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Arctic ambitions: Will US let Russia control shipping in the Far North?

  • Author: Mead Treadwell
  • Updated: September 28, 2016
  • Published June 28, 2015

YAKUTSK, Russia -- In August 1981, our Russian hosts built a campfire on a bluff overlooking the Lena River here, a region most Americans only know from its strategic position in the board game Risk. Under a bright midnight sun, we washed down frozen whitefish, cucumbers, tomatoes, potatoes and stewed horsemeat with numerous toasts of Soviet champagne, vodka and brandy, and dreamed out loud about what could happen in the Arctic.

A boat steamed by, headed downstream toward the port of Tiksi on the Arctic Ocean.

Wally Hickel, then between his service as U.S. Interior secretary and his second term as Alaska governor, jumped up and waved his arms with excitement, explaining "that ship can turn west and go to Murmansk in Europe, east and go to Vladivostok on the Pacific. These Russians have shown how Arctic shipping can link the continents. The rest of us need to learn there even is an Arctic Ocean!"

It no longer takes the reverie of a campfire to envision hundreds, if not thousands, of ship voyages happening each year over the top of the world. For the practical purposes of commerce, the world has a brand-new ocean. Mines and gas fields in Northwest Siberia and the Norwegian Arctic use Russia's Northern Sea Route to expand their market options to the Pacific. Container ship owners -- who currently use canals in Suez and Panama as shortcuts -- are looking to a newly accessible Arctic to link Europe and Asia. China's Overseas Shipping Company (COSCO) made an experimental trans-Arctic container shipment in 2013. That same year, Asia's largest shipping and trading nations -- India, Singapore, China, Korea and Japan -- successfully pressed to join the eight-nation Arctic Council as "observers."

Three major changes in the Arctic have occurred in a generation:

• Arctic sea ice is thinner;

• Icebreaking technology is better; and,

• The supply of and demand for Arctic energy and mineral resources is growing.

While polar explorers have sought Arctic routes for centuries, nations in our time have an opportunity to work together now to offer a reliable international seaway in the Arctic. The world once coped with lengthy and dangerous shipping around two capes -- Cape Horn and the Cape of Good Hope -- before replacing them with the Panama and Suez canals. Singapore made port investments, based on Lee Kuan Yew's vision in the 1960s, and today it's a major trans-shipment hub of Asia. In the Arctic, coordinated investments in icebreakers, ports and promotion will make a huge difference for global shipping in a generation. The top of the world is no less ripe for infrastructure than the American West was after the Louisiana Purchase and before the transcontinental railroads.

Perhaps the most effective model for an Arctic shipping regime is the St. Lawrence Seaway, operated by Canada and the U.S. and linking the Great Lakes to the Atlantic. Last year, the Seaway's 3,900 vessel customers carried 37.1 million metric tons of cargo, mostly grain, iron ore and bulk commodities. Icebreakers provided by the U.S. and Canada ensured the route stayed open 286 days. A Seaway analysis says their infrastructure supports 227,000 jobs, $35 billion in economic activity, and saved shippers $3.6 billion in transport costs.

Arctic shipping will happen, but without strong Western participation, it is likely to happen poorly -- with negative consequences for business reliability, the environment, energy access and security. In the last decade, Western nations bent over backward to keep Russia from having more opportunities to "turn off the tap" as pipelines were built to bring oil and gas from the Caspian Region. The Arctic basin contains 13 percent of the world's potential oil and 30 percent of the world's potential gas. Leaving Russia alone to shepherd shipping from the Arctic gives them even more dangerous leverage over global energy supplies. Avoiding future conflict is in Russia's interest, as well as our own; all nations would be served by greater international cooperation in Arctic shipping.

Moreover, for many nations, Arctic shipping is a strategic business opportunity with high potential returns. Alaska, Canada and Russia benefit daily, financially, from their Arctic territory in the rapidly growing international aviation market. For Anchorage, operations in support of international air cargo produces thousands of jobs; close to 50,000 Alaskans work in aviation overall. Russia and Canada get less of the interchange revenue but earn millions every year for flights over their territory. (The U.S. does not charge.) Meanwhile, much of the industrialized world benefits from shorter passenger and cargo flights. The same global benefits can arise from a determined effort to establish safe, secure and reliable Arctic shipping.

Russia’s Arctic shipping aspirations

In 2011, the Russian Geographic Society invited Arctic experts from around the world to come to Arkhangelsk, the Russian Arctic port used to receive lend-lease equipment from the allies during World War II.

The society's chairman, then-Prime Minister Vladimir Putin, convened a bevy of Russian cabinet members and governors whose territories cover Russia's northern coast. Putin spoke at length about Arctic shipping, which he believed would have the economic importance of the Suez Canal. He announced that Russia would build nine new icebreakers by 2020 and offer competitive tariffs to attract ships. His ministry of emergency situations would build depots of oil spill response equipment along the Russian coast. His space agency would launch new communications, weather and ice-monitoring satellites to make sure the route is safe. His navy would establish new bases to make sure Russia's northern coast is secure.

International cooperation was invited, but the message was clear -- Russia was going ahead, with or without the rest of the world.

Tariffs up to $500,000 per voyage

If you are master of a ship with a cargo to bring to Europe from the Pacific Ocean, how do you get there today? If you head north, the Northern Sea Route across the top of Russia is currently a better option than the often ice-choked Northwest Passage across the top of Canada. A direct, straight over-the-pole route used by aircraft probably would not be your best choice due to ice, but it's theoretically possible.

A company seeking to transport goods through the Northern Sea Route would have to contact Russia's Northern Sea Route Administration several months in advance. Then, it would pay a tariff that can reach up to $500,000 a voyage.

In 2013, close to 60 vessels made this trip, twice as many as the year before. In 2014, the numbers were down, due to delays in oil drilling on Alaska's north coast as well as the "chilling" effect of Western sanctions against Russia. Nevertheless, Russia's Northern Sea Route is open for business and, so far, offers the only regular icebreaker ship-escort service in this part of the world. Rates are set to recover costs of the nation's nuclear icebreakers while leaving clients some savings due to shorter times and distances.

However, shippers also look at reliability, not just cost and distance, in selecting routes.

Russia's reputation for reliability has never been strong in global transportation. For example, trips linking Europe and Asia along the 99-year-old Trans-Siberian Railroad require switching railcar gauges and maintaining faith that the cargo won't be diverted en route. Legends of lost trains die hard.

Russia's role in global aviation is a brighter story -- a large portion of flights linking Europe and North America to Asia and the Gulf countries fly through Russian airspace. However, Russia has been a cagey aviation partner. Russia publicly considered denying overflights last September in response to sanctions. It opted instead to maintain fees for airlines that reportedly total $500 million a year.

Alaska still holds the lion's share of cargo trans-shipment for polar aviation. U.S. reliability was established in the Cold War (Anchorage is the world's fourth largest air cargo airport due to polar flights), while Russia excluded many flights and even shot down a flight that strayed off its Pacific coast, Korean Airlines 007, in 1982. Besides caviar, vodka and unbranded resource commodities, it's hard to find a Russian service or product that leads in world markets.

Hillary Clinton first

The Arctic Council and its predecessor, the Arctic Environmental Protection Strategy, had convened foreign ministers every other year or so since 1991. However, Hillary Clinton's decision to attend the 2011 meeting marked the first time the U.S. secretary of state participated. The meeting in Nuuk, Greenland, produced the first binding agreement among the Arctic eight -- Russia, United States, Canada, Denmark, Iceland, Norway, Sweden, and Finland -- divvying up the Arctic region to assign responsibility for rescues in international waters. Tens of thousands of air passengers cross that region weekly, and summer cruise ships full of tourists have plied the waters off Greenland, Alaska and Canada's Northwest Passage in recent years.

In 2013, Secretary of State John Kerry kept the precedent and signed a similar binding oil spill response agreement when the council met in Sweden.

The fact that Western diplomats have, with Russia, addressed Arctic Ocean safety is a good first step, but that should not be confused with addressing business opportunities. Under these two Arctic Council pacts, "Drill, baby drill" has become more than a political slogan: Exercise after exercise to prepare for cruise ship accidents or oil spills from any source will help identify gaps in Arctic marine safety infrastructure.

The most obvious gaps are the lack of aircraft and icebreakers. The U.S. has just two icebreakers -- based thousands of miles away in Seattle -- that can tow a ship. Its nearest search-and-rescue Coast Guard helicopters are in Kodiak, based more than 1,000 miles from the Arctic Ocean. U.S. Coast Guard facilities on the Arctic coast are temporarily leased.

During the Cold War, the U.S. appeared to be more interested in Arctic capability than it is today. Networks of sensors helped determine where Russian submarines were operating in the North. Spies were parachuted in, and extracted by "Skyhook," reminiscent of a James Bond movie, off of Russian ice islands. Attack submarines more regularly plied the depths of the Arctic Ocean. Today, the Northern Command has the job of advocating for military resources the U.S. needs in the North, and if a recommendation for new icebreaking capacity has come forward, it has yet to appear in a president's Department of Defense or Homeland Security budget. The idea that leadership in sea power includes both military and commercial leadership seems to be lost; the last heavy icebreakers commissioned by the United States were justified for submarine rescues in the early 1970s.

Slow and slower

Governments are seldom entrepreneurial or visionary when it comes to establishing new global infrastructure. The Panama Canal, begun and stalled by the French in 1881, was taken over by the U.S. in 1904 and opened in 1914. The first proposals for the St. Lawrence Seaway came in the 1890s, but the first treaty between the U.S. and Canada was signed in 1932, only to not be ratified. After more political somersaults in both countries, the seaway opened in 1959.

Some U.S. reluctance to moving forward in the Arctic stems from those benefiting from the status quo: Today's waterborne container trade is dominated by a few large firms that have established a network of trans-shipping ports that circle the globe. Commodity shipments out of the Arctic, delivery of supplies to communities, and resource extraction sites now dominate Arctic shipping. It is usually ship owners and shipbuilders from China, Korea, Singapore and Norway who speak with vision about regular continent-to-continent container trade. When it comes to predicting which mariners will truly pioneer regular trans-Arctic shipping, some bet on upstarts, not big firms.

Washington has some ideological reluctance to Arctic shipping as well. As the U.S. takes the chair of the eight-nation Arctic Council, it wants to focus on fighting climate change. Simultaneously promoting new business in this newly accessible ocean might come off as counter to the U.S. agenda at best, unseemly profiteering at worst. But there is little scientific belief that a global climate agreement will restore lost ice to the Arctic Ocean, and icebreaker advocates tell us that Arctic shipping is here to stay, even if ice returns.

There is even a green argument in favor of Arctic shipping. The distance savings -- and other efficiencies if vessel size is unconstrained by canal width and depth -- will reduce greenhouse gas emissions. Others argue the Arctic ships could be asked (or told) to use cleaner fuels, such as liquefied natural gas.

Furthermore, diplomatic attention in this region is often focused on other matters. Even the U.S., which has not ratified the United Nations Law of the Sea agreement, is preparing a claim for new subsurface land control. Russia's claim under that treaty would give it control of 45 percent of the Arctic Ocean bottom; the U.S. claim in the Arctic and in a few other coastal areas where the continental shelf extends past 200 miles would add undersea lands to U.S. territory offshore about twice the size of California. Resolving these issues should not be hard, but the question of who owns the Arctic takes a large amount of the attention nevertheless.

Another diplomatic diversion is a fundamental disagreement over freedom of navigation in the Arctic. Russia and Canada have both passed legislation asserting that the best routes in Arctic shipping -- the Northern Sea Route adjacent to Russia and the Northwest Passage through the Canadian archipelago -- are the internal waters of Russia and Canada. In principle, the U.S. and most seafaring nations reject their claims, forcefully but quietly. The National Strategy for the Arctic Region, signed by President Barack Obama in May 2013, insists that the U.S. will "support and preserve … international legal principles of freedom of navigation and overflight and other uses of the sea and airspace related to these freedoms …"

The fact that the U.S. did agree in Law of the Sea negotiations to the terms of Article 234, which allows a coastal state with traditionally ice covered waters to regulate shipping for protection of the environment, should make things easier. The language seemingly would allow Russia to regulate shipping on the Northern Sea Route within its 200-mile limit, and Canada to require notification before vessels come through. For that matter, the U.S., if it wanted to, could use Law of the Sea principles to require itinerant vessels to file an oil spill prevention and response plan in waters near Alaska. To coastal Alaskans' dismay, it has not.

It is time to iron out this issue, either bilaterally or in a tribunal. Any solution should let the effect of Canada and Russia's internal waters claim -- a ship safety regime -- move forward, and establish a similar regime in waters near the U.S. Indeed, a requirement that ships coming and going through the Arctic Ocean pay for icebreaker assistance, for example, might be constructed in concert by six Arctic coastal states.

Ships are coming anyway. The Coast Guard knows it. The Arctic Council's agreements on marine safety, plus adoption of a Polar Code by the International Maritime Organization in 2014, marked great progress on the agenda Arctic nations agreed to pursue when it published an Arctic Marine Shipping Assessment in 2009. The Coast Guard's proposal to establish a vessel-traffic system, with Russia, in the Bering Strait is another sign. Alaska's call for improved oil spill response rules for itinerant vessels, still a struggle after the 2004 shipwreck of the Malaysian-registered cargo ship Selendang Ayu in the Aleutians, has been met with only a minimal standard by the Coast Guard for some ships passing through the Aleutians and the Bering Strait. Native subsistence hunters, plying the same waters for seals and whales, as well as some of the world's most productive fishing fleets, need more effective safety measures applied to passing ships.

A National Security Presidential Directive, signed by President George W. Bush in 2009, seeks Arctic sea routes that are "safe, secure and reliable." But the real question is whether the U.S. will act on its goal by building ports and icebreakers. President Obama's commencement speech to the U.S. Coast Guard Academy this spring indicates the White House is looking hard at the issue. "I believe that our interests in the Arctic demand that we continue to invest in an enduring Coast Guard icebreaking capacity," he told the cadets.

The key word for Arctic shipping is "reliable" -- in the transportation world, trains, planes, ships and trucks need to meet a schedule or customers go elsewhere. Still hidden in Arctic haze is a commitment by any nation, with the exception of Russia, to develop a business model that will attract the real investment necessary to make the Arctic Ocean a regular, working seaway.

How reliable?

What could an ideal Arctic shipping regime be like?

At the headquarters of the St. Lawrence Seaway in Montreal, a huge diorama pays tribute to the seaway that leads from the eastern edge of Quebec to the Great Lakes. A ship might use the seaway to ship grain from Chicago to Europe, or iron ore from Duluth to a steel mill in Germany. From the Great Lakes to the sea, ships cross the U.S.-Canada maritime border 23 times, but U.S. and Canadian leaders together promote this seaway to the world, and together offer reliability ship masters can depend on.

Reliable Arctic shipping can happen two ways.

The first course, currently happening, is controlled by the Russian's Northern Sea Route administration. Use of the Russian system has been, and will be, slow. Geopolitical concerns about over-reliance on Russia for energy and transportation will remain. Sanctions will deter companies, and the result will be that the primary users of the sea routes will be Russian firms exporting their energy and minerals to China. Call that the slow, dangerous course.

An alternative approach is for the Arctic nations and other interested countries to work together, with or without Russia, to establish an icebreaker ship escort service across the Arctic. This requires thinking of the Arctic as a mutual business opportunity, like a jointly owned canal.

An Arctic shipping system has something to offer all participants. Trans-shipment ports might be constructed near the gateways, where cargo traveling trans-Atlantic or trans-Pacific routes can interchange with Arctic lines. Dutch Harbor/Unalaska and Adak are two candidates on the Pacific; ports in Iceland, northern Norway, or Russia's Murmansk are contenders at the other end. Russia has a port on the Bering Sea, Provideniya, which serves as one port of refuge for ships in distress; the U.S. side is considering building up Port Clarence, north of Nome, or the shallower Port of Nome.

Early calls for cooperation in northern shipping came from northern governors of Russian regions, Canadian territories, the state of Alaska and others -- a group called the Northern Forum, which seeks shipping not just for economic opportunity, but for reducing the high cost of fuel and other delivered goods in remote regions of the North. For the U.S. to play in this venue, it would need investments in icebreakers. In response to a congressional inquiry, Alaska's last governor, Sean Parnell, said that AIDEA could potentially be involved in financing icebreakers, just as the same state agency -- profitably -- helped finance a new Coast Guard facility on Joint Base Elmendorf-Richardson in Anchorage. As an intermediary, the state may find it easier to charge for icebreaker services where the federal government doesn't. (Shippers in the St. Lawrence system have learned that their costs of moving through ice depends on the luck of the draw -- as with overflights, Canada charges for icebreaking and the U.S. does not.) A recent Arctic Policy Commission report to the state Legislature laid out additional investments the state will foster -- make on its own account or get from others -- to get U.S. port infrastructure on the western and Arctic coast of the state.

Mead Treadwell, Alaska's lieutenant governor from 2010 to 2014, was previously chair of the U.S. Arctic Research Commission, appointed by President George W. Bush. He is currently president of Anchorage-based Pt Capital, an Arctic-focused investment firm, and chairs a task force on shipping commissioned by the Arctic Circle, a nongovernmental organization operating across the Arctic. An earlier version of this appeared in the Harvard International Review.

UPCOMING:

Arctic shipping summit

A three-day meeting in August at Anchorage's Hotel Captain Cook will focus on building partnerships that boost shipping and ports in the arctic. Hosted by Alaska Dispatch News publisher Alice Rogoff, the summit will including for Lt. Gov. Mead Treadwell and Iceland President Olafur Ragnar Grimsson. Among the topics: establishing a task force to offer global shippers a regular, safe and reliable system; securing infrastructure investments; protecting hunting and fishing in Arctic waters that could be used by cargo ships. Details at info@alaskasummit.com.

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