Arctic Politics

(from Lloyd’s Report 2012: Arctic Opening – Opportunity and Risk in the High North)

The Arctic is, in general terms, a stable region with considerable mutual trust between states. The Arctic Council – comprising the eight Arctic states, permanent participants and observers – represents the key role of dialogue in Arctic governance politics (xxxi). Nevertheless, there is naturally a range of potential stress points within and between the eight Arctic states, and between these states and non-Arctic states. A number of potential shifts are in sight within Arctic geopolitics – from the possible independence of Greenland, to the increasing involvement of non-Arctic states such as China in Arctic politics, and the risks of misunderstanding arising from a build-up of Arctic states’ military hardware. However, while any of these factors could affect Arctic politics, and all need to be managed, none of them are likely to fundamentally change the co-operative nature of Arctic politics and governance. The key question, therefore, is the extent of co-operation rather than the possibility of outright conflict.

Who owns what? Who controls what?

Ownership of the Arctic is principally determined by ownership of land in the Arctic, by scientific data, by the international law of the sea and by the domestic law of Arctic states¹ .

Most parts of the land of the Arctic are beyond dispute – Hans Island is the only area of minor dispute between Canada and Denmark.

All Arctic states, except the United States, have ratified the UN Convention on the Law of the Sea (UNCLOS) which establishes the global framework of rules for rights and responsibilities on the world’s oceans, including determining how far states can claim sovereign rights over resource-rich areas (xxxii). In May 2008 five coastal states – Canada, Denmark (Greenland), Norway, Russia and the United States – re-committed themselves to the framework of the law of the sea and to the orderly settlement of overlapping claims (xxxiii).

Under the law of the sea, all states exercise an exclusive economic zone (EEZ) 200 nautical miles (370 kilometres) from their coastline, giving them economic rights over the water and seabed resources up to that point. Most potential offshore oil and gas developments are well within this limit. Although land borders are not disputed, adjacent states may disagree over their maritime borders. Canada and the US disagree over their maritime border in a potentially hydrocarbon-rich area of the Beaufort Sea. Norway and Russia agreed a new maritime border in the eastern Barents Sea in 2010 after 40 years of dispute, opening the way to oil and gas exploration.

Beyond the EEZ, in the Arctic as elsewhere, states may have ownership over the economic resources of the seabed – the extended continental shelf – up to 350 nautical miles (650 kilometres). Beyond these areas of the seabed, other provisions of the law of the sea determine the conditions under which resources could be developed, were they to be discovered² .

Establishing ownership over the extended continental shelf depends on a range of geological and geomorphological factors, often requiring expensive and large-scale data collection. The Commission on the Limits of the Continental Shelf (CLCS) provides recommendations to states which provide submissions to the CLCS. Some states have cooperated bilaterally in data collection for UNCLOS submissions, both to share the cost of research and to increase mutual trust. It is possible for states to make joint submissions.

States have ten years to make submissions to the CLCS from ratification of UNCLOS. Russia provided a submission in 2001 and was told to supply more data to establish its case. This is expected to happen in 2012. Norway submitted data in 2006 and received recommendations in 2009. Canada and Denmark have until 2013 and 2014 respectively to make submissions. The United States is not able to make a submission, but maintains that UNCLOS recognises rights rather than establishes them, and is active in collecting data.

There is potential for other states to challenge Arctic states’ submissions and for the areas they cover to overlap at their outer edges. If this happens, states will have to negotiate between themselves, with the CLCS potentially playing an advisory – but not binding – role. While it is conceivable that a state might fail to agree with a CLCS recommendation, the political costs of doing so would be high in terms of breaking with the prevailing legal arrangements of the Arctic. Either way, the CLCS has a considerable backlog of submissions, meaning that full legal clarity in the near term may require co-operative submissions.

There are some other areas of disagreement. Norway asserts that the Svalbard Treaty does not apply to Svalbard’s potentially mineral-rich continental shelf. Others disagree. Norway has invited them to seek a ruling of the International Court of Justice. Russia and Norway have long disputed fishing rights around Svalbard. An official Russian government strategy on the Russian presence on Svalbard up to 2020 is expected shortly.

Canada’s position on the legal status of the North West Passage – that it comprises internal Canadian waters – is disputed by the United States and others. The United Kingdom views the Northwest Passage and the Russian Northern Sea Route as international waters. The legal rights of coastal states to regulate shipping in ice-covered waters under UNCLOS may be challenged because of climate change, as specific UNCLOS provisions applying to ice-covered waters may be considered no longer applicable.

But sovereignty and ownership are only one aspect of legal issues in the Arctic. Equally salient may be the establishment of international regulations and guidelines, such as through the International Maritime Organisation. In most parts of the Arctic – and particularly onshore – it is domestic regulation and domestic legal challenges rather than uncertainties over the international legal position that are likely to affect economic development and investment.

The geopolitics of Arctic energy

Arctic oil and gas resources are highly politicised. Within most Arctic countries, oil and gas development is politically controversial on environmental grounds and can have a significant influence on the political dynamics between central and local governments. Over time, the integration of the Arctic economy into the global economy – principally through energy and transport – will further increase its geopolitical relevance.

In the US, the opening of further areas of the US Arctic to exploration and, ultimately, development has strong support within Alaska, but limited support elsewhere (xxxiv). In Canada, Arctic energy and mining projects play into complex federal politics and the domestic politics of indigenous peoples across the north. In Greenland, exploration for offshore hydrocarbons is widely accepted as a pathway to greater economic prosperity and a guarantee of self-government. In Russia, maintaining oil production and increasing production of natural gas is a strategic imperative. In Norway, government and public support for development is contingent on strong environmental regulation.

There is a key geopolitical dimension to Arctic oil and gas developments, involving states’ power, stability and influence. This is particularly true of Russia, where hydrocarbons represent 40% of export earnings and the state budget depends on taxes and royalties from hydrocarbon production. Russia’s gas exports are a major feature of its geopolitical role in Europe, while expanding oil and gas exports to China has become an important policy objective for the Russian government. Nonetheless, development of the Russian oil and gas sector in the Arctic – particularly offshore – depends to some extent on the participation of Western oil and gas firms with the technology and management skills to develop them.

The development of Norwegian gas production, and the potential for export via existing pipeline networks to which the United Kingdom is connected, may reduce European dependence on other sources of gas. In November 2011 British company Centrica signed a 10-year, £13bn ($20bn) supply deal for natural gas from Norway, following a wider UK–Norway Memorandum of Understanding on energy³ .

Increased oil and gas production in Arctic North America is often presented as a way of improving US ‘energy security’, though export prospects to Asia may ultimately trump home markets. Investments across the Arctic are increasingly international – with interest from Indian, Chinese and South Korean companies.

Arctic governance

Arctic governance is multi-layered. Responsibility for governing the Arctic lies principally with the eight sovereign Arctic states operating through their domestic administrative and legal systems and, where they chose to, through bilateral arrangements and international treaties, such as the 2011 Arctic Search and Rescue Agreement. All the Arctic states, however, have other affiliations and roles within the international system – in NATO, the European Union or the UN Security Council – which affect their perspectives on Arctic governance and their ability to shape it.

International agreements – for example on biodiversity, or on certain pollutants – also apply to the Arctic. There are a number of other governance bodies involved in creating rules and regulations for Arctic activity, the most prominent of which is the International Maritime Organisation.

However, the essential organisation in Arctic governance frameworks is the Arctic Council, a forum for coordination and co-operation between the Arctic states on a range of issues, excluding security, but including environmental monitoring and the creation of common standards for shipping and oil and gas development. The eight Arctic states are all equal members of the Arctic Council. The Council also includes a number of non-voting permanent participants. Most of these are indigenous groups and some are highly influential in the domestic politics of Arctic states. There are also a number of permanent observers, including France, Germany and the United Kingdom.

In 2008, it appeared that a separate caucus group was emerging within the Arctic Council, comprising the five Arctic coastal states – Canada, Denmark (Greenland), Norway, Russia and the United States or collectively the A-5 – but excluding Iceland and the non-coastal states (xxxv).

Perhaps more significantly in the long term, the Arctic Council is currently discussing the application of criteria for the status of permanent observers. These criteria were established in 2011 following disagreements between Arctic states as to how to approach applications from non- Arctic states – including the European Union and China – for permanent observer status. A final decision on these states should be taken in spring 2013.

Figure 15: The Arctic politics matrix  

Footnotes: 

(xxxi) Other Arctic forums include the Barents Euro-Arctic Council and the Nordic Council.

(xxxii) The United States views UNCLOS as representing international customary law.

(xxxiii) Iceland and the non-coastal states (Sweden and Finland) were not present, leading to suggestions that the Arctic Council was being circumvented in favour of a new grouping: the A-5.

(xxxiv) The development of domestic energy supply is a major political issue in the United States, and was a motivating force behind the permitting of the Trans-Alaska Pipeline in the 1970s. Support for drilling in offshore Alaska – and in sensitive onshore areas such as the Arctic National Wildlife Reserve (ANWR) – is greater in Alaska for a number of reasons; jobs associated with the oil and gas industry, state revenues, and because all residents receive an annual dividend payment from the Alaska Permanent Fund, in to which a share of oil revenues have historically been diverted.

(xxxv) This exclusion provoked some concern amongst other Arctic Council member states. In 2010, the United States, itself a member of the A-5, publicly criticised the A-5 format at a second meeting held in Canada. Nonetheless, the possibility of future A-5 meetings has been left open by several Arctic states.

Charles Emmerson, Glada Lahn, 2012, Arctic Politics, Lloyd’s.©