The last year’s events have turned more than one widely-held assumption about Arctic developments on its head. The vision of a new resource bonanza is paling as the collapse of oil prices (together with already low gas ones) halts new investment even in the most familiar and safest exploration grounds. Where analysts used to speculate about great-power rivalry and possible triggers for conflict around the Pole, the crisis over Ukraine makes the spillover of Russia-West tensions from elsewhere into the Arctic suddenly look a much more plausible scenario.

Scotland, too, is riding the roller-coaster of hydrocarbon prices; and as the part of the UK nearest to the Arctic, it may be more than averagely interested in shifts of atmosphere there.  This short brief will therefore ask in more detail how events in Ukraine, and Western reactions, have or have not affected recent developments in the High North. It will comment among other things on the roles played by the Nordic countries, who are particularly close to Scotland both geographically and in many of their policy values. 

Sanctions or business as usual?

First, it is important to be precise about which effects can or cannot be ascribed to Western protest measures against Russia since last Spring, and to Russia’s counter-measures. Many factors, as we shall see below, are conspiring to make Arctic prospects look less promising – The Economist is even speaking of an Arctic ‘bubble’ ready to burst[1] – and most of them would have operated even if Moscow had kept its hands off Ukraine.

Just two kinds of measures can definitely be seen as impacting on real-time relationships in the Arctic here and now.  First, NATO agreed in April 2014 that its members’ military cooperation with Russia must stop until further notice,[2] and in the North this includes Norway – which has suspended contacts initially until end-2015 – and Denmark. (Iceland has no armed forces anyway.) Further, a meeting planned for mid-2014 where the military leaders of Arctic Council member countries (Canada, the Nordics, Russia and the US) would have discussed how to cooperate when working on peaceful tasks like Search & Rescue had to be postponed. It would have been the third in a series designed primarily to back up agreements made in the Arctic Council on S&R and cooperative oil-spill response. Another military forum[3] that includes coastguards, and is attended by the UK, Germany and the Netherlands as well as the Nordics, did take place in August 2014 but without Russia.

Secondly, Russia’s counter-measures announced in August 2014<a “mso-footnote-id:=”” ftn4″=”” href=”https://web.archive.org/web/20151210041916/https://www.scottishglobalforum.net/alyson-bailes-arctic-chill.html#_ftn4″ title=””>[4] which block a range of food imports from EU countries have hit the cross-border trade with Finland particularly hard.  Border crossings fell by a third in December 2014 and another 37% in early January, though the weakness of Russian currency was the proximate reason.<a “mso-footnote-id:=”” ftn5″=”” href=”https://web.archive.org/web/20151210041916/https://www.scottishglobalforum.net/alyson-bailes-arctic-chill.html#_ftn5″ title=””>[5] A particular kind of cheese produced specifically for Russian export must now be sold at cut price to the Finns themselves and is ironically called ‘Putin cheese’.   As a curiosity, Russia did not include Iceland in the list of countries targeted by this embargo; it remains unclear whether it was a mere slip, or based on Iceland’s non-membership of the EU, or an attempt to drive wedges among the Nordics.  In any case, Iceland’s government made clear that it fully supported the NATO stand on Ukraine.

Another general sanctions measure has been linked by many with the Arctic: the halting of Western financial credits for all Russian oil and gas projects, anywhere. This could indeed be important for longer-term exploration and exploitation, as Russia is dependent on foreign support in investment and risk-taking as well as high technology. However, the measure does not undo existing contracts for joint operations, and while ExxonMobil has withdrawn from a joint venture with Rosneft in the Kara Sea, other companies such as Statoil have said that they are standing by existing agreements with Russia or have even signed new ones. In the near term, Russia intends to press ahead under its own steam with development of recent finds both in the Yamal peninsula and in more accessible offshore fields; for a medium-term alternative it says it can work with partners in the BRICs[6] group – notably, China – and others in Asia. This last claim should be taken cautiously, as China has seemed more disposed so far to exploit Russia’s difficult position than to join Moscow in the international dog-house.

The most important point to make, however, is that in anything to do with oil and gas Russia’s real enemy is the global price collapse: which in turn has overwhelmingly economic rather than political causes.  This in itself is bound to make many exploration plans non-viable, and make Western firms especially cautious about wasting resources on them – even if some miracle solution could be found for Russia-Ukraine relations.  

Where cooperation continues

Rather paradoxically, there has been much less sign of disruption in the formal cooperation between Russia and its neighbours over Arctic affairs than in the private business and other specialized sectors. The main body convening to discuss environmental challenges, scientific work, health and safety in the Arctic is the Arctic Council already mentioned, where Canada currently holds the Chair. Despite taking a strong line nationally over Ukraine, the Canadian authorities have made clear they still want to invite Russia’s Foreign Minister to the next high-level AC meeting which they will hold at Iqaluit, in their northern territories, in April 2015. Russian senior officials have attended the preparatory meetings as normal and the AC’s main subordinate bodies, six mainly scientific Working Groups, have continued on schedule.  The only disturbances so far reported involve a US and Canadian decision not to send officials from home to two working groups held back to back in Moscow (but their Embassies did send observers); the pull-out of some Russians from Western-hosted Arctic seminars; and the cancellation of one US/Russian workshop outside the main programme. Some analysts also see a slow-down in work on joint approaches to preventing (as distinct from handling) major oil-spills.

Given that all the Western AC members are countries commonly vocal about international norms, this willingness to shield or ‘compartmentalize’ inter-governmental Arctic cooperation in the face of Russian wrong-doing demands an explanation. Three contributing factors can be suggested here.  First, the work of the AC serves higher interests where success matters equally for all participants and indeed, for the rest of the world. Its main objectives under the present Canadian programme and that of the US – the next incoming Chair – include cutting pollution, mitigating climate change, protecting local peoples and wildlife against its consequences, making Arctic shipping safer, and making Arctic business more responsible and sustainable.[7]  As the Arctic is warming twice as fast as any other part of the world, these laudable aims already mean a race against time. It is not easy for any government to suggest they be sacrificed for one specific political quarrel.

The other side of the coin is what the AC does not deal with. According to its founding document, it cannot discuss military security. It has no expertise in, or particular hold over, big business, notably because it has no power to make legally binding decisions. If its members want to create such obligations they make ad hoc treaties among themselves (as was done over S&R cooperation and managing oils pills)[8], or pass the issue to another international body with the right competence.  Over the last year, for example, the International Maritime Organization (IMO, a UN agency) has worked on original AC proposals to turn them into a binding code for Polar shipping, designed both to boost safety and protect the environment.[9] This will be opened for signature and states will decide what to do about quite independently of the AC and, indeed, of the Ukraine issue. In sum: if either side in the Ukraine debate wanted to make life harder for the other in the Arctic, they should logically take action where the real beef is, rather than in the rarefied and relatively ineffective forum of the AC.

The third factor is the complexity of AC members’ interests regarding Russia, and the policy conclusions they draw from them. Even if the Arctic saw intense military (including nuclear) activity during the Cold War and is still an important zone for East-West balance and deterrence, such deployments are largely geared  to the general Russia-West confrontation. They do not mean that the peoples actually living and working in the High North dislike and fear each other or have conflicting interests: indeed, the opposite is usually the case. Since the end of the Cold War, the Nordic states and Russia have worked together to improve trade, tourism and mutual help across their mutual northern frontiers,[10] and relations between Alaska and North-east Siberia are equally good. Fishing regimes are cooperative; coastguards and border controllers work together.

For Norway, in particular, safe and effective management of its oil and gas wealth demands active cooperation with Russia, and the latter is a main theme of its published Arctic strategy[11] alongside the resolve to defend its territory with NATO’s help.[12]  While no-one doubts Finland’s sturdy resolve against any Russian incursion, keeping things calm and controlled on the long common border is clearly in Helsinki’s interest as well. Iceland and the Danish possessions of Greenland and Faroes, as small nations with no armed forces of their own, have the greatest stake of all in avoiding any risk of Arctic conflict, while their fish-based economies put a premium on continued access to the Russian market.

The U.S. with its global interests commonly finds itself needing Russia as a partner on some issues – say, currently, Iran and Syria – even while leading the Western backlash on others closer to Europe. It has a long history of two-way policies (e.g., grain supplied to the Soviet Union mid-Cold War) and of keeping back channels open to Moscow. Canada, finally, has to be mindful of its duties as the Chair of the AC where it represents the interests of all eight states, and cannot achieve any decision without full consensus. If any further explanation is needed of why ‘business as usual’ is the default choice for the AC community as things stand, one might note that countries more straightforwardly critical of Russia like the Baltics are not present there, and Poland has only the relatively weak status of an Observer.  

And yet – an Arctic slowdown?

Precisely because the AC’s grip is so light on the rudder of Arctic development, however, political will does not guarantee progress.  The impact on the region of collapsing oil prices has already been mentioned. In addition, figures recently released<a “mso-footnote-id:=”” ftn13″=”” href=”https://web.archive.org/web/20151210041916/https://www.scottishglobalforum.net/alyson-bailes-arctic-chill.html#_ftn13″ title=””>[13] showed that only 23 ships completed a transit of the Northern Sea Route over Russia in 2014 compared with 71 in 2013, and that an even sharper drop – 77% – occurred in the weight of cargo carried.   Some headlines immediately linked this with the downturn in West-Russia relations,<a “mso-footnote-id:=”” ftn14″=”” href=”https://web.archive.org/web/20151210041916/https://www.scottishglobalforum.net/alyson-bailes-arctic-chill.html#_ftn14″ title=””>[14] but the connection is hard to prove given the nature of the traffic and the specific incidence of sanctions as explained above. Besides, the number of transit permits that shippers sought from Russia was only slightly lower than 2013, which suggests that something else interfered with their plans. Analysts closer to the Arctic have pointed to bad ice conditions, a late summer opening of the route, generally poor economic conditions (making sponsors unwilling to fund purely experimental or demonstration journeys), and the likelihood that Russia has pitched its charges for transit and icebreaker escorts too high. One writer[15] also points out that China, prospectively the most interested party in an Arctic short-cut for the longer term, has been investing heavily in a land-based ‘Silk Route’ where Russia cannot dictate the conditions so easily.

In reality, it would be as imprudent to draw hasty conditions from 2014’s experience as it was to do so from a 50% rise in ship transits in 2012-13. Fluctuations both in climate and economic activity are inevitable in an arena as rapidly evolving as today’s Arctic. They would be ‘nothing to write home about’ if various players – not just journalists, but speculators in search of profit – had not hyped the Arctic expansion so uncritically beforehand.

If the latest influences on the Arctic, including whatever limited effects the political chill may have, mean that exploitation will go more slowly and Arctic oil and gas will stay under the ground (or the seabed) for longer, that is arguably no bad thing.  A sharp rise in economic activity would have outrun the availability of support facilities and security cover, and brought higher risks of accident and environmental damage from untried technologies. Avoiding surplus oil/gas production makes sense both for those interested in bolstering prices, and for those wanting to phase out fossil fuels.

On the other hand, a stagnating Arctic with no new economic opportunities is no inviting prospect. The 10 million or so people living in the zone still need to make a living. Environmental change does not wait upon human convenience and will be doing serious economic damage, for instance through more frequent weather extremes, permafrost melting and flooding, probably well before any serious new profits start to roll in. And while the Arctic countries are not poor or unstable, it may be too much to expect especially the smallest ones to absorb the costs in a static or backward-sliding economic environment.

Back to Scotland

Here we may return to the relevance of the issue for Scotland.  While hopefully not in the front line for Arctic-related damage, it can offer expertise on at least two fronts for getting through the next, increasingly challenging and complicated period.  If the supposed big earners of oil and gas and bulk shipping do not perform as expected, more specific, specialized and imaginative economic niches will need to be developed by sea and by land. One should not forget here the likely new opportunities for fishing and fish farming, in which Scotland has a larger proportionate stake than any other part of the UK.  And slower development should, if nothing else, give more time to work out environmentally and socially sustainable solutions to help Arctic nature and Arctic peoples meet the pressures of unrelenting change.  Scotland has much relevant experience that could be proffered both through governmental cooperation and commercially.

If Scotland was sitting today in the Arctic Council, what attitude should it take on the big issue of working with Russia? The best guess is that it would share many of the motives of the Nordic states for trying to disentangle the genuine joint interests behind Arctic cooperation from the shock to both Western values and Western interests that Russia has administered in Ukraine.  Good diplomacy in a crisis means keeping open the channels of communication, and the AC and other Northern regional organizations offer suitably low-key, low-cost arenas for doing just that.  In the best case, talking quietly to Russia in the North might give a chance to move from megaphone diplomacy toward a better understanding, and ultimately a stronger peace.
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SOURCES:
[1] See http://www.economistinsights.com/sustainability-resources/event/arctic-summit-2015.
[2] Details at http://www.nato.int/cps/en/natohq/topics_50090.htm?.
[3] Known as the Arctic Security Forces Roundtable
[4] See http://www.bbc.co.uk/news/world-europe-28687172.
[5] ‘Grim economic outlook puts brakes on border traffic’, Barents Observer 12.1.2105, at http://barentsobserver.com/en/borders/2015/01/grim-economic-outlook-puts-brakes-border-traffic-12-01. Crossings over the Norway-Russia border near Kirkenes have also dropped but less sharply.
[6] Brazil, Russia, India and China.
[7] For a comment on US Chairmanship goals see ‘As US Outlines Arctic Council Goals, Native Groups and State Lawmakers Left Wanting’, 13.11.2014, at http://www.alaskapublic.org/2014/11/03/as-us-outlines-arctic-council-goals-native-groups-and-state-lawmakers-left-wanting/. [8] These two inter-governmental agreements were made at AC high-level meetings in 2011 and 2013 respectvely: details are at www.arctic-council.org
[9] See http://www.imo.org/MediaCentre/HotTopics/polar/Pages/default.asp.
[10] This is done notably in the framework of a sub-regional organization called the Barents Euro-Arctic Council, and in the EU’s ‘Northern Dimension’ scheme which includes Iceland, Russia and Norway.  So far as is known, cooperation in these frameworks as well as the AC has been maintained unchanged over the last year. For further background see Ingmar Oldberg, The Role of Russia in Regional Councils, Reykjavik: Centre for Arctic Policy Studies, 2014, at http://ams.hi.is/wp-content/uploads/2014/08/The-role-of-Russia_Online.pdf, and Alyson JK Bailes, ‘Understanding the Arctic Council: A ‘Sub-regional’ Perspective’, <em “mso-bidi-font-style:=”” normal”=””>Journal of  Military and Strategic Studies, Vol.15 No 2 (2013), at http://www.jmss.org/jmss/index.php/jmss.
[11] The Norwegian Government’s High North Strategy, 2006,
at https://www.regjeringen.no/globalassets/upload/ud/vedlegg/strategien.pdf
[12] On the tricky issue of NATO’s Arctic role see Alyson JK Bailes, The Arctic as European Periphery, International Relations and Security Network (ISN) January 2014, at http://www.isn.ethz.ch/Digital-Library/Articles/Detail/?id=186496.
[13] ‘Northern Sea route traffic plummeted’, Barents Observer website 16.12.2014, at http://barentsobserver.com/en/arctic/2014/12/northern-sea-route-traffic-plummeted-16-12.
[14] ‘Sanctions sap allure of Russia’s Arctic shipping route’, Reuters 22.1.2105, at http://www.reuters.com/article/2015/01/22/sanctions-russia-arctic-shipping-idUSL6N0V03WO20150122.
[15] ‘China’s silk road plans could challenge Northern Sea Route’, <em “mso-bidi-font-style:=”” normal”=””>Barents Observer 6.1.2015, at http://barentsobserver.com/en/business/2015/01/blog-chinas-silk-road-plans-could-challenge-northern-sea-route-06-01.

Professor Alyson JK Bailes is currently Adjunct Professor at the University of Iceland in Reykjavik, and a Visiting Professor at the College of Europe in Bruges.  She sits on the Advisory Board of the the Scottish Global Forum.