Call it a new cold war: Russia, China and the United States all vying for influence and control in a part of the world that, this time, is quite literally cold.
With more than half of all Arctic coastline along its northern shores, Russia has long sought economic and military dominance in part of the world where as much as $35 trillion worth of untapped oil and natural gas could be lurking. Now China is pushing its way into the Arctic, announcing last month its ambitions to develop a "Polar Silk Road" through the region as warming global temperatures open up new sea lanes and economic opportunities at the top of the world.
At play is between one-fifth and a quarter of the world's untapped fossil-fuel resources, not to mention a range of mineable minerals, including gold, silver, diamond, copper, titanium, graphite, uranium and other valuable rare earth elements. With the ice in retreat, those resources will come increasingly within reach.
At a December meeting of climate scientists in New Orleans, a team from the National Oceanic and Atmospheric Administration declared that the Arctic as we've known it is now a thing of the past. Coining a new phrase — the New Arctic — they described the uptick in ocean surface warming and decline in sea ice since 2000 as unprecedented in the past 1,500 years. The Arctic, they wrote, "shows no sign of returning to [the] reliably frozen region of past decades."
As the ice pulls back, corporations and governments are moving in. Seaport facilities, mining operations, oil and gas pipelines — as well as new roads, railways and airstrips to serve them — are arriving in the region at an accelerating pace. An inventory of planned, in-progress, completed or canceled Arctic infrastructure projects compiled by global financial firm Guggenheim Partners tallies roughly 900 projects, requiring a total of $1 trillion in investment, some of which is already on the way.
With $300 billion in potential projects either completed, in motion or proposed, Russia is the clear leader in Arctic infrastructure development. The world's largest country has moved to reopen some abandoned Soviet-era military installations and place new facilities and airfields in its northern territory, while also establishing a string of seaports along its northern coastline. State-controlled oil company Rosneft started drilling the northernmost rig in the Russian Arctic shelf last year in an attempt to tap into a field that could hold more than half a billion barrels of oil. In June it found its first oilfield, in the Laptev Sea in the eastern Arctic. Meanwhile, Russian energy giant Gazprom Neft already pumps oil from beneath Arctic waters via a different offshore field, in the Pechora Sea.
The ultimate goal: to have offshore Arctic oil account for between 20 and 30 percent of Russian production by 2050.
Russia isn't alone. Finland, the United States and Canada have also proposed significant infrastructure investment within their respective Arctic zones. Norway's state energy company is pursuing exploration activities in the far reaches of the Barents Sea even as its sovereign wealth fund considers divesting from fossil fuels. In January the Trump administration announced plans to open up much of the U.S. outer continental shelf to offshore drilling, including areas off the north shore of Alaska.
But it's the emergence of China — a nation with no territorial claim to the Arctic — as a rising polar power that has the potential to shake up the competition for resources and influence in the region. With its economic and naval power on the rise, China has begun underwriting Arctic development projects despite its lack of territory there, underscoring the region's growing global importance.
Though not all of the Arctic infrastructure projects logged by Guggenheim will be completed, "the level of projects has been improving," says Jim Pass, a senior managing director at Guggenheim Partners who has traveled extensively in the region. Projects once deemed largely conceptual have matured into well-thought-out capital infrastructure projects that show meaningful return on investment, he says. As the ice continues to recede, a race is on to develop or buy into the projects that can best position states and companies to compete in the New Arctic.
In December, at about the same time climate scientists were discussing the latest Arctic Report Card in New Orleans, a tanker departed Russia's Yamal LNG facility on the country's northeastern Yamal peninsula bound for the UK. The tanker carried the first shipment of liquified natural gas (LNG) produced by the Yamal LNG facility, which officially opened in the first week of December with Russian President Vladimir Putin presiding over the occasion.
The project, one of the Arctic's more complex energy infrastructure undertakings to date, is but one of nearly $275 billion in potential Arctic energy investments logged in Guggenheim's database, and a milestone project for Russia, which accounts for nearly $150 billion of that potential investment alone.
A look at Russia's icebreaker inventory underscores its commitment to the region; Russia has nearly 40 icebreaker ships in service, with five more under construction and six more planned. Finland, owner of the world's second-largest icebreaker fleet has seven, followed by Canada and Sweden at six apiece. The U.S. has five, only one of which is a so-called heavy icebreaker. Scrambling to update its aging fleet, the U.S. Coast Guard plans to build six more (three heavy and three medium icebreakers), though the first won't be delivered until 2023.
Energy resources will likely remain the driver of major investments in the Arctic for the foreseeable future, but for all the fanfare around them highly visible energy projects like Yamal LNG only paint a fraction of the economic picture in the Arctic, Pass says. Guggenheim's Arctic project inventory includes a data center in Norway, a Finnish biomass-to-ethanol plant, and a Swedish lithium-ion battery factory, among many other projects that fall outside the more conventional categories of fossil fuels, mining, roads and railways.
But the greatest opportunity, he says, is arguably in transport — not just within the Arctic but through it. Much of the Arctic likely won't see ice-free summertime shipping lanes for some time, perhaps two decades or longer. But other routes, like the Northern Sea Route along Russia's northern shore are already navigable — albeit not easily — during certain times of the year, trimming some 30 percent to 40 percent off the distance ships would travel between East Asia and Northern Europe if they traversed the conventional Suez Canal route instead. Russia has already installed more than a dozen seaports along the route at places like Arkhangelsk and Murmansk, in the country's northwest, to Tiksi and Pevek in the northeast.
Meanwhile, if data really is the new oil, the New Arctic could be home to those pipelines as well. Undersea cables laid through the Arctic could one day connect Asia, Northern Europe, and North America more directly, providing far shorter routes for data traveling around the northern hemisphere.
"Whether it's the fraction of a millisecond it takes for financial transactions to travel between Tokyo and London or whether it's shorter shipping routes from Northern Europe to China, the Arctic shortens distances," says Heather Conley, senior vice president for Europe, Eurasia, and the Arctic at the Center for Strategic and International Studies. "As globalization continues to emphasize speed, the Arctic will continue to be an important part of our story."
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The story of the New Arctic could nonetheless prove slow to unfold. Though the ice is receding, the Arctic remains a difficult environment in which to operate. The intense cold alone presents challenges not present in other maritime environments, and while sea-ice measurements from last year were, on average, a full quarter lower than the average across three decades prior to 2010, there's still plenty of ice in the water. Shipping concerns dreaming of an Arctic that's both easily navigable and inexpensive to traverse will have to wait, perhaps for decades.
China has nonetheless taken a keen interest in what the Arctic has to offer in terms of global shipping, fishing stocks, energy security and other mineral resources. The Chinese government has taken what is arguably the longest view in the region, using its financial might to secure access to resources it cannot obtain through territorial claims.
For instance, when funding for the the Yamal LNG facility fell short following the imposition of U.S. sanctions on Russia in 2014, China stepped in with $12 billion in financing to finish the project. During President Trump's trip to China in November, Chinese energy concern Sinopec inked a deal alongside China Investment and Bank of China to provide financing for Alaska LNG, a liquefied natural gas export facility on the other side of the Pacific.
"They see themselves as a near-Arctic state and as an Arctic stakeholder, and they want to make sure they're not blocked from the Arctic by the coastal states," Conley said. "They want to make sure they are sort of an equal partner. Right now they're exploring their economic opportunities and making sure they have a seat at the negotiating table if anything gets decided about future use of the Arctic."
Last summer Chinese authorities expanded the country's $1 trillion global infrastructure initiative, known as Belt and Road, to include an Arctic component, bringing the region into China's larger vision for a connected world with China at the hub. At the same time, a Chinese icebreaker on a scientific mission completed a circumpolar navigation, traversing both the Northern Sea Route along Russia's northern shore and the Northwest Passage atop North America. It continues to explore free-trade deals in Scandinavia and Canada, while pushing for scientific collaboration in the Arctic as well.
"There's high diplomatic engagement and initiative. The Belt and Road initiative now has an Arctic manifestation, and they have a continued interest in science," Conley said. "The new economic dynamic is that China is very present in the Arctic."
Climatological concerns aside — and there are many — one ancillary consequence of a melting Arctic is a rise in human activity there. This includes an uptick in commercial and scientific traffic and also in military presence and activity. For Russia, in particular, the receding sea ice represents the withdrawal of a natural barrier that has long protected its northern border, prompting its military to boost capability and presence in the region as a means for securing both its border and the increasingly valuable sea lanes and resource wealth beyond.
"What we're seeing now is a very slow refreezing of the Arctic geopolitically," Conley said. "Russia has continued its military modernization in the north, and while it's not massive, it's definitely a change in posture."
The growing Russian military presence in the region has stoked old feelings of mistrust, she said, producing antibodies within NATO that are now pushing for an increased Western military presence in the region as well. "We're not going back by any stretch to a cold war posture, but you're starting to see that muscle memory coming back," she said. "And it's because we're seeing this uptick in military activity."
The notion that the Arctic might evolve into a flashpoint for global tensions remains remote. The region has long proved a place of international cooperation, where Arctic states settle boundary disputes and other conflicts amicably at the negotiating table (as Russia and Norway did as recently as 2010). But as military activity in the region trends upward alongside commercial activity, the chance of accidents, misunderstandings and miscommunications heightens as well.
In a New Arctic with emerging strategic and economic value and where norms are still being established, the potential for tensions to escalate is real. If the Arctic shortens distances, countries that once felt quite far apart may soon find themselves much closer together as the ice recedes.
Wary of what geopolitical realities the New Arctic may hold, military planners are already taking such factors into consideration. At a Surface Navy Association event near the Pentagon earlier this month, Coast Guard Commandant Adm. Paul Zukunft noted that the Coast Guard's new heavy icebreaker will be unarmed when it enters service in 2023. But the ship will have the space, weight and electrical power built in to ensure it can carry offensive weapons in the future.
— By Clay Dillow, special to CNBC.com