Moisés Naím / World Energy & Oil

Melting sea ice in the Arctic is changing not only the geographical landscape of the circumpolar region; it is transforming the political environment, as well as global dialogue and policy-making. The abundance of oil, gas, and mineral wealth, along with wind, tidal, and geothermal energies, have converted the Arctic into a fiercely debated topic – and a highly contested region.

There are four main forces which have changed how we need to think about the Arctic: climate change; a fresh global yearning for resources; the emergence of new and influential actors; and new technologies.

CLIMATE CHANGE
For several decades, changes in the climate have led to huge disruptions in the Arctic environment, as rising temperatures, retreating sea ice, melting glaciers, and thawing permafrost have drastically transformed the terrain. The implications of climate change have led governments and businesses to pay more attention to the potential benefits from Arctic transport, tourism, fishing, and to the exploitation of its vast reservoirs of natural resources. Scientists, multilateral organizations, and activists are also increasingly present in the Arctic.

Even though the region will not be completely ice-free and navigable year-round, the months in which it becomes passable will clearly have an impact on the shipping industry. Opening waters may lead to the development of major new shipping routes, shortening the distance, travel time, and costs of intercontinental transportation. Moreover, the melting ice will also open new opportunities for “polar tourism,” as exploration and sightseeing will flourish.

The trend, then, is for climate change to make the region more accessible, bolstering the attraction to the Arctic’s wealth of oil, gas, and mineral supplies. Inevitably, all of this poses enormous risks as well. The most immediate is the danger these new activities pose to those who currently inhabit this region, particularly indigenous groups such as the Inuit. With the emergence of an Arctic economy, a corresponding prevalence of new diseases and epidemics has surfaced. For instance, according to a 2011 report published by the University of the Arctic’s Institute for Applied CircumpolarPolicy, the rise in tick-borne diseases, tularemia, and contaminants like mercury, as well as exposure of animal burial grounds (and potentially anthrax) may create a dangerous public health situation.

But an Arctic region altered by climate change and human activity poses risks for others beyond the indigenous inhabitants. Changes there will not stay there: they will affect the rest of the planet. The effects of receding coastlines and melting ice are already having a global impact. It is safe to assume that other unintended consequences of changes in the polar habitat will also be felt in the future.

The Arctic has never been a static environment, but in the past two decades its changes have become more complex, varied, and rapid. And in the decades ahead, the Arctic will change more than it has in previous centuries. The consequences of these changes will be both promising and dire.

A NEW FRONTIER FOR OIL, GAS AND MINERALS
The Arctic is endowed with a lavish supply of valuable natural resources including petroleum, minerals, fish, and even forests. In 2008, the U.S. Geological Survey released a report estimating that the undiscovered oil north of the Arctic Circle could amount to as much as one-third of the entire world’s reserves. Gas reserves in that same area could reach 12 percent of the world’s total. Most Arctic petroleum production is taking place in Alaska and Northern Russia. The mineral wealth concentrated in this region includes the world’s most abundant fossil fuel, coal, as well as iron ore, nickel, cobalt, titanium, bauxite, zinc, lead, copper, gold, silver, platinum, and diamonds. Fish stocks in the Arctic include shrimp, snow crab, cod, herring, and sardines; salmon and trout are also farmed there.

Although most of the Arctic resembles a polar desert, low shrub vegetation is evident. The boreal forest, though uncultivated, is the largest natural forest on earth. While wood removal and harvesting does occur, stringent environmental regulations have, so far, limited their exploitation.

All of these valuable commodities are attractive not only to countries with claims to the region, but also to potential investors from non-Arctic nations. For instance, Russia may allow western companies to own oil licenses in its Arctic waters, which might make Russia the world’s second largest crude producer.

In 2012, ArcelorMittal, the world’s largest steel company, was authorized to begin a multi-billion dollar project to develop the first iron-ore mine on Baffin Island—a Canadian territory in the Arctic. Due to the extremely harsh conditions, this is the first and largest mining development in the frigid Arctic.

While the Arctic is the repository of immense reserves of natural, mineral, and hydrocarbon resources, the complexities of converting this potential into a reality are enormous. Difficult environmental, technological, political, and institutional questions about how to operate in the Arctic remain unanswered.

NEW ACTORS
Governing the arctic is a complicated matter. Start with the fact that the main body charged with coordinating the many different nations, peoples and organizations with claims in the Arctic is overwhelmed by an exploding demand for action and a more limited capacity to deliver what its diverse constituents want.

The Arctic Council is formed by the eight countries with territorial sovereignty over parts of the region, plus organizations of indigenous peoples, as well as intergovernmental and non-governmental organizations. The member countries of the Council – Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the United States – are not, however, the only nations actively involved in the Arctic. Geopolitical ambitions are emerging from non-member states, including the European Union, Japan, South Korea, and China.

A potential resource boom in the Arctic would be especially attractive to the emerging economies of China and India, whose hunger for energy is well known. In August 2012, for example, China proclaimed itself a “near-Arctic state.” The Asian giant’s attempts to secure access to resources in the Arctic are driving its expanded diplomatic relations with the member nations of the Arctic Council, focusing on this matter. It has also inked lucrative agreements involving geothermal energy with Iceland and Greenland. The Arctic Council has itself changed substantially since its official inception in 1996, increasingly assuming new roles such as negotiating agreements for oil spill remediation and conducting studies on shipping and climate change.

It is important to note that countries are not the only actors proliferating within the circle of Arctic policy. Multinational companies – the United States’ Exxon, Italy’s ENI, Norway’s Statoil, and Russia’s Rosneft and Gazprom – are actively engaged in the region, exploring for hydrocarbons. The maritime industry (shipping companies, offshore drilling companies, cruise lines, the fishing industry, and oil spill response organizations) is gaining more influence, as are marine insurers. New groups of scientists from all over the world, as well as non-governmental organizations, are also multiplying. How to govern and organize all this booming activity in such a fragile and fast-changing environment? Currently, the main locus of the policy debate remains in the Arctic Council and its members.

With several initiatives that deal with issues ranging from conserving Arctic flora and fauna and protecting the marine environment, to assessing Arctic biodiversity, climate change, and human development, the eight Arctic nations are working with other nations (including permanent and ad-hoc observer states), NGOs, multinationals, intergovernmental bodies, and indigenous peoples to protect the region from harmful exploitation and mismanagement. As technologies advance and resource extraction becomes more viable, the political and economic ambitions of all these actors will influence the direction of diplomacy and negotiations.

How these dynamics will shape global politics is still uncertain, as the Arctic Council is still finding its way on how to best respond to the growing number of responsibilities and challenges it faces. The demands on the Arctic Council are growing faster than its capacity to adequately respond to them.

NEW TECHNOLOGIES
The expanded possibilities to operate in the Arctic and seek its treasures have also been driven by an explosion of technological innovation. New technologies are opening new opportunities, but also creating new problems for the Arctic. Remotelyoperated vehicles equipped with high-definition cameras have allowed scientists to collect samples and identify several creatures never seen before. More sophisticated icecoring techniques, in which cylinders of ice are drilled out of glaciers and ice sheets, also provide scientists with fresh opportunities to learn about sea ice algae as well as pollutants and dust, allowing them to gain a deeper understanding of the Arctic food chain and biological systems. New technologies, including drill ships for year-round operation, are being tested.

All of these advances, however, also have shortcomings. In December 2012, for instance, a drill ship used by Shell Oil was under investigation by the U.S. Coast Guard for problems related to pollution control equipment and crew safety. The drill ship, Noble Discoverer, is just one example of how even the most advanced equipment can have potentially devastating imperfections. Even mechanical problems, which may not necessarily harm the environment, may make search and rescue efforts problematic, by placing rescue squads in harm’s way. Because of the Arctic’s pristine nature, countries with an interest in exploration are especially selective in their choice of the corporations allowed to operate in the region; only the most environmentally sensible, technologically advanced, and financially robust companies are suited to pursue endeavors in the Arctic. Corporations engaging in natural resource exploration there use a variety of state-of-the-art technologies and techniques, such as drilling rigs, marine streamers, and inspection devices. “The Arctic Marine Shipping Assessment” published in 2009 by the Arctic Council outlined several of the challenges faced by navigators, as well as potential solutions. Navigation devices with accurate and timely information, icebreakers, deep-water ports, search and rescue squads and equipment, and resources to respond to emergencies are still in their infancy. The Automated Identification System (AIS) transmitter, which electronically identifies, locates, and prevents the collision of vessels, has advanced the evolution of Arctic expedition, although it is not yet mandatory for all vessels. Nonetheless, the continued development of high-tech devices, equipment, ports, and vessels will expand the realm of Arctic exploration.

TWO EXTREME SCENARIOS
The economic and strategic implications of ice-free Arctic seas are growing in importance as climate change reconstructs the region and the opportunities it presents. One feature is irrefutable: the Arctic, always fragile, has now become even more vulnerable.

Formerly inaccessible to and isolated from the rest of the world, the wildlife, indigenous people, and landscape are now more at risk. The Arctic is exposed to governments, businesses, and institutions previously indifferent to the region – all of whom must be mindful of the implications of their activities there. The new frontier of the Arctic is only beginning to shift; limiting the costs and damages associated with industrial development, climate change, pollution, natural resource extraction, and disturbance to the precious ecosystem must be prioritized and monitored with great attention.

The Arctic can evolve in two vastly different scenarios. In one – let’s call it the predatory future of the Arctic – the region and the environment are polluted, decayed, and overexploited, and each actor is able to pursue its own interests more or less autonomously and without coordination with others. Individual governments assume total sovereignty in their endeavors to explore and exploit the Arctic, and thus weak or no overall governance of the region is the norm. The outcome is an Arctic where anarchy reigns. In the other extreme scenario – global governance at its best – we find that governments find a way to agree on an effective and shared governance of the region. They are capable of coordinating their actions, agreeing on rules applicable to all the different actors, and mustering the will and the ability to enforce these rules. This leads to an Arctic governing arrangement that is both sustainable and harmonious. In this scenario, multilateral governance has successfully led to the orderly development and effective collective decisionmaking in the Arctic. Clearly, the utopian nature of the latter scenario would benefit humanity the greatest. These two extreme scenarios are unlikely to unfold, but depicting these two options brings to mind the limitations, benefits, and drawbacks of effective collaboration as well as the consequences of institutional anarchy. In reality, the most likely scenario is that the Arctic will be wedged somewhere in between these two extremes. In order to achieve a more sustainable Arctic, responsible and shared governance must create incentives, regulatory measures, and institutions that will be capable of maintaining peaceful relations at the international level without pushing the region into the path of over exploitation and even destruction.

The Arctic wilderness is the perfect evolving, modern day example of the tragedy of the commons – the concept that highlights how a resource available to all is prone to be abused and eventually destroyed. It encompasses all textbook examples including pollution, depletion of fish stock, loss of habitat – the list goes on. Countries must act rationally, but most importantly, they must act responsibly in their political and economic endeavors in the Arctic to ensure its environment and resources are not needlessly sacrificed.

What happens in the Arctic in the next decade will have consequences for us all.