Igor Ossipov, Casing Point
11 december

The Arctic Frontier - Armed with Cooperation


In the midst of the 20th century the Arctic resembled a geopolitical playground where two superpowers tested each other’s nerves with their burgeoning nuclear arsenals, as submarines plied deep beneath icy waters. What changed? In the 21st century bipolarity has ended and memories of the Cold War are withdrawing deeper into history books, whilst people slowly desert countless dated yet seemingly inherent dispositions. It seems stories about latent conflict or sparks beside a fuse only exist in the press, which cannot go without an impeding Armageddon almost by nature. Hence, this post will dwell into an Arctic from a pragmatic stance of promising potential and a need for stakeholders to cooperate, as certain waters cannot be crossed alone. As customary Casing Point will take an energy based angle and to assist analysis will draw from the recent conference hosted by RIAC. Enjoy & Feel Free to Comment! 



Personal Note:


As my list of ''conferences attended'' grows, I am starting to feel like a lavish hotel connoisseur – as it is usually where such events are held. All antics aside, such forays are valuable as they allow one to gauge specialised knowledge by meeting top experts who are eager to confer the budding issues of international affairs. At the opulent Lotte Hotel in Moscow, “The Arctic: Region of Development & Cooperation International Conference” was no different, as the event welcomed government, media, business and academic representatives of utmost calibre. In the busy two-day program, focus was given to maritime transport, fishing, regional and local populations, environment, cooperation of all different types and specific bilateral relations, like those between Russia and the US. Interestingly, even though energy issues were intentionally sidelined as they were too complex for an already big event, they still crept up almost at every turn – as there is a webbed aspect to the Arctic. As this event covered enough material for an encyclopaedia with 25 pages of notes and frankly a dead hand – I will split my notes into two posts. In this post we will focus predominantly on geopolitics and energy, while the second post will build upon earlier findings and tackle more specifially physical shipping via the Northern Sea Route. At this point I want to thank Giles DeMourot and Pat Filbert, from the International Relations Professional Discussions Group on LinkedIn, for providing very insightful comments and citations for this topic. Finally, I thank RIAC for their invitation, congratulate them for hosting a successful event and applaud all the guests. 


* Full list of Event’s Material.

* Full Program with all the speakers' official positions - for readability long titles were excluded.

* RIAC's zoomable Arctic Stats Map



The Arctic – New Global Model?


The Ambassador-at-Large of the Russian Federation Anton Vasilyev laid out a line of thought that caught on for the entire conference and essentially became its underlining theme. He argued that the last two decades brought with them huge change to the Arctic as the atmosphere dominated by mutually assured destruction (MAD) was now obsolete. In fact, this area now could serve as a real shinning example for the less stable regions of the world, or even be an outright model as the Arctic is stable, structured and crucially relatively predictable in regards to its future. As other speakers took to the podium, many referred to it as being a test bed, or even a greenfield project, which can be then reapplied elsewhere.  


The Arctic Council – Talk, But No Action?


The Arctic Council (AC) is a high-level intergovernmental forum that tackles issues faced by the states and indigenous people of the region. Its official role is to foster sustainable development and enhance quality of life for the local population. As of now there are 8 full members from the Arctic area and 12 observers from the wider world. The initial 6 observers joined in 1996, but notably this year, 5 out of the 6 new observers came from Asia (see: Arctic Stats Map). In essence, this reflects the changing tide in the world as countries like China and India seek new flows of economic growth. Still, even with an increasing number of participants as the Ambassador-at-Large Vasilyev outlines: sovereignty, security of various types (incl. environmental) and care for indigenous people remain vital. In the foreseeable future the council will build upon its existing successes: such as the 2011 agreement on search and rescue collaboration or this year's binding agreement on coordinating response efforts to marine pollution incidents. As Vasilyev sees there is not a single problem in the Arctic which cannot be resolved with existing framework or good old cooperation. In fact, the number of disputes has fell and this trend is expected to persist as more states engage.


To avoid presenting a false veneer of success, it is worth pointing out that the officially long-titled pollution act is just the second ever binding agreement signed by all the 8 members. Hence, it is not surprising that some perceive the AC as successful in talking rather than doing (Barents Observer, 2013). As both Alexander Shestakov of WWF and Heather Conley from the Arctic Program stress, the AC must not only draft new laws and recommendations – it must regulate. At the moment there is no monitoring body in the Arctic and continued efforts to create one have not been fruitful, either in a new form or in the shape of AC. As a result, Stratfor (2013) analysts anticipate that the AC will likely continue to gain attention as a broad discussion forum for policymakers, but will struggle to actually seriously sway decision-making of state agendas. Moreover, which ever form the AC takes a lot will depend on willingness of engagement. As a number of speakers said it will be vital for USA to finally ratify the overdue UNCLOS (laws of maritime trade), as it does not fall under the rules set by the international community, which may be problematic if there is a dispute. As Sovcomflot’s Vladimir Mednikov adds, progress will be slow if USA does not take part in international norms or if it takes too long to gauge if its sovereignty is hindered – at the moment only about a dozen states have not ratified/signed UNCLOS (Iran, Syria, North Korea, etc.). However, as Stratfor (2013) underline even if there is willingness AC is far from the only organization in the area (e.g. Barents Euro-Arctic Council, the Nordic Council) and will need to prove its merits. That said, not to undermine the AC, as Yelena Nikitina of RAS says the body currently has 85 multifaceted projects; so clearly it is not all talk.



Geopolitical Iceberg – It's Quiet, Too Quiet:


As the opening lines of this post stressed the Cold War mentality should be left in the past and in this conference almost everyone shared such a view. IMEMO’s Alexander Dynkin outlined that we should not over dramatise the situation in the Arctic, because there is no threat of conflict as most of typically conflictual obstacles have been resolved (e.g. territorial disputes / natural resources distribution). Ambassador-at-Large Vasilyev concurred, as allocation of resources has already taken place and aside from longstanding nuclear arsenals there is no new militarization in the region. In essence, many argued there is no luxury of being too politicised as the Arctic is extremely vast and complex, making cooperation simply a must because not a single country commands the ability or technology to confront its challenges singlehandedly. As the conference went on a news emerged that Canada just applied to have its seabed boarders extentended into the Arctic seafloor by about 1.7 million sq km, where an estimated 30% of world's untapped gas and 15% of oil is preserved (Daily Mail, 2013). A similar claim was made by Russia in 2001, when it filed the UN's CLCS for an extension by arguing that the underwater Lomonosov Ridge was an extension of its territory which amounted to 1.2 million sq km. It was an unsuccessful bid due to a lack of evidence, but it has been resumed and is now in progress through a very long-application procedure (decades, not months). To add more umph to the bid, Russia even put a titanium flag on the Arctic's seabed with a mini-submarine in 2007 (USA Today, 2007). In much of the Western press this venture was criticised as 'too 15th century', albeit forgetting the US flag on the Moon even though technically the outer space is more explored than depths of earth's seas. Also, no one recalled in the same criticisms the far less impressive Canadian effort when Minister of National Defence, Bill Graham, placed a flag on Hans Island to plank the Danish in "James Bond'ish" operation called "Exercise Frozen Beaver" (Canada, 2005).


As it seems, not quite all resources are yet allocated and some like the North Pole have overlapping contentions (Canada vs. Russia) (see: Stimson, 2013). Hence, to avoid triumphalism of cooperation some caution may well be justified, particularly for Russia. Leonid Kalashnikov from the State Duma recalled the Arctic NATO meeting in Dubrovnik he attended and he believes Russia must not lose its geopolitical and strategically imperative focus - as he said at the conference it is worrying that so many Arctic states are members of this Cold War body. If Finland and Sweden go further than just mulling over a NATO membership, then Russia will be the only non-NATO AC state (Atlantic Council, 2013). It may be unlikely, but NATO can increase its military presence with nuclear submarines and anti-nuclear missile carriers, which may dent Russia’s capacity for a nuclear deterrent. It is an issue which is receiving increasing attention, as the Arctic is Russia's most peaceful boarder, but the fact that NATO has such evident presence it creates tensions, whereas almost naturally any move by the Russian side to fortify its stance is perceived as muscle-flexing in a classical fashion of IR's security dilemma (CENAA, 2012). As the event took place Russia made a statement that from 2014 special military units as well as air force contingents will be stationed in the Arctic on undoubtedly for the West symbolical ex-Soviet New Siberian Islands (Yahoo, 2013). As already said USA’s UNCLOS ratification will be key, as it technically follows it yet without being binded by it, particularly in the light of the news which was said at the conference by several speakers that now even the US will likely claim further seabed from the international waters due to oil and gas riches there. It is interesting to point out that a nation can claim a 200 nautical mile territory, but UN allows for a claim of up to 350 nautical miles if proof is given that there is an extension of land underwater. With the above in mind, Kalashnikov still sees cooperation as crucial, possible and likely so we must avoid hysteria, but stay pragmatic, as nations will naturally have their own aspirations, but these may conflict.



Russian Federation – Leading the Way:


To cite a decorated Russian Arctic explorer, Artur Chilingarov, the region is rapidly gaining prominance with Russia leading the way as the first country to take sizeable steps. In 2013 alone, many distinguished conferences, open groups and meetings occurred across Russia. Chilingarov specifically referred to a conference in Salekhard (The Arctic – Territory of Dialogue), as there President Putin made a speech underlining that the world is entering a new Arctic epoch and Russia’s leadership will be decisive for all. Interestingly, as a Senior Fellow of the Arctic Program John Higginbotham said, even developed countries are hoping to learn from Russia. It was especially nice to find out that Canada hopes to imitate Russian progress, as even though it is a developed OECD state, it lacks even basic search-rescue capacity, navigational infrastructure, charting systems, or a sizeable icebreaking fleet. Aside from other states looking to Russia, it seems that even domestic firms are turning back home. As Norilsk Nickel’s, Vladimir Zhukov, said that this global metallurgy giant is shifting its focus back to the Arctic by selling its international assets after a decade abroad. It could be a welcoming sign for the wider economy and especially the isolated from the rest of the country city of Norilsk, as this world leading producer of many metals sees its future in Russia. In all, it is unsurprising that the Arctic plays a key role in the eyes of policymakers, as Russia controls the longest boarder with ample shipping potential and favourable anticipated lion’s share of natural reserves. In the official document the 'Russian national security strategy to 2020' the Arctic receives a lot of attention as a major source of revenue for the state, mainly from energy production and maritime transport. A main goal is to transform the Arctic into Russia’s top strategic base for natural resources by 2020, and preserve the country’s role as a leading Arctic power. Interestingly, this strategy in contrast to some rhetoric in the past and earlier documents avoids 'hard-power' or conflictual language, being quite welcoming towards cooperation (Geopolitics North, 2009). 



USA and Russia Relations – Slow to Get Going, Bumpy on the Way? 


Andrew Kuchins of CSIS outlined that regrettably the Arctic does not get much notice in Washington. A possible reason for this is that the USA views itself not as an Arctic nation, but as a country tipping the Arctic with Alaska. As a result, an apparent deficit of understanding exists about the area and more so about Russia's meddling in it. In addition, the USA has yet to seriously outline and more importantly show in action its own approach to the Arctic. To cite US President Obama, "the Arctic is one of our planet’s last great frontiers... [due to the fact that] the Arctic is changing... we must proceed, cognizant of what we must do now, and consistent with our principles and goals for the future" (The White House, 2013). However, what are these principles and are they conducive with other regional players? Kuchins sees that these issues lead to obstacles, but a mutually constructive relationship is achievable. A potential impediment, if one does ever emerge, is likely to come not from the Arctic, but from events in other parts of the world. The summer of 2013 was a clear low point, but lately Russia and USA had some triumphs in dismantling Syrian chemical weapons and limiting Iran's nuclear program. In all, as Kuchins and US Ambassador David Balton see this region has potential with fewer historical obstacles and more mutually important issues, such as global warming, which leave no room for hysteria. In geopolitics one expects flactuation in relations among major powers, but to ease tensions, as Balton adds, the US needs to sign the UNCLOS, whereas Russia needs to ratify the 1999 convention about mapping its boarder. At the same time, we must not be romantical as issues like NATO's presence still exist. Moreover, as Sergey Rogov from the Institute of US and Canadian Studies argues, we could see China's ships and even nuclear submarines enter the Arctic in the future to counterbalance USA. In fairness, I think many anticipate some sort of tension amid China and USA, but only time will tell if Russia will be pulled in or if it can remain neutral this close to home. As Defense Secretary Chuck Hagel said on November 22nd: "mankind has raced to discover the next frontier... and time after time, discovery was swiftly followed by conflict... we cannot erase this history... but we can assure that history does not repeat itself in the Arctic" (Defense Gov, 2013). As the saying goes, only time will tell, but being a triumphalistic optimist is not easy (unless one is Francis Fukuyama). In all, as Kuchins and Alexander Dynkin from IMEMO stress, it is vital that common goals and approaches are formed and interests are consolidated.



Melting Permafrost – Good, Bad or Ugly?


As Mikhail Suslin of Sovcomflot stressed without Global Warming, the Northern Sea Route and Arctic development in general would not have been feasible as old-aged ice or permafrost would have stood as an impregnable obstacle. Since 2007 there have been some fears that the Arctic is not actually melting and as Vasiliy Bogoyavlenskiy said some in the Russian Academy of Sciences (RAS) agreed to this hypothesis. Still, most attendees of the RIAC conference quashed the idea and Vladimir Mikhailichenko of CNSRN said that the planet experiences a major tempreture shift every 150 years and we are now firmly in the warmer shift; thus a few years in the opposite direction are just a blip. We cannot deny that Arctic ice has increased in size by 1.5 times since last year, but we must wait for at least several years until a true trend emerges. A major problem that many of these findings use historic data, which is highly innaccurate, but cannot be avoided due to the necessity to draw trends longer than a few decades. 


As the above hinted in the case of Russia, there is a peculiar situation as technically the world is facing an impeding disaster, yet as the Arctic melts 22% of the worlds undiscovered gas and oil reserves can be found offshore strategically located within its reach. So, it is hard not to wonder, if for Russia it is the best thing since slice bread! Still, before Russia can uncork the champagne, there are caveats. Firstly, Russia has not yet surveyed the shelf to find out whether it struck the black gold, or more specifically gas, as this region is mostly a gas sphere. In contrast, the US, Canada and Norway have been doing so for ~20 years with success. Russia has only surveyed the Far East a little and is yet to find the critical gas hydrates. Secondly, as waters warm it may open up some industries like energy and shipping, but affect others like fishing. In warmer waters the fish will swim out more from the shores and out of the 200 nautical miles control. It might be startling for some, but Japanese and Korean vessels fish as far as the Barents Sea! Hence, they could easily use this opportunity to fish legally as both these nations see the Arctic as a way to reignite their faltering stocks.


In the USA’s case melting ice has been more of a bad issue as it undermined exploratory drilling and made production harder, as the window for drilling was narrowed a lot due to ice gaining mobility. As the former Deputy Secretary of US Department of Interior David Hayes outlined, companies like Royal Dutch Shell were faced with very strict regulation how long they could drill and they had to vacate the waters well before the ice returned in case there was a setback that had to be addressed. In a more uglier way, aside from the known issues of Global Warming, such as endangered species loosing habitat, Hayes said we should not forget the indigenous people as for instance the loss of permafrost leads to naturally made ice-cellars being broken, so these people have no where to store food. 



…Thanks For All The Fish!


An issue which requires separate attention, with both big winners and losers, is Arctic fishing. Vyacheslav Zilanov, the chairman of Sevryba, almost made me think about changing my career after quoting that fishing in the Barents Sea yields 2.5-3 million tons of fish annually, which equates to $40-45 billion. Yet, the existing players are in danger of loosing their position due to incoming outside players. As US Ambassador Balton recalls even in the 1970s, when ice was relatively thicker, fleets of Japanese fishing vessels were intermittingly spotted in the Barents Sea – which is right across the globe from Japan! This loss of position is partly due to at best poor legal regional framework. In respect to Russia, many of the acts signed, particularly in 1990, were done as USSR was faltering, which gave it a weak bargaining position and in effect for the last 23 years its fishermen fished on what can be deemed as preliminary acts. In respect to other Arctic players, the agreements simply do not meet the changing environment of the area. As Scott Highleyman from the Pew Charitable Trusts outlines, the warmer temperatures in the Arctic push the fish out from the traditionally warmer waters near the mainland out to the deeper sea, which in effect results in fish migrating out of the 200 mile sovereign zone of the local players and into the hands of foreigners. In addition, as 100% of the US waters de-ices, 78% of Russia’s, 30% of Canada’s and 22% of Norway’s in the future, there is a greater chance for unregulated and illegal fishing.


Highleyman and then Trevor Taylor also from the Pew Charitable Trusts, stress that we must act now in drafting fresh rules for the region, especially as the Arctic nations have the most to lose. As they outline, Japan recently said that it considers the Arctic as a way to revive its own withering industry (partly due to Fukushima Disaster) and South Korea brands it as one of its fishing pillars in the global fishing industry for the foreseeable future. Interestingly, only China does not seem to have ambitions towards the Arctic’s fishing basin – even though it is typical portrayed by the media as an all encroaching dragon. In all, as Taylor fears, we could see a lot of illegal vessels in the region or in areas outside the 200 nautical miles sovereign UN limit, thus to stop or limit this, dialogue will be crucial. More radically, Taylor proposes to close the region completely as a possible option before all regulations are in place, but that is unlikely due to sheer sums involved. On the bright side, as Highleyman reminiscences, even in the mid of the Cold War, Alaskan and USSR’s fishermen had a good relationship as the Arctic has always been about cooperation as its harsh characteristics mean that only with it can all survive. 



Environment vs. Big Business:  


With a series of major accidents that rocked the tabloids it can easily feel that the big oil business is all about profits with no regard for the environment. It may well be the case for some firms; however it is not the case in the Arctic. If we recall those series of major accidents, the Exxon Valdez spill of the coast of Alaska had a total cost of $5-9 billion, as about 40-72,000 tons leaked into the water in 1989. It was not too severe as the cargo was not too large nor did the oil hit ice. In 2002 the Prestige grounded near Spain costing €5 billion as 64,000 tons of mazut hit the coast. In 2010 the Deepwater Horizon Incident broke all records as the most infamous and biggest oil spill in history. This tragic event not only took the lives of 11 people, but only a small portion of the oil was successfully removed, or burned, leaving huge pollution in the Gulf of Mexico. In addition, BP who charted the drilling platform ended up with a cleaning up and damages bill of $25 billion as well as more than $40 billion in asset losses (Business Week, 2013). As David Hayes outlined, the potential of such disaster is unthinkable for any firm in the Arctic. It would far exceed the Gulf of Mexico incident and likely wipe out even one of the global oil majors. To no surprise not many take on this region. As A. Krivorotov of Shtokman Development Company highlighted Royal Dutch Shell is the most active with investments of $4.5 billion, but most cannot enter the market due to risk or huge costs. Even the French oil supermajor Total had to exit, whereas Exxon Mobil that receives a lot of public attention in the region is highly selective. As LUKoil's Alexander Abashin outlined Russian firms are not left behind either, as his major invests 10% of their investment in selected areas towards safety and even though there is competition amongst LUKoil and Gazprom, they have a deal in place to assist each other in the event of an accident. 


As clear there is a change of behaviour towards the Arctic as no corporate headperson wants to attend the funeral of their firm and their likely career, but aside from majors, state governments are also doing their bit. Hayes stressed that the US is forcing firms like Shell to only enter the Arctic if they bring their best equipment and know-how. As the Arctic is absent of infrastructure and there is no stationed tools in the case of an accident, so a major cannot just try to redirect from nearby. USA has demanded that capping-stacks are always available if drilling as well as oil well replacement parts and special collector vessels that can quickly sweep up spills if they do occur. In 2012 drilling was postponed as Shell did not have such vessels in the vicinity, as the risk of oil hitting ice is unthinkable – purely because there is no technology that can clean or collect oil back under ice. In May 2013 President Obama also launched an Integrated Arctic Management System, whereby any construction of ports or oil type installations had to be openly discussed with all the potential stakeholders as the US hopes to avoid such an event whereby investment is made that soon becomes unnecessary. In all, from an American perspective, we must be realistic that oil production will take place as at the end almost everything is ran on oil, but it must be done in the safest of ways for this region. As Hayes puts it, USA has a “managed approach”.


USA is by no means the only state to have a specific way, as Norway has what it calls a “safety-based approach”. However, what will be crucial for the region is whether its many players come together, as it is evident no one state can singlehandedly deal with a big disaster nor develop the regional prospects. As we heard in the RIAC conference the Arctic Council could bring states together. It will be imperative as certain questions remain unanswered that are increasingly becoming more urgent, such as who and how exactly deals with an incident and who will be at the end accountable? In the Gulf of Mexico the event was haunted by disputes, but the Arctic is less developed legally and alike, this exacerbates the worry. To add, from a Russian side, it will be vital to see some sort of a fund being formed which will be dealing with oil spills or disasters, as Natalya Khludenyova from IMEMO underlined.



Arctic Fuels – A Needed Market?


2012-2013 period was slow at best as on the Russian Arctic Shelf no new drilling platforms were setup. In 2014 two foreign-build platforms the GSP Jupiter and West Alpha may be up, but even so this reflects the slow economic climate. That said, Russia still easily maintains its leading place for the foreseeable future as its production of hydrocarbons since 2005 has not been outmatched in the Arctic. USA has peaked in the 1990s, but its 9 Alaskan fields are now in sharp decline and Norway’s Snovhit Field is not matching the Russian spike in production as it is only producing single digits output vs. 45 million tons extracted by Russia. In fact, Alaska’s Kenal LNG Terminal was closed due to its inability to compete against the new Sakhalin LNG. Moreover, competition in the near future from Russia is set to rise further following the anticipated increase in shipments via the Northern Sea Route. To cite some top figures we expect to see 15 million tons of transit cargo pass here, 10 million tons of crude oil pass from Noviy Port and 15 million tons of LNG pass from Yamal LNG facility, where construction of a new Port Sabetta is in full swing.


As Vasiliy Bogoyavlenskiy from RAS outlined, Russia is in a good position in the Arctic as it extracts 3.5 times more than all other nations combined and is gaining vital experience, as 2/3 of it is located under permafrost that sooner or later will need to be developed. It is also a positive sign as both the Gulf of Mexico and North Sea locations are now declining, which means that offshore production will need to shift somewhere with its rigs. It is unlikely to go to either the US or Canada, as the former has steadily decreased production offshore including in the Arctic due to the massive shale boom, whereas the latter finds its offshore fields uneconomical against tar sand deposits and conventional onshore reserves. Still, Bogoyavlenskiy stresses that there are problems as Russia currently lacks its own drilling fleet to make a bigger push, as its last fleet was either disused or sold during the collapse of USSR with sometimes next to nothing. Interestingly, Bogoyavlenskiy underlined that the perception that the Russian platform fleet currently used is old is false. As the average age of drilling platforms is just 25 years, in contrast Shell’s fleet in Alaska is almost averaging 40. Also, rigs are not as monopolised as some think: 40% of platforms are operated by Rosneft, 34.7% by Gazprom, 8.3% by LUKoil and remaining 17% by the other Russian majors.


In all, whether the Arctic market proves successful remains to be seen, as a lot depends on other parts of the world which will ultimately determine the end price of fossil fuels that production could be pegged to. At the moment Canada made good progress with its own shale production, aside from the tar sands and conventional fuel. USA continues to post ample figures. Moreover, Bogoyavlenskiy says that China is set on a successful shale production albeit with some lag as it lacks a technological know-how. Only in Poland, the situation seems dead for shale. Not to forget, Russia has not stood still as the Bazhenov Shale Formation in West-Siberia has great promise that could rival the famous US Bakken Field. Aside from this Russian giant, there are many small shale fields that could be utilised for local needs, but as a great deal of reserves are located as deep as 4000 meters extraction will be difficult – albeit safer than in Europe or USA as the water-table many environmentalist fear for is much less likely to be polluted, as it is separated by many more layers. Hence, not only is Arctic offshore production will be challenged by foreign fossil fuels, but it will need to contend with onshore shale production both at home and abroad.



Shtokman Gas Field:


I have been especially interested in the progress of the giant Shtokman Gas Field over the last several years, as it closely linked to my M.A. thesis. Alas, the RIAC conference came a bit late for it, as there Andrey Krivorotov of Shtokman Development spoke. Sadly, Krivorotov did not come bearing good news, as the huge offshore gas field in the Barents Sea looks to remain frozen and most likely sidelined, even though this company in charge of its development is trying to muster new strategies and proposals over the next few years. Shtokman Gas Field essentially has been unfortunate as it was targeted at the US export market, but as the Shale Revolution erupted it closed-off this path. Also, in recent years drilling prices, equipment costs and specialised wages have skyrocketed, in turn making offshore production in inhospitable places uneconomical. As a result, its foreign partners, Statoil and Total, withdrew or did not renew their contractual/shareholders agreement limits as these expired. Still, Andrey Krivorotov believes Shtokman may have an indirect hope as these firms are not disinterested and potentially as Norway launches its smaller fields in the Barents Sea to replace its dwindeling main giants it could in time make this offshore Russian field viable in a domino-effect – as logistical costs will be slashed by economies of scale. Lastly, a lot depends on actual price levels of fossil fuels. As Krivorotov says, which pleasantly supports the analysis in my earlier post (see: Who Decides Global Oil Prices), oil rates of up to $100 per barrel are greatly influenced by OPEC and physical global production, but past that point its down to other factors such as speculation. As Shtokman will need prices well above $100 per barrel, it is definitely a project for the future, but even so, such high price expectation beside speculative instability makes it risky. 



To Conclude – New Arctic Era:


In the RIAC conference a lot of attention was given to an idea of a model that can be replicated to the rest of the world. It cannot be denied that the Arctic is truly unique in contrast to other realms, but whether its model can be used elsewhere will be decided by the 'will' of policymakers, who all too often seem to forget it at home when going abroad. If we agree with RIAC’s President, Igor Ivanov, it is the only place where the UN truly functions and an almost pyramid type structure exists which is predictable and hierarchical. If we take a more pessimistic view of the future the Arctic may turn out to be a disguised iceberg. However, which ever one it turns out to be, the charge will lay squarely at the feet of policymakers as they had almost a blank canvas in front of them. If it turns out to be the latter, they have clearly failed to shake of the shackles of the old world or in geopolitics there really are no gentlemen. Overall, as the world becomes more open and states become freer, this is a great time to begin a discussion on a crucial issue of the 21st century. Hence, I welcome any comments below!



Thank You for Reading & I hope You've Enjoyed this Post!


Igor Ossipov

M.A. University of Kent & Higher School of Economics, Oil/Diesel Broker and RIAC Blogger.


Comments (всего 1)

12 january

Just A Little Extra: Do Not Forget the Locals!

In talks about great powers play and impeding challenges it can regrettably be to easy to forget about smaller groups in society. In respect to the Arctic, this is even truer especially as many of these areas are only accessible for 2 or 3 months per year due to ice. As Senior Fellow of the Arctic Program John Higginbotham stressed at the RIAC conference, this is especially so for Canada, which has a difficult geographical terrain with many excluded regions and separated communities. Still, out of all the speakers on this issue, most memorable was Alfred Jakobsen who represented a community of 160,000 people from across Alaska, Greenland and Canada. I managed to spot with my keen eye what appeared as a very interesting indigenous bag that Mr Jakobsen had with him, but he made an important point that success and credibility of the AC will greatly depend on whether it succeeds as it outright charters in protecting the indigenous people. Mr Jakobsen also said that it is vital to estimate the fish resources available in the Arctic, as absence of such statistics make it impossible to calculate sustainable level for fishing, on which the local communities depend for food (e.g. Arctic cod, wild Arctic red salmon, etc.) To add, about a half of the total indigenous population resides in Russia, or 4 million people, so the issue is even more important for it.

Igor Ossipov