From Arctic Circle 2013 to 2014, a big drop in the price of oil

Tourists frolick amidst the geothermal steam of the Blue Lagoon. Reykjavik, Iceland. © Mia Bennett.

Tourists frolic amidst the geothermal steam of the Blue Lagoon. Reykjavik, Iceland. Photo © Mia Bennett.


I’ve arrived in Iceland for the Arctic Circle 2014 assembly. I expressed some reservations about the conference program yesterday, but it should still be an intriguing event. For one, there are two heavy issues hanging in the air that weren’t last year. First are the tensions between Russia and the West, which now threaten Arctic cooperation. Second is the price of oil. Last year, the price of Brent crude oil sat at $115 per barrel on the first day of the conference. This year, it will sit around $85 per barrel, representing a 26% drop.

The drop in oil prices spells big trouble for all sorts of countries and states around the world, as the Economist reports. Russia will inevitably face issues with balancing its budget, but so will Alaska. As Brad Keithley writes on his blog on Alaska oil and gas, the state’s budget would only break even at $117/barrel, while the current state budget, which already assumes a deficit, is working at assumptions of $105/barrel.

Iceland resides within a bubble within the Arctic, as unlike Norway, Russia, and the U.S./Alaska, it doesn’t have an oil and gas industry. There’s been some exploration of the Dreki Area, lying in the ocean off the country’s northeast. Yet everything is in the very early stages. Hydropower and geothermal energy are still the name of the game. Iceland’s biggest export is aluminum, a product that’s made in smelters powered by the country’s churning glacial streams after being funneled through dams. Sidewalks are heated geothermally, which melts the snow that would otherwise cover them in winter. Geothermal energy even powers the tourist industry: just look at the tourists frolicking yesterday in the Blue Lagoon, spending a minimum of 35 euros for admission to the ethereally steamy hot baths.

A view of the Blue Lagoon, created by a geothermal power plant, from above. Photo © Mia Bennett.

A view of the Blue Lagoon, created by a geothermal power plant, from above. Photo © Mia Bennett.


Hydropower is controversial in Iceland since it necessitates the destruction and flooding of large swaths of land. It’s even more controversial in densely populated places like China and India, where hundreds of thousands of people must be removed in order to build dams. That’s one reason why this North Atlantic island has instead focused on exporting its geothermal energy technology. Icelandic energy consultants have shared their experiences by working with places in the Global South endowed with geothermal energy, like Kenya. The African country is home to the geothermally active Olkaria Area in the Great Rift Valley. These are the types of North-South dialogues that would be useful to have at Arctic conferences.

Earlier this month, Kenya – the first in Africa to develop its geothermal energy – opened the 140-MW Olkaria IV geothermal power plant. Upon its inaguaration, President Uhuru Kenyatta remarked, “The benefits of stable, clean, green energy radiate to all sectors of our economy.” Of course, geothermal energy has certain disadvantages. But clearly, the same cannot be said of Arctic oil no matter how safely it is developed.

With Brent crude at $85 a barrel, Reuters reports that up to 1 billion barrels of oil might be left in the ground. Norway’s Arctic fields are at risk, as are Scotland’s offshore fields. Standing on even shakier ground is exploration of Greenland, now threatened by the dual problem of parliamentary upheaval and weak oil prices. And in Russia, U.S. export controls are stymying companies from importing the technology they need to extract offshore Arctic resources, although they are not backing down so easily. Rosneft, for instance, has said it will press ahead in the Kara Sea despite ExxonMobil’s forced withdrawal on October 10.

If the Arctic can’t import the technology it needs to extract offshore oil, when possible, northern countries should instead try to export their renewable technologies that will work in other parts of the world. Such an exchange would show that the Arctic is more than a region of exception: it can also be a model for other parts of the world. With that in mind, let’s wait and see how the conversations at Arctic Circle 2014 turn out.

Arctic Circle: Denizens of the North, Make Way for Corporate Development

900 delegates from 34 countries will soon descend on Reykjavik for the Arctic Circle conference. Photo: Mia Bennett.

900 delegates from 34 countries will soon descend on Reykjavik for the Arctic Circle conference. Photo: Mia Bennett.

The Arctic Circle Assembly will soon be convening in Reykjavik, Iceland for the second time ever. The conference is the brainchild of Icelandic President Olafur Ragnar Grimsson, former Prime Minister of Greenland Kuupik Kleist, and media mogul Alice Rogoff, the publisher of the Alaska Dispatch (where this blog is occasionally syndicated). President Grimsson is more of a figurehead in Iceland than a leader with decisive political powers; for the most part, those lie with the prime minister. Yet he has still managed to become a big booster for turning Iceland into an important Arctic state. Grimsson is keen to curry interest in the now financially-solvent North Atlantic island nation. He has, for interest, few qualms about inviting Asian investment, unlike others in Icelandic government.

Given the president’s personal enthusiasm for the Arctic Circle project and the fact that Iceland is easier to reach than Alaska for Europeans and even many from the East Coast, the conference’s Icelandic backers have to come to dominate. While this year’s meeting was initially slated to take place in Anchorage, it is instead taking place in Reykjavik, which will continue to serve as the host city every year.

Arctic Circle brings together many political and economic movers and shakers from both within and outside of the region. This year, German Chancellor Angela Merkel will deliver a video message , and Jose Angel Gurria, the Secretary General of the OECD, will come to talk in person. Last year, former U.S. Secretary of State Hillary Clinton gave a video address, while Google even sent its Executive Chairman, Eric Schmidt, to speak. Investment firm Guggenheim Partners is a big sponsor of the conference. Shell, ExxonMobil, Daewoo Shipping (Korea) and COSCO (China) will all have envoys, too. “Sustainable development” and “corporate social responsibility” are catchphrases that I expect will be thrown around a lot at the conference, but the real motto actually seems to be corporate development of the Arctic.

Arctic Circle is pretty much the opposite of more academic meetings like the International Congress of Arctic Social Sciences (ICASS) VIII, which took place in the run-down former logging town of Prince George, British Columbia last spring. By contrast, Arctic Circle is situated in the effortlessly charming city of Reykjavik inside the beautiful Harpa concert hall, which the government spent 27 billion ISK ($222 million in today’s dollars) to build at the height of the recession. ICASS, whose location changes every time it convenes every three years, took place at the University of Northern British Columbia some miles from the center of town, where a short hike into the woods led one delegate to a chance encounter with a bear. When I wandered through downtown looking for dinner one night, I encountered the bleak sight of several burnt down and abandoned buildings and a lone inebriated First Nations individual. This was no town for the rundturs of the sort that take place in Reykjavik each weekend, let alone a flashy gathering like Arctic Circle.

Since Prince George had neither the glamour of Reykjavik nor sponsors like Google and the Carnegie Corporation of New York, both the town and the conference forced delegates to confront different realities about the Arctic and sub-Arctic, some of which I explored in a previous blog post recapping the event. The Arctic isn’t just about oil and gas and shipping. It’s about the individual lives of 4 million plus people, not all of them rosy-cheeked and wool-sweatered. There are many sad stories in the Arctic, too, of people left out of modernist development schemes led by states and corporations to “break the region” and extract its resources for use in the metropolises lying to the south. That’s not to say that you won’t hear occasionally these alternate tales at Arctic Circle, but the conference’s resounding theme seems to be one of slick, modern development, even more so than last year. Of a total 48 breakout sessions, I counted only five that pertain to the lives and well-being of people residing in the Arctic.

Furthermore, of all the plenary sessions at what’s billed as “the largest international gathering on the Arctic,” only one is dedicated to indigenous peoples. Held for 45 minutes on the last day, it’s called “Indigenous Voices from the Arctic.” By contrast, there are countless sessions devoted to the interests of countries, firms, and regions from outside the Arctic, like “Korea in the Arctic,” “Italy in the Arctic,” “Britain and the Arctic,” “Japan,” “France,” and “Maine: U.S. Partner in Arctic Development.” One has to wonder with only a single plenary session dedicated to indigenous peoples, if their voices will even be heard.

Next year, Arctic Circle plans to hold special “Arctic Circle Forums” in Singapore, the U.S., and Greenland. Last March, I attended the “Asia’s New Security Agenda” conference in Singapore, where geopolitical discussions naturally took the fore. The Norwegian Foreign Ministry had flown in many of its diplomats stationed in various locations around Asia to the city-state to learn about developments in Asian affairs and also specifically in the Arctic. Singapore seems to be turning into a hub for suits and policy wonks to discuss Northern affairs. The country has expressed a strong interest in working with indigenous peoples, so hopefully any discussions there will be nuanced.

As more forums spring up to discuss the Arctic both inside and outside the region, it’s important that they will invite more than just envoys from states and corporations headquartered in the capitals of Arctic nations. Individuals count, too. At Arctic Circle, several Asian countries, including Japan, South Korea, and Singapore, are sending official delegations. In the Arctic Circle Forums in Singapore and beyond, I hope that there are delegations from Arctic communities and indigenous peoples, too. It’s the only way that flows of knowledge between the Arctic and the rest of the world can be guaranteed to take place on a two-way street.

Rhetorical or real, Russian expansionism threatens the Arctic

Military bases and airfields along the Northern Sea Route that Russia is restoring.

Military bases and airfields along the Northern Sea Route that Russia plans to restore. The newly acquired “Peanut Hole” in the Sea of Okhotsk is also displayed.

In October 1987, Soviet leader Mikhail Gorbachev declared, “The Soviet Union is in favor of a radical lowering of the level of military confrontation in the region. Let the North of the globe, the Arctic, become a zone of peace.” Today, news stories about Russian activities in the Arctic make that speech seem like a very distant memory.

Russia Today triumphantly reports that Russian military bases will span the country’s entire Arctic coastline by the end of 2014, “just a year after Moscow announced its ambitious plan to build military presence in the region.” Defense Minister Sergey Shoigu claims, “By the end of the year we will already deploy most of our units in the region – from Murmansk to Chukotka.” Severomorsk, the city that is the headquarters of Russia’s Northern Fleet, will be the core of the new Joint Strategic Command along with the new strike force. Thousands of kilometers to the east, Tiksi, in the Sakha Republic, will serve as the base for Russia’s Arctic Air Force. Airfields are also reportedly being brought up to speed in Vorkuta, a coal-mining city in the Komi Republic, and Anadyr, at the country’s eastern edge. An article in another state-owned Russian news agency, ITAR-TASS, quoted President Vladimir Putin: “The fact that we restore it – what was lost. I’ll see,” referring to the restoration of all of these former Soviet military bases in the Arctic. This fixation with getting back what the Soviet Union once had, from Crimea to Arctic military bases, is no passing fancy of the Russian leader. A map of Soviet naval bases on Wikipedia, however, illustrates just how much work he might have cut out for him in returning Russia to a Soviet level of military presence in the Arctic, as the USSR invested a significant amount of money and resources into constructing military bases.

Towards “mastery of the North” and the militarization of Arctic environmental protection

Whether or not this military infrastructure is actually ever (re-)built in the Russian Arctic, the Kremlin’s plans fit into a longer history of Russian and Soviet desires to achieve “mastery of the North” (освоение севера) [1]. The word “освоение” (mastery) can also be translated as “development,” meaning that the Russian language takes mastery and development to be one and the same. It’s therefore possible that a typical Russian perspective might not see an area as mastered or controlled unless it was developed – hence why, unfortunately, development would traditionally be preferred over environmental conservation in order to guarantee Russia’s sovereignty over its Arctic region. One exception to that, however, might be the news that the country’s Northern Fleet is planning to create an Arctic environmental center to monitor and improve the region’s ecological status. This represents, in effect, the militarization of environmental protection in the Arctic.

The 20th-century Russian polar explorer Leonid Starakadomskiy (after whom an island in the Northern Sea Route is named) expressed,

“It is enough to note, that the Arctic Ocean washes the whole of the northern part of the sovereign shore of Asiatic Russia and represents the single open ocean connecting our far eastern possessions with European Russia” [2].

One hundred years later, nothing has changed. The Achilles’ heel of Russia’s vastness is that it has always struggled to knit together its enormous territory, causing an obsessive and defensive attitude in Moscow as it attempts to achieve this.The development of the Northern Sea Route can be seen as a maritime counterpoint to the land corridor that some commentators believe Russia yearns to establish from the mainland to the newly annexed Crimea. Development of the Arctic shipping lane would connect western Russia, where the bulk of the population lies, to the country’s newly acquired, resource-rich territory in the Sea of Okhotsk – 52,000 square kilometers of ocean space and seafloor, sometimes referred to as the “peanut hole,” that the United Nations designated as part of the country’s continental shelf this past March in a ruling that slipped under the radar as the conflict in Ukraine was boiling over [3].

Russian state-owned media: speaking too soon?

As a state-owned media outlet, RT could possibly be overstating the extent of Russia’s drive into the Arctic. Someone once mentioned to me during a conversation about Russia’s plans to build ten search and rescue stations along the Northern Sea Route: “When Russia says that something is under construction, that means it’s still in the planning stages. When they say it’s been built, that means its under construction.” In other words, news coming out of Russia might be one step ahead of the game.

Similarly, in describing the plentiful oil and gas resources located in the Arctic, RT mentions how “as technologies have advanced, more and more of those hydrocarbons have become recoverable and viable.” They conveniently forget to note how Western-imposed sanctions have made those very hydrocarbons less recoverable and viable. Earlier this month, for instance, despite the fact that ExxonMobil and Rosneft struck oil in the first well they drilled in the Kara Sea, the American oil major was forced to withdraw due to sanctions, putting the project on thin ice even as Rosneft vows to carry on.

RT also tries to put the militarization of the Arctic in a good light. “Despite concerns from environmentalists,” the story explains, “Shoigu said that the military would play a positive role in safeguarding the unique Arctic environment, and said that units are already engaged in a program of clearing up debris “that has accumulated for centuries.” But where did that debris come from? Largely, military activities in the Arctic. A single storage facility on the Kola Peninsula holds some 20,000 discarded nuclear fuel rods from nuclear submarines and nuclear-powered icebreakers. This debris isn’t just a Russian problem: Alaska, for example, has 700 military sites, many of which have been abandoned, while the Cold War-era Distant Early Warning Line has also left its mark across much of the North American Arctic and Greenland.

Environmental consequences of militarization

Former Soviet leader Mikhail Gorbachev.

Former Soviet leader Mikhail Gorbachev.

An article in The Barents Observer highlighted how Putin stressed that militarization would not harm the ever-iconic polar bear. But even if military activities do not directly impact polar bears, militarization of the Arctic will. Polar bears are a circumpolar species that requires international cooperation for protection. In fact, one of the first major circumpolar Arctic treaties was the Agreement on the Conservation of Polar Bears, signed in 1973 by Canada, Denmark (Greenland), Norway (Svalbard), the Soviet Union, and the United States, and it is still in effect today. But when militarization heats up in the Arctic, countries lose the motivation to work towards international environmental agreements.

On that cold day in Murmansk so many Octobers ago, Gorbachev encouraged military détente in the Arctic. Today, as an alleged Russian submarine idles in the Gulf of Bothnia somewhere off Stockholm, one wonders what the former world leader, now spending his days in Moscow, must think of the situation in the circumpolar north. If nothing else, let’s hope he’s popped in an old VHS tape of The Hunt for Red October.

Sources

[1] For more on this concept, see John Tichotsky’s book, Russia’s Diamond Colony: The Republic of Sakha (2000).

[2] Ibid, p. 3.

[3] For a deep analysis of the ruling and its implications, see John R. Haines’ article, “Ali Baba’s Cave’: The Sea of Okhotsk’s Contentious Triangle” (2014).