufort Sea region relying on energy imports from southern British Columbia, despite massive reserves of oil and gas just off the coast. The irony of such an inefficient logistical scheme is not lost on Northwest Territories Premier Bob McLeod, he has been arguing for a regional extraction effort to drive economic growth and cease the territory’s reliance on external imports. Other countries use the Arctic as “their economic generator”, McLeod tells The Financial Post, and he is hopeful of Canada’s efforts to do the same.

Jessica Shadian, CEO of Arctic 360 and a Professor at the University of Toronto, is critical of the Canadian energy program.  Despite Russia, Canada’s Arctic rival, investing heavily into the Arctic, Ottawa does “not have a long-term strategy” in the region and does not think “about the north as an economic opportunity”, Shadian explains to FP.  Her group, Arctic 360, is trying to educate major Canadian investors to see the Arctic as an economic opportunity that will greatly benefit Canada in the future, but has so far found little interest.

Research by Gulas, Downton and others in 2019 has found that Arctic exploration depends heavily on energy prices, as the high cost of Arctic extraction demands a higher profit margin than more conventional methods. It is estimated that viability requires over $70 per barrel to enable Arctic nations to begin more widespread extraction efforts. The low prices and the 2016 federal moratorium on offshore extraction are the reasons that Canada’s Beaufort Sea projects have shut down – despite the existence of massive reserves in the area, the profits do not justify the higher salaries, increased technical expenses and the perilous transportation routes that shrink profit margins.

While Russia’s exact energy profit margins are unknown, it is likely that the Russian government is operating at a loss in the Arctic for now. Russia is offering a 5% tax incentive for the first 15 years of energy development projects, seemingly borrowing a page from Canada’s Beaufort book – where Canada offered a huge 0% tax rate for the first 12 years of operation in the 1970s and 80s to stimulate development, explains Doug Matthews to the CBC.

To become a strong Arctic power, Canada would benefit greatly from reopening the Beaufort Sea playbook: invest in northern energy at a short-term loss and use future gains to fund further Arctic infrastructure developments and naval modernization plans. Without a solid strategy in place, Canada’s presence will be dwarfed by Russia’s and other Arctic and near-Arctic powers. Growing Arctic power inequalities will eventually lead to economic and military vulnerabilities that may be exploited by Canada’s competitors.

Beyond strengthening national security, falling behind on northern infrastructure construction would mean that Russia’s Northern Sea Route would be far more attractive to global shipping companies compared to the Northwest Passage, as Russia’s support infrastructure, Arctic ports and escort ships already provide an appealing alternative to the Panama Canal. Russia’s Arctic vision also involves industrialization and exploitation of a largely inhospitable territory, the long-term impacts of which may be vital to its economic development. Canada’s comparable geography shows that like Russia, it could also reap major benefits from an Arctic development program. However, its national strategy does not seem interested in investing in regional growth despite viewing the Northwest Passage as a strategic national asset.

Whether Canada chooses competition or cooperation, climate change and a growing demand for resources require an assertive national strategy that transforms the Arctic from an inconvenient periphery to a driver of economic growth.

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