Arctic Bridges for Russia, Business in Sustainable Arctic and Arctic Divide.

Dear readers,

Welcome to week 5 edition of Arctic Highlights! You will find interesting news and analysis of recently published reports.

Looking forward to your comments and feedback!

Arctic Bridges for Russia

This article from?January 20, 2025, published by Vivekananda International Foundation (VIF) article "Arctic Bridges: Are They Still an Option for Russia?" authored by Senior Fellow Anurag Bisen and Anton Sokolov provides a timely assessment of the evolving Arctic landscape, particularly concerning Russia's strategic posture and the region's increasing geopolitical significance.

Geopolitical & Security Risks

The Arctic faces escalating security risks due to heightened tensions between Russia and the West. Increased military presence from both sides, coupled with unresolved territorial disputes and differing interpretations of international law, raises the risk of conflict. This instability hinders cooperation and dialogue, making the region increasingly volatile.

Sovereignty & Governance Challenges

Russia's assertion of sovereignty over the Northern Sea Route (NSR) and the weakening of the Arctic Council create significant governance challenges. Disputes over maritime rights and the potential formation of alternative governance frameworks by Russia contribute to an uncertain and fragmented regulatory environment, posing obstacles to international cooperation and sustainable development.

Economic & Investment Implications

The Arctic's economic potential is intertwined with geopolitical complexities. While the NSR offers opportunities for global trade, its viability depends on navigating geopolitical tensions and securing investment. Resource exploitation faces increased scrutiny and regulatory hurdles due to environmental concerns and strategic competition. Investors must factor in a higher risk premium and anticipate a complex, evolving regulatory landscape.

Shifting Alliances & Partnerships

Geopolitical shifts may lead to the realignment of alliances in the Arctic. Russia's potential isolation within the Arctic Council could foster closer ties with non-member states, particularly India. These new partnerships could reshape regional power dynamics, creating new opportunities for investment and cooperation while altering existing international frameworks.

Environmental Considerations

Environmental protection is becoming a tool of economic and geopolitical strategy in the Arctic. The analysis suggests Russia might use environmental regulations to exert pressure on foreign companies or challenge projects deemed harmful. This adds another layer of complexity for businesses operating in the region, requiring them to prioritize sustainable practices and navigate a politically charged regulatory environment.

Technological and Logistical Factors

Technological advancements and logistical infrastructure will be crucial for unlocking the Arctic's economic potential and ensuring safe operations. Investment in ice-breaking technology, resource extraction techniques, and robust infrastructure will be essential.

Four possible scenarios for Russia in the Arctic:?

1. Isolationist Strategy

Russia could pursue an independent trajectory, leveraging its extensive Arctic coastline and icebreaker fleet to implement military and commercial projects within its exclusive economic zone. This approach offers autonomy in agenda-setting but risks international criticism and potential counter-alignment by other Arctic stakeholders.

2. Adversarial Posturing

Utilizing the BRICS+ framework, Russia could forge a counterweight to existing Western-dominated Arctic governance structures. While potentially appealing to BRICS+ members seeking greater Arctic involvement, this approach carries inherent risks of intra-group conflict due to divergent national interests, particularly between Russia, China, and India, concerning Arctic policy.

3. Reformist Framework

Russia could advocate for a revision of current Arctic governance mechanisms, positioning the region as a shared global asset. This strategy aims to minimize conflict while appealing to international actors, especially those from the Global South, seeking greater inclusivity and a more equitable distribution of influence in Arctic affairs.

4. Integrationist Model

Emphasizing the complex challenges of the Arctic, Russia could promote a collaborative platform for scientific exploration and commercial development, independent of existing power blocs like BRICS+. This approach envisions engaging diverse stakeholders, including regional and subregional alliances, the Commonwealth of Independent States (CIS), scientific and business communities, and leveraging informal channels like "people's diplomacy" to foster cooperation.

Chinese Shipping Traffic on Northern Sea Route Doubles in 2024

Chinese shipping companies increased their use of the Northern Sea Route (NSR) in 2024, with voyages nearly doubling compared to the previous year, according to a report from the Russian government's press service. The number of voyages by Chinese vessels rose from 7 in 2023 to 13 in 2024.

The data was presented during a meeting on the socio-economic development of Russia's Far East, led by Deputy Prime Minister and Presidential Envoy to the Far Eastern Federal District, Yuri Trutnev. Vladimir Panov, special representative for Arctic development at Rosatom, Russia's state nuclear corporation and the designated infrastructure operator of the NSR, highlighted the overall growth of the route.

Panov reported that cargo traffic on the NSR reached 37.9 million tons in 2024, exceeding the previous record by over 1.6 million tons. The increase in Chinese traffic underscores the growing importance of the NSR as a potential alternative shipping lane between Asia and Europe, offering shorter transit times compared to traditional routes. Rosatom's continued development of the NSR is a key element of Russia's Arctic strategy, aiming to capitalize on the region's strategic location and resource potential. (source: here)

The Private Sector's Role in a Sustainable Arctic

The Arctic is undergoing unprecedented transformation, driven by the rapid climate change and escalating geopolitical tensions. In their policy brief, "A Warmer Arctic in a Colder Geopolitical Climate: What Role for the Private Sector?", Evan Bloom , Sturla Henriksen, and Elana Wilson Rowe explore the complex interplay of these forces and articulate a critical role for the private sector in fostering stability and sustainability in this rapidly evolving region.?

Existing Arctic governance structures, designed to foster cooperation among states and Indigenous peoples, are facing visible strain. The Arctic Council, a key forum for regional collaboration, has been significantly impacted by the conflict in Ukraine, hindering its ability to address pressing issues. Within this context, the private sector finds itself navigating a complex web of environmental, economic, and political factors.

The authors argue that the private sector's role extends far beyond mere commercial activity. Businesses operating in the Arctic have a vested interest in, and a responsibility to contribute to, a safe and stable environment.

The authors outline two primary avenues for constructive engagement: supporting governance and sharing knowledge.

Strengthening Governance

The private sector can play a vital role in reinforcing the rule of law in the Arctic. This includes advocating for the robust enforcement of the United Nations Convention on the Law of the Sea (UNCLOS), promoting literacy regarding the unique commercial challenges of the region, implementing voluntary principles for sustainable maritime operations, and engaging in meaningful consultations with Indigenous and local communities to ensure their concerns are addressed. Specifically, the report emphasizes the importance of advocating for and developing regulations at the International Maritime Organization (IMO), particularly regarding decarbonisation of shipping, to create a consistent global ocean regime.

Facilitating Knowledge Sharing

Data sharing and public-private partnerships are essential for improving scientific understanding, enhancing contingency preparedness, and fostering situational awareness. The private sector can contribute valuable data to advance scientific insights into the changing Arctic environment, support actions aligned with the Paris Agreement's climate targets, and collaborate to ensure adequate search and rescue capacity. Moreover, businesses can play a role in sharing knowledge and best practices for responding to emerging security threats.

To secure a sustainable future for the rapidly changing Arctic, collaborative action is essential. The call to action is clear: businesses must embrace their role as responsible stakeholders in shaping the Arctic's future.

Arctic Special Issue?

I am delighted to share a special Arctic issue I edited for Policy Commons. This edition focuses on the Arctic, a region of growing geostrategic importance and a prospective source of critical minerals.

In this issue of Policy Matters, I explore a range of compelling topics, including:

• The geopolitical dynamics of Greenland
• The rights and perspectives of Indigenous communities
• The green transition and its implications for the Arctic

Arctic's Uneven Transformation: Report Reveals Stark Economic Contrasts

A new report on the Arctic reveals a region undergoing profound economic and social change, marked by stark contrasts and uneven development. The "Arctic Value Creation, Employment, and Investments" report, from the Business Index North (BIN)-Arctic project, analyzes 22 Arctic regions across eight countries, providing key insights for investors and policymakers. Here is a summary of my OpEd based on the report for High North News

The report, featuring an interactive PowerBI function for accessibility, highlights diverse demographic trends. While Iceland and Canada's Yukon see population growth, the Russian Arctic faces decline. Income inequality is a major concern in resource-dependent economies like Russia's Yamal-Nenets and Alaska.

Resource-Driven Economies Face Volatility, Inequality

Gross Value Added (GVA) data reveals a divide between mineral-rich areas and those reliant on traditional industries. Canada's northern territories show GVA growth fueled by mining, while Alaska's declines with a weakening oil and gas sector. The Nordic Arctic is mixed, with Sweden's Upper Norrland growing and Norway's Arctic regions facing downturns.

Russia Dominates Investment, Greenland Diversifies

Russia accounts for 50-60% of Arctic investments, primarily in resource extraction and infrastructure. Alaska is the second-largest investment destination, also focused on oil and gas. Greenland shows modest population growth and a surge in fisheries investment alongside expanding tourism.

The BIN-Arctic report provides valuable data to inform decision-making and policy formulation for a more sustainable and equitable Arctic future, emphasizing the significant economic and social transformation driven by resource availability, demographic shifts, and investment flows.?

Have a lovely weekend!

Yours,

Alexandra Middleton