The Pandemic Depression
The Global Economy Will Never Be the Same
The countries of Asia are looking north, toward the Arctic. At last year’s Arctic Council ministerial meeting, held in May in Sweden, applications for permanent observer status were accepted from China, India, Japan, South Korea, and Singapore, as well as Italy. In the run-up to this year’s meeting, all eyes will be on the observers. It is difficult to exaggerate the significance of the council’s expansion to Asia, particularly to the continent’s powerhouses -- China, Japan, and India -- which underscores the Arctic’s strategic value to the global economy.
For a long time, the Arctic received short shrift on the global agenda. Not so today. A potent combination of natural variation, greenhouse gas emissions, and other changes to the environment over the past two decades have accelerated the melting of Arctic ice. In fact, global warming is progressing twice as fast in the Arctic as anywhere else. The quality and thickness of sea ice there brings these changes into sharp relief. In the Arctic today, most of the ice is what scientists term first-year ice, which is on average 1.5 meters thick. This is in marked contrast to old ice or multi-year ice, which is usually around 4.5 meters thick. Not only is first-year ice thinner, it also contains more brine cells and air pockets, all of which makes it easier for ice-breakers to cut through. Climate change thus portends the potential opening up of a passage along the northern coast of Eurasia connecting the Atlantic and Pacific Oceans.
In August 2012, Xue Long (Ice Dragon) became the first Chinese ship to cross the Arctic Ocean, making its way through the Northern Sea Route to arrive in Iceland. In December 2012, the LNG tanker Ob River, owned by Dynagas and carrying the flag of the Marshall Islands, sailed from Norway to Japan along the same route. These two voyages were among the 46 through the Northeast Passage in 2012, a considerable increase from 34 in 2011 and four in 2010. In 2013, this figure rose to more than 70. And far more traffic is likely in store. For starters, the passage significantly reduces travel distance and time between Europe and Asia. The voyage from Rotterdam to Yokohama through the Suez Canal and Malacca Straits, the current route of choice, covers a distance of 11,200 nautical miles; the Northeast Passage route is a mere 6,500 nautical miles. And that translates to reduced fuel consumption and CO2 emissions. Before the passage becomes a real shipping lane, though, it needs heavy investment in infrastructure, particularly along the Russian coast. That is not necessarily a bad thing. Several Asian states, notably South Korea and Singapore, have extensive experience in port development and management.
Although the Northeast Passage’s potential is undeniable, it is important to remember that 46 transits, while significant, pale in comparison to the 18,000 that were made through the Suez Canal over the same period. Furthermore, none of the 46 were return journeys, and none involved container ships, the workhorses of the global economy. Most of the Northern Sea Route is controlled by Russia, and passage would require costly investments in modern ice-breakers and escorts. Furthermore, given the still unpredictable weather patterns along the route, the tight delivery schedules that characterize container shipping will always be in danger of being compromised. Another factor is insurance costs associated with the voyage, which at present rates are prohibitive. And finally, the Northeast Passage would largely be useless for up to 50 percent of global trade, which is effectively intra-Asian. In other words, the Northeast Passage is still some ways from being a game changer for international trade.
Even so, a new trade route is not the Arctic’s only draw. According to the U.S. Geological Survey, up to 30 percent of the world’s undiscovered gas and 13 percent of undiscovered oil deposits lie in the Arctic region. China, in order to sustain its nearly seven percent annual growth rate, will need to consume vast amounts of energy. And Japan’s highly industrialized economy is almost entirely dependent on imported oil and gas. It is no wonder, then, that the region’s booming economies are interested in staking a claim to the Arctic. Beyond that, the waters there are rich fisheries, and, as a former Chinese ambassador to Norway has written, the “new fishing grounds” could be “the world’s largest storehouse of biological protein” -- all the more appealing considering that food security is such a big problem in Asia.
Aside from the transit and resource benefits, a third factor accounting for heightened Asian interest in the Arctic is the anticipated impact of climate change on their respective societies. Asian governments are concerned about the increased unpredictability of weather patterns, which affect anything from agricultural cycles to the duration of monsoon seasons. In fact, four of the five new Arctic Council observer states already have a presence in the research facilities on Ny-Ålesund, in Norway’s Svalbard archipelago. The entrance to the Chinese facility is conspicuously guarded by twin lion statues.
Against this backdrop, the Arctic Council will likely only grow in importance in the coming years. To be sure, although the mandate of the Arctic Council is more policy-shaping than policy-making, it nevertheless has a legal framework in place to regulate activities in the region. This is expressed in the form of the Ilulissat Declaration of May 2008, which adopted UNCLOS as the legal framework for the delimitation of maritime boundaries among the Arctic states. In the event that greater Asian interest in the region turns into a competition, or if the temptation to challenge current boundaries arises, the existence of a legal framework is reassuring. In addition, the council also concluded its first legally binding agreement on search and rescue at its May 2011 meeting in Nuuk, Greenland.
However, as the council seeks to build its diplomatic clout, it is coming up against two obstacles. First, there will be increasing scrutiny of Russia’s role in Arctic governance. Given that the Northern Sea Route runs along the Russia’s northern coast, the country’s cooperation will be critical. It doesn’t seem like a given, though. In 2012, Moscow introduced legislation that made it compulsory for all traffic plying the North Sea Route to travel with Russian ice-breakers. That is all well and good, but for the fact that a large portion of the Russian diesel ice-breaker fleet is aging, with many vessels due to be decommissioned over the next few years. Moscow plans to replace them with nuclear-powered ice-breakers, but these have not yet come onstream and probably will not for the next couple of years. Infrastructure poses yet another challenge. Russian port facilities along the Siberian coast will need to be upgraded, as will its navigation and hydrographic support systems. The challenge lies not in Russian engineering and technological know-how, which is available and of the highest order, but in Russia’s cumbersome bureaucracy and its glacial decision-making process.
Second, tensions have crept into the Arctic Council between members who favor an inclusive forum, including Norway, and those who have demonstrated more insular views on the matter of Arctic governance, including Canada. Although the tensions are still manageable, they have to be monitored closely. Some council members believe that Arctic states are custodians of the region and thus are entitled to govern it. Their anxiety was expressed during the deliberations over the new observers members at the Kiruna meeting, when Russian and Canadian observers were uncomfortable with signing off on the new members. Following the Ukraine crisis, tensions within member states are likely to be exacerbated. This time, though, it will be between Canada and Russia -- Canada is home to a large and politically significant Ukrainian migrant population.
So what can be done? For starters, it might be useful to explore the possibility of reforming the structure of the Arctic Council. Although the council has accepted the new observers, their precise roles have yet to be determined. Clearly, the observers have an interest in Arctic affairs, and by virtue of that will want to be involved in deliberations. The council, in other words, would do well to integrate observers into its processes. Among other things, this would mean that the group would have to reexamine the activities and operation of its six working groups. It might also be time for the Arctic Council to consider how to tackle to more substantive issues, such as how to strike a better balance between scientific research and the maximization of the region’s commercial potential, as well as strengthening of existing regimes so as to better govern activity in the area. To that end, the council is well placed to lend support to the adoption of a Polar Code designed to manage the risks to shipping in the difficult waters of the Arctic.
The economic potential of the Arctic is undoubtedly considerable, and that has heightened Asian interest in the region. Because these are perilous times for the Arctic environment, though, the exploration (and exploitation) of the area needs to be done sustainably. Not only that, it has to be done in a manner that fully engages all interested parties, including the major Asian states that have now been granted observer status in the Arctic Council. The Arctic Council remains the best game in town for Arctic governance, and it is up to the council to establish and maintain a viable regional order that preserves the delicate balance between human progress and the preservation of nature.