Economic Cooperation Prevents Conflict of Interests in the Arctic

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Igor Alexeev

February 20, 2013

New technologies and climate change have significantly raised the profile of Arctic resources for the global economy. According to the Economist, the Arctic is warming twice as fast as the rest of the planet. Many experts quoting Alfred T. Mahan’s work «The Influence of Sea Power Upon History» agree that seaborne commerce in the High North will become an important geopolitical factor over the next several decades. Prospects of political dominance in the Arctic provoke heated debates sometimes overdramatised by the media. But realpolitik dictates that all states concerned should rely on existing legal and institutional framework enabling peaceful cooperation.

Looking beyond the media hype we should admit that political tension in the Arctic is low today. Nevertheless, business competition may create challenges in the future. Luckily the Arcitc Council has already established all necessary mechanisms to deliver credible and balanced regional management. If we want to understand the Arctic better, the situation analysis should cover three important areas: military aspects, legal environment and energy policy.

Speaking about power politics the U.S. military planners currently consider the Arctic to be «an area of low conflict». Swedish experts agree with American conclusions. Background paper «Military Capabilities in the Arctic» (SIPRI, 2012) says, that power projection into the Arctic in 2010-2011 was very limited. The Arctic states maintain military presence in the region only to patrol and protect sovereign territories. There is no sign of military standoff along the borders – the situation is stable and predictable. Therefore any extension of NATO’s engagement in the Arctic is counterproductive, because it could renew tensions nonexistant since the end of the Cold War. As the Russian Foreign Minister Sergey Lavrov put it in 2011, «there is no reason for drawing NATO into Arctic affairs». The Arctic is a zone of peace now and should remain so.

From the legal point of view the status of the Arctic is already specified in the provisions of the international law. The Arctic Council and the Ilulissat Declaration (Greenland, 2008) provide a solid institutional and legal foundation for responsible management of the Arctic by the five coastal states. Under the Ilulissat declaration any demarcation issues in the Arctic should be resolved on a bilateral basis between contesting parties. Besides, all members of the Arctic Council except the U.S. ratified an important treaty – the United Nations Convention on the Law of the Sea (UNCLOS). Norway and Denmark also made an official submission into the UN Commission on the Limits of the Continental Shelf. Russia's final claim to a portion of the Arctic shelf would be filed with the Comission by December 2013, according to Arthur Tchilingarov, the veteran explorer who led the expedition to plant a Russian flag on the seabed at the North Pole in 2007.

As to energy policy the members of the Arctic «five» have preferential rights to tap its resources. It should be noted, that 97% of the discovered and potential reserves of the Arctic are located under the sovereign jurisdiction of the Arctic states. Concerned countries especially China and some members of the EU should consider that there is no «unclaimed» territory in the region. However, third parties can freely apply for a mining claim through bilateral agreements. Most probably the Arctic sweet spots will be developed on the basis of public–private partnership.

The latest example is the $500 billion offshore venture deal between Rosneft and Exxon Mobil. The contract will grant Exxon preference to develop three vast untapped fields in the Russian Arctic Kara Sea, with hydrocarbon reserves estimated at 85 billion barrels of oil equivalent. This high profile business initiative brings hope for productive cooperation, despite all political differences. The common ground, although of purely economic nature, is a fine example of civilized approach to energy policy in the Arctic. We cannot but hope it will set benchmarks for all players in the market – both public and private.

The views of individual contributors do not necessarily represent those of the Strategic Culture Foundation.

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Arctic European Union Exxon Mobil Rosneft Russia United States

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Economic Cooperation Prevents Conflict of Interests in the Arctic

New technologies and climate change have significantly raised the profile of Arctic resources for the global economy. According to the Economist, the Arctic is warming twice as fast as the rest of the planet. Many experts quoting Alfred T. Mahan’s work «The Influence of Sea Power Upon History» agree that seaborne commerce in the High North will become an important geopolitical factor over the next several decades. Prospects of political dominance in the Arctic provoke heated debates sometimes overdramatised by the media. But realpolitik dictates that all states concerned should rely on existing legal and institutional framework enabling peaceful cooperation.

Looking beyond the media hype we should admit that political tension in the Arctic is low today. Nevertheless, business competition may create challenges in the future. Luckily the Arcitc Council has already established all necessary mechanisms to deliver credible and balanced regional management. If we want to understand the Arctic better, the situation analysis should cover three important areas: military aspects, legal environment and energy policy.

Speaking about power politics the U.S. military planners currently consider the Arctic to be «an area of low conflict». Swedish experts agree with American conclusions. Background paper «Military Capabilities in the Arctic» (SIPRI, 2012) says, that power projection into the Arctic in 2010-2011 was very limited. The Arctic states maintain military presence in the region only to patrol and protect sovereign territories. There is no sign of military standoff along the borders – the situation is stable and predictable. Therefore any extension of NATO’s engagement in the Arctic is counterproductive, because it could renew tensions nonexistant since the end of the Cold War. As the Russian Foreign Minister Sergey Lavrov put it in 2011, «there is no reason for drawing NATO into Arctic affairs». The Arctic is a zone of peace now and should remain so.

From the legal point of view the status of the Arctic is already specified in the provisions of the international law. The Arctic Council and the Ilulissat Declaration (Greenland, 2008) provide a solid institutional and legal foundation for responsible management of the Arctic by the five coastal states. Under the Ilulissat declaration any demarcation issues in the Arctic should be resolved on a bilateral basis between contesting parties. Besides, all members of the Arctic Council except the U.S. ratified an important treaty – the United Nations Convention on the Law of the Sea (UNCLOS). Norway and Denmark also made an official submission into the UN Commission on the Limits of the Continental Shelf. Russia's final claim to a portion of the Arctic shelf would be filed with the Comission by December 2013, according to Arthur Tchilingarov, the veteran explorer who led the expedition to plant a Russian flag on the seabed at the North Pole in 2007.

As to energy policy the members of the Arctic «five» have preferential rights to tap its resources. It should be noted, that 97% of the discovered and potential reserves of the Arctic are located under the sovereign jurisdiction of the Arctic states. Concerned countries especially China and some members of the EU should consider that there is no «unclaimed» territory in the region. However, third parties can freely apply for a mining claim through bilateral agreements. Most probably the Arctic sweet spots will be developed on the basis of public–private partnership.

The latest example is the $500 billion offshore venture deal between Rosneft and Exxon Mobil. The contract will grant Exxon preference to develop three vast untapped fields in the Russian Arctic Kara Sea, with hydrocarbon reserves estimated at 85 billion barrels of oil equivalent. This high profile business initiative brings hope for productive cooperation, despite all political differences. The common ground, although of purely economic nature, is a fine example of civilized approach to energy policy in the Arctic. We cannot but hope it will set benchmarks for all players in the market – both public and private.