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The European Arctic Challenge

The European Arctic Challenge

June 3, 2015

By Tim Reilly

With Shell obtaining its drilling license in the North American Arctic, and an increasing number of Asian countries applying for Observer status at the Arctic Council (AC), the shape and governance of the U.S. AC chairmanship is cause for both celebration and caution. Yet despite increased activity and attention being paid to the North American Arctic, the fact of the matter is the European Arctic is where the AC faces its most daunting challenges and rewarding opportunities.

For instance, over 90 percent of booked gas reserves in the Arctic are in the Russian offshore sector, where Exxon resides alongside Rosneft. But barring their presence, there is no comparable American commercial interest in the European Arctic offshore sector. Moreover Asia, led by China, is predominantly interested in the European Arctic for environmental, climatic, commercial, strategic, and geo-political reasons.

As chair, the U.S. should consider carefully the balance of its own North American interests and that of the vast, complex, and geopolitically vital European Arctic. Along with increased U.S. engagement in the European Arctic will come enormous commercial advantages, but only the U.S. can kick start stable development with its own emphasis on infrastructure build-out and the establishment of an Arctic Development Bank. Such a financial entity would accommodate not only commercial progress for the U.S. but also provide an infrastructure framework upon which to build, maintain, and measure sustainable development and environmental protection across the entire Circumpolar North.

However, without some additional dialogue about Russian Arctic sanctions and direct U.S. engagement in the European Arctic, there is a growing danger of the AC overseeing an ideological split in the Arctic. The likely outcome of such a conflict would find North America and possibly (some but perhaps not all) Scandinavian countries on one side, and Russia allied with powerful Observer non-Arctic countries like China and other Asian countries (possibly accompanied by Iceland and an eventually independent Greenland) dominating the European Arctic on the other.

It is critical, therefore, that Russia’s reaction to sanctions in its European Arctic offshore territory is understood to be potentially far more volatile and unmanageable than those imposed on the Russian mainland economy. The good news is that the common denominator for Asia, Europe, and America—and that which may bind all three together—is a desire for predictable and sustainable commercial development of both the European and North American Arctic to the benefit of its respective indigenous inhabitants and host countries.

A Russian swing toward Asian markets has long been predicted in the Arctic, and the increasing presence of powerful Asian countries as AC Observer members is now a reality. This means that the potential for a Sino-Russian tie-up, for example, in the European Arctic, with both the development of the Northern Sea Route and oil/LNG exploitation on the initial agenda, is both technically possible and commercially logical. For the moment, however, China will remain very circumspect about operating with Russia in the Arctic. Nonetheless, last year’s tie-up between Russia and China over long-term, massive multi-billion dollar energy deals did include an Arctic dimension.

The Arctic’s growing global importance is three-fold. First, the Arctic is geographically at the epicenter of a significant physical state change, and as such is of intense scientific interest as much outside the Arctic as within. Secondly, the Arctic still accommodates both Russian and American nuclear weapon systems. It also has strategic resources in abundance, and it hosts emerging maritime trade routes linking the East to the West across the Arctic, which are of global strategic and geo-economic interest. Lastly, the success of the AC relies on proving its worth as an international relations framework for dealing not only with Arctic governance, but also with great power relations that are concerned with polar issues.

U.S. Arctic policy is now equally clear in relation to, and mindful of, these three global developments in the region. Its objectives are to maintain scientific research into the Arctic climate and its environment; establish the financing and build out of infrastructure capability; and ensure that any Arctic commercialization both includes directly and benefits the indigenous peoples of the Circumpolar North. This last point is essential as the AC is concerned with the economic development and good husbandry of both the North American Arctic and the vast European Arctic, which are geographically dominated by Russia.

The state of Alaska is not the foremost concern in American politics. However, pressing D.C. hard for a more robust and rapid infrastructure build-out of its Arctic territory, especially for hydrocarbon exploitation, remains a tough sell. Nonetheless, Washington should not be deflected. Its policy is long-term, strategic, and most vitally, pan-Arctic and internationally inclusive. With a U.S. framework focused on infrastructure, climate research, and inclusivity of indigenous peoples, sustainable commercial exploitation can occur to the eventual benefit of not just Alaska, but the greater North American and European Arctic as well.

There are additional strategic reasons why Washington should stick to its stated policy and not become solely U.S.-centric in its chairing of the AC. Greater American leadership, via both its chairmanship of the AC as well as its support of the newly founded Arctic Economic Council, is certainly required in the European Arctic while a sanctioned Russia remains a powerful and inescapable presence.In which case, U.S./EU-led sanctions in the Russian Arctic have led to some unintended consequences, partly because of politicians’ apparent unawareness of Russia’s indispensability in the Arctic. Another reason is because present U.S./EU sanctions do not curtail Russia’s strategic options in the Arctic, many of which the Russians have already initiated. These include, for instance, increased Sino-Russian relations, steady militarization, potential undermining of US’s chairmanship of AC, selective voting on Arctic commercial regulation and legislation, and a recently announced objection to EU Observer membership of the AC.

Emerging developments in the AC’s governance style and authority in the region require the U.S.’s attention during their stewardship of the AC. Each of these conundrums is compounded by ongoing rapid climate change, which is, in turn, altering both the geographical and the socio-economic landscape. The effects of both of these latter developments are most pronounced in the European Arctic.

For these reasons, it may be the case that in time, or perhaps even before the end of the year, certain aspects of Russian Arctic sanctions may be re-evaluated within the AC. This U.S.-led AC proposal could be seen as an initial confidence building measure between Russia and the West. Incentives for a possible relaxation in sanctions include an avoidance of the emergence of a two-tier geographical Arctic region, continued Russian cooperation with the AC’s mandates, and a recognition by the West of the indispensability of Russia in the Arctic’s sustainable future.
The global stakes in the 21st century Arctic are high, but if the U.S. were to meet Russia in the European Arctic, recognizing its scientific achievements, polar experience, and geography as crucial to the safe and sustainable development of the entire Circumpolar North, then that would be a good starting point to its chairmanship. Doing so would also set an appropriate tone to the development of additional commercial opportunities for the U.S. in the European Arctic, alongside non-Arctic newcomers, and established inhabitants alike.



Tim Reilly is the founder of the Arctic Advisory Group in London.

[Photo courtesy of Backbone Campaign]

This article first appeared on the World Policy Institute website.