Centre for Russian Studies

M. Honchar: * Conflict of Economic Interests in the Arctic as Potentially Destabilizing Factor

First of all, I would like to draw your attention to one thing. You have the Black Sea Security magazine in your hands. Strategy XXI Centre for Global Studies has resumed production of this famous quarterly, published by the Nomos Centre in Sevastopol, where I had the honour to work from 2006 to 2014 (in fact, till the occupation of the Crimea). Dmytro Shtyblikov and Olexiy Bessarabov worked at the editorial office of this edition. Today is the 183rd day of their unlawful detention by the Russian FSB following the falsified charges in organizing acts of sabotage.

The logic of the Russian regime: if you are an analyst and journalist - you are a potential enemy of Russia, moreover at the occupied territory. My colleagues were engaged in military-political analysis of the Black Sea region, they could have made a brilliant report at today's conference, as they studied and knew well the military aspects of the Russian policy in various regions of the world; but they are in custody and me and my colleagues are calling - remember this, add your vote for their release. This is a reminder for those who want to do business with Russia as usual. Here I would also recall - read "The Red Note" by Bill Browder, the largest Western investor in Russia in 1990s-2000s, where the schemes and technologies of Putin’s looting and prosecution of those who denounced them were described - the famous Magnitsky list was named after a Russian lawyer who worked for Browder and was killed in the torture chambers of the Russian law enforcement system. The Arctic is not the least in the schemes of embezzling budget funds in Russia, but is most promising from the view of prospects.

Professor Bersheda made quite an apt comparison of the Arctic and the Crimean policies of Russia - " the Arctic is ours." I would like to recall one thing: an expanded board of the Ministry of Defence of Russia with the participation of Vladimir Putin was held in mid-December, 2013, when the then President of Ukraine Viktor Yanukovych was rushing to Moscow "to sort out problems", when passions raged in Kyiv in Maydan. He said the military about the need to pay special attention to the development of infrastructure and the deployment of military units in the Arctic area. In other words, we can put it clearly that at the time when the preparation was underway for "the Crimea is ours ", a set of measures was also supposed as for "the Arctic is ours." Not in the sense that those processes should be made parallel to a certain extent - approach to the Arctic is a longer term. But the goal is the same – capture and control. Just from my point of view, a favourable moment is expected, "H hour". but the preparation, moreover for the case of the Arctic conditions, must be made in advance.

When we talk about economic issues in the Arctic for Russia, it should be borne in mind that it is subordinated to its military interests. In other words, there is a close relationship when economic interests are subordinated to the military interests considering that then it will bring economic dividends later. It is not essential when it would happen, the time factor plays a minor role here. Recall the famous Russian principle: "At any price." And it works.

The main threat for Russia is identified as arising from melting ice cover in the Arctic -  the emergence of the American fleet in the polar latitudes, destroyers, equipped with «Aegis», which can successfully intercept Russian missiles in the direction of the main attack to the United States via the North Pole. Thus, according to the Russian strategists, it would dramatically reduce the threat to the United States and on the contrary, increase it to Russia. Russia, like the Soviet Union, is developing military infrastructure both defensive and offensive. In this context, the current Russian military bases are not only restored former Soviet basing points, bases and airfields for long-range aviation, but also new, in order to promote military infrastructure further into the Arctic region.

 

 

Russian military bases in the Arctic

 

In this case, when we look at what Russia wants to do at the time when military potential and preparations of other Arctic states are either absent or weak, including the USA and Canada, the obvious conclusion is Russia has left all far behind in the Arctic arms race.

The question is: why spend the money? But here is the answer. The Russian Institute of Military and Political Analysis has formulated it very clearly: "The implementation of these measures (military) will give Russia an opportunity to gain indisputable advantage, at least in the Eurasian Arctic, as all other countries are not resorting to anything like this now, and apparently do not even plan it. In this case, the issue of the status of the Northern Sea Route as internal waters of Russia would be at least removed, so that it would be impossible to pass it without the permit of the Russian authorities. Similarly, there would be no problem with regard the ownership of offshore mineral deposits on the shelf of the Russian sector of the Arctic".

Thus, Russia is trying to resolve the issue of control over the Arctic areas not belonging to it de facto, avoiding de jure procedures under the UN Convention on the Law of the Sea, bearing in mind that international legal decisions may not be in its favour.

As in the case of Ukraine - the occupation and annexation of the Crimea, Russia violated all possible rules of international law, hoping that it would adhere to them in the Arctic case, would probably be naive. And, of course, some other more well-known Russian principles are going off  - “make it hot” for all in the Arctic, "pin the NATO’s ears back ". These principles are also well-known for us and thus what now looks like a bluff, to a larger extent, and is perceived as a bluff, however, contains a component of real preparations. If we look, for instance, at the report of the Centre for Military Studies of the Institute of the USA and Canada of the Academy of Sciences of Russia, dedicated to the optimization of the military  policy to ensure national energy security in 2012, there was a significant recommendation there: "One of the specific measures of the military agency could be boosting the strengthening of military presence in energy important for Russia regions such as Central Asia, the Caspian basin, the Arctic, the Far East. This could be accompanied by increasing military alignment in the Arctic Ocean to balance the presence of the NATO forces in the region and building military bases there."  It seems that this recommendation is implemented.

Certainly, the impact on Arctic policy not only of the Arctic countries causes global warming. And in this case, when we look at the preparations at the Arctic, we can see that the most powerful icebreaker fleet (there is nothing to do in the Arctic without icebreaking fleet and aviation) is in Russia. All other Arctic states or the so-called circumarctic (according to the Chinese terminology) have very modest, to say the least, opportunities. And in this case we can say (here we return to the subject related to the energy-centric vision  by Russia of its policy in general and in the Arctic, in particular) that the main strategic objectives of Russia in the Arctic as the energy superpower are:

1) retaining and enhancing the status of the world producer of hydrocarbons at the expense of promising Arctic projects;

2) maintaining and enhancing the status of the main supplier of hydrocarbons to Europe and controlling related infrastructure;

3) taking control over promising hydrocarbon reserves in the Arctic.

Our colleague A. Baronin says that it is meaningless under low oil prices - it is, but it does not stop Russia, where it is assumed that low oil prices is a temporary phenomenon, the era of cheap energy is in the past and in the future everyone will need hydrocarbons the same as before, and then all will turn to Russia, which must take care of increasing "the reserves of the nation" now.

These large-scale projects, which are confusing the European partners of Russia, such as Shtokman project, which seemed absurd from the logical point of view, in fact is not absurd from the standpoint of the Russian oligarchonomics, because it is a great opportunity to loot state or corporate budgets. And that is the essence of oligarchonomics of Putin sample. Moreover, the Arctic provides much wider opportunities for this than before. Russian experts have called Putin's gas pipelines - Nord Stream, South Stream and others – “kickback money lines”. But Arctic projects give by far more possibilities. Because these projects account for billions or dozens of billions US dollars, and Arctic projects will account for hundreds of billions dollars. Accordingly, the amounts of "kickbacks" are proportionally larger. So this is the main incentive, in my view - this is the main stimulus that explains why the Russian kleptocracy aspires to the Arctic.

Accordingly, the "Great Russian Arctic Dream" is to get the desired distribution of a sector of the Arctic. And then, of course, the geotectonic conflict of interests works inherent in the geology of the Arctic. When it comes to the Mendeleev Ridge, the continuation of what it is, the Russian point of view - it is the continuation of the Eurasian continental plateau. From the viewpoint of Denmark it is the continuation of the Greenland plateau and Dannebrog, the Danish flag, should be hoisting over the centre of the Arctic and the North Pole, which according to this approach belongs of Denmark. According to Canada this is the continuation of the North American continental plateau. And, accordingly, the systematic conflict of interests is built here and clashes in the Arctic (not necessarily military) will take place sooner or later. Here it should be understood that when Russia does not get what it has outlined through negotiations, it will do it without prior arrangement - "the Arctic is ours."

Now let us have a look at the vision of the Arctic from the resource perspective. We have already mentioned the Arctic hydrocarbon reserves, and I will not repeat it, I will just bring aggregated data only. According to the US Geological Service, there are the following resources beneath the Arctic Ocean: oil - 12 billion tons, gas condensate - 5.9 billion tons, gas - 47.3 trillion cubic meters. And this is  rather conservative estimation. And off the coast of Alaska oil fields are concentrated, while gas is at nobody’s Arctic shelf, off the coast of Russia. Many multinational companies have the appetite for Arctic deposits. Leaders in these appetites are Russian and American companies.

 

(Green – Rosneft, red – Gazprom, orange – Lukoil, yellow – others)

         The schematic map is marked with green blocks in the Arctic zone, belonging to the national Rosneft. In fact, almost all of them were meant for joint projects with the US ExxonMobil. They were worked out at a time when ExxonMobil was led by the current US Secretary of State Rex Tillerson. Development of the mentioned contract blocks in the Arctic conditions is enormous money - several hundred billion dollars of investments which Russia envisaged to get from the USA and international financial markets. "The Crimea is ours" interrupted the implementation of "the Arctic is ours" in terms of attracting foreign investments and technologies, without which Russia is not able to achieve the goal of the development of the Arctic shelf.

The vision of Russia's development of the Arctic was formulated very specifically in the Arctic ideology laid down by pro-Putin Izborsk club. I intentionally have picked this quote because it is quintessential for the present Russian strategy for the Arctic: "Development of the Arctic is a cultural axiom of our advancement. Development of Northern Arctic territories should be a priority for our domestic policy. Strategic centre of our national interests definitely shifts northward, to the northern horizon of our civilization, "North Heartland", the 10th Federal District and the capital of the future empire." Hence, it is not just a tag, although it looks like the one, it is fixing realities: the resource base (and Russia is a resource dependent country) is increasingly shifting to the Arctic, the North. And not only hydrocarbon but also the resource base of the future, because the mineral resource base of the Arctic is not just oil and gas. Especially in an environment where energy prices are falling (and perhaps will go on falling), profitable business for offshore hydrocarbons becomes problematic. There are rare earth metals, which are indispensable for further technological progress. And the Arctic should not be considered separately from Eastern Siberia and the Far East. And it is important to mention China.

Chinese vision of the Arctic is quite different from the Russian. China has no outlet to the Arctic, but feels itself a sircumarctic state, since the source of the Irtysh River, which flows into the Arctic Ocean, is in Xinjiang. Global perspective of the development of rare earth metals, which are so important for modern technological progress, is connected with Russia's Arctic regions of Siberia and the Far East due to the fact that their deposits in the US were virtually exhausted in 1990s, China, occupying a dominant position will exhaust its reserves in the near future, and Brazil has some deposits of non-strategic volume.

The next item is associated with the use of the Northern Sea Route and in this case the melting of the ice cover around the North Pole and adjacent land of Eurasia and North America. It is China who links with this most prospects. Sure, not only China, but also Japan and South Korea who are discussing the possibility of developing a joint strategy of the three countries on the Arctic and how to go through the Arctic both to North America and Europe. And mind that China considers the strategy in three areas at once: the Silk Road, the Southern Route (across the Indian Ocean) and the Northern Sea Route. Therefore, it is not just China's ambitions for quite serious intentions for the future stand up for this related not only to logistics of Chinese products at the world markets, but also to the resource prospects of the Far East, Eastern Siberia and the eastern sector of the Arctic. This determines the long-term algorithm of the Chinese expansion Northward.

         Arctic Ambitions of China.

 

Therefore, a hypothetical scenario could look like NovoChina scenario - there may be a change of the current maps of Russia in favour of China due to the increasing needs of the Chinese industry, which can be satisfied only by access to new resource bases.

 

 

Scenario-XXI: NovoChina (Eastern Sector of the Arctic, Eastern Siberia, the Far East)

 

 

(Orange: territories to the east of the Yenisei – Krasnoyarsk Territory, Irkutsk Province, Republic Saha (Yakutia),Chukchi Autonomous District, Magadan Province, Kamchatka Province. These territories are handed over to China as an indefinite lease for US$10 bln. a year;

Yellow: Territories occupied by China to become part of the Chinese People’s Republic;

Red: disputable Southern Kuril Islands return to Japan;

Green: Demilitarized zone (Tumen, Omsk, Tomsk, Novosibirsk, Kemerovo Provinces, Khakassia, Altai);

Violet: Kazakhstan. At its territory the citizens of China enjoy the same rights as the local population. Kazakhstan refuses to have Armed Forces and allows the deployment of a limited contingent of the Chinese Army.

Light green: territories under the jurisdiction of the Russian Federation)

 

This does not mean that the National Liberation Army of China will carry out any action in technologies of the hybrid war. This may be the result of some Russian-Chinese agreements in order to save the related regime in the Kremlin, with Putin or, most likely, without Putin. By the way, it is not accidental that China holds its line in the not yet officially formulated polar strategy of "The Arctic as a Common Heritage", thus clearly indicating their claims in the polar latitudes.

As for us in Europe, we should take into account an important thing. As the basic concept, the vision of the Russian side is somehow energy-centric, resource-centric, Russia acts for the annihilation of major competitors who can supply additional energy to Europe, alternative to the Russian one, out of independent from Russia sources and along independent routes. And so it organizes "hot scenarios", trying to transform the energy map in their interests by acting in non-competitive ways. Actions against Ukraine are an example of such Russian policy.

But in the Arctic, too, with the account of the plans, production of the natural gas and the fact that the main competitor at the European market for the Russian gas is the gas from Norway, we should not rule out a scenario that in some way the Russian side would try to neutralize the rival.

 

 

“Hot scenario” for alternative sources and routes of hydrocarbons in order to retain the monopoly status of Russia as a supplier of Hydrocarbons to Europe from the East

 

 

Therefore, a Norwegian TV series "Occupied" dedicated to hybrid occupation of Norway by Russia, which is popular in Ukraine now, is not meaningless. Sometimes artists feel in a more subtle way than the analysts.

Finally. With regard to protection of the fragile environment of the Arctic, the conflict of economic interests, and the lack of global consensus on the Arctic, the best decision would be to introduce a moratorium (by signing a relevant international legal document) on economic activities, especially the production of mineral resources and above all – oil, - to about 50 years. You can retain only shipping along the Northern Sea Route, though, with the exception of oil tanker traffic. And in 50 years we will see whether we are dealing with a global and long enough period of warming which opens the Arctic from the ice cover, which will improve the safety of navigation, or it really comes to a new micro-ice age and the Arctic will not open.

 

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* Information about the author:

Mykhailo Honchar – President, Centre for Global Studies "Strategy XXI", expert, Centre for Russian Studies, Kyiv, Ukraine.

The article is based on the presentation at the International Conference "Russian Activity in the Arctic: Goals, Directions and Security Challenges".