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The melting of the Arctic ice cap, coupled with developments elsewhere concerning future energy security, is creating scenarios that range from low level friction to potential conflict between the Arctic littoral states. Much attention has been devoted to maritime boundary disputes involving the Arctic states: Canada, Denmark, Norway, Russia, and the US. In addition, the emerging interest of non-Arctic states in shipping, polar research and non-living resource exploitation also adds uncertain elements to the Arctic geopolitical development. Many Arctic states' populations are sceptical about non-Arctic states' intentions in the Arctic, raising questions such as--"Is China going to take away our oil and gas from the Arctic to meet its energy needs", "Why are Japan and South Korea interested in observatory status in the Arctic Council" Associated with these concerns is the essential question--"Is the energy factor a curse to Arctic cooperation or an opportunity for peaceful settlement of Arctic maritime disputes"
Arctic energy resources in perspective
The melting ice coverage has led some analysts to believe that previously inaccessible oil and gas deposits may now be accessible permanently or periodically. Successful development of these reserves would help to alleviate the pressure on the global oil and gas markets and potentially enhance energy security as a result.
While there are deposits of uranium and coal scattered throughout the area north of the Arctic Circle, commercial operators are mainly interested in oil and gas. The precise quantities of these resources remain unknown. However, a study conducted in 2008 by the United States Geological Survey (USGS) suggested that the Arctic may contain approximately 13 percent of the global mean estimate of undiscovered oil, which is approximately 618 billion barrels of oil (BBO).
Current estimates of hydrocarbon resources in the Arctic vary between 3 percent and 25 percent of the world total. Most are likely within established Russian territory, but the extent of deposits in disputed or international spaces is unclear, and the viability of extraction depends on a host of shifting economic and technological variables.
Much attention has been devoted to maritime boundary disputes involving the Arctic states. Some analysts believe the Arctic may witness conflicts between the littoral states caused by the quest for energy resources from low level friction to potential conflict between the eight nations surrounding the Arctic region. Which leads to the question under the legal framework: Who owns the energy resources in the Arctic
Legal aspects: Who owns the Arctic's energy resources
In order to clarify ownership of the Arctic's rich resources, a closer look at the disputes among the Arctic state is needed.
The United Nations Convention on the Law of the Sea (UNCLOS) provides a framework to resolve boundary disputes in the Arctic. UNCLOS contains provisions regarding the delineation of the outer limits of continental shelves and maritime boundaries. It obliges states to submit their boundary claims to the UN Commission on the Limits of the Continental Shelf (CLCS) within 10 years of ratifying UNCLOS. Russia, US, Canada, and Norway have all claimed a 12 nautical mile (nm) territorial sea and a 200 nm Exclusive Economic Zone (EEZ) in the Arctic Ocean. Like the EEZ, the continental shelf automatically extends out to 200 nm, save for the need for a boundary with a neighbouring state. The international law on how to define a continental shelf beyond 200nm is found in Article 76 of UNCLOS. Within the extended continental shelf, a State has sovereign rights on and under the seabed, including hydrocarbons (e.g. oil, gas, and gas hydrates), minerals, etc.
Challenge and cooperation in energy development
Political challenges for oil companies that show interest in energy extraction may stem from unresolved boundary disputes. Moreover, the opening up of Arctic sea routes, once navigable only by icebreakers, threatens to complicate delicate relations between countries with competing claims to Arctic territory--particularly as once inaccessible areas become ripe for exploration of oil and natural gas. The US, Russia and Canada are among the countries attempting to claim jurisdiction over Arctic territory alongside Nordic nations.
Analysts say Japan, South Korea and China are also likely to join the rush to capture oil and gas trapped under the region's ice. The Arctic states are very concerned about these non-Arctic States' position on Arctic status. For example, China is looking to use existing regimes to advance its interests at the multilateral and bilateral level; It has recently entered into bilateral discussions with both Norway and Canada. Due to the Mainland's fast economic growth and military capacity building, suspicions about the country's intentions in the Arctic also arise, driven by what Western analysts call the "China Threat Theory", though China defends this with the "Peaceful Development Theory".
Economic challenges also exist. Finding large Arctic oil and natural gas deposits is difficult and expensive. Developing them as commercially-viable ventures is even more challenging. It is expensive because of the harsh winter conditions that require additional site preparation and specially-designed equipment to withstand frigid temperatures, while limited transportation access and long supply lines increase transportation costs. Moreover, it is difficult to predict the timing of a significant expansion in Arctic production.
Besides political and economic challenges, technological concerns should not be overlooked as the feasibility and cost of extracting oil and gas in the Arctic will depend heavily on the state of the available technology. Thus the pace of new advancements will dictate the feasibility of exploitation in the coming years.
Furthermore, given the fragile nature of the Arctic environment, in comparison to other hydrocarbon-producing areas of the world, companies will be expected to operate with increased environmental safeguards in the Arctic, which will raise operating costs for the oil and gas companies. These costs may offset the potential gains of investing in the region.
Opportunity for cooperation
The high cost of doing business in the Arctic suggests that only the world's largest oil companies will have the financial, technical, and managerial strength to accomplish the costly, long-lead-time projects dictated by Arctic conditions. Incentives to settle outstanding disputes would rise with the increasing potential economic returns posed by exploitation and the resulting polarisation within the international system.
Joint management of resource fields is another option countries involved in a dispute can consider instead of losing a claim in an international tribunal. Cooperation between Norway and Iceland regarding the development of the Dreki field could serve as a model for similar arrangements in the future. Another example is the continental shelf dispute concerning an area rich in natural gas between Russia and Norway in the Barents Sea. Both countries dispute the other's interpretation of where their borders extend into the offshore EEZ. While it is possible that there could be a conflict between the two countries over this area, it seems highly unlikely given the potential costs versus the potential benefits.
Geopolitical issues are not exclusively conflicts over interests, although such concerns tend to dominate. They can also reflect cooperative, multilateral initiatives by which a state pursues its interests vis-à-vis others. Such cooperative ventures are often considered desirable and even unavoidable when a state is seeking a result that cannot be achieved unilaterally. At the same time, cooperation frequently establishes a level of governance--in some cases formally, in others less formally--by which mutual understanding can clarify intentions and help to build trust.
To develop such partnerships of cooperation, Arctic and non-Arctic states should, first and foremost, recognise and respect each other's rights under the international law. In accordance with UNCLOS and other relevant international laws, Arctic states have sovereign rights and jurisdiction in their respective areas in the region, while non-Arctic states also enjoy rights of scientific research and navigation.
Conclusion
The Arctic has recently witnessed a manifold growth in its geostrategic importance due to the huge deposit of oil and natural gas, and the potential contribution of northern sea routes for global shipping. As a result of this, northern regions and seas have become a target area for the growing economic, political and military interests of the Arctic states as well as of major powers outside the region and trans-national companies.
While it is important to look at the Arctic issue from a "law of the sea" perspective, transnational corporations are seeking to develop the region within a framework of a 'common heritage of mankind' beyond national jurisdictions. Political, economic and technological concerns also challenge further investment in energy development in the Arctic. Joint management of resources is another option that may benefit countries involved in a dispute rather than engaging in a zero sum game. Thus, the energy factor, rather than being a curse for the Arctic, could serve as an opportunity for regional cooperation in the region.
Nong Hong is a postdoctoral fellow with the China Institute, University of Alberta, and also the Deputy Director, Research Centre for Oceans Law and Policy, National Institute for the South China Sea Studies.
BY : Nong Hong