Arctic nations are squaring up to exploit the region’s rich natural resources

The Arctic is on the cusp of extraordinary and irrevocable change as a host of countries move in on its oil, gas, rare metals and fishing resources

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By Mark Rowe

The Arctic is one of the last frontiers still free from full-on exploitation of its resources by humans. For now, everything north of the Arctic Circle, or 66°N, remains, for the most part, a place apart. That picture is quickly changing, however, with glacial melting accelerating and an ice-free summer ocean extending every year. A century ago, whalers talked of ‘harvesting’ the cetaceans that plied the waters of the High North. As the Arctic becomes easier to gain access to, the talk is increasingly of another harvest – of the fossil fuels and minerals that lie beneath the land and the seabed.

So far, environmental concerns have focused on a handful of high-profile incursions, such as proposals to drill in Alaska’s Arctic National Wildlife Refuge. Disturbing as these may be, they are far from the exception: onshore areas in Canada, Russia and Alaska have already been explored for hydrocarbons, resulting in the discovery of more than 400 oil and gas fields north of the Arctic Circle. Some 2.6 million barrels of fossil fuels are pumped out of the Russian and Canadian Arctic each day. Norway, often portrayed as a poster child for forward-thinking green policies, launched a process in January to open up areas on its extended continental shelf to exploration and production of minerals, with plans to issue the first licences as early as 2023. Arctic nations, non-Arctic states and corporations are licking their lips at the prospects for exploitation, which include oil and gas, rare earth metals, fishing, shorter transport routes and even, remarkably, the cultivation of crops. The Arctic appears to be on the cusp of extraordinary and irrevocable change.

‘The Arctic is changing by the minute, with vast geopolitical, human, environmental and developmental consequences,’ says Mathieu Boulègue, a research fellow in Chatham House’s Russia and Eurasia Programme. ‘We know the Arctic is changing, but the speed of climate change is still unknown, so we don’t yet really know how major players in the region will respond.’

Is a new Great Game set to be played out, with major powers scrambling for their ice axes and crampons in a bid to gain early footholds? There are certainly parallels between the end of the Cold War and today’s climate change. ‘During the Cold War, the Arctic was cold in all its guises; literally and also politically, it was a place apart,’ says Caroline Kennedy-Pipe, head of politics and international studies at the University of Loughborough. Since the 1990s, as the Cold War melted away, so has Arctic melting accelerated. ‘What happens in the Arctic doesn’t stay in the Arctic. Just as melting Arctic glaciers lead to sea-level rise in the eastern Mediterranean, so are the emerging geopolitics of the Arctic impacting how the world’s major powers interact with one another.’

The Arctic Circle encompasses about six per cent of the Earth’s surface, an area of more than 21 million square kilometres. Around 40 per cent of this area is land (belonging to various countries) and more than a third is made up of the same countries’ continental shelves, which sit under less than 500 metres of water. The rest of the region is made up of the international waters that lie beyond the 200-nautical-mile limit of the exclusive economic zones of the eight Arctic nation states: Russia, the USA, Canada, Denmark (through Greenland), Sweden, Finland, Norway and Iceland. More water gets exposed each year. In late 2020, according to NASA and the National Snow and Ice Data Center, sea ice cover shrank to 3.74 million square kilometres – 2.48 million square kilometres below the 1981–2010 average and the second-lowest extent since modern record-keeping began during the late 1970s. The startling decrease was linked to a Siberian heatwave in spring 2020 that began the year’s Arctic sea ice melt season unusually early. Last year, Arctic temperatures were 8–10°C warmer than average.

The main Arctic regions linked to oil and gas exploitation are the Beaufort Sea (North Slope, Alaska, and Mackenzie Delta, Canada) and the northwest Russian Arctic (Barents Sea and West Siberia). Oil and gas are also found in the Canadian Arctic Archipelago (Nunavut). According to the US Geological Survey (USGS), up to 90 billion barrels of oil, 1,669 trillion cubic feet of natural gas, and 44 billion barrels of liquid natural gas may remain in the Arctic, around 84 per cent of it in offshore areas. This translates to roughly 22 per cent of the undiscovered, technically recoverable fossil fuel resources in the world. The USGS says that the ‘extensive Arctic continental shelves may constitute the… geographically largest unexplored prospective area for petroleum remaining on Earth’.

For now, however, oil and gas aren’t at the top of the international wishlist. ‘If you want to get oil and gas out of the Arctic, it’s going to cost you a lot – setting up the infrastructure, transporting it,’ says Nima Khorrami, a research associate at the Washington DC-based Arctic Institute. ‘Why do that when there’s still so much available in the Middle East?’ 

Instead, the main drivers of the Arctic resource rush are minerals, in particular rare earth metals such as neodymium, praseodymium, terbium and dysprosium. These minerals are key to the world’s electric-vehicle and renewable-energy revolutions, underpinning battery technology and wind turbines among other things. However, it’s worth noting that lead, iron, nickel, zinc, gold, silver, coal, mica, precious stones and construction minerals such as sand, gravel and crushed rock are also believed to be present in significant quantities.

The estimated value of minerals in Arctic Russia stands at $US1.5–2 trillion. The Geological Survey of Norway concluded that the subsurface of the Kola Peninsula contains a ‘remarkable’ abundance of various minerals. Meanwhile, the Canadian Shield, which extends through eastern and central Canada from the Great Lakes to the Arctic Ocean, features high-grade metamorphic rocks that hold large reserves of copper, gold, lead, molybdenum and uranium. In Greenland, melting ice is exposing mineral belts that are highly likely to contain gold, nickel, platinum-group elements, copper, lead, zinc, molybdenum, diamonds and rare earth elements.

Most of the known resources are located within the boundaries of Arctic nation states, making their ownership and rights to any exploitation politically uncontroversial and beyond challenge. ‘The land masses are pretty much clearly defined among the Arctic Eight and their exclusive economic zones,’ says Boulègue. ‘On land and within their continental shelves, there is no scramble for resources.’ 

Yet the melting Arctic and the remaining space are intensely intertwined with geopolitics. Back in 2007, Russia dispatched a submarine to plant a titanium flag on the seabed four kilometres beneath the North Pole, symbolically staking a claim to more than a million square kilometres of seabed around the pole and the billions of dollars of oil and gas reserves thought to lie therein. Although the act was interpreted as Russia thumbing its nose at the rest of the world, it’s clear that Moscow meant business.

‘Culturally and historically, the Arctic is hugely important to Russia,’ says Kennedy-Pipe. ‘But it’s also important militarily and for security as it provides access to the Atlantic Ocean. Now it also offers an opportunity to harvest oil and gas. Russia sees an ice-free northern sea route as key for transporting coal to India and China, but it also looks at a map and sees that it’s a short distance for a nuclear missile to travel from North America over the Arctic. It will look to defend its Arctic space vigorously.’

Last month, Russia extended its Arctic seabed claim by 703,000 square kilometres, taking it right up against areas also coveted by Greenland and Canada. The focus of this trio is the Lomonosov Ridge, a subsea mountain range that stretches across the North Pole between Russia, Greenland and Canada. If the ridge is proved to be part of a continental shelf, it can be exploited by the owner of that shelf. Under the UN Law of the Sea, access to anything beyond the continental shelf is prohibited, but this may soon change (see Digging in the Deep Blue on page 25).

The niche nature and value of some of these coveted metals adds a further dimension. As with most issues that involve global resources, China is involved. China currently produces and processes about 90 per cent of the world’s rare earth metals. ‘The reason the issue becomes geopolitical,’ says Khorrami, ‘is because everyone in the West is thinking, “Hang on, rare earths are critical, we need to make sure we have access to these resources”.’

In the short term, it seems as though China, a voracious consumer of seafood, is ‘following the fish’, says Boulègue. ‘As waters warm, cod, haddock and other pelagic species will head further north for cooler waters and fishing fleets will follow them.’ Taking a longer-term view of opportunities presented by climate change, China is inexorably ramping up its presence in the Far North. In 2013, it became an observer nation on the Arctic Council, while its 2018 Arctic Policy White Paper described the country as a ‘near-Arctic state’ (even though China’s northernmost points are located 3,000 kilometres from the Arctic Circle) and outlined a ‘Polar Silk Road’ economic plan. For China, regular use of a northern sea route would cut the distance from Shanghai to German ports by 4,600 kilometres compared to the Suez Canal route and the country is building a fleet of hardened-hull cargo ships and ice-capable liquid natural gas carriers.

Currently, China’s approach involves doing what it does best: investing here and there in seemingly disparate but, in reality, deeply connected projects. It has proposed placing both a research station and a satellite ground station in Greenland and has offered to renovate the nation’s airports. It has also built a satellite station in northern Sweden and invested in infrastructure in Svalbard. In 2008, it played a major role in bailing out Iceland’s banks. ‘China is playing a long game, knowing that there’s no need to rush and laying down the first stones of its policy,’ says Boulègue. ‘China sees the Arctic as a global area, open to everybody – which is very different to the view of the Arctic Eight, who see themselves as a well-guarded club. China is looking to slowly change that narrative and perception of the Arctic to one of open access. Supporting projects in Greenland unsettles Denmark as it knows the Chinese price of financial support to Greenland is political. If Greenland were to become fully independent, then China has more influence over its minerals.’

China’s lengthening shadow means that tensions among the Arctic Eight nations are, by and large, on the backburner. ‘What’s holding everything together at the moment among the Arctic is a fear of China,’ says Kennedy-Pipe. ‘China’s long-term rationale for its actions is the exploitation of minerals and oil and gas, and the question is whether there’s a long-term coherent response to that.’

China’s aim is to expose two unanswered questions: who owns the wider Arctic and who should have a say in what happens to it? While national laws govern regulations on dry land, Khorrami believes there’s merit in setting up an overarching framework for offshore areas. There are parallels with cyberspace, he suggests, where a vacuum needs to be filled. ‘The question is, whose rules, norms and values will inform decision making in the region?’ he asks. ‘Do you keep that to the Arctic Eight? Russia has different values to the democratic nations in the region. If you extend it to non-Arctic nations, to the UK or Italy, how do you keep out the Chinese?’ We need some kind of framework for resource diplomacy and to make companies and countries stick to it.’

Given the remoteness of the region, those with the technology to monitor the Arctic may have the greatest influence. Kennedy-Pipe believes that it’s possible that whoever controls the satellites that observe the Arctic from above and which can catalogue areas that are remote and lightly populated, may hold sway. Such satellites allow for the monitoring of illegal activity and offer the chance to sell data on prospective sites of exploitation. The Arctic Council was set up in 1996 to represent the interests of the eight Arctic nations, observer states and indigenous peoples, but the body doesn’t currently have a security component.

If anyone ‘owns’ the Arctic, it could surely be argued, reasonably enough, that it’s the region’s indigenous peoples, including First Nation peoples in Canada and Alaska, the Sami of Scandinavia, the Greenland Inuit and Russian Arctic communities such as the Chukchi and Evenk. Yet, according to Boulègue, ‘indigenous peoples are generally the first ones left behind’. Sweden has acknowledged that it discriminated against the Sami in the past and human rights organisations have criticised both Canada and the USA for their poor provision of healthcare, among other things, to Arctic peoples. Article 69 of the Russian Constitution notionally protects indigenous peoples, but it has been much criticised.

‘They all live in the Arctic and are impacted by climate change,’ says Boulègue. ‘Measures to minimise the impacts on them don’t go as fast as the events themselves. The democratic states in the region have just woken up to the idea that local communities aren’t really keen on an expanded outside presence.’ Greenland is described by Khorrami as ‘the sweetheart’ of the mining industry but, he points out, a recent election saw an indigenous party that has pledged to freeze all new mining licences come to power.

According to Kennedy-Pipe, long-term issues around governance and poor job prospects mean that the exodus of young indigenous people from the Arctic is becoming a major factor. ‘The Arctic is being hollowed out, younger people are moving away,’ she says. ‘The Arctic is a harsh environment, people have better education, there are better-paid jobs in Denmark or Norway. Why wouldn’t you move? The traditional way of life in the Arctic has always been brutal, but it’s becoming even harsher with climate change – melting ice makes it harder to catch seals, melting snow makes reindeer migrations difficult. We like to romanticise the Arctic as a place of hunting and traditional folk but it’s not like that.’ 

A gender imbalance is becoming increasingly apparent, too, says Kennedy-Pipe. ‘Woman are moving away at greater rates. Work in the Arctic is hard and very physical. The jobs that attract people are also those involving heavy lifting and tend to be male-oriented.  The untold story of the diaspora is women moving away, not for fame or fortune but for a better life.’

Yet a warming climate may provide an opportunity to reverse this trend. Khorrami believes that depopulation isn’t a fait accompli: opening up the Arctic doesn’t have to mean allowing resource-hungry companies to dig up the land or seabed and ship it around the world. Instead, he has a vision in which the melting ice facilitates a greener kind of transition, with farming becoming more widespread on previously unfertile land and better communications and infrastructure developed. This could allow a highly educated workforce to emerge from local communities or could attract white-collar workers from other areas. 

‘Everybody talks about sustainable development in the region but nobody puts forward concrete ideas – it doesn’t have to be the case of just creating heavy-industry jobs,’ says Khorrami. ‘You can create hi-tech jobs, but you need the connections, the infrastructure in place. Companies won’t come unless countries put schools, healthcare, broadband in place first. If you plan enough, you attract the right kind of labour. It’s up to us; the Arctic is an opportunity if we invest now. The future can be very bright – this could really benefit humanity.’

Such a vision is, to some extent, a counterbalance to fears about neo-liberalism and unfettered globalisation, yet Kennedy-Pipe wonders if it’s naïve. ‘The question is the darker side of that – the exploitation of local peoples and the environment without safeguards that can be enforced,’ she says. ‘I think this can get horribly messy.’ 

Perhaps the wider challenge is that the issues facing the Arctic are both urgent and long-term. The region won’t be open for business this year or next; the major ‘harvesting’ of minerals and oil and gas is unlikely to really accelerate before 2050, something that explains why the jockeying between the international powers resembles a slow-motion tango that will speed up, but not just yet. 

‘Right now, no-one is having to budge, but it’s a long-term issue,’ says Boulègue. ‘It becomes more of an issue when access becomes mainstream, which won’t really be for 40 years or so. The risk is that we change the lens through which we view the Arctic. Ultimately, it’s not about the threat from NATO or the threat from Russia or China – the biggest threat of all is from climate change.’

On one thing most observers seem to agree: climate change is irrevocable and the only question is the extent to which we can mitigate its impact on the Arctic. ‘The idea of Arctic exceptionalism, that it’s a place apart, no longer applies,’ says Kennedy-Pipe. ‘Sadly, the Arctic is becoming susceptible to the great and medium-sized powers, and commercial interests.’ 

Despite the reality of unfolding climate change, Boulègue is determined to remain optimistic. ‘The pity is that it’s too late to do anything about climate change and the Arctic – it’s going to happen, we should have taken steps 40 years ago. What we can do is manage how that unfolds when it comes to nations looking to exploit its resources. To keep the Arctic exceptional, we have to work at it. I’d like to believe we can continue to manage it in a mature way that’s in the best interests of everyone. I’m still optimistic that we can keep the Arctic as an area of low tension, or we can manage that tension in a non-confrontational way.’