World Review | Arctic nations push economic development up the agenda

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Arctic nations push economic development up the agenda

Arctic nations push economic development up the agenda
Summer 2013 and tourists cut through the Arctic ice (photo:dpa)

THE Arctic is an area of vast undeveloped wilderness. But that could be about the change as the eight nations which have territory in the region assess how they can overcome the challenges of inhospitable territory to enable them to tap into its massive resources of oil, gas and minerals.

Economic development, which looks like being a reality in the not too distant future, will almost certainly take precedence over the environmental lobby which believes development will disturb the ecosystem for indigenous people and wildlife.

Maths and geography are the reasons behind the increasing interest in the Arctic. It contains one-sixth of the world's land mass and is the crossroads of territory for eight Arctic nations: Russia, Canada, the US, Norway, Finland, Sweden, Denmark and Iceland, as well as Greenland, which is likely to become an independent nation within the next decade. The region also includes waters to which all commercial shipping has the right of passage.

The issue is not ‘if’ there will be an increased human presence, but when, how much, and how development will evolve. Some trends have already started to emerge.

No single country has sufficient public resources to develop the infrastructure needed to make Arctic conditions suitable and profitable for trade, mining, and oil and gas extraction. The size of the challenge for developers and the need for integrated markets will mean that countries will need to work together.

Private investment is going to be crucial to the development of polar commerce. Development of the Arctic will require integrated transnational economic activity.

The need for cooperation and partnerships means that Arctic nations have every incentive not to establish policies rooted in military dominance or confrontation. But while activity in the region is unlikely to become militarised, a build-up of military capacity is inevitable for search and rescue, environmental disaster response, protection of fisheries and ensuring air and maritime sovereignty.

The Arctic's future is unlikely to be shaped by the global climate change agenda. Advocates for polar activities often discuss the need to deal with climate change and attempts to minimise the impact of commercial activity on the fragile Arctic environment in the same sentence, but the reality is that the issues are at odds with one another.

In the past, those advocating more human activity in the Arctic and those advocating placing a priority on climate change and environmental protection could accommodate one another because development in the polar region was growing at a modest pace.

However, the scale and speed of economic activity in the Arctic could accelerate rapidly in the near term. Global consensus on a climate change agenda, on the other hand, is not gaining momentum.

The consequences of three economic factors are likely to be the most powerful determinants of the Arctic's future.

One is integration of activities such as mining, shipping, and oil and gas exploration. Longer timelines for the development of Arctic commercial activities are linear projections of current economic activities.

For example, most estimates of trans-polar shipping predict it will be 25-30 years before Arctic sea lanes become major, significant transcontinental commercial shipping routes.

Others dispute that. They argue that if other economic activity in the region grows, there would be a synergistic impact on commercial shipping. Greenland, for example, is poised to approve mining of uranium. A rapid expansion of mining activities in Greenland would stimulate other development.

The second factor is investment. Large private sector capital will be required to build the infrastructure necessary to support the increased activity. Nations are scrambling for investors.

The more favoured model seems to be to encourage business-to-business partnerships under the umbrella of public-private cooperation, which could all give due deference to environmental and local concerns, such as involving indigenous peoples in development planning.

The third factor is competition. There are a number of potential transcontinental shipment routes in the near future: the Northern Sea Route, the Northwest Passage, and the Arctic Bridge.

All three routes are feasible for development. But rather than one eclipsing the others, it is far more likely that economic activity will result in the development of all three. Competition will spur more development and infrastructure construction, fostering innovation and lowering costs.

Dr James Jay Carafano

James Jay Carafano, a leading expert in America’s national security and foreign policy challenges, is the Washington-based Heritage Foundation’s vice president for foreign and defence policy ...

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