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Sanctions on Russia -- helping or hindering the Arctic environment?

Mia BennettEye on the Arctic

Many in the Arctic have vowed that tensions outside the region between Russia and the West would not affect circumpolar cooperation. After last week’s downing of Malaysia Airlines Flight 17 over Ukraine, however, the escalation of tension has threatened to spill northward, at least in the political realm.

According to Reuters, in a news conference, European Union energy commissioner Guenther Oettinger expressed, “If they (Russia) don’t decisively try to do something to prevent escalation, then there is no reason for us to help promote the growth of their industry and develop new resources for gas and oil and therefore to put this equipment on the list of sanctions.”

But could the EU seriously affect Russia’s plans for oil and gas development in its Arctic backyard? European companies like France’s Total, Italy’s Eni and Norway’s Statoil all have investments in the region, so tougher sanctions could theoretically impinge their plans. Norway is not a member of the EU, but Norwegian Foreign Minister Børge Brende declared, “It is important that Europe stand together in this serious situation. EU’s decision to extend the measures is an appropriate and necessary step.” Norway is arguably Russia’s most important partner in the Arctic, from environmental cooperation to oil and gas development, so its decision to follow tougher EU sanctions could hit Moscow hard.

Exxon Mobil and Rosneft move ahead with exploration in the Kara Sea

Still, it’s one thing to get foreign ministers to say something. It’s quite another to stop the immense, multibillion-dollar joint ventures between European, American and Russian companies from moving forward in the Russian Arctic. This week, U.S.-based Exxon Mobil, the world’s largest oil company, began towing Norwegian company Seadrill’s West Alpha oil rig to a site in the Kara Sea that is a four-day sail from Murmansk. Exxon is partnering with Rosneft in a $600 billion project to explore for oil and gas in the Universitetskaya geological formation, which lies within one of three license blocks the two companies hold in the sea. The two companies do not have as much money in the Arctic on the line as Shell, for instance, which has invested nearly $6 billion in looking for fossil fuels in the Chukchi and Beaufort Seas with no returns so far. But overall, Exxon and Rosneft’s joint venture in the Kara and Black Seas still totals an enormous $3.2 billion, so it’s unlikely that either company is going to want to allow events in Ukraine to affect their designs.

Especially in the Arctic, exploration activities are planned years in advance given the short operating seasons. Any delay can push back plans by years, so it’s important that companies adhere as closely as possible to the planned schedule. While Exxon Mobil’s activities are not technically in violation of American sanctions, when the West’s states and companies are split, it’s difficult for it to put up a united front against Russia.

With sanctions from the West, Russia looks east

Whether or not European and American sanctions affect Russia’s plans Arctic oil an gas development, increasingly, Russia is turning eastward. The country is looking to Asia not just for export markets for its fossil fuels, but also for investors and technology providers for its Arctic oil and gas projects.

Consider the Yamal LNG project under development in coastal central Siberia. China National Petroleum Corporation, with which Gazprom signed the long-awaited $400 billion, 30-year gas deal in May 2014, holds a 20 percent stake in the project. France’s Total holds another 20 percent stake, while independently owned Russian company OAO Novatek holds the remaining 60 percent stake. In July 2014, it was announced that South Korea company Daewoo would build the nine LNG tankers that will be needed to transport the resource to and from the gas field. Japanese company Mitsui O.S.K. has already signed up to buy and operate three of these tankers. As such, Yamal exemplifies the increasing participation of China, South Korea and Japan in the Russian Arctic oil and gas sector -- participation which sanctions will not affect.

As South Korea makes plans to turn into an oil hub for the Asia-Pacific, Russia could have even more reasons to send its oil and gas east along the Northern Sea Route instead of west, at least when ice conditions allow.

Problems ahead for Arctic cooperation on environment, SAR

In short, commercial interests are facilitating Arctic cooperation as geopolitical tensions freeze partnerships elsewhere. This is worrying for polar search and rescue and the Arctic environment because it’s states rather than corporations that partner on these matters. For instance, in March, events in Crimea put the planned Northern Eagle search and rescue exercise between the U.S., Russia and Norway, on hold indefinitely. And in April, Canada, the current Arctic Council chair, boycotted the intergovernmental forum’s working group meetings in Moscow. Those meetings were over black carbon and methane, pollutants that threaten to have an increased impact on the Arctic as industrial activities in the region increase.

At the time, the chair of the Arctic Council and Canada’s minister for the Arctic Council, Leona Aglukkaq, expressed, “Canada is proud to show leadership on the world stage through its chairmanship of the Arctic Council. As a result of Russia’s illegal occupation of Ukraine and its continued provocative actions in Crimea and elsewhere, Canada did not attend working-group-level meetings in Moscow this week. Canada will continue to support the important work of the Arctic Council.” But by boycotting these meetings, Canada was actually not supporting the work of the Arctic Council, especially in the environmental domain. Without international cooperation between Russia, the biggest Arctic country and the one moving forward the most quickly with Arctic oil and gas development, and the rest of the Arctic states, including Canada, oversight of the ever-increasing extractive industries will weaken.

There’s one glimmer of hope for the Arctic environment, though, and that’s if European (and American) sanctions are strong enough to manage to delay exploration and production in the Russian Arctic due to the lack of technology and knowledge transfer. In that case, sanctions would achieve Greenpeace’s goal, which is to delay (if not altogether ban) drilling in the Arctic. If this happens, it would be just another strange twist in how events in distant lands like Ukraine can affect the future of the Arctic environment.

 This post first appeared on Cryopolitics, an Arctic News and Analysis blog.

 

This story is posted on Alaska Dispatch News as part of Eye on the Arctic, a collaborative partnership between public and private circumpolar media organizations.