Arctic Geopolitics

Russia continues hostility as climate change melts ice caps

The chilling climate of arctic geopolitics in a time of global warming

June 3rd 2015 | Montana | Christopher Beddow

Photograph by Davide Monteleone

There are signs of climate change in nearly every aspect of our environment today, including the behaviour of the human civilisation.

Melting ice caps in the last 50 years have had a ripple effect on the world. A few decades ago, the media began highlighting concerns about shrinking polar bear habitats as a result of drastic climate change. Yet, in 2007, the hypothetical sea route known as the Northwest Passage was so devoid of ice that it was opened for shipping for the first time in recorded history, allowing a Norwegian cargo ship to successfully navigate the route in 2013 on a voyage from Vancouver to a port in Finland.

With foresight, the Russian government submitted a request to the United Nations in 2001 for permission to stake claim to a large swath of the Arctic. Even though the motion was rejected, Russia began moving submarines and aircraft through the region in a high profile manner. This activity sparked serious worries among other stakeholders in the Arctic, notably the Nordic countries, Denmark with its Greenland territory, and Canada.

Law and the Arctic Council

The Arctic is a rather difficult region to regulate, but is mostly covered by the UN Convention on Law of the Sea 1982 (UNCLOS) and the Arctic Council. Comprised of representatives from eight member states, the Arctic Council primarily addresses environmental concerns and the socioeconomic well-being of local communities in the region. It is made up of The United States, Canada, Russia, Sweden, Norway, Finland, Denmark, and Iceland.

In order to be compliant with the UNCLOS 1982, the territorial boundaries of Arctic Council nations must end 12 miles offshore, whilst their economic zones can extend up to 200 miles. The agreement also gives freedom of navigation through the region to all, an issue which is becoming increasingly relevant as melting ice actually opens up new trade routes for ships to sail through.

Photograph by the World Wild Fund

Commercial traffic through the Arctic has been growing significantly in the past decade, which creates the need for additional government presence in the region in order to provide security and safety. It is predicted to quadruple over the next twenty years as raw materials are shipped out in volume, construction materials are shipped in to support development, and melting ice leads to faster transit times.

The Arctic region is rich in natural resources, a trait that drives competition between nations in the same manner that has been seen throughout all of history. While Canada expects a growing output of minerals from its Arctic territories, much of the Arctic’s potential resources — including one third of the planet’s untapped oil and gas reserves — are not clearly owned by any member of the Arctic Council.

The council itself is intended to act as a barrier against any government establishing hegemony over the region, but increased Russian military presence, combined with Russian aggression in neighboring Ukraine and Georgia in past years, has made other Arctic nations cast a more serious eye on their northern coasts.

International relations

Whereas Iceland was seeking to establish better economic relations with Russia up until recently, it was discouraged by the war in Ukraine and Russia’s takeover of Crimea. This February, Russian bombers skirted along the Icelandic coast, further pushing Iceland into the grudging circle of Nordic nations against Russia.

Finland, a country whose older generation still recalls Russian and Soviet incursions during the first half of the 20th Century, is now questioning its security in the wake of recent events. This includes Russian military targeting Finnish research vessels in international waters, as well as repeated violations of Finnish airspace.

Likewise, Sweden is also growing wary of Russian activity, as seen by their efforts in pursuing a suspected Russian submarine that entered Swedish waters in the fall of 2014. Unlike other Nordic countries, neither Finland nor Sweden are members of NATO, but both recognise a need for increased security cooperation with their neighbors.

Norway made a show of strength its own response to Russia. Conducting an exercise called Joint Viking in the far northern Finnmark province, the Norway fielded more than 5,000 troops for the operation, making it the largest Norwegian military exercise since the Cold War. As a result, Russian navy was placed on high alert in the Arctic region, especially in areas bordering Norway and Finland.

Photograph by Reuters

Ironically, Norway and Iceland had both been warming their relationships with Russia in recent years. For Norway, this involved dismissing the notion that Russia is a threat to global security as it had been in the past, as well as a decommissioned Norwegian submarine base being rented to the Russian government.

On the other hand, Iceland had recently signed several agreements for economic and social cooperation, including the establishment of a joint center for collaborative development of geothermal energy. Now, it may be rolling back its willingness to work with Russia as it resumes a role similar to that of the Cold War years — when Iceland was the centre point of the Greenland-Iceland-UK gap (GIUK) that was patrolled to prevent Russian incursion into the North Atlantic.

The physical changes occurring in the Arctic are heralding a parallel transformation of economic, political, and social relationships in the region. This grand shaft, deemed the “respatialisation” of the north, is making the Arctic region less of a periphery and instead more of a functional, critical part of geopolitics. Whilst governments, private industry, and local communities in the north may experience increased prosperity as a result of melting ice caps, they will also require environmental stewardship to mitigate the risk of accidents and damages.

Russian commercial harbors along the country’s 10,000 mile coastline are being modernised, but investment in Russian military is also growing. Meanwhile, Canadian air patrols in the north have increased, and American military presence in Alaska continues to be marked by advanced missile testing ranges and regular deployment of paratroopers in frigid Arctic training grounds.

A cold future?

Despite the economic promise of the Arctic, it truly appears to be a case of geopolitical tension for the time being. The state of affairs is not one where Arctic Council members are collaborating for positive developments in the Arctic, but rather one where Russia has indicated its intentions to seek singular benefit and compete sternly against other Arctic stakeholders.

The gravity of the situation was further sealed last month by the emergence of a new Nordic defence agreement which calls for increased security cooperation against Russia in the far north. As in many other regions, it is now becoming clear that the key threat to peaceful economic cooperation in the Arctic is a solid alliance against Russian aggression.

As the northern landscape continues to morph into something navigable and inhabitable, geopolitics may dive in the opposite direction and leave an increasing amount of anxiety and hostility amid the chilling Arctic waters.

Keystone XL Pipeline

Obama vetoes Republican oil bill

Canada’s economic future and the Dutch Disease theory

February 26th 2015 | New York | Alex Shapiro

Photograph by BBC

President Obama made true his promise to congress that he would veto the Keystone XL Pipeline bill should it come across his desk. The president stated that “through this bill, the United States Congress attempts to circumvent longstanding and proven processes for determining whether or not building and operating a cross-border pipeline serves the national interest”.

Elizabeth Warren, Senator of Massachusetts for the Democrats, questioned why the Keystone bill was the number one priority on the agenda for the new 2015 GOP congress and which interests were really being served. Based on research done by Politico and by Burdett Loomis, a political scientist at the University of Kansas, Warren argued that the Keystone XL Pipeline bill was simply a “lobbyist support act”. In other words, it would disenfranchise anyone who is not connected to an oil plutocrat. “It just won’t do much to help the American people,” said Warren, “but it is worth a whole lot to the Canadian oil industry.” As a matter of fact, TransCanada has spent more than $7 million dollars in lobbying expenses alone related to the Keystone since 2009.

Obama’s concern that the pipeline would not serve the national interest is right on the money. The bill would have allowed TransCanada Corp. to deliver its product through the Keystone XL Pipeline to the Gulf of Mexico, which is a tax-exempt area. The oil would then most likely be exported overseas, not benefitting America’s energy costs or contributing directly to American cleanup funds.

What about Canada?

As Tom Mulcair, Leader of the New Democratic Party of Canada puts it, “the Canadian dollar is being held artificially higher [by the demand for oil], which is fine if you’re going to Walt Disney World, not so good if you want to sell your manufacturing product.” This problem of an inflated currency is a symptom of a larger problem in economics called the Dutch Disease.

Economists coined the term in the 70s to describe how the Netherlands ruined their manufacturing sector in the late 50s by heavily exporting natural gas. In such scenarios, a booming natural resource sector drives up the exchange rate, thus making it more difficult for other countries to afford the relative cost of their exported products. The manufacturing and agricultural sectors, in essence, are hollowed out by the pull of the resource boom, and, in turn, the economy’s driving force ends up being a basket with too many eggs. Canada’s economy is not diversified enough, which means it may struggle to be competitive in world markets once it can no longer rely on oil exports.

Currently, there is a pipe factory in Camrose, Canada, which sits right across the street from the pipes installed for the Keystone XL pipeline. Yet, those pipes were made in China. Gil McGowan, president of Alberta Federation of Labour indicated that “Canada’s own manufacturing sector cannot compete to support it’s own industry”, and that they now have “18,500 fewer manufacturing jobs, here in Alberta […] than we did 10 years ago”. 

When a nation mostly exports oil and relies on imports for manufacturing and agriculture, it is essentially exporting jobs. For that matter, Canada will lose much more in manufacturing and other sectors than it could gain in the oil sands. Simply put, a shift in Canada’s economy to the extraction of non-renewable resources is not sustainable in the long-term.

The other side of the story

Despite its apparent downsides, Republicans have repeatedly argued that the Keystone XL Pipeline project would create thousands of American jobs in the energy and construction sectors – boosting opportunity for growth in coming years.

With regards to the Dutch Disease, Dylan Jones, President and CEO of Canada West Foundation, did make some interesting counter-arguments. He pointed out that although the Canadian manufacturing sector “dropped 23%”, from 2002 to 2011, the exact same thing happened in the United States, a country that is not a key petroleum exporter. He argues that the manufacturing in both countries has been reduced not because of the oil industry, but because of “low cost competition from China, Vietnam, Indonesia, and other countries” and  “lower global demand in the developed world for stuff, caused by financial and economic crises and an aging population”.

The National Post also drew attention to this by saying that the bulk of Canada’s currency gains were made in 2007 when it shot up 27% against America’s dollar, but it only made up about half of that against the Euro. This was against the backdrop of America’s biggest financial disaster since the great depression. The Institute of Research and Public Policy in Canada realizes this, but still concedes that there was a real output problem in the textiles and leather products industries in central Canada, and that the transportation and food sectors experienced a smaller effect of Dutch Disease.

Looking forward

The Keystone XL Pipeline consigns Canadians to an industry here today, gone tomorrow. This is a palliative for a larger problem: we are all energy junkies.

On January 19th, 2015, the Bridger Pipeline Co. spilled up to 50,000 gallons of oil into the Yellowstone River. Although more will need to be investigated, this is clear proof that environmental disasters are always a possibility, and they will happen time and time again. Regarding the Keystone Pipeline: water pollution, carbon emissions, potential oil spills, and site remediation issues are still substantial concerns which remain to be concluded. As President Obama put forth, the bill “cuts short thorough consideration of issues that could bear on [America’s] national interest – including our security, safety, and environment”. 

The world, not just North America, needs to invest in clean, safe, and renewable energy. We need energy that does not pollute or distract from the vitality of the economy. Naturally, this cannot happen overnight, but it definitely will not start with a pipeline from Canada either.