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Asia Business Development – Asia Business Consulting » The Arctic – Emerging opportunities beneath the ice

SpirE-Journal 2014 Q2

The Arctic – Emerging opportunities beneath the ice

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The Arctic - Emerging opportunities beneath the ice

With global warming gradually melting away polar ice caps, new opportunities are slowly, but surprisingly, emerging for trade, tourism and natural resource extraction in the Arctic Circle. But is developing such opportunities at odds with environmental sustainability?

Arctic sea ice sank to yet another record annual low in September 2012, at 44% below the 1981-2010 average. The Arctic Ocean is projected to be almost ice-free by the end of this century; with the ice melting at an accelerating rate, quicker than predicted by any climate model.

A decade ago, Al Gore’s “An Inconvenient Truth” drew world attention to the moral consequences of global warming. These included the destruction of farming, the flooding of coastal land displacing millions of people and the spread of tropical diseases to new parts of the global population.

Though the consequences of global warming on the Arctic are inherently detrimental, the shrinking icecaps herald new opportunities for trade, tourism and natural resource exploration in the Arctic Circle. The Arctic is expected to become more important in the coming decades, as climate change uncovers hidden natural resources and reveals new transport routes.

In 2012, 46 ships transported a total of 1.3 million tons of cargo using the Northern Sea Route - up from 34 ships and an estimated 820,000 tons in 2011.

In 2012, 46 ships transported a total of 1.3 million tons of cargo using the Northern Sea Route which runs along the northern coast of Russia – up from 34 ships and an estimated 820,000 tons in 2011.

What does the Arctic region offer?

A powerful testament to the interest that the Artic is arousing among the nations of the world was the fierce competition to gain observer status at the Arctic Council. Six new countries were recently granted this status, including China, India, Singapore, Italy, Japan and South Korea.

The council was first established in 1996 to promote co-operation amongst countries with interests in the Arctic. While it is an intergovernmental forum with no decision-making power, it aims to protect the Artic region’s environment.

Why the heightened interest among the nations of the world in the Arctic region?

Discovery of shipping routes

Image 1

New shipping routes would principally translate to greater cost and time savings for cross-continental exports and cargo hauling. When the Arctic ice melted over the summer of 2012, 46 ships from Far Eastern ports used the Northern Sea Route (which runs along the northern coast of Russia) to sail through the icy Arctic to Europe.

European countries have a vested interest in the new shipping route, as it would enable ships to circumnavigate numerous bottlenecks, like the Suez Canal, to increase access to Asia’s rapidly expanding consumer markets and manufacturing centers. It is therefore not surprising that Russia set up the Northern Sea Route administration in March, so as to supervise shipping.

Emerging tourist spot

In recent years, Icelandic destinations like Jokulsarion and Hella have become popular tourist spots because of their Northern Lights displays. This is a huge departure from the trickle of extreme adventurer tourists which used to be the region’s mainstay.

Polar tourism caters to tourists looking for unique experiences in the Polar Regions such as wildlife observation, sightseeing, fishing and hunting, not to mention extreme outdoor activities as well as cultural and historical activities.

While this rise in tourism has yielded economic benefits, it has also enhanced global awareness of the culture of the indigenous Arctic communities.

Icelandic destinations like Jokulsarion and Hella have become popular tourist spots because of their Northern Lights displays.

Abundant natural resources

The Arctic region could be well on its way to slake the worlds thirst for oil – now running at 86 million barrels of oil consumption per day. This is on account of unexplored oil hidden beneath the ice.

Artic oil has been irretrievable until only recently. Global warming has melted the Arctic ice to such an extent that it propelled oil corporations into a “black gold rush” frenzy. The US Geological Survey (USGS) surmised that approximately 90 billion barrels of undiscovered oil and 1,670 trillion cubic feet of natural gas lie within the Arctic Circle; signifying billions of dollars in revenues. This might account for as much as 20% – 30% of the world’s undiscovered oil and natural gas reserves.

In addition to oil and gas exploration, the warmer water has led to an extension of fish stocks such as capelin and cod in the melting Arctic Ocean. This might lead to massive growth for commercial fisheries.

Zones of conflict

Amidst the mad scramble to grab a piece of the Arctic pie, challenges remain.


As the Arctic ice continues to disappear, indigenous people and species are facing the prospect of endangerment. The Artic is home to 4 million indigenous inhabitants spanning across 30 tribes who have lived there for thousands of years. Their livelihood could possibly be threatened by global economic interests.

An estimated 1.1 million square miles of Arctic waters are unregulated, and this could lead to overfishing. This might lay waste to the fragile Arctic ecosystem and affect sea mammals, such as whales and polar bears.

Major oil spills due to industrial oil drilling would cause extensive damage to marine life and prove difficult to clean up due to the harsh environment conditions; akin to BP’s Deepwater Horizon drilling platform explosion in 2010. That episode caused an environmental disaster and resulted in over 200 million gallons of oil spreading into the Gulf of Mexico. It is still taking a toll on the fishermen since the oyster population – which accounts for about two-thirds of American supply – has been declining since then.

Possibility of political conflict

Image 2

Under International Law, no country has the ownership of the North Pole. However, eight neighbouring countries (U.S., Canada, Denmark, Russia, Norway, Finland, Sweden and Iceland) are keen to stake out unclaimed territories and take advantage of the region’s vast resources, as shown in Image 2. Rivalry for the black gold lying under the Arctic has made it a burgeoning priority to maintain stability and prevent maritime crime.

Russia has plans to upgrade its northern fleet and train military troops specifically for Arctic warfare, whereas the US plans to position armed coastguard vessels in its Arctic waters. Canada intends to further strengthen its Arctic fleet by building 28 ships with a capital outlay of USD33 billion over the next 30 years.

The Arctic region opens up to economic activity, there is a growing chance that military rivalry will accidentally tip over into armed conflict.

What lies ahead?

As global warming and the melting of the Arctic ice accelerates, tremendous economic opportunities beckon in terms of natural resource extraction, fishing, shipping and tourism. However, equally great are the dangers of irreversible environmental degradation, damage to indigenous peoples as well as political conflict.

The discovery of new sea routes would open up shipping shortcuts between Asia and Europe. The loss of Arctic ice would make commercial fishing feasible, while the unexplored billions of dollars’ worth of oil and gas will inevitably be tapped for human use. Coupled with a rise in mass tourism, the region is definitely poised for economic growth.

The Arctic is thus emerging as the world’s most important test case for whether the current multi-polar world order can successfully engineer peaceful and sustainable co-operation in the pursuit of economic goals.

The development of the tourism industry should be made a key priority by all political players with a stake in the Artic game. In particular, trans-boundary tourism should be fostered. This is because the tourist industry will provide a strong incentive and nudge for global powers to maintain peaceful and environmentally sustainable economic development in the Arctic region. The Arctic should never be allowed to become a desolate military-dominated no-man’s wasteland akin to the high-altitude glaciers that divide China and India.

A thriving tourism industry – perhaps drawing in the legions of Asian tourists eager to see the Northern Lights, reindeer and polar bears – will stand as a bulwark, making the prospect of a peaceful and prosperous Arctic that much more likely.

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