!

!
!
!
!
!
!
!
!
!
!
!
!

Imagining 2030 Series

The Far North

Gabrielle Falardeau is currently completing a Masters degree in War Studies at Kings College
London. Her research focuses on energy and maritime security with a special focus on the Arctic.

Its 2030, the Arctic landscape has changed significantly both geographically and
ecologically over the last few decades. The transition from ice and snow to open water
has increased the availability and access to natural resources and shipping routes.
However, the increased economic activity in the Arctic has not been linear and has
suffered various setbacks.
To begin, the North Sea Route has seen increased navigation. This route currently allows
ships from North East Asia to transport cargo to Europe and even the Canadian and
American East coast. Before 2010this route was not possible, but now that there are
longer periods of navigable waters extending from June to October its a viable option.
As such, this shipping route is now an alternative for ships who wish to reduce travel
time and some associated costs. Indeed, the North Sea Route is 40 per cent shorter than
traditional routes for ships traveling from China to Northern Europe. It has also allowed
merchant ships to circumvent chokepoints and other dangers along the traditional sea
route through the Suez Canal.

That being said, use of the North Sea Route has not become as widespread as some had
hoped because of the sustained challenges and limitations that the Arctic environment
presents. First, weather patterns and moving ice continue to present a danger to traveling
ships. Second, companies wishing to navigate through the Arctic need to account for
additional costs and therefore need to be certain of the viability of the North Sea Route.
In fact, since the adoption of the Polar Code in 2014, all ships traveling through the
Arctic have been required to adopt additional protection measures (such as dual hulls)

and therefore additional expenses. Furthermore, the additional cost of building and
fueling an ice-class cargo vessel, or the cost of the alternative icebreaker escort increases
the overall price of shipping via the Arctic. This in turn reduces the cost efficiency of the
North Sea Route as an alternative. Finally, because of the characteristics of the Arctic
environment, there is an imposed size limit on ships wishing to travel through the North
Sea Route.

Despite these disadvantages, the North Sea Route has seen increased but not abundant
traffic due to its ability to diversify trade routes. The alternative Arctic shipping route
through the United States, Canada and Greenland, the Northwest route, currently remains
unavailable because of sizable ice barriers.

With regards to energy resources in the Arctic, because of the elevated startup costs, the
challenging nature of the environment as well as its distance from established
infrastructure and markets, development in the Far North has not been an easy venture,
nor as successful as people had predicted it would be in the early 2000s. As such, the
Arctic continues to be an area of interest for oil and gas extraction, but the markets
growth has been slow and somewhat unsteady. This rate of growth has resulted from
economic and political setbacks, as well as environmental concerns.

Because of Russias extensive oil and gas reserves in the Arctic and the governments
strong emphasis on natural resource development, the country has easily become the
most important developer of the Far North. Despite this, their plans for the Far North
have already suffered delays. The reasons for these delays are twofold. First, the
economic sanctions which resulted from their involvement in the Ukraine in 2014-2015
restricted Russias ability to procure western (namely American) technology. It also
restricted the ability of Russian companies to conduct joint ventures in order to attract
foreign investment and expertise. Although Chinese investors demonstrated a willingness
to support Arctic initiatives, Russian companies were not able to move forward without
the technology and expertise that only western companies could provide. Finally, Arctic
development was inconceivable until 2020 when oil prices increased sufficiently to
compensate for high startup and ongoing costs.

When the sanctions were lifted during the fall of 2020and oil prices increased to over $80
per barrel, Russian energy development saw a notable increase. Until that occurred,
Russia focused on opportunities in less challenging onshore energy fields in East Siberia,
as well as unconventional oil.

In other Arctic states, energy development was met with resistance from the
environmental community. Activists pressured Arctic states to restrict energy
development in the area because of possible consequences to global temperatures, sea
levels, weather patterns, as well as the fragile local ecosystem. -Greenpeaces ship Arctic
Sunrise has on several occasions disrupted oil and gas projects, as well as tanker ships

traveling through the North Sea Route, resulting in damages. These activists have sought
to highlight the effects of resources extraction in the Arctic on global warming. Indeed,
the Far North continues to lack the proper safeguards across states to capture and
transport the natural gas mostly methane gas that is emitted when drilling for oil. If
companies choose to burn the methane gas because of the absence of adequate
infrastructure, a layer of soot will be scattered across the ice and snow. The soot will then
absorb the solar energy that would normally be reflected by the snow. This then results in
warmer waters and melting ice.

Furthermore, even with proper safeguards, there is still the danger of a potential oil spill
in the Far North. Because of the fragility of the local ecosystem as well as the difficulty
to clean up oil in cold and icy waters, environmentalists showed deep concern for Arctic
development. This pressure in turn slowed down but did not halt - energy development
in the Arctic.

Altogether, the Arctic has been an area of growth, but it is not yet considered an emergent
market. Despite predictions in the early 2000s that the growth in the Far North would
skyrocket, the political, economic, and environmental challenges surrounding ventures
into the Arctic, as well as various climate related difficulties, made rapid growth in the
Far North simply not possible. Instead, the Arctic market requires additional time to
evolve into an emergent or even an emerging market.