Emerging Arctic Issues: Opportunities for Canada, EU and Russia

WPF Historic Publication

Cecilia Silundika December 31, 2010

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Emerging Arctic Issues: Opportunities for Canada, EU and Russia

Cecilia Silundika

Circumpolar Analyst, Circumpolar Liaison Directorate, Department of Indian Affairs and Northern Development, Canada

Originally published 2010 in World Public Forum Dialogue of Civilizations Bulletin 7, 155–74. 1

Does the Current Focus on Emerging Arctic Issues Provide Canada, EU and Russia an Opportunity to Strengthen their Economic Cooperation in Energy Security?

Introduction

The importance of connecting the dialogue of civilizations to economic, political and historical conditions, within which civilizations were constituted and express themselves today, cannot be over emphasized. This means not making of dialogue something in itself without rapport with the context within which the cultural and socio-economic activity is practiced. While a lot is said about the potential for commercial and economic benefits in the Arctic, the Canada-EU; EU- Russia discourse on the Arctic is often dominated by issues of peace, security and environment. Without underestimating the importance of these issues, this paper attempts to flip the coin and explore the interconnections with the view of finding how commercial cooperation can be strengthened through the Arctic dimension. The focus is on Canada and Russia as energy rich countries with potential to meet a significant part of the EU’s energy needs.

1. Overview of Changes in the Geo-Strategic Significance of the Arctic since the Cold War

During the Cold War, Arctic-wide cooperation was not possible, except in limited policy areas, such as the conclusion of the 1973 Polar Bear Treaty by the five Arctic states with bear populations. Kristin Atland examines the role played by Secretary General Mikhail Gorbachev’s speech of October 1, 1987 Murmansk. The Author analyzes the de-securitization dynamics of the Russian Arctic, offered by Gorbachev speech. The concept of ‘de-securitization’ is defined in the Copenhagen School literature as ‘the shifting of issues out of the emergency mode into the normal bargaining process of the political sphere. She asserts that the Murmansk initiative was a turning point in Soviet Arctic policies, because it

2 served to launch a series of policy initiatives that tied together a wide array of security, economic and environmental issues in a unified package (Atland, 2008). Using Weaver’s security theory on ‘speech act’, aimed at taking politics ‘beyond the established rules of the game’ she analyzes the initiatives and the finding is that Gorbachev’s Murmansk speech came to mark the beginning of a new era in the Arctic and it contributed in a number of ways to the de- securitization of interstate relations in the region. By calling attention to the need for East/West dialogue and cooperation on non-military security challenges, such as environmental degradation, economic decline and indigenous peoples, the Soviet leader was instrumental in defusing tensions and overcoming military security concerns that had stood in the way of trans-Arctic cooperation. In economic terms however, Arctic waters have been important for fishing for centuries and fishery issues cut across the Cold War divide. This is evidenced by the well established Russian-Norwegian Fisheries Commission from the mid- 1970s onwards. While it was also well known during the Cold War that the seabed in the Arctic could contain hydrocarbons, it was only in Prudhoe Bay, Alaska that offshore installations were established, more towards the end of the Cold War. Still, in a geo-strategic perspective, resources played a relatively limited role in the Arctic during the Cold War. The situation is different today in the Arctic. Now resources are the main driver of the region in a geo-strategic sense, primarily oil and gas. Energy has re-emerged as a major issue in international politics. The rapid economic growth in Asia, particularly China and India, has led to a growing demand of fossil fuels. While attempts continue to develop other energy forms, hydrocarbons remain the dominant source of energy for the next generation. Energy Security is partly about securing stable and predictable deliveries of hydrocarbons. A key concern among net importers is that the majority of the

3 known reserves of hydrocarbons are to be found in politically unstable regions, notably the Middle East.

1a. Arctic Context and Issues One of the most significant potential conflicts over resources arises from intensified competition over access to, and control over, energy resources. The

Arctic region is reported to contain about 25 % of the world’s hydrocarbon resources. The opening of the new waterways and international trade routes in the

Arctic will lead to increased access and thereby change the geo-strategic dynamics of the region. One of the new strategic interests is illustrated by the recent planting of the Russian flag in 2007, under the North Pole (Borgerson, 2008; Vsevolod,

2008; Stack, 2008). The response has been an intensified effort by Canada, US,

Russia, Norway and the EU to develop and articulate their Arctic policy based on the evolving geo-strategy of the Arctic region.

These significant and consequential current events have also triggered a growing literature aimed at analyzing the expanding oil and gas activities in the

Arctic and its impact on both world climate, the environment and its northern communities. Moreover, within the global context, the security of energy supply remains a central tenet of energy policy which is closely related to macro and micro-economic developments. Imports and exports have a significant impact on the balance of payments and are therefore important to world economies. Current trends seem to indicate widespread concerns about the security of oil and gas supply. In the face of new economic and political challenges, there is also concern

4 about the ability of the energy industry to timely and adequately invest in production, transportation and conversion of energy products required to meet the expected growth in demand (Correlje and Coby, 2008). Another important factor is that proven reserves of oil and gas are rather unevenly distributed in a few countries and regions.

The Persian Gulf contains 60% of the current proven oil reserves, while

Russia along with the Caspian Sea Region and the Middle East account for about two-thirds of total world gas reserves. Large consuming areas including the US, the EU and Japan will become dependent on the same oil and gas resources in the

Persian Gulf, Russia and the Caspian Sea1. Over time, the demand from countries with fast economic growth like China and India will induce a growing demand, which also has to be met from these sources. These factors easily converge to make the Arctic a new front for opportunity as well as for global tensions.

As seasonal ice melt increases, Arctic shipping routes become accessible for greater portions of each year. The two key routes are the Northwest Passage, which passes through channels between northern Canadian islands and Greenland, and the Northern Sea Route, which traverses waters north of continental Russia, provide paths to reduce shipping times and costs. These savings make shipping through the Arctic attractive to commercial carriers and some military surface vessels during periods of open water or ice thin enough to traverse with a reinforced hull design. As summer Arctic ice retreats, ships may travel even more

1 ref. BP Statistical Review of World Energy, 2004

5 directly across extreme northern latitudes to further reduce route distances and associated transit costs or use these routes for longer periods each year.

Commercial freight shipping savings spur great interest since the vast majority of world trade travels via ocean-going vessels. It is reported that voyages between

Europe and the west coast of North America using Arctic routes stand to save distance and money compared to traversing the Panama Canal. For example, by using the Northwest Passage, voyages between Long Beach and Rotterdam reduce distance by 14 percent and save a canal fee. As the Arctic ice pack retreats toward

Greenland, that savings could increase to 24 percent by traveling directly through the Arctic Ocean. In fact, all voyages between the US and Canadian west coast ports and northern Europe ports realize significant savings by traversing the

Arctic.

1b. Disputes and Legal Regimes

Russia has filed its claim of the Lomonosov Ridge, which it asserts is a natural extension of its Eurasian landmass, almost the size of Western Europe.

Canada and Denmark on the other hand are reported to be at odds over the possession of Hans Island, while Canada and the US are in dispute over the

Northwest Passage. Russia and Norway continue to dispute their maritime limits in the Barents Sea and Russia's fishing rights beyond Svalbard's territorial limits within the Svalbard Treaty zone. Important issues pertain to the weakness of international law governing the region. Gusintsky and Borgeson argue that the

6 current legal framework provided by the United Nations Law of the Sea

(UNCLOS), as well as the oversight by the Commission on the Limits of the

Continental Shelf (CLCS) does not adequately address the unique issues characterizing the Arctic. The Authors argue that the unique geographic circumstances of the Arctic will require a different framework than UNCLOS, and thereby suggest the development of an Arctic Treaty.

Concerning institutional mechanisms, the main intergovernmental forum, originally established to address issues of the environment is the Arctic Council.

This forum promotes cooperation, coordination and interaction among the Arctic

States. Member States of the Arctic Council are Canada, Denmark (including

Greenland and the Faroe Islands), Finland, Iceland, Norway, Russian Federation,

Sweden, and the United States of America. The European Union’s arctic member states are Finland, Iceland and Denmark/Greenland. The council also has six indigenous groups that sit as permanent observers. The list of council observers has been growing. Eight countries currently have observer status: China, France,

Germany, Italy, Poland, Spain, the Netherlands and Britain. Following the release of its Arctic Communication in November 2008, the EU has been pursuing discussions to gain direct membership in the Arctic Council. The notion of an overarching treaty to guarantee an orderly and collective approach to extracting the region’s wealth has been raised by the EU, but it is being highly contested by other States. Nevertheless, the AMAP Report suggests that with anticipated increased activity and risk unavoidable, sound coordination, planning and

7 management will help to reduce negative impacts such as oil spills, and increase the benefits of oil and gas activity in the Arctic.

2a. Canada-EU Arctic Cooperation

The Northern Dimension is the main policy framework for relations with non-EU Arctic states. In recognition of their mutual interest in the north, Canada and EU in 1999, issued a Joint Statement on Northern Co-operation to work together on northern issues. The Arctic Window is seen as the political space within the Northern Dimension in which the EU and the Arctic nations can consult on matters of common interest and supports the intention of building bridges between the Arctic and the Northern European cooperative structures. The major intergovernmental cooperative bodies in these areas are the Baltic Council, the

Euro-Arctic Barents Council and the Arctic Council.

The key driver for establishing the Arctic Window was based on the premise of Finland’s and Sweden’s accession to the Union, whereby the EU got a distinct Northern Dimension because of the differing aspects of the Arctic areas in these countries from the rest of Europe. Cooperation with Russia is mentioned as the key feature of this northern policy. Canada has been an observer in the

Northern Dimension (ND) since this EU policy was established in 1999, actively participating in all its high level meetings. Canada’s main contribution has been to the nuclear envelope of the Northern Dimension Environmental Partnership

(NDEP) focusing on cleaning nuclear waste in the Russian Kola Peninsula.

Canada also contributes to the ND Partnership on Health and Social Well-Being.

The establishment of a ND partnership on Transport and Logistics was adopted at the ND Ministerial on 28 October 2008. 2

2b. Arctic in Canada-EU Summit Declarations

While references have been made within Summit declarations since the

Berlin Summit in 2007, the portrayal of the Arctic as a region of commercial significance is unclear. In the 2007 Berlin Summit, the Arctic appears under Peace and Security where it says: ‘We affirm our commitment to intensify cooperation on

Arctic issues, including through the renewed Northern Dimension policy and

International Polar Year.’ In the Quebec Summit Declaration of 2008, the Arctic appears under Energy and Environment, ‘We also reiterate our shared interest and objectives for the Arctic and the North, which include, among others, protecting the environment and ensuring that Northerners can contribute to economic and social development in the region now and in future generations. We recognize and reiterate the importance of, and the global interest in, the international scientific community's research activities. We commit to preparing a joint progress report on Arctic cooperation in 2009, taking into account work completed in the context of the Northern Dimension and the Arctic Council.’ In the 2009 Prague

Declaration, climate change has been added to the Energy and Environment and it states: ‘We also recognise the challenges and opportunities faced in the Arctic and

2 http://www.international.gc.ca/polar-polaire/ndfp-vnpe2.aspx

9 the North, which include protecting the environment and ensuring that

Northerners benefit directly from economic and social development in the region now and in future generations. The EU and Canada agree to maintain a bilateral dialogue and cooperate on Arctic issues, with a focus on research and the concerns and interests of Arctic peoples and communities.’

3. Russia – EU Relations: An Emerging Energy Security Dilemma Russia is the EU’s most important energy supplier and has been a reliable partner for 30 years. Sixty percent of Russian oil exports go to the EU and represent 25 percent of total EU consumption; fifty percent of Russia’s natural gas exports are consumed by the EU, a quarter of the Union’s requirements. Owing to the high interdependence between the Russian Federation and the European Union, both partners will pursue a common strategy of energy security on the European continent. Andrew Monaghan explores the reciprocal relationship which has developed, whereby the EU imports close to 50% of its gas from Russia and 30% of its oil, while more than 50% of Russia’s energy exports go to EU, and this relationship is expected to grow (Monaghan, A). The Author is concerned about three central interlocking questions that lie at the heart of the relationship which are: Russia’s political reliability as a supplier, the practical side of the relationship which focuses on Russia’s resources and ability to meet the EU’s needs, and finally the EU-Russia relationship in the broader international context. By reviewing the processes and the outcomes of the EU-Russia Energy Dialogue, launched to discuss mutual interests in the energy sector and continental energy sector, the Author concludes that positive practical measures remain marginal and the dialogue has been held up by differing interpretations and priorities. He contends that while Russia seeks support to modernize its energy sector and

10 protect itself, the EU wants reform and the opening of the Russian market through the creation of a positive business climate. On the political side of the relationship, the Author points to the lack of confidence on both sides cautioning that diversification efforts by both sides may begin to undermine the EU-Russia relationship. He also asserts that while some have argued that EU’s dependency on Russia’s energy undermines its ability to negotiate with, and criticize Russian events in Chechnya, Ukraine and Belarus, trends indicate that the EU continues to increase its Oil and Gas quotas. He argues that the ‘dependency’ argument does not stand and is less applicable for the EU, which can afford more alternatives. He raises concerns about Russia which include the lack of adequate investments in exploration to replace maturing fields in Siberia, high production costs, poor political and business atmosphere for investment as well as the problem of deteriorating infrastructure. The Author suggests that given the relatively tense political situation between Russia and the EU, and given the finite Russian resources and the increasing competition for those resources, energy security of both the EU and Russia would be severely undermined if the relationship began to drift apart in search for more superficially reliable sources. He further cautions to move away from the language suggesting notions of ‘dependency’, which in his view tends to set consumer versus producer. The Author concludes with a call for continued effort by both sides to establish and develop a dialogue and confidence building measures needed to iron out the economics and technicalities identified. Monaghan suggest the need to enhance approaches for dialogue between the EU and Russia and to focus on the practical sides which will help address the persisting irritants. The Author views the diversification as a threat to the relationship. On the contrary, Fiona Hill views diversification as a necessary step to push Russia to think more strategically about its domestic situation and its future. Both Authors agree on the concern regarding the unstable condition of the oil industry in Russia.

3a. EU Arctic Policy

When launching the EU Communication in Brussels, November 20, 2008,

Commissioner Benita Ferrero-Waldner, responsible for External Relations and

European Neighbourhood Policy, said: "The Arctic is a unique and vulnerable region located in the immediate vicinity of Europe. Its evolution will have significant repercussions on the life of Europeans for generations to come.

Enhancing the European Union’s contribution to Arctic cooperation will open new perspectives in our relations with the Arctic states. The EU is ready to work with them to increase stability, to enhance Arctic multilateral governance through the existing legal frameworks as well as to keep the right balance between the priority goal of preserving the environment and the need for sustainable use of natural resources including hydrocarbons."

Joe Borg, Commissioner in charge of the Maritime Affairs and Fisheries added: "We cannot remain impassive in the face of the alarming developments affecting the Arctic climate and, in consequence, the rest of our planet. On the other hand, the combination of the climatic changes and the recent technological developments opens up new opportunities interlaced with challenges. As many EU policies in the areas such as climate change, environment, energy, research, fisheries and transport have a direct impact on the Arctic, a coordinated action is

12 needed and the Integrated Maritime Policy can provide a much needed collaborative platform."3

The Communication on the EU and the Arctic region which aims to become the first layer of the EU Arctic policy indicates commitment to play a greater role in this region. The EU Communication report identifies three major objectives: protecting and preserving the Arctic in unison with its population, promoting sustainable use of resources, and contributing to enhanced multilateral Arctic governance. The EU sees the prevention and mitigation of the negative impacts of climate change and the adaptation to inevitable changes resulting from it as the most important goals of its Arctic policy. It stresses the need to strengthen both its own policies and international agreements relating to environmental protection and the mitigation of climate change. The EU also emphasizes its support for the region’s local and indigenous communities and claims indigenous rights to be one of its priorities. In addition, it calls for an open dialogue between indigenous inhabitants using traditional hunting methods and the

European animal rights movement. The Communication also addresses the subject of untapped hydrocarbon reserves in the Arctic, which are partly located within the 200-mile zones of the Arctic states. The Commission sees these resources as potentially playing a role in enhancing the EU’s energy security. It also argues that the fishing industry must be regulated both to ensure sustainability and to protect

3 http://ec.eropa.eu/marineaffairs/arctic_overview_en.html; http://ec.eropa.eu/external_relationship/arctc_region/

13 the rights of local communities. At present, Arctic communities are concerned that opening the Arctic Ocean to international fishing fleets will deprive them of their livelihood and leave them unable to compete with industrial fisheries on the open market. The Commission is therefore calling for detailed management plans to avoid such consequences. In view of the reduction of sea ice coverage in the

Arctic, the EU argues for the gradual introduction of commercial navigation through the region while stressing the need for stricter safety and environmental standards. At the same time, it supports the principle of freedom of navigation and the internationally recognized right of innocent passage in newly opened routes and areas. It also argues that the existing obligations concerning maritime safety and environmental standards recognized by the IMO must be implemented. There is potential for conflict here with Canada. The EU’s emphasis on freedom of navigation and right of passage is seen at least in parts of the Canadian academic community as an attempt to question Canadian jurisdiction regarding navigation and safety in the Northwest Passage. In terms of Arctic governance, the EU sees the main problems as the fragmentation of the legal framework, and agenda- setting process. The Commission therefore calls for the further development of cooperative Arctic governance based on the UNCLOS, arguing that existing legal and policy instruments should be developed and adapted to the new conditions in the Arctic region.

3b. Canada’s Arctic Policy

On July 26, 2009, Minister Strahl of Indian and Northern Affairs Canada together with the Minister of Foreign Affairs, Lawrence Cannon, launched the

‘Northern Strategy’, a document 4that outlines the Government of Canada's ongoing work and future plans for Canada's Northern Strategy which focuses on four priorities: exercising Canada's Arctic sovereignty; protecting the North's environmental heritage; promoting social and economic development; and improving and devolving northern governance. The document outlines

Canada's vision for the North going forward, including major investments under

Budget 2009, Canada's Economic Action Plan. The release of the Northern

Strategy follows an earlier Statement issued by Lawrence Cannon on March 11, prior to the meeting of the Arctic Council in April 2009 in Tromso, Norway.

Addressing an audience in Whitehorse, Minister Cannon emphasized Canada’s dedication to “ensuring that the international spotlight stays focused on the challenges and opportunities facing the Arctic.” He also stated: “Looking ahead to

Canada’s chairmanship of the Arctic Council in 2013, I intend to meet with my

Council counterparts this year to further engage them on the challenges and opportunities unfolding in the Arctic. We will explore ways to strengthen bilateral and multilateral cooperation”. Following that meeting, Minister Cannon held meetings with Danish counterpart, Per Stig Moller in Copenhagen, and there were a series of events during that period promoted through Canadian Embassies to the

4 http://www.northernstrategy.gc.ca/cns/cns-eng.asp

UK, France, Norway and Germany aimed to ‘promote Canada’s Arctic foreign policy with Arctic nations and others.’ 5

3c. Russia’s Arctic Strategy

In September 2008, The Russian government adopted a new Arctic strategy in September 2008. The document, entitled “The fundamentals of state policy of the Russian Federation in the Arctic in the period up to 2020 and beyond” (Osnovy gosudarstvennoi politiki Rossiiskoi Federatsii v Arktike na period do 2020 goda i dalneishuiu perspektivu, was published on the Russian Security Council’ website in the end of March 2009. According to Katarzyna Zysk,6 the strategy clearly emphasizes the region’s importance to Russia’s economy as a major source of revenue, mainly from energy production and profitable maritime transport. A main goal is to transform the Arctic into Russia’s top strategic base for natural resources by 2020, and preserve the country’s role as a leading Arctic power. The Russian authorities consider the region as crucially important for Russia’s further wealth, social and economic development and competitiveness on global markets. Defining the limits of the country’s continental shelf by 2015 is listed as a top priority. Among other strategic goals the document points at developing the transport and communication infrastructure in the region, particularly connected to the Northern Sea Route as a national, wholly integrated transportation route and a central element in maritime connections between Europe and Asia. The strategy reveals that one of Russia major goal is to establish special Arctic military formations in order to protect the county’s national interests in various military and political situations. It also emphasizes the need to preserve the Arctic as a zone of peace and cooperation, and underlining the role of regional bilateral and multilateral cooperation.

5 http:www.international.gc.ca 6 Senior fellow at the IFS: http://www.geopoliticsnorth.org

4. Relative Bargaining Power of Canada vs. the EU

As noted earlier, the EU is a global economic power, with a population of over 400 million. Canada, on the other hand, has a much smaller domestic market which accounts for only 2% of the EU’s foreign trade. Given this asymmetric relationship, it is important to draw on the insights from scholarly literature in order to establish options for Canada to increase its bargaining power. The reference to power in this paper is based on the definition of - who gets what in a negotiation, being a function of - who has the capacity and leverage to force the opponent into making concessions. According to classical ‘power politics’ theory, states seek either to keep power, to increase power or to demonstrate power (Morgenthau, 1985), under the general assumption that the actor with the larger amount of power has advantage over an actor with a smaller amount. If we go by some Negotiation theorists who view power the same way in international negotiations, it would be correct to assume that states with higher structural power would win negotiations involving a weaker power. In the case of states with symmetric powers, there would be a draw in negotiations. However, experience shows that this is not always the case, which leaves room for more explanatory factors. In their study of Domestic and International Asymmetries in US-EU Trade

Negotiations, William Roberts Clark et. al. determine two kinds of bargaining power determinants: market-related and security-related, whereby negotiating strength can be derived from the size of one’s market and one’s dependency on the economy of the negotiating opponent: the larger one’s own internal market and the

17 smaller the dependency on the other, the greater the bargaining power in bilateral negotiations. Structural theorists also expect systemic political factors, such as international security environment, to affect bargaining power. In that context, the larger one’s military might and the smaller one’s security dependency on the other, the higher the bargaining power in bilateral negotiations.

Moreover, it has been found that a reliance on trade dependency as the predictor of bargaining power is often misleading, as it has been found that a power such as the US has obtained a varying amount of success/outcomes with the same country it negotiated with on different issues. Because structural factors are not sufficient in predicting the distribution of bargaining outcomes, authors explore alternative variables to account for paradoxical ‘wins’ of structurally weaker over structurally stronger parties in international negotiations. Other analysts have suggested alternative and complementary factors to explain distributional outcomes which include: the nature of the issue under discussion, skills of the negotiators themselves, domestic variables such as interest group pressure, changes in domestic coalitions and electoral cycles. These have all been documented to have an effect on bargaining power of states. (Clark et. al, 2000).

For the purposes of this research paper, these findings are adequate to establish that despite structural and institutional asymmetry between the EU and Canada,

Canada can increase its bargaining power in its trade negotiations.

4b. Energy supply security and geopolitics: A European perspective “The EU is already the largest importer and second largest consumer of energy in the world. We depend on external sources for 50 percent of our energy needs [and] this could rise to 70 percent by 2030.We have to do something about this, and we have to do it now… The year 2030 may seem a long time away, but it is the day after tomorrow in energy terms.” José Manuel Barroso. President European Commission

Aad Correlje et al examine the security of energy supply to the EU within the context of two storylines: Markets and Institutions and Regions and Empires. The Markets and Institutions assumes that there is a continuous intensification of the social, cultural and economic internationalization or ‘globalization’ of markets. This in turn implies an enduring cooperation in the international political and economic institutions, supporting a constant development of the multilateral system that governs international relations. It also assumes that effective international and regional institutions like the UN, EU manage to deal with most of these conflicts. Moreover, the liberalization of markets allows the international flows of goods, persons and capital to grow, coordinated by ‘market forces’, facilitated by institutions such as World Trade Organization (WTO), the International Energy Agency (IEA), OPEC, the EU, NAFTA and others. Collective pressures for good governance and effective financial institutions are stressed under this mode. Under the Market storyline, import dependence is not seen as a major geopolitical or economic risk for the EU security of energy supply. The emphasis in energy security policy is on prevention and crisis management as a response to operational or technical disruptions. The Authors suggest that emphasis of EU foreign policy and trade relations will thus be on maintaining good relation with producer countries. On the other hand, the Regions and Empire storyline involves a division of the world into countries and regions, on the basis of ideology, religion and political arguments. Political and military strategy, bilateralism and regionalism divide the world up into competing US, EU, Russian and Asian spheres of

19 influence. National and international security concerns and conflicts impede international economic integration, through the regulation of activities and the control over flows and goods, persons and capital. The Authors show that these storylines have a significant impact on the development of the energy market, and on the supply. They suggest that the EU would have to reorient its energy security policy, given its inherent multilateral nature, and given the current global tendency towards Regions and Empires. The Authors emphasize that the dynamics of international political and economic relations and suggest that a static singular approach to energy security may not suffice. The course of action recommended is that EU develops its own strategy, actively investing in dialogues with producer countries in the Persian Gulf and Russia and that sustainable prosperity in these regions will support EU energy security. They also question if some EU member states may disagree with measures and policy instruments used especially if they are in conflict and not fitting with the traditional process of Community consultations. They caution that the absence of agreement on a common direction in political-strategic issues could jeopardize the formulation of an EU security of energy supply policy and fuel the preference for adverse national approaches. Authors also examine how Russia plays out under both storylines, and suggest that Russia will play a crucial role in supplying oil and gas to the EU, as the only ‘empire’ that is able to export oil and gas in significant volumes, adding that in contrast, other blocks, the US, the EU, India and China will have to compete for resources outside their territories. Under the Markets and Institutions world, the assertion is that Russia will become deeper and more integrated to the EU market, whereas in a Regions and Empire world, Russia will develop its own ‘empire’, a position not unfamiliar to Russia. However they suggest that in contrast to the EU which is firmly embedded in multilateral liberal approach, Russia would easily adapt to a Regions and Empire world order and might espouse re-integration with its Caspean sea neighbours.

Published in 2005, the Authors were not aware then of the 2008 breakdown of major Breton Woods Institutions due to the global financial crisis. Questions are being asked about the vision and the effectiveness of multilateral institutions like the International Monetary Fund (IMF) and World Bank as global stewards of globalization. In this context, one wonders whether the only option would be for states to move more towards the Regions and Empires storyline, and if so, in the context of the Arctic, what can be done to alleviate the confrontations that tend to disrupt energy supply.

4 c. Evaluating Arctic Policies of Canada, Russia and the EU

A close examination of the objectives of Canada, Russia and EU articulated in their Arctic policies shows very little divergence between their approaches.

There seems to be more convergence in objectives addressing the challenges and opportunities within the Arctic dimension:

1. Environment EU: protecting and preserving the Arctic in unison with its population Canada: protecting the North's environmental heritage Russia: protecting the sensitive Arctic environment from the impact o economic activity 2. Social and Economic Development

promoting sustainable use of resources

promoting social and economic development

promotion of good governance, social and economic development in Russia’s Arctic; improving quality of life of indigenous peoples of the North (Russia)

3. Governance

EU contributing to enhanced multilateral Arctic governance

Canada improving and devolving northern governance and exercising Canada's Arctic sovereignty Russia: international cooperation: supporting a regime of bilateral and multilateral cooperation between Russia and other Arctic states on the basis of international treaties and agreements to which Russia is party Russia’s strategic priorities in the Arctic include:

a. ensuring active interaction with other Arctic states on the delimitation of maritime boundaries on the basis of international law, mutual agreement and national interest

b. ensuring an effective coordinated regional search & rescue capacity in the Arctic, including capacity to deal with natural disasters

c. strengthening bilateral and regional organizations such as the Arctic Council in order to ensure continuing good relations among Arctic states and cross-border cooperation

4. facilitating the effective use of Arctic air and sea routes

5. enhancing the participation of Russian state and civil society institutions in international discussions on the Arctic (including inter-parliamentary cooperation within the Russia- EU Partnership Agreement)

(6) Maritime delimitation in the Arctic Ocean

5. Potential for increased commercial cooperation

Concerning its relevance as a political space, the western Arctic poses challenges and opportunities for Canada as a middle power, lacking resources to secure and maintain its coastline. However, as a NATO member and long-term ally of the US, it could continue to defer this role to the US which has sea power and views the Arctic as key space for national security, particularly given the presence of its northern-most state, Alaska. A key issue between Canada

22 and EU also pertains to the Northwest Passage, which the EU indicates is an international strait, a position also supported by the US. However because of the commercial advantages in utilizing this route, it is hoped that the issue will eventually be amicably resolved. There could be a push from Member states such as the UK which have commercial interests in the region, especially UK’s insurance industry, also a world leader in underwriting Arctic activities, covering infrastructure (for example pipelines) and other industrial developments throughout the region. Moreover, this also points to the continuation of Canada’s tradition vis-à-vis its economic and security priorities which continue to be defined by its relationship with the US.

Russia on the other hand, is a big power with a track record in terms of capabilities for Arctic oversight, and Europe, as a normative power, could contribute to Arctic cooperation by providing leadership in the areas of environment and climate change. It should be noted that these are policy areas which both Russia and Canada support within the framework of the Arctic

Council.

Concerning Maritime routes, as the Arctic ice pack retreats toward

Greenland, it is anticipated that time savings on distances could increase to 24 percent by traveling directly through the Arctic Ocean. In fact all voyages between the U.S. and Canadian west coast ports and northern Europe ports realize significant savings by traversing the Arctic. An example is the route demonstrated

23 by a Russian tanker carrying fertilizer from Churchill Manitoba to the Port of

Murmansk in 2008.

Another example on the eastern Arctic side is the recent breakthrough by a

Russian ship, Beluga Forsight, which succeeded in cutting the distance from South

Korea to the Netherlands by 75% through the Northeast Passage. Experts report that this means that the time in transit can be cut by as much as 10 days.

Moreover, commercial air carriers also seek distance savings as annual cross-polar flight counts trend higher. Since 2001, annual cross-polar flights have increased. Arctic adventure tourism also grows due to an increasingly navigable

Arctic. Canada hit a new record, in 2007—bringing about 3,000 tourists.

Meanwhile, about 55,000 tourists cruised to villages on the Arctic coastline during

2008, arriving on 2,000-passenger cruise ships. Arctic climate change also creates new fisheries that inevitably bring fishing vessels from around the world. David

Biello explains the effects of climate change on fish migration, noting that there is a new fishery of sorts opening in the Arctic, thanks to sea ice receding. He notes that Salmon, among other fish, are beginning to show up north of the Bering Strait as they migrate in search of cooler waters that are disappearing in the more southern parts of the ocean. As of October 2007, commercial vessels already fish in the Barents, Beaufort, Chukchi, Kara and Greenland Seas. (Biello, D. 2009).

Because of its interest, the EU is keen to begin discussions leading to an international regime for managing commercial fishing in the new habitats.

In terms of governance, although there could be varying degrees of self- interest, I would assert that, both Canada and EU as normative Actors, with a track

25 record of functionalism, are on the same page concerning role and importance of multilateral mechanisms such as Arctic Council, International Marine

Organization and UNCLOS to coordinate inter-state interests. The two belong to the NATO and have established a broad based network of institutional cooperation through the Northern Dimension and International Polar Year. Russia on the other hand, has articulated within its Arctic Strategy its commitment to multilateral cooperation in the Arctic. It would be safe therefore to assume that this culture of cooperation would not allow for competition to derail the potential for mutually beneficial commercial partnership in the Arctic.

6. Conclusions

This paper has examined the notion of Canada, Russia and EU using the

Arctic dimension as an opportunity to strengthen economic partnership. I have argued that Canada is best classified as a middle power and that it is possible for

Canada to increase its bargaining power in asymmetric trade negotiations with the

EU. Correspondingly, Canada could use its geographic advantage as an Arctic power to enhance its bargaining with the EU. For Russia-EU, the Arctic unveils a new potential for expanded dialogue and economic cooperation, illustrated by the current Mega Projects such as Shtokman and Nord Stream. I have also argued that the Arctic dimension in itself has potential to offer Canada, Russia and the EU commercial opportunities beyond just peace, security and the environment currently dominating their northern cooperation discourse.

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