The Arctic has been the source of geopolitical conflict and territorial disputes for centuries. From walrus ivory and seal skins starting in the middle ages to coal, oil, and gas today, the Arctic is a veritable treasure trove of resources. But it’s also one of the most fragile and most vital ecosystems on Earth.
First founded in 1996, the Arctic Council is comprised of eight nations: Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the United States. While these members represent a huge range of interests, priorities and concerns -- many of which conflict -- all Arctic nations are concerned with sovereignty and security, resources and development, shipping routes, and environmental conservation. Those oft conflicting priorities, however, are coming to a head against the backdrop of global warming.
Just last month, the United Nations and the Intergovernmental Panel on Climate Change (IPCC) sounded a “code red for humanity” and announced that we have reached a point of no return for climate change, having already irreversibly altered the climate due to human pursuits. What’s more, the Arctic, which contains shrinking ice caps which are essential to regulating the Earth’s temperature and reflecting sunlight, is heating up faster than any other place on Earth.
As the ice caps melt, new shipping routes are opening up in icy northern waters, and some nations and industries are taking these newly navigable seas as an invitation to scale up oil and gas exploration in the region that is disappearing thanks to those very same fossil fuel sectors. “Tragically, the Arctic is estimated to include 13% of the Earth’s oil reserves and a quarter of its untapped gas reserves,” Barron’s reported this week. “The untapped reserves in the Russian region alone have an estimated value of $35 trillion. Little wonder, President Putin is offering $300 billion of incentives for new projects.”
Putin’s increased activity in the Arctic has raised the hackles of other Arctic Council nations, and in the past U.S. officials have accused the Kremlin of militarizing the region. Russia isn’t the only nation poised and ready to expand its political and industrial presence in the Arctic, however. China, too, has made moves to open up a “polar silk road” between Asia and the West.
Currently, hundreds of ships are crowded around the Arctic Coast near Russia’s Gydan Peninsula in order to deliver construction materials for new oil and gas extraction operations. While other nations have begun to move away from fossil fuels and diversify their energy economies in the face of climate change and the global green energy transition, Russia seems dead-set on selling the world’s very last barrel of oil before it will even consider decarbonization.
This plan is controversial to say the least. The imperative to protect Arctic ecosystems may cause nations like Denmark and Norway to come to blows with Russia according to Barron’s. But that would only be likely in the case of an extreme acceleration of Arctic fossil fuel extraction. For now, it’s unclear whether Arctic exploration will even be financially viable. Global oil prices are relatively low and they will surely get lower as the global economy moves further away from emissions-heavy fuel sources. What’s more, the giants of the banking industry have been steadily divesting from Arctic oil and gas projects over environmental concerns for years now.
Tensions in the Arctic may fizzle out on their own as demand for oil and gas tapers off. But if not, the region could be a geopolitical powderkeg. And the nations who could light the fuse, namely Russia and China, are not necessarily known for their diplomatic restraint.
By Haley Zaremba for Oilprice.com
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