CIPHER SNAPSHOT: President Barack Obama recently visited the Arctic region to bring attention to the effects climate change is already having in Alaska. The president also addressed a State Department conference with members of the Artic Council, whose members include Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the United States.
Climate change will likely be the “icebreaker” to open up a greater dialogue. The Arctic is warming faster than the rest of the world, which means Arctic fisheries may disappear, there will likely be more forest fires and storm damage to coastal communities, and global sea levels will rise as glaciers melt.
The diminishing Arctic ice has also created geopolitical tensions as nations seek to capitalize on increased shipping and more vigorous exploration for oil, gas, and minerals.
The melting ice is providing new shipping lanes that will potentially speed up trade. Because of rising temperatures, navigational seasons may be longer, shipping lanes may be wider, and the existing routes may be more accessible. Currently, the Northern Sea Route that encompasses the water north of Russia is only passable for two months a year. This route is also entirely in Russia’s Exclusive Economic Zone and all ships that pass through must pay transit fees.
With the expanded shipping lane, the travel distance between Europe and the northern Pacific region will be reduced by 40 percent as nations choose the Northern Sea Route over the Suez Canal. The previously inaccessible shipping lanes north of Canada may be accessible as well. If climate change continues, shipping over the North Pole may even become a possibility.
A quarter of the world’s energy potential could be beneath the melting arctic. Accessing these wells, though, is extremely difficult and potentially dangerous. Russia has spent billions in the Arctic on oil development projects, and Shell has spent roughly $7 billion total. The risks and costs of oil exploration in the Arctic could outweigh the potential benefits.
Declining oil prices are making it less appealing for companies to risk new explorations, where there might be only a small payoff. Moreover, these are all long-term opportunities, and it is unlikely companies would see results within the next 10 years.
The competition over shipping and energy is increasing security tensions within the region. Last month, Moscow appealed to the UN Commission on the Limits to the Outer Continental Shelf to expand its territorial claims in the Arctic by over 463,000 square miles. Russia has ordered the reopening of 50 Soviet-era military bases in the Arctic and increased the number of military personnel; all while the Russian economy is suffering greatly.
Since sanctions were placed on Russia in 2014, economic development in the Arctic region, particularly involving oil exploration, has slowed. At the same time, Russia has substantially increased its military presence in the region, leaving many questioning Putin’s motives. Further complicating the security dynamic, Chinese ships were spotted in the Alaskan Bering Sea at the same time as President Obama’s visit to the Arctic state.
The U.S. military is now attempting to catch up with plans for additional assets in the region. But the problem has been the lack of interest by the U.S. in the Arctic. The intent of President Obama’s visit was to draw attention to American’s role in the region by focusing on climate change as an area to promote compromise and cooperation among the Arctic states.
Alexandra Viers is an analyst with The Cipher Brief.
Correction: A previous version of this article stated that Shell had spent $7 billion this summer.
