The Arctic race

Foreign investors may benefit from the melting of the last virgin territories, from Greenland to the Arctic Sea

The city of Svolvaer on the Lofoten archipelago in Nordland County in Northern Norway. The Northern Norway GDP grew by almost 1% more than the rest of the country between 2008 and 2013. REUTERS/Alister Doyle

Foreign investors may benefit from the melting of the last virgin territories, from Greenland to the Arctic Sea

The Arctic is a paradox. One of the least inhabited areas of the planet (the circumpolar population hardly tops the 13 million mark), it nevertheless boasts vast natural resources. It’s remote, but surrounded by the world’s largest economies. And today it’s even sparking curiosity among countries which, from a merely geographic point of view, have nothing to do with it: this has meant that the Arctic Council in recent years has added Spain, China, India, Italy, Japan, South Korea, Singapore and lastly Switzerland to its list of members.

Thanks to global warming, the area is now (relatively) more accessible. But climate change aside, what has had the most impact on the renewed relevance of the Arctic is the Asian economic development. «As commodity chains expand to encompass more of the planet, not only do you have more resource extraction in the Arctic, but you also have more infrastructure development happening in the region too – often to support further extraction or nowadays, increasingly, transportation shortcuts like the Northern Sea Route» says Mia Bennet, assistant professor in geography at the University of Hong Kong, referring to the commercial route that runs along the Russian Arctic coast, from the Bering Straits  to the Sea of Kara.

Another opportunity for development, which has the advantage of being much more environmentally sustainable, is the so called blue economy. An example is provided by Max McGrath-Horn, founding partner of Arctic Tern Consulting, who explains that, «fisheries are moving north rapidly. The main lobsters fisheries are already moving to Greenland. So Greenland could potentially be a major beneficiary [of this shift] of fisheries moving north». The phenomenon could also involve the coasts of Iceland, Canada, Russia the USA and especially Norway.

And with regard to the Scandinavian country, the case of Northern Norway (Nord-Norge) is emblematic. This remote region, comprising the three counties of Nordland, Troms and Finnmark is bursting with forests, mountains and fiords. One of its island, Magerøya, has a legendary outcrop: Cape North. Yet the regions GDP between 2008 and 2013 has grown almost 1% more than the rest of the country. This growth has been prompted by tourism, the fishing sector, mining industries and clearly, energy resources: two thirds of Norway’s undiscovered oil is in the Sea of Barents and the entire industry is moving north (as are the coalfish and herrings in search of colder waters).

The North Norway region however does not rely exclusively on traditional economic revenue. From Brussels Nils Kristian Sørheim Nilsen, the head of North Norway European Office, explains: “We have two universities with excellent marine and mining faculties. We also specialise in cold climate technologies, e-health and marine”. The region can also rely on ports that never ice over: «Everyone believes that the Arctic is one and the same. This is not the case, ours is a very green land, thanks to the influence of the Gulf Stream».

The North Norway ports could become a stage on the Polar Silk Road between China and Europe. The issue tops the agenda at Kirkenes, on the border with Russia. This is where the Barents Euro-Arctic Council (in which Italy has an observer role) has its headquarters, and in two or three decades, this is where countless containers from Asia could land. The dream is to become one of the main Scandinavian ports, and link up with Rovaniemi in Finland so as to gain access to the rest of the continent from there.

However, caution is the operative word. According to Ingrid A. Medby, senior lecturer in political geography at Oxford Brookes University «The potential for transpolar shipping is probably somewhat overstated; the conditions are simply too adverse and costly for it to be a real substitute for present routes. However, the Northern Sea Route may indeed become more trafficked in coming years, not least if China chooses to make this a priority».

The news of the major ice class container ship’s journey from the Russian port of Vladivostok, on the Pacific, to Saint Petersburg, on the Baltic, was hailed worldwide. With its load of South Korean electronics and frozen Russian fish, the journey was met as a foretaste of things to come. But for the time being the traditional routes are far better. It will take a long time before the Arctic ports can vie with those in Singapore, Hamburg and Rotterdam, but the Russians believe it could come to pass.

What they certainly believe in is the fuel extraction and mining potential of the Arctic. For Moscow, the Russian Arctic could harbour resources worth around 30 trillion dollars. This explains why the Kremlin is in the process of bolstering its Arctic military infrastructure: by building more military bases (for example at Tiksi, on the Laptev Sea), and kitting out snowcats with submachine guns. Of course the weakness of the Russian economy is an obstacle to this escalation: according to the analysts contacted, the Northern Fleet, though potentially fearsome, is in decline.

In the past Russian assertiveness had got many backs up in the West. Especially in Canada. Frédéric Lasserre, head of the Quebec Council of Geopolitical Studies, explains: «Canada’s priorities for the Arctic are twofold:  –  Asserting Canada’s claim on the Northwest Passage as internal waters  –  Developing Inuit communities and a strong partnership with Nunavut and the Northwest Territories. This implies giving a greater say to local communities regarding the regulations on fishing, natural resources exploitation and shipping regulations».

Supporting indigenous cultures is a moral imperative, but also a way of consolidating the Canadian presence in complex regions. In the Nunavut region for example, out of a population of 37,000 people scattered over a land that is seven times the size of Italy, 31,000 are Inuit. Compared to the Russians and Scandinavians, Canadians invest much less on their northernmost reaches. Luckily for Ottawa, the race to the Arctic is less dramatic than one may think. For professor Lasserre, «the competition between powers in the area is mainly showboating, at least for the time being».

Cooperation still prevails, especially in scientific and environmental contexts, though some chancelleries are a little worried. One such is the United Kingdom, which according to the British government «is not an Arctic state, but is the closest to the Arctic». London does not appreciate the increase in Russian submarine activities in the North Atlantic: which have reached levels not seen since the Cold War, apparently. For Klaus Dodds, professor of geopolitics at the Royal Holloway University in London, «The UK’s Arctic policy is informed by two strands. First by the Arctic policy framework, Beyond the Ice, which stresses the role the UK should play in fields of interest such as commerce, resource development, science and governance». The second, a British Arctic defence strategy which «will endorse closer military cooperation with NATO partners such as Norway, US and the Netherlands».

During the course of the year the RAF is expected to send four Eurofighter Typhoon fighter planes to Iceland. This is no one off incident. In recent years even countries like Italy, Norway, Denmark and Germany have flown their planes over Icelandic skies. The West seems to fear Beijing’s economic dynamism. In 2018 a half-hearted international dispute broke out when it transpired that a Chinese company was intending to take part in upgrading the airport facilities in Greenland. Because the Arctic is about cooperation, to some extent. Because the Arctic is just that: a paradox.


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