North America Is Losing The Arctic

James Hammond/Athabasca, Alberta

North America’s relationship with its Arctic frontier has always bordered on amnesic. Occasionally, a story will flicker onto the radar of public consciousness. Oil, wildlife, poverty, Russian ambitions, or something of the sort will spur a media cycle. More often than not, commentators will concur that this is a Very Big Problem, and something that should doubtless be addressed in the future. Then, the memory fades until the next cycle.

This has occurred for one very simple reason: inertia.

But the room for inertia is fast disappearing. The Arctic region is on track to becoming a central geopolitical theater. Climate change is the driving force in this transformation. While many countries are still treating the climate as a future problem, the Arctic region is living it out. Polar amplification means that the region will be disproportionately impacted by climate change—and sooner than everywhere else. Disappearing ice, rising temperatures, increased precipitation, and thawing permafrost, are just a sample of what Arctic dwellers already face. The politicized debates which rage in southern regions of the U.S. and Canada are absent here—to deny these realities would get you laughed out of any corporate boardroom operating in the region. It’s hard to stare straight at large blocks of melting ice without concluding that something is happening.

So why are North America’s Arctic states looking at all this and shrugging? A few options seem viable. Do the governing classes actually reject the climate change predictions altogether? Is the combined capital might of the U.S. and Canada so tied up that nothing more is possible? Could the political will be absent thanks to more immediate electoral concerns? Or worse—could the types of statesmen capable of tackling the problem simply not exist?

The opening of the Northwest Passage as a trade route will change everything. Though now occasionally open in summer, the passage is not yet clear enough for shipping. But climate change will open it as a potential route. At that point, investment in infrastructure will become the deciding factor in making it a reliable alternative to the Panama Canal—a successful grand plan will make the route through the Bering Strait a key international shipping lane and point of geopolitical contention. In 2013, the commercial bulk carrier MS Nordic Orion saved around 1,000 nautical miles in its journey from Vancouver, Canada to Pori, Finland by traveling through the Northwest Passage instead of the Panama Canal.

The Arctic regions, so far from the bulk of the American and Canadian populations, are now finding themselves far nearer to major rivals. Geopolitical relationships that were once west-east have become north-north. Building around the Northwest Passage opens up possibilities for transportation infrastructure, mining, and general development of the Arctic. In previous decades, governments could maintain basic social infrastructure and otherwise shrug that the markets for development simply weren’t there. Now—unable to put out of mind what has so often been out of sight—the region’s importance is growing in the halls of power.

Russian assertiveness in the region is well-known: staking claims on the Arctic seabed, for example. But much more important is its ongoing expansion of a northern military presence, on bases ranging from the far-northern archipelago of Franz Josef Land, to Wrangel Island, just over 800km from the Alaskan town of Utqiagvik. China is also entering the Arctic game in earnest, having released its policy white paper in 2018. China’s ambition as a “near-Arctic state”—already with observer status on the Arctic Council—is demonstrated in the goal a “Polar Silk Road”: close Chinese cooperation in the development of international northern shipping lanes. The Belt and Road brand that is so familiar in cities like Kuala Lumpur or Nairobi is suddenly entering a sphere shared by state and territorial capitals like Juneau, Whitehorse, and Yellowknife.

Presently, the Arctic Council brings a number of players together—and successfully enough, compared to the incompetence and hot air that characterize a lot of “international bodies.” Eight member states, six indigenous organizations, a number of working groups, and a panoply of observer states and NGOs provide a framework for cooperation. When Canadian relations with Russia were strained over its annexation of Crimea and other actions in Ukraine, the Arctic Council proved a useful diplomatic backchannel.

However, the major challenge is not the region as it currently exists, but rather how it will develop in the coming decades. The situation begins to look uncomfortably similar to how Central Asia was routinely ignored, up until people began to realize that China had steadily prepared trade agreements and built up cities like Urumqi as a jumping point into the region. By then, competition was already at hand.

There’s no feasible model of development where the market goes first. Significant and lasting development won’t be possible without planning and investment from federal powers in the south. But national leadership and mobilization of this sort has become almost non-existent since the mid-20th century post-war era. National leadership has given way to self-absorption in the squabbles and faux excitement of electoral politics. Responding to geopolitical pressures in the region means a return to a more active, state-driven development strategy.

First Movers And Arctic Power

Why does the Arctic matter at all for strategic development?

Sure, maybe the shipping traffic will increase. A logistical problem, perhaps, but is it really existential? As for Russian or Chinese rhetoric, the overall security measures for North America, like NORAD, are firmly intact. Militarization of the Arctic space doesn’t seem imminent. In the most hands-off scenario, federal governments could simply adapt as needed on the margin and otherwise leave the region as it is: sparsely governed, strategically irrelevant, and resigned to continuing as a continental backwater.

To answer the question, it’s important to understand the different forms of power.

The Arctic is a global space. Ultimately, it is not only states with formal Arctic territory that desire to operate in the region. China’s audacious claims to be a “near-Arctic state” are possible because of its size, and by a loud public relations effort to present itself as a global juggernaut. But other Asian and European countries are also eyeing a more accessible Northwest Passage. Moreover, companies that want access to near-Arctic markets (Eurasian or northern European), but also desire the stability of U.S. and Canadian business and legal norms, would benefit from northern hubs tied in with or exporting to these markets.

In short, anyone desiring access to Arctic trade routes or market opportunities will be looking out for an optimal mix of physical infrastructure, economic opportunity, and political stability.

To understand why this is important, we need only look back at the geopolitical contests to control strategic trade regions in prior decades, and the advantages accrued to the victors. The Panama and Suez Canals were each the objects of significant diplomatic and—in the latter case—military strife. The Panama Canal ultimately came under Panama’s control after significant local agitation and diplomatic wrangling, and is still one of its major economic prizes. The Suez Canal was so important to the interests of nearly every major power that Egypt’s victory in the Suez Crisis is popularly seen as the once-mighty British Empire’s final tipping point. Nicaragua has long desired a canal of its own, with the latest attempt at development involving a now defunct deal with a Hong Kong-based private developer.

Control over key transportation infrastructure is not just an important marker of sovereignty. Revenues are crucial for reinvesting in more development. And infrastructure built down the line will face the further obstacle of having to integrate with the existing systems built by rivals and which, if successful, have become normalized in global operations. One need only think of the difficulties faced by the U.S. in building new transport infrastructure, when so many of its existing systems were constructed decades ago and are difficult to integrate with radically different and upgraded plans. But even natural resource and manufacturing markets have a difficult time bargaining with established rivals, as any developing country in negotiations with established trading blocs knows well.

The Northwest Passage will become more accessible. Currently, though, ice conditions block full shipping. But if the predictions pan out, waiting until every state and company with a stake in the Arctic region is knocking on North America’s doorstep will almost certainly be too late. The infrastructure question is one to be addressed now—before necessity tightens its grip.

At present, Arctic sovereignty is a bloodless principle. To give it real teeth, deep water ports and expanded energy hubs are necessary to establish proper on-the-ground control. Regional governments on these north-north frontiers, who recognize passivity as a real threat to the future, have agitated for these measures to little avail. Both security and construction require well-maintained heavy icebreakers, and neither the U.S., nor Canada has them. The U.S. is down to two icebreakers, and only one of them is able to break through the heaviest forms of ice. While both the Obama and Trump administrations directed funding toward icebreakers, priorities like the U.S.-Mexico border wall have taken up bandwidth in recent years. Canada has been trying to acquire a new heavy icebreaker built since 2011 under the Harper government. But construction of the projected CCGS Diefenbaker has only just been moved to a new shipyard, four whole years since his successor took office.

North America can thank its lucky stars at the continuing success of current security agreements in maintaining the status quo. There is internal debate as to whether Russian activities like bomber patrols should be interpreted as a defensive stance or provocation. NORAD has continued to work more or less effectively at maintaining U.S. and Canadian air security.

I had the opportunity to discuss the topic with Will Greaves, an assistant professor at the University of Victoria and Arctic expert.

Greaves cautioned against Russia alarmism, seeing strategic signaling rather than expansionist planning as the chief motivator. Under this hypothesis, Russia sees no real benefit to instigating direct military engagements over Arctic space, particularly given their outsized dependence on the region. Greaves went a step further, questioning whether Russia would even benefit from territorial expansion: “Russia already has more Arctic territory than they can effectively govern, and they can’t even reap the benefits of their resource wealth in the undisputed territory.”

Nevertheless, it’s unlikely that the U.S. and Canada can long abide such actions even as a defensive measure. Northern governments have repeatedly requested expansions of Arctic security patrols. While heavy icebreakers or nuclear attack submarines will require time to plan, fund, construct, and mobilize, an initial step would be for the two countries to further expand the presence of their respective coast guards. However, such a move would only work as a short-term stepping stone. Countries with the capacity for significant presence in ice-covered Arctic waters will become preferred partners in security, business, and research. Doug Chiasson, a specialist in the World Wildlife Fund-Canada’s Arctic program with whom I delved into the topic, termed this position “hard water power”—in contrast to naval forces with advantages in brown water (rivers) and blue water (open sea).

When the overarching geopolitical logic translates into on-the-ground realities, the results are plain: infrastructural, institutional, and economic development constitute forms of power because they are the hard mechanisms that shape entire regions. To be in such a position in the Arctic region, it will not do to wait until shipping routes are already in use.

Whatever country makes the necessary investments to gain a dominant position can maintain a leading role for decades to come. The infrastructural ins and outs of Arctic development are far from mere logistical problems. They are the vehicles of geopolitical will in the north.

Arctic Nation-Building

Northern regions are viewed as massive budget sinks by U.S. and Canadian federal policymakers. Structural unemployment and social assistance has created an image of dependency. However, regional governments have themselves pushed for greater investment in sustained economic growth. Moreover, a number of initiatives exist as successful examples of what can be made possible by an active strategic mindset. While currently small, these are the testing grounds for best practices which can be scaled up and applied in bolder projects.

Besides the usual fishing and tourism, the Northwest Territories has established several diamond mines, which generate significant revenues, and establish a logistical presence. Russia already has a significant dependency on its northern resource economy, with 75% of the country’s oil and over 90% of its natural gas production coming from the Arctic region. Russia is also dependent on the region for other minerals, timber, and fish. The Scandinavian countries have likewise pursued mining activities, and perform extremely well in terms of public investment and linking northern regions to the south.

But in terms of real nation-building, these are preliminary steps. Discussions of expanding energy production are always controversial in a northern environment, for reasons of conservation and environmental responsibility. But resource development, conducted the right way, is an opportunity to build up long-impoverished communities. Many northern residents depend on diesel which is trucked or flown in. Local governments and investors have pointed to projects like Norway’s Snohvit LNG field and Johan Castberg oil facility as examples of responsible Arctic development. Such investors generally look to national governments for strategic vision in long-term northern development.

One of the most vital components for developing human capital in the region is the scaling up or development of urban hubs. The city of Anchorage, Alaska, is perhaps one of the best examples: despite its remote location, the city boasts a population of over 290,000. Its strategic location in global transport as a refueling station and shipping gateway places it on the radar of both countries and companies. However, the city’s initial growth occurred thanks to actions taken by the U.S. federal government in the context of World War II and the Cold War. By the 1950s, investment in military installations and civilian air transport grew the city’s population by nearly 15 times its pre-World War II level. The establishment of major highways allowed the city to connect with other parts of the state, further expanding its ability to act as a regional hub. The growth of Alaska’s energy industry—and the state’s long-term mindset in investing the proceeds—created the basis for growth throughout the late 20th century and into the present day.

Since it will be far easier to scale up Arctic hubs rather than continually build new settlements, their ability to trade is among the most vital elements of development. Shipping infrastructure and road networks are among the most pressing investments in this space. One need only consider the impact of the Interstate Highway System on American trade, work, family connections, and life in general. The ability to move goods and people efficiently undergirds all other aspects of development.

But the Arctic has remained undeveloped because it’s difficult to build roads and infrastructure that can handle the damage of harsh winters and permafrost that covers everything. In the summer, the thawing of the permafrost makes the ground unreliable and difficult to build on. So, most ground shipping in the Arctic is done in the winter, when the ground and water freezes hard. But even this is not a new or insurmountable challenge—the U.S. completed the Alaska Highway just after WWII, and some permanent roads are still being built.

At present, capital remains a major barrier; for example, lack of capital is one of the main obstacles to western Nunavut’s Grays Bay Road and Port initiative, a 227km all-weather road project that would connect a currently defunct mining project with a deep sea port.

But by themselves, roads only connect communities on land. To build infrastructure that can effectively service and govern sea traffic, expanded deep water ports are necessary. Compared to other Arctic countries, the U.S. and Canada are woefully behind. Some initiatives have tried to address this problem, only to meet with the obstacles of costs and logistics. As with other projects, companies and foreign trade partners look to national governments to show initiative in strategy and primary infrastructure funding.

However, successful expansion of such transport infrastructure is not an end in itself. The ultimate goal is to see growth in industry, trade, and population. These are the necessary building blocks of a north which is not only growing, but flourishing and self-sustaining.

To achieve that goal, Arctic states will have to ensure that economic partners—from governments to the private sector—have credibility in their commitments to a development plan. Rather than relying on markets in order to excuse passive approaches, a different strategy would be to treat markets as useful signalling mechanisms to indicate confidence. This integrates markets into the planning process in order to overcome the classic calculation problems which arise from trying to over-manage the various processes of development. Rather, development-oriented states can take tips from previous Western and non-Western efforts like in directing the energies of markets and harnessing the feedback loop of information to discern where the best opportunities lie.

Northwest Territories Premier Bob McLeod has suggested that a special economic zone (SEZ) model could accelerate development. While such models would likely have to be tested on a localized scale and then expanded, it could potentially incentivize capital investment—likely responding to the direction of initial public infrastructure and research funding. However, the SEZ model is most successful when pursued as part of a broader state plan for reform or development. McLeod’s strategic vision for the Canadian north would see an SEZ paired with a northern military base serving 5,000 personnel, expanded coast guard presence, a locally-based federal Arctic affairs department, civil service rotation program, three more deep water ports and icebreakers apiece, and a population goal of 1 million northern residents by 2050. Though the specifics are tailored to Canada, it’s a scale of thinking appropriate for many of the Arctic states.

The final plank in that vision is important. Infrastructure and incentives won’t amount to anything if the Arctic population isn’t there to support it. In 2019, the combined population of Alaska and all three Canadian territories stands at 850,000. The Russian population is more than double that figure. Though Scandinavian countries have small Arctic populations, they make up for it with superior infrastructure and economic integration with the south.

The chicken-and-egg problem is that it’s difficult to expand family size, stimulate internal migration, or convince immigrants to settle in northern climes. Convincing some migrants to go north is not entirely impossible; throughout the process of writing this piece, the Arctic experts I spoke with mentioned the presence of Syrians working in Nunavut, Filipino communities in the Northwest Territories and Alaska, and so on. But the majority of immigrants to the U.S. and Canada choose more comfortable southern states and provinces. The types of industries which need to be developed in the north require skilled labor, which could come through incentivizing domestically trained workers, or retraining and certifying foreign workers. Canada does in fact have such a program.

Still, the deterrents are strong. Housing and medical services are poor in many regions, particularly in the Canadian north. Unemployment is high, especially in indigenous communities. Without infrastructure and spurring on industry, incentives to settle in the north are weak, despite the high incomes possible in both the public and private sectors. One possible use of an SEZ is the ability to offer significant incentives for domestic migrants—say, zero taxes on income earned in the first five years. Likewise, work visas could be issued for the SEZ specifically. While temporary foreign worker programs have always been politically controversial, one possible solution could come in the form of federal initiatives that allow northern residents to personally sponsor foreign workers. In addition to the economic contributions provided by such workers, this would also provide direct benefits to local communities, who often rightly see temporary worker programs as displacing the domestic labor force.

In the long run, it will be some combination of family growth, domestic migration, and new settlement from abroad that achieves the northern population levels necessary to underpin industry, community, —and ultimately, sovereignty. However, strengthening this position will in turn influence the broader cycle of Arctic development. As the region continues to be an area of operation for a number of both great and small powers, those countries who pursue infrastructural and economic development will be in the strongest position to negotiate and bargain as north-north ties continue to grow.

The Human Footprint

It’s difficult to change strategic direction and infrastructure development midstream. This means that plotting an economically and socially sustainable development path is an imperative for Arctic states. If development is overly reliant on a single, finite industry, a collapse scenario would devastate these communities, leaving them even worse than they were on their own. Likewise, a failure of social cohesion between indigenous and non-indigenous communities—as well as newcomers—will cause a political crisis. The deep local knowledge possessed by northern residents is unique, and any serious development strategy will institutionalize this feedback loop.

These tensions don’t start and stop in the north. People and organizations based in southern communities also threaten to shortstop the north’s development, particularly on environmental grounds. Environmental groups can be divided into those with a focus on sustainable development, and those that generally see development as an ecological threat. Arctic development, any real Arctic development, will accelerate the differences. Premier McLeod and others have previously compared environmentally-justified southern intransigence to the colonialism of past eras. During our conversation, Greaves noted that this is inseparable from Arctic experience: “They were treated as colonies and they viewed themselves as colonies. It was only in the late 20th century that they shook this off, but the history is still highly relevant. That power balance is deeply woven into their relationships with the rest of the country.”

Regional governments are already well-aware of the politics of development. Both public research funding and incentives for private investment have opportunities to focus on industries which will compliment sustainable growth. But climate change presents risks for Arctic investors. Increasing volatility in weather and sea ice patterns threaten both infrastructure and the industries that rely on them—meaning that technology and emergency response have to be developed well in advance.

Investors are waiting for national governments to commit—in security, infrastructure, and research. In other words, the reality of central coordination is impossible to overcome. Without a clear understanding of the economic, social, and ecological risks involved—and the institutional and technological fixes—governments won’t realize the north’s potential.

What does failure look like? Governments will continue making marginal adjustments necessary to accommodate increased traffic—to a degree. But as trade between Eurasia, Europe, and North America accelerates, decisions will be made regarding shipping and transport routes which go beyond immediate capacity. The questions will be about the next 20-50 years. With no signals of seriousness from those countries in effective control of the Northwest Passage, the result will be diversion to other routes or lost trade. Without effective hubs on at least the level of Anchorage along the route, there is also little reason for companies to invest in the sorts of support industries which generally crop up along trade routes, nor for the harder-to-predict downstream effects of economic development on such hubs to occur.

In that case, the benefits to North America will effectively take the form of rents—charges for continued security and transportation support—and a few scattered industries. A key opportunity to project north-north geopolitical and economic power into the Eurasian sphere will be lost, along with trade opportunities for the benefit of U.S. and Canadian citizens.

Is this the mindset of a continent intent on establishing a secure and influential foothold through to the year 2100 and beyond? Doubtful.

Moving Northward

Arctic states that fall back from the challenge of a coordinated and ambitious program of development through incompetence or apathy will not see an undeveloped Arctic. What they will be confronted with is a rising Arctic region in which they are subordinate. Even in the best case scenario, where open conflict is not in the interests of any major player, economic clout on the northern frontier will suddenly bring neighboring powers much closer.

Waiting for some ambitious company to devote throwaway funding on high-risk experiments won’t suffice. The markets have spoken; states must think in terms of northern nation-building—and follow through on security, infrastructure, and population growth. First-movers on all these issues will expand their negotiating power with fellow Arctic states and benefit from new trade routes. The spillover effects of such innovation could even benefit national and global economies more broadly.

That all this is based on a model of increasing climate change impact cannot be overlooked. Climate instability is a potential threat to growing Arctic communities as well, giving the region as much of a stake as anywhere else in finding solutions. The institution-building that happens here could itself provide a basis for reforming approaches to resource conservation and sustainable development in other parts of the world.

The Arctic region is no longer a far-off frontier. North-north ties and development will make it a center—a hub and a meeting place between continents.

Ash Milton is a market analyst and managing editor at Palladium Magazine.