The Arctic is quickly reemerging as a strategic area where vital U.S. interests are at stake. The geopolitical and geo-economic importance of the Arctic region is rising rapidly, and its mineral wealth will likely transform the region into a booming economic frontier in the 21st century. The coasts and continental shelf of the Arctic Ocean are estimated to hold large deposits of oil, natural gas, and methane hydrate (natural gas) clusters along with large quantities of valuable minerals.

With the shrinking of the polar ice cap, extended navigation through the Northwest Passage along the northern coast of North America may soon become possible with the help of icebreakers. Similarly, Russia is seeking to make the Northern Sea Route along the northern coast of Eurasia navigable for considerably longer periods of the year. Opening these shorter routes will significantly cut the time and costs of shipping. (See Map 1.)

In recent years, Russia has been particularly active in the Arctic, aggressively advancing its interests and claims by using international law and by projecting military might into the region.

Despite the Arctic's strategic location and vast resources, the U.S. has largely ignored this region. The United States needs to develop a comprehensive policy for the Arctic, including diplomatic, naval, military, and economic policy components. This should include swiftly mapping U.S. territorial claims to determine their extent and to defend against claims by other countries. With oil and gas prices recently at historic highs in a tight supply and demand environment, the rich hydrocarbon resources in the Arctic may bring some relief to consumers. These resources, especially the hydrocarbons, also have the potential to significantly enhance the economy and the energy security of North America and the world.

The Arctic's Vast Untapped Resources

The U.S. Geological Survey estimates that the Arctic might hold as much as 90 billion barrels (13 percent) of the world's undiscovered oil reserves and 47.3 trillion cubic meters (tcm) (30 percent) of the world's undiscovered natural gas. At current consumption rates and assuming a 50 percent utilization rate of reserves, this is enough oil to meet global demand for 1.4 years and U.S. demand for six years. Arctic natural gas reserves may equal Russia's proven reserves, the world's largest.[1] (See Table 1.)

The Russian Ministry of Natural Resources estimates that the underwater Arctic region claimed by Russia could hold as much as 586 billion barrels of unproven oil reserves.[2] The ministry estimates that proven oil deposits "in the Russian area of water proper" in the Barents, Pechora, Kara, East Siberian, Chukchi, and Laptev Seas could reach 418 million tons (3 billion barrels) and proven gas reserves could reach 7.7 tcm. Unexplored reserves could total 9.24 billion tons (67.7 billion barrels) of oil and 88.3 tcm of natural gas.[3] Overall, Russia estimates that these areas have up to 10 trillion tons of hydrocarbon deposits, the equivalent of 73 trillion barrels of oil.[4]

In addition to oil and gas, the Arctic seabed may contain significant deposits of valuable metals and precious stones, such as gold, silver, copper, iron, lead, manganese, nickel, platinum, tin, zinc, and diamonds. The rise of China, India, and other developing countries has increased global demand for these commodities.[5]

Alaska 's North Slope. Alaska's North Slope contributes significantly to U.S. oil production and could supply more. The North Slope is the region of Alaska from the Canadian border on the east to the Chukchi Sea Outer Continental Shelf (OCS) on the west. It includes the Chukchi Sea OCS, the Beaufort Sea OCS, the Arctic National Wildlife Refuge (ANWR), the Central Arctic (the region between the Colville and Canning Rivers), and the National Petroleum Reserve, Alaska.[6] (See Map 2.)

Between 1977 and 2004, the Prudhoe Bay oil field on the North Slope produced more than 15 billion barrels of oil. By 1988, Prudhoe Bay was accounting for more than 25 percent of U.S. crude oil production. However, Prudhoe Bay oil field is currently in steep decline.[7] A U.S. Department of Energy report found that the North Slope has potentially 36 billion barrels of oil and 3.8 tcm of natural gas, close to Nigeria's proven reserves. The report also estimates that the Chukchi Sea OCS and the Beaufort Sea OCS hold combined energy reserves of 14 billion barrels of oil and about 2 tcm of natural gas.[8]

Furthermore, these reserves are even more attractive because their development is less limited by federal, state, and local legislation, as is the case with ANWR, and are thus more accessible to drilling.[9]

To enhance U.S. energy security, America should expand domestic oil production. America remains the only oil-producing nation on earth that has placed a significant amount of its reserves out of reach.[10] Until recently, potentially large U.S. natural gas deposits have been off limits.[11] For instance, ANWR holds potential reserves of about 10 billion barrels of petroleum.[12] Such reserves could lead to an additional 1 million barrels per day in domestic production, which could be transported south through the Trans-Alaska Pipeline, which has a spare capacity of 1 million barrels per day. An additional 1 million barrels per day would save the U.S. $123 billion in petroleum imports, create $7.7 billion in new economic activity, and generate 128,000 new jobs.[13]

Methane Hydrates. Large methane hydrate deposits are located on the deep seabed of the Arctic Ocean.[14] Methane hydrates are a solid form of natural gas and have 3,000 times the concentration of methane found in the atmosphere.[15] While no technology currently exists to mine methane clusters, the capability appears to be just over the horizon. The U.S. and Japan have agreed to cooperate in researching and developing commercial methane hydrate processing with the goal of selling gas from methane hydrates by 2018.[16] The South Korean Ministry of Energy has also announced that it will work with the U.S. in exploring and developing methane hydrate deposits to develop a commercially viable energy source. Seoul is also hoping to participate in the U.S.-sponsored Alaska North Slope project in 2009 to test the viability of using methane hydrates as an energy source.[17]

Global Oil Supply and the Demand "Crunch." Arctic oil and gas resources have become increasingly important given the tight energy market. Escalating demand for energy in 2001–2008, stagnating supply, political instability, growing resource nationalism, terrorism, and ethnic conflict have combined into a perfect storm of a global supply and demand crunch.[18] This crunch has been reflected in high oil prices ($147 per barrel in July). While oil prices have since retreated to less than $70 per barrel due to the financial crisis, global energy markets are expected to remain tight for the long-term as the fundamentals remain largely the same (i.e., rising demand in emerging markets and flattening supply). While these trends bode ill for energy security, the resources in the Arctic offer a glimmer of hope.

U.S. Energy Supplies. Developing oil deposits in the Arctic is strategically important because the region is not beset by religious, ethnic, or social strife and resource nationalism that plague oil-producing countries in the Middle East, West Africa, and Latin America. One way to reduce U.S. dependency on foreign oil is to develop Arctic oil fields. Such development would lower prices in the international oil market, even after accounting for the time lag for bringing new oil fields online. Moreover, the rich oil and gas deposits in Alaska's North Slope and in the U.S. offshore Arctic territories could further increase U.S. energy supply by guaranteeing availability of additional domestic energy supplies in the time of a national emergency.[19]

Liquefied Natural Gas. U.S. demand for natural gas is growing because generating electric power using natural gas is cleaner and more efficient than with coal or oil. Natural gas production in the U.S. and Canada has not kept pace with the rising demand and is "flattening out" or declining.[20]

In 2004, former Chairman of the Federal Reserve Alan Greenspan saw increased imports of liquefied natural gas (LNG) as a solution, or "price-pressure safety valve," to reduce prices and fill the gap from diminishing North American gas supply.[21] However, LNG imports have so far proven expensive in meeting growing demand. The price of natural gas abroad is nearly double the price in the U.S., so LNG flows to other buyers who are willing to pay higher prices, such as in Japan.

As Royal Dutch Shell's executive director of gas and power Linda Cook suggested, U.S. domestic production of natural gas could run 15–20 billion cubic feet per day below domestic demand by 2025.[22] However, augmented LNG production from the Arctic could help to meet future demand and to reduce gas prices in the domestic market, which would benefit industry and consumers.

Opening the Arctic Outer Continental Shelf. In a timely move prompted by the current demand, the Mineral Management Service in the U.S. Department of the Interior has started offering oil and gas lease sales for drilling rights in the Outer Continental Shelf in the Chukchi and Beaufort Seas. For example, the Chukchi Sea Lease Sale in February 2008 was the first OCS lease sale in 17 years.[23]

International corporations are now flocking to the High North. BP is developing a drilling project known as Liberty in the OCS. In February 2008, Royal Dutch Shell paid $2.1 billion for 275 lease blocks in the Chukchi Sea Lease Sale 193. At the February 2008 lease sale, Norway's StatoilHydro and Italy's ENI were the high bidders on a number of blocks. In total, seven companies participated in the Chukchi Sea Lease Sale, which spanned an area covering 5,354 blocks.[24] In the future, these and other projects on the Arctic Outer Continental Shelf could deliver gas to the lower 48 states through the Trans-Alaska Pipeline and the Canadian Mackenzie Valley Pipeline.

U.S. Claims in the Arctic

The U.S. relies on its sovereign power and diplomacy when pursuing territorial claims in the Arctic. The United States is not a party to the United Nations Convention on the Law of the Sea Treaty (LOST) and therefore is not bound by any procedures and determinations concluded through LOST instruments. Instead, the U.S. is pursuing its claims "as an independent, sovereign nation," relying in part on Harry S. Truman's Presidential Proclamation No. 2667, which declares that any hydrocarbon or other resources discovered beneath the U.S. continental shelf are the property of the United States.[25] The U.S. can defend its rights and claims through bilateral negotiations and in the multilateral venues such as through the Arctic Ocean Conference in May 2008, which met in Ilulissat, Greenland.

Many have argued, including the Bush Administration, that the U.S. will not have leverage or a "seat at the table" to pursue or defend its Arctic claims on condition that the U.S. is not a party to LOST. However, U.S. attendance at the conference in Ilulissat significantly weakened this argument. Even though the U.S. is not a LOST party, other Arctic nations "are unable to assert credible claims on U.S. territory in the Arctic or anywhere else in the world" because President Truman already secured U.S. rights to Arctic resources with his proclamation.[26]

Yet to protect its rights, the U.S. needs to know how far its claims stretch into the Arctic Ocean. The U.S. has been mapping the bottom of the Arctic Ocean and the Outer Continental Shelf since 2003.[27] Mapping is essential to determining the extent of the U.S. OCS and determining whether the U.S. has any legitimate claims to territory beyond its 200-nautical-mile exclusive economic zone. Despite ongoing U.S. efforts to chart the bottom of the Arctic Ocean, mapping efforts have been inadequate. According to a National Research Council report in 2007, the U.S. continental shelf and the Northwest Passage have not yet been entirely mapped.[28] Mapping is also important for disputing any conflicting claims by other Arctic nations. For example, the U.S. and Canada have likely claimed some of the same parts of the continental shelf.[29] Mapping data will also help to determine whether Russian claims conflict with U.S. and Canadian claims.

The expedition undertaken by the icebreaker USCGC Healy in the Chukchi Sea focused on surveying an area 400 to 600 miles north of Alaska and cost about $1.2 million—a pittance compared to the billions of dollars of Arctic natural resources that are at stake. The survey indicated that the foot or lowest part of the Alaskan continental shelf stretches more than 100 miles beyond what was previously thought, thus expanding the U.S. claim.[30]

The U.S. requires a modern flotilla of icebreakers to conduct mapping and to sustain U.S. claims. The U.S. currently has only three icebreakers that belong to the Coast Guard, of which only the Healy (commissioned in 2000) is relatively new. The other two icebreakers, while heavier than the Healy and thus capable of breaking through thicker ice, are at the end of their designed service life after operating for about 30 years. Yet even if the U.S. begins now, it will be eight to 10 years before a new icebreaker can enter service, and no money has been allocated to build a new-generation heavy icebreaker.[31]

Russian Claims

After its invasion of Georgia, Russia has clearly hardened its international posture and is increasingly relying on power, not international law, to settle its claims. Moscow has also intensified its anti-American policies and rhetoric and is likely to challenge U.S. interests whenever and wherever it can, including in the High North.

Russia takes its role as an Arctic power seriously. In 2001, Russia submitted to the U.N. Convention on the Law of the Sea a formal claim for an area of 1.2 million square kilometers (460,000 square miles) that runs from the undersea Lomonosov Ridge and Mendeleev Ridge to the North Pole. This is roughly the combined area of Germany, France, and Italy.[32] The U.N. commission did not accept the claim and requested "additional data and information."[33] Russia responded by sending a scientific mission of a nuclear-powered icebreaker and two mini-submarines to the area. During this meticulously organized media event, the mission planted the Russian flag on the ocean's floor at the Lomonosov Ridge after collecting soil samples that supposedly prove that the ridge is part of the Eurasian landmass. During the mission, Deputy Chairman of the Russian Duma Artur Chilingarov, the veteran Soviet explorer heading the scientific expedition, declared, "The Arctic is ours and we should demonstrate our presence."[34] Such statements run counter to the spirit and potential of international cooperation and seem inappropriate for a scientific mission.

The U.S. has objected to these claims and stated that they have "major flaws." Professor Timo Koivurova of the University of Lapland in Finland stated that "oceanic ridges cannot be claimed as part of the state's continental shelf."[35] Russia intends to resubmit its claim by 2009.[36]

Russia is also moving rapidly to establish a physical sea, ground, and air presence in the Arctic. In August 2008, Russian President Dmitry Medvedev signed a law that allows "the government to allocate strategic oil and gas deposits on the continental shelf without auctions." The law restricts participation to companies with five years' experience in a region's continental shelf and in which the government holds at least a 50 percent share, effectively allowing only state-controlled Gazprom and Rosneft to participate.[37] President Medvedev also featured the Arctic prominently in the new Russian Foreign Policy Concept, which states: "In accordance with the international law, Russia intends to establish the boundaries of its continental shelf, thus expanding opportunities for exploration and exploitation of its mineral resources."[38]

During 2008, Russian icebreakers have constantly patrolled in the Arctic. Russia has 18 operational icebreakers, the largest flotilla of icebreakers in the world.[39] Seven are nuclear, including the 50 Years of Victory, the largest icebreaker in the world.[40] Russia is planning to build new nuclear-powered icebreakers starting in 2015. Experts estimate that Russia will need to build six to 10 nuclear icebreakers over the next 20 years to maintain and expand its current level of operations.[41] Russia's presence in the Arctic will allow the Kremlin to take de facto possession of the underwater territories currently in dispute.

In addition to icebreakers, Russia is constructing an Arctic oil rig in the northern shipbuilding center of Severodvinsk, which will be completed by 2010. The rig will be the first of its kind, capable of operating in temperatures as low as minus 50 degrees Celsius (minus 58 degrees Fahrenheit) and withstand the impact of ice packs. The new rig was commissioned by the state-controlled Gazprom and demonstrates that Russia is serious about oil exploration in the Arctic.[42]

Russia's Polar Saber Rattling

In August 2007, shortly after sending the scientific expedition to the Arctic ridge, then Russian President Vladimir Putin ordered the resumption of regular air patrols over the Arctic Ocean. Strategic bombers including the turboprop Tu-95 (Bear), supersonic Tu-160 (Blackjack), and Tu-22M3 (Backfire) and the long-range anti-submarine warfare patrol aircraft Tu-142 have flown patrols since then.[43] According to the Russian Air Force, the Tu-95 bombers refueled in-flight to extend their operational patrol area.[44] Patrolling Russian bombers penetrated the 12-mile air defense identification zone surrounding Alaska 18 times during 2007.[45] Since August 2007, the Russian Air Force has flown more than 90 missions over the Arctic, Atlantic, and Pacific Oceans.[46]

The Russian Navy is also expanding its presence in the Arctic for the first time since the end of the Cold War.[47] Lieutenant General Vladimir Shamanov, head of the Defense Ministry's combat training department, said that the Russian Navy is increasing the operational radius of the Northern Fleet's submarines and that Russia's military strategy might be reoriented to meet threats to the country's interests in the Arctic, particularly with regard to its continental shelf. Shamanov said that "we have a number of highly-professional military units in the Leningrad, Siberian and Far Eastern military districts, which are specifically trained for combat in Arctic regions."[48]

On July 14, 2008, the Russian Navy announced that its fleet has "resumed a warship presence in the Arctic." These Arctic naval patrols include the area of the Spitsbergen archipelago that belongs to Norway, a NATO member. Russia refuses to recognize Norway's right to a 200-nautical-mile exclusive economic zone around Spitsbergen. Russia deployed an anti-submarine warfare destroyer followed by a guided-missile cruiser armed with 16 long-range anti-ship cruise missiles designed to destroy aircraft carriers.[49]

The resumption of Cold War–style patrols and increased naval presence in the Arctic is in keeping with Moscow's more forward posture and is intended to increase its leverage vis-à-vis territorial claims. Moscow is taking a dual approach of projecting military power while invoking international law. Regarding the naval deployments near Spitsbergen, the Russian Navy stated:

Sorties of warships of the Northern Fleet will be made periodically with a necessary regularity. All actions of the Russian warships are fulfilled strictly in accordance with the international maritime law, including the UN Convention on the Law of the Sea.[50]

At a meeting of the Russian government's Maritime Board in April 2008, Russian Foreign Minister Sergei Lavrov backed a policy of settling territorial disputes in the region with the countries bordering the Arctic through cooperation. First Deputy Prime Minister Sergei Ivanov, who is now deputy prime minister, stressed at the meeting that Russia observes the international law on the matter through adherence to "two international conventions": the 1958 Convention on the Continental Shelf, signed by Canada, Denmark, Norway, Russia, and the U.S., and the 1982 U.N. Convention on the Law of the Sea.[51]

While paying lip service to international law, Russia's ambitious actions hearken back to 19th-century statecraft rather than the 21st-century law-based policy and appear to indicate that the Kremlin believes that credible displays of power will settle the conflicting territorial claims. By comparison, the West's posture toward the Arctic has been irresolute and inadequate.

Arctic Sea-Lanes

The Arctic Ocean has two main sea routes that are open to shipping for about five months of the year with the help of icebreakers: the Northern Sea Route and the Northwest Passage. (See Map 1.)

The Northern Sea Route links the Barents Sea in the west with the Chukchi Sea to the east and services isolated settlements along Russia's long Arctic coastline. If the Arctic ice cap continues to shrink, it will become a major route for international shipping.[52] A Northern Sea Route that is navigable longer would make the transportation of commodities to international markets easier and significantly reduce transportation costs between the Pacific Rim and Northern Europe (and Eurasia).

A Russian Information Agency Novosti political commentator argued:

The country that dominates this sea lane will dictate its terms to the developers of the shelf deposits and will see the biggest gains from the transportation of raw materials to the Pacific and the Atlantic. These include billions of tons of oil and trillions of cubic meters of gas, not to mention other minerals in which the local lands abound.[53]

Another Russian expert similarly lamented, "If we do not start immediately reviving the Arctic transportation system, voyages on the Northern Sea Route will be led by the Japanese or the Americans."[54]

The Northwest Passage runs through Canada's Arctic archipelago. If the polar ice cap continues to recede, the Northwest Passage will become a major shipping lane for international trade between Europe and Asia, cutting transit times substantially. Currently, navigation is possible along the Northwest Passage during a seven-week period with the use of icebreakers.[55]

According to a report by the U.S. Office of Naval Research, by 2050 "[t]he Northwest Passage through the Canadian Archipelago and along the coast of Alaska will be ice-free and navigable every summer by non-icebreaking ships."[56]

Use of the Northwest Passage is a contentious issue between the United States and Canada. The U.S. argues that "it is a strait for international navigation" because it regards the Northwest Passage as international waters. Canada, on the other hand, claims that the straits of the sea route are "inland seas" falling under Canadian sovereignty.[57] Resolving this dispute amicably is essential for both countries to benefit from further economic and security cooperation.

International Cooperation

The United States has a strong interest in cooperating with its Arctic neighbors, especially Canada, in developing offshore oil and gas fields and policing the region. Canada is a close NATO ally and a reliable oil and natural gas supplier to the United States. Canada also maintains a very friendly investment climate compared to other energy-producing nations. Opening the Arctic is a major opportunity for U.S. and Canadian companies to enhance the energy security of North America.

At a recent conference, Robert McLeod, former minister of energy of Canada's Northwest Territories, said that exploitation of the oil and gas resources in the Arctic would improve North American energy security and that "[t]he combined northern gas reserves in Canada and the United States could supply southern markets in Canada and the United States with 8 billion cubic feet per day."[58]

Opportunities also exit for cooperation in defense and national security. As during the Cold War, the U.S. could work with its NATO partners in the Arctic region. This is already taking place at the U.S. Air Force base in Thule, Greenland, under bilateral agreements between the U.S. and Denmark that facilitate this cooperation. The U.S. and Canadian Coast Guards resupply the Thule Air Base.[59] The most important example of U.S.–Canadian defense cooperation is the North American Aerospace Defense Command (NORAD). The Alaskan NORAD Region is regaining its former relevance with the Russian bomber incursions.[60]

Warmer ocean temperatures and a smaller ice cap would also provide increased opportunities for U.S.–Canadian maritime cooperation in combating potential terrorist operations and unlawful navigation. Moreover, warming of the northern portion of the Bering Sea may induce the migration of fish to the Arctic Ocean, opening opportunities for joint fishing regulation.[61] With the North Pacific already suffering from extensive poaching, unlawful fishing could become a problem. Joint law enforcement coordination for commercial fishing will be increasingly important.

Reestablishing the U.S. Arctic Presence

The U.S. needs to revitalize its Arctic policy, beginning by elevating U.S. Arctic policy from its third-tier status. Specifically, the United States should:

1. Create an interagency task force on the Arctic bringing together the Departments of Defense, State, Interior, and Energy to develop the overall U.S. policy toward the region. The U.S. should use diplomatic, military, and economic means to maintain its sovereignty in the Arctic. The U.S. should also establish a Joint Task Force–Arctic Region Command, headed by a Coast Guard flag officer. This joint task force would maintain U.S. sovereignty and have an interagency staff with representatives from relevant U.S. agencies and departments. The U.S. should also establish an Arctic Coast Guard Forum modeled after the highly successful Northern Pacific Coast Guard Forum.
2. Accelerate the acquisition of icebreakers to support the timely mapping of the Arctic Outer Continental Shelf and the Arctic in general to advance U.S. national interests. The U.S. needs to swiftly map U.S. claims on the OCS and areas adjacent to Alaska to preserve its sovereign territorial rights. Timely mapping will be important as the other Arctic nations submit their claims within the 10-year window. The U.S. should not rely on mapping from other countries to advance its claims or to defend against the claims of other countries.
3. Provide the U.S. Coast Guard with a sufficient operations and maintenance budget to support an increased, regular, and influential presence in the Arctic.
4. Reach out to Canada, Norway, Denmark, and—wherever possible—Russia. Diplomacy and cooperation with Canada and European allies with interests in the region will be required to prevent conflict with Russia and to maintain the special relationship with Canada. The U.S. needs to work with Canada to develop a mutually beneficial framework for the commercial exploitation of Arctic hydrocarbons.
5. Create a public–private Arctic task force to provide a formal avenue for the private sector to advise the U.S. government on Arctic economic development. This task force should include representatives from energy, natural resources, and shipping sectors among others.
6. Authorize oil exploration and production in ANWR and other promising Arctic areas in order to expand domestic energy supply. Congress should also streamline regulations for areas that it has already opened but heavily regulated.

Conclusion

As an Arctic nation, the United States has significant geopolitical and geo-economic interests in the High North. The U.S. should not only have a place at the table, but also seek a leadership role in navigating the nascent challenges and opportunities, such as disputes over the Outer Continental Shelf, the navigation of Arctic sea-lanes, and commercial development of natural resources and fisheries.

To play this role and to vindicate its interests, the U.S. needs to continue swiftly mapping the Arctic, build a modern U.S. icebreaker fleet, and work with its Arctic partners in bilateral and multilateral venues. The U.S. needs to revitalize its Arctic policy and commit the necessary resources to sustain America's leadership role in the High North.

Ariel Cohen, Ph.D., is Senior Research Fellow in Russian and Eurasian Studies and International Energy Security and Lajos F. Szaszdi, Ph.D., is a Researcher in the Douglas and Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation. Jim Dolbow is a defense analyst and a member of the Editorial Board at the U.S. Naval Institute.