Putin’s Arctic strategy: conflict or cooperation?
Elizabeth K. Buchanan
A thesis submitted for the degree of Doctor of Philosophy of The Australian National University
Centre for European Studies, College of Arts and Social Sciences
The Australian National University
September 2017
© Copyright by Elizabeth Buchanan 2017 All Rights Reserved
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Declaration
I hereby declare and confirm that this thesis is entirely the result of my own work except where otherwise indicated, and has not been submitted, either in whole or part, for a higher degree or qualification at this or any other university or institute.
Elizabeth K. Buchanan
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Acknowledgements
I would like to thank my colleagues at what has become my academic home – the ANU Centre for European Studies, in particular Professor Jacqueline Lo. I am forever grateful for the guidance and unwavering support of my supervisors John Besemeres and Annmarie Elijah as well as my advisory panel members Stephen Fortescue and Kyle Wilson. Given the systematic defunding of Russian studies in Australia, this project relied heavily upon the assistance of those far beyond this country. I thank Fiona Hill at The Brookings Institution, Washington, for her mentorship whilst hosting my research during the final project stages. Thanks also to James Nixey at Chatham House, UK, for hosting my project during its fieldwork stages. Likewise, I am grateful to Andrei Zagorski at the Moscow State Institute of International Relations, Russia, for hosting my fieldwork. I wish to acknowledge Bobo Lo, Philip Hanson, Angela Stent, Thane Gustafson, Heather Conley, Andy Kuchins and Charlie Ebinger who assisted my project in an advisory capacity over the past 4 years at one point or another.
I thank all of my interviewees who span the UK, Canada, USA, Russia and Australia. I am grateful to the many industry representatives who shared commercial insight and corporate modelling of the Arctic market. Thanks also to my editor, Nigel Brew (Director, Foreign Affairs and Security section of the Australian Parliamentary Library, Australian Parliament House), who provided copyediting and proofreading services, according to the guidelines laid out in the ANU-endorsed national ‘Guidelines for editing research theses’
Finally, this project would not have succeeded without the support and unwavering interest in all things Putin from my husband, Chris. I hope I have made our son proud.
- 3 - Abstract
The Arctic is widely considered to be a potential flashpoint for international conflict over access to, and control of, its riches. Russia's assertive foreign and military policies in recent years have accentuated this perception. This study of Russian Arctic strategy under Putin proceeds from the notion that Putin’s Russia seeks to regain great power status on the back of its energy wealth, and argues that it will continue to apply energy in a coercive nature within the former Soviet Union and the near abroad. However, when it comes to the Arctic, Russia has no alternative but to approach the region and its counterparts in a measured and cooperative manner. The hypothesis of this study is that there is a strong case for Russian cooperation with the West in the Arctic. The thesis argues this cooperation results from Russia’s technological and investment requirements from the West; Russia’s solid legal case in the Arctic with regards to the continental shelf debate; and finally, the strong precedent of cooperation over Arctic matters. These themes are explored through a neoclassical realist framework. For now, Russia may continue to try to repair relations with the West, where possible, including the Arctic and many Western leaders and corporations will want to respond positively. Even if tensions persist in Russia's near abroad, including the Baltic region, the 'new cold War' paradigm will not apply to Arctic resources and governance issues.
- 4 - List of acronyms
A5 Arctic Five AAR Alfa Access Renova AU Assessment Unit bcm billion cubic meters BP British Petroleum/Beyond Petroleum BS Bering Straight CARA Circum-Arctic Resource Appraisal CEO Chief Executive Officer CIS Commonwealth of Independent States CLCS Commission on the Limits of the Continental Shelf CNOOC China National Offshore Oil Corporation COSL China Oilfield Services Limited EEZ Exclusive Economic Zone EU European Union FP Foreign Policy FSB Federal Security Service FSU Former Soviet Union GDP Gross Domestic Product HIV/AIDS Human Immunodeficiency Virus/Acq. Immunodeficiency Syndrome IASSA International Arctic Social Sciences Association IASC International Arctic Science Committee ICBM Inter-Continental Ballistic Missile IOC International Oil Company IR International Relations ISIL Islamic State of Iraq and the Levant KGB Komitet Gosudarstvennoy Bezopasnost LNG Liquefied Natural Gas
- 5 - mcm million cubic meters MH17 Malaysia Airlines Flight 17 NATO North Atlantic Treaty Organization NGO Non-Government Organization NM Nautical Miles NOAA National Oceanic and Atmospheric Administration NRC NATO-Russia Council NSR Northern Sea Route NWP North West Passage OPEC Organization of the Petroleum Exporting Countries PhD Doctor of Philosophy SCRF Security Council of the Russian Federation TNK Tyumenskaya Neftyanaya Kompaniya TNK Tyumenskaya Neftyanaya Kompaniya-British Petroleum UK United Kingdom UN United Nations UNCLOS United Nations Convention on the Law of the Sea US United States of America USA United States of America USSR United States of the Soviet Republics USGS United States Geological Survey
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List of tables
Table 1: Summary of key foreign policy theories……………………………………………...36
Table 2: Russian foreign policy ideologies………………………………………………………..45
Table 3: Results of 26 March 2000 Presidential election……………….………………….71
Table 4: Tax revenues as a percentage of Russia’s GDP (2000–2004) ………………..73
Table 5: Percentage of siloviki in elite groups from Yeltsin to Putin up to 2004….77
Table 6: Results of 14 March 2004 Presidential election…………………………………….79
Table 7: Gazprom assets in FSU countries (2007) ……………… ………………………..…….82
Table 8: Summary of Klimenko’s study into Arctic policymaking in Russia…………174
Table 9: Precedent of A5 cooperation within the Arctic……………………………………247
Table 10: Application of neoclassical realism to Russian Arctic strategy…………….259
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List of figures
Figure 1: Russia’s original 2001 Arctic claim…………………………………………………..18
Figure 2: A neoclassical realist reading of foreign policy…………………………………34
Figure 3: NATO’s eastward expansion………………………………………..………………….54
Figure 4: Russia’s natural gas pipeline nexus………………………………………..……….68
Figure 5: Oil price during Putin’s first term (2000-2004)……………………………..…74
Figure 6: Ukrainian prices for Russian natural gas (2000–2008)……………………..86
Figure 7: Oil price during Putin’s second term (2004-2008)…………………..……….94
Figure 8: Nord Steam I and Nord Steam II pipelines……………………………….…….100
Figure 9: Oil price dive of 2014……………………………………………………………..……….103
Figure 10: Illustration of the Arctic………………………………………………………….……108
Figure 11: Trajectory of crude oil prices (2000–2015)……………………………….….109
Figure 12: Probability of Arctic hydrocarbons by the USGS CARA findings…..113
Figure 13: Map of the Northern Sea Route in comparison to the Suez Canal….115
Figure 14: Environmental impact of global transportation (grams/tonne-km)…116
Figure 15: Canada’s expected Arctic claim…………………………………………………….122
Figure 16: Denmark’s Arctic claim……………………………………………………………….125
Figure 17: Norwegian Arctic claim……………………………………………………..……….128
Figure 18: Illustration of A5 stakes………………………………………………………….…139
Figure 19: Illustration of maritime zones affected by UNCLOS…………………….142
Figure 20: Map of the Lomonosov Ridge……………………………………………………..144
- 8 - Figure 21: Bathymetric map of the Lomonosov Ridge………………………145
Figure 22: Occurrence of ocean oil spills (1970–2014)………… …………..148
Figure 23: Soviet sector claim to the Arctic……………………………………….158
Figure 24: Arktika mission image……………………………………………………….181
Figure 25: 2001 Russian Arctic claim…………………………………………….…...184
Figure 26: Russia’s revised Arctic claim……………………………………………….188
Figure 27: Russia’s evidence of continental shelf prolongation…………….189
Figure 28: Comparison of the 2001 and 2015 Russian Arctic claims……..192
Figure 29: Foot of Russian continental shelf in Okhotsk Sea………………..194
Figure 30: Russia’s military presence in the Arctic……………………………..198
Figure 31: Barents Sea…………………………………………………………………….….205
Figure 32: Disputed area of the Barents Sea………………………………………..207
Figure 33: 1957 USSR-Norway delineation of Varangerfjord…………………209
Figure 34: Barents Sea boundary agreement……………………………………..….213
Figure 35: Map of Pechora, Kara and Barents Seas………………………………222
Figure 36: Rosneft’s Prinovozemelsky field…………………………………………..223
Figure 37: Rosneft-ExxonMobil Arctic agreement areas………………………….227
Figure 38: Oil price (2014–16)……………… ………………….……………………………232
Figure 39: Incidence of ‘Arctic’ in reportage Russian Arctic developments……239
Figure 40: Oil price (2000–2016)……………… ……………………………………….244
Figure 41: Territorial claims in the Arctic as at July 2016…………………251
Figure 42: A neoclassical realist reading of Russian Arctic strategy (2000-2016)..267
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Preface
Given the scope of the thesis, as limited by my PhD candidature period and pregnancy, the study is capped at July 2016. Events since are not explored. However, these events (including Brexit, Donald Trump’s ascendency to US President, the continued global slump in oil prices, all coupled with enduring Russia-West tensions) have served as an interesting litmus test for this thesis.
It is too early to determine what impact the ongoing Congress and intelligence investigations into the Trump campaign and administration’s ties with Russia will have for US-Russia relations and a potential ‘reset-plus’. Should Trump withstand inquiries, we should expect to see cooperation maintained between Russia and the West within the Arctic. That said, Russia is still committed to strengthening its military position in the Arctic as part of its overall planning to be able to confront NATO. Cooperation may yet take a back seat to competition between Russia and the West in the Arctic. Neoclassical realism would continue to serve as a useful framework to assess the variables responsible for such a shift.
Consistent with my hypothesis, the Arctic has withstood the spill-over effect of soured Russia-West relations elsewhere.1 Cooperation was sustained between Russia and the West in the Arctic throughout the US Chairmanship of the Arctic Council. Current signals support the cooperation hypothesis of this thesis, further refuting the applicability of the ‘new Cold War’ paradigm to the Arctic.
1 For further discussion on the balance between conflict and cooperation between Russia and the West in the Arctic see: Closson, S (2017) ‘Russian foreign policy in the Arctic: balancing cooperation and competition’ Kennan Cable 24: Wilson Centre. For further insight into Russia’s militarization in the Arctic despite its commitment to cooperation see: Klimenko, E (2017) ‘Russia and the Arctic: an end to cooperation?’ Stockholm International Peace Research Institute.
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Table of contents
Declaration …………….……………………………………………………………………. 2 Acknowledgements ……………………………………………………………………… 3 Abstract ………………………….……………………………………………………………. 4 List of acronyms .………………………………………………………………………….. 5 List of tables .………………………………………………………………………………… 7 List of figures ……………………………………………………………………………….. 8 Preface…………………………………………………………………………………………. 10 Table of contents………………………………………………………………………….. 11
Chapter One: Introduction 1.1 Introducing the current state of affairs……………………………………… 16 1.2 Thesis hypothesis and outline………………………………………………….. 21 1.3 Purpose of study and definitions of key terms…………………………. 26 1.4 Theoretical framework………………………………………………………………. 28 1.5 Situating the Arctic narrative in the broader Russian foreign policy agenda…………………………………………………………………………………… 47 1.6Literature review: Russian Arctic strategy…………………………………... 56 1.7 Methodology……………………………………………………………………………… 63 1.8 Conclusion…………………………………………………………………………………. 65
Chapter Two: Energy and Putin’s Russia 2.1 Introduction……………………………………………………………………………….. 66 2.2 Russia’s natural resource base…………………………………………………… 67 2.3 Russian energy strategy 2000-2004: recentralisation…………………… 70 2.4 Russian energy strategy 2004-2008: renationalisation………………… 78 2.5 ‘Weaponising’ Russian energy………………………………………………….. 84 2.6 Russian energy strategy 2008-2012: the modernization agenda….. 95 2.7 Russian energy strategy 2012-2016: reintroducing the great power agenda……………………………………………………………………………………………… 96 2.8 Current challenges for Russian energy strategy………………………….. 99 2.9 Conclusion: a neoclassical realist account of the relationship between energy and Putin’s Russia……………………...... ………………………………….. 105
Chapter Three: Conquering the Arctic 3.1 Introduction……………………………………………………………………………….. 108 3.2 The prize…………………………………………………………………………………….. 110 3.2.1 Resources…………………………………………………………………………….. 111 3.2.2 Shipping……………………………………………………………………………….. 114 3.3 The contenders for the Arctic…………………………………………………….. 116
- 11 - 3.3.1 The Arctic five………………………………………………………………………. 117 3.3.1.1 United States of America (US)……………………………………….. 117 3.3.1.2 Canada…………………………………………………………………………… 120 3.3.1.3 Denmark……………………………………………………………………….. 123 3.3.1.4 Norway………………………………………………………………………….. 126 3.3.2 Other stakeholders………………………………………………………………. 130 3.3.2.1 China……………………………………………………………………………… 130 3.3.2.2 European Union (EU) ……………………………………………………. 132 3.3.2.3 North Atlantic Treaty Organization (NATO)……………………. 137 3.4 The challenges……………………………………………………………………………. 138 3.4.1 Governance…………………………………………………………………………. 140 3.4.2 Environmental……………………………………………………………………… 145 3.4.3 Military………………………………………………………………………………… 149 3.4.4 Technological ………………………………………………………………………. 152 3.5 Conclusion: a neoclassical realist reading of Arctic geopolitics..... 154
Chapter Four: Russia looks north 4.1 Introduction……………………………………………………………………………….. 156 4.2 The significance of the Arctic to Russia……………………………………….. 157 4.2.1 Soviet Arctic policy……………………………………………………………….. 157 4.2.2 The significance of the Arctic under Putin…………………………….. 165 4.2.3 The continental shelf debate……………………………………………….. 179 4.3 Contemporary Arctic claims: Russia’s 2001 bid…………………………… 180 4.4 Contemporary Arctic claims: Russia’s 2015 bid…………………………… 187 4.5 Key drivers of Russian Arctic strategy under Putin……………...... 194 4.5.1 Securitization……………………………………………………………………….. 195 4.5.2 Individual interests………………………………………………………………. 199 4.6 Conclusion: a neoclassical realist explanation for Russia’s Arctic interest……………………………………………………………………………..…………….. 200
Chapter Five: Case studies 5.1 Case study one: Barents Sea……………………………………………………….. 204 5.1.1 Introduction…………………………………………………………………………. 204 5.1.2 The dispute………………………………………………………………………….. 206 5.1.3 The resolution……………………………………………………………………… 211 5.1.4 Current state of affairs…………………………………………………………. 214 5.2 Case study two: Rosneft and the Russian Arctic…………………………. 221 5.2.1 Introduction………………………………………………………………...... 221 5.2.2 The Rosneft-BP Arctic partnership……………………………………….. 224 5.2.3 The Rosneft-ExxonMobil Arctic partnership…………………………. 226 5.2.4 Current state of affairs for Rosneft’s Arctic ventures……...... 230 5.3 Conclusion: a neoclassical realist explanation of Russian cooperation in the Arctic…………………………………………………………………. 234
Chapter Six: Conclusion 6.1 Introduction……………………………………………………………………………….. 237 6.2 Discussion…………………………………………………………………………………… 238
- 12 - 6.3 The Arctic as a conduit for East-West cooperation.……………...... 253 6.4 Neoclassical realism and Russian Arctic strategy…………………………. 258 6.5 Area for further research ……………………………………………………………. 262 6.6 Conclusion………………………………………………………………………………….. 263 List of references……………………………………………………………………………… 271
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‘Everyone wants a piece of the thawing Far North. But that doesn’t mean anarchy will reign at the top of the world.’
Lawson Brigham
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Chapter One: Introduction
‘Our first and main task is to turn the Arctic into Russia’s resource base of the 21st Century’
Dmitri Medvedev 1
Chapter One provides an overview of the purpose, aims and scope of the thesis. First, it provides context for the thesis by exploring the current state of affairs in the Arctic, as well as the significance of energy for Putin’s Russia. Next, it outlines the research hypothesis of the thesis and discusses the methodology. Third, it attempts to situate the thesis within existing Russian Arctic strategy literature. In this chapter, the central themes of the thesis are introduced as is the neoclassical realist framework for this study.
1 New York Times, 2013. Rushing for the Arctic’s riches. Available at: http://www.nytimes.com/2013/12/08/opinion/sunday/rushing-for-the-arctics- riches.html?pagewanted=all&_r=0
- 15 - 1.1 Introducing the current state of affairs
In August 2007, a titanium Russian flag was planted demonstratively on the seabed of the Arctic Ocean.2 The message was clear and a global warning had been sent—the Arctic had been claimed and it was Russian. As global energy resources dwindle in the face of increasing global demand, fuelled in particular by the rise of China, the Arctic has rapidly become the focus of intense geopolitical interest. The Arctic may hold the last great deposit of undiscovered energy resources on Earth and as a result of climate change it is melting faster than any other part of the planet. Certainly, Russia’s assertive Arctic stance has intensified international focus upon the region as it emerges as a potential flashpoint for conflict.
Russia is the world’s leading natural gas producer; it also holds the world’s largest gas reserves and is seeking to restore its great power status by using its energy reserves as a foreign policy ‘weapon’.3 Whilst no longer a superpower, Russia remains a major world power thanks to some 17 million square kilometres of landmass; its nuclear weapons arsenal and standing army, as well as its permanent member status on the UN Security Council. Russia’s increased assertiveness has resulted largely from the influx of ‘petrodollars’ filling government coffers, which has increased room for manoeuvre within its foreign policy. Since coming to power, Vladimir Putin has, in effect, worked to nationalise the energy sector and demonstrate the Kremlin’s willingness to use energy as a political ‘weapon’. Putin’s Russia has often employed its energy wealth to pressure or influence other countries—especially former Soviet states and other neighbours.4 Notably, Russia has employed energy as a coercive tool in its dealings with Ukraine—as demonstrated in the 2006 and 2009 gas ‘wars’ which severely disrupted EU natural gas supplies.
2 The Guardian. 2007. Russia plants flag on North Pole seabed. Available at: http://www.theguardian.com/world/2007/aug/02/russia.arctic. [Accessed 6 October 2014]. 3 Rumer, E, 2007. Russian Foreign Policy beyond Putin. International Institute for Strategic Studies, Adelphi Paper 390. 4 Chapter Two further explores the decrease in applicability of Russia’s energy ‘weapon’ in recent years.
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Putin’s vision to re-establish Russia’s national pride and reinstate its rightful international standing has centred energy as key to the vision’s realisation. Energy is Russia’s new currency of power and is now a matter of significant national interest, as is now the Arctic. Russia’s Arctic coastline stretches over 6,600 km and 11 different time zones.
Although it is not known exactly how large the deposits are, the 2008 US Geological Survey estimates that the Arctic holds 30% of the Earth’s remaining natural gas and 18% of the world’s remaining oil reserves. According to Russia’s Ministry of Natural Resources, the Arctic region claimed by Russia could possess twice the volume of Saudi Arabia’s oil reserves.5 Given the challenges to global energy security, the region and its riches are often touted as a future flashpoint for conflict.
Russia’s military activity in the region is not solely to blame for such an assumption— in 2012 Norway conducted a series of Arctic war-games which amassed 16,000 troops in the Arctic. True, Russia’s shift to the north has coincided with Russia’s efforts to modernise its military. However, a knock-on effect within the Arctic region has seen the other Arctic rim powers—Norway, Sweden, the United States, and Canada— reassess their Arctic military capabilities and move military units north. Russia’s original Arctic claim in 2001 is illustrated in Figure 1.6
5 Trenin, D, 2002. The End of Eurasia: Russia on the border between geopolitics and globalization. Washington DC: Carnegie Endowment for International Peace. 6 Russia’s Arctic claims are further examined in Chapter Four. By way of introduction, Russia’s original 2001 Arctic claim is discussed, with forthcoming chapters looking to the revised 2015 Arctic claim.
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Figure 1: Russia’s original 2001 Arctic claim comprises the following elements:7
1) North Pole: Russia leaves its flag on the seabed, 4,000m beneath the surface, as part of its claims for oil and gas reserves.
2) Lomonosov Ridge: Russia argues that this underwater range is an extension of its continental territory.
3) 200 nautical mile line: shows how far countries' agreed economic areas extend beyond their coastline.
4) Russian-claimed territory: the bid to claim a vast area is being watched closely by other countries. This area is challenged by Denmark and Canada, both of which have overlapping claims with Russia. These disputes are explored further in Chapter Three. The previously disputed territory between Norway and Russia is examined via a case study in Chapter Five.
7 BBC NEWS. 2007. Russia ahead in Arctic 'gold rush'. Available at: http://news.bbc.co.uk/2/hi/in_depth/6925853.stm. [Accessed 6 August 2015].
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The impact of climate change and the rapid advances in offshore drilling technology have ushered in the opening up of the Arctic. This poses as many challenges as it does opportunities. Challenges include rapid militarisation of the region; issues of regional governance and the power of international law, and various bilateral or trilateral territorial disputes. Challenges also arise from the increasing interests of non-Arctic rim states in Arctic affairs. Some challenges also present significant opportunities. Beyond the resource wealth of the Arctic, the advances in international transportation routes are one such opportunity. Russia seeks to capitalise on the emergence of the Northern Sea Route—which runs within Russia’s Arctic Exclusive Economic Zone (EEZ). This sea lane is of significant interest to China given that the route is a much shorter alternative to the existing Suez or Cape Horn sea lanes.
Given Russia’s assertive foreign policy, the question is often raised as to whether or not Russia will foster cooperation or conflict in the Arctic region. Russia’s readiness to use force to advance national interests was underscored by the 2008 Russian- Georgian war.8 The conflict marked the first time since the collapse of the Soviet Union in 1991 that Russian troops had violated sovereign borders. Russia’s annexation of Crimea in 2014 and the sustained assault upon Ukraine since is further evidence of Russia’s foreign policy. However, upon analysing Russia’s bilateral relationship with Norway and its approach to the previously disputed Barents Sea, it is evident that Russia is capable of forging cooperative foreign policies. Yet the question arises—how long can we expect Russia to conduct itself cooperatively in the Arctic? This is particularly relevant given the competition over the sovereignty of the Lomonosov and Mendeleev Ridges. This particular section of the Arctic, which Russia claims to be an extension of the Siberian shelf, is believed to hold the largest portion of the Arctic’s oil and natural gas reserves.
8 Russia did insert itself in Georgia previously through proxies as it did also in Moldova.
- 19 - This study coincides with enhanced international interest in the Arctic region. Paying particular attention to the less-than-transparent energy policy of the resurgent energy juggernaut, and through shedding light on the relevance of the Arctic to Russia’s foreign energy policy, this study seeks to assess the future trajectory of the Arctic region.
Putin’s Russia has placed energy at the centre of its quest for great power status. When it comes to positioning the Arctic within Russia’s foreign energy strategy this thesis argues that the central driving force behind Russia’s Arctic strategy is access to and control of the region’s energy resources. It takes a sceptical view of the popular expansionist and neo-imperial assessments of Russian Arctic strategy. Instead, it argues that the international community should not expect to see a ‘new cold war’9 or any serious military confrontation in the Arctic.10 Russia’s Arctic strategy is not dissimilar to the strategies of other competing Arctic rim powers. Despite an increasingly assertive foreign energy strategy, Putin’s Russia can be expected to cooperate with foreign energy firms who agree to Russian terms. As this thesis highlights, despite Russia’s Arctic ambitions requiring the use of foreign technological expertise and exploration investment, existing commercial agreements are framed to allow Putin’s Russia to maintain the upper hand in the Arctic. The competitive hunger for resources in Russia’s Arctic territory is likely to ensure this continues to be the case, regardless of fluctuations in the broader framework of international relations.
9 For discussion of the leading texts on the notion of the ‘new Cold War’ see: Galbreath, D, 2008. Putin’s Russia and the new Cold War: Interpreting myth and reality. Europe-Asia Studies, 60:9. 10 For further discussion on the ‘new Cold War’ see: Monaghan, A, 2015. A new Cold War? Abusing history, misunderstanding Russia. United Kingdom: Chatham House; Legvold, R, 2014. Managing the new Cold War: what Moscow and Washington can learn from the last one. Foreign Affairs, July/August. Available at: https://www.foreignaffairs.com/articles/united-states/2014-06- 16/managing-new-cold-war [Accessed 11 January 2016].
- 20 - 1.2 Thesis hypothesis and outline
The hypothesis of this thesis is that Putin’s Russia approaches the Arctic in a cooperative manner despite its more assertive approach elsewhere.
This research hypothesis comprises the following propositions. First, the Kremlin uses Russia’s resource wealth as a foreign policy tool. As Chapter Two explains, Russia has a track record of employing energy as a foreign policy weapon in the near abroad. Energy is also, despite efforts by some neighbours to reduce their dependency on Russia, central to Russia’s modernisation and economic planning. As Chapters Two and Six discuss, the use of energy as a foreign policy tool will continue to feature in Russian policy towards the near abroad due to the large existing pipeline infrastructure as well as Kremlin market control and contracts. When it comes to Arctic energy reserves, however, Russia has no alternative to cooperation with the West in order to access and exploit its reserves for it lacks necessary technology and capital.
Second, Putin’s vision of Russia reattaining great power status is linked to Russia’s ability to exploit its resource base. Russia’s ambition of rebuilding itself into an ‘energy superpower’ was a particularly prominent goal in the 2005-2007 period of Putin’s leadership. Whilst the strategy was less about the Russian Arctic and more about Russia’s discovered resource wealth in the Far East, since 2010 this discourse has been abandoned and replaced with a policy focus on the Arctic as a priority. As Chapters Two and Four explain, Russia has failed to diversify its overreliant economy away from energy and as a result was hit hard by the 2014 oil price dive. Russia’s economic woes were compounded by Western sanctions earlier that year as well as ongoing corruption issues in the sector. Furthermore, Russia’s aging workforce is a demographic issue affecting the ability for Russia to ‘man’ future labour intensive energy projects. Russia’s foreign energy policy is further challenged by the development of unconventional energy sources and shifts in the global energy mix
- 21 - toward renewables. Likewise, Russia’s quest to become an energy superpower is restricted by consumer questions around the reliability of Russia as trustworthy energy supplier.
Third, there is strong precedent for Putin’s Russia having a cooperative approach to the Arctic. Russia adheres to the prevailing international law of the region – UNCLOS – submitting Arctic claims through the formal legal channel that it prescribes. As Chapter Five argues, Russia recently chose to settle its maritime dispute with Norway in the Barents Sea, which again pointed to its interest in a cooperative Arctic environment. Russia has not so far opted to secure its Arctic claim by force, despite having a military capacity that is unmatched by other A5 powers in the region. Furthermore, as Chapter Five explains, Russia has consistently sought joint venture partnerships with foreign firms to exploit its Arctic reserves. Russian Arctic strategy will likely continue along this cooperative course, and in doing so, will reflect a deviation from aggressive policy elsewhere. Russia’s cooperative approach to the Arctic is valued by Western interlocutors as one of remaining regions for dialogue and cooperation with Putin’s Russia. Likewise, it is in the best interest of all A5 powers to keep conflict out of the Arctic given the vast economic interests at stake.
Fourth, Western sanctions on Russia (particularly those curtailing offshore drilling technology exchanges and financial capital injections) have affected the overall pace of Russia’s Arctic offshore ventures. However, the situation was aggravated by the 2014 oil price dive. Arctic oil has a cost price of around $130 a barrel, which is commercially unviable given that the oil price has fallen as low as $28 a barrel in recent times. Today, the oil price hovers at a mere $48 a barrel.11
Finally, this thesis proposes that neoclassical realism is a useful framework for the study of Russian Arctic strategy. Neoclassical realism accounts for Russia’s deviation
11 Price at study cap of July 2016.
- 22 - from its more assertive foreign policy beyond the Arctic. This theory also accounts for Russia’s interest in seeking joint venture partnerships with foreign firms in the Arctic. A traditional neorealist reading would argue Russia would not foster partnership with firms from competing states (such as China and the US). Neorealism accounts well for Russian foreign policy beyond the Arctic, yet fails to explain Russia’s cooperative agenda in the Arctic. On the other hand, neoclassical realism does. As Chapter Four and Five illustrate, a range of variables account for Russia’s cooperative Arctic strategy.
This is the first of six chapters in this study. The relationship between energy and Putin’s Russia is explored and analysis provided of the link between Russia’s domestic energy politics and Russian foreign energy strategy. Building upon this, Russia’s Arctic strategy is examined and the conclusion drawn that Russia will continue to approach the Arctic in a cooperative manner. This thesis argues that ultimately Russia will seek cooperation in the form of commercial joint venture partnerships with foreign energy firms in the Arctic. However, this cooperation will continue to be dictated heavily by Russian interests and achieved on Russian terms. Any show of force or aggression on Russia’s part will be employed to defend Russia’s Arctic claim – a claim that this thesis argues is based upon sound legal reason. However, this thesis argues that conflict is an unlikely scenario in the Arctic. Not only is there strong precedent for cooperation among the Arctic rim powers, these states remain explicitly committed to peaceful Arctic development.
Chapter Two examines the significance of energy to Putin’s Russia, exploring Putin’s personal quest to restore state control over Russia’s energy sector, and his use of the sector to revitalise the economy in order to re-establish Russia’s great power status and international standing. Chapter Two examines key foreign energy policy achievements for Russia across four distinct phases. Putin 1 (2000–2004) highlights the recentralisation of power, the establishment of the power vertical, the rise of the siloviki in energy corridors, and the rapid suppression of Russia’s energy oligarchs.
- 23 - Putin 2 (2004–2008) builds upon Putin’s consolidation of power and his establishment of control, as well as his efforts to re-nationalise Russia’s energy sector and position Gazprom and Rosneft as national champions. In phase three (2008-2012), Medvedev’s modernization agenda for Russia is explored. In the final phase, Putin 3 (2012-2016), the re-emergence of the great power agenda and the role of energy within said agenda is examined. It highlights how Putin’s Russia has historically employed energy as a tool of foreign policy, in particular, towards the former Soviet Union states.
Chapter Three examines the current state of affairs in the Arctic. This chapter pays particular attention to the ongoing continental shelf debate while providing an overview of the Arctic ‘carve-up’. It provides background to Arctic geopolitics by examining the competing interests and ambitions of the A5 powers and the emerging interests of non-Arctic powers. This study is not a historical survey of Arctic geopolitics. It focuses on Russia’s Arctic strategy under Putin, examining the drivers behind the strategy responsible for Russia’s overall cooperative approach to the region. Chapter Three also deals with the rise of Chinese involvement in the region, particularly its strong interest in the emergence of a Northern Sea Route. Chapter Three also examines the standing political stalemates of the Arctic region as well as the accommodations that have been reached in response to territorial disputes. The purpose of Chapter Three is to outline the realities of the Arctic, beyond its ‘new great game’ connotations.
Chapter Four examines the emergence of the ‘northern vector’ in Russia’s foreign energy strategy. Building upon an understanding of the current state of affairs in the Arctic, this chapter outlines Russia’s Arctic claims, and provides an assessment of the continental shelf dispute, which constitutes Russia’s primary claim to the vast majority of the Arctic region. Chapter Four attempts to tackle the flawed assessment of Russian Arctic ambitions that has emerged in which Russia’s Arctic strategy is largely perceived by the global community as aggressive and expansionist. The aim of this chapter is to provide evidence for the view that Russian Arctic strategy is in essence pragmatic and
- 24 - not dissimilar to the strategies of the other Arctic rim powers. It argues that Russia will ultimately seek cooperation over conflict by forging partnerships with foreign energy firms in the Arctic.
Chapter Five offers two case studies on Russia’s cooperative efforts in the Arctic. The first case study provides an overview of Russia’s conduct in state-to-state relations, illustrated by the bilateral maritime dispute between Russia and Norway in the Barents Sea. The second case study looks at Russia’s conduct in its non-state Arctic engagements. This case study is a comparative study of the Rosneft-BP and Rosneft- ExxonMobil commercial Arctic dealings. Both case studies provide supporting evidence for the proposition that Russia seeks avenues for cooperation when it comes to the Arctic.
Chapter Six ties together the key themes explored in the preceding chapters. This final chapter reviews the debate over whether we can expect conflict or cooperation over access to, and control of, Arctic energy reserves. Building upon the arguments of this thesis, Chapter Six draws the conclusion that it is unlikely that the Arctic rim powers will engage in armed warfare over access to the Arctic’s riches. This chapter concludes that although we can expect Russia to continue to throw its weight around in the region, the concept of a Russian Arctic is an exaggeration of both Russia’s ambitions and its abilities.
The notion of Russia as an energy superpower is problematic given the serious domestic political issues within Russia. Chapters Four and Six examine the lack of investment in new exploration and production technologies, as well as an energy sector riddled with corruption. This short-term focused foreign energy strategy means that Russia must continue down a path of partnering with foreign entities in order to retain its lead in the Arctic carve-up. Chapter Six draws the conclusion that Russia will inevitably continue to employ its energy wealth as a foreign policy ‘weapon’ against
- 25 - the former Soviet republics, where it has been a proven success. This will undoubtedly see Russia remaining a formidable regional energy power. Notions of Russia as an energy superpower overstate Russian abilities. Although Russia’s Arctic ambitions are currently assertive, its strategy relies on continued cooperation via commercial partnerships with foreign energy firms to exploit the Arctic riches as they become increasingly accessible.
1.3 Purpose of study and definitions of key terms
A central purpose of this study is to offer a semi-revisionist reading of Russian Arctic strategy under Putin. It challenges the growing body of alarmist commentary on Russian Arctic strategy. More broadly, it aims to fill a gap within existing Arctic studies in which the bulk of the literature positions the Arctic as an emerging theatre for conflict. Certainly, the military-security angle garners the most international attention as attention-grabbing headlines sell newspapers. The study will pay particular attention to the domestic drivers of Russia’s Arctic policy, notably the extent of Putin’s perception of Russia’s Arctic potential.
This study aims to provide new insight into what is driving Russian Arctic strategy under Putin, by investigating the commercial relationships between foreign energy firms and Russia in the Arctic. Given the range of emerging challenges within the Arctic, especially those technological in nature, Russia has come to terms with the reality that it requires foreign investment and expertise to exploit its resources effectively. However, such commercial cooperation is defined by Russia where it can do so and arrived at on Russian terms. The results of this study aim to assist international energy firms seeking to engage with Russia in the Arctic, as well as policymakers dealing with an increasingly assertive Russia.
This thesis utilizes Robert Keohane’s definition of ‘cooperation’. For Keohane, powers adjust their behaviour to the anticipated or actual preferences of other powers, and
- 26 - this affects the beliefs, rules and practices that form the context for future action.12 Cooperation does not necessarily mean the absence of conflict. As Keohane notes, cooperation itself is only possible in situations where powers are potentially in conflict.13 As such, this thesis defines ‘conflict’ as a disagreement or dispute which is typically protracted.
Defining the Arctic is difficult, as there is no universally agreed definition of the region. Scientists, geographers, historians and security studies experts all operate within their own Arctic delineations.14 One such definition is based on the Arctic Ocean and its extensive continental shelf—covering a third of the ocean’s seabed.15 Figure 10 (Chapter Three) illustrates the area of the Arctic for the purposes of this study as marked by the dotted blue line. This thesis defines the Arctic as the area north of the Arctic Circle. This allows for a focus on the Arctic Five (A5) powers and their Arctic strategies. A5 powers are Arctic coastal states with territorial waters north of the Arctic Circle. A definition of the Arctic beyond the Arctic Circle, as sometimes utilized, would include the Arctic Eight (A8) powers. The inclusion of Sweden, Finland and Iceland with the A5 creates the A8. However, these three states lack direct coastal borders within the Arctic Circle, and furthermore, they do not claim territory within the Arctic Circle.16
This study focuses on a definition of the Arctic which narrows the context to A5 powers and the area north of the Arctic Circle where the majority of strategic
12 Keohane, R, 1984. After Hegemony: Cooperation and Discord in the World Political Economy. 1st ed. United States: Princeton University Press. 13 Ibid. 14 Emmerson, C, 2010. The Future History of the Arctic. New York: Public Affairs. 15 Hill, F, 2004. 16 It should be noted that prominent field researcher, Dr Oran Young, also utilizes this definition of the Arctic, pointing out that Iceland is “not generally regarded as an Arctic coastal state” (Young, 2012). Iceland does have a slightly more significant Arctic stake than Sweden and Finland with the small island of Grimsey which is home to 86 people and sits directly on the Arctic Circle – (Le Miere & Mazo, 2013). Further, leading Russian Arctic scholar, Katarzyna Zysk, defines ‘Arctic’ as “pertain(ing) to all areas north of the Arctic Circle” (Zysk, 2010).
- 27 - agreements (such as the Ilulissat Declaration) have been forged and where the bulk of Arctic changes and challenges are set to occur. The obvious limitation of this narrow definition is that it ignores a range of important Arctic issues which fall within some of the A8 High North regions. For example, indigenous peoples, environmental concerns and onshore energy projects are components of the Arctic narrative that fall beyond the scope of this thesis. This thesis focuses on answering whether or not we should expect conflict or cooperation between Russia and the West within the Arctic, primarily in terms of offshore energy projects and territorial claims within the Arctic Circle.
When referring to ‘energy’ this thesis is referring primarily to oil and natural gas. References to ‘resources’ or ‘resource wealth’ signify the oil and natural gas assets of the Arctic. These two commodities are inherently political. Access to, transport of, and control over both energy sources are increasingly featuring on the international energy security agenda. They are a determining facet of relations between the energy- rich and the energy-poor. Throughout the thesis, the Brent Crude trading classification is used when discussing oil prices. Further, all amounts are expressed as US dollars (unless specified).
1.4 Theoretical framework
This thesis presents a neoclassical realist reading of Russia’s strategy and foreign policy in the Arctic. The purpose of this section is to examine the realist paradigm and trace the emergence of the neoclassical realist school of thought. International relations theories provide a useful lens to understand global events and in some cases, help predict the behaviour of states. For Walt it is important to link the abstract world of theory to the real world of policy.17 Any study of the Arctic requires a theoretical
17 Walt, S, 1998. International Relations: one world, many theories. Foreign Policy, 110. Available at: http://connection.ebscohost.com/c/articles/382407/international-relations-one-world-many- theories [Accessed 11 August 2015].
- 28 - framework which elicits both an understanding of developments as well as the signposting of potential trajectories. Neoclassical realism proves to be one such framework, which, moreover, lends itself to the study of the role of energy resources in international relations.
Realism is a state-centric view of international relations—the central actors are states which are motivated by power. States exist as unitary actors within an international system that is anarchical and find themselves in constant competition with each other. This competition is a result of the aggressive nature of humans. Realism is not a single theory but a family of theories. All rest on three core assumptions.18 First, realism assumes that the system is made up of actors which are states. States are all rational actors and exist in a system fixed in anarchy. Second, realism asserts that state preferences and goals are distinct from each other and ultimately in conflict. Third, the international system is structured in a way that orders states by their material capability. For Morgenthau, classical realism posits that states, like human beings, have an innate desire to dominate others, which leads to war.19
Realism is well-suited to analysis of Cold War thinking and the relationship between Russia and the US is still viewed primarily through this lens. For Sakwa ‘the category of Cold War remains stubbornly entrenched in our understanding of international politics in general, and in relations with Russia in particular’.20 Realism is still the dominant theory of the post-Cold War system as it provides the most basic
18 Legro, J & Moravcsik, A, 1999. Is anybody still a realist?. International Security, 24:2. Available at: http://belfercenter.hks.harvard.edu/publication/568/is_anybody_still_a_realist.html[Accessed 28 April 2015]. 19 Morgenthau, H, 1978. Politics Among Nations: The Struggle for Power and Peace. 1st ed. New York: Alfred A. Knopf. 20 Sakwa, R, 2008. ‘New Cold War’ or twenty years’ crisis? Russia and international politics. International Affairs, 84:2. Page 241. Available at: http://is.cuni.cz/studium/predmety/index.php?do=download&did=30439&kod=JPM522 [Accessed 9 October 2013].
- 29 - explanation of war, imperialism, and various barriers to cooperation, and because it was ‘consistent with the central features of the American-(Russian) rivalry’.21
Realism contends that energy resources are power elements included in a state’s foreign policy when the state seeks to expand its influence. Energy resources are material objects and as such, belong to a materialistic ontology.22 Luft and Korrin examined the role of energy in international relations theory and found that:
through history, certain commodities, and in particular energy commodities, minerals, water and food have had a strategic value beyond their market price and as such they have been repeatedly used as tools of foreign policy by exporters and have been among the prime catalysts of armed conflict.23
Taliaferro agrees, noting that resource security is an emerging global challenge in which it is useful to have an IR theory for foreign policy.24 Cesnakas notes there is very little literature assessing the role of energy resources within international relations theory. The majority of the existing research that explores the role of energy in international relations is largely historical and descriptive in nature.25 In line with one of realism’s core tenets, Luft and Korin note that states are the main actors when it comes to global energy politics. States are not willing to cede control over energy resources to ‘international energy companies, free market mechanisms or supranational organisations’.26 State-owned energy firms control 85% of world oil reserves and 70–80% of world natural gas reserves. States that are net energy
21 Walt, Foreign Policy. Page 31. 22 Cesnakas, G, 2010. Energy resources in foreign policy: a theoretical approach. Baltic Journal of Law and Politics, 3:1. Available at: https://www.degruyter.com/view/j/bjlp.2010.3.issue-1/v10076-010- 0003-y/v10076-010-0003-y.xml [Accessed 12 December 2013]. 23 Luft, G, & Korrin, A, 2009. Energy Security Challenges in the 21st Century. United States: ABC-CLIO. Page 340. 24 Taliaferro, J, 2009. ‘Neoclassical realism and resource extraction: state building for future war’ in Lobell, S; Ripsman, N & Taliaferro, J, Neoclassical realism, the state and foreign policy. Cambridge University Press: UK. 25 Cesnakas, Baltic Journal of Law and Politics. See also Yergin, D, 1990. The Prize: The Epic Quest for Oil, Money & Power. 1st ed. United States: Free Press. 26 Luft, G, & Korrin, A, 2009. Page 91.
- 30 - exporters are ultimately nationalising their energy industries in order to increasingly use energy as a tool to advance their foreign policy agendas.27
For Fareed Zakaria the key problem with realism is related to the notion of power maximisation. Zakaria notes that it is unclear whether states expand for material resources or as a result of material resources.28 The power maximisation tenet of realism also fails to explain why a state does not expand its interests abroad when there is a relative increase in the state’s power. In terms of energy resources, Zakaria queries why all states with vast reserves do not use them for political means. For example, energy-rich Canada and Mexico do not employ their reserves as political weapons, but Russia and Venezuela often do.29 There appears to be a critical step in decision-making within the state that falls between the power maximisation means and foreign policy ends. Evidently, there are independent variables that account for the difference in actions of states that are otherwise similar. The strength of neoclassical realism is that it allows for the inclusion of these variables.
Neorealism (otherwise known as structural realism) places the structure of the international system at the forefront of analysis. The system places certain constraints on state structure. These constraints are therefore the primary drivers of states—not their own interests.30 Structural realists remove the human nature component of analysis and assume that states will behave similarly in the international structure. But some states are seeking survival in the international system, not power. Structural realists fail to account for divergences in foreign policies between similar states in the system. Structural realists like Waltz ignore human nature and focus on the international system in which ‘states at a minimum, seek their own preservation and,
27 Ibid. 28 Zakaria, F, 1998. From Wealth to Power: the unusual origins of America’s world role. 1st ed. United States: Princeton University Press. 29 Ibid. 30 Cesnakas, Baltic Journal of Law and Politics.
- 31 - at a maximum, drive for universal domination’.31 Yet neorealism fails to explain why states behave differently when exposed to similar system pressures.
An offshoot of neorealism is defensive realism. Defensive realists assign less attention to the system, instead focusing within the individual state. Like its structural realist father, defensive realism posits that states seek security not power. For defensive realists, state expansion is driven by insecurity within the system—whereby states ‘expand their political interests when they become increasingly insecure’.32 Further, ‘rational states pursuing security can often afford to be relaxed, bestirring themselves only to respond to external threats, which are rare’.33 Should a threat arise, states will balance against it, which ultimately deters the threat and removes any need for conflict. Defensive realism allows for a non-military analytical focus and energy can be linked to state power. However, defensive realism cannot go further to explain ‘the constant aim to expand (a) states’ energy security as the result of the state’s perception of its own weak position in terms of energy security’.34 Certainly, Russian energy interests abroad are much more than a quest for security. Russia’s foreign energy policy is also about power. Defensive realism lacks the ability to account for the duality of Russian foreign energy policy.
Offensive realism is another offshoot of structural realism. Offensive realism differs from its defensive realist brother in terms of how much security states seek. For offensive realists, security within the international system is sparse and states must therefore employ maximum power to gain security. Offensive realism places great focus upon military might for it is seen to be crucial to power maximisation. Energy is not accepted by offensive realists as a powerful enough means to attain security in the international system. Offensive realism fails to include the role of energy in a
31 Waltz, K, 1979. Theory of International Politics. 1st ed. United Kingdom: Addison-Wesley. Page 118. 32 Zakaria, F, 1998. Page 21. 33 Rose, G, 1998. Review: Neoclassical Realism and Theories of Foreign Policy. World Politics, 51:1. Available at: https://www.jstor.org/stable/25054068?seq=1#page_scan_tab_contents [Accessed 11 November 2013]. Page 149. 34 Cesnakas, Baltic Journal of Law and Politics. Page 42.
- 32 - state’s power maximisation process. Contemporary Russian policy points to the centrality of energy in Russia’s power maximisation processes. As Mearsheimer notes, domestic differences are seen to be unimportant, for system pressures will ultimately make states behave alike.35 As the overarching explanation for exploring Arctic strategy, neorealism is on fragile ground given the existing strong precedent of cooperation between Arctic states. While neorealism fails to explain cooperation between states in the Arctic as well as why Arctic states behave differently, neoclassical realism can, and therefore presents as a useful theoretical framework to assess the Arctic geopolitical trajectory.
Neoclassical realism involves the inclusion of independent variables into the analysis. Neoclassical realists focus on both the relative power capabilities of states and the perception of leaders regarding these relative power capabilities. Here, the main actors in the system are not states but statesmen.36 The central argument of neoclassical realism is that ‘nations try to expand their national interests abroad when central decision-makers … perceive a relative increase in state power’.37 Here, neoclassical realism employs some tenets of constructivism by including the variable of state perception in analysis. Neorealism does what constructivism cannot—it moves beyond a state-level focus to consider the relationship between domestic variables and the international system.
Neoclassical realism allows for the assessment of foreign energy policy as the theory ‘concentrates on material power, and underlines importance of state structure, as well as statesmen’s perception of the international system’.38 Further, this framework accounts for why energy resources are more commonly utilised in foreign policy in states where the energy sector is more closely related to government.39
35 Mearsheimer, J, 2001. The Tragedy of Great Power Politics. New York: W. W Norton. 36 Zakaria, F, 1998. 37 Ibid. Page 38. 38 Cesnakas, Baltic Journal of Law and Politics. Page 47. 39 Ibid.
- 33 - Independent variables
•Relative state power •Position of state in •Perception of state power international system •Perception of position in international system •State identities: nationalism Foreign Policy •State structure
Power
Figure 2: A neoclassical realist reading of foreign policy40
Within the realist paradigm, neorealism dominates the study of international relations theory. Neoclassical realism occupies the ‘middle ground’ between the structural theories of neorealism, offensive and defensive realism, and constructivism. While neorealism may explain the outcomes of state interactions and does include some general assumptions about the motivations of states, it does not explain their behaviour in great detail.41 Neoclassical realism seeks to go deeper as a theory of foreign policy to explain why states act the way they do. The development of foreign policy theory as a subset of international relations theory has been slow as it receives little attention within the field. Rose states this is simply because traditional realists rule the subject out of bounds due to its complexity.42 For Waltz, the key issue for traditional realists with neoclassical realism is that it does not operate in autonomous realms, instead dealing with both internal and external forces at once.43
40 Author’s summary of neoclassical realism. 41 Rose, G, 1998 42 Ibid. 43 Waltz, K, 1979.
- 34 - Developed by Gideon Rose, neoclassical realism ‘explicitly incorporates both external and internal variables, updating and systematizing certain insights drawn from classical realist thought’.44 Rose defines neoclassical realism as a theory which argues:
the scope and ambition of a country’s foreign policy is driven first and foremost by its place in the international system and specifically by its relative material power capabilities. This is why they are realist … the impact of such power capabilities on foreign policy is indirect and complex, because systemic pressures must be translated through intervening variables at the unit level. This is why they are neoclassical.45
Neoclassical realists posit that a state’s material power establishes the basic aims of its foreign policy. Yet, there is no immediate ’transmission belt’ linking material capabilities to foreign policy behaviour. For neoclassical realists ‘foreign policy choices are made by actual political leaders and elites, and so it is their perceptions of relative power that matter, not simply relative quantities of physical resources or forces in being’.46 Wivel agrees that foreign policy decisions are influenced by leaders’ perceptions of relative power, intent and other states’ motivations. Further, the specific values of those leaders often interact with their cost-benefit analysis in economic and security affairs in the formation of foreign policy.47 It is often argued that both offensive and defensive realism oversimplify the behaviour of states and inaccurately portray the realities of the international system. Defensive realism is misguided because it places emphasis on countries’ responses to threats and overlooks the fact that one’s perceptions of threat are partly shaped by one’s relative material power. Whereas, ‘instead of assuming that states seek security, neoclassical realists assume that states respond to the uncertainties of international anarchy by
44 Rose, G, 1998. Page 146. 45 Ibid. Page 146. 46 Ibid. Page 147. 47 Wivel, A, 2005. Explaining why state X made a certain move last Tuesday: the promise and limitations of realist foreign policy analysis. Journal of International Relations and Development, 8:4. Available at: http://research.ku.dk/search/?pure=en/publications/explaining-why-state-x-made-a- certain-move-last-tuesday(7fb23b30-aecc-11db-bee9-02004c4f4f50)/export.html [Accessed 27 November 2014].
- 35 - seeking to control and shape their external environment’.48 Furthermore, in limiting itself to systemic factors alone, offensive realism is not entirely accurate.
A key advantage of neoclassical realism is its ability to predict that over the long term the relative amount of material power countries possess will shape the magnitude and ambition of their foreign policies; as their relative power rises states will seek more influence abroad, and as it falls their actions and ambitions will be scaled back accordingly.49This has been the case with Putin’s Russia. Syria and Ukraine have given Russia increased confidence to influence their sphere of special interest. That said, it is unlikely that any rises or falls in Russian confidence will spill over into the Arctic given that Russia already holds a strong legal claim. Three variants of realism are illustrated in the table below, highlighting the influence of the system on the state and the causal logic of foreign policy.
THEORY VIEW OF VIEW OF UNITS CAUSAL LOGIC INTERNATIONAL SYSTEM Defensive realism • occasionally Highly differentiated System incentives or *Leading theory post-Cold important internal factors War • the impact of (independent variable) anarchy is = Foreign Policy (FP) variable Offensive realism • very important Undifferentiated System incentives = FP • anarchy is inevitable Neoclassical realism • important Differentiated System incentives • anarchy is (independent variable) murky internal factors = FP
Table 1: Summary of key foreign policy theories50
48 Rose, G, 1998. Page 152. 49 Ibid. 50 Lobell, S, Ripsman, N & Taliaferro, J (eds) Neoclassical realism, the state, and foreign policy. Cambridge University Press: UK.
- 36 - Traditional realists assert that systemic forces and relative material power shape state behaviour, but neoclassical realism goes one step further. It moves beyond the system focus and as such enables us to explain much of contemporary international relations. Neoclassical realism allows for the exploration of how foreign policy is shaped by statesmen and their particular perception of the international system. For the effective application of a neoclassical framework it is vital to have area expertise. Of course, area expertise is crucial for an accurate understanding of state behaviour. Understanding Russia’s domestic political landscape is vital for embarking upon a study of its foreign policy in the Arctic.
Neoclassical realism serves as a useful framework for international relations (IR) research seeking a greater richness and fit when it comes to a theoretical lens.51 In the post-Cold War system, traditional realist frameworks are unable to account for an increasing number of developments. As this thesis illustrates, Russian foreign policy is not uniform, it shifts between conflict and cooperative agendas on various global issues. Neoclassical realism allows for the inclusion of variables at the state level to assess how foreign policy is shaped and impacted on a domestic level and not simply as a direct result of international system pressures.
For Schweller, the link between the international system and the state, in terms of its foreign policy, is complex and indirect.52 Specifically, complex domestic political processes act as conduits that channel and direct policy outputs in response to external forces. Significantly, this explains why states respond differently to similar system pressures, and why a state’s foreign policy is ultimately less driven by system level forces than domestic ones.53 Neoclassical realism has been criticised for being an ‘ad hoc and theoretically degenerative effort to explain away anomalies for neorealism’.54 According to Rathbun, however, neoclassical realism is a logical
51 Ibid. 52 Schweller, R, 2004. Unanswered threats: a neoclassical realist theory of underbalancing, International Security, 29:2. 53 Ibid. 54 Rathbun, B, 2008. A Rose by any other name: neoclassical realism as the logical and necessary extension of structural realism, Security Studies 17.
- 37 - extension and a necessary step in advancing neorealism. Neoclassical realism should be viewed not as a distinct variety of realism, but rather as the next generation.55
Traditionally, Russian foreign policy has fitted the neorealist theses well, with a special focus on ambition.56 However, this framework fails to account for various instances of cooperation between Russia and the West since 2000. On the other hand, neoclassical realism posits that changing national preferences or interests will, under certain circumstances, result in cooperation among states in the system. Russia plays different roles in the international system, dictated by varying interests and perceptions. It positions itself as a global leader in relation to the US; a regional leader with the EU and a local leader in the CIS.57
As a framework, neoclassical realism provides scope for understanding why states seek both cooperation and conflict in different spheres because it incorporates domestic level variables that are key to explaining the dualism of Russian foreign policy.58 Moving beyond a discussion of what Russia could do, neoclassical realism extends the scope to consider what Russia wants to do. For Nygren, state interests are a better predictor of the future behaviour of states than their power resources alone.59 For interests and intentions do not change as much as power resources do. Russia takes a neoclassical realist approach to its foreign policy—as evident in its present strategy under Putin to recreate its great power status.60
Given Russia’s economic interests in the Arctic, a number of liberal IR theories could potentially account for its cooperative approach to the region. Neo-liberalism, for example, focuses on free market competition and economic growth. Neo-liberalism focuses on the power of institutions to shape the international system, but this underplays the role of the state. Neo-liberalism encourages reduced state
55 Ibid. 56 Wieclawski, J, 2011. Contemporary realism and the foreign policy of the Russian Federation. International Journal of Business and Social Science 2:1. 57 Ibid. 58 Wieclawski, J, 2011. 59 Nygren, B, 2012. Using the neoclassical realism paradigm to predict Russian foreign policy behavior as a complement to using resources, International Politics, 49:4. 60 Ibid.
- 38 - intervention in economic affairs, which makes the theory ill-suited to the study of Russian Arctic strategy. The Russian state is heavily involved in Arctic projects.
Likewise, liberal institutionalism appears on face value to be a suitable theoretical framework for exploring Russian Arctic strategy. Russia’s engagement and use of formal multilateral bodies such as the Arctic Council, as well as Russia’s adherence to the UNCLOS in Arctic territorial matters, indicate the suitability of a liberal institutionalist framework. However, such a framework fails to work beyond the Arctic. Beyond the Arctic, multilateral institutions and rule-based governance mechanisms are unable to curb Russia’s foreign policy.61 Thus a liberal institutionalist framework fails to account for Putin’s tendency to pick and choose institutions and norms based purely on self-interest. When it comes to the Arctic, norms and institutions geared towards cooperation are already, by virtue of geography, in Russia’s favour.
Liberal theories are generally able to account for Russia’s cooperative Arctic agenda. However, this works only at a surface level, as liberal theories are unable to account for the fact that presently this approach to foreign policy does not extend beyond the Arctic. Further, these theories do not provide flexibility to account for scenarios in which the cooperative agenda might be abandoned. Liberalism’s focus on the ‘society of states’ downplays the power of leaders in developing and executing what they deem to be the national interest. It is the leadership’s perceptions of the international system that shape the states perception. For example, this is evident in Russia and China, whilst trade partners, are also competitive external threats. It is the perception variable that sees Putin assessing the relative power of Beijing against Moscow’s or Beijing’s grand strategy which in turn shapes and informs Russian foreign policy toward China.
61 Examples of Russia’s divergence with multilateral organizations or international law and norms see: Georgian War (2009); actions in eastern Ukraine (2014-present); the annexation of Crimea (2014); Russia leaving the G8.
- 39 - Institutionalism sees international institutions as mechanisms for achieving international security, yet the Arctic Council is specifically mandated not to discuss or deal with international security issues.62 Furthermore, liberal institutionalism would see institutions as frameworks for cooperation over security concerns, yet this is not helpful as Russia picks and chooses which international norms to adhere to. Liberalism is not necessarily a good fit for Putin’s Russia across the board because some variants promote free trade and open markets, as well as Western democratic values and institutions. Neo-liberal institutionalists argue that institutions can be used to overcome conflict and competition between states. To an extent it works for this study, given Russia uses Arctic institutions (such as the Arctic Council, UNCLOS, CLCS). It will be argued here that is only because their interests fall on same side.
Both liberalists and neorealists address issues of global security in different ways – liberalists are aiming to promote cooperation within the international system and neorealists are aiming to survive the within system. Neoclassical realism allows us to go deeper by offering insight into the decision making processes (the transmission belt) of foreign policy within the two conceptual frameworks.
Likewise, given the study’s concern with issues pertaining to global order and Russia’s role within it, the English School appears to be a well suited theoretical framework. The English School assumes that there exists an order in world politics. Using the English School to assess the concept of cooperation in the Arctic is difficult due to the lack of an overarching global actor at the top of the world order. For Buzan, the English School examines the interaction between three elements: the international system (power politics); international society (interaction between states and institutionalised norms); and world society (individuals and non-state organizations as shared identities).63 As Bull posits, world politics exists ‘when a group of states, conscious of certain common interests and common values, form a society in the sense that they conceive themselves to be bound by a common set of rules in their
62 Arctic Council, 2013. The Arctic Council: a backgrounder. Available at: https://www.arctic- council.org/index.php/en/about-us [Accessed 15 June 2016] 63 Buzan, B, 2015. ‘The English School: a neglected approach in International Security Studies’. Security Dialouge, 46:2.
- 40 - relations with one another, and share in the working of common institutions’.64 Certainly, this is not an approach to world politics that Putin’s Russia adheres to. As this thesis argues, Russian cooperation in the Arctic is confined to the region and somewhat of an outlier in contemporary Russian foreign policy. Russia adheres to international law in Arctic, purely because it is in Russia’s interest to do so.
The problem with the English School, as pointed out by Copeland, is that the concept that international societies of shared norms and rules is what pushes towards greater cooperation than one would expect from realist theories. This leaves out the interest and perception variables and in doing so, has a hard time accounting for deviations in cooperation between Russia and the West.65 The English School’s treatment of shared values and norms of states as regulators of international relations does not sit well when assessing Putin’s Russia. Put simply, Russia does not share all norms with the other states in the international system – it certainly picks and chooses which to adhere to. Furthermore, the English School does not shed light on why Russia touts the primacy of international law in the Arctic yet rejects international law in other areas. Ukraine 2014 and Georgia 2009 are both clear cases in point.
Constructivism may also be engaged when studying Russian Arctic strategy given the focus of this thesis on personalities within the Kremlin. For Wendt, constructivism treats state ideas and identity as dependant variables.66 The shortfall of constructivism for this particular study is that Russia’s cooperative approach to the Arctic fails to translate into all other areas of its foreign policy. The importance of the independent variable is offered by neoclassical realism. Further, constructivism in this case is challenged by the extent to which ideational continuity is to be expected in the absence of Putin’s leadership. Constructivism does not explain why similar states in the Arctic - Canada, the US or Russia produce different Arctic strategies despite all identifying in some way as ‘Arctic powers’. The missing piece here is the ‘transmission belt’ which shapes the states Arctic strategy.
64 Bull, H, 1977. The Anarchical Society: a study of order in world politics. Macmillan: London. Page 13. 65 Copeland, D, 2003. ‘A realist critique of the English School’. Review of international studies, 29. 66 Wendt, A, 1992. ‘Anarchy is what states make of it: the social construction of power politics’. International Organization, 46.
- 41 - Neoclassical realism essentially boils down the relevant elements of neoliberal institutionalism, constructivism and neorealism to provide a rich theoretical framework to explore Russian Arctic strategy. Institutions play an important role in the international system, but are not shapers of foreign policy. Russia adheres to the key institutions within the Arctic. It is in Russia’s interest to. Although neorealists would not focus on institutions because as a general rule, states do not sacrifice relative power, they would find it is in Russia’s advantage to use international law in the Arctic as it falls on Russia’s side anyway. Further, constructivists would argue that Russian Arctic strategy reflects dominant beliefs and identity within Russia as an Arctic power. Russia’s nationalist sentiment of its great power past, Stalin’s conquering of the High North, as well as Russia’s growing strength and the modernization agenda of military are all shaping Russia’s Arctic strategy.
Neorealism and liberal institutionalism alone are no longer adequate to explain Russian foreign policy. It is necessary to take into account constructivist tenets like domestic factors and leadership perceptions to ‘fathom the factors that drive Russian policy towards the outside world’.67 Neoclassical realism, as this thesis demonstrates, steps up to the challenge by incorporating both the unit and system level factors whilst borrowing various tenets of neorealism, liberal institutionalism as well as constructivism.
Neoclassical realism offers the ability to explore why states choose to act in ways which structural realism would not expect.68 For example, why does Russia seek cooperative avenues, dialogue in the region, or submit to the CLCS thus adhering to UNCLOS? Certainly, the international system gives Russia information about costs and benefits of particular foreign policies and it is this area in which neoclassical realism is advantageous, in its assessment of how this information is processed. Neoclassical realism also goes the other way, allowing for the West to analyse its own perceptions of Russian Arctic strategy. The 2007 Russian Arctic flag plant (explored in Chapter Four) is case in point. There were no legal implications for the symbolic action, and
67 Kanet, R, 2012. ‘Russia in the new international order: theories, arguments and debates’. International Politics, 49:4. Page 397. 68 Kitchen, N, 2010. ‘Systemic pressures and domestic ideas: a neoclassical realist model of grand strategy formation’. Review of international studies, 36:1.
- 42 - yet the application of learnt Cold War narratives was immediately applied to the event. Ultimately, shaping Western perceptions of Russian Arctic policy.
Neoclassical realism, as this thesis demonstrates, overcomes various shortfalls of other schools of theory. It allows for variation in foreign policy strategies of like powers (such as the A5). Further, it offers duality to foreign policy as it explores both the external situation and the international drivers. Neoclassical realism combines useful elements of realism, liberalism and constructivism schools to provide a richer framework to elicit an understanding of Russian foreign policy in the Arctic. Ultimately, it allows for the inclusion of variables to account for sways between the cooperation and conflict policies of the Kremlin in the Arctic.
Neoclassical realism involves a “top-down” conception of the state, focusing on the state’s leadership and its processes of perception to arrive at the states national interest.69 This framework moves slightly away from liberalism which incorporates various interest groups into policy making, by placing control firmly in the leader’s perception, and this is illustrative of Russian policymaking under Putin. This thesis focuses on Russia’s support of international law in the Arctic. A neoclassical realist reading of Russia’s adherence and touting of international law in the Arctic reflects the fact that the Kremlin finds itself in a position in the Arctic in which geography puts international law squarely in Russia’s interest.
Neorealism is popular to inform foreign policy in Russia for two key reasons. Firstly, Russia has always had a strong central state power and as a result, neorealism was the dominant paradigm for it to translate state interests succinctly. Until recently, Russian foreign policy practice had not contradicted the neorealist power maximisation theses.70 Secondly, neorealism serves de facto as the basis for ‘the bulk of Russia’s state foreign policy documents’ whereby ‘national interests serve as instruments to legitimize the country’s actions, and consolidate public opinion and the elite in
69 Ripsman, N, 2002. Peacemaking by democracies: the effect of state autonomy on the post-world war settlements. The Pennsylvania State University Press: US. 70 Ibid.
- 43 - support of the state’s actions on the international stage’.71 Within Russia, the use of neoclassical realism to explain and articulate Russian foreign policy is ‘practically non- existent’.72 This is despite it being the case that Russia’s changing domestic context has a direct impact on Russian foreign policy.
More broadly, post-Cold War international relations theory within Russia rests largely on West-centric theory. Accordingly this thesis draws on international relations theory from within Russia to broaden the theoretical framework. For Tsygankov and Tsygankov ‘IR theory is grounded in certain social conditions and may reflect ideological and cultural premises’. Specifically, ’International Relations (is) a branch of research that often reflects political, ideological and epistemological biases of Western, particularly American, culture’.73
In the Tsygankovs’ view, within Putin’s Russia there are three schools of thinking about Russia and its position in the international system. While Russian foreign policy has responded to a variety of changing international contexts, it has displayed a ‘remarkable degree of continuity’.74 The first post-Soviet school of thought was that of the Westernisers. Proponents envisioned Russia as part of the West, citing similarities between Russia and the West. Here, the West is considered the ‘most viable and progressive civilization in the world’.75 Westernisers allude to a ‘natural affinity with the West’ which is based on (perceived) shared values such as democracy, human rights and free market mechanisms. The central aim of Westernisers is to support the development of Western liberal institutions in Russia in order to reverse ultimately Russia’s economic and political backwardness.
71 Romanova, T, 2012. Neoclassical Realism and Today’s Russia. Russia in Global Affairs, 3, Available at: http://eng.globalaffairs.ru/number/Neoclassical-Realism-and-Todays-Russia-15681 [Accessed 26 July 2016]. 72 Ibid. 73 Tsygankov, A, & Tsygankov, P, 2010. National ideology and IR theory: Three incarnations of the ‘Russian idea’. European Journal of International Relations, 16:4. Page 663. 74 Ibid. Page 668. 75 Ibid. Page 668.
- 44 -
The second school was that of the Statists. Statists view Russia as a strong, independent state of great power status. This school features a deep ‘psychological complex of insecurity’ and a readiness to ‘sacrifice global stability for sovereignty’.76 Significantly, statists are not inherently anti-Western, for they evidently seek the West’s recognition. The Tsygankovs note that this produces a foreign policy dualism of ‘relative accommodation with the West as well as balancing strategies against the West’.77 This dualism is evident in Russian foreign policy under the early Putin—for example, Russia’s support post-9/11 for Western anti-terror policies and Russian support for Assad’s Syria.
Finally, the third ideological school—dominant in the later Putin period—is that of the Civilisationists. Advocates of this school find Russia and the West in definite, constant opposition. Russian values are as a matter of principle, ‘principally different’ to those of the West.78 Civilisationists maintain Russia is a unique civilisation and the world would benefit from the spread of Russia’s particular brand of civilisation—most pressingly to the near abroad.79
Westernism Statism Civilisationism Russia Part of the West Independent state Independent civilisation West Ally of Russia Threatening Russian Not Russian independence Outcome Integration with West Build Russian great power Resist the West and promote Russian civilisation Foreign Policy Atlanticist (Kozyrev; Nationalist (Primakov) Eurasian (Dugin) Concept Chubais)
Table 2: Summary of three Russian ideologies in IR.80
76 Ibid. Page 669. 77 Ibid. Page 669. 78 Ibid. Page 670. 79 Ibid. 80 Author’s summary based on findings by Tsygankov, A, & Tsygankov, P, 2010.
- 45 -
Table 2 provides a summary of three popular Russian international relations ideologies. Since 2000, Russia has oscillated between Westernism and Statism, but with a growing tendency towards the latter over time. Since Russia’s aggression against Ukraine in 2014 in particular, there have been clear signals of Civilisationism being the dominant rationalisation for Russian foreign policy. There is certainly a deepening dualism in Russian international relations ideology that in turn shapes Russia’s foreign policy. The following discussion seeks to determine what these shifts might mean for Russian Arctic policy.
Russian foreign policy is not as predictable as traditional realists would argue. This underlines the necessity of a neoclassical realist approach to understand Putin’s Russia and the formation of Russian international relations theory. These three schools have emerged at once from Russia’s interactions with the West and are coloured equally by the Russian elites’ perception of the West.81 Once more, the significance of this variable highlights the usefulness of employing neoclassical realism as a framework for exploring Russian foreign policy. For Kropatcheva, neoclassical realism can offer important insights into the shifts and continuity as well as ‘cooperation and non-cooperation in Russian foreign policy’.82
Putinism is a key component of Russia’s Arctic strategy and as such, is examined throughout this thesis. It is an ideology and approach to foreign policy which has emerged from within Russia.83 The key features of Putinism are:
• a strong centralised state apparatus • state control over strategic resources • strengthening repression of civil society and
81 Ibid. 82 Kropatcheva, E, 2012. Russian Foreign Policy in the Realm of European Security through the Lens of Neoclassical Realism. Journal of Eurasian Studies, 3:1. 83 Nygren, B, 2012
- 46 - • the idea that Russia is the most important state in its region and as a global power, locked in a contest with the US.84
In summary, neoclassical realism proves to be a useful theoretical framework for the analysis of Russian foreign policy, and in terms of this thesis, for the analysis of Russian Arctic policy. Neoclassical realism’s inclusion of independent variables allows for the flexible framework that is required given that what Russia can afford to do in the world arena will, to a large extent, depend on the ups and downs of other powers.85 Furthermore, neoclassical realism’s treatment of the state and the international system as equal parts allows the inherent dualism of Russian foreign policy to be explored. Further, it will be necessary to examine both the domestic and international elements of Russia’s Arctic policy for they are constantly updating, informing and shaping each other.
1.5 Situating the Arctic narrative in the broader Russian foreign policy agenda
This study is multidisciplinary although when situating this thesis the most relevant field is that of international relations. Existing literature on Russian foreign policy under Putin tends to focus on Russian resurgence. The concept of Russia as a resurgent great power stems from the idea that Russia, as the Soviet Union, was once a superpower and deserves to be so once again.
Putin’s quest to recapture Russia’s great power status stemmed from the desire to return Russia to a standing reminiscent of the Soviet era. Great power status was not just an objective of Kremlin policymakers; it was also a nostalgic desire of the Russian people. Trenin supports this by citing a series of polls conducted in Russia that indicated the majority of Moscow high school students would ‘like to see the return
84 Ibid. 85 Lobell, S & Ripsman, N & Taliaferro, J (eds), 2009. Neoclassical realism, the State, and foreign policy. United Kingdom: Cambridge University Press. Page
- 47 - of the Soviet Union or at least something approximating the empire of the Czars’.86 For Putin, this empire does not necessarily only involve territorial expansion in the FSU, but a rise in international standing to that of an energy superpower.
Russia was once a great power, as the Tsarist and Soviet periods of history demonstrate. Looking to the Soviet period, it was evident that by 1980 the USSR was a superpower. For White, the USSR had:
…acquired an international influence that accorded … with the country’s enormous territory, population and natural resources ... the USSR has acquired a strategic capability which gave it an approximate parity with the USA…The Soviet Union had one of the world’s largest armies and one of its largest navies, and it stood at the head of the world’s two major military alliances. It was the centre of one of the world’s major trading blocs … and an influential member of the United Nations...87
Furthermore, Soviet foreign policy boasted that the Soviet Union was one of the greatest world powers and although perhaps such rhetoric was an exaggeration, it was a ‘pardonable’ one.88 Today, Russia considers energy to be a powerhouse of economic growth and the basis of the nation’s claim to great power status. Certainly, Russia’s importance as ‘Eurasia’s leading energy power’ teamed with its seat on the United Nations (UN) Security Council and its arsenal of nuclear weapons, situate Russia as a ‘key regional player with global ambitions’.89
With the collapse of the Soviet Union in 1991, it appeared that Russia had lost its superpower and thus, great power, status. Putin sought to regain Russia’s great power
86 Trenin, D & Baev, P, 2010. The Arctic: A View from Russia. United States: Carnegie Endowment for International Peace. Page 37. 87 White, S, 1993. After Gorbachev. UK: Cambridge University Press. Page 1. 88 Ibid. Page 2. 89 Perovic et al, 2009.
- 48 - status by positioning Russia as a key global energy player. Putin voiced general concern in stating:
Russia is in the midst of one of the most difficult periods in its history … [for] the first time in the past 200–300 years, it is facing a real threat of falling into the second, and possibly even third echelon of world states.90
Essentially, there were four driving factors behind the notion that Russia had lost significant political standing in world affairs. Firstly, the breakup of the Soviet empire resulted in vast territorial loss as well as a significant dispersion of the Russian population, with some 25 million Russians finding themselves within the confine of newly independent states. Secondly, the economic collapse of the 1990s, culminating in the 1998 financial crisis, crippled Russian great power. Thirdly, as a result of the economic collapse and years of lack of funding, the crippling of Russia’s military potential contributed significantly to the loss of great power status. Fourthly, Russia’s severe demographic issues such as the HIV/AIDS epidemic, decreased life expectancy, and a shrinking birth rate, no longer allowed Russia to lay claim to great power.91
The domestic issues outlined above are still roadblocks on Russia’s path to re-attaining great power status. For instance, despite influxes of ‘petrodollars’ into state coffers, Russia has not been able to improve individual life expectancy. In 1960, Russia’s life expectancy was more or less on par with that of developed countries at the time. However, today Russian men are dying on average 15 years earlier than males of other developed countries. Average life expectancy in Russia for men now sits at 65 years. Similarly, with an average life expectancy of 77, women are dying some 7 years earlier than their counterparts in other developed countries.92 This poses a risk for the future of Russia and its ability to populate a work force, particularly in the labour-intensive energy sector.
90 Wegren, S & Herspring, D, 2010. After Putin's Russia. New York: Rowman and Littlefield Publishers. 91 Dibb, P, 2006. The Bear Is Back. The American Interest, 2:2. 92 World Bank Data http://data.worldbank.org/indicator/SP.DYN.LE00.FE.IN.
- 49 -
Furthermore, the future of Russia’s workforce is impacted by the nation’s shrinking birth rate. Pirani notes that Russia’s population is decreasing by an estimated 800,000 people a year and is projected to shrink from 142 million in 2008 to 125 million in 2025. The state of the Russian healthcare system is further cause for concern, particularly with regards to the HIV/AIDS epidemic. Registered cases stand at 1 million and Russian authorities note that some 54% of newly detected cases are related to drug use, itself a critical issue for Russia.93 In addition, the gap between the rich and the poor is widening.94
Despite these challenges to Russian great power status, Putin continues to see energy and the military as key, while relatively neglecting urgently needed budgetary outlays for education and health. The notion of regaining great power status also demonstrates Russia’s desire to regain an identity in the international political arena.95 Shearman notes the importance of Russia’s search for identity in the context of contemporary Russian foreign policy.96 For instance, he argues, Russia’s consistent opposition towards NATO expansion within the near abroad97 demonstrates the ‘psychological factor linked to questions of prestige and identity’ within Russian foreign policy.98 Under Putin, a re-invigorated sense of Russian national identity has emerged, based on the notion of a strong state, no longer being a ‘junior partner’ of the US but an equal one, and being a key player in the global energy market. By 2007, Russia had made headway in its great power ambitions, with 66% of Russians already
93 Russia beyond the headlines. 2016. More than 1 million HIV infected persons registered in Russia. Available at: https://in.rbth.com/news/2016/03/23/more-than-1-million-hiv-infected-persons- registered-in-russia_578185. [Accessed 17 May 2016]. 94 Pirani, S, 2010. 95 See for further discussion of the role of oil and gas in Russia’s national narrative and identity: Rutland, P, 2015. Petronation? Oil, gas and national identity in Russia. Post-Soviet Affairs, 31:1; Easter, G, 2008. The Russian State in the Time of Putin. Post-Soviet Affairs, 24:3. 96 Shearman, P, 2001. The Sources of Russian Conduct: Understanding Russian Foreign Policy. Review of International Studies, 27:2. Page 261. 97 The ‘near abroad’ refers to the newly independent republics established as a result of the 1991 dissolution of the USSR. 98 Shearman, P, 2001.
- 50 - believing that there had been a definite improvement in global respect for Russia.99 This figure has increased further in recent years with Russia’s increasing assertiveness within in its foreign policy.
Putin’s concern for Russia’s fall from great power status predates his presidency. His plan for recovering that status can be found in his 1997 St Petersburg Mining Institute PhD dissertation.100 In this document, Putin outlined the strategic significance of Russia’s vast natural resource wealth.101 Goldman notes that Putin’s plan encompasses the following tenets: the Russian Government should re-assert control over natural resources; oligarch control within the energy sector should be eliminated, as ‘regardless of who is the legal owner of the country’s natural resources … the state has the right to regulate the process of their development and use’; Russia should welcome international foreign investments, so long as the state remains in majority control; and only increased state control over the energy sector will allow Russia ‘to emerge from its deep crisis and restore its former might’.102 It should be noted that eliminating oligarch control in the energy sector was more or less a process undertaken by Putin to substitute state-favoured for the existing ones.
Putin’s vision for righting what he viewed as historical wrongs saw energy ushered in as the key to returning Russia to great power status. A central feature of Russian energy diplomacy is that it employs its energy wealth as a foreign policy ‘weapon’ when it deems so necessary. For Stanislaw, ‘Russia is an energy superpower that uses its vast resources as the basis of economic development and as an instrument for carrying out domestic and foreign policy’.103 Cohen goes further, noting that what has developed in Russia is a comprehensive energy strategy, which ‘masterfully integrates geopolitics and geo-economics’.104 Likewise, for Klare, Putin’s belief in the crucial role
99 Rose, R, 2007. New Russia Barometer XV: The Climax of the Putin Years in Studies in Public Policy. United Kingdom: Centre for the Study of Public Policy. 100 Goldman, M, 2010. 101 See footnote 92. 102 Goldman, M, 2010. Page 98. 103 Stanislaw, J, 2008. Power play – Resource nationalism, the global scramble for energy. United States: Deloitte Center for Energy Solutions. Page 9. 104 Cohen, A, 2007. Europe’s Strategic Dependence on Russian Energy. United States: The Heritage Foundation. Page 7.
- 51 - of the state in the management of Russia’s natural resource base has resulted in the emergence of a foreign energy strategy which employs oil and natural gas as the guarantors of the nation’s international position.105
Certainly, the assertive nature of Russia’s energy diplomacy under Putin is evident in its foreign energy strategy towards the former Soviet Union. Klare concludes the strategy aims to punish former vassals who flag their intentions to exit the Russian orbit by starving energy supplies—often in the depths of winter.106 A further aspect of Russian energy diplomacy is the state’s push to gain footholds in the domestic energy network of former Soviet states. Similarly, the concentrated efforts to reorient energy transit routes away from former vassal states are a central component of Russian energy diplomacy under Putin. For example, the development of the Nord Stream and South Stream routes allow Russia to reorient around Ukraine and Belarus respectively, and this ultimately restricts any previous transit state power the former vassals possessed, enabling Russia in effect to blackmail them while continuing to serve their Western European customers.
Within Russian energy diplomacy literature there appears to be a disagreement over whether economic or political ends drive the strategy.107 For Shaffer, energy is the currency of power in contemporary international relations whereby climate change is now a security threat and energy security has become a nation’s leading security imperative.108 Upon this basis, it is evident that Russian energy strategy is driven by both economic and political ambitions. For example, efforts to gain a foothold in the domestic energy markets of former vassals indicate how Russian energy diplomacy is driven by a desire to use energy both as a political weapon and as a means on which to capitalise, and where possible, monopolise commercial opportunities.
105 Klare, M, 2008. 106 Ibid. 107 For further insight see: Henderson , J, 2015. The Political and Commercial Dynamics of Russia’s gas export strategy. Oxford Institute for Energy Studies: UK. 108 Shaffer, B, 2009. Energy Politics. Philadelphia: University of Pennsylvania Press.
- 52 - Under Putin, Russia has increasingly tied resurgent great power ambitions to its energy wealth. However, Russia’s ability to effectively utilize its natural resource endowment to such ends is challenged by changes in the global energy mix and the move towards renewables as well as domestic issues around lack of investment in new technology and exploration efforts.
Nonetheless, Russian foreign policy under Putin has reflected an increasingly assertive tone.109 In Russia’s backyard, its relationship with a number of its former satellites deteriorated as these states contemplated democratic reform on revolution and integration in the EU and NATO. Significantly, the current relationship between Russia and NATO is marred by what may be the deepest tension since the end of the Cold War as a direct result of Russia’s actions on the Crimean Peninsula. For Putin, NATO’s eastward expansion is tantamount to Russian strategy insecurity. Figure 3 illustrates NATO’s eastward expansion comparing 1989 members to 2015 members as outlined in Russia’s new military doctrine, released in late 2014. NATO featured as the driving force for the new doctrine, as did Russia’s increasing presence in the Arctic and deepening ties with China and India. The document ranked NATO as the leading external military risk, listing as key threats the ‘build-up of the power potential of NATO’, ‘vesting NATO with global functions’ carried out ‘in violation of the rules of international law’, and ‘bringing the military infrastructure of NATO into member countries near the borders of the Russian Federation’, or any ‘further expansion of the alliance’.110
109 For further discussion of Putin’s foreign policy see Rumer, E, 2007. Russian foreign policy beyond Putin. Adelphi Series Paper, 390. 110 Government of the Russian Federation, 2014. The Military Doctrine of the Russian Federation. Available at: http://rusemb.org.uk/press/2029 [Accessed 5 November 2015].
- 53 -
Figure 3: NATO’s eastward expansion111
NATO expansion into the post-Soviet sphere is a red line for Russia, as are NATO efforts to further anti-missile defence programs within Europe. The document claims such moves by NATO ‘undermine global stability and (are) violating the balance of power in the nuclear-missile sphere’.112 The doctrine flagged Russia’s intention to balance against NATO in the missile shield space through the development of joint anti-missile systems with Russia’s allies. For Oliker, the 2014 doctrine is more or less similar to its 2010 predecessor in terms of its assessment of NATO, but it sees the NATO threat as ‘more perilous than in early 2010’ and much more immediate. Oliker
111 ‘NATO’s eastward expansion comparing 1989 members to 2015 members’. Business Insider, 2015. Available at: http://www.businessinsider.com/putins-next-move-on-ukraine-2015-2. Reproduced with permission. 112 Government of the Russian Federation, 2014. The Military Doctrine of the Russian Federation. Available at: http://rusemb.org.uk/press/2029 [Accessed 5 November 2015].
- 54 - notes that ‘the 2010 doctrine spoke of NATO’s (illegal, according to Moscow) intent to develop a global role and capability, to deploy military infrastructure near Russia’s borders and to continue to expand’, whereas the 2014 doctrine ‘describes these same things as actions already underway’.113
Klein and Major have developed three scenarios for the future trajectory of NATO- Russian relations given the apparent return of the security dilemma.114 First, confrontation with strong potential for escalation. Here, the ‘lack of trust, inadequate dialogue and military build-up generate great instability’ where ‘tensions can escalate militarily, either accidentally as the result of misinterpretations or deliberately whipped up, for example for domestic political reasons’.115 Second, contained confrontation. In this scenario, ‘there is neither aspiration nor hope to resolve the overarching conflict about the institutions and principles of the Euro-Atlantic security order’, yet ‘both sides work to avoid a military escalation, for example with the assistance of transparency, confidence-building measures and bilateral arrangements’. Third, a pragmatic partnership to address shared concerns, in which the conflict persists but the actors are willing to address it in selected fields. What follows from this selective partnership is ‘an intensified, long-term and institutionalised cooperation’.116 It is near impossible to predict the future trajectory of Russian-NATO relations given recent vacillation between cooperation to stand-off with Russia under Putin. Perhaps there is a sliver of hope in the reality that ‘where shared interests exist, ad hoc cooperation is possible’.117
113 Oliker, O. 2015. Russia's New Military Doctrine: Same as the Old Doctrine, Mostly. Available at: http://www.rand.org/blog/2015/01/russias-new-military-doctrine-same-as-the-old-doctrine.html. [Accessed 24 June 2014]. 114 Klein, M & Major, C. 2015. Perspectives for NATO-Russia Relations. Available at:http://www.css.ethz.ch/content/specialinterest/gess/cis/center-for-securities- studies/en/services/digital-library/articles/article.html/195137. [Accessed 24 June 2014]
115 Ibid. 116 Ibid. 117 Ibid.
- 55 - 1.6 Literature Review: Russian Arctic strategy
There is a vast body of literature on Russian foreign policy under Putin. For background on the early Putin years and Russian foreign policy see in particular Eugene Rumer’s Russian Foreign Policy beyond Putin as well as Chatham House’s The Russian Challenge.118 For accounts of Russian foreign policy in the years directly following the collapse of the Soviet Union see for example see the work of Bobo Lo.119 There is also a large subset of literature that deals with Russia’s foreign energy strategy, see for example, Edward Lucas’ The New Cold War: Putin’s Russia and the treat to the West.120 For economic background on the relationship between Putin’s Russia and energy see Phillip Hanson’s Regional economic change in Russia and Richard Sawka’s Russian politics and society.121 For work on Putin’s personal role in Russia’s foreign energy strategy see particularly research by Peter Rutland.122 For coverage of Russia’s domestic energy scene see especially Stephen Fortescue’s publications.123 For further insight into corruption in Russia’s energy sector see in particular Karen Dawisha’s Putin’s kleptocracy.124 These important works inform this study, however many of the issues raised and contested in the broader Russian foreign policy literature are beyond the scope of this thesis. Russia’s Arctic strategy falls within the subfield of Russian foreign policy and this thesis deliberately takes a narrow focus to draw on the (relatively few) secondary sources in this emerging field.
Given the rise of international attention towards the Arctic, it is hardly surprising that Russia has developed a comprehensive Arctic strategy. For obvious geographical reasons, the Arctic is strategically significant to Putin’s Russia. However, the Arctic is also particularly important to Russia for a range of geo-economic reasons. Russia
118 Rumer, E, 2007. 119 Giles, K, Hanson, P et al, 2015. The Russian Challenge. Chatham House: UK. 120 Lucas, E, 2008. The New Cold War: Putin’s Russia and the treat to the West. Bloomsbury: US. 121 Hanson, P, 2000. Regional economic change in Russia. E Elgar: UK; Sakwa, R, 2008. Russian politics and society. Routledge: US. 122 For example: Rutland, P, 2015. ‘Petronation? Oil, gas and national identity in Russia’, Post-Soviet Affairs, 31:1. 123 Fortescue, S, 2006. Russia’s oil barons and metal magnates. Palgrave Macmillan: UK. 124 Dawisha, K, 2014. Putin’s kleptocracy. Simon and Schuster: US.
- 56 - already generates 20% of its GDP and 22% of foreign exports from the Arctic region.125 Furthermore, Russia’s 2008 Arctic policy outlined the future of the region—namely that the Arctic would represent a leading source of global energy for the 21st Century.126 Russia’s Arctic strategy is multipronged.127 In terms of economics, despite the current lull, the Arctic provides significant gains by way of foreign partnerships. Russian primary sources are crucial material for this thesis and Russia’s Arctic policy documents are examined at length in Chapter Four.
This section surveys key works on Russian Arctic strategy under Putin. Existing literature on Russia’s Arctic ambitions appears concentrated at either end of the Arctic ‘carve up’ spectrum, with the ‘new Cold War’ camp at one end and the ‘arena for international cooperation’ camp at the other. Proponents of the ‘new Cold War’ analysis view Russia’s Arctic strategy as fostering a dialogue of regional competition.128 For Borgerson, the Arctic will descend into a new scramble for territory and control of the natural resource wealth.129 This ‘mad dash’ for the Earth’s remaining untapped resource wealth is also touted by Blank who views the Arctic as an ideal field for expression of great power ambitions.130 Blank (2015) points to Russia’s very real economic and security interests in the Arctic as accounting nicely for the process of securitization occurring under Putin. He also makes the valid point that no Western power has expressed the desire to outright threaten Russia’s interests in the Arctic. However, Blank ignores the militarization efforts of Norway, Canada and the US in the Arctic.
125 Medvedev, D, 2008. Protecting Russia’s National Interests in the Arctic. Moscow: Russian Security Council. 17 September. Available: http://eng.kremlin.ru/text/speeches/2008/09/17/1945_type82912type82913_206564.s html. Accessed: 4 May 2014. Note: Medvedev’s Arctic definition is inclusive of Russia’s entire high north region – noting a large volume of onshore energy projects there. Making the GDP figure higher than reality. 126 Zysk, K, 2014. Asian interests in the Arctic: Risks and gains for Russia. Asia Policy, 18. 127 See for example: Trenin, D & Baev, P, 2010. 128 See for example: Blank, S, 2011; Lucas, E, 2009. The New Cold War. United Kingdom: Bloomsbury Publishing; Stulberg, A, 2007. Well-Oiled Diplomacy. New York: State University Press; Sakwa, R, 2008; Borgerson, S, 2013. The Coming Arctic Boom. Foreign Affairs, July; Gupta, A, 2009. Geopolitical Implications of Arctic meltdown. Strategic Analysis, 33:2. 129 Borgerson, S, 2008. Arctic Meltdown. Foreign Affairs, 87:2. 130 Blank, S, 2011.
- 57 -
In line with the ‘new Cold War’ proponents, Klare states that the Arctic will become a battlefront for the looming resource war which will result from global energy supply failing to meet global energy demands.131 Further, Haas also argues that military clashes are most likely to occur in regions where energy is to be won or lost—with the Arctic qualifying as such a region.132 Across the board, proponents of the ‘new Cold War’ camp tend to label Russia’s Arctic strategy as neo-imperialist. Ariel Cohen notes that a key feature of Russia’s neo-imperialist approach to the Arctic is the way in which Russia views the region as a ‘mega project’ for the 21st Century.133 For Cohen, the Arctic represents an opportunity for Putin’s Russia to satisfy its ambition of becoming an energy superpower. He also argues that Russian Arctic strategy under Putin represents a throwback to the 1930s Stalinist attempts to conquer the Arctic. New Cold War analysts also like to focus on Russian nationalist ideologists like the Eurasianist Aleksandr Dugin, who incites nationalist fervour and actively trumpets a neo-imperialist agenda. For example, when addressing the Russian public on Arctic matters, Dugin declared, ‘the purpose of our being lies in the expansion of our space … polar bears live there, Russian polar bears’.134
This group can be contrasted to those who identify Russian Arctic strategy as paving the way for, and encouraging, international cooperation and involvement in the region.135 Proponents of this camp assert that competition, but not necessarily to the
131 Klare, M, 2008. 132 Haas, M, 2009. Russia’s Arctic Strategy: Challenge to Western energy Security. Baltic Rim Economies Review, 4. 133 Cohen, A, 2007. Russia's Race for the Arctic. The Heritage Foundation. Available at: http://www.heritage.org/research/commentary/2007/08/russias-race-for-the-arctic [Accessed 10 January 2016]. 134 Spiegel Online. 2009. Riches at the North Pole: Russia Unveils Aggressive Arctic Plans. Available at: http://www.spiegel.de/international/world/riches-at-the-north-pole-russia-unveils-aggressive- arctic-plans-a-604338.html. [Accessed 19 October 2015]. 135 See for example: Pohler, M, 2009. Russia’s Energy Assets: Security and Foreign Policy Issues. United States: Nova Science; Balzer, H, 2005. The Putin Thesis and Russian Energy Policy. Post-Soviet Affairs, 3; Tulupov, D. 2013. Time for Russia and China to chill out over the Arctic. Available at: http://www.russia-direct.org/analysis/time-russia-and-china-chill-out-over-arctic.[Accessed 8 January 2016]; Laruelle, M . 2014. Continuing cooperation patterns with Russia in the Arctic. Available at: https://www.wilsoncenter.org/sites/default/files/FINAL%20CI_140915_Laruelle_brief_v1.pdf. [Accessed 15 February 2016]; Lackenbauer, P. W. 2016. Canadian Arctic Security: Russia’s not coming.
- 58 - extent of conflict, will result from looming global energy security challenges. This group accepts the concept of growing global demand for scarce energy supplies, but refutes the notion that armed warfare will ensue as a result.136 For Shaffer, the rise in unconventional energy sources137 will continue to ensure that the global energy market stays ahead of global energy demands.138
The notion that Arctic competition may not necessarily result in Arctic confrontation is also supported by Marlene Laruelle.139 She examines contemporary Arctic geopolitics as evidence of the return of nationalist rhetoric, something not unique to Russia. Laruelle makes the point that is largely an identity building project for Putin. She plots the changes in Russian strategic thinking about the Arctic and concludes that Russia does not have sufficient capability to dominate the Arctic. This thesis departs from this assumption. Not only does Russia remain unmatched in terms of military capability in the Arctic region, ‘dominating’ is not really the end goal for Russian Arctic strategy under Putin. This is why neoclassical realism is a useful framework, as it explains what neorealism cannot: why has Russia not simply claimed sovereignty by military might? Instead, Russia has actively used legal channels in the region.
Brigham provides a succinct overview of the common misconceptions of contemporary Arctic geopolitics.140 He notes the oversimplification in the news media of the Arctic’s resource wealth, highlighting the fact that the Arctic is unlikely to experience any kind of ‘21st Century gold rush’. Although Brigham points to the ‘vast storehouse of natural resources’, he fails to examine the realities of extracting them in the harsh, largely inoperable offshore Arctic environment. Further, there are a range of alternative energy sources, such as Shale gas and LNG, that powerhouses like China and India will tap before attention is fixed on Arctic resource potential. In
Available at: https://www.newsdeeply.com/arctic/op-eds/2016/04/14/canadian-arctic-security- russias-not-coming. [Accessed 22 April 2016]; Conley, H & Rohloff, C, 2013. The New Ice Curtain. Washington DC: CSIS; Zagorski, A, 2013. The Arctic: a new geopolitical pivot?. Moscow: Russia Direct/Russia Beyond the Headlines; Trenin, D & Baev, P, 2010. 136 For a good discussion of Arctic geopolitics see: Byers, M, 2009. Who Owns the Arctic?: Understanding sovereignty disputes in the North. Vancouver: Douglas & McIntyre. 137 Unconventional sources are energy sources beyond traditional hydrocarbons (oil and natural gas) such as shale gas and oil sands which involve complicated technology to extract. 138 Shaffer, B, 2008. 139 Laruelle, M, 2014. Russia’s Arctic strategies and the future of the Far North. Routledge: US. 140 Brigham, L, 2010. ‘Think again: the Arctic’ Foreign Policy.
- 59 - support of the cooperation theses, Brigham makes the point that any looming Arctic resource boom does not threaten stability, it ‘reinforces it’. Also tackling common misconceptions of Russian Arctic strategy, Klimenko examines the regions security policy.141 Whilst flagging the potential for tensions outside the Arctic to spill into the Arctic, Klimenko makes the important point that Russia’s growing military capabilities may be taking place in the Arctic but are not necessarily for the Arctic. It is questionable, however, how useful Arctic brigade forces will be outside of the unique Arctic environment.
Further proponents of the Arctic cooperation theses, Konyshev and Sergunin, argue that Russia is not seeking military superiority in the Arctic.142 Instead, Moscow’s military ambitions serve three major goals: to demonstrate Russia’s sovereignty over the continental shelf; to protect economic interests and finally, to demonstrate that Russia remains a great power through its military capabilities. The driving ambition in the Arctic is to upgrade existing capabilities. However, this argument fails to account for the introduction of new capabilities in the Russian Arctic – new command posts, machinery and frequent exercises. The authors are correct to note that Russian military presence in the Arctic has “considerably decreased” since the end of the Cold War. Yet, it would appear that in comparison to the other A5 powers, Russia already holds military superiority in the region. It is the case that A5 powers have begun to upgrade some military capabilities, however, it is problematic to note that Russia’s modernization program does not affect the regional military balance. The authors rightly conclude that Russian ambitions may be high in the Arctic, yet they are far from being realized.
Le Miere and Mazo also present a detailed study of the challenges and opportunities stemming from the opening of the Arctic.143 The comprehensive overview of the issue finds that the Arctic should be viewed in terms of the array of avenues for global
141 Klimenko, E, 2016. Russia’s Arctic Security Policy: Still quiet in the High North. SIPRI Policy Paper, 45. 142 Konyshev, V & Sergunin, A, 2014. ‘Is Russia a revisionist power in the Arctic?’. Defense and Security Analysis. 143 Le Miere, C & Mazo, J, 2014. Arctic Opening: Insecurity and opportunity. Adelphi Series, UK.
- 60 - cooperation it provides. When it comes to questions of Russian military rejuvenation, the authors argue such developments can be accounted for as a process of Moscow “simply rejuvenating its decrepit Northern Fleet”.144 Of course, as this thesis highlights, this approach falls short of recognising Russia’s commitment to military capabilities that also go beyond ‘rejuvenation’. Russian fighter jet adventures into restricted airspace of its Arctic neighbours is an example. Their study does, however, make the important point that the concept of “a race for resources in the Arctic” is undermined entirely by the fact that up to 95% of offshore hydrocarbons are within demarcated EEZ’s. Dispelling myths of Arctic showdowns, their study supports the cooperation narrative. Delving further into the conflict versus cooperation Arctic narrative, Rowe and Blakkisrud note that whilst Russia’s Arctic rhetoric sways between the two, overall it is geared towards cooperation.145
The rise in unconventional energy sources, and the complexities of extracting the resources are similar to the Arctic challenges and will require international cooperation, investments and technology partnerships. This reality will foster a climate favouring international cooperation over conflict to achieve energy security. Certainly, Russia’s readiness to cooperate in the Arctic is illustrated by its agreement with Norway over the Barents Sea border delimitation issue. Øverland points out that, to date, Russia has adhered to all legal frameworks governing the Arctic.146 Further, it appears to be playing by the rules in submitting official claims to the UN in order to substantiate its territorial claim. Of course, in terms of geography, Russia is in a strong position legally in the Arctic and can therefore afford to be magnanimous. This thesis argues that Russian Arctic strategy under Putin does seek cooperation, on its own terms, through foreign partnerships in the Arctic.
144 Ibid 145 Rowe, E & Blakkisrud, H, 2014. A new kind of Arctic power? Russia’s policy discourses and diplomatic practices in the High North. Geopolitics, 19:1. 146 Øverland, I, 2010. Russia's Arctic Energy Policy. International Journal, Autumn.
- 61 - The literature on Russian Arctic strategy includes a thin body of literature that falls in the balanced middle ground.147 The middle ground camp of the Arctic ‘carve-up’ spectrum tends to acknowledge the competing territorial claims, the conflicting ambitions of the Arctic rim powers and the rising international significance of the region. However, the middle ground downplays the arms build-up and future warfare scenarios and instead reaches a pragmatic conclusion which highlights the requirement for regional cooperation in the Arctic given the shared challenges.148 Leading expert on Russian Arctic matters, Baev, suggests that Russian Arctic strategy represents an identity-building project for Russia by way of a new front on which to express its brash self-assertion. He also notes there are numerous drivers of Moscow’s Arctic strategy and a range of significant domestic constraints on Russia’s Arctic capability. Further, Baev argues that the Arctic resource prize and shipping routes are unproven and potentially exaggerated. As such, it is unlikely the region will play host to a new Cold War.149
Zysk pays particular attention to the militarisation of the Arctic, pointing out that as economic interest grows in the region, so too will Russia’s desire to defend its claims to the region, with force if necessary.150 She is hesitant to address the concerns around the proven resource potential in the Arctic. A comprehensive study by Perry and Andersen does look to the realities of the Arctic ‘great game’.151 The authors agree that factors such as time, cost and technology are working against the “rush to the Arctic” theses. Independent scholar, Alexander Golts, also takes aim at this concept. He notes that there is no “guarantee that in 50 years oil and gas will play the same important role in the global economy as they do now”.152 In reality, it is likely the world
147 See for example: Goldman, M, 2008; Orban, A, 2008. Power, Energy, and the new Russian imperialism. United States: PSI Reports. 148 See Howard, R, 2009. The Arctic gold rush. United Kingdom: Continuum. 149 Baev, P, 2007. Russia’s Race for the Arctic and the New Geopolitics of the North Pole. United States: The Jamestown Foundation. 150 Zysk, K, 2010. Russia’s Arctic Strategy: Ambitions and Constraints. JFQ, 52:2. 151 Perry, C & Anderson, B, 2012. New strategic dynamics in the Arctic region. Institute for Foreign Policy Analysis, US. 152 Golts, Alexandr’, 2011. ‘The Arctic: A clash of interests or clash of ambitions?’ in Blank, S (ed) Russia in the Arctic. Strategic Studies Institute, US. Page 49.
- 62 - will remain hydrocarbon heavy for longer than 50 years. Further, Golts makes the point that Russia’s 2001 Arctic policy (the ‘Basics of state policy of the Russian Federation in the Arctic Region’ as explored at length in Chapter Four) concentrated on military issues in the region much more than its revised 2008 document. This points to the fact that Russia’s perception of external threats posed in the Arctic has already been scaled back. Golts goes further to argue the Arctic is a region where the interests of Moscow and Washington clash. However, this is not necessarily the case, if anything they share many of the same interests in the Arctic which has, as recent history has demonstrated, provided a basis for cooperation.
Shaped by renewed tensions between Washington and Moscow, Conley and Rohloff present a US view of Russian Arctic policy.153 Their study presents various avenues to preserve and protect the existing Arctic cooperation between Russia and the West. The authors see the Arctic as a confidence building exercise and blueprint for Russia- West communication despite tensions elsewhere. This thesis aligns itself with the small body of the existing literature which favours the middle ground.
1.7 Methodology
This project involves a primary source document-based study including a number of both unstructured and semi-structured interviews.154 It draws upon various ‘pools’ of reference—the commercial petroleum industry, formal government reportage and academic think tanks as well as the news media —with the ultimate aim of forming a nexus between them. Interviews were conducted with field experts across the private sector, colleagues in academia, as well as key individuals within the commercial energy sector. Interviewees spanned Russia, the EU and the US. The research was greatly informed by the author’s commercial industry background, which offered
153 Conley, H & Rohloff, C, 2013. The New Ice Curtin. Washington DC: CSIS 154 As per ANU ethics protocol #2014/061
- 63 - insight from a trustworthy network of individuals working at the forefront of commercial Arctic negotiations with Russia. 155
Given the commercial sensitivity of Arctic dealings, interviewees are not identified.156 To avoid overdependence on Western academic and professional perceptions of Russian Arctic strategy this project incorporated content from Russian-based research. A range of primary source documents from the UNCLOS archive were examined, including all formal submissions to the UN body. Further, primary source documents from the Kremlin, such as Osnovy gosudarstvennoi politiki Rossiiskoi federatsii v Arktike na period do 2020 goda i dal’neishuyu perspektivu (Russia’s 2008 Arctic Strategy),157 the Strategiya natsinal’noi bezopasnosti Rossiiskoi Federatsii do 2020 goda (Russia’s 2009 Security Strategy),158 and Energeticheskaya strategiya Rossii na period do 2030 goda (Russia’s 2009 Energy Strategy)159 where examined. Of course, given the nature of the topic and the reality that Russia views energy as a matter of national security, there are a limited number of government documents available on the Arctic. However, this was overcome with secondary documents relevant to Russian foreign energy policy sourced from a range of academic journals, newswires and think tank reportage.
The government research bodies of Arctic rim nations—particularly those based in Scandinavia—were also consulted as they provide strong insight into Arctic geopolitics. These research units have expansive research budgets, which allow for insightful research on topics of national security interest not widely considered by other agencies. This study also incorporates primary sources in the form of in-house
155 My positions with Royal Dutch Shell as a Business Analyst as well as my current position as a Program Manager for Rio Tinto. Note: all views in this thesis are the author’s own and do not reflect views or positions of Royal Dutch Shell or Rio Tinto. 156 Primary interviews conducted in November, December 2014 in Washington; April, May 2014 in Moscow; April 2014 in UK and January-December 2015 in Canberra. 157 Government of the Russian Federation. ’Osnovy gosudarstvennoi politiki Rossiiskoi federatsii v Arktike na period do 2020 goda i dal’neishuyu perspektivu’. Available at: www.scrf.gov.ru/documents/98.html. 158 Government of the Russian Federation. ’Strategiya natsinal’noi bezopasnosti Rossiiskoi Federatsii do 2020 goda’. Available at: www.scrf.gov.ru/documents/99.html. 159 Government of the Russian Federation. ’Energeticheskaya strategiya Rossii na period do 2030 goda’. Available at: www.energystrategy.ru/projects/es- 2030.htm.
- 64 - publications of major energy firms. For instance, key contacts in international oil company (IOC) Arctic teams have made available various modelling and scenario publications.
Private consulting firms have also provided various briefings and commercial publications. Such sources serve to provide an antidote to the ‘hot air’ media reports on Russian Arctic ambitions. They provide a real-time assessment of the current commercial climate in the Arctic, beyond geopolitics.
1.8 Conclusion
Chapter One has laid the foundation of the thesis and introduced the neoclassical realist framework used by the study. It provides context for the conceptual framework of the study by outlining the overlapping and interconnected themes of Putin’s energy strategy, Russia’s great power ambitions and the importance of the Arctic for Russia. It has also outlined the hypothesis and signposted the development of key arguments with a detailed chapter breakdown.
- 65 -
Chapter Two: Energy and Putin’s Russia
‘In the old days of the former Soviet Union, Russia’s political clout was measured by the 14,000 nuclear missiles it had pointing west. Now it’s measured by the pipelines it has pointing west’
Chris Weafer, OPEC1
2.1 Introduction
Chapter Two seeks to provide insight into the relationship between energy and Putin’s Russia. It does so by exploring how Putin has tried to use Russia’s energy wealth to restore the country’s influence in world affairs, particularly in the former Soviet Republics and in Europe. Firstly, this chapter offers an analysis of Russia’s natural resource wealth. As outlined in Chapter One, when considering Russia’s natural resource base, the scope of this study is confined to hydrocarbons. Secondly, it examines the ‘weaponization’ of energy under Putin and assesses its current effectiveness as a foreign policy tool. Thirdly, it explores the evolving strategies of energy diplomacy in four distinct phases: Putin 2000-2004, Putin 2004-2008, Medvedev 2008-2012 and Putin 2012-2016.2
1 The Moscow Times. 2004. Russia is revising the Great Game rule book. Available at: http://www.themoscowtimes.com/sitemap/free/2004/4/article/russia-revising-great-game-rule- book/231610.html. [Accessed: 5 June 2014]. 2 This study is capped at July 2016.
- 66 - 2.2 Russia’s natural resource base
Russia’s importance to global energy security derives from its vast resource base, as well as its geographical position, and its attempts to leverage its energy resources to build and exert influence. The EU imports nearly a third of its oil and almost half of its natural gas from Russia.3 Russia delivers 96% of Greece’s natural gas, 70% of Austria’s, 47% of Poland’s, 43% of Germany’s, 30% of Italy’s, as well as 26% of France’s.4 The Baltic States, Estonia, Latvia and Lithuania, rely on Russia for 100% of their natural gas deliveries. Additionally, the majority of natural gas and oil originating from the energy- rich Caspian states must pass through Russian to reach European customers.5 Russia ranks among the world’s leading countries in terms of reserves and production in all three categories of global primary energy sources: natural gas, oil and coal. Russia also controls a third of global natural gas reserves and ranks as the world’s largest gas producer. Russia produces some 13% of the world’s total oil, rendering it the second largest oil producer behind Saudi Arabia.6
Three interrelated issues emerge when examining the political nature of Russia’s natural gas sector. The first is that of dependency. After the collapse of the Soviet Union in 1991, Russia continued to control and operate the vast network of Soviet gas pipeline infrastructure. This network of gas pipelines shapes Russia’s relations with former Soviet states much like an umbilical cord, as illustrated by Figure 4. Second is the strategic purchasing by Russia of the domestic energy infrastructure of former Soviet states as part of Russia’s debt-for-asset swaps. Russia drives up the prices of natural gas in states unable to meet higher prices, propelling consumer debt. Russia then offers to trade the states’ debt for stakes in their domestic infrastructure, thus strengthening its control of the global energy market and also of economic and political life in the countries in question.
3 Perovic, J & Orttung, R & Wenger, A (eds.) 2009. Russian Energy Power and Foreign Relations: Implications for Conflict and Cooperation. New York: Routledge. 4 Klare, M, 2008. 5 Perovic, J & Orttung, R & Wenger, A, 2009. 6 As of May 2016, Russia had overtaken Saudi Arabia.
- 67 -
Figure 4: Russia’s natural gas pipeline nexus7
Third, political pricing ensures that many former Soviet Union republics remain in Russia’s orbit. Depending on a state’s relationship with Russia, the natural gas price varies. For example, Belarus and Moldova have enjoyed fairly inexpensive subsidised Russian gas deliveries, whereas Ukraine and Georgia, both less inclined to comply with Moscow’s wishes, have struggled to pay severely inflated prices. These three elements illustrate how the politics of natural gas are manipulated by Moscow to hold the former Soviet empire together.8
Central to Russia’s foreign energy strategy are two national energy firms: Gazprom and Rosneft. Putin’s plan for Russian resurgence called for the creation of national
7 ‘Major Gas Pipelines of the Former Soviet Union’. East European Gas Analysis, 2014. Available at: http://www.eegas.com/shelf.htm. Reproduced with permission. 8 Balzer, H, 2005.
- 68 - energy champions, which Gazprom and Rosneft became. For Putin, a ‘national champion’ was an energy corporation that would ultimately place state interests before profit maximisation.9 Soon after coming to power in 2000, Putin removed Viktor Chernomyrdin—Yeltsin’s former Prime Minister—from his position as Gazprom’s chairman, replacing him with Dmitry Medvedev—a long-time associate of Putin’s. In addition, Putin removed Chernomyrdin’s protégé and Gazprom CEO, Rem Vyakhirev, replacing him with Alexei Miller, another former associate of Putin’s from his St Petersburg days. The overall aim was to merge state interests with private sector capabilities.10 Putin recognised the strategic value inherent in the natural gas sector and acted swiftly to bring the corporation into the hands of government. By early 2004, the Russian Government had secured a majority stake in the gas company.11
Rosneft was established in 1993 as a state enterprise formed from assets held previously by the successor to the Soviet Ministry of Oil and gas (Rosneftegaz). In 1995, the Russian government turned Rosneft into an open joint-stock company and ‘like the rest of the sector the company performed poorly’.12 In 1998, Sergey Bogdanchikov took the reins of Rosneft and under his decade long leadership Rosneft became the largest oil company in Russia. In 2014, the Russian government announced it was selling 19.5% of Rosneft’s shares. The sale aims to net the Kremlin $11 billion dollars, with Putin stating ‘we need the money’. The guidelines for privatization were announced in July 2016 to include: the shares must be held for at least three years, shareholders must sign an agreement stipulating they will vote in favour of any government member who applies for a seat on the board of directors and finally, investors must be free from corruption charges.13
9 Goldman, M, 2008. 10 Goldman, M, 2008. Moscow's New Economical Imperialism. Current History, 323. 11 Olcott, M. 2004. Vladimir Putin and the geopolitics of oil. Available at:http://carnegieendowment.org/files/wp-2005-01_olcott_english1.pdf. [Accessed 12 July 2016]. 12 Gawdat, B, (ed) 2011. Energy security: an interdisciplinary approach. United States: Wiley. 13 The Moscow Times. 2016. Russian Government presents Rosneft privatization guidelines. Available at: https://themoscowtimes.com/article/575305.html. [Accessed 16 July 2016].
- 69 - Despite the creation of his national champions in the energy space, Putin is limited by the fact that only one is easily ‘weaponised’ for foreign policy. It is only the export of natural gas that Moscow is able to use as an instrument of foreign policy. Gazprom is often engaged in supply cuts to unruly neighbours. That said, Rosneft seeks out commercial ventures in the interest of the Kremlin at every available opportunity. With both firms acting as agents of the Russian government, Russia’s interests in the energy space are safeguarded.
2.3 Russian energy strategy 2000-2004: recentralisation
Putin was elected in 2000 with over 50% of the vote, as illustrated in Table 3. For Pirani, Putin was ‘elevated to the presidency not by a KGB plot, but by Yeltsin’s corrupt entourage’.14 From 1991–1996 Putin was based in St Petersburg working closely with then Mayor, Anatoly Sobchak, then moving in 1996 to Moscow with the help of his old Petersburg friend and senior Yeltsin official Alexei Kudrin.15 In Moscow Putin ‘rose rapidly’, appointed as Pavel Borodin’s deputy in a key department of the Yeltsin presidential administration by May 1996 and then director of the Federal Security Service (FSB) by July 1998.16 The ‘Yeltsin clique’ was looking for its 2000 presidential candidate and the consensus was among Kremlin watchers that Putin had the full support of Yeltsin’s most powerful cronies: that is, (support from) Berezovsky, Yeltsin’s daughter Tatiana Dyachenko and future son-in-law Valentin Yumashev, and Aleksandr Voloshin. Both Sobchak (until his death in 2000) and Kudrin remained in Putin’s inner circle. Borodin lost favour with Putin and was removed from office, as was Yeltsin’s daughter, in an effort to rid the administration of the potentially challenging Yeltsin ‘family’ remnants.
14 Pirani, S, 2010. 15 For further discussion of Putin’s rise to power see Gessen, M, 2012. The man without a face: the unlikely rise of Vladimir Putin. New York: Riverhead books. 16 Pirani, S, 2010.
- 70 -
Candidate Votes Percentage
1. Vladimir Putin 39,740,434 52.94
2. Gennady Zyuganov 21,928,471 29.21
3. Grigory Yavlinsky 4,351,452 5.80
4. Aman Tuleev 2,217,361 2.95
5. Vladimir Zhirinovsky 2,026,513 2.70
6. Konstantin Titov 1,107,269 1.47
7. Ella Pamfilova 758,966 1.01
8. Stanislav Govorukhin 328,723 0.44
9. Yury Skuratov 319,263 0.42
10. Alexei Pokberezkin 98,175 0.13
11.Umar Dzhabrailov 78,498 0.10
Against all 1,414,648 1.88
Table 3: Results of 26 March 2000 Presidential election:17
Putin’s career in the Russian political apparatus had begun in the KGB, where he worked from 1975 to 1991, including a formative stint in Dresden, leading up to the collapse of communism in East Germany. Putin left the KGB with the rank of Lieutenant Colonel and went to work for his former law professor and reformist politician, Mayor Anatoly Sobchak, in his St Petersburg office. It was in St Petersburg that Putin became known as a ‘smooth but capable enforcer’.18 Certainly, Yeltsin
17 Sakwa, R, 2004. Putin: Russia's Choice. United Kingdom: Routledge. 18 Szászdi, L, 2008, Russian Civil-Military Relations and the Origins of the Second Chechen War. United States: Rowman & Littlefield.
- 71 - appreciated such a trait, and made Putin the Deputy Chief of the ‘Russian President’s Business Management Department’ in 1996, and then the Deputy Chief of the Russian Presidential Administration, as well as the Chief of the President’s Main Control Directorate in 1997. A year later, in 1998, Yeltsin promoted Putin to the Directorship of the FSB, and in 1999 to the role of Secretary of the Security Council of the Russian Federation (SCRF).19 In August 1999, Yeltsin appointed Putin as Russia’s Prime Minister with observers noting that Yeltsin felt he could rely on the loyalty of Putin who appeared to be a ‘professional and unassuming employee of the state that lacked political ambitions of his own’.20
Putin inherited from Yeltsin a somewhat embattled Russia which had been losing respect and significance in the global arena. Putin’s pursuit of Russia’s economic and political resurgence was made much easier by the restoration of high energy prices on the back of an increase in global energy demand. When Putin came to power he immediately worked to strengthen the control of the state over public life.21 This meant a series of democratic ‘rollbacks’ for Russian independent media. Putin’s efforts to re-assert state power over the press, Russian civil society and state political structures, were all facets of Putin’s grand domestic strategy of derzhavnost, which translates roughly to ‘authoritarian statism’.22 The president saw derzhavnost as the means by which Russia could once more behave like a great power.
Putin’s authoritarian statist approach can be seen as the restoration of a paternalist state marked by ‘a return to a traditional Russian form of legitimacy characteristic of the tsarist and Soviet periods, in which the idea of a strong state replaces that of a nation’.23 Putin’s principal aim during his first presidential term was to re-assert centralised authority over the Russian state. He implemented a ‘managed democracy’
19 Ibid. 20 Ibid. 21 Perovic et al, 2009. 22 Gessen, M, 2012. 23 Bugajski, J, 2008. Expanding Eurasia: Russia's European Ambitions. United States: Center for Strategic & International Studies.
- 72 - style of leadership, built around top-down control,24 with the re-creation of Russian federal districts, which represented ‘super regions’ to which individuals directly linked to Putin were appointed.25 Putin’s efforts to re-establish central authority within the energy sector during his first term included important taxation reforms.26 In January 2002, Putin introduced the ‘mineral resource extraction tax’ which had a recentralising effect, shifting energy revenues from regional coffers to the federal government.27 These reforms strengthened Russia’s fiscal health as earnings from key resource sectors were no longer sitting in oligarch bank accounts, but rather were returning to the state. The result of Putin’s effort to establish power by recentralising presidential control is demonstrated in Table 4. It shows Russian tax revenues as a percentage of GDP during Putin’s first term. These figures compare to a low of 9.2% of GDP in 1998, in the midst of Russia’s financial crisis. Such increases in fiscal budgetary strength in this period would not have been possible had the oligarchs continued to personally reap the benefits of increases in global energy prices. As a result of Putin’s domestic reforms, namely the selective curtailment of oligarchs, there was an influx of ‘petrodollars’ into state coffers.
Year Percentage of GDP
2000 15.5
2001 17.6
2002 17.1
2003 19.6
2004 20.4
Table 4: Tax revenues as a percentage of Russia’s GDP (2000–2004)28
24 Olcott, M, 2004. 25 Ross, C, 2004. Russian Politics under Putin. United Kingdom: Mancester University Press. 26 Appel, H, 2008. Is It Putin or Is It Oil? Explaining Russia's Fiscal Recovery. Post-Soviet Affairs, 24:4. 27 Pirani, S, 2010. 28 Data compiled from Orban, A, 2008; Smith, K, 2004. Russian Energy Politics in the Baltics, Poland and Ukraine. Washington DC: CSIS Reports.
- 73 - The political and economic reforms implemented by Putin in his first term highlight an important point. Although the ‘oil boom’ which started in the late 1990s and lasted with fluctuation through Putin’s first two terms in office (see Figure 5) is often credited as the reason for Russia’s resurgence, it is important not to overlook Putin’s role in Russia’s fiscal resurgence. If Putin’s tax reforms had not occurred, or if the oligarchs had continued to control Russia’s vast resource sector, it is likely that the economy would not have benefited as much as it did from the increase in global energy prices. The inclusion of St Petersburg economists such as Alexei Kudrin and German Gref in Putin’s trusted circle of advisors also contributed to Russian fiscal resurgence in the early Putin years through sensible reform and wise fiscal management. But Putin’s recentralisation of power with regards to the natural resource sector was vital to the state reaping the benefits of high energy prices and increasing global demand. Figure 5 illustrates an oil price rise from around $25 a barrel in 1999 to $65 by 2004.
Figure 5: Oil price during Putin’s first term (2000-2004)29
29 Author’s research. Data sourced and compiled online at: macrotrends.net.
- 74 - Russia’s economic resurgence relied heavily upon Putin’s ability to ensure the ‘petrodollars’ from Russian natural resources were being returned to the state. The oligarchs, extremely wealthy Russians who ‘fuse power and capital’, proved to be a significant roadblock to Putin’s grand strategy for Russian resurgence.30 The oligarchs emerged from the economic reforms executed under Yeltsin, namely his ‘shock therapy’ and the associated privatisation processes. Yegor Gaidar and Anatoly Chubais were two important figures involved in creating Russia’s new economic system under Yeltsin. In significant measure, the ‘chaos’ they unleashed was actually essential to the spurts of growth that later appeared under Putin.
Gaidar’s most important contribution was to free market pricing from state control, as state control had ‘cripple[d] the centrally planned economy’ Russia inherited from the Soviet Union. However, the effect of freeing market pricing was to bring about hyperinflation across Russia.31 Chubais sought to break the monopoly of the state in property, which allowed for ‘the enormous industrial wealth of the country [to fall] into private hands’.32 Gaidar’s free pricing initiative all but ‘eroded the life savings of the population’ and Chubais did not seem to mind where the riches of the resource sector fell, so long as it was not in the hands of the state.33 The Yeltsin-era reformers were motivated not just by the desire to unleash the economic force of private enterprise, but also by efforts to put an end to the Soviet state by delinking it as far as possible from the commanding heights of the national economy.
Yeltsin’s ‘shock therapy’ allowed oligarchs to amass their wealth by purchasing strategic assets cheaply. This was evident in widespread oligarch purchases of property from the state’s resource sector. Yeltsin continued to support the process of privatisation via what was known as ‘voucher privatisation’, which involved the state
30 Duncan, P, 2007. Oligarchs' Business and Russian Foreign Policy: From El'tsin to Putin. United Kingdom: Centre for the Study of Economic and Social Change in Europe. ; See for further discussion: Sakwa, R, 2014. Putin and the Oligarch. United Kingdom: I.B Tauris & Co. 31 Hoffman, D, 2003. The Oligarchs: Wealth and Power in the New Russia. New York: Public Affairss. 32 Ibid. 33 Ibid.
- 75 - giving away some 148 million ‘vouchers’ (one for every child, man and women of the Russian Federation) that could be traded for shares in companies.34 However, the vouchers were ‘less an economic tool than a political gambit … to make people feel they were getting a piece of the pie’.35 In reality, it was a select few individuals, the oligarchs, who managed to purchase entire assets at prices far below their actual value. Notably, with widespread public unrest stemming from Yeltsin’s ‘shock therapy’ and economic reforms, the next presidential election threatened Yeltsin’s re-election. In order to secure victory in 1996, Yeltsin relied heavily upon the oligarchs, such as Berezovsky, to support his re-election bid. Through financing Yeltsin’s campaign, the oligarchs’ political influence increased. Yeltsin won with the aid of oligarch funding which bought ‘advertising to drown out the voices of the opposition’.36
In line with his ‘authoritarian statist’ approach, Putin set about stripping Russia’s oligarchs of their power. He regarded the oligarchs as ‘owners who had acquired their wealth in the 1990s [and] had done so illegitimately’.37 They were of course replaced by Putin favoured individuals. Given that Putin’s aim of regaining control over the economic flows associated with the rise in global energy prices was at odds with the continued power of unruly oligarchs, systematic attacks on their power and wealth began. Early in his first term, Putin met with these oligarchs and ‘laid out the new rules of the game’ whereby they were warned to invest back into the economy, pay taxes and above all, stay out of politics.38 The highly publicised 2003–2005 ‘Yukos Case’ was a further grim warning to Russia’s wealthiest businessmen that failure to respond to Kremlin demands would be punished severely. According to Orttung, Putin’s assault on the oligarchy signified necessary steps in reversing the resource privatisations that occurred under Yeltsin.39 Evidently, Putin’s efforts to disable the power and influence of undesirable oligarchs were successful.
34 Sakwa, R, 2014. 35 Hoffman, D, 2003. 36 Ibid. 37 Perovic et al, 2009. 38 Pirani, S, 2010 39 Orttung, R & Wenger, A, (eds) 2009. Russian Energy Power and Foreign Relations. New York: Routledge.
- 76 - The siloviki, who were likewise ‘wedded to the concept of a strong Russia’ were important allies for Putin in his efforts to establish power during his first term.40 The siloviki are individuals in influential positions with military or KGB backgrounds. Generally, siloviki have a worldview and foreign policy outlook in conflict with the West, informed by a mix of ‘patriotism, anti-Westernism, imperialism, orthodox clericalism, militarism, authoritarianism, cultural uniformity, xenophobia’.41 Putin’s appointment of siloviki to head five of the seven federal administrative districts created in 2000 was widely viewed as ‘evidence for the fact that what [was] … happening [was] the insertion of a police-state mechanism into a … declarative democratic state’.42 Table 5 illustrates the increasing presence of siloviki within Russian elite groups.
The presence of siloviki in key positions in post-Soviet politics was not a wholly new phenomenon. Yeltsin incorporated siloviki into numerous high-level political or administrative posts with, for example, Yevgeny Primakov serving as Foreign Minister and Prime Minister, Sergei Stepashin serving as Federal Security Minister, Vladimir Putin serving as Prime Minister as well as Alexander Korzhakov heading the Presidential Security Service. 43
Russia’s Russia’s Upper Lower house national regional house of of parliament Government Average leadership elite parliament
Yeltsin 33.3 11.4 2.2 2.8 6.3 11.2
Putin 58.3 32.8 10.2 14.9 9.4 25.1
Table 5: Percentage of siloviki in elite groups from Yeltsin to Putin up to 200444
40 Smith, K, 2004. 41Kryshtanovskaya, O & White, S, 2015. Inside the Putin Court: A Research Note. Europe-Asia Studies, 57:7. Page 1073. 42 Renz, B, 2006. Putin's Militocracy? An Alternative Interpretation of Siloviki in Contemporary Russian Politics. Europe-Asia Studies 58:6. Page 903. 43 Ibid. 44 Renz, B, 2007. The Siloviki in Russian Politics: Political Strategy or a Product of the System? Russian Analytical Digest, 17:07.
- 77 -
Yeltsin also surrounded himself with a group known as ‘the family’, who have been described as a ‘fluid group of favoured Kremlin insiders’.45 Putin systematically replaced remaining members of Yeltsin’s inner circle, ‘the family’, with close associates from his former St Petersburg and KGB/FSB years.46 Putin had a favoured group of individuals with whom he had previously worked and these individuals became known rapidly as ‘Putin’s Men’. ‘Putin’s Men’, although often categorised as siloviki, also come from a range of business, economic and technocrat backgrounds. ‘Putin’s Men’ represented a ‘new’ siloviki, equipped with business or economic backgrounds, who are placed on the boards of most Russian energy corporations.
2.5 Russian energy strategy 2004-2008: re-nationalisation
By his second term, Putin’s heavily-Petersburg inner circle had consolidated to include siloviki, like Igor Sechin and Sergei Ivanov, as well as groups such as the St Petersburg lawyers Medvedev and Kozak, and the St Petersburg economists Gref and Kudrin.47
On 14 March 2004, Putin was re-elected in a landslide with 71.31% of the presidential vote (see Table 6). However, 2004 was largely remembered for the trial of Russia’s richest man, Khodorkovsky.48 For Putin, Khodorkovsky represented an oligarch refusing to toe the line and stay out of politics. As he has done with many anti- corruption campaigners, Putin accused Khodorkovsky himself of corruption and initiated show-trial proceedings against him. Putin also had his sights set on Khodorkovsky’s multi-billion dollar oil company, Yukos.49 Most Western observers believed the 2004 trial illustrated the increasingly antidemocratic nature of Putin’s Russia, and that it was driven essentially by ‘political considerations, political
45 Renz, B, 2006. Page 906. 46 Olcott, M, 2004 47 Philip Hanson, P & Nixey, J & Shevtsova, L & Wood, A, 2012. Putin Again. United Kingdom: Royal Institute of International Affairs. 48 Note: for a more extensive review of the Khodorkovsky case see: Sawka, R, 2014. Putin and the Oligarch: the Khordorkovsky-Yukos Affair. I.B Tauris: UK. 49Sakwa, R, 2014.
- 78 - grievances, and political rivalries’.50 Putin, meanwhile, continued efforts to consolidate presidential power and exert state control over the energy sector.
Candidate Votes Percentage
1. Vladimir Putin 49,565,238 71.31
2. Nikolai Kharitonov 9,513,313 13.69
3. Sergei Glaz’ev 2,850,063 4.10
4. Irina Khakamada 2,671,313 3.84
5. Oleg Malyshkin 1,405,315 2.02
6. Sergei Mironov 524,324 0.75
Against all 2,396,219 3.45
Table 6: Results of 14 March 2004 Presidential election.51
In early 2008, the Duma passed a law slightly altering the stringent restrictions on foreign investments within Russia’s energy sector. It allowed for foreign capital investments of up to 49% in Russian energy sector operations.52 Buckley and Catan note that Putin then went about wooing high-profile foreigners to take the helm of strategic energy corporations and initiatives in order to boost Russia’s international credibility.53 The appointment of former German Chancellor Gerhard Schröder to head the pipeline consortium Nord Stream was one highly dubious example.54
50 Colton, T & Goldman, M & Saivetz, C & Szporluk, R, 2005. Russia in the Year 2004. Post-Soviet Affairs, 21:1. Page 2. 51 Ibid. 52 Financial Times. 2006. Gas pressure: why Putin is squandering world prestige in his squabble with Kiev. Available at: http://www.ft.com/cms/s/0/59da53b2-7cc7-11da-936a- 0000779e2340.html?ft_site=falcon&desktop=true#axzz4FIgImNJO. [Accessed 17 May 2014]. 53 Buckley, N & Catan, T, 2006. ‘Gas Pressure: Why Putin is Squandering World Prestige in his Squabble with Kiev’ in Financial Times 4 January. 54 Ibid.
- 79 -
More broadly, despite these selective overtures to foreign business interest, Putin’s second term saw the emergence of an increasingly assertive, and at times, aggressive Russia. The domestic reforms established in Putin’s first term were consolidated throughout Putin’s second term. ‘Putin’s Men’ were largely running the state’s energy sector and also reinforcing the state apparatus Putin had built up. Significantly, Putin’s second term fostered a closer merger between energy and politics in Russia.55 The consolidation of presidential power over the strategic resource sector and the Russian political system more broadly was Putin’s central objective.
As examined previously in this chapter, Gazprom is a key strategic corporation for Putin’s Russia. Throughout Putin’s first term, efforts by the Kremlin had been made to control the corporation by placing ‘Putin’s men’ at the helm of Gazprom. However, Putin’s second term saw a move in 2005 to state ownership of the gas behemoth, with the state becoming the majority shareholder of Gazprom. In doing so, the Russian state increased its ownership stake in Gazprom from 38% to 51%, thus ‘moving from de facto to de jure control’.56
This incorporation of Gazprom into the Russian state apparatus came at an important time. The Kremlin was concerned about increasing resistance to Moscow within the near abroad as a result of rising nationalist sentiment, leading to colour revolutions in Georgia in 2003 and Ukraine in 2004. In an attempt to bring unruly ex-vassals back into Russia’s orbit, Gazprom began deploying under a veil of ‘market price’ rhetoric, arbitrary price hikes. Market price rhetoric refers to Russia’s demands (implemented by Gazprom) that former Soviet Union republics begin paying ‘market prices’ for natural gas, essentially putting an end to the large discounts the republics had historically enjoyed as part of the USSR.57 Gazprom’s demands ultimately reflected
55 Perovic et al, 2009. 56 Financial Times. 2006. 57 Pirani, S, 2010.
- 80 - the reality that the state-owned corporation was acting as a coercive foreign policy tool.
With the state now the majority shareholder of Gazprom, the corporation began to act increasingly as an arm of Russian foreign policy. This is demonstrated by Gazprom’s strategic purchasing of domestic energy infrastructure abroad. By the end of Putin’s second term, Gazprom had purchased domestic energy assets in approximately twenty European countries. However, particularly aggressive ownership takeovers of strategic energy assets took place within the FSU, as Table 7 illustrates.
- 81 - Mother company Country Activity Company % owned
Gazprom Kazakhstan Gas extraction ZAO Kazrosgaz 50%
Gazprom Kazakhstan Gas development Centr-Kaspnieftiegaz 50%
Gazprom Uzbekistan - - -
Gazprom Kyrgyzstan Gas and oil AO Kyrgyzneftegaz 85.16% exploitation
Gazprom Armenia Gas exploitation ZAO Armrosgazprom 45%
Gazprom Ukraine Gas pipeline operator SP RosUkrEnergo 50%
Gazprom Ukraine Equipment for field Druzhovkiy zavod gazovoi 51% operation and gas apparatury transmission
Gazprom Ukraine Pipeline expansion Gaztranzyt 37%
Gazprom Moldova Gas pipeline operator AO Moldovagaz 50% + 1 share
Gazprom Estonia Gas distribution Eesti Gaas 37%
Gazprom Latvia Gas distribution Latvijas Gaze 34%
Gazprom Lithuania Gas distribution Lietuvos Dujos 25%
Gazprom Belarus Equipment for field Brestgazoapparat 51% operation and gas transmission
Gazprom Belarus Banking Belgazprombank 34.99%
Gazprom Lithuania Power plant Kaunas CHP Unclear
Table 7: Gazprom assets in FSU countries (2007)58
The use of Gazprom as an arm of foreign policy was well illustrated by the 2007 Kovykta gas field incident. The joint venture TNK-BP held a 63% stake in the Kovykta
58 Hedenskog, J & Larsson, R, 2006.
- 82 - gas field in Eastern Siberia, until the Kremlin directed Russia’s Natural Resource Ministry to withdraw TNK-BP’s license to develop the field.59 As a result, BP was excluded and Gazprom acquired the field—home to some 1.9 trillion cubic metres of gas, equal to roughly the entire amount that the world’s third largest gas producer, Canada, holds.
Another example of political motives prevailing in the Russian energy sphere is that of the Shtokman field.60 Shtokman, located in the Barents Sea, holds 3.2 trillion cubic metres of gas and in 2005, in line with Putin’s foreign investment law passed by the Duma, 49% of the field was opened to foreign investment. Foreign investment interest in the field came from five main corporations; Norsk Hydro, Statoil, Chevron, ConocoPhillips and Total. Yet, in 2006, Gazprom announced that it would develop the field itself as none of the five interested parties offered assets of values ‘that would correspond in terms of quality and volume to Shtokman’s reserves’.61 Evidently, Gazprom was after more than foreign investment; Gazprom was seeking substantial asset swaps from the five interested parties.
Whether Russia’s energy strategy under Putin reflects predominantly economic or political motivations, the reality is that Putin’s Russia has utilised energy as a coercive foreign policy tool, driven by a mixture of economic and political causes, but with the political usually dominant. It is important that the international community, as well as the study of Russian energy strategy, moves away from the debate over categorising Russian motivations as either economic or political. Ultimately, both are causal underpinnings of Russia’s energy strategy under Putin, motivated by the Kremlin’s perception of Russia’s national interest.
59 Shlapentokh, V, 2006. Russia as a Newborn Superpower: Putin as the Lord of Oil and Gas. Johnson's Russia List, 18. 60 Poussenkova, N, 2010. The Global Expansion of Russia's Energy Giants. Journal of International Affairs, 63:2. 61 Ibid.
- 83 -
2.5 ‘Weaponising’ Russian energy
The ‘2003 Energy Strategy of the Russian Federation to 2020’ refers to Russia’s energy reserves as ‘an instrument for the conduct of internal and external policy’ as it was believed that ‘the role of a country in world energy markets largely determines its geopolitical influence’.62
The idea of Russian foreign policy integrating energy into its apparatus is not a new one, as the Soviets also intertwined energy and foreign policy. During the Cold War, the US criticised its Western European allies for ‘seeking to foster energy ties with the Soviet Union’ as it believed the inflow of currency would ultimately aid the Kremlin’s efforts to modernise its military.63 The recovery in oil prices that set in towards the end of the 1990s allowed Russia to benefit significantly from its natural resource base. It was this newly generated wealth associated with increased global energy prices that ‘provide[d] Putin … with foreign policy leverage that is unprecedented in Russian, even Soviet, history’.64
The use of natural gas as a coercive Russian foreign policy tool is not then a new phenomenon. The leading study by Robert Larsson found that between 1991 and 2006 there were more than 55 incidents in which gas supplies to the former Soviet republics were disrupted or suspended.65 These events occurred under both the Yeltsin and Putin administrations. Goldman offers support for the notion that Russian gas diplomacy reflects political motivations.66 Hedenskog and Larsson suggest that Russian natural gas strategy reflects both economic and political aims so that one
62 Ministry of Energy of the Russian Federation, 2003. Summary of the Energy Strategy of Russia for the Period of up to 2020. Moscow: Ministry of Energy of the Russian Federation. 63 Perovic, J & Orttung, R & Wenger, A, (eds) 2009. Russian Energy Power and Foreign Relations. New York: Routledge. 64 Goldman, M, 2008. 65 Larsson, R, 2006. Russia's Energy Policy: Security Dimensions and Russia's Realiability as an Energy Supplier. Stockholm: FOI - Swedish Defence Research Agency. 66 Goldman, M, 2008.
- 84 - cannot easily allocate Russian motivations to either category as they are mutually reinforcing.67
In this author’s view, however, their own and other evidence seems to suggest that Russia uses energy diplomacy primarily as a means to political ends for the following four reasons. First of all, the existence of political pricing of natural gas per se refutes the notion that Russian gas is serving economic aims. Political pricing is evident in that ‘friendlier’ states enjoy lower gas prices and vice versa. Secondly, the fact that Russia is willing to upset flows to important customers such as the EU for the sake of pursuing a dispute with a transit country, demonstrates the overriding priority of political aims in Russian gas policy, as this would otherwise be economically irrational. Thirdly, if one looks look to the timing of various cut-offs of gas supply, they swiftly follow exits by former Soviet Republics from the Russian orbit. This again highlights the essentially political aims of Russia’s gas policy. Finally, the creation of pipeline routes that bypass increasingly pro-Western transit states points to the subordination of economic aims in favour of political ones. Re-routing of particular gas pipelines is not only expensive, but the new pipelines are largely unable to deliver the same capacities as the original route and therefore economic motivations clearly cannot be paramount.
This points to an important aspect of foreign policy under Putin—the cementing of energy as an arm of Russian foreign policy. Putin’s Russia carries incredible clout when it comes to threatening gas supply cuts, for targets know this is no bluff. Like its Yeltsin- era predecessor, Putin’s Russia selectively employs energy as a ‘weapon’ of foreign policy, both to support the compliant and punish the uncompliant.
A striking example of Putin’s Russia employing energy as a foreign policy weapon for clearly political reasons is that of the 2006 gas ‘war’ with Ukraine. Natural gas prices imposed on Ukraine began to skyrocket in response to the nationalist Orange Revolution in Ukraine and Ukraine’s increasingly independent ambitions. What follows is a short case study illustrating the power of Russia’s energy weapon. The conflict internationalised Russia’s new Energy Incorporated68 brand of foreign policy,
67 Hedenskog, J and Larsson, R, 2007. ‘Russian leverage on the CIS and Baltic states’. FOI: Sweden. 68 The ‘Energy Incorporated’ concept is explored by Goldman, M, 2010; Klare, M, 2008; Yergin, D, 2006. Ensuring Energy Security. Foreign Affairs, April.
- 85 - with the impact reaching far beyond Ukraine. It meant that not only did Europe suffer indirectly thanks to its over-reliance on Russian supplies which transited Ukraine, but it also put energy security back on the international agenda and triggered debate about Russia’s reliability as an energy supplier.
The 2006 Russian-Ukrainian gas ‘war’ illustrated the EU’s over-reliance on Russian natural gas deliveries; as at the time more than 80% of Russian natural gas destined for the EU transited through the Ukraine. The ‘war’ also demonstrated how petrostate conflict greatly impacts the global energy chain, certainly in terms of supply security. Figure 6 illustrates the stark contrast of Ukrainian gas prices during Putin’s first term with prices imposed on Ukraine after the Orange Revolution.
Figure 6: Ukrainian prices for Russian natural gas (2000–2008)69
69 Pleines, H, 2008.The Natural Gas Conflict between Russia and Ukraine. Russian Analytical Digest, 41.
- 86 - The 2006 gas dispute resulted from the 2004–2005 Ukrainian Orange Revolution, against the backdrop of a falsified presidential election. The huge unrest forced a re- run of the election in which the Russian-backed candidate, Viktor Yanukovych, was defeated by the pro-Western candidate, Viktor Yushchenko. Russia resolved to utilise natural gas as a coercive foreign policy tool, both to punish Ukraine and bring the country back into Russia’s orbit. Historically, like most of the former Soviet Union, Ukraine enjoyed heavily subsidised Russian gas prices. Soon after the Orange Revolution, Russia began to insist upon ‘market prices’ for natural gas exports to Ukraine, bringing an apparent end to the ‘free ride’. Russia’s rhetoric about applying market prices was merely a facade for its political motivations. Ukraine came to be charged more than Russia’s wealthier customers in Europe.
Given that there is no global natural gas market, there are actually no natural gas ‘market prices’,70 enabling Russia to set prices as it pleases. The gas crisis also reflected Russia’s ambition to keep the former Soviet Union to itself, by halting NATO and EU expansion into Russia’s backyard.71 Bilateral relations between Ukraine and Russia soured following the December 2004 re-run presidential elections when Moscow’s favourite, Yanukovych, was defeated. The tensions began to show on the energy front when the newly-elected Ukrainian president, Viktor Yushchenko, abandoned an early 2004 natural gas consortium agreement with Russia in favour of seeking to build independent gas pipelines.72
In May 2005, the Gazprom ‘storage episode’ pushed bilateral relations to boiling point. Gazprom, Russia’s largest company and the largest extractor of natural gas globally, claimed that 7.8 billion cubic metres (bcm) of gas that it had deposited in Ukrainian storage had not been made available despite numerous requests. At first, it was
70 Time. 2005. Q&A: Putin's critical adviser. Available at: http://content.time.com/time/world/article/0,8599,1145192,00.html. [Accessed 11 May 2015] 71 Trenin, D, 2007. Russia redefines itself and its relations with the West. The Washington Quarterly, 30:2. 72 Stern, J, 2006.
- 87 - assumed that either Ukraine had stolen the gas or it had disappeared as a result of technical faults. Soon after, the gas was accounted for within Ukrainian storage facilities, but a dispute arose over whether Kiev should pay for it or deliver the gas back to Russia.
Gazprom pushed for the gas to be subtracted from the transit payments charged by Ukraine. Ukraine accepted 2.55 bcm of the gas in lieu of transit payments from Gazprom, and the remaining 5.25 bcm was to be delivered to RosUkrEnergo during 2005–06.73 However, in the meantime, negotiations between the neighbours about gas prices and a new gas supply agreement came to a standstill. Moscow reacted negatively in April 2005 when Yushchenko suggested that Russian natural gas transit tariffs should be on par with European levels. The Kremlin perceived Yushchenko’s comments about shifting pricing levels as Ukraine reneging on the 2004 agreement, thus making it invalid. By December 2005, virtually every aspect of the 2004 agreement between Russia and Ukraine had been challenged at one stage or another.74
Russia appeared to be losing control of its fragile bilateral energy relationship with Ukraine. Moscow sought to regain the upper hand by resorting to coercive natural gas ‘diplomacy’ in the final months of 2005. By December 2005, Gazprom was demanding US$160 to US$230 per 1,000 cubic metres of gas from Ukraine. Provided that Ukraine agreed to hand over a majority stake in its domestic transit pipeline system, the price would have been lowered significantly, with the maximum price in 2006 capped at US$80 per 1,000 cubic metres of gas.75 The ‘market prices’ Russia demanded involved a price hike, often a triple price increase over the period of one year. In the final days of 2005, Gazprom purchased the entire stock of Turkmenistan gas (available via the limited capacity of the Central Asian pipeline), leaving nothing for Ukraine to purchase.76 Gazprom contracted 30 bcm of Turkmen gas for 2006 at a price of US$65 per 1,000 cubic metres, and requested that half that volume be delivered in the first quarter of 2006. Russian-Ukrainian tensions mounted on New Year’s Eve when Putin
73 Ibid. 74 Ibid. 75 Ibid. 76 Ibid.
- 88 - offered Ukraine the option of US$230 per 1,000 cubic metres for natural gas deliveries and a suspension of the price increase for three months. After Ukraine rejected this offer, Russia reduced deliveries through the pipeline to Ukraine and beyond by the amount Ukraine consumed (deliveries were still flowing as usual for the EU). When it became apparent that Ukraine had resorted to appropriating the gas destined for Russia’s EU customers, Russia suspended all flows to Ukraine on 1 January 2006.
Ukraine interpreted the gas cuts as punishment for the Orange Revolution, and as an attempt by Russia to curtail Ukraine’s pro-Western policies—in particular, its bid for NATO membership. From Russia’s perspective, Ukraine had failed to pay its debt for gas deliveries and had resorted to siphoning off gas deliveries destined for the EU. While Russia claimed to be acting in line with market and economic interests, evidence suggests that Russia’s actions were politically motivated. The calls for higher prices occurred when Ukraine began to vocally remove itself from Russia’s political orbit. The dispute was not simply a case of Russia wanting to protect its strategic zone of influence by punishing its unruly neighbours. It also sought to punish Ukraine to send a message to other former Soviet states about the consequences of seeking exit from Russia’s orbit.
The dispute and subsequent reduction in gas deliveries affected Europe, particularly Eastern Europe. Gazprom claimed to be supplying contractual volumes to Europe, implying that Ukraine was siphoning off gas for domestic purposes. Ukraine’s gas company, Naftohaz, claimed in turn that it had only siphoned off Turkmen gas to which it believed itself entitled. Ukraine also claimed entitlement to 15% of gas crossing its territory in lieu of transit fees.77 Ukraine had siphoned off 104.8 million cubic metres (mcm) of gas between 1–2 January and another 118.7 mcm of gas between 2–3 January.78 When Russia responded by finally demanding $230 per 1,000 cubic metres of gas, Ukraine retorted with a threat to increase the rental fees for
77 Ibid. 78 Larsson, R, 2006.
- 89 - Russia’s Black Sea Fleet naval base in Sevastopol.79 Ukraine, however, eventually backed down when Russia in turn threatened to reconsider the entire 1997 Friendship Treaty, which, in addition to granting Russia access to the Black Sea naval facilities, had also formally recognised Crimea as a part of Ukraine.80
On 4 January, after four days of suspended gas deliveries, Russia and Ukraine declared the dispute had been settled. Naftohaz and Gazprom announced an agreement, ending the dispute that was finalised with the signing of a five-year contract. The two parties agreed:
• Gazprom would pay Naftohaz a tariff of $1.60/mcm per 100 km for gas transit • RosUkrEnergo would be the company that delivers gas to Ukraine • by 1 February 2006, RosUkrEnergo and Naftohaz would form a joint venture • RosUkrEnergo would purchase 17 bcm of Russian gas from Gazprom at a price of $230 per 1,000 cubic metres of gas and • transit payments and gas prices could only be changed with the agreement of all parties.81
Soon after the 2006 agreement, the Ukrainians launched an investigation into the ownership of RosUkrEnergo, which had been established by the former Ukrainian government, but which was now deemed by Kiev (with good reason) to be a ‘shady intermediary’. RosUkrEnergo was originally established to provide Turkmen gas to Ukraine via Russian pipelines.82 But Gazprom owned 50% of RosUkrEnergo, while two Ukrainian individuals known for their pro-Russian sympathies owned the other half.83 The price escalation during the resolution process betrayed Russia’s central aim in the gas dispute. Russia had never intended to reach an immediate agreement with Ukraine: the dispute was first and foremost a result of Russia’s efforts to punish
79 Sokov, N, 2006. The Ukrainian Gas Crisis Revisited. Current History, 105:693. 80 See towards the end of Chapter Two and Chapter Six for discussion of events on Crimean Peninsula since 2006. 81 Stern, J, 2006. 82 Larsson, R, 2006. 83 Sokov, N, 2006.
- 90 - Ukraine. Russia aimed to ensure that ‘the negotiating partner felt sufficiently insulted to make reaching the agreement impossible’.84
As a result of the 2006 gas crisis, the international community began to recognise fully the geopolitical leverage that Russia has over the other countries of the former Soviet Union. US Secretary of State Condoleezza Rice was quick to condemn Russia’s actions by announcing, ‘no interest is served if Russia uses its great wealth, its … gas wealth, as a political weapon, or … if it treats its independent neighbours as part of some old sphere of influence’.85 The gas crisis was the ‘ultimate coup de grace for the former Soviet Union’.86
The dispute also generated support in Europe for Russia’s Nord Stream I pipeline project, particularly from the EU countries which had been most affected by the crisis (the East experienced the worst of it, but they were—and some are still —not supporters of the Nord Stream pipelines). By connecting Russian gas supplies to Germany via the Baltic Sea, Nord Stream I neutralised the transit leverage Ukraine held as its only defence against Moscow’s pressure. However, the Nord Stream pipelines are part of a wider divide-and-conquer Moscow policy aimed at undermining EU efforts to agree on a common energy approach.87
The economic fallout in Ukraine severely damaged the reputation of Yushchenko’s Our Ukraine party, which bore the brunt during the 2006 Ukrainian parliamentary elections, coming third behind the Tymoshenko bloc and Yanukovych’s party. As a result of squabbles between Yushchenko and Tymoshenko, the pro-Russian Yanukovych returned as Ukraine’s Prime Minister in 2006.88 The gas dispute demonstrated to the former Soviet republics that full independence from Russia carried a price, whereby countries that did not respond to Russian interests would no longer enjoy economic benefits in the form of lower gas prices.89
84 Time. 2005. 85 Perovic et al, 2009. Page 11. 86 Trenin, D, 2007. Page 99. 87 Perovic et al, 2009. 88 Wilson, A, 2010. Dealing with Yanukovych’s Ukraine. Brussels: European Council on Foreign Relations. 89 Sokov, N, 2006.
- 91 - The four-day dispute affected many countries outside of Ukraine, particularly much of Eastern Europe. In teaching Ukraine a lesson in geopolitical loyalty, Russia effectively damaged energy relations with its most important and largest customer, Europe.90 That Russia was willing to jeopardise its relationship with Europe for even a few days, demonstrates that the 2006 gas dispute was motivated by political rather than economic factors. It also exposed again the EU’s overreliance on Russian natural gas deliveries. In 2009, the world witnessed a rehash of the Russian-Ukrainian gas conflict. Due to the effects of Moscow’s high gas prices and the global financial crisis on Ukraine’s fragile economy, Ukraine’s mounting gas debt had not been repaid and by December 2008 it had reached $2 billion.91 Ukraine claimed to only owe $1.5 billion and swiftly paid it, denying that it owed any more.92
Once again, Russia applied pressure by reducing natural gas deliveries until the outstanding debt was settled. After Ukraine refused, Russia cut the supply on 1 January 2009.93 The stand-off lasted twenty days, with European nations again affected during a cold winter. Ukraine insisted on a $2 per 100 km transit tariff charge for Russia; meanwhile, Russia was demanding from Ukraine a price of $250 per 1,000 cubic metres of gas. The gas supply finally resumed on 20 January, after Ukraine agreed to pay an increased rate of $228.80 per 1,000 cubic metres of gas—whereas Russia managed to avoid a rise in transit tariffs.94
The February 2010 Ukrainian presidential election result, which finally delivered the presidency to the pro-Russian Yanukovych, improved Russian-Ukrainian relations markedly in the short term. By 2014, the Maidan revolution proved to be the tipping point—Russia fostered Ukraine’s downfall, war broke out in the Eastern region and the Kremlin annexed the Crimean Peninsula.
90 Stern, J, 2006. 91 Ibid. 92 East View Press, 2006. Russia Tightens, Reopens Gas Valve to Ukraine. The Current Digest of the Post-Soviet Press, 60:9. 93 Torres, J, 2010. Russian-Ukrainian Gas Conflict Case Study. Spain: University of Navarra. 94 Ibid.
- 92 - The 2010 Kharkiv Accords, in which Kiev granted Moscow a 25-year extension on the lease of the Sevastopol port to Russia’s Black Sea Fleet in return for a natural gas ‘subsidy’ for Ukraine, is all but useless now given Crimea’s annexation. At the time, critics viewed the Kharkiv Accords as the mortgaging of Ukrainian independence for the sake of short-term economic and political gains.95 In retrospect, this is exactly what eventuated, thanks to Ukraine’s failure to diversify its energy base away from Russian natural gas.
As with gas, the oil price boom during Putin’s second term filled Kremlin coffers.96 Figure 7 illustrates the steady oil price rise over Putin’ second term. This delivered further confidence in the longevity of Putin’s energy weapon.
Figure 7: Oil price during Putin’s second term (2004-2008)97
95 Sherr, J, 2010.The mortgaging of Ukraine’s independence. Johnson’s Russia List, 161:35. 96 See for a discussion of factors contributing to Russian fiscal recovery under Putin: Appel, H, 2008. 97 Author’s research. Data sourced and compiled online at: macrotrends.net.
- 93 -
That said, the effectiveness of Moscow’s gas ‘weapon’ is notably declining. Today, this instrument can only be applied to a few former Soviet republics. Even Ukraine, non- compliant in Moscow’s view, is receiving much of its natural gas from the West.98 The point of highlighting the 2006 gas ‘war’ with Ukraine is to illustrate precedent of Putin’s Russia employing energy as a foreign policy tool. Of course, such precedent misleads the West to assume that Russia seeks to wield Arctic hydrocarbons as a foreign policy tool.
2.6 Russian energy strategy 2008-2012: the modernization agenda
In 2008, Putin assumed the role of Prime Minister, placing his hand-picked successor, Medvedev, in the presidency.99 This tandemocracy, as it soon became known, sought to represent Russia’s democratic progression, for Putin had seemingly stepped back from power as required by the Russian constitution. In reality, Putin retained the political power and influence once assured by the presidential title, and Medvedev became known as a ‘Puppet President’.100 During Putin’s stint as Prime Minister he successfully extended the Russian presidential term from four to six years, just in time for Medvedev to cede the presidency back to him, as planned, in May 2012.
Despite the ‘puppet presidency’ label, Medvedev was responsible for a broad economic modernization agenda. This agenda included a slight warming in Russia’s relationship with the West, accession to the World Trade Organization in 2011, as well as significant focus on developing Russia’s technological expertise in the resource sector. Crucially, Medvedev oversaw the mammoth task of modernizing the Russian
98 Rettman, A, 2016. ‘EU to help Ukraine cut Russia gas dependence’. EU Observer. [Available at: https://euobserver.com/energy/134892] 99 Russia’s Constitution at the time, permitted only two consecutive presidential terms. Note that Putin’s changes to the Russian Constitution in the final days of his Presidency meant that foreign policy issues were moved partially to the Prime Minister’s portfolio. 100 Spiegel Online. 2011. The Puppet President: Medvedev's Betrayal of Russian Democracy. Available at: http://www.spiegel.de/international/world/the-puppet-president-medvedev-s-betrayal-of- russian-democracy-a-789767.html. [Accessed 24 June 2014].
- 94 - military machine. This military reform and modernization agenda was a major achievement of the Medvedev presidency.101
Further, Russia’s bilateral relationship with China strengthened on matters of natural gas.102 Russia’s energy ties with Latin American also deepened. Overall, Medvedev’s modernization agenda was centred around technological innovation in all areas for Russia – a so called “intelligent economy” shift.103
2.7 Russian energy strategy 2012-2016: reintroduction of the great power agenda
International challenges have been plentiful since Putin assumed the presidency for his third official term. In early 2012 the United States signalled the end of the costly Iraq War. The departure of US forces rippled across the region, plunging the post-Arab Spring Middle East deeper into chaos. Coupled with the global rise in terrorism and the rapid emergence of decentralised terror cells, securitisation was placed back on the global agenda. The emergence of a mutual enemy had allowed for the development, since Obama’s succession, of warmer Russia-US ties, even talk of a ‘reset’ in Russian-US relations. However, the competitive hunt to secure individual energy futures soon came to the forefront of the relationship.
Spurred by intensifying of focus on climate change since 2012, the global energy mix started to change as it shifted away from coal-intensive economies. Notably, China’s public shift from high-intensity coal power to natural gas caused gas-producing nations to jostle for China’s business. For Russia, this was an opportunity to diversify its customer base away from Europe, putting Europe in a difficult position given it had no short-term alternative to Russian gas. In 2014, after a decade of negotiation, Russia
101 Baev, P, 2013. Russia’s Arctic ambitions and anxieties. Current History, October. 102 Buchanan, E, 2014. ‘Consumers, not strategists, are the winners in the China-Russia gas deal’. East Asia Forum. [Available at: http://www.eastasiaforum.org/2014/06/19/consumers-not-strategists-are- the-winners-in-china-russia-gas-deal/]. Accessed 13 May 2015. 103 Medvedev, D (2009). Go Russia. Available at: http://eng.kremlin.ru/transcipts/298. Accessed 5 July 2016.
- 95 - signed a 30-year gas supply partnership with China.104 But some key components of that deal remain unclear, and it appears that in its desire to demonstrate to the West that Russia had other options, Moscow allowed Beijing to push through a very tough deal, largely in Beijing’s favour.
In similar fashion to its 2008 Georgian invasion, Russia showed its defiance of international laws and norms by annexing Crimea in 2014 and actively destabilising Donbas. Effectively plunging Ukraine into a lengthy civil conflict, Russia has continued to probe further into Ukraine, seeking to divide the nation. Certainly, this causes concerns for European security more generally. Since 2012, Russia has reintroduced an assertive foreign policy against Europe and the West more broadly. Since Putin’s third term, the re-emergence of Russia’s great power quest has been obvious.
Russia’s 2014 annexation of Crimea was punished by an array of Western sanctions.105 Beginning in April 2014, sanctions targeted Russia’s energy market, and were sharpened considerably after the downing of Malaysian Airlines flight MH17 in June. They crippled Russia’s ability to explore new regions for hydrocarbon potential as sanctions blocked Western transfer of exploration technology and funding. Given the Kremlin’s reliance upon technology and investment from the West, sanctions have effectively delayed the production by new Russian fields in the offshore Arctic. Some joint ventures between Russian energy firms and Western counterparts were protected from the sanctions as they did not apply retrospectively.
Shale, liquefied natural gas (LNG) and renewables are certainly three areas in which Putin’s Russia is very weak.106 The head of Gazprom, Alexei Miller, had asserted
104 The Guardian. 2014. Russia signs 30-year deal worth $400bn to deliver gas to China. Available at: http://www.theguardian.com/world/2014/may/21/russia-30-year-400bn-gas-deal-china. [Accessed 24 June 2014]. 105 For the purposes of this thesis, I focus primarily on the sanctions related to Russia’s energy market. See for wider discussion into sanctions against Russia: European Union, 2016. EU sanctions against Russia over the Ukraine crisis. Available at: http://europa.eu/newsroom/highlights/special- coverage/eu_sanctions_en 106 Whitmore, B. 2015. Why Putin is losing. Available at: http://www.rferl.org/content/why-putin-is- losing/27181633.html. [Accessed 24 June 2014].
- 96 - publicly, that the shale gas revolution is a ‘bubble that will burst soon’.107 But, he was wrong. The value of Gazprom has plummeted from US$350 billion in 2008 to around $50 billion today. Shale gas is thought by many to constitute the ‘next big thing’ in energy.108 Not only are reserves thought to be plentiful, it is environmentally friendlier than its coal and oil brothers. Further, proponents of shale gas believe it is key to diversifying the global energy mix—allowing for the reduction of unilateral dependency on petrostates such as Russia. Shale gas is natural gas produced via a hydraulic fracking process—essentially the process blasts water into the earth (shale rock deposit areas) to release gas deposits. It has been dubbed a revolution given the impact shale gas has had in the US. In 2000, shale gas in the US constituted 1% of domestic gas production, and by 2010 it constituted some 20%. The US predicts that by 2035 nearly 50% of its domestic gas supply will come from shale.109
As an energy market representative stated:
…I think it’s fair to say the shale gas boom is confined to North America. This is in part thanks to the unique land rights of people in the USA—you can own outright the mineral rights under the ground of your property. You can even lease that land. Americans are leasing to independent producers—mom and pa outfits not just the majors. This has facilitated the spread of shale operations. There just doesn’t appear to be much red tape, plus it’s about job creation, so shale has just boomed. The industry calls this ‘disruptive technology’, which allows resources to be exploited—even if the industry wants to cap it, they can’t—and oil is an industry that really likes control of such matters…110
Although Russia is aware of its shale gas potential in the Far East, it has opted to put this energy source on the backburner. Moscow largely ignores the potential of shale gas in Russia’s energy mix, and it is also the case that Russia does not require access
107 Institute of Modern Russia. 2013. The Kremlin Tries to Roll Back the “Shale Revolution". Available at: http://imrussia.org/en/economy/524-the-kremlin-tries-to-roll-back-the-shale-revolution. [Accessed 24 June 2014]. 108 See: Gideon, R, 2014. Power to the people: what will fuel the future?. Foreign Affairs, 93:3; Morse, E, 2014. Welcome to the revolution: why shale is the next shale. Foreign Affairs, 93:3. 109 Stevens, P, 2012. The 'Shale Gas Revolution': Developments and Change. United Kingdom: Chatham House. 110 Interview, Canberra, October 2015.
- 97 - to its shale wealth—at least for the short to medium term.111 Russia’s existing and readily accessible resource base provides ample product for the global market. Shale does, however, pose a threat to Russia’s foreign energy strategy through its growing capacity to muscle in on Russia’s customer base. In terms of Russia’s future customer base, an IOC representative stated:
…Russia’s a true petrostate—and it’s now in the time of suffering. Luckily for Putin, the price drop in 2009 was remedied by OPEC, they helped fix it. Putin’s luck is running out because—as we have seen—this time around, OPEC is not going to help. I would think at this time Russia is busy planning market share strategies—Europe is only buying refined crude products; the US market has left, thanks to shale; and Asia is not sure which way it’s headed. For Russia’s sake, you’d hope transport costs prohibit any real flow of LNG from USA; just because Asia is a straightforward market to supply to, doesn’t mean that Russia will be able to do so … Petrostates have an uncanny ability to complicate their own export market and essentially shoot themselves in the foot by using resources as political tools. Too many markets have diversity of supply and increasing optionality… 112
2.8 Current challenges for Russia’s foreign energy strategy
The immediate challenges to Russia’s foreign energy strategy span Russia’s failure (to date) to diversify its economic base away from resources, failure to invest in new and unconventional energy projects as well as deep levels of sector corruption. These issues are further compounded by the fact that Russia’s energy ‘weapon’ has lost some of its bite. Europe, Russia’s key energy customer, is strategically planning to secure its energy future with a reduced reliance upon Russian gas. Though the apparent determination in key capitals to go ahead with Nord Stream II might suggest otherwise.
111 Bloomberg. 2013. Putin Dismisses Concern Gazprom ‘Slept Through’ Shale Gas Boom. Available at: http://www.bloomberg.com/news/articles/2013-04-25/putin-dismisses-concern-gazprom-slept- through-shale-gas-boom. [Accessed 24 June 2014]. 112 Interview, Canberra, October 2015.
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For Putin, the EU is destined to be a failed project.113 Recent pressures spanning the Greek economic crisis, the migration crisis and ‘Brexit’ plunge the EU further into troubled territory. These challenges are exerting pressure on a weakening EU, much to Putin’s delight. For Gotev, Putin’s EU policy is based on a divide and conquer mentality.114 Putin’s efforts since 2014 to divide the EU over Ukraine are striking. Notably, there is now an air of Ukraine fatigue within the EU as well as growing pressure from the business community to salvage energy relations with Russia and return to business as usual.
At the centre of the current EU-Russia energy security debate is Nord Stream II. This pipeline further undermines the EU effort to ensure energy security. Germany’s natural gas supplies are secured directly via the Nord Stream I pipeline. The Nord Stream II project is aimed by Moscow at removing any remaining leverage Ukraine had over the transit of Russian natural gas as well as the desperately needed transit fees. Figure 8 illustrates the two Nord Stream pipelines.
113 European Council on Foreign Relations. 2015. Ruxit is real: Russia's exit from Europe. Available at: http://www.ecfr.eu/article/commentary_ruxit_is_real_russias_exit_from_europe311243. [Accessed 24 June 2014]. 114 Gotev, G. 2015. Think tanks: Russia will make new attempt to divide the EU. Available at:http://www.euractiv.com/section/global-europe/news/think-tanks-russia-will-make-new-attempt- to-divide-the-eu/. [Accessed 5 June 2014].
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Figure 8: Nord Steam I and Nord Steam II pipelines.115
President Dmitry Medvedev and German Chancellor Angela Merkel opened Nord Stream in 2011. The pipeline delivered Russian natural gas to Western Europe via Germany through the Baltic Sea. Former German Chancellor Gerhard Schröder, who went on to chair the Nord Stream stakeholders committee, strongly backed the pipeline.116 Nord Stream has the capacity to deliver 55 billion cubic metres of gas to Europe. Although favoured by Germany, the Nord Stream pipeline garnered strong opposition from many Eastern EU-member states such as Poland. For Poland, the pipeline was a ‘waste of European consumers’ money’ with the consortium unable to explain why a sea route was cheaper than the land alternative.117 Estonia and Lithuania also voiced concern over the pipeline, claiming it facilitated the eventual increase in Europe’s ‘direct dependence on Russia for natural gas’.118
115 ‘Nord Steam I and Nord Steam II pipelines’. Russian International Affairs Council, 2016. Available at: http://russiancouncil.ru/en/inner/?id_4=7373#top-content.Reproduced with permission. 116 EurActiv. 2011. Russian, EU leaders inaugurate Nord Stream pipeline. Available at: http://www.euractiv.com/section/energy/news/russian-eu-leaders-inaugurate-nord-stream- pipeline/. [Accessed 28 June 2016]. 117 EurActiv. 2011. Nord Stream ‘a waste of money’, says Poland. Available at:http://www.euractiv.com/section/europe-s-east/news/nord-stream-a-waste-of-money-says- poland/. [Accessed 28 June 2016]. 118 Ibid.
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Despite the furore Nord Stream I had unleashed, and in apparent breach of EU sanctions over the Russian seizure of Crimea and military intervention in eastern Ukraine, in September 2015, Gazprom formed a consortium with Germany’s E.ON, BASF/Wintershall, Austria’s OMV, France’s ENGIE and Anglo-Dutch’s Royal Dutch Shell to develop Nord Stream II. The US$11 billion pipeline is set to deliver natural gas to Germany from 2019, again bypassing Ukraine and other Eastern countries.119 There is strong opposition to the Nord Stream II pipeline.120 In March 2016, the eight heads of government of the Czech Republic, Estonia, Hungary, Latvia, Poland, Slovakia, Romania and Lithuania, signed a formal letter to European Commission President Jean-Claude Junker objecting to the project.121 The letter outlined ‘potentially destabilising geopolitical consequences’ and noted that the project ‘can pose certain risks for energy security in the region of central and eastern Europe’.122
In short, Nord Stream II will effectively deprive Ukraine of some $2 billion of transit fees and set back the EU’s common energy security strategy.123 The US has also raised concern over the proposed pipeline, with Deputy Assistant Secretary for Energy Diplomacy, Robin Dunnigan, recently querying ‘why would (the EU) support Ukraine with one hand and strangle it with the other?’124 For Judy Dempsey, Nord Stream II ‘has become so controversial for its opponents because it runs contrary to Merkel’s policy toward Russia in addition to undermining the EU’s energy policy’.125 Dempsey outlines the perplexing nature of Merkel’s support for Nord Steam II:
119 EurActiv. 2015. Germany-favored Nord Stream-2 risks strangling Ukraine, US says. Available at: https://www.euractiv.com/section/energy/news/germany-favoured-nord-stream-2-risks- strangling-ukraine-us-says/. [Accessed 28 June 2016]. ; Likely to be an overly optimistic figure. 120 Russia beyond the headlines. 2016. Nord Stream 2: is Russian gas politically incorrect?. Available at: http://rbth.com/international/2016/03/04/nord-stream-2-is-russian-gas-politically- incorrect_573273. [Accessed 28 June 2016]. 121 Reuters. 2016. EU leaders sign letter objecting to Nord Stream-2 gas link. Available at:http://uk.reuters.com/article/uk-eu-energy-nordstream-idUKKCN0WI1YV. [Accessed 28 June 2016]. 122 Ibid. 123 EurActiv. 2015. Germany favored Nord Stream 2 risks strangling Ukraine US says. Available at: https://www.euractiv.com/section/energy/news/germany-favoured-nord-stream-2-risks-strangling- ukraine-us-says/ 124 Ibid. 125 Dempsey, Judy, 2016. Germany, dump Nord Stream 2. Available at: http://carnegieeurope.eu/strategiceurope/?fa=62567
- 101 - …She has been the one European leader who has consistently taken a tough stance against Russian President Vladimir Putin. It was she who pushed the EU member states to impose sanctions on Russia for its annexation of Crimea in March 2014 and its subsequent invasion of eastern Ukraine. It was she who, along with the Russian, Ukrainian, and French leaders, negotiated the Minsk accords aimed at ending the fighting in eastern Ukraine. Above all, it has been Merkel who has turned away from Germany’s Ostpolitik … yet her unstinting support for Nord Stream contradicts her policy toward Russia…126
For now, the status of the pipeline remains clouded by doubt. At the time of writing, there is deep debate pitching Germany against a number of central and eastern European nations.127 There is also discussion about the European Commission extending the rules of the EU Third Energy Package—which would require consent from Brussels and potentially changes to the pipeline’s configuration. The current rules of the Third Energy Package include the rejection of an energy supplier who is also the owner of the transport network.128 Ultimately, ‘the decision will be political, and it will be linked to the Ukrainian crisis’.129
The unexpected oil price dive of June 2014 (illustrated in Figure 9), coupled with Western sanctions, delivered a severe blow to Russia’s energy strategies.
126 Ibid. 127Reuters, 2016. EU leaders sign letter objecting to Nord Stream-2 gas link. Available at: http://uk.reuters.com/article/uk-eu-energy-nordstream-idUKKCN0WI1YV 128 Russia Beyond the Headlines, 2016. Fate of Nord Stream 2 could hang on Germany and U.S. Available at: http://rbth.com/business/2016/03/22/fate-of-nord-stream-2-could-hang-on-germany- and-us_577957 129 Ibid.
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Figure 9: Oil price dive of 2014130
In regards to the unsuspected nature of the 2014 price dive, an IOC representative commented:
…Firstly, no one saw this coming. Then again, we (in the industry) all say that, we have to or else we look terrible at our one job—prediction. But no one can accurately predict when these falls occur, and likewise we can’t truly predict when prices will rise. Those who claim to have the magic to do that are flat-out lying. At best we can talk about a $10–$20 range when predicting oil prices. I would think Brent would sit at no more than $60 for 2016 and potentially even out till 2017, and then it could hit $130 again in 2018 and sit above $100 for another 5 years…131
130 Author’s research. Data sourced and compiled online at: macrotrends.net 131 Interview, Canberra, October 2015.
- 103 - In terms of drivers for the 2014 price fall, an IOC representative noted:
..That said, the 2014 price drop had less to do with basic supply-demand pressures and more to do with the actions of Saudi Arabia. The Saudis cut prices by upping production, something they still refuse to cut today, and that’s why we have the supply glut driving down prices. As to the reason why? Shale. Saudis needed to halt the spread of shale technology and product to stop the ‘revolution’. By confining the shale gas market to domestic USA, and in keeping oil cheap, the Saudis can protect their market share. Customers aren’t going to walk away from oil at $50 a barrel for shale—you have to factor in transport costs and so on. Sure, the Saudis are bleeding cash, but market share is priceless. Something to protect literally at all costs…
Russia’s sovereign wealth reserves, financed by energy windfalls, are depleting. Estimates suggest the $144.5 billion fund may be levelled within the next two years should oil prices remain low.132 It was thought that, battling its first recession since 2009, Russia would scale back spending—particularly in the defence sector—but this has not happened. This is probably partly due to the fact that the Kremlin assumes that the oil price will inevitably bounce back. It also assumes the growing demand for increasingly scarce supplies will leave it well-placed to cash in sooner than later.
2.9 Conclusion : a neoclassical realist account of the relationship between energy and Putin’s Russia
This chapter examined the relationship between energy and Putin’s Russia, demonstrating that Russia is not necessarily driven by imperial ambitions to rebuild the Soviet Union, but rather looking to maintain and in some cases extend its sphere
132 Bloomberg, 2015. Russian finance chief warns on wealth funds in austerity debate. Available at: http://www.bloomberg.com/news/articles/2015-09-18/russian-finance-chief-warns-on-wealth-funds- in-austerity-debate-iepqv80o
- 104 - of influence and global standing. For Putin, this could be achieved on the back of high global energy prices by harnessing the nation’s energy sectors through processes of re-nationalisation and using that capacity as a coercive tool. Yet, Russia is still unable to curb the eastern expansion of NATO and the US has a substantial presence in the region. The demand for Russian resources is showing signs of slowing, particularly given the rise in renewables and low energy prices as a result of market oversupply. Perhaps increasing demands from the powerhouses of China and India will turn the tide. Yet, whilst Gazprom claims to have sufficient resources to meet such demand, much of it is still yet to be physically extracted. Foreign investment is therefore still paramount. 133
This chapter has also examined the consolidation of the relationship between power and money under Putin.134 It highlighted the incorporation of ‘Putin’s Men’ and an increased presence of siloviki within Russia’s energy sector as key facets of Putin’s plan for Russia. Putin’s ‘attack’ against particular oligarchs was a necessary pre-condition to diverting Russia’s resource revenue back to the state rather than the pockets of a select few individuals. Those pockets are still lined; it is just the case that a few of the dramatis personae have changed. Of course, as the Yukos case demonstrated, the state systematically worked to re-nationalise much of the energy sector. This was coupled the introduction of ‘managed democracy’ to Russia and further authoritarian measures by Putin to fortify his power base at home. 135
Winston Churchill noted the key to deciphering Russian action lies within understanding Russia’s national interest. Certainly, under Putin, regaining great power status has proved to be the primary national interest, together with recovering a sense
133 For further discussion on Gazprom’s failure to develop offshore technical capacity see: Baev, P, 2007. Russian flag stakes energy claim at North Pole. Jamestown: Eurasia Daily Monitor. 134 Pirani, S, 2010. 135 Putin’s political reform efforts to maintain power include the systematic clamping down on Russian media and journalists and the introduction of the ‘Foreign Agents Law’ for all NGO’s operating in Russia. See for further discussion on durability of Putin’s regime: Gill, G, 2015. The stabilization of authoritarian rule in Russia?. Journal of Elections, Public Opinion and Parties, 25:1.
- 105 - of global respect. This chapter has demonstrated that Putin has successfully pursued his own vision and not necessarily the embodiment of Russia’s national interest— the coercive use of Russia’s resource wealth. A neoclassical realist reading of Russian foreign energy strategy supports this notion. The shaping of Russian foreign energy policy under Putin can be linked directly to Putin’s personal agenda for reattaining Russian great power status.
Chapter Two has highlighted Putin’s steps to rectify Russia’s tax system, and ensure the Kremlin collected windfalls from high oil prices and exorbitant gas rents. It looked at Putin’s processes of nationalising energy majors and demonstrated the application of Russia’s energy weapon whilst questioning its efficiency. Further, this chapter has sought to explore the various challenges and opportunities posed and presented to Russia’s foreign energy policy under Putin.
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Chapter Three: Conquering the Arctic
‘Possession is nine-tenths of the law’
Legal truism
This chapter examines the Arctic’s resource endowment, its governance and the competing claims of Arctic rim powers. It considers the emerging regional challenges spurred by the easier access to the Arctic, brought about by climate change, and sets out the key opportunities related to the opening up of the Arctic. Primary source fieldwork interviews conducted during 2013–2016 with various government, academic and industry analysts are utilised to further explore contemporary Arctic geopolitics.
The key aim of this chapter is to highlight the mutual interests of, and interrelated challenges faced by the Arctic powers. Chapter Three argues that there are a range of variables at play in the Arctic and a neoclassical realist reading of the region finds that it may still serve as a theatre for Russia-West cooperation.
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3.1 Introduction
As Chapter One noted, defining the Arctic is difficult, as there is no universally agreed definition of the region. This thesis defines the Arctic as the area north of the Arctic Circle, as illustrated in Figure 10.
Figure 10: Illustration of the Arctic1
The Arctic is a complex, ‘moving-target’ issue in which contemporary strategic challenges are framed by journalistic historical parallels. For example, the Cold War is repackaged as an Arctic ‘new Cold War’ and the Great Game in Central Asia is
1 ‘Arctic map, political’. UNEP/GRID-Arendal, 2008. Available at: http://www.grida.no/graphicslib/detail/arctic-map-political_1547. Reproduced with permission
- 108 - rehashed as the Arctic’s ‘new Great Game’.2 The Arctic is viewed nostalgically by many as the home of polar bears, the North Pole and crisp white snow. Yet in reality, it is predominantly dark, bleak, isolated and unforgiving. In recent decades, the Arctic has been a zone of military interest, used by both NATO and Soviet strategic forces as bases for their nuclear submarines and as testing grounds for intercontinental ballistic missiles. The Arctic initially appeared to lose its strategic significance with the end of the Cold War. However, since 2000 this has changed due in large part to the ‘combination of accelerating climate change and a rapid increase in energy prices’.3
Figure 11: Trajectory of crude oil prices 2000–2015.4
Figure 11 illustrates the rise of global oil prices after 2000. This rapid rise in the price of oil facilitated the exploration of undiscovered resource pockets globally. IOCs had the cash flow to look for new sources of energy and the impetus to do so given the increases in global demand—fuelled largely by China and India.
2 Laruelle, M, 2013. Russia’s Arctic Strategies and the Future of the Far North. New York: Routledge. 3 Gorenburg, D, 2011. Russia’s Arctic Strategy. Russian Analytical Digest, 96. 4 Author’s research. Primary data sourced and compiled online at: macrotrends.net.
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Over the past 30 years, the geopolitical situation in the Arctic has drastically changed, yet a ‘hot conflict versus cold realities’ paradigm remains one of the keys to understanding contemporary Arctic affairs.5 Here, a number of challenges are posed by the Arctic ‘opening up’, with most presented as fanning the potential for conflict between Arctic rim powers. There is a particular focus in the media on the looming battle over the Arctic between Russia and the West.6 Yet, these ‘hot conflict’ points run up against the ‘cold reality’ of an Arctic governed by international legal frameworks and precedents of Arctic 5 (A5) cooperation.7 This thesis argues, however, that Russia is disposed to be cooperative and engaged when it comes to matters Arctic.
3.2 The prize
The Arctic holds two key ‘prizes’ which attract keen interest from powers both within and outside the region. These Arctic opportunities are hydrocarbons and shipping. Both also represent some key challenges for Arctic rim powers in terms of logistics and the international interest they attract. These Arctic ‘prizes’ are becoming increasingly accessible as a direct result of global warming.8 As stated in Chapter One, to limit the scope of this study, ‘resources’ are taken to refer only to Arctic hydrocarbons (oil and natural gas).
5 Young, O, 1986. The Age of the Arctic. Foreign Policy, 61. 6 See for example: ‘The New Cold War’; ‘The Russians are coming, is Denmark ready?’ and ‘Russia claims the North Pole’. 7 Arctic rim powers are generally referred to as the Arctic 5, all of which have an Arctic Ocean coast. 8 The Arctic’s summer sea ice is thinning, yet the coverage in winter months still remains. What this means is the Arctic is becoming easier to navigate (without ice breaker assistance in some cases) in the summer months.
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3.2.1 Resources
The Arctic is home to the world’s largest unexplored hydrocarbon reserves. The Arctic encompasses about 6% of the globe’s surface, an area of more than 21 million square kilometres. The Arctic’s continental shelves may constitute the largest unexplored prospective area for undiscovered oil on Earth.9 The 2008 US Geological Survey (USGS) is often cited as the central study on Arctic resources. The survey estimates that the Arctic accounts for 13% of undiscovered global oil and 30% of the world’s undiscovered natural gas. That said, these are unexplored deposits and it is necessary to remember that these are only estimates. Moreover, the study excluded any reserves of unconventional energy such as gas hydrates. Since the 2008 survey such estimates have been overtaken by a number of large discoveries, namely in the Barents and Laptev Seas.
To investigate Arctic resources, the Survey utilised the Circum-Arctic Resource Appraisal (CARA) model, which, it is important to note, is based only on probabilities.10 The CARA methodology involves dividing the Arctic region into assessment units (AUs). Each AU is a mappable area of rock with common geological traits found in provinces all over the Arctic. These AUs were then assessed for their hydrocarbon potential. However, given ‘the sparse seismic and drilling data in much of the Arctic, the usual tools and techniques used in USGS resource assessments, such as discovery process modelling, prospect delineation, and deposit simulation, were not generally applicable’.11 This meant the CARA group was left to work with a probability methodology. The CARA team concluded that the Arctic holds approximately 90 billion barrels of oil and some 1,669 trillion cubic feet of natural gas,12 with 84% of these
9 US Department of the Interior, 2008. ‘Circum-Arctic Resource Appraisal: Estimates of Undiscovered Oil and Gas North of the Arctic Circle’. U.S. Geological Survey. Available at: http://pubs.usgs.gov/fs/2008/3049/fs2008-3049.pdf. 10 Interview, Washington, November 2014. 11 US Department of the Interior, 2008. ‘Circum-Arctic Resource Appraisal: Estimates of Undiscovered Oil and Gas North of the Arctic Circle’. U.S. Geological Survey. Available at: http://pubs.usgs.gov/fs/2008/3049/fs2008-3049.pdf. 12 Ibid.
- 111 - resources located in the offshore Arctic. Essentially, the Arctic’s hydrocarbon ‘prize’ is a highly informed guess.13 Figure 12 illustrates the CARA findings and location of potential Arctic hydrocarbons. Evidently, the majority of hydrocarbons are adjacent to the Russian coast, well and truly within Russia’s EEZ.
The finding that the majority of hydrocarbons in the Arctic are located offshore raises concerns around the commercial viability of these resources. As a leading energy security academic stated:
...I don’t hold my breath when it comes to Arctic hydrocarbons, sure there has to be some amount of resources up there but I honestly doubt it will be the treasure trove it is peddled to be. In any case, it’s a near impossible feat to operate in the [Arctic] offshore environment—no matter how flash the technology gets, I do wonder how much risk the corporates will actually take on…14
Nonetheless, the ever-growing global energy demand positions Arctic hydrocarbons as a strong option, if not necessary, for the longer-term future. This sentiment is echoed by a Russian academic:
…Arctic resources are Russia’s lifeline. In fact, they (Arctic resources) are the Earth’s lifeline; oil will remain the leading fuel choice for the next 100 years at least—I doubt the world will leave this [Arctic] resource potential in the ground. It can’t. We won’t…15
13 Interview, Washington, November 2014. 14 Interview, Washington, December 2014. 15 Interview, Washington, December 2014.
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Figure 12: Probability of Arctic hydrocarbons as indicated by the USGS CARA findings.16
16 ‘Circum-Arctic Resource Appraisal: Estimates of Undiscovered Oil and Gas North of the Arctic Circle’. U.S. Geological Survey, 2008. Available at: http://pubs.usgs.gov/fs/2008/3049/fs2008- 3049.pdf. Reproduced with permission.
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3.2.2 Shipping
Climate change is increasing access to Arctic shipping routes. As a direct result of climate change, the Arctic sea ice is thinning and the globe beginning to see longer ice-free summers in the Arctic Ocean. At this stage, there is little chance of the Arctic becoming ice-free all year round, but in the Arctic summer (June–August) the sea ice is already thinner and passable without icebreakers. Moreover, the sea ice extent is diminishing with each passing summer, resulting in Arctic areas close to shore remaining relatively ice-free in summer. The reduced need for icebreaking support has alerted the world’s shipping firms to the Arctic’s potential. Through the Arctic’s Northern Sea Route (NSR), the Atlantic and Pacific Oceans are connected. The NSR is not a new addition to the Arctic’s shipping routes; it has been utilised for decades, albeit largely by Russian merchant ships between Russian ports. NSR traffic appeared to peak in 1987, long before Putin’s Arctic push.17 But the NSR is still of great interest to the world’s largest exporter—China.
In 2013 the first Chinese merchant ship transited the NSR and was the first container vessel to do so.18 Travel time for the NSR is 35 days, compared to the Suez’s 48. Russia holds all the trump cards in relation to the NSR. As illustrated in Figure 13, the NSR wraps along the Russian coastline for most of its route. This is important to Russia for two reasons. First, much of the NSR falls within Russia’s Exclusive Economic Zone (EEZ) and therefore Russia has deemed it necessary to charge transit tariffs. The tariffs have been accompanied by Russia’s introduction of tight rules for foreign firms looking to
17 The Economist Intelligence Unit. 2014. The Northern Sea Route: Rivaling Suez?. Available at: http://www.eiu.com/industry/article/591780243/the-northern-sea-route-rivalling-suez/2014-05-02. [Accessed 28 June 2016]. 18 Barents Observer. 2013. First container ship on Northern Sea Route. Available at:http://barentsobserver.com/en/arctic/2013/08/first-container-ship-northern-sea-route-21-08. [Accessed 28 June 2016].
- 114 - utilise the route.19 Second, in the summer months, Russia insists vessels can only navigate the NSR when accompanied by Russian nuclear icebreakers.20 The NSR’s potential is thus subject to strict Russian directives.
Figure 13: Map of the Northern Sea Route in comparison to the Suez Canal.21
The NSR cuts global shipping transit times drastically. Shorter lead times have an obvious knock-on effect, exerting downward pressure on costs. In total, the NSR is nearly 40% shorter than the traditional Suez Canal route.22 The NSR efficiency goes
19 Russian Government, 2013. NSR Legislation. [Available at: http://www.arctic- lio.com/nsr_legislation ] 20 ITAR-TASS . 2013. Moscow intends to expand its Arctic zone. Available at: http://special.itar- tass.com/en/opinions/762930. [Accessed 28 June 2016]. 21 ‘NSR’. RT, 2015. Available at: https://www.rt.com/business/265756-northern-sea-route- medvedev/. Reproduced with permission. 22 Schoyen, H, 2011. The Northern Sea Route versus the Suez Canal: cases from bulk shipping. Journal of Transport Geography, 19:4.
- 115 - beyond transit time. The Northern Sea Route also presents itself as a safer alternative to routes affected by high seas piracy and ports or passages affected by political unrest. Furthermore, the Arctic’s transit route ironically provides a more environmentally conscious alternative to traditional transport routes. As Figure 14 highlights, in terms of CO2 emissions, shipping accounts for as little as 15 grams per tonne-km compared to 540 grams per tonne-km for airfreight.
Figure 14: Environmental impact of global transportation (grams/tonne-km).23
That said, there has been a significant decline in maritime traffic utilising the NSR. Navigation numbers had been growing steadily since 2010, however between 2015 and 2014 transit cargo has declined by 86%.24
3.3 The contenders for the Arctic
There are a number of interested stakeholders hoping to gain access to, and control of, the Arctic’s resource and shipping potential. It is therefore relatively easy to draw parallels between the Arctic’s trajectory and the notion of a ‘new Great Game’. This section examines contemporary Arctic stakeholders, including the Arctic rim powers,
23 ‘Comparison of CO2 emissions between different modes of transport’. NTM, Sweden, 2010. Available at: http://www.ictsd.org/downloads/2011/12/international-transport-trade-and-climate- change-information-note.pdf. 24 Barents Observer, 2016. Declining interest in use of the Northern Sea Route. [ Available at: https://thebarentsobserver.com/en/industry/2016/03/declining-interest-use-northern-sea-route]
- 116 - China as an external power with a strong Arctic agenda, and international organisations with firm Arctic interests—NATO and the EU.
3.3.1 The ‘Arctic Five’
Arctic rim powers are generally referred to as the Arctic 5 (A5), all of which have an Arctic Ocean coast. Chapter Four focuses on Russia’s Arctic strategy in depth, so it is therefore not explored in this section. The following provides an overview of the contemporary strategies of the remaining A5 powers.
3.3.1.1 United States of America (US)
By way of Alaska, the US is an A5 power. The US approaches the Arctic from a strategic point of view, for it was historically a theatre of Cold War with Russia, and presently serves as the shortest route for Russian missiles to reach Washington. In 2015, the US took the reins of the Arctic Council. The duration of the Arctic Council Chairmanship is two years, and rotates between the Arctic Council permanent members. The Arctic Council is further discussed later in this chapter. The US Chairmanship’s theme is ‘one Arctic: shared opportunities, challenges and responsibilities’.25 Ostensibly, cooperation drives the US agenda.
In Arctic matters, the US is largely focused on bilateral issues. Key bilateral concerns for the US are the North West Passage (NWP), the Bering Strait (BS) and more generally, Alaska. Arguably, the US has no formal strategy when it comes to the Arctic.26 This situation is unique to the Obama Administration, as Bush II had developed an Arctic policy for the US in the final days of his presidency. As an Arctic politics observer stated:
25 Arctic Council. 2016. US Chairmanship. Available at: http://www.arctic- council.org/index.php/en/about-us/arctic-council/u-s-chairmanship. [Accessed 27 June 2016]. 26 Interview, Washington, December 2014.
- 117 - …Bush left a strategic doctrine for the Arctic upon exit. It urged ratification of the United Nations Convention on the Law of the Sea (UNCLOS) and outlined a leadership role for the states in the Arctic. That momentum ended with Obama; Obama is interested in the environment—the last place he was about to get involved in was the Arctic. That’s pristine, that’s off limits. I think that was the mentality, then perhaps it simply fell to the wayside given the domestic economic situation (jobs and debt) that has plagued his time in the White House. Either way, under Obama the Arctic has been an afterthought…27
Bush’s 2009 policy for the Arctic set out US interests in the region. 28 The policy outlined the US’s ‘varied and compelling interests in the region’ including ‘broad and fundamental national security interests’, warning that it was ‘prepared to operate either independently or in conjunction with other states to safeguard these interests’.29 Furthermore, the directive called for the ratification of UNCLOS and the necessity to ‘develop greater capabilities and capacity’ to protect US interests.30 The policy was never acted upon by the next administration and significantly, the capacity gap between the US and other A5 powers has widened substantially in the meantime.
In 2013, the Obama Administration a paper outlining a ‘National Strategy for the Arctic Region’ which ‘prioritised [the] corporate economic opportunities’ of the Arctic.31 The strategic capabilities and capacity earmarked for development by the 2009 Bush directive dropped into the background, and as a result, the US now finds itself at an
27 Interview, Washington, December 2014. 28 This policy was realised in Bush II’s final days of office. 29 US News. 2009. Bush Signs Off on New U.S. Arctic Policy. Available at: http://www.usnews.com/news/world/articles/2009/01/12/bush-signs-off-on-new-us-arctic-policy. [Accessed 27 June 2016]. 30 Ibid. 31 The Guardian. 2013. Obama's Arctic strategy sets off a climate time bomb. Available at:http://www.theguardian.com/environment/earth-insight/2013/may/17/obama-arctic-energy- security-climate. [Accessed 27 June 2016].
- 118 - Arctic disadvantage. In 2015, the US’s focus on the Arctic is still rather ‘modest’ which undoubtedly will further ‘undermine and limit’ the US in the Arctic.32
UNCLOS is the legal governing framework agreed upon by A5 powers to rule on territorial matters within the Arctic. This body and the wider governance components of the Arctic are examined at a later stage in this chapter. The US is the only A5 power yet to ratify UNCLOS and therefore cannot submit any formal territorial claim within the Arctic for consideration. The US’s lack of focus on the Arctic region has resulted in the US being seen as a reluctant Arctic power.33 As a leading think tank representative on energy affairs commented:
…We [the US] are latecomers to the Arctic; we are gearing up to take the reins of the Arctic Council next year and the truth is we are still deciding what our Arctic policy looks like. Heck, the only Americans who have the Arctic on their radar are the Alaskans. For the rest the Arctic is a vague region far out of sight and very much out of mind. Without ratifying UNCLOS the US isn’t even in the game, we are parked on the bench…34
The notion of the US missing out on the Arctic ‘great game’ is supported by a US think tank specialist on Russian affairs who remarked:
…There’s keen interest in what the US is planning to do with our Chairmanship; just the other day colleagues from the Australian Government met with me and the topic of the Arctic arose. I simply stated the US doesn’t really have an Arctic strategy; this was met with laughter, but my comment really wasn’t far from the truth…35
32 The Conversation. 2015. As the Arctic melts, the US needs to pay attention. Available at:http://theconversation.com/as-the-arctic-melts-the-us-needs-to-pay-attention-35578. [Accessed 27 June 2016]. ; Ebinger, C, 2014. Offshore oil and gas governance in the Arctic. Washington DC: The Brookings Institute. 33 Huebert, R, 2009. United States Arctic Policy: The Reluctant Arctic Power. United States: University of Calgary. 34 Interview, Washington, December 2014. 35 Interview, Washington, December 2014.
- 119 - July 2016 sees the US heading towards the final half of its Arctic Council Chairmanship. So far the US has facilitated the continuation of a cooperative Arctic agenda with Russia and raised the Arctic’s environmental profile.
3.3.1.2 Canada
Under Stephen Harper’s leadership, Canada has provided a strong voice in the Arctic. The Canadian Arctic encompasses close to 40% of the nation's total landmass, and two thirds of Canada’s marine coastline, but with a population of only 85,000 individuals.36
Canada ratified UNCLOS in 2003 and, in line with the UNCLOS mandate, had ten years to submit a formal Arctic bid. In 2013, Canada requested an extension to gather necessary scientific support for its claim.37 In 2014, Ottawa submitted a partial Arctic claim in the form of a preliminary submission to the Commission on the Limits of the Continental Shelf (CLCS).38 This claim was tacked onto a formal Atlantic Ocean claim, as Canada still required time for its Arctic bid, but was due to submit a continental shelf claim under the ten year UNCLOS ruling. Canada was granted an extension within the Atlantic Ocean submission to provide necessary scientific information to the CLCS in support of its Arctic claim. The preliminary submission does, however, outline the direction of Canada’s Arctic claim in terms of the continental shelf. It states:
The continental margin of Canada in the Arctic Ocean is part of a morphologically continuous continental margin around the Canada Basin and along the Amundsen Basin. It comprises a number of seafloor elevations (Lomonosov Ridge and Alpha Ridge) and forms the submerged prolongation of the land mass of Canada. Throughout, the areas of continental shelf extend beyond 200 nautical
36 Arctic Council. 2016. Canada. Available at: http://www.arctic-council.org/index.php/en/about- us/member-states/canada. [Accessed 27 June 2016]. 37 The Guardian. 2013. Canada to claim North Pole as its own. Available at:http://www.theguardian.com/world/2013/dec/10/canada-north-pole-claim. [Accessed 27 June 2016]. 38 Canadian Government, 2013. Preliminary Information concerning the outer limits of the continental shelf of Canada in the Arctic Ocean. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/preliminary/can_pi_en.pdf.
- 120 - miles from the territorial sea baselines of Canada and, on the Alpha and Lomonosov Ridges, beyond the 350 nautical mile constraint.39
In the 2014 partial submission, Canada flagged its intent to extend its claim beyond its EEZ to include the disputed Lomonosov Ridge as Canadian Arctic territory. Canada’s 2014 preliminary submission also extends its territorial claim to include the North Pole. This was of interest to Arctic watchers given the understanding that in the months leading up to submission, the Canadian claim did not include the North Pole. Figure 15 illustrates what was predicted to be the Canadian Arctic claim prior to the inclusion of the North Pole. This particular section of the Arctic Ocean is deemed to be too difficult to operate in, so much so that commercial activities will likely not eventuate at the North Pole. This reality undermines the economic element to Canada’s push for the North Pole, highlighting the lengths the Harper Administration went to in essentially rewriting Canada’s Arctic bid.40
39 Ibid. 40 The Globe and Mail. 2013. Turf war with Russia looms over Ottawa’s claim to Arctic seabed. Available at: http://www.theglobeandmail.com/news/politics/turf-war-with-russia-looms-over- ottawas-claim-to-arctic-seabed/article15777123/. [Accessed 27 June 2016].
- 121 -
Figure 15: Canada’s expected Arctic claim.41
For Canada, the inclusion of the North Pole was not about economics (though much of its Arctic interest is based on economic gain), but rather, it was driven by domestic politics. Harper did not want to be seen as having surrendered the North Pole to the Russians, even if the science does not entirely support Canada’s claim to the North Pole.42 This sentiment is supported by a Russian academic who stated:
Russia might have planted a flag which upset some Arctic partners, but Canada has voiced its own hostile Arctic ambitions increasingly under the Harper administration. How should Canada’s Arctic neighbours respond to its ‘use it or
41 ‘Canada’s Arctic claim’. The Canadian Press, 2013. Available at: http://www.cbc.ca/news/canada/canada-to-file-arctic-seafloor-claim-this-week-1.2447166. Reproduced with permission. 42 The Guardian. 2013. Canada to claim the North Pole as its own. Available at:http://www.theguardian.com/world/2013/dec/10/canada-north-pole-claim. [Accessed 27 June 2016].
- 122 - lose it’ comments? Canada appears to be drawing a line and yet Russia is the one scorned in popular media. 43
At the time of writing, Canada is yet to formally submit its Arctic claim to the CLCS. The Canadian Government has attached a note to its formal partial submission related to the Atlantic Ocean foreshadowing its pending Arctic submission. At a later stage, Canada can submit a formal Arctic claim, as it has adhered to the UNCLOS guidelines by submitting a general claim within the ten year timeframe.44
3.3.1.3 Denmark
Denmark is an A5 power by virtue of Greenland (an autonomous nation within the jurisdiction of the Kingdom of Denmark). Here, nationalism and resource development drive Arctic strategy. For most, the Danish claim is a move to ‘shore up its popularity in independence-seeking Greenland, where the claim is very, very popular’.45 Predictably, Russia takes a negative view of Denmark’s claim. As a Russian official comments:
Denmark has increased spending for its navy and relocated much of it to the Arctic. Yet Denmark is not punished for seemingly militarising the region. They simply state they have no coast guard and therefore this responsibility falls to their navy. This is accepted. Russia states the same reason for its increased naval presence—coast guard development—and we are therefore militarising. There is a clear double standard. It is a pure necessity for all A5 powers to increase military capabilities in the case of disaster relief. 46
43 Interview, Moscow, April 2014. 44 Canadian Government, 2013. Preliminary Information concerning the outer limits of the continental shelf of Canada in the Arctic Ocean. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/preliminary/can_pi_en.pdf 45 The Guardian. 2014. Why does Denmark think it can lay claim to the north pole?. Available at: https://www.theguardian.com/world/shortcuts/2014/dec/16/why-denmark-thinks-it-can-lay-claim- to-north-pole. [Accessed 27 June 2016]. 46 Interview, Moscow, April 2014.
- 123 - Denmark had till 2014 to submit a claim to the CLCS after ratifying UNCLOS in 2004. In December 2014, Copenhagen submitted a formal claim for some 895,000 square kilometres of the Arctic beyond Greenland and the North Pole, a claim some 20 times the size of Denmark.47 The submission was a joint undertaking between the Danish Government and the Government of Greenland. Figure 16 outlines the Danish Arctic claim as submitted in 2014 to the CLCS.
Denmark’s Strategy for the Arctic 2011–2020 outlines the nation’s key objectives in the region.48 From the outset, the strategy advocates that the region be ‘managed internationally on the basis of international principles of law to ensure a peaceful, secure and collaborative Arctic’.49 It focuses on avenues for self-sustaining growth and development in the region; climate and environment challenges; as well as avenues for close cooperation with international Arctic partners.
47 Ibid. 48 Kingdom of Denmark, Strategy for the Arctic 2011–2020. Available at: http://naalakkersuisut.gl/~/media/Nanoq/Images/Udenrigsdirektoratet/100295_Arktis_Rapport_UK_ 210x270_Final_Web.pdf 49 Ibid.
- 124 -
Figure 16: Denmark’s Arctic claim50
50 Kingdom of Denmark, Government of Greenland, 2014. Submission to the Commission on the Limits of the Continental Shelf. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/dnk76_14/dnk2014_es.pdf
- 125 -
Norway responded to Denmark’s claim in December 2014 by stating it planned to make any final delimitations on overlapping continental shelf claims ‘through a bilateral agreement’.51 Canada responded with no objection to Denmark’s claim, but stated it had ‘taken note of the potential overlap in … the continental shelves of Canada and the Kingdom of Denmark’.52 In 2015, the US responded with no objection.53 Finally, Russia responded by drawing attention to ‘overlap of the continental shelf of the Russian Federation and that of the Kingdom of Denmark in the area referred to in the Danish submission’.54 However, in ‘accordance with the agreement reached between the Russian Federation and the Kingdom of Denmark’ Russia did not object.55
3.3.1.4 Norway Norway’s high reliance on energy exports makes its Arctic stake rather entrenched. Historically, Norway was party to one of the leading Arctic territorial disputes—that with Russia over the Barents Sea, which is analysed as a case study in Chapter Four. Norway ratified UNCLOS in 1996 and had until 2006 to submit a formal continental shelf claim. In November 2006, Oslo submitted claims across three areas in the North East Atlantic and the Arctic.56 The three areas included in the submission were: the Loop Hole (Barents Sea); the Western Nansen Basin (Arctic Ocean), and the Banana Hole (Norwegian Sea). Figure 17 illustrates the three claims.
51 Permanent Mission of Norway to the United Nations, Response to Continental Shelf Notification. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/dnk76_14/2014_12_17_nor_nv_dnk4_001 .pdf 52 Permanent Mission of Canada to the United Nations, Response to Continental Shelf Notification. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/dnk76_14/2014_12_29_CAN_NV_DNK4_0 01_en_15-.pdf 53 Ibid. 54 Permanent Mission of the Russian Federation to the United Nations, Response to Continental Shelf Notification. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/dnk76_14/2015_07_21_RUS_NV_NV_001_ 15-00554.eng.pdf 55 Ibid. 56 Kingdom of Norway, 2009. Submission to the Commission on the Limits of the Continental Shelf. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/submission_nor.htm
- 126 -
In 2009, the CLCS recommended that, in regards to the Loop Hole, Norway ‘fully satisfies the requirement of a submission for continental shelf beyond 200NM from the territorial sea baselines of Norway’.57 The Commission urged ‘a bilateral delimitation between Norway and the Russian Federation … to delineate the extent of each coastal state’s continental shelf in the Loop Hole’.58 On the Western Nansen Basin, the Commission ruled in favour of Norway’s findings and recommended ‘the delineation of the outer limits of the continental shelf in the Western Nansen Basin area be conducted’.59 Finally, the Commission agreed with the claim in respect of the Banana Hole and recommended the outer limits be determined in conjunction with the Kingdom of Denmark.
57 Ibid. 58 Ibid. 59 Ibid.
- 127 - Figure 17: Norwegian Arctic claim60
60 Kingdom of Norway, 2009. Executive Summary of Submission to the Commission on the Limits of the Continental Shelf. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/nor06/nor_exec_sum.pdf
- 128 - Although Norway has no stake in the North Pole dispute, Norway is actively increasing its Arctic military capability. For example, Norway has a leading contingency of Special Forces trained to recapture offshore oil platforms, attacking from submarines, the air, or by boat.61
That said, Norway benefits from a cooperative Arctic environment and as such, seeks avenues to ensure open lines of communication between the A5. As a Norwegian government official stated:
Bilateral ties between Arctic nations are still strong, and I don’t see that changing largely. Russia has strong and rightful interests in the Arctic and is not an expansionist actor in the Arctic. 62
The Putin era ushered in a breakthrough in Norwegian-Russian relations. Both rediscovered mutual interests and the Barents Sea decision allowed for deeper trade relations. Norwegian business flourished in Russia, but some NGOs did not, and this points to the two faces of the relationship between Norway and Russia. Neoclassical realism accounts for Russia’s multifaceted foreign policy toward Norway in the Arctic. A range of variables impacted Russia’s approach to Norway, but the leading variable was that of perception. Russia saw the chance to demonstrate a cooperative foreign policy agenda in the Arctic, aimed at the international audience. Russia is constrained by its lack of required technology and finance to explore and develop the offshore Barents Sea but saw an avenue to take advantage of Norway’s abilities. 63
Russia’s Arctic strategy swayed in a more assertive direction in 2007 when it planted the Russian flag on the Arctic seabed. Even then, neoclassical realism accounts for Norway’s apparent calmness over the action. Norway wasn’t overly worried, with the Norwegian leadership’s perception of the overall picture shaping their reaction.
61 Emmerson, C, 2010. 62 Interview, November, 2015. 63 See Chapter Five for case study on Barents Sea
- 129 - Norwegian leadership viewed the act as a symbol of Russia’s domestic politics, and understood the flag incident was for that domestic audience.
Certainly, there have been limits to Arctic cooperation with Russia since the 2014 conflict with Ukraine. As a Norwegian government official commented:
The sanctions have impacted our ability to work with Russia in the Arctic and in fact we have suspended previously planned joint military exercises in the wake of Russian policy toward Ukraine and the events surrounding MH17. Counter sanctions have impacted Norway greatly in terms of our fisheries industry. Norway is slowly adjusting and finding alternative markets, but the reality is 76% of our exports pre-sanctions to Russia were seafood. This has almost halted our seafood industry. 64
3.3.2 Other stakeholders
Beyond the A5 powers there are a range of interested parties seeking a stake in the Arctic, specifically, the interests of China, NATO and the EU in the Arctic.65
3.3.2.1 China
China is yet to release a formal strategy for the Arctic, but is a permanent observer on the Arctic Council. In 2013, China was granted observer status and for many this symbolised ‘an unspoken acceptance of Beijing’s Arctic expansion’.66 Besides representing an avenue for the diversification of China’s energy supplies, the Arctic is of interest to China given its shipping potential. Chinese demand for access to NSR shipping is likely to increase, with successful test sailing in 2013 by the vessel Yong
64 Interview, November, 2015. 65 For in depth studies of China in the Arctic see: Jakobson, L, 2010. China prepares for an ice-free Arctic. SPIRO, March; Blank, S, 2014.Enter Asia: The Arctic heats up. World Affairs Journal. 66 The Diplomat. 2015. China, Iceland and the Arctic. Available at: http://thediplomat.com/2015/05/china-iceland-and-the-arctic/. [Accessed 27 June 2016].
- 130 - Sheng encouraging other Chinese firms.67 However, this demand might yet be reduced by the success of China’s Silk Road infrastructure. Official estimates signal that China still has significant plans for the NSR, with estimates of between 5 and 15% of China’s international trade set to transit the NSR.68 Ann-Marie Brady outlines China’s strategic Arctic interests in two broad categories.69 First, there is a range of resource-related interests spanning hydrocarbons, fishing, and tourism and transport routes. Second, China has a science and technology stake in the region, as access is essential for their space program, as well as greater weather forecasting abilities.
Of course, China is deeply interested in the impact of climate change in the Arctic.70 Efforts to increase its engagement in the Arctic are most evident in China’s developing relationship with Iceland. Iceland has two key hydrocarbon areas in the Arctic named Dreki and Gammur; China’s state owned firm China National Offshore Oil Corporation (CNOOC) holds a 60% share in Dreki.71 In 2006, Iceland released plans for a logistics hub that would act as a key shipping port between Europe and Asia along the Northern Sea Route (NSR).72 Brady has commented that China should be encouraged to issue a formal statement on its Arctic strategy for ‘transparency builds trust, while ambiguity breeds mistrust and suspicion’.73
It seems clear that the Chinese Arctic strategy is to internationalise the Arctic. As a leading Chinese economist notes:
China’s Arctic interest is not unlike its African interest—it’s all about diversity. Diversity of resources for future growth. The slight difference is the potential of
67 Financial Times. 2013. First Chinese cargo ship nears end of Northeast Passage transit. Available at: https://next.ft.com/content/010fa1bc-16cd-11e3-9ec2-00144feabdc0. [Accessed 27 June 2016]. 68 Zysk, K, 2014. 69 Brady, A. 2014. Arctic 2014: Who gets a voice and why it matters. Available at:https://www.wilsoncenter.org/sites/default/files/CI_140915_BRADY_Brief_v2r1.pdf. [Accessed 27 June 2016]. 70 See: Flake, L, 2013. Russia and China in the Arctic: A team of Rivals. Strategic Analysis, 37:6 71 The Diplomat. 2015. China, Iceland and the Arctic. 72 Ibid. 73 Brady, A, 2014.
- 131 - the Northern Sea Route for China; the opportunity to ship goods rapidly between Asia and Europe is a key component of maintaining Chinese global reach…
…China will no doubt exploit the Russians’ predicament with the US and Europe— they require both finance and a consumer base for various Arctic resource ventures and China will be front and centre when Russia comes knocking. 74
Currently, China is working to increase its overall presence in the Arctic in order to strengthen its ‘right to speak’ on Arctic matters at an international level.75 China is an attractive Arctic partner for Russia given its willingness to invest in emerging Arctic projects. So long as Russia desperately needs foreign capital for its Arctic endeavours, China will be seen primarily as a valued partner, despite posing a potential threat. This sentiment is supported by a Russian academic who notes:
China is rejected as an A5 power, as an Arctic actor. But it is accepted as an investment partner and monetary injections are welcomed warmly. 76
In the Arctic, China sees the potential for long-term planning around its own energy security and trade security, so for the immediate future, this bilateral relationship is a win-win scenario for both partners. A stable and peaceful Arctic is in China’s best interest particularly for the use of the NSR given its potential economic opportunity.77
3.3.2.2 European Union (EU)
The Arctic is of key strategic relevance for the EU. Beyond the EU’s wider concern for the global environment, Denmark, Sweden and Finland are EU member states. Further, Iceland and Norway have close relations with the EU via the European Economic Area agenda, and Canada, Russia and the US are strategic partners of the
74 Interview, Washington, December 2014. 75 Brady, A, 2014 76 Interview, Moscow, April 2014. 77 Russia in Global Affairs. 2016. The Impact of U.S.-Russian Relations on Chinese-Russian Cooperation in the Arctic. Available at: http://eng.globalaffairs.ru/number/Arctic-Geopolitics-18074. [Accessed 27 June 2016].
- 132 - EU.78 The aforementioned nations are members of the Arctic Council. However, the EU is not.
There have been three distinct phases in the development of the EU’s Arctic strategy. First, the EU introduced an ‘Arctic window’ component into its 1999 Northern Dimension. This window, or opportunity, was then ignored by the EU.79 The Arctic appeared to be beyond the scope of the EU’s immediate interests. Then, in 2007 the Arctic was mentioned in the EU’s Integrated Maritime Strategy, in which the Arctic was discussed in the context of global warming.80 Third, in 2008 the EU Commission’s communication The European Union and the Arctic Region was released.81 This document focused on the 2007 Russian flag planting incident; made a suggestion that the EU seek observer status in the Arctic Council; and called for an international treaty similar to that governing the Antarctic. Although the communication highlighted calls for international cooperation, it mentioned Russia very few times, which was striking given that Russia is the Arctic’s largest actor.
In 2012, the EU Commission renewed its Arctic interest with its communication on Developing a European Union policy towards the Arctic Region: progress since 2008 and next steps.82 The paper revisited the EU’s Arctic strategy for increased engagement in the region. Strongly focused on environmental issues in the Arctic,
78 European Parliament. 2008. Communication from the Commission to the European Parliament and the Council - The European Union and the arctic region. Available at: http://eur-lex.europa.eu/legal- content/EN/ALL/?uri=CELEX%3A52008DC0763. [Accessed 27 June 2016]. ; Note: Although the Russia- EU Strategic Partnership was signed in 2011, it was challenged in 2015 following Russia’s annexation of Crimea. See for further discussion: European Parliament. 2015. Russia is no longer a strategic partner of the EU says MEPs. Available at: http://www.europarl.europa.eu/news/en/news- room/20150604IPR62878/Russia-is-no-longer-a-strategic-partner-of-the-EU-say-MEPs. [Accessed 27 June 2016]. 79 Offerdal, K. 2012. An EU Arctic Policy?. Available at:http://www.geopoliticsnorth.org/index.php?option=com_content&view=article&id=156:an-eu- arctic-policy&catid=39&Itemid=107. [Accessed 3 July 2016]. 80 Ibid. 81 European Parliament. 2008. 82 European Commission, 2012. Developing a European Union Policy towards the Arctic Region: progress since 2008 and next steps. Available at: http://eeas.europa.eu/arctic_region/docs/join_2012_19.pdf
- 133 - spurred by climate change, the paper argued for EU investment in climate change research. The revised strategy also pointed to the EU’s key economic interests in the Arctic. Notably, 88% of the EU’s total output of iron ore is sourced from the Arctic Barents region.83 There appear to be three key objectives for the EU in the Arctic today:
1. to preserve the Arctic’s fragile ecology 2. to promote sustainable development and 3. to support international cooperation.84
Significantly, the revised EU approach accepted the existing international legal order—notably the UNCLOS—and the Arctic Council as the lead regional body. The EU was at this point seemingly interested primarily in the supporting role it could play ‘in supporting this successful co-operation and in helping to meet the challenges that now confront the region’.85 The EU aims to provide Arctic leadership in terms of scientific knowledge, international responsibility and engagement.86 However, this leadership position is not necessarily widely welcomed, or perhaps even necessary. In 2009, the EU’s first membership application for Arctic Council observer status was denied. This was the first case of a supranational organisation applying for membership.87 Technically, there is no rule against organisations applying.88 Many indigenous and environmental organisations have done so successfully. It is more of a general understanding among Arctic Council permanent members that moving beyond states will erode the sovereignty of individual members in the Arctic.
83 Ibid. 84 Ibid. 85 Ibid. 86 Ibid. 87 The Heritage Foundation. 2013. No European Union membership in the Arctic Council. Available at: http://www.heritage.org/research/reports/2013/04/no-european-union-membership-in-the- arctic-council. [Accessed 3 July 2016]. 88 Arctic Council. 2016. Observers. Available at: http://www.arctic-council.org/index.php/en/about- us/arctic-council/observers. [Accessed 3 July 2016].
- 134 - In 2011 when the EU again applied for Arctic Council membership as an observer state, its application was again rejected. There was no clear understanding of the aspects of Arctic affairs in which the EU was interested. There were already EU member states with Arctic Council status. It was a case of the Council ‘waiting for the EU to show what they can do in the Arctic, while the EU has been waiting to be told what to do in the Arctic’.89
Further, in 2013, EU membership was again rejected, this time by Canada as retaliation for the seal trade dispute. The EU import ban on seal furs and meat met with opposition from Canada.90 In 2015, the EU’s membership application was once more rejected. Although Canada now supported the EU bid, Russia did not.91 With EU- Russian relations deteriorating steadily since the 2013 bid, this was no surprise. As it stands currently, the EU is a pending-observer, and must apply to attend meetings.
In April 2017, the EU released an ‘Integrated policy for the European Union in the Arctic’.92 Priorities once again centred on EU objectives of mitigating climate change in the region, supporting sustainable development and fostering international cooperation in the Arctic. The communication signalled the progress of EU understanding as to its role in the Arctic narrative. However, challenges still arise for the EU in streamlining a huge range of priorities and interests within the EU Arctic nations, making consensus difficult. Furthermore, the A5 are consistently reminding the EU that it lacks real power to influence Arctic narrative.
89 The Arctic Institute . 2015. The EU’s Arctic Policy: Eventually Getting Somewhere?. Available at: http://www.thearcticinstitute.org/eu-arctic-policy-getting-somewhere/. [Accessed 3 July 2016]. 90 The Wall Street Journal . 2013. Six Nations Win Seats on Arctic Council. Available at:http://www.wsj.com/articles/SB10001424127887324767004578484621098493056. [Accessed 3 July 2016]. 91 Barents Observer. 2015. EU bid to become Arctic Council observer deferred again. Available at: http://barentsobserver.com/en/arctic/2015/05/eu-bid-become-arctic-council-observer-deferred- again-04-05. [Accessed 26 July 2016]. 92 European Union, 2016. ‘EU launches a new integrated policy for the Arctic’. Available at: https://eeas.europa.eu/headquarters/headquarters- homepage_en/3500/EU%20launches%20a%20new%20integrated%20policy%20for%20the%20Arctic [Accessed 4 July 2016]
- 135 - In the immediate future, the EU will surely bolster its campaign for an observer status seat at the Arctic Council. In 2017, the international framework ‘Polar Code’ will enter into force. The Polar Code is a mandatory framework for ships operating in the Arctic and Antarctic regions.93 Given that the EU controls some 40% of global tonnage, and that the development of the NSR will ultimately shift trade routes, the EU will have a vital interest in the application of the Polar Code in the Arctic.94
In late 2014, it became apparent there was an emerging security situation affecting the EU when news broke of an Arctic refugee route.95 Largely Syrian refugees were transiting from Russia through the Arctic to Europe, and by 2015 it had emerged as one of the fastest routes into Europe. Displaced peoples were flying to Russia from Syria, then taking an internal Russian flight to Murmansk, followed by a 200 km taxi trip to the Norwegian border.
Under Russian law, crossing into Norwegian territory cannot be done on foot, thus refugees complete their journey with a 100 m bike ride into Norway.96 As at January 2016 there had been 5,500 such documented crossings since August 2014, compared to just ten from January–August 2014.97 In early November 2015, Norway officially opened a welcome centre, aware of the impending security threat at its Arctic crossing—late November to the end of February sees the region in complete darkness. The desired end point for refugees taking this route is still the EU—specifically
93 GARD. 2015. New mandatory regulations for vessels operating in polar waters. Available at:http://www.gard.no/web/updates/content/20872272/new-mandatory-regulations-for-vessels- operating-in-polar-waters-. [Accessed 26 July 2016]. 94 Oxford Economics . 2014. The economic value of the EU shipping industry . Available at:http://llsa.lt/images/articles/naudinga_info/2014-04- 01%20Oxford%20Economics%20Shipping%20value.pdf. [Accessed 5 July 2016]. 95 Sydney Morning Herald. 2015. Syrian refugees take Arctic route into Europe. Available at:http://www.smh.com.au/world/migrant-crisis/syrian-refugees-take-arctic-route-to-europe- 20150929-gjx400.html. [Accessed 5 July 2016]. 96 The Guardian. 2015. Bicycles used by Syrian refugees to enter Norway from Russia to be destroyed. Available at: http://www.theguardian.com/world/2015/nov/18/bicycles-syrian-refugees-enter- norway-russia-destroyed. [Accessed 5 July 2016]. 97 The Moscow Times. 2016. Russia Closes Arctic Border to Norway Amid Security Concerns. Available at: http://www.themoscowtimes.com/news/article/russia-closes-arctic-border-to-norway-amid- security-concerns/556843.html. [Accessed 5 July 2016].
- 136 - Germany. In January 2016, the welcome centre was closed, and Norway put pressure on Russia to close its border, which it did by February. Soon after, the Finnish-Russian Salla and Raja-Jooseppi Arctic borders were closed to prevent illegal immigration. These border crossings had seen some 1,000 asylum seekers enter Finland in the first two months of 2016, up from 700 for the whole of 2015.98
3.3.2.3 North Atlantic Treaty Organization (NATO)
NATO has no formal Arctic strategy and there is much debate over the role NATO should—or even could—play in the Arctic. Four of the five A5 states are NATO members, yet there is disagreement over the requirement for NATO to play a role in the region. For instance, Norway welcomes an active role for NATO in the Arctic, whilst Canada is more wary.99 Of course, for Russia, as the sole non-NATO A5 power, formal NATO engagement in the Arctic is a non-negotiable issue.100
The notion of NATO in the Arctic is discussed by a Norwegian government official who stated:
Of course there is a role for NATO in the Arctic—four of the Arctic polar nations are NATO nations. Northern Norway is just as important to NATO as the south. NATO’s role must come simply by default. This doesn’t mean NATO needs a military presence or post; simply NATO must have an understanding of northern affairs and follow developments in the Arctic. Prior to Ukraine and Crimea, this was the case and it will continue to be the case. Perhaps closer lines of communication will develop however. 101
98 World Bulletin . 2016. Russia, Finland agree to close Arctic border to refugees. Available at:http://www.worldbulletin.net/news/170778/russia-finland-agree-to-close-arctic-border-to- refugees. [Accessed 5 July 2016]. 99 The Heritage Foundation . 2012. NATO in the Arctic: Challenges and Opportunities. Available at: http://www.heritage.org/research/reports/2012/06/nato-in-the-arctic-challenges-and- opportunities#. [Accessed 5 July 2016]. 100 For further discussion see: Brooke Smith-Windsor, B, 2013. Putting the N back into NATO: A High North policy framework for the Atlantic Alliance?. Rome: NATO Research Division. 101 Interview, November, 2015.
- 137 -
For Alexander Shaparov, NATO’s interest in the region has less to do with potential military confrontation than it has to do with geopolitical rivalry which takes the form ‘of economic, technological and political competition’.102 Although NATO is not yet an actor in the Arctic, and there is still no consensus within NATO on its Arctic role, it is starting to direct attention to the region. In March 2016, NATO led a Cold Response exercise in Norway. Cold Response is a group of annual military exercises led by Norway since 2006. This exercise involved 15,000 soldiers from 13 NATO Allies and partners including all Arctic rim powers except Russia. The aim of the exercise was to develop military capabilities in the Arctic’s challenging conditions. As per the Vienna Document, signatories are able to conduct three inspections per year – this helps promote openness and prevent misunderstandings.103 Russia sent an inspection team to follow the Cold Response exercise.
3.4 The challenges
There is an array of challenges inherent in the opening up of the Arctic. This section reviews the key challenges posed by the Arctic. It looks to issues of governance and environment, as well as military and technological challenges emerging in the Arctic. Figure 18 illustrates the overlapping and competing Arctic claims, as explored earlier in this chapter. Responsibility for mediating these claims falls upon the governing UN legal architecture of the Arctic, as implemented by the Arctic Council.
102 Shaparov, A. 2013. NATO and a new agenda for the Arctic . Available at:http://eurodialogue.eu/energy-security/NATO-and-a-New-Agenda-for-the-Arctic. [Accessed 5 July 2016]. 103 See for further information on the Vienna Document see: Arms Control Association. 2010. Vienna Document. Available at: https://www.armscontrol.org/factsheets/ViennaDoc99. [Accessed 5 July 2016].
- 138 - Figure 18: Illustration of A5 stakes104
- 139 -
3.4.1 Governance
The Arctic’s central governing institution is the Arctic Council. Established in 1996, the Arctic Council as an intergovernmental forum and consensus body which focuses on the Arctic’s protection and sustainable development. Military or security issues are not mandated for discussion.105
The Arctic Council consists of eight members: Canada; Denmark; Finland; Iceland; Norway; Russia; Sweden and the US. There are a number of organisations representing Arctic indigenous peoples that have permanent participant status in the Council. The Arctic Council decides by vote whether or not to grant applicant states observer status. The following hold observer status: Germany; The Netherlands; Poland; Spain; UK; Italy; Japan; Korea; Singapore; India and most recently, China.106
In 2008, Arctic Council members signed the Ilulissat Declaration, through which members set a firm course for cooperation, agreeing to resolve territorial disputes without resorting to military means.107 In addition, members renewed their support for UNCLOS to remain the sole legal regime in the region. According to Denmark, the ‘landmark political declaration’ sent a ‘strong political signal that the five coastal states (would) act responsibly concerning future development in the Arctic Ocean’.108 The Arctic Council has formalised cooperation between Arctic nations. Certainly, Russia has been instrumental in this cooperation. In the past, this cooperation had been insulated from other global affairs. However, following Russia’s annexation of
104 ‘Arctic territorial claims’. Durham University, 2015. Available at: http://www.durham.ac.uk/ibru/resources/arctic. Reproduced with permission. 105 Brigham, L, 2014. The changing Arctic: new realities and players at the top of the world. Asia Policy, 18. 106 Arctic Council. 2016. Member States. Available at: http://www.arctic- council.org/index.php/en/about-us/member-states. [Accessed 5 July 2016]. 107 Dodds, K, 2013. The Ilulissat Declaration (2008): The Artic states, ‘Law of the Sea’ and the Arctic Ocean. SAIS Review of International Affairs, 33:2. 108 Kingdom of Denmark, Strategy for the Arctic 2011–2020.
- 140 - Crimea, A5 members have largely cut defence cooperation with Russia and kept to a reduced level of communication on Arctic affairs.
In terms of legal architecture, the Arctic is governed by the 1982 UN Convention on the Law of the Sea (UNCLOS). The Convention has been ratified by some 150 states, including all A5 powers except the US. UNCLOS is a legal regime but it is not legally binding. Signatories have ten years from the ratification of UNCLOS to submit a claim of territorial extension. Multiple claims may be submitted from that point thereafter.
The Commission on the Limits of the Continental Shelf (CLCS) is empowered to pass judgement on UNCLOS submissions; however, it is ultimately at the discretion of claimants to negotiate disputes bilaterally. No country has a right to establish control over the Arctic other than states which have access to the Arctic Ocean (the A5). These Arctic rim powers may declare an area extending 200 miles from the coast of their EEZs. The EEZ can be extended a further 150 nautical miles (NM) if the country proves that its Arctic shelf is an extension of its land territory.109 In order to prove such extensions of existing territories, some Arctic rim powers have turned their attention to their continental shelves. The continental shelf debate is a key territorial issue in the Arctic today. An extension of the EEZ provides rights to the claimant over the sea floor and any resources below the sea floor. The extension does not guarantee that claimants receive rights to the water column, or sole passage within this extended area. Figure 19 illustrates UNCLOS.
109 United Nations, General Assembly, (10/12/1982). United Nations Convention on the Law of the Sea, Section 2, Article 4. Available at: http://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf
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Figure 19: Illustration of maritime zones affected by UNCLOS.110
Central to the Arctic continental shelf debate is the Lomonosov Ridge - a 1,800 km long underwater mass. Figure 20 outlines the location of and overlapping claims to the ridge. The ridge is essentially an underwater mountain range over which there is a dispute as to whether it is a territorial extension of the Russian, Danish (by way of Greenland) and Canadian continental shelf. Scientific evidence provided in formal claims to the CLCS could potentially grant claimants an extension of their EEZ by 150 NM, based on this ridge. The US, yet to ratify the UNCLOS, approaches the ridge as an oceanic ridge and thus not as an extension of any one state’s continental shelf— rejecting any single claim to ownership. All claims to the ridge may be regarded as tenable by the CLCS—however, in this scenario, the CLCS would refuse to rule either way and would instead call on the competing claimants to settle the dispute bilaterally (or potentially trilaterally).111
110 ‘Maritime zones as affected by UNCLOS’. National Oceanography Centre, 2012. Available at: http://noc.ac.uk/research-at-sea/planning-expedition/law-at-sea/law-sea. Reproduced with permission. 111 Stimson Analysis. 2013. Evolution of Arctic Territorial Claims and Agreements: A Timeline (1903- Present). Available at: http://www.stimson.org/content/evolution-arctic-territorial-claims-and- agreements-timeline-1903-present. [Accessed 5 July 2016].
- 142 -
All three nations moved to focus their claims on questions of ‘geologic origin’— sovereignty over the ridge being based on estimates from rock deposits as to where the ridge originally formed. Given the rock deposits were from the same ridge, all three nations have come to the same conclusion—the ridge is a continuation of each of their particular continental shelves. Figure 21 illustrates the shelves’ connection with bathymetric findings linking all three claimants to sections of the ridge. It is likely the CLCS will not rule in the matter; instead opting for the nations to come to an agreement amongst themselves. Canada’s new Trudeau leadership is presenting itself as an advocate of international cooperation, Denmark is not able to defend its claim militarily against Russia’s superior forces, and it is unlikely Russia will recognise other claims. For Russia, the ridge is synonymous with national pride, reflected in the fact that the ridge is named after a celebrated eighteenth-century Russian polymath.
- 143 -
Figure 20: Map of the Lomonosov Ridge112
112 ‘Arctic territorial claims’. The Economist, 2014. Available at: http://www.economist.com/news/international/21636756-denmark-claims-north-pole-frozen- conflict. Reproduced with permission.
- 144 -
Figure 21: Bathymetric map of the Lomonosov Ridge.113
3.4.2 Environmental
Climate change is raising Arctic temperatures at twice the global average. This means the Arctic will see ice-free summers as soon as 2050.114 A National Oceanic and Atmospheric Administration (NOAA) study has found:
Rapid Arctic sea ice loss is probably the most visible indicator of global climate change; it leads to shifts in ecosystems and economic access, and potentially
113 Kingdom of Denmark, Government of Greenland, 2014. Submission to the Commission on the Limits of the Continental Shelf. 114 NOAA. 2013. Arctic nearly free of summer sea ice during first half of 21st century. Available at:http://www.noaanews.noaa.gov/stories2013/20130412_arcticseaice.html. [Accessed 5 July 2016].
- 145 - impacts weather throughout the northern hemisphere … Increased physical understanding of rapid Arctic climate shifts and improved models are needed that give a more detailed picture and timing of what to expect so we can better prepare and adapt to such changes. Early loss of Arctic sea ice gives immediacy to the issue of climate change. 115
A further concern for Arctic development is the waste from increased activity in the region, as well as the potential for an oil spill. Compared to spills on land, those at sea are harder to contain. With higher traffic and areas of more intense resource production, tanker spills are a risk. Further transportation utilising the NSR is set to increase, emitting waste as a by-product of transit. Likewise, increased Arctic tourism brings with it the potential for environmental degradation.
Any oil spill within the Arctic Ocean would be a grave challenge to the fragile Arctic ecosystem. However, with advances in technology, there is cause for optimism for the future of the Arctic as a bustling commercial hub. Advances in technologies such as satellite surveillance will provide early warning of potential Arctic devastation.116 Oil spills at the deep-water level are often not recognised until the oil slick appears on the surface, or miles away, carried by ocean currents. Satellites provide images which penetrate deeper beneath the ocean surface, able to detect deep spills sometimes days before they surface.
The emergence of social responsibility campaigns at IOCs, as well as the general public’s concern for the Arctic, has resulted in a cautious operating environment for firms. This is evident in the IOC approach to Arctic offshore exploration. Firms are going slow, investing billions in state-of-the-art technology and pulling out of projects if there is any cause for concern. Concern for the polar environment is voiced by a representative of an IOC who stated:
115 Ibid. 116 Offshore Technology . 2014. The remarkable decline of oil spills in the Baltic Sea - lessons learnt?. Available at: http://www.offshore-technology.com/features/featurelessons-learnt-the-remarkable- decline-of-oil-spills-in-the-baltic-sea-4379564/. [Accessed 5 July 2016].
- 146 - Shell left its Arctic (Chukchi Sea) venture because it couldn’t meet operational requirements. It’s really that simple; although their PR machine would have you believe anything from Obama blocking license renewal, to the oil price having been too low. Shell pulled out because it rushed to the Arctic and in the rush, got caught up with inefficient deep-sea production materials. They are back to the drawing board. We have oil rigs that can’t be anchored correctly—Shell lost one of their rigs and it drifted to the Alaskan shore. Like the rest of us, they now won’t touch the wells until the technology is foolproof. The industry is almost there; demand will get us over the line sooner or later. 117
ExxonMobil’s 1989 Valdez and BP’s 2008 Gulf of Mexico spills are ever-present in IOC thinking in its approach to the Arctic. These firms are risk-averse, for no one wants to be the first to spill in the Arctic. Estimates from the US Department of the Interior put the risk of Arctic spills at 75%, yet the Department still sold licenses for offshore Arctic exploration.118 That said, globally there has been a decrease in oil spills despite solid increases in oil trade. Figure 22 illustrates the decline in ocean oil spills, likely because of the risk-averse approach firms now have more generally.
117 Interview, Washington, December 2015. 118 US Government, Bureau of Ocean Energy Management, 2015. Chukchi Sea Planning Area – Oil and Gas Lease Sale. Available at: http://www.boem.gov/uploadedFiles/BOEM/About_BOEM/BOEM_Regions/Alaska_Region/Leasing_a nd_Plans/Leasing/Lease_Sales/Sale_193/2015_0127_LS193_Final_2nd_SEIS_Vol1.pdf
- 147 -
Figure 22: Occurrence of ocean oil spills (1970–2014).119
Key to preventing ocean spills as far as possible are cross-border collaboration and cooperation. For example, the Baltic Sea area represents an important policy lesson for Arctic rim powers. It was once the case that the ‘Baltic Sea had something of a reputation as being a cradle for oil spills’, with the Finnish Environment Institute recording a record 107 spills in 2001.120 Fast forward to 2013 and the Institute reported only nine oil spills, and none at all in 2014.121 Governed by the Baltic Marine Environment Protection Commission, the region is working to maintain a zero spill rate out to its next review in 2021. Success stems from Baltic Sea rim states collaborating to act as a commercial watchdog, passing regulatory changes as well as
119 ‘Occurrence of ocean oil spills’. International Tanker Owners Pollution Federation, 2015. Available at: http://www.itopf.com/fileadmin/data/Documents/Company_Lit/Members_Handbook_2015_lo.pdf Reproduced with permission. 120 Offshore Technology. 2014. 121 As at June 2014.
- 148 - conducting cross-border surveillance operations. Finland carried out 625 hours of aerial surveillance over the Baltic Sea in 2013, and whilst the majority of flight time was in Finnish territory, around one quarter of the time was spent in the territory of neighbouring countries.122
Baev notes that Putin has gradually developed an interest in the Arctic environment. Although Putin may have few concerns related to global warming, he has used the Kremlin media machine to portray him as deeply committed to the welfare of polar bears.123 As per Putin’s previous wildlife photoshoots with tigers and whales, this is also employed to perpetuate the ‘strong man’ Putin persona.
3.4.3 Military
Militarisation is a central challenge to the Arctic, but it is not a new one. In the post- Cold War period, the Arctic underwent a major decline in levels of militarization. With the collapse of the Soviet Union, Russia no longer directed funds to the Far North projects and the region became somewhat forgotten. Since 2012, there have been steady efforts by Arctic-rim powers to restore and in some cases, enhance, Arctic military capabilities. It is therefore important to note that the current military build- up has the potential to surpass even Cold War levels.
Generally, the Arctic is viewed as the home of a new arms race and as a theatre for a new Cold War between Russia and the West.124 The Arctic rim powers have actively bolstered their military presence in the region, further fuelling such sentiments. In
122 The Finnish Border Guard, 2014. A record low in oil spills detected by aerial surveillance in 2013. Available at: https://www.raja.fi/en/facts/news_from_the_border_guard/news/1/0/a_record_low_in_oil_spills_d etected_by_aerial_surveillance_in_2013_50494 [Accessed 23 April 2015]. 123 Baev, P, 2013. Russia’s Arctic ambitions and anxieties. Current History, October. 124 See for example: Lucas, E, 2008; Blank, S, 2014. The Russian Arctic: Between Economic Development and Accelerating Militarization. Eurasia Daily Monitor, 11:199; Blank, S, 2015. Russia’s New Arctic Base Continue the Militarization of the High North. Eurasia Daily Monitor, 12:202; Borgerson, S, 2013.
- 149 - 2007, Canada launched an annual ‘sovereignty operation’ called Nanook in the Canadian Arctic. The operation involves the deployment of 600-1250 navy, army and air force personnel to ‘assert Canada’s sovereignty over its northernmost regions’ and enhance ability to operate in Arctic conditions.125 Since 2007, Nanook has also involved various international military partners. 126 However, the operation objectives since 2007 have focused on responses to petrochemical leaks and general maritime emergency scenarios. Operation Nunalivut is a further annual sovereignty operation conducted by Canada in the High North. Since 2007, the exercise has also included various international military partners.127
These militarisation efforts are unsurprising and to be expected given geopolitical pressures. Such pressures span A5 economic interests and the securitisation of borders as global activity increases in the region. The domestic politics of the respective A5 rim powers are often the leading driver of military policy in the Arctic. As Michael Byers argues in relation to the ‘rush’ for the North Pole:
We're talking about the centre of a large, inhospitable ocean that is in total darkness for three months each year, thousands of miles from any port … the water in the North Pole is 12,000 feet deep and will always be covered by sea ice in the winter. It's not a place where anyone is going to be drilling for oil and gas. So it's not about economic stakes, it's about domestic politics.128
Certainly, the requirement for functioning search and rescue capabilities in the region is also driving states to acquire new equipment or move existing hardware north.
125 National Defence and the Canadian Armed Forces. 2016. Operation NANOOK. Available at: http://www.forces.gc.ca/en/operations-canada-north-america-recurring/op-nanook.page. [Accessed 27 July 2016]. 126 For example, NANOOK 2015 included US troops with UK observation. NANOOK 2010 involved members of the Royal Danish Navy and the US Coast Guard. 127 National Defence and the Canadian Armed Forces. 2016. Operation NUNALIVUT. Available at: http://www.forces.gc.ca/en/operations-canada-north-america-recurring/op-nunalivut.page. [Accessed 24 June 2016]. 128 The Guardian . 2013. Canada to claim North Pole as its own. Available at:https://www.theguardian.com/world/2013/dec/10/canada-north-pole-claim. [Accessed 27 July 2016].
- 150 - Disputes that could be labelled ‘conflicts’ are cordoned off as largely bilateral issues. Further, outright military conflict in the Arctic is unlikely. This reality is supported by a Russian government official:
We have to look to capability and deployability before war can be waged in the Arctic. Military capabilities cannot change the fact that the environment is unpassable between Nov–Jan each year, the region is dark 24 hours a day and ice storms limit deployability. It is difficult to fight over a region that simply will not host the battle. 129
There is existing precedent for regional military cooperation, given the various joint exercises. Further, arguing that there is a correlation between increasing military activity in the Arctic and looming Arctic conflict is problematic. First, all Arctic rim nations have a history of military exercises in the region. Given that US submarine deployments to the Arctic continued after the collapse of the Soviet Union and that the Cold Response exercise predates the return of Russian long-range bomber patrol flights, it is evident that the Arctic isn’t militarising now for it never demilitarised in the first place. 130 The installation, in Russia’s case reinstallation, of military infrastructure should not be narrowly viewed as increasing Arctic tensions – for ‘not all military capabilities are designed for force’. 131
Norway, via a statement to NATO, noted that Russia’s military activities in the Arctic are similar to other countries and as such reflect a ‘return to a more normal level of activity from a major power with legitimate interests in the region’. 132 In 2015, despite Russia-West tensions, Norway and Russia conducted a joint exercise codenamed Barents 2015. The two-day exercise trained for search and rescue events in the Arctic Ocean and was conducted despite Norway’s 2014 suspension of military cooperation
129 Interview, Moscow, April 2014. 130 National Defense. 2016. Five Nations Jockey for Military Influence in Arctic . Available at:http://www.nationaldefensemagazine.org/archive/2016/March/Pages/FiveNationsJockeyforMilita ryInfluenceinArctic.aspx. [Accessed 27 July 2016]. 131 Ibid. 132 Store, J, 2009. Current Strategic challenges in the High North. Available at: www.regjeringen.no/en/dep/ud/about.mfa.minister-offoreign-affairs-jonas-gahr-s/Speeches. [Accessed 10 June 2016].
- 151 - with Russia in the wake of Ukraine.133 In line with suspension of joint military activities, the annual Norwegian-Russian Pomor Arctic exercise was suspended in 2015.134 Barents 2015 signals the maintenance of bilateral cooperation and communication between Norway and Russia. Ultimately, the Arctic is progressing from ‘Cold War theatre to mosaic of cooperation’.135 Although, continued regional peace is of course contingent on Putin’s Russia cooperating. As Chapter Four argues, Russia itself has no choice but partnership with foreign firms to invest in and exploit the Arctic.
Russia’s military efforts in the Arctic are examined in more detail in Chapter Four.
3.4.4 Technological
There is a range of technological challenges associated with the Arctic, stemming from its remoteness, the harsh ice, extreme temperatures and long periods of darkness in winter.136 Russia has failed to invest in the development of new technology for its Arctic endeavours. Instead, it relies on Western firms armed with the required materials to operate in the Arctic.
The Arctic’s permafrost is a drilling hazard given the accumulations of natural gas hydrates which exist within and directly beneath it. Offshore Arctic technology for drilling platforms is being updated constantly to better withstand strong storms, currents and icebergs.137 As a Russian academic states:
Technological capability in the Arctic is a key component of Arctic development. Currently, only Russia has the icebreaker fleet capable of navigating the offshore
133 Sputnik News. 2015. Russia, Norway Team Up for Joint Exercise in Barents Sea. Available at:http://www.nationaldefensemagazine.org/archive/2016/March/Pages/FiveNationsJockeyforMilita ryInfluenceinArctic.aspx. [Accessed 27 July 2016]. 134 Barents Observer . 2010. Russian-Norwegian naval exercise in Arctic Waters. Available at:http://barentsobserver.com/en/sections/topics/russian-norwegian-naval-exercise-arctic-waters. [Accessed 27 July 2016]. 135 The Arctic Institute . 2016. Thinking Critically About Security and the Arctic in the Anthropocene. Available at: http://www.thearcticinstitute.org/thinking-critically-about-security-and-the-arctic-in- the-anthropocene/. [Accessed 27 July 2016]. 136 Royal Dutch Shell. 2016. Energy and Innovation. Available at:http://www.shell.com/global/future- energy/arctic/arctic-technology.html. [Accessed 27 July 2016]. 137 Bishop, A, 2010. Petroleum Potential of the Arctic: Challenges and Solutions. Oilfield Review, 22:4.
- 152 - Arctic all year round. China comes close, yet its current fleet can break 1.4m of ice and its new fleet will be able to break 1.8m. These ships will only be useful in summer months. 138
The cost of the sophisticated technology needed to build Arctic projects is roughly $3– 5 billion per rig. Further, the geographical constraints of Arctic production, the long supply lines, limited infrastructure and higher salaries for the workforce are all roadblocks to rapid Arctic project development.139 While shallow Arctic waters have yielded resources without much hassle, depths exceeding 100 m are another problem. Yet, the bulk of resources are estimated to be in the deep offshore Arctic Ocean, and it is here that extraction becomes tricky.140 Over the past ten years, the necessary technology has advanced considerably—enabled as the resource prize was deemed big enough. The 2008 US survey results gave some IOCs the confidence to attempt to overcome the major technology hurdles to ‘safely and economically produce large hydrocarbon accumulations in harsh environmental conditions’.141
In the case of France’s Total S.A, the CEO argues the risk of Arctic spills is simply too high. The IOC was the first, and is still the sole firm to speak out against Arctic hydrocarbon development.142 Total S.A does, however, maintain stakes in a range of onshore Russian Arctic projects, as well as a role in the Nord Stream consortium.
Arctic hydrocarbons are still a long-term reality, ever constrained by shifts in the global energy market. As an energy consultancy representative explained:
138 Interview, Moscow, April 2014. 139 NATO Parliamentary Assembly. 2015. The High North: Challenges and Opportunities. Available at: http://www.nato-pa.int/default.asp?SHORTCUT=3788. [Accessed 27 July 2016]. 140 Hamilton, J, 2011. The Challenges of Deep Water Arctic Development. United States: International Society of Offshore and Polar Engineers. 141 Ibid. 142 Financial Times. 2012. Total warns against oil drilling in Arctic. Available at:https://next.ft.com/content/350be724-070a-11e2-92ef-00144feabdc0. [Accessed 27 July 2016].
- 153 - Arctic oil and gas is squarely a long-term project and simply won’t be feasible unless either a) oil is above $130 a barrel, or b) demand sidesteps non-traditional energy routes like renewables. I don’t think either are all that likely in the long term (35+ years). Of course, oil majors are strategic thinkers and no doubt we will remain fixed on the potential of the Arctic offshore. 143
3.5 Conclusion: a neoclassical realist reading of Arctic geopolitics
Viewed as a ‘final frontier’ in some states, opportunities stemming from domestic political gains and resource potential, drive A5 strategies. The key strategic challenge in the Arctic is that environmental and hydrocarbon project success will depend on the eventual development of new technologies.144
The Arctic is a rapidly changing region. Tensions and mistrust are rife in this current period of strained Russia-West relations, and the spill-over is evident in the Arctic. The pace of commercial projects has slowed as a result of sanctions and the low oil price. A5 militarisation processes, once deemed inevitable in an opening Arctic are viewed with scepticism and touch off renewed discussion of a new Cold War. Yet, cooperation and regional peace within the Arctic are still likely to prevail, and this argument is developed further in Chapter Four in the course of an assessment of the drivers of Russia’s Arctic strategy. Viewing the Arctic wholly through the lens of conflict or cooperation is problematic, for it is too simplistic. The Arctic is so complex that it can represent at any one-time elements of both conflict and cooperation. External forces might elicit more of one or the other from time to time.
Neoclassical realism is a useful framework to explore such deviations between the cooperative and competitive Russian foreign energy policy. It allows for the assessment of the middle ground between the two foreign policy outcomes by
143 Interview, Canberra, October 2015. 144 Bishop, A, 2010.
- 154 - offering flexibility around the domestic pressures which shape foreign policy. Putin’s perceptions and the domestic audience interest in seeing Russia retain its leading Arctic position will undoubtedly continue to shape Russia’s Arctic strategy. Generally, all A5 states are geared towards cooperation in the Arctic simply because they perceive a range of areas conducive to bilateral and multilateral partnership. Climate change, scientific explorations, communication networks, shipping and piracy control as well as search and rescue capabilities are all areas in which leaders perceive the value of cooperation.
- 155 -
Chapter Four: Russia looks north
‘The Arctic is a Russian Mecca’
Dmitry Rogozin 1
4.1 Introduction
Chapter Four examines Russia’s Arctic strategy under Putin. It focuses on how Putin’s Russia has approached the Arctic and how it has conducted itself in the region more broadly, first providing an overview of the Arctic’s place in Soviet Russia, and then considering where it ‘fits’ in the foreign and domestic policies of Putin’s Russia. By examining key primary Russian Government documents dealing with the Arctic, it traces the development of Russia’s Arctic strategy under Putin and the progress of Russia’s territorial claim in the Arctic.
An examination of responses from neighbouring Arctic powers to Russia’s claim suggests there is relatively little to substantiate the new ‘Cold War’ thesis. Avenues of communication and cooperation between Russia and the West in the Arctic remain open, despite the ongoing tensions elsewhere. It is argued here that a flawed assessment of Russian Arctic ambitions has emerged, in which Russia’s Arctic strategy is often perceived by the global community as expansionist, like its policy towards its western neighbours. A close examination of the evidence suggests otherwise. The main conclusion of this chapter is that Russia’s Arctic strategy is geared rather toward cooperation with the other A5 powers. As this chapter demonstrates, Russia’s legal and geographical position in the Arctic is strong. Other Arctic stakeholders essentially accept this as a working assumption.
1 Business Insider. 2015. Russian deputy prime minister: 'The Arctic is a Russian Mecca'. Available at: http://www.businessinsider.com.au/the-arctic-is-a-russian-mecca-2015-4?r=US&IR=T. [Accessed 27 July 2016].
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4.2 The significance of the Arctic to Russia
The following sections examine the importance of the Arctic to Putin’s Russia. The first section looks at Soviet Arctic policy in historical perspective assessing the significance of the Arctic to Putin’s Russia. This section will focus briefly on key stages in the development of Arctic strategy under the Soviet Union, and Russian Arctic strategy under Yeltsin and Putin. The second section looks to the Arctic continental shelf dispute and positions Russia’s territorial claim within the contemporary debate.
4.2.1 Soviet Arctic policy2
In 1926, the Soviet Union claimed the entire Arctic area adjoining the polar coast. Figure 23 depicts the 1926 Soviet Arctic claim. Under the Soviet sectoral approach, the claimed territory was a large triangular area beginning at the Western border of the USSR, stretching to the centre of the Bering Strait with its apex at the North Pole.3 No other country recognized the Soviet delineation. In addition, the Soviets acknowledged four other sectors belonging to Canada, Denmark, Norway and the US. When it came to the North Pole, the intersecting point of all 5 sectors, the leading Soviet authority on Arctic matters noted:4
As to the ownership of the North Pole, it should be remarked that the Pole is an intersection of meridian lines of the said five sectors. Neither legally nor in fact does it belong to any one. It might be represented as a hexahedral frontier post on the sides of which might be painted the national colours of the State of the corresponding sector.
2 For in-depth insight into Soviet Arctic policy see: Taracouzio, T, 1938. Soviets in the Arctic. New York: The Macmillan Company 3 Radio Free Europe/ Radio Liberty. 2007. Russia: Race To The North Pole. Available at: http://www.rferl.org/content/article/1077849.html. [Accessed 27 July 2016]. 4 RAND Corporation. 1972. Territorial Waters in the Arctic: The Soviet Position. Available at: http://www.rand.org/content/dam/rand/pubs/reports/2009/R907.pdf. [Accessed 27 July 2016].
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Figure 23: Soviet sector claim to the Arctic5
The US, Denmark, and Norway did not recognize the 1926 claim or the sectoral claim principle in general. In 1925, Canada made a sector claim in the Arctic extending to the North Pole. Critics of the sector principle claim it has ‘no basis in international law’ whereas proponents of the principle claim their theory is simple to apply and follow.6
5 RAND Corporation. 1972. Territorial Waters in the Arctic: The Soviet Position. Available at: http://www.rand.org/content/dam/rand/pubs/reports/2009/R907.pdf. [Accessed 27 July 2016]. 6 Ibid.
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As in other policy domains, Stalin was the most important figure in the evolution of official Soviet attitudes to the Arctic; arguably the Arctic received more attention from Stalin than from any other Soviet leader. Stalin saw clearly the strategic potential of the Arctic and personally involved himself in three signature Arctic projects during the 1930s—the White Sea Canal, development of Arctic aviation and the Northern Sea Route (NSR).7 Infamously, the Soviet Arctic also became home to extensive parts of Stalin’s vast prison system, the GULAG. In 1932, the Soviet Union navigated the NSR. This event ‘transformed the Arctic and the state proved more than eager to take advantage of the public’s enthusiasm for things polar’.8
In a process that has been dubbed the ‘Stalinisation’ of Arctic exploration, Stalin greatly increased global attention to the Arctic region.9 Two key themes illustrate the centrality of the Arctic Soviet policies and ideology under Stalin: First, the Arctic’s place in the modernisation and industrialisation agenda and second, the significance of the Arctic for Stalin’s propaganda campaign. The harshness of the Arctic environment and humanity’s battle with Arctic nature was a neat fit for communist propaganda.10 The Soviet Union’s wide array of successful explorations into the Arctic region with limited means could be repackaged as communist propaganda celebrating the Soviet system’s unique capabilities. The Arctic became an important focus for propelling Soviet communist ideals. What emerged was the concept of the ‘Red Arctic’—a myth of popular Soviet culture epitomising the leadership of the Soviet Union in all matters Arctic. For Laruelle, the Arctic was presented as ‘the forepost of Soviet civilization’ which celebrated Stalin’s core values of patriotism, heroism, and the exceptional industrial capacities of socialism, as the Soviet Union appeared to conquer what was the world’s harshest environment.11
7 Emmerson, C, 2010. 8 McCannon, J, 1998. Red Arctic: Polar Exploration and the Myth of the North in the Soviet Union, 1932-1939. United Kingdom: Oxford University Press. Page 111. 9 Horensma, P, 1991. The Soviet Arctic. New York: Routledge. 10 Ibid. 11 Laruelle, M, 2013. Page 69.
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The year 1932 saw the end of the first five-year plan of which the primary focus was the establishment of heavy industry and the collectivisation of agriculture.12 From 1933, the NSR underwent significant development, sparked by the extensive Soviet Arctic development plan. For Stalin, the Arctic was of crucial significance to the future economic bottom line of the Soviet Union:
The Arctic and our northern regions contain colossal wealth. We must create a Soviet organization which can, in the shortest period possible, include this wealth in the general resources of our socialist economic structure.13
After Stalin’s death, Soviet interest in the Arctic faded. The Far East presented itself as a more viable propaganda frontier and focus for the Soviet economy, and by the 1960s, the West Siberia oilfields were of central importance. But while in the post- Stalin period the Russia’s Arctic region lost some of its allure, at the same time, it was ‘neither rejected, nor exalted’.14 After Stalin, Soviet Arctic policy was driven primarily by securitisation. At the height of the Cold War the Arctic was transformed into a strategic and military space marked by East-West tensions. As the Arctic sea route was the shortest distance between the two superpowers, with the development of ballistic missile technology, the Arctic became a Cold War theatre. Both superpowers built and deployed missile defence systems, further entrenching the region as a potential theatre for conflict. By the 1960s, intercontinental ballistic missiles (ICBMs) replaced bombers as the primary nuclear threat and with further development in the 1970s the stark fact was that the Arctic was the shortest distance between the US and Soviet Union. By 1980, the Arctic Ocean was the leading operational space for nuclear-
12 Armstrong, T, 2011. The Northern Sea Route: Soviet Exploration of the North East Passage. United Kingdom: Cambridge University Press. Note: ‘Five-year plans’ refers to the series of centralized economic plans for the Soviet Union. 13 Emmerson, C, 2010. 14 Laruelle, M, 2013. Page 69.
- 160 - powered submarines from both superpowers. Towards the end of the 1980s the Arctic was viewed as the ‘strategic frontier’ in US-Soviet relations.15
Mikhail Gorbachev did much to shape Russia’s contemporary Arctic policy in his October 1987 Murmansk Initiative outlining the Soviet Union’s Arctic strategy.16 The Murmansk Initiative was part of Gorbachev’s wider strategy to warm ties with the US.17 Both speeches were key components of Gorbachev’s overall perestroika and glasnost reform programs. The Murmansk Initiative aimed at reducing the arms race and specifically in terms of the Arctic, to reduce the armed presence of both superpowers. Gorbachev envisioned the Arctic as a space for cooperation and as the first step in implementing a wider peace initiative. Gorbachev called for a nuclear-free zone, restrictions on naval military activities, cooperative resource development, coordinated scientific research, environmental cooperation, and the opening of the Northern Sea Route.18
Gorbachev argued that although the ‘international situation was still complicated’ there had been ‘some change’.19 Western leaders were continually branding Soviet Arctic policy as ‘communist expansion’ and yet in reality, the sentiment was often ‘forgotten’ when it came to ‘businesslike political negotiations and contracts’ in the Arctic.20 In the Murmansk speech, Gorbachev particularly focused on the dangers of rapid militarisation of the Arctic:
The militarization of this part of the world is assuming threatening dimensions. One cannot but feel concern over the fact that NATO, anticipating an agreement
15 The Atlantic Online. 1993. The Last Front of the Cold War. Available at:http://www.theatlantic.com/past/politics/foreign/front.htm. [Accessed 27 July 2016]. 16 Alaska Dispatch News. 2012. How Gorbachev shaped future Arctic policy 25 years ago. Available at: http://www.adn.com/arctic/article/how-gorbachev-shaped-future-arctic-policy-25-years- ago/2012/10/01/. [Accessed 27 July 2016] 17 See similar initiatives such as his 1986 Vladivostok speech on the Asia Pacific. 18 The Atlantic Online. 1993. 19 Gorbachev, M, 1987. Speech in Murmansk at the Ceremonial Meeting on The Occasion of the Presentation of the Order of Lenin and the Gold Star to the City of Murmansk. Available at: https://wwwbarentsinfo.fi/docs/Gorbachev_speech.pdf. 20 Ibid.
- 161 - on medium- and shorter-range missiles being reached, is preparing to train military personnel in the use of sea- and air-based cruise missiles from the North Atlantic. This would mean an additional threat to us and to all the countries of Northern Europe. A new radar station, one of the Star Wars elements, has been made operational in Greenland in violation of the ABM Treaty. US cruise missiles are being tested in the north of Canada. The Canadian government has recently developed a vast programme for a build-up of forces in the Arctic. The US and NATO military activity in areas adjoining the Soviet Polar Region is being stepped up. The level of NATO's military presence in Norway and Denmark is being built up. Therefore, while in Murmansk, and standing on the threshold of the Arctic and the North Atlantic, I would like to invite, first of all, the countries of the region to a discussion on the burning security issues.21
Western distrust, even scepticism, initially made Gorbachev’s cooperation objective difficult to realise.22 However, in the case of Canada, Gorbachev’s policy encouraged the Mulroney Government to engage with Russia in Canada’s first multilateral negotiations since the formation of the Soviet Union.23 Gorbachev’s cooperative stance on the Arctic continued with Prime Minister Nikolai Ryzhkov visiting Norway and Sweden in 1988 to suggest reducing military exercises in the Arctic to every two years whilst also extending an invitation to both nations to attend Soviet Arctic exercises.24 Foreign Minister Shevardnadze’s Arctic arms control proposals at the 1989 conference on Arctic cooperation, in which he stated a ‘willingness to negotiate an agreement with the US on limiting the areas of test and combat’ in the Arctic, was further evidence of the Soviet Union’s cooperative approach to the Arctic.25 As Gorbachev’s domestic and external reform program gathered momentum, Western
21 Ibid. 22 Lackenbauer, W, 2010. Mirror images? Canada, Russia and the circumpolar world. International Journal, 65:4. 23 Ibid. 24 Axworthy, T, 2013. Changing the Arctic Paradigm From Cold War to Co-operation. Finland: Fifth Polar Law Symposium. Available at: http://gordonfoundation.ca/sites/default/files/publications/Changing%20the%20Arctic%20Paradigm %20from%20Cold%20War%20to%20Cooperation_Paper%20(FINAL)_0.pdf 25 Gizewski, P, 1993. Arctic Security After the Thaw: A Post-Cold War Assessment Report of the Panel on Arctic Security. Aurora Papers, 17:2.
- 162 - scepticism was replaced by a growing recognition that Gorbachev was a man they could ‘do business with’.26 Essentially, Gorbachev’s Murmansk Initiative was an attempt to de-securitise state-to-state relations in the Arctic.
The fall of the Soviet Union did not reduce the cooperative atmosphere. Despite his personal rivalry with Gorbachev, the reformist leader of the Russian Federation, Boris Yeltsin continued his Soviet predecessor’s cooperative approach to the Arctic, at least in the early years. Against the backdrop of the fall of the Soviet Union, and coupled with the severe economic issues of the 1990s, Russia’s northern regions became largely forgotten. This posed issues for the inherited armed forces of the Soviet Union posted in Russia’s high north. During the early 1990s ‘Russia [did] not intend to eliminate entirely its armed forces in the North, but it [didn’t] know how many troops to keep’. This also affected the 1.2 million military-related civilians living in Russia’s Arctic region (areas north of the Arctic Circle).27
These economic difficulties did not, however, affect multilateral cooperation in the Arctic. Given the economic limitations, Yeltsin allocated a bare minimum of resources to the Arctic. This inevitably favoured the maintenance of a cooperative approach. Under Yeltsin, Canadian-Russian relations in the Arctic warmed as evidenced by their joint 1992 Declaration of Friendship and formal Arctic Cooperation Agreement. For Yeltsin, as he told a joint sitting of both houses of the Canadian parliament, it was the case that ‘only together can we solve all of the problems involving the Arctic’.28 Aspects of Gorbachev’s Murmansk Initiative survived the Union’s fall and helped Russia bring about the establishment of the Arctic Council in 1996.
26 See Margaret Thatcher’s 1984 BBC quote: ‘I like Mr Gorbachev. We can do business together’. 27 The Atlantic Online, 1993. 28 Yeltsin, B, 1992. Boris Yeltsin to both Houses of Parliament in Canada, Parliament, House of Commons, Debates. 34th Parliament, 3rd Session. Ottawa: Canadian Government Publishing.
- 163 - A range of committees and working groups emerged in the years that followed the Murmansk Initiative. The International Arctic Science Committee (IASC) was founded in 1990 by the USSR, US, Canada, Norway, Iceland, Finland, Denmark and Sweden; today the IASC also includes some 15 non-Arctic states.29 Likewise, in 1990, the International Arctic Social Sciences Association (IASSA) was founded following a meeting in Leningrad in 1988 on the coordination of research in the Arctic.30 The 1991 Finnish Initiative resulted in the Arctic Environment Protection Strategy signed by the USSR, US, Canada, Denmark, Finland, Iceland, Norway and Sweden. The Initiative aimed to ‘monitor, protect, and promote sustainable development in the Arctic region and recognize the rights of indigenous peoples in relation to environmental issues’.31 This was the forerunner to the Arctic Council, which was established five years later in 1996 through the Ottawa Declaration.32
Gorbachev’s Arctic legacy was above all to advance the cause of the region’s potential for cooperation. Certainly, if it were possible ‘to assign a date marking the beginning of the current era of circumpolar cooperation, October 1st 1987, is it’.33 Despite Gorbachev seeking a ‘radical lowering of the level of military confrontation in the region’, the Soviets maintained their Arctic hardware at Cold War levels throughout Gorbachev’s leadership.34 Substantive Arctic demilitarisation was ushered in by Yeltsin largely as a direct result of the fall of the Union in 1991. For Russia, the military presence was too costly to maintain, while for the US the threat of the Soviet Union was no more.
29 International Arctic Science Committee. 2016. IASC History. Available at:http://iasc.info/iasc/history. [Accessed 27 July 2016] 30 International Arctic Science Committee . 2016. IASC Objectives . Available at:http://iassa.org/about-iassa/objectives. [Accessed 27 July 2016]. 31 Council on Foreign Relations. 1991. Arctic Environmental Protection Strategy. Available at:http://www.cfr.org/world/arctic-environmental-protection-strategy/p20582. [Accessed 27 July 2016]. 32 Arctic Council, 1996. Declaration on the establishment of the Arctic Council. Ottawa: Canada. Available at: https://oaarchive.arctic- council.org/bitstream/handle/11374/85/00_ottawa_decl_1996_signed%20%284%29.pdf?sequence= 1&isAllowed=y 33 Alaska Dispatch News, 2012. 34 Gorbachev, M, 1987.
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A hangover of Soviet Arctic policy, with lasting effects for the contemporary Arctic, is the method by which the USSR decommissioned radioactive hazards. Utilised as a nuclear testing site, the Soviet Arctic was also routinely treated as somewhat of a nuclear waste-dumping site.35 Russia’s state nuclear organisation, Rosatom, reported to then-President Medvedev in 2011 a catalogue of Soviet dumped waste. According to the report, there were some 17,000 containers of radioactive waste, 19 ships containing radioactive waste, 14 nuclear reactors, including five that still contained spent nuclear fuel, 735 other pieces of radioactively contaminated heavy machinery, and a K-27 nuclear submarine with its two reactors loaded with nuclear fuel, all dumped in the offshore Russian Arctic region.36 The clean-up task has been tackled by a joint Russian-Norwegian taskforce, given that the majority of Soviet waste is in the Kara Sea region. Operations in 1992, 1993 and 1994 set a precedent for bilateral cooperation between Norway and Russia in this domain, and the clean-up is ongoing.37
4.2.2 The significance of the Arctic under Putin
The Arctic is by ‘no means a peripheral pursuit’ for Putin’s Russia, with the High North covering some 60% of Russian territory, 20% of Russia’s GDP and 22% of all Russian exports.38
Russia was one of the first Arctic states to develop an Arctic strategy with the drafting in 2001 of the Foundations of the State Policy of the Russian Federation in the Arctic. The final version of Russia’s Arctic strategy was developed in 2008 and approved by
35 Bellona. 2014. Russia, Norway urge raising of dumped Soviet-era nuclear subs. Available at:http://bellona.org/news/nuclear-issues/2014-04-russia-norway-urge-raising-dumped-soviet-era- nuclear-subs. [Accessed 27 July 2016]. 36 Bellona. 2012. Russia announces enormous finds of radioactive waste and nuclear reactors in Arctic seas. Available at: http://bellona.org/news/nuclear-issues/radioactive-waste-and-spent-nuclear- fuel/2012-08-russia-announces-enormous-finds-of-radioactive-waste-and-nuclear-reactors-in-arctic- seas. [Accessed 27 July 2016]. 37 Ibid. See for discussion of Nunn-Lugar program: https://armscontrolcenter.org/fact-sheet-the- nunn-lugar-cooperative-threat-reduction-program/ 38 Rowe, E & Blakkisrud, H, 2014. A New Kind of Arctic Power? Russia's Policy Discourses and Diplomatic Practices in the Circumpolar North. Geopolitics, 19:1.
- 165 - then-President Medvedev. The Medvedev presidency ushered in a period of a slightly more ‘softly-softly’ approach in foreign policy, and this was reflected in the 2008 Arctic policy document. Entitled Foundations of the State Policy of the Russian Federation in the Arctic to 2020 and Beyond, the strategy highlighted Russia’s national interests in the Arctic.
The strategy garnered global interest mainly because it followed the 2007 publicity stunt in which Russian explorers planted a Russian flag on the seabed of the North Pole. It outlines the national security interests of Russia in the Arctic as follows:
a) the utilisation of the Russian Federation's Arctic zone as a national strategic resource base capable of fulfilling the socio-economic tasks associated with national growth
b) the preservation of the Arctic as a zone of peace and cooperation
c) the protection of the Arctic's unique ecological system and
d) the use of the North Sea passage as a unified transportation link connecting Russia to the Arctic.39
In terms of social and economic development objectives, the strategic priority in the Arctic is the ‘expansion of the resource base’. In the sphere of military security, the ‘defence and protection of the state border of the Russian Federation’ was seen as the key priority in the Arctic. Further, the strategy stated that this would require the ‘necessary grouping of the Armed Forces of the Russian Federation’.40
With regards to international cooperation, the strategy outlines the objective of ‘maintenance of a mutually advantageous bilateral and multilateral cooperation’ area within the Arctic, ‘on the basis of international treaties and agreements’.41 The
39Medvedev, D, 2008. Of the State Policy of the Russian Federation in the Arctic for the Period till 2020 and for a Further Perspective. Available at: http://www.arcticgovernance.org/russia-basics-of-the- state-policy-of-the-russian-federation-in-the-arctic-for-the-period-till-2020-and-for-a-further- perspective.4651232-142902.html 40Medvedev, D, 2008. 41 Medvedev, D, 2008.
- 166 - strategy’s objectives also address environmental security, information technology and communication, as well as scientific interests. The 2008 strategy presents the following ten priorities for Russia in the Arctic:
a) carrying out of an active interaction of the Russian Federation with the sub- Arctic states with a view of delimitation of maritime areas on the basis of norms of international law and also for tackling issues of an international legal substantiation of the external border of the Arctic zone of the Russian Federation;
b) building -up of efforts of the sub-Arctic states for the creation of a uniform regional system of search and rescue, and also prevention of man-caused accidents and liquidation of their consequences, including coordination of activity of rescue forces;
c) strengthening, on a bilateral basis and within the framework of regional organizations frontier cooperation, including in the field of effective natural resources management and environment preservation in the Arctic;
d) assistance in the organization and effective utilization of transit and cross Polar air routes in the Arctic, and also in the use of the Northern Sea Route for international navigation under the jurisdiction of the Russian Federation and according to international treaties of the Russian Federation:
e) activation of the participation of Russian official agencies and public organizations in the work of international forums devoted to Arctic problems, including the inter-parliamentary interaction within the framework of the Russia - European Union partnership;
f) delimitation of maritime spaces in the Arctic Ocean and maintenance of a mutually advantageous presence of Russia on the Spitsbergen archipelago;
- 167 - g) perfection of the system of state management of the social and economic development of the Arctic zone of the Russian Federation, including through expansion of fundamental and applied scientific researches in the Arctic;
h) improvement of quality of life of the indigenous population and social conditions of economic activities in the Arctic;
i) development of the resource base of the Arctic zone of the Russian Federation through the use of cutting edge technologies;
j) modernization and development of the infrastructure of the Arctic transport system and the fisheries complex in the Arctic zone of the Russian Federation.42
The strategy outlined three key stages for the realisation of Russia’s Arctic objectives. In the first stage (2008–10), basic ‘geologic-geophysical, hydrographic, cartographical’ works were to be carried out in preparation for ‘substantiation of the external border of the Arctic zone of the Russian Federation’.43 This exploratory work was used in evidence for Russia’s 2015 Arctic claim to the CLCS. The first stage also called for the ‘expansion of possibilities of international cooperation’ in the Arctic. The second stage (2011–15) focused on securing the ‘international legal formation of the external border of the Arctic zone and the realisation on this basis of competitive advantages for Russian exploitation and transportation of energy resources’.44 Certainly, the realisation component is evident in the national significance Putin has attached to the Arctic as Russia’s future economic base, as is the redeployment of military hardware on Russia’s Arctic coast to defend the said competitive advantage held by Russia. Militarisation is further discussed later in this chapter.
In terms of formalising its Arctic zone border beyond its EEZ, Russia only submitted its revised territorial claim to the CLCS in August of 2015. Generally, this can take up to ten years to be considered by the Commission and it is likely, therefore, that
42 Ibid. 43 Ibid. 44 Ibid.
- 168 - negotiations between overlapping claimants will be undertaken without a CLCS ruling. As outlined in Chapter Three, the CLCS does not provide binding legal rulings, it does not rule on overlapping claims and therefore overlapping claims are largely entrusted to bilateral negotiations. The CLCS will, however, make recommendations for the parties to work towards. The second stage of the strategy also earmarked the NSR for development in terms of ‘infrastructure and control systems’. Investment has been lacking given Russia’s economic slump, and therefore, Russia has not yet realised this component of its 2008 strategy document.
The third stage (2016–20) of the Foundations strategy envisions the ‘transformation of the Arctic zone of the Russian Federation into a leading strategic resource base’. At the time of completing this thesis in 2016, it is evident Russia will not realise this stage by 2020. Economic conditions between 2013–16 in Russia have slowed investment in the region and global energy prices have placed Arctic hydrocarbons out of reach until the price rebounds to a commercially viable figure. Emerging energy alternatives such as shale gas also complicate the competitiveness of untapped Arctic resources. In addition, sanctions on the sources of the finance and technology Russia requires to make advances in the Arctic mean a slower pace in general. In light of the above, this final stage is clearly unrealistic. That said, when the strategy was formulated in the midst of sky-high oil prices in August 2008—$145 a barrel—Russia’s declared ambitions were not surprising. It is worth noting that by December 2008 the oil price had plummeted to $30 a barrel, for this is evidence of Russia’s experience in weathering oil price slumps.
Beyond the strategic economic importance of the Arctic, the Arctic offers a throwback to Soviet times in which Putin was raised and about which he is strongly nostalgic. The Arctic provides a new avenue for reinstating Soviet symbols in contemporary Russia.45 For Putin, reinstating Soviet symbols, particularly those of Stalin, is a deliberate
45 For in depth discussion of Soviet symbolism in Russia see: Gill, G, 2013. Symbolism and regime change in Russia. United Kingdom: Cambridge University Press.
- 169 - project.46 There are parallels between Stalin’s ‘cult of the hero’ Arctic propaganda and Putin’s Arctic agenda. This is evident in the fact that Putin is the face of Russia’s Arctic stake, demonstrated by his staged photo shoots in the region as well as his role in personally announcing all Arctic commercial dealings. Putin’s romanticism about Stalin’s Arctic achievements and the significance of the Arctic to Russia’s Soviet history is an important component of Russia’s Arctic agenda, albeit less significant than economic and security interests. Similarly, in 2009, Putin commemorated the first Arctic airborne landing made by Soviet scientists in May 1949 by dropping a trained team of parachutists over the North Pole.47
Today, the Arctic is raised to national strategic significance, because of the high- energy prices reached prior to the 2014 fall (and the expectation that prices will eventually bounce back). As a Russian academic stated in 2014:
Mother Nature’s gift to the Soviet Union was the Arctic. She placed it geographically in our care, but our caretaker role has changed as time has passed. There is still a strong security role for Russia, protecting our border and protecting customers who will use our Arctic region for passage, as well as producing energy with great care not to effect the ecosystem. Russia has a caretaker role now related to the Arctic as a future resource base to look after the Russian population. You asked about great power status and whether the Arctic will help lift us to this position—this is a pointless question for Russia was ensured great power from the start. The Arctic is Russian and will be developed when we decide to develop, just look to how many others are pushing to be included on our journey. I am talking about the states with no Arctic proximity— Singapore, Japan, China—they need access to our region and they know who to talk to, they communicate with the Arctic leader, they communicate with us.48
46 See further discussion on Putin’s efforts to revitalise Stalinist culture in Russia: Baev, P, 2013. Russia’s Arctic ambitions and anxieties. Current History, October. 47 ‘Howard, R, 2010. Russia and the Arctic: Parachuting In. The World Today, 5. 48 Interview, Moscow, April 2014.
- 170 - In 2013, Putin approved the Strategy of the Arctic zone of the Russian Federation and National Security for the Period up to 2020. This was a revision of Medvedev’s 2008 Arctic strategy.49 It is important to note that the priorities outlined in the 2008 strategy reflect somewhat of a Gorbachev-Yeltsin liberal and cooperative approach to the Arctic by Medvedev. Putin’s priorities for Russia’s Arctic strategy refocused efforts across four spheres. In the social sphere, ‘negative demographic trends in most of the Arctic regions of the Russian Federation and the outflow of labour (especially skilled)’ were listed as key issues. In the economic sphere, the ‘lack of Russian modern equipment and technologies for exploration and development of offshore hydrocarbon fields in the Arctic’ as well as ‘underdevelopment of basic transport infrastructure’ are seen as problems. Within the scientific sphere ‘scarce technical resources and capabilities’ within the Arctic are listed as issues for Russia. In the environmental sphere, ‘potential sources of contamination and high levels of accumulated environmental damage’ are seen as threats to the Russian Arctic.50
In comparison to the 2008 strategy, the 2013 strategy re-orders the priority areas of the Arctic zone for Russia and presents them in a way that is more oriented to nationalist objectives. They include:
a) integrated socio-economic development of the Arctic zone of the Russian Federation
b) the development of science and technology
c) the establishment of a modern information and telecommunications infrastructure
d) environmental security
e) international cooperation in the Arctic and
49 Given Medvedev’s ‘puppet presidency’ it is very likely that Putin heavily shaped the 2008 Arctic strategy 50 Government of the Russian Federation, 2013. Strategy of the Arctic zone of the Russian Federation and National Security for the Period up to 2020. Available at: http://www.iarc.uaf.edu/sites/default/files/node/4484/russia_the_strategy_for_the_development_o f_the_a_15503.pdf
- 171 - f) provision of military security, and protection of the state border of the Russian Federation in the Arctic. 51
The 2013 document embodies a more determined Arctic strategy with implementation to be carried out in two stages. The first stage (2015) calls for the groundwork to be laid for the ‘necessary conditions for strengthening national security through the integrated development of the Arctic zone, including coordination of all stakeholders of state policy’. Further, this stage envisages the ‘international legal registration of outer limit of the continental shelf’. There is also mention of the ‘establishment and development of the Coast Guard of the Federal Security Service of the Russian Federation’.
The second stage (2020) focuses more on reaping the rewards of stage one’s groundwork. Here, it aims to access ‘the competitive advantages’ of ‘mineral resources in the continental shelf’. This stage also calls for the ‘retooling of federal border security’ and the ‘protection of territory, population and critical facilities’ in the Russian Arctic. The strategy serves to ‘strengthen the position of the Russian Federation in the Arctic and greater international security, peace and stability, as well as increased international cooperation’.52
In 2014, during an extended meeting of Russia’s Security Council, Putin reaffirmed Russia’s approach to the Arctic:
This region has traditionally been a sphere of our special interest. It is a concentration of practically all aspects of national security—military, political, economic, technological, environmental and that of resources … we are aware of the growing interest in the Arctic on the part of the international community. Ever more frequently, we see the collision of interests of Arctic nations, and not only them: countries far removed from this area are showing a growing interest
51 Ibid. 52 Ibid.
- 172 - as well. We should also bear in mind the dynamic and ever-changing political and socioeconomic situation in the world, which is fraught with new risks and challenges to Russia’s national interests, including those in the Arctic. We need to take additional measures so as not to fall behind our partners, to maintain Russia’s influence in the region and maybe, in some areas, to be ahead of our partners.53
Putin went on to outline six key tasks for Russia in the Arctic:
Firstly, we need to improve the quality of government control, of decision- making. This requires the creation of a single centre of responsibility for the implementation of our policy in the Arctic. I would like to stress here that we do not need a cumbersome bureaucratic structure; we need a flexible agency that would help to better coordinate the activity of ministries and agencies, of the Russian regions and businesses.
Secondly, we need to consider very carefully how we intend to implement measures of the state programme Socioeconomic Development of the Arctic Zone of the Russian Federation through to 2020, how we will provide the resources required to resolve the tasks facing us in this area.
Third, a pressing issue that requires careful work is the legal formalisation, in line with international law, of the outer boundary of Russia’s continental shelf in the Arctic Ocean. We have proven experience in resolving such issues. Let me remind you that at the 33rd session of the UN Commission on the Limits of the Continental Shelf held in March, Russia spoke of its right to part of the Sea of Okhotsk that was earlier considered open—this is a 52,000 square kilometre area, the bottom of which is the continuation of Russia’s continental shelf.
Fourth, we need to develop the best economic model for the development of the Northern Sea Route. We also need to complete the creation of a modern
53 Putin, V, 2014. On the Implementation of Russia’s State Policy in the Arctic in the Interests of National Security at the meeting of the Security Council on state policy in the Arctic. Available at: http://en.kremlin.ru/events/president/news/20845
- 173 - navigation, communication, technical maintenance and emergency relief infrastructure along the entire length of the Northern Sea Route.
The fifth task is to maintain environmental security. The ecological system of the Arctic, as we all know, is fragile; therefore there should be regular environmental monitoring.
Finally, the sixth main area is ensuring the comprehensive security of the Russian Arctic zone. Oil and gas production facilities, loading terminals and pipelines should be reliably protected from terrorists and other potential threats. Nothing can be treated as trivia here.54 Although Putin is central to Russian Arctic strategy, there are a range of actors also engaged in the policymaking process. Ekaterina Klimenko has studied the decision- making processes in relation to energy in Putin’s Russia. Her findings are summarised in Table 8. Beyond the Presidential Administration, Russia’s Security Council has also been a prominent decision-maker in Arctic strategy.
Actor Area Presidential Administration Determines scope for policy Security Council Inter-agency coordination; consensus building Ministry of Defence Troop contingency Ministry of Foreign Affairs Diplomacy Federal Security Service (FSB) Intelligence Ministry of Energy Development issues in Arctic Ministry of Natural Resources and Environment Development issues in Arctic Gazprom Exploration/production of hydrocarbons Rosneft Exploration/production of hydrocarbons Ministry of Transport NSR Northern Sea Route Administration NSR Atomflot Operates state icebreaker fleets Sovkomflot State owned hydrocarbon shipping firm Table 8: Summary of Klimenko’s study into Arctic policymaking in Russia.55
54 Putin, V, 2014. 55 Klimenko, E, 2016. Russia’s Arctic Security Policy: Still quiet in the High North. SIPRI Policy Paper, 45.
- 174 -
In line with Putin’s 2014 speech on Russian Arctic strategy, Putin oversaw the establishment of a new commission for Arctic issues—the State Commission on the Development of the Arctic. This new government structure was to serve as ‘a single point of accountability for the implementation of Arctic Policy’.56 Deputy Prime Minister Dmitry Rogozin, the most hawkish person in Putin’s inner circle, was selected by Putin to head up the commission. Formerly Russia’s ambassador to NATO, Rogozin is also at the helm of Russia’s defence and space portfolios.57 The commission seeks to coordinate all government authorities involved in Arctic development. It includes some 60 individuals spanning the oil and gas industry, Ministry of Defence, the FSB and the presidential administration. This includes the five Arctic commission deputies: Minister of Natural Resources, Sergey Donskoy; Minister of Energy, Aleksandr Novak; Minister of Economic Development, Aleksey Ulyukaev; Minister of Transport, Maksim Sokolov; and the Deputy Secretary of the National Security Council, Vladimir Nazarov.58
The establishment of this Commission prompted backlash from Western counterparts, who pointed to the fact that Russian Arctic policy ‘is shaped by the leading figures of Russian President Vladimir Putin’s inner circle, based on the interplay of their personal and business interests in the Arctic.’59 Nikolai Patrushev (Putin’s long-term associate, a former director of the FSB and now head of the Security Council), Igor Sechin (head of Rosneft), Alexei Miller (head of Gazprom), and Gennady Timchenko (co-founder of the investment group that owns Novatek) are all closely tied to the policymaking processes of Russian Arctic strategy.60 Kristian Atland has long emphasized the interplay between personal and business interests in Putin’s Russia, noting that ‘whereas Russia’s Arctic policy in the past was governed by national
56 High North News. 2014. Russia Considers to Establish Arctic Ministry. Available at:http://www.highnorthnews.com/russia-considers-to-establish-arctic-ministry/. [Accessed 27 July 2016]. 57 Government of the Russian Federation, 2016. Dmitry Rogozin, Deputy Prime Minister of the Russian Federation. Available at: http://government.ru/en/gov/persons/170/events/. 58 Barents Observer, 2015. Arctic Policy up for remake. Available at: http://barentsobserver.com/en/politics/2015/03/arctic-policy-remake-17-03. 59 Klimenko, E, 2014. 60 Ibid.
- 175 - security interests, it is now increasingly governed by national economic interests and the interests of companies closely associated with the Russian state’.61
A further significant change to Russian Arctic policy was introduced by Putin in 2008. It receives less attention in the existing literature on Arctic resource development given that most of the attention has focused on the period since 2013. In 2008, Putin oversaw an amendment to the Law on Subsoil Resources. This amendment limited access to hydrocarbon deposits on Russia’s continental shelf to companies with over 50% state ownership. Such firms must also have no less than five years offshore drilling experience.62 Only two companies fit such criteria—Gazprom and Rosneft. Foreign firms are only able to work in the Russian Arctic in partnership with these two firms. Essentially, Putin locked the Arctic shelf away for only state-owned firms to access, maximising Kremlin control of any cooperative ventures with foreign enterprises. Russia’s private oil and gas firms challenged Putin’s changes in 2012. Heads of Lukoil and three other major firms wrote to Putin urging a reversal of the amendments. The CEOs of Gazprom and Rosneft, Alexei Miller and Igor Sechin respectively, responded in turn, writing to Putin that ‘granting access to private companies would be dangerous for the strategically important Arctic region’.63
Unsurprisingly, given his statist instincts and loyalties to his own, Putin agreed with the two long-time loyalists and determined that all licences for Arctic offshore exploration would be reserved for the two state firms. Rosneft now holds 28 Arctic- field licences, estimated to possess some 190 billion tonnes of oil, and Gazprom holds 17 licences.64 To date, Russia has only one success story in offshore Arctic drilling. In 2014, Gazprom’s Prirazlomnoye project (in the Pechora Sea) became the first Russian
61 Atland, K, 2011. Russia’s armed forces and the Arctic: all quiet on the Northern Front?. Contemporary Security Policy, 32:2. 62 Government of the Russian Federation, 2012. Amendments to the Federal Law On Subsoil Resource. Available at: http://en.kremlin.ru/events/president/news/15663 63 Klimenko, E, 2014. 64 Ibid.
- 176 - Arctic operation to ship oil.65 However, development of this field began some 20 years ago and has since seen significant delays and a cost blowout of $2.5 billion.66 Discovered in 1989, the Prirazlomnoye field is 60 kilometres offshore and holds over 70 million tonnes of oil. November 2015 marked the millionth tonne of Russia’s first Arctic oil to be produced.67 Further to delays and cost blowouts, the Prirazlomnoye field played host to the 2013 Greenpeace controversy. A Greenpeace vessel came into close contact with the oil platform and in response the Russian Coast Guard detained the ship’s crew.68 Whilst the Russian government had planned to charge all activists with piracy, they were eventually released. The incident highlighted a brief deviation by Russia away from its cooperative agenda in the Arctic.
Beyond these two key Arctic strategies, the Arctic is also discussed in other Russian security strategies. The Concept of Foreign Policy of the Russian Federation, approved by Putin in 2013, points again to the significance of energy to Putin’s Russia.69 The term ‘Arctic’ is used 14 times, mostly in relation to ‘strengthening multi-formal international cooperation’ as well as ‘cooperation with non-Arctic actors as long as they respect the independence, sovereign rights and jurisdiction of Arctic states’.70 The prominence of the general energy theme in the document confirms that energy has become central to Moscow’s security outlook due to its ‘ability to produce high revenues and its use as an instrument of power’.71 By contrast, the Military Doctrine of the Russian Federation, approved by Putin on 25 December 2014, discusses the Arctic only once. Here, the doctrine lists the main task of Russian troops (in peacetime)
65 Barents Observer, 2013. Prirazlomnoye ready to drill in October. Available at: http://barentsobserver.com/en/energy/2013/08/prirazlomnoye-ready-drill-october-07-08 66 Klimenko, E, 2014. 67 Gazprom, 2016. Prirazlomnoye oil field. Available at: http://www.gazprom.com/about/production/projects/deposits/pnm/. 68 The Guardian, 2013, ‘Russia to charge Greenpeace activists with piracy over oil rig protest’. Available at: https://www.theguardian.com/environment/2013/sep/24/russia-greenpeace-piracy-oil- rig-protest. [Accessed 12 August 2015] 69 Ministry of Foreign Affairs of the Russian Federation, 2013, Concept of the Foreign Policy of the Russian Federation. Available at: http://archive.mid.ru//brp_4.nsf/0/76389FEC168189ED44257B2E0039B16D. 70 Ibid. 71 De Haas, M, 2009. Medvedev’s Security Policy: A Provisional Assessment, Russian Analytical Digest, 62:09.
- 177 - as being to ‘protect the national interests of the Russian Federation in the Arctic region’.72
Russia’s new National Security Strategy, signed by Putin on 31 December 2015 had little focus on the Arctic. The revised strategy has a total of 116 points and the word ‘Arctic’ is only mentioned on three occasions.73 The first reference is to processes of international cooperation within ‘a new polycentric model of world order’. Here, the strategy highlights Russia’s leadership ‘in exploiting the resources of the world’s oceans and the Arctic’. The second reference occurs in the context of ‘the development of equal and mutually beneficial international cooperation in the Arctic’.74 And the third reference is to ‘countering threats to economic security’. For Russia, this involves ‘widening the use of the instruments of state-private partnership to perform strategic tasks in the development of the economy … particularly in the Arctic’.75 The original strategy, the 2009 National Security Strategy of the Russian Federation to 2020, also only mentioned the ‘Arctic’ on three occasions. However, the discussion was entirely different. First, the Arctic is mentioned in regards to the ‘long term’ focus of international politics on ‘ownership of energy resources of the Arctic’. Second, it is discussed in terms of ‘resolution of border security problems’ and third, in terms of ‘ensuring national security in the medium term’.76
The 2015 strategy mentions the Arctic merely in passing, with the strategy focused solely on perceived threats to Russia. The term ‘threat’ is used 24 times in the document. For Olga Oliker, the strategy reflects an ‘ambitious Russia that sees
72 Government of the Russian Federation, 2014. The Military Doctrine of the Russian Federation. Available at: http://rusemb.org.uk/press/2029. 73 Barents Observer, 2016. What Russia’s new security strategy says about the Arctic. Available at: http://www.thebarentsobserver.com/security/2016/01/what-russias-new-security-strategy-says- about-arctic. 74 Government of the Russian Federation, 2015. The Russian Federation’s National Security Strategy. Available at: http://www.ieee.es/Galerias/fichero/OtrasPublicaciones/Internacional/2016/Russian- National-Security-Strategy-31Dec2015.pdf. 75 Ibid. 76 Government of the Russian Federation, 2009. National Security Strategy of the Russian Federation 2020. Available at: http://rustrans.wikidot.com/russia-s-national-security-strategy-to-2020.
- 178 - constraints on its ambitions as threats to be overcome’. 77 The lack of specifically Arctic discussion may potentially reflect Putin’s confidence the West would never seriously challenge Russia’s Arctic stake. But the scant reference to the Arctic in the 2015 document is nonetheless interesting given the national security status Putin has afforded the Arctic since 2000. Possibly, this was a deliberate move by Putin to distance the Russian Arctic narrative from geopolitics and soothe the growing unease in the West about Russia’s more assertive posture in Arctic matters. It is more likely that Russia merely views the Arctic as Russian, for the strong legal case by way of geography makes it the largest Arctic stakeholder.
What is nonetheless evident from a comparison of the two strategies is the emergence of an increasingly confident and assertive Russia. The revised security strategy emphasises Russia’s leadership role on the international stage and focuses on perceived threats—namely NATO and the US—with the message that Russia will counter these threats.
4.2.3 The continental shelf debate
In Chapter Three the continental shelf debate was introduced. This section delves specifically into Russia’s approach to the debate and provides an analysis of Russia’s formal claim to the shelf. As discussed, the continental shelf debate refers to the Lomonosov Ridge (Figure 20, Chapter Three). Russia, Canada and Denmark all have overlapping claims to the ridge, deeming it a natural prolongation of their respective continental shelves. Russia and Denmark have submitted formal claims to the CLCS, with Canada’s formal claim expected before 2017. All parties have agreed to allow the CLCS to rule on the matter and to move forward from there through trilateral negotiations. Given the current agreement between the three nations over the continental shelf, it is unlikely conflict will arise over this issue.
77 Oliker, O, 2016. Unpacking Russia’s New National Security Strategy. Available at: http://csis.org/publication/unpacking-russias-new-national-security-strategy.
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4.3 Contemporary Arctic claims: Russia’s 2001 bid
Russia’s claim to the Lomonosov Ridge was signalled in part by the 2007 Arktika expedition. Arktika involved the world’s first descent to the ocean floor of the North Pole and was headed by famed Russian explorer Artur Chilingarov.78 Chilingarov holds a range of roles and is said to have close ties with Putin.79 He was awarded the honour of Hero of the Russian Federation, and was earlier made a Hero of the Soviet Union, serves as both President of the Association of Polar Explorers, and the presidential envoy for international cooperation in the Arctic.80
Arktika’s mission goals were to collect deep sea soil samples to substantiate Russia’s continental shelf claim and to plant the Russian flag on the seabed. It was the latter objective that gained global attention. Figure 24 depicts the moment when the Russian flag was planted some 4,000 metres below the Arctic’s surface. The missions scientific value was ‘negligible compared with its political value’.81 This claim is supported by Russia’s own Arctic and Antarctic Research Institute which noted ‘samples taken from the surface of the seabed are not very reliable…besides we already know the geology of the Arctic Ocean’s seabed and have been collecting samples for many years’. 82
78 Nezavisimaya gazeta reported the drilling of the Lomonosov Ridge by Russia some years prior to the 2007 expedition. The activities attracted minimal press coverage, and yet the 2007 drilling was reported in terms of Russia’s proactive expansion into the Arctic. The 2007 expedition coincided with increased awareness of an aggressive Putin’s Russia and thus must have influenced some of the media commentary of the expedition to take a darker view of the activity than they might otherwise have done. See for further discussion: Blagov, S, 2007. Russian experts divided over claims to Arctic continental shelf. The Jamestown Foundation, August. 79 Interview, Moscow, May 2014. 80 The Russian Geological Society, 2015. Arktika 2007: Closed hydrospace walk. Available at: http://arctic.ru/analitic/20150826/148239.html. 81 The Economist, 2007. Ships, subs and missiles. Available at: http://www.economist.com/node/9622181. 82 Ibid.
- 180 -
Figure 24: Arktika mission image83
Chilingarov announced ‘the Arctic is Russian’ to onlookers on the expedition, and declared that ‘the North Pole is an extension of the Russian coastal shelf’.84 The expedition was viewed largely by the West as an exercise in Kremlin public relations propaganda.85 At the time, Chilingarov was not only an Arctic explorer, he was also Deputy Speaker of the Russian parliament. Canada’s foreign minister, Peter MacKay, signalled Canadian anger over the symbolic flag planting, stating ‘this isn’t the 15th century, you can’t go around the world and just plant flags and say: “we’re claiming this territory”’.86 Foreign minister Sergey Lavrov responded to criticism of the 2007 expedition by saying that ‘the aim of this expedition [was] not to stake Russia’s claim
83 The Telegraph, 2007. Russia Arctic stunt celebrated by Moscow press. Available at: http://www.telegraph.co.uk/news/worldnews/1559367/Russia-Arctic-stunt-celebrated-by-Moscow- press.html. 84 BBC News, 2007. Russia ahead in the Arctic ‘gold rush’. Available at: http://news.bbc.co.uk/2/hi/in_depth/6925853.stm. 85 See for example: Financial Times, 2007. Scramble for the Arctic. Available at: http://www.ft.com/cms/s/0/65b9692c-4e6f-11dc-85e7-0000779fd2ac.html; Financial Times, 2007. Russia plants flag on North Pole seabed. Available at: http://www.ft.com/cms/s/0/12294b00-40e7- 11dc-8f37-0000779fd2ac.html#axzz4FNESQ5M5. 86 The Guardian, 2007. Russia plants flag on North Pole seabed. Available at: http://www.theguardian.com/world/2007/aug/02/russia.arctic.
- 181 - but to show that our continental shelf reaches to the North Pole’.87 The symbolic planting of Russia’s flag on the seabed of the North Pole sparked new debate surrounding a resurgent Russia. However, Arctic expeditions are not a new phenomenon in Russia as established earlier in this chapter. Stalin’s conquest of the north (pokorenie severa) initiatives between 1936–39 set the historical precedent for post-Soviet Russian Arctic interest.88
Putin called all members of the Arktika expedition to thank them personally, a clear sign of the high importance of the operation to the Kremlin.89 A Russian academic commented on the controversial nature of the expedition:
The 2007 flag plant and mission resulted in an element of surprise among the Arctic neighbours. This was something Russia did not account for, we thought our objectives in the north were much clearer and didn’t require a titanium flag to confirm. Chilingarov’s team just used the flag to highlight Russia as a leading scientific Arctic power; they had no orders to carve out the North Pole as Russian. The US planted a flag on the moon and why didn’t the world have issues with this? The US was not at any point claiming the moon! Just as Russia was not using the flag to claim the North Pole per se—we leave that up to international law. This is already in our favour.90
In retrospect, concerns were largely unwarranted as ‘Russian rhetoric [has] quieted down and its leaders [are] focusing on negotiated solutions to territorial disputes in the region’.91 Despite Putin’s assertiveness since Ukraine 2014, avenues of communication and cooperation within the Arctic appear to be relatively open. In the years since the Arktika flag planting, the idea of Russia staking its Arctic claim by force
87 Spiegel Online, 2007. Claim-Jumping the North Pole? Russian Subs Dive to the Arctic Ocean Floor. Available at: http://www.spiegel.de/international/world/claim-jumping-the-north-pole-russian-subs- dive-to-the-arctic-ocean-floor-a-497774.html. 88Dodds, K & Powell, R, 2014. Polar Geopolitics? Knowledges, Resources and Legal Regimes. United Kingdom: Edward Elgar Publishers. 89 New York Times, 2007. Russians Plant Flag on the Arctic Seabed. Available at: http://www.nytimes.com/2007/08/03/world/europe/03arctic.html?_r=0. 90 Interview, Moscow, April 2014. 91 Gorenburg, D, 2011. Russia’s Arctic Security Strategy. Russian Analytical Digest, 96.
- 182 - has lost currency as Russia continues to seek confirmation of its continental shelf stake based on international law, by adhering to UNCLOS.
In 2001, Russia made a formal submission to the CLCS after ratifying UNCLOS in 1997. Russia’s 2001 claim is illustrated in Figure 25, a map which shows the claim submitted to the CLCS. The map covers the area of the Russian continental shelf right up to the North Pole.
- 183 -
Figure 25: 2001 Russian Arctic claim.92
92 Government of the Russian Federation, 2001. Submission to the CLCS on the outer limits of the Russian Federation’s Continental Shelf. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/rus01/RUS_page5_Legend.pdf.
- 184 - In providing evidence of territory beyond the 200 NM EEZ zone, the map offers various markers at the bottom left of the map translated into English as follows:
1. provisional line of delimitation of the continental shelf of the Russian Federation with neighbouring states; subject to more precise determination through negotiations. 2. 200 nautical mile zone from the baselines. 3. line showing the thickness of the sedimentary rocks equal to 1% of the distance from the foot of the continental slope. 4. 60 nautical mile zone from the foot of the continental slope. 5. points of the outer limits of the continental shelf determined 6. numbers of segments of the outer limits of the continental shelf determined according to various criteria. 7. baselines 8. basepoints 9. 200 nautical mile zone from the baselines. 10. the area of the continental shelf of the Russian Federation in the Arctic Ocean beyond the 200 nautical mile zone.
The CLCS circulates all submission materials and UNCLOS signatory states are encouraged to communicate their reactions to submissions. In 2002 Canada responded to Russia’s 2001 claim by stating:
[Canada] is not in a position to determine whether it agrees with the Russian Federation’s Arctic continental shelf submission’ and that its inability to comment ‘should not be interpreted as either agreement or acquiescence by Canada to the Russian Federation’s submission.93
Denmark also responded in 2002 to Russia’s submission, stating it too was ‘not able to form an opinion on the Russian submission’. It declared it would also make an Arctic
93 Permanent Mission of Canada to the United Nations, 2002. Notification regarding the submission made by the Russian Federation to the CLCS. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/rus01/CLCS_01_2001_LOS__CANtext.pdf.
- 185 - claim in the coming years, although not having ratified the UNCLOS, Denmark would not be subject to the ten-year submission rule. However, shortly after, Denmark communicated ‘its reservation to the Government of the Russian Federation’ about the claim extending Russia’s continental shelf to that appurtenant to Greenland.94
Norway also responded in 2002, citing the unresolved delimitation issue between Russia and Norway in the Barents Sea. Norway urged the CLCS to treat the Barents Sea issue as a ‘maritime dispute’ and argued that as an area under dispute, it needed to be shielded from ‘prejudice’ related to Russia’s early claim.95 Finally, the US responded, stating that ‘the submission has major flaws as it relates to the continental shelf claim in the Arctic’, and attaching a brief paper for circulation to all members of the UN.96 The paper questioned the legal architecture of UNCLOS, noting ‘the United States of America is of the view that, while the commission has no competence over questions of baselines from which the breadth of the territorial sea is measured, it should not be perceived as endorsing particular baselines’.97 Further, the US argued that the Lomonosov Ridge ‘is a freestanding feature in the deep, oceanic part of the Arctic Ocean Basin, and not a natural component of the continental margins of either Russia or any other state’.98
The US response pushed for the Russian claim to be ‘considered in a deliberate manner’ ‘insofar as no applications to explore or exploit the Area have been made or
94 Permanent Mission of Denmark to the United Nations, 2001. Notification regarding the submission made by the Russian Federation to the CLCS. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/rus01/CLCS_01_2001_LOS__DNKtext.pdf. 95 Permanent Mission of Norway to the United Nations, 2002. Notification regarding the submission made by the Russian Federation to the CLCS. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/rus01/CLCS_01_2001_LOS__NORtext.pdf. 96 Permanent Mission of The United States of America to the United Nations, 2002. Notification regarding the submission made by the Russian Federation to the CLCS. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/rus01/CLCS_01_2001_LOS__USAtext.pdf. 97 Ibid. 98 Ibid.
- 186 - are likely to be made in the Arctic for the foreseeable future, no prejudice is likely to result from a deliberate process’.99
The CLCS agreed with respondents and ruled that Russia needed to provide further detailed scientific data to substantiate its continental shelf claim in the Arctic. The commission recommended ‘that the Russian Federation make a revised submission in respect of its extended continental shelf in the Central Arctic Ocean’, and suggested that Russia ‘follow the scientific and technical advice as indicated’.100 Moreover, the commission ruled that ‘according to the materials provided in the submission, the Ridge cannot be considered’.101
4.4 Contemporary Arctic claims: Russia’s 2015 bid102
In August 2015, Russia submitted a revised Arctic claim to the CLCS. Based largely on its 2001 submission, it was bolstered by additional scientific information which allowed for an additional extension of territory on the Lomonosov Ridge. Moscow sought to prove that the Lomonosov Ridge is a continuation of the Siberian continental shelf. By providing supporting evidence for the claim, Russia would be able to extend the existing 200 NM EEZ by a further 150 NM, an area equivalent to 1.2 million square kilometres. Ultimately, this would extend Russian control to 60% of all hydrocarbons that can be found in the Arctic.103 Figure 26 below is a copy of the official submission to the CLCS outlining Russia’s 2015 claim.
99 Ibid. 100 Government of the Russian Federation, 2015. Partial Revised Submission of the Russian Federation to the Commission on the Limits of the Continental Shelf. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/rus01_rev15/2015_08_03_Exec_Summary _English.pdf 101 Ibid. 102 At time of thesis publication, Russia’s 2015 revised claim is yet to be considered by the Commission. As at July 2016, dates of August 8-12 2016 have been set for the submissions consideration with the Commission At this meeting, key sections of Russia’s claim will be discussed in detail as presented by the Russian experts who prepared them. Despite this meeting, Russia’s revised claim could still take some five years to receive a ruling 103 ITAR-TASS, 2013.
- 187 -
Figure 26: Russia’s revised Arctic claim104
104 Government of the Russian Federation, 2015. Partial Revised Submission of the Russian Federation to the Commission on the Limits of the Continental Shelf.
- 188 -
The Russian Federation’s 2015 partially revised submission to the CLCS in respect of its continental shelf in the Arctic Ocean, was prepared by a wide array of Russian federal authorities: the Ministry of Natural Resources and Environment; the Federal Agency on Mineral Resources; the Ministry of Foreign Affairs; the Ministry of Defence; the Department of Navigation and Oceanography; and the Russian Academy of Social Sciences.105 Coordinating the large number of authorities on the revised Arctic bid accounts for the prolonged revision period.
The revised submission set out scientific evidence that the Lomonosov Ridge has ‘continental origin … that there are natural components of the continental margin under paragraph 6 of Article 76 (of UNCLOS), which are not subject to a distance limit of 350 nautical miles’.106 Between 2002 and 2014 a range of geological expeditions were carried out in the Russian Arctic beyond the Arktika expedition. Significantly, Russia was the first state to embark upon deep-water drilling in the Arctic, drilling in 2004 and again in 2007 on the Lomonosov Ridge.107 Seismic data was utilised to support Russia’s claim that the Lomonosov Ridge was a natural prolongation of the Siberian shelf. Figure 27, which was provided formally as evidence in the 2015 revised submission, illustrate the claim that the Lomonosov Ridge is a natural progression of the Siberian continental shelf.
Figure 27: Russia’s evidence of continental shelf prolongation108
105 Ibid. 106 Ibid. 107 Ibid. 108 Ibid.
- 189 -
In anticipation of submissions from Denmark and Canada with regard to the overlapping continental shelf claim, Russia held consultations in 2014 with both states. All three reached an understanding on ensuing submissions to the CLCS, a summary of which is as follows:
When one State makes (a) Submission to the Commission, the other State shall immediately forward to the Secretary-General of the UN a diplomatic note that exactly says:
1. A State does not object to the Commission considering the Submission of the other State and make recommendations thereon;
2. The recommendations made by the Commission in respect of the Submission of one State shall be without prejudice to the rights of the other State in the course of the Commission’s consideration of its own Submission;
3. The above recommendations with respect to any State shall not prejudice the delimitation of the continental shelf between the two States.
Each Party refers to this agreement in its Submission to the Commission; requests the Commission to make recommendations based on this agreement; and requests the Secretary-General of the United Nations to declare the content of the above-mentioned diplomatic note to Member States of the United Nations and the States parties to the Convention.109
Denmark responded, as per the agreement with Russia, to the CLCS in October 2015 drawing attention to the claim’s ‘potential overlap with the continental shelf of the Kingdom of Denmark’.110 Denmark did not object to the CLCS ‘considering or making recommendations on the Russian submission’, but requested that ‘the commission make recommendations taking account’ of Denmark’s formal submission of 2014.111
109 Ibid. 110 Permanent Mission of Denmark to the United Nations, 2015. Notification regarding the revised partial submission made by the Russian Federation to the CLCS. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/rus01_rev15/2015_10_07_DNK_NV_UN_0 01_15-00785.pdf. 111 Ibid.
- 190 - The US also responded in October 2015, this time taking a step back from proceedings. Besides supporting Russia’s claim that the two states have adhered to the 1990 agreement regarding the delineation of the Chukchi and Bering Seas, the US confirmed that ‘it does not object to’ Russia’s revised submission.112 Canada responded, in line with its agreement with Russia, in November 2015 advising that it had ‘taken note of the potential overlap’ of the continental shelves of Canada and the Russian Federation.113 Further, Canada requested its response be made public to UN members. At the time of writing, Norway is yet to formally respond via the CLCS to Russia’s revised Arctic bid.
The 2015 Russian claim adds two new areas and subtracts one from the original 2001 claim. In total, the 2015 bid adds about 103,000 square kilometres to the 2001 claim area. Figure 28 provides comparison of the 2001 and 2015 Arctic claims. This renewed claim was deemed ‘neither surprising nor threatening’ with A5 powers already well aware of the negotiations still ahead.114
112 Permanent Mission of The United States of America to the United Nations, 2015. Notification regarding the revised partial submission made by the Russian Federation to the CLCS. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/rus01_rev15/2015_11_02_US_NV_RUS_00 1_en.pdf 113 Permanent Mission of Canada to the United Nations, 2015. Notification regarding the revised partial submission made by the Russian Federation to the CLCS. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/rus01_rev15/2015_30_11_CAN_NV_en.pd f. 114 New York Times, 2015. As the Arctic Thaws, New Temptations. Available at: http://www.nytimes.com/2015/08/07/opinion/as-the-arctic-thaws-new-temptations.html?_r=0.
- 191 - Figure 28: Comparison of the 2001 and 2015 Russian Arctic claims.115
115 ‘Map of Russian Arctic claims’. IBRU, Durham University. Available at: https://www.dur.ac.uk/resources/ibru/resources/ArcticmapRussianonlyclaims05_08_15.pdf. Reproduced with permission.
- 192 -
The 2015 Russian claim crosses into the Canadian and Danish sides of the North Pole for the first time. The Russian view is that while this may have symbolic impact (especially for Canada and Denmark), for now Russia will await the CLCS ruling.116 An interview with a Russian Government official confirmed Russia’s commitment to cooperation in the Arctic:
Russia’s position is along the lines of ‘international law precedent does not define action’. Georgia, Ukraine and the Arctic are all very separate areas of conduct. Russia might be seen to have breached norms in the first two regions—although that is a separate discussion entirely—however, we have shown adherence to UNCLOS in the Arctic and will continue to do so. The issue becomes one of our counterparts—and I am talking about the US primarily—not being able to accept our claim in line with international law. Arctic nations agreed to the regime of UNCLOS and our Arctic claim should not be seen as anything other than what it is: legal in the eyes of international law. Perhaps other precedent demonstrates otherwise, but there too are individual readings of international law.117
There is precedent for the CLCS favourably handing down recommendations for Russia, as evident in the Sea of Okhotsk. In March 2014, the CLCS recommended Russia be given rights to a 52,000 square kilometre enclave in the Sea of Okhotsk based on evidence that the base of the enclave ‘is the continuation of Russia’s continental shelf’.118 The Sea of Okhotsk is located in Russia’s east. It is surrounded by Russia on all three sides and borders Japan to the south. The seabed is known to contain vast amounts of natural resources. According to 2011 estimates by Rosneft, the shelf of the Sea of Okhotsk may contain 1.1 billion tonnes of oil and two trillion cubic metres of gas. 119 Figure 29 illustrates Russia’s formal submission (since
116 The Conversation, 2015. The truth about politics and cartography: mapping claims to the Arctic seabed. Available at: http://theconversation.com/the-truth-about-politics-and-cartography- mapping-claims-to-the-arctic-seabed-46043. 117 Interview, Moscow, April 2014. 118 Klimenko, E, 2014. 119 RT, 2013. Ali Baba’s cave: UN declares Russian sovereignty over resource-rich Sea of Okhotsk enclave. Available at: https://www.rt.com/news/un-okhotsk-enclave-russia-804/.
- 193 - accepted) concerning its territorial extension in the Sea of Okhotsk. The yellow dots indicate the claimed Russian continental shelf and thus the precedent for successful continental shelf expansion.
Figure 29: Foot of Russian continental shelf in Okhotsk Sea.120
4.5 Key drivers of Russian Arctic strategy under Putin
This section explores the central drivers of Russian Arctic strategy under Putin. These drivers help shape and direct Russia’s Arctic strategy and are often interrelated. These drivers are relatively standard and to be expected when it comes to the development of Russia’s Arctic strategy.
120 Government of the Russian Federation, 2013. Revision of the partial submission of the Russian Federation to the Commission on the Limits of the Continental Shelf related to the Continental Shelf in the Sea of Okhotsk. Available at: http://www.un.org/depts/los/clcs_new/submissions_files/rus01_rev13/part_1_Rezume_MID_engl.p df.
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4.5.1 Securitization
Securitisation is a key driver of Russian Arctic strategy under Putin. Russia has an evident interest in securitising its economic stake in the Arctic – both in terms of the region’s energy resources and the NSR. The region is a central component of Russia’s projected future budgetary position and factors into the wider great power identity project for Putin. As evidenced in the key policy documents examined above, Russia is actively working to secure not only its vast border from increasing activity, but also its stake as the Arctic’s leading actor and the largest holder of territory. Russia’s formal territorial bid to the CLCS to extend its shelf would, if accepted, cast a large shadow over the entire region. The Arctic race, as it were, has already been won —Russia will continue to direct the Arctic narrative. As a Russian Government official comments:
The Arctic isn’t going away for Russia, the Arctic is largely Russian by default. Three per cent of our population resides there—you would have heard that polar bears are Russian. I think, to borrow from Robert Kaplan, what the West is witnessing now is the ‘revenge of geography’. The more demand increases, the sooner we will have people approaching Russia for partnership, and this could be a powerful position for us, but we have shown—and of course, this requires careful reading of our policy documents that are made readily available to all— that we seek partnerships based on cooperation with our neighbours in the Arctic. I think this is wishful thinking in the short to medium term however, but just think about a passenger ship running into trouble on the NSR for a moment. It becomes Russia’s duty to search and rescue and this would be expected by our neighbours, and yet in order to carry out such missions, there would need to be readily deployable teams stationed nearby. We are building such teams and growing our capacity and yet Russia is criticised for these actions? Symptomatic maybe, but the West cannot have it all. 121
The process of securitisation in Russia’s Arctic necessarily invites discussion of Russia’s militarisation of the Arctic. Often confused, the two concepts are nonetheless distinct
121 Interview, Moscow, April 2014.
- 195 - and their confusion can result in a misreading of Russian Arctic activity if viewed purely through a militarisation lens. As examined in Chapter Three, the majority of the NSR falls within Russia’s EEZ. Any vessel seeking passage will have to negotiate with Russia—as would be the case with any major shipping route elsewhere. Further, the increase in activity in the Arctic will necessitate an active coastguard operation, which Denmark, Norway and Canada have already implemented. In developing Arctic coastguard capabilities, Russia is merely applying the same measures as its neighbours. Militarisation has been apparent in the updating of ageing Soviet hardware in the Arctic and the re-opening of Soviet bases on the Arctic coast, spurred by Russia’s newly formed Arctic Joint Strategic Command. This should not be a surprise for it is a desperately overdue modernization project given the hardware has been neglected since the fall of the Soviet Union.
As discussed in Chapter Two, Medvedev’s modernization agenda for the Russian military necessarily included Russia’s Northern Fleet. Since 2012, under Putin, the pace of military modernization has increased. Beyond the reopening of Arctic bases there has been increase in Russian military exercises and war games. However, these activities are more or less outlined in the 2008 Arctic security strategy. Further, most of the refurbished military outposts in the Arctic are ‘dual use’ facilities also servicing regional search and rescue operations. Russia’s securitization efforts in the Arctic have clearly intensified, going far beyond standard coastguard strengthening capabilities. Russia’s Arctic threat perceptions are more intense than in the Cold War period, as seen in the deployment of Arctic brigades. Yet, despite apparent militarization, it is still nowhere near what it was during the Cold War. In 1989, before the collapse of the Soviet Union, the Soviet navy had 69 strategic submarines in operation within the Arctic including 63 nuclear powered ballistic missile submarines (SSBNs) and 6 ballistic missile submarines (SSBs). By 2015, the Russian navy had a mere 12 submarines in operation within the Arctic.122
122 Conley, H & Rohloff, C, 2013. The New Ice Curtin. Washington DC: CSIS
- 196 - It is important to note that the majority of Russia’s military capabilities in the Arctic are confined to operation within the region. Therefore, the argument that these forces can be mobilised elsewhere is problematic. It is incorrect to determine Russia’s Arctic military developments as a reaction to events beyond the Arctic. In many ways, Russian Arctic strategy (including its securitization aspect) predates Russia’s current assertive foreign policy. The Kremlin’s strategic planning documents, as examined earlier in this chapter, indicate that military growth plans were implemented long before events on Crimean Peninsula.
For Stephen Blank, Russia’s militarisation of the Arctic coast ‘highlights a certain paradox’ in Moscow’s Arctic strategy.123 The bases are closely connected to the development of Russia’s economic interests in the Arctic, serving to safeguard the region. However, it appears Russia is becoming increasingly alarmed about potential threats. As Blank points out, this is interesting given, to date, no A5 state has ‘even remotely expressed the intention (let alone the desire) or demonstrated the capacity to threaten’ Russia’s Arctic position and interests.124 The notion that militarisation efforts are to warn off China’s mounting Arctic interest is also moot given Russia’s recent close dialogue with China for Arctic project investment.
Further, despite the current economic constraints, Putin has ensured some military investment continues. Since 2014 the planned redevelopment of airstrips and northern fleet docking facilities has continued. On Russia’s securitization approach to the Arctic a Russian Government official commented:
Russian security officials, for example the FSB and some individual interests, will keep the current statist approach and continue to securitise the existing state of affairs in the Arctic. I don’t see a departure from this thinking. It is important to understand that our Arctic posts have dual operational civil, industry, and defence purposes. We militarise out of
123 Blank, S, 2015. Russia’s new Arctic base continues the militarization of the high north. Eurasia Daily Monitor, 12:202. 124 Ibid.
- 197 - necessity to match increasing human activity on our shores, as our neighbours are also doing. 125
In any case, this apparent Arctic militarisation is long overdue for Russia.126 Had events on the Crimean Peninsula not occurred, it is likely that the modernization of Russian infrastructure in the Arctic would have been viewed in the securitisation context as an expected development in the changing region. Instead, events beyond the Arctic have swayed Russia’s Arctic policies more towards an intensified strategy of militarisation. Figure 30 illustrates Russia’s military presence in the Arctic. It also incorporates non- Russian bases in the Arctic region, demonstrating that it is not uncommon for Arctic states to possess military outposts in the Arctic. It is important to note that of those Russian military bases illustrated in Figure 30, the majority date from Soviet times.
Figure 30: Russia’s military presence in the Arctic.127
125 Interview, Moscow, April 2014. 126 See for discussion on Russia’s downsizing of the Northern Fleet during the 1990s: Baev, P, 2013. Russia’s Arctic Ambitions and Anxieties. 127 Business Insider, 2015. This map shows Russia’s game-changing militarization of the Arctic. Available at: http://www.businessinsider.com.au/chart-of-russias-militarization-of-arctic-2015- 8?r=US&IR=T.
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4.5.2 Individual interests
There is a range of factors driving Russian Arctic strategy under Putin. Bobo Lo speaks to the guesswork associated with Russian foreign policy in which ‘decisions, rarely if ever, reflect an “objective” national interest, but are made by individuals with their own particular biases, prejudices, and vested interests’.128 This is certainly the case in contemporary Russian Arctic strategy.129
Beyond Putin, the leading individual driver of Russian Arctic strategy is Nikolai Patrushev.130 As Russia’s current national Security Council head, he is central to all Arctic affairs and is a close and long-standing Putin ally. Patrushev is responsible for the reordering of Russia’s maritime priorities to promote the Arctic, and to a lesser extent the Antarctic, to greater national significance. Another key individual in Russia’s Arctic policymaking processes is defence minister Sergey Shoygu. Shoygu is responsible for the undercurrent of securitisation within Russia’s Arctic strategy. In step with Putin, Shoygu deems the Arctic to be of great strategic significance and brings the hardline Arctic aspect to the table—as evident in the refocus and redevelopment of Russia’s Arctic military capabilities. Although neither Patrushev nor Shoygu are ‘free agents’ they nonetheless have central roles in Arctic matters.131
In a commercial sense, personal interests are apparent in the potential financial windfalls from Arctic resources. As the heads of the state energy apparatus, Igor Sechin and Alexei Miller have a vested interest in seeing Russia’s Arctic strategy realised.132 This variety of individual interests helps shape Russian Arctic strategy, and against the background of shifts in Russia’s relationship with the West, can at times
128 Bobo, L, 2015. Russia and the New World Disorder. United States: Brookings Institution Press. 129 AS is the case for Russian politics more broadly, for further discussion on the latent brittleness of Putin’s power base in terms of his elite management see: Gill, G, 2016. 130 Interview, Moscow, April 2014. 131 Interview, Moscow, April 2014. 132 Interview, Moscow, April 2014.
- 199 - elicit more airtime depending on the circumstances. For example, souring relations between Russia and the West post-2014 have allowed some individual biases to emerge in Arctic decision-making. Dugin’s ultra-nationalist agenda for Putin’s Russia has gathered pace, marking the Arctic as a zone for Russia to flex its imperial muscles. Despite these current tensions, those at the helm of Russian foreign policy are consistently voicing calls for multilateral cooperation in the Arctic. In November 2015, Patrushev declared Russia’s continued commitment to ‘expanding the platform of international dialogue’ in the Arctic which he described as a region with a ‘tradition of good neighbourliness and cooperation’.133
4.6 Conclusion: a neoclassical realist explanation for Russia’s Arctic interest
A range of different drivers have clearly shaped Russian Arctic strategy. International appraisals since 2014 have tended to view these drivers primarily as indicators for Russia’s looming expansionist Arctic agenda. This discourse is to be expected given Russia’s recent actions beyond the Arctic. Rowe and Blakkisrud argue that Russia is ‘presented as the bad guy in narratives about potential Arctic conflict’ as the state that is most likely to tip the region into a geopolitical competition for resources and sovereignty.134 In fact this is highly unlikely. The majority of resources are in undisputed territories, with most of the rest falling within Russia’s continental shelf (as illustrated in Figure 12 in Chapter Three).
Historically there is an apparent divergence between Soviet Arctic strategy under Stalin and Soviet Arctic policy under Gorbachev. The Arctic has morphed from a theatre of Cold War tensions to one of marked multilateral cooperation. Under the influence of spill-over effects from the increasing East-West tensions of recent years, it could change again. At this stage, however, that does not appear likely. There are apparent links in Russian Arctic strategy under Putin to Stalinist Arctic policy. The use
133 The Russian Geological Society, 2015. Patrushev: Arctic should be an area of dialogue, peace and good neighborliness .Available at: http://arctic.ru/international/20150916/167048.html. 134 Rowe, E & Blakkisrud, H, 2014. Page 66.
- 200 - of the Arctic for domestic propaganda purposes, as per the 2007 Arktika expedition and the heroism attributed to the expedition’s explorers have been exploited by Putin in the same manner as by Stalin. Among the range of Stalin-era hallmarks reinstated by Putin, the push to the Arctic and the associated Stalin-era romanticism are important facets of Arctic strategy under Putin, as is the public perception Putin seeks to create. Putin attends all Arctic resource development signing ceremonies, illustrating the strategic significance of the Arctic.
Stimulated by variables partly beyond political control throughout the early 2000s— climate change, energy security and rising oil prices—the Arctic was thrust back onto the international agenda. Neoclassical realism accounts for the Russian leadership’s perception of these variables and its resulting strategy for the Arctic. Despite renewed tensions between Russia and the West under Putin, Arctic cooperation is surviving, if only by way of continued communication over Arctic matters. At the time of writing, the Arctic represents one of the few spheres, besides space, in which Russia-West cooperation is continuing. Russia has a strong legal case for the expansion of its existing, although already vast, Arctic territory. Furthermore, Russia is following international law in engaging with the CLCS to stake its claim to the region.
Russia’s securitisation of its Arctic border is, as this chapter has argued, an unsurprising behaviour. Putin is invoking the Stalinist propaganda of ‘conquering the Arctic’ not simply to mobilise domestic support. Drawing on the historical romanticism and national pride associated with Stalin’s Arctic propaganda, Putin seeks to demonstrate his efforts to reinstate Russia’s international prestige. This is aimed at the domestic population, yet is often picked up by the West and translated into evidence of Russia’s conflict-seeking agenda in the Arctic. But this chapter has provided evidence of Russia’s commitment to observe rule of law and avoid conflict.
- 201 - Arctic conflict would not be in the interest of any of the A5 powers. It would render hydrocarbon resources untouchable in the midst of warfare and severely complicate transit passage for global goods—the two key gains of developing the Arctic. A5 nations are simply not interested in conflict within the region, and this is evident in the consistent efforts to maintain multilateral dialogue. The apparent ‘race’ by A5 powers to delineate their Arctic territories is an important first stage of tapping into the Arctic prizes. The misreading of Russian Arctic strategy might have much to do with ‘residual Cold War geopolitical story lines’ but it also stems from mixed signals from Russia itself about its intentions in the region.135 From planting a Russian flag on the seabed of the North Pole to conducting large-scale military exercises in the region, Russia has certainly advertised its Arctic ambitions.
However, these actions are first and foremost propaganda tools for Russia’s domestic audience. Beyond the public show of force, Russia continues to rely on cooperation with the West in Arctic matters. Further, there has been strong commitment to international law in the Arctic, including by Russia. A neoclassical realist reading of Russia’s adherence and touting of international law in the Arctic reflects the fact that the Kremlin finds itself in a position in the Arctic in which geography puts international law squarely in Russia’s interest. The application of UNCLOS is to be expected, and as the largest Arctic rim power, Russia’s larger Arctic stake is not a surprising outcome. The domestic variable of perception allows the Kremlin to present its adherence to international law as an example of good global citizenship. Neoclassical realism accounts for the adherence to international law in the Arctic and yet a complete disregard for international law elsewhere in its foreign policy. Russia perceives the relative gains of touting support for international law in the Arctic as good for public relations. The next chapter provides select case studies to demonstrate the cooperative nature of Putin’s Arctic policies.
135 Rowe, E & Blakkisrud, H, 2014. Page 66.
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Chapter Five: Case studies
‘Oil and gas have made Russia something of an indispensable power on today’s global stage’
Fiona Hill 136
This chapter uses two case studies to provide further evidence of Moscow’s more cooperative approach to the Arctic. The first case study provides an overview of Russia’s conduct in terms of its state-to-state relations. Here, the maritime dispute between Russia and Norway in the Arctic’s Barents Sea is assessed. The case study shows how Russia exerted considerable effort to end the dispute, which had simmered since 1974. The second case study analyses Russia’s non-state Arctic engagements, focusing on Rosneft’s commercial Arctic dealings with the US’s ExxonMobil. It argues that given the serious investment and technological shortcomings in Russia’s commercial Arctic partnerships, Russia has opted to partner with Western firms. That said, Russia consistently retains the upper hand in such commercial partnerships. These case studies provide supporting evidence for the Arctic cooperation thesis.
136 Hill, F, 2006. Moscow Discovers Soft Power. Current History, October. Page 345.
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5.1 Case study one: The Barents Sea
The Barents Sea dispute has long been a difficult issue for both Norway and Russia. Historically, the maritime dispute was framed by the Cold War geopolitical context of Norway being an Arctic NATO power. This case study delves into the background of the Barents Sea dispute, examines the bilateral resolution of the issue and assesses the contemporary state of affairs between Norway and Russia in the Barents Sea. It illustrates Russia’s policy of seeking cooperative avenues in terms of its state-state relations in the Arctic.
5.1.1 Introduction
Situated in the High North, above the Arctic Circle and forming part of the Arctic Ocean, the Barents Sea is named after Dutch explorer Willem Barents. As Figure 31 illustrates, it is located off the Norwegian and Russian shoreline extending out to Svalbard (Norway), Novaya Zemlya (Russia) and Franz Josef Land (Russia). The Barents Sea covers an area roughly 1,405,000 square kilometres.137
137 Norwegian Institute of Marine Research, 2005. The Barents Sea Ecosystem. Available at: http://www.imr.no/temasider/havomrader_og_okosystem/barentshavet/Barentshavet/en.
- 204 - Not only was this disputed area economically valuable given its vast hydrocarbon reserves, it was also strategically important for both states. For Norway, the Barents Sea is a key fisheries resource, significant for Norway’s domestic market as well as its export market to the EU. For Russia, the Barents Sea provides the sole year-round ice- free port (located in Murmansk) for the Northern Fleet. Today, the Sea is strategically important as an entrance to the Northern Sea Route. Further, it represents a vital shipping route for Russia’s oil and LNG projects located in the East Barents Sea and the neighbouring Kara Sea.
Figure 31: Barents Sea138
138 Ibid.
- 205 - 5.1.2 The dispute
The Soviet Union and the Kingdom of Norway began official negotiations over the disputed Barents Sea region in 1974. The area in question equated to 175,000 square kilometres. Figure 32 illustrates the overlapping area of the rival claims. The dispute was complicated by the fact that the two parties had very different methods of delineating their Barents Sea territory. The Soviet Union (and then Russia) was firmly applying a ‘sectoral line’ process for territorial delineation in the Barents Sea, whereas Norway based its approach on the ‘median line’ principle. The sectoral line process refers to drawing a line from the North Pole down towards each of the A5’s landmass, essentially sectioning off the Arctic according to Arctic coastlines and their intersection upon drawing a straight line north, to the North Pole. The median line principle is a line every point of which is equidistant between two A5 territories.
- 206 -
Figure 32: Disputed area of the Barents Sea139
For Russia, the dispute had its roots in the 1926 Soviet decree On the Proclamation of Lands and Islands Located in the Arctic Ocean as Territory of the USSR. This decree ‘reiterated the legal tradition in Tsarist Russia that was characterized by the notion of the sectoral line, the line of longitude that starts from the terminus of the land boundary and intersects with the North Pole’.140 This approach was rejected by
139 ‘Disputed area of the Barents Sea’. Hugo Ahlenius, UNEP/GRID-Arendal. Available at: http://www.grida.no/graphicslib/detail/extraction-activities-and-disputed-areas-in-the-barents- sea_af5b. 140 Valdai Discussion Club, 2014. Russian Strategies in the Arctic: Avoiding a New Cold War. Available at: http://www.uarctic.org/media/857300/arctic_eng.pdf.
- 207 - Norway. With neither party willing to alter its approach, the dispute entered a deadlock. It remained that way for four decades.
There was however, a precedent for cooperation prior to the formal negotiations commencing in 1974. In 1957, the USSR and Norway agreed for the first time on a maritime boundary in the Arctic. The maritime delineation was at the base of the Barents Sea in the Varangerfjord.141 An illustration of the 1957 agreement is provided below (Figure 33). This 1957 agreement contributed to the overall maintenance of good-neighbourly relations between Norway and the Soviet Union.142
141 United Nations Delimitation Treaties Database, 1957. Agreement between the Royal Norwegian Government and the Government of the Union of Soviet Socialist Republics concerning the sea frontier between Norway and the USSR in the Varangerfjord. Available at: http://www.un.org/depts/los/LEGISLATIONANDTREATIES/PDFFILES/TREATIES/NOR-RUS1957SF.PDF. 142 Ibid.
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Figure 33: 1957 USSR-Norway delineation of Varangerfjord.143
Building upon the Varangerfjord momentum, Norway requested negotiations over the wider Barents Sea region in 1957. The Soviet Union ignored these requests and it was
143 Varangerfjord’. US Department of State International Boundary Study, 1970. Available at: http://www.state.gov/documents/organization/61609.pdf
- 209 - not until 1970 that Norway and the Soviet Union informally discussed the outstanding delimitation issue, with formal negotiations not taking place until 1974. At the time, the formal negotiations were driven primarily by fisheries disagreements in which both states argued the other was actively fishing in its sovereign territory.
Throughout the dispute, Norway applied the median line principle in which it argued the Barents Sea boundary should be determined via the equidistant point of the nearest two state coastlines. As noted earlier, the Soviet Union relied on its 1926 decree that based its argument on a sectoral line drawn from the coast straight to the North Pole. With neither party prepared to move from its position, the region fell into a ‘grey zone’ where the parties simply agreed to disagree.144 In 1980 the two nations signed a moratorium to such effect, which banned hydrocarbon exploration in the disputed area. Norway and Russia continued to work together in areas of fisheries management and joint search and rescue exercises.
Over time, driven by increases in global demand for food and energy resources, the resource-rich Barents Sea could not remain a grey zone. With ample prospective economic and strategic windfalls for both parties, the Barents Sea issue returned to the Russia-Norway agenda in 2007. In 2007, the 1957 Varangerfjord agreement was revisited whereby the two nations extended the agreed median-line some distance further off the coastline. Further, in 2007 Putin invited Norwegian partnership in a joint venture with Gazprom to develop the Shtokman natural gas field. The Shtokman field considered to be one of the world’s largest gas fields is located in the undisputed Russian sector of the Barents Sea. Discovered in 1988, it was only slated for development from 2005.
144 Arctic Forum Foundation, 2014. Delimitation Agreement: A new era in the Barents Sea and the Arctic?. Available at: http://eu-arctic-forum.org/allgemein/delimitation-agreement-a-new-era-in-the- barents-sea-and-the-arctic/.
- 210 - Since 2005, Gazprom has signed a range of partnership agreements for the field— spanning partnerships with ConocoPhillips, ExxonMobil, Statoil, Total, Royal Dutch Shell, Chevron and Norsk Hydro. In a series of backflips, Gazprom rejected all other foreign bids and agreements to develop the consortium Shtokman Development AG in 2007 together with Total and Statoil. This indicated Russia’s readiness to engage cooperatively, and signalled the potential mutual economic benefits to be gained by delineating the Barents Sea.145
5.1.3 The resolution
On 15 September 2010 President Dmitry Medvedev and Norway’s Prime Minister Jens Stoltenberg announced from Murmansk an agreement on the 40-year Barents Sea dispute. This was a surprise ‘to the public and experts alike in both Norway and Russia, as there had been no leaks in advance’, with both governments remaining extremely discreet throughout the negotiations.146 Ratification documents were exchanged in Oslo on 7 June 2011. The treaty is illustrated below in Figure 34, whereby the disputed 175,000 square kilometres was simply split into two nearly equal parts. Figure 37 also demonstrates the original boundary proposed by Russia (as it was by the Soviet Union) and the boundary proposed by Norway throughout the dispute.
The delineation was complicated by two very different interpretations of the UNCLOS legal framework. Specifically, Norway and Russia had different readings of a key provision in Article 15 of Part II: Territorial Sea and Contiguous Zone, which states:
where the coasts of two States are opposite or adjacent to each other, neither of the two States is entitled, failing agreement between them to the contrary, to extend its territorial sea beyond the median line every point of which is
145 Orttung, R & Wenger, A, 2016. Explaining Cooperation and Conflict in Marine Boundary Disputes Involving Energy Deposits. Regional Studies of Russia, Eastern Europe, and Central Asia, 5:1. 146 Moe, A & Fjærtoft, D & Øverland, I, 2011. Space and Timing: Why was the Barents Sea Delimitation Dispute Resolved in 2010? Polar Geography, 34:3. Page 145.
- 211 - equidistant from the nearest points on the baselines from which the breadth of the territorial seas of each of the two States is measured. The above provision does not apply, however, where it is necessary by reason of historic title or other special circumstances to delimit the territorial seas of the two States in a way which is at variance therewith.147
Russia argued that such ‘special circumstances’ did exist, and rejected the median line principle, citing the 1926 Soviet decree precedent as historic title and also its larger coastline. For Norway, the clear application of the median line principle was the only way to delineate the maritime boundary. Yet, the resulting 2010 agreement saw Russia concede entirely and adopt the median line approach. What sets the Barents Sea agreement apart is the fact that Russia had pushed on with its preferred sectoral line principle enshrined by the Soviet decree in delineating its maritime boundaries in the Caspian Sea with Iran, Kazakhstan and Turkmenistan.148 Evidently, there were factors at play in the Barents Sea issue that caused Russia to deviate from its maritime delineation precedent.
Significantly, both parties conceded a substantial amount of claimed territory in this agreement. Such a concession is of interest because it is in contrast to Russia’s foreign policy elsewhere and signals Russia’s desire to create a cooperative Arctic environment. The Barents Sea resolution was viewed as a valuable model for how best to delineate overlapping Arctic territorial claims. For Medvedev, the resolution reflected a ‘practical illustration of the principle that all disputes in the Arctic [could] be tackled by the Arctic nations by way of talks and on the basis of international law’.149 The nations’ joint statement on the Barents Sea resolution rested heavily on
147 United Nations, 1958. Convention on the Territorial Sea and the Contiguous Zone Done at Geneva on 29 April 1958. Available at: http://legal.un.org/ilc/texts/instruments/english/conventions/8_1_1958_territorial_sea.pdf. 148 Shafiyev, F, 2001. The Legal Regime of the Caspian Sea: Views of the Littoral States. Prism, 7:6 149 The Guardian, 2010. Russia and Norway resolve Arctic border dispute. Available at: https://www.theguardian.com/world/2010/sep/15/russia-norway-arctic-border-dispute [Accessed 2 May 2014].
- 212 - the primacy of UNCLOS as the selected regime for the Arctic as well as the importance of the 2008 Ilulissat Declaration for settling any overlapping claims in the region.
The agreement touted bilateral cooperation as key to keeping the region peaceful, and urged claimants with outstanding disputes to follow suit and resolve them swiftly. Certainly, the timing of the Barents Sea resolution is of interest—in terms of what was driving the dispute, and why after almost 40 years the two nations opted to resolve it.
Figure 34: Barents Sea boundary agreement150
It is likely the two nations sought a resolution above all so that their respective resource industries could start formally exploring the resource-rich basin. Economic drivers were probably the key rationale for the resolution. In Russia’s case however,
150 Moe, A & Fjærtoft, D & Øverland, I, 2011.
- 213 - it was attractive to demonstrate a cooperative approach to the Arctic in the lead-up to its formal 2012 Arctic bid. After all, much of the bid discussed Russia’s adherence to international law and its interest in the peaceful development of the Arctic. The Barents Sea provided at least some precedent. A Norwegian government official provides some insight into how the two nations came to the sudden agreement:
The Soviets were not in a position to compromise over the Barents Sea, and I don’t think that would have changed given the Cold War setting. Timing is everything in politics. Russia needed precedent of international law in the Arctic - oddly enough, the cornerstone of Russia’s Arctic strategy is adherence to international law - and the pressures of potential resource development in the region meant Russia now wanted an agreement.151
5.1.4 Current state of affairs
The Barents Sea debate between Russia and Norway shifted over time from a dispute over fisheries to one driven by mutual gains in the hydrocarbons realm. Certainly, the resolution required a large concession by Russia for it ceded territory deemed Russian under the 1926 Soviet decree, which dictated the use of the sectoral line in all maritime issues. The Norwegians praised the resolution and soon after began exploratory expeditions in their half of the previously disputed region of the Barents Sea.
In Russia the resolution was met with some criticism. This criticism was linked to the notion that Medvedev was the softer in the ‘tandem’ with Putin when it came to Russian leadership.152 Medvedev’s presidency was coloured by a peace offensive with the West and only appeared to be markedly distinct from Putin line when it came to Libya in 2011. In a rare moment of estrangement from Putin, Medvedev publicly
151 Interview, November 2015. 152 For discussion on the ‘Medvedev thaw’ see: Wilson, K, 2015. Modernization or more of the same in Russia: was there a ‘thaw’ under Medvedev?. Problems of Post-Communism, 62: 3.
- 214 - differed on the UNSC resolution authorizing airstrikes. Then Prime Minister, Putin criticised the use of force arguing that the resolution was ‘deficient and flawed’. 153 Russia had opted not to use its veto vote to block the resolution, instead abstaining from the vote altogether. For Putin, the Libyan airstrikes reminded him of ‘a medieval call for a crusade’.154 Following Putin’s remarks, Medvedev issued a statement noting ‘under no circumstances is it acceptable to use expressions that essentially lead to a clash of civilizations – such as ‘crusade’’. 155
In the case of the Barents Sea, there was domestic backlash in Russia over Medvedev seemingly ceding sovereignty to Norway.156 The Medvedev presidency coincided with Russia’s push for recognition as a constructive international player, to some extent influenced by Medvedev’s own more liberal inclinations. The Barents Sea agreement was further a key deliverable for Medvedev’s policy of partnership for modernization with the EU. But as Roman Kolodkin (head of the Russian delegation to the delineation talks) pointed out, concessions were made on both sides of the dispute. Kolodkin highlighted that not only had Russia accepted the median line principle over its historically preferred sectoral line principle, Norway also accepted that the median line would have to be slightly altered to account for Russia’s larger coastline.157
Significantly, the agreement ‘angered vocal Russian nationalists who strongly criticized the Russian leadership for the deal’ with the treaty ratification bill passing in the Duma with 311 votes in favour, 57 opposed and 82 not voting.158 Given the criticism of the agreement, the Russian Foreign Ministry issued a formal statement denying it had ceded to Norway a vast amount of resource-rich territory, stating that
153 New York Times, 2011. In Rare Split, Two Leaders in Russia Differ on Libya. Available at: http://www.nytimes.com/2011/03/22/world/europe/22russia.html?_r=0. 154 Reuters, 2011. Putin Likens U.N. Libya Resolution to Crusades. Available at: http://www.reuters.com/article/us-libya-russia-idUSTRE72K3JR20110321. 155 Medvedev, D, 2011. Statement by Dmitry Medvedev on the Situation in Libya. Available at: http://en.kremlin.ru/events/president/news/10701. 156 Putin distanced himself from the initiative though ‘there is hardly any doubt that Medvedev acted with his full consent’ see for further discussion: Baev, P, 2013 157 Orttung, R & Wenger, A, 2016. 158 Ibid.
- 215 - it ‘knew what resources were there and had received equally lucrative deposits as part of the deal’.159 These efforts did little to lift the domestic blame directed towards Medvedev over the concession, with the Russian press further scapegoating Medvedev years later. For instance, in 2013 the Russian newspaper Ekho Russkogo Severa ran a front page entitled ‘Aleksandr II sold Alaska, Dmitry Medvedev gave Norway the part of the Barents Sea with huge reserves of hydrocarbons’.160 Like earlier attacks on Medvedev, this probably reflected Putin’s control over domestic media output, both before, and more particularly, after his return to the presidency in 2012.
Putin was in favour of an agreement with Norway in the Barents Sea. For Putin, the Barents Sea agreement was useful for both Russia’s cooperative Arctic narrative as well as its push for its continental shelf claim in line with international law. It was evidently also good for Putin to have the nationalist resentment for the agreement deflected to the then-President, Medvedev. In 2010, as prime minister, Putin addressed the international forum The Arctic: Territory of Dialogue, noting the ‘Arctic was at the juncture of serious geopolitical and economic interests’.161 Putin stated:
I have no doubts at all that the existing issues in the Arctic, including those related to the continental shelf, can be resolved in a spirit of partnership through negotiations and on the basis of existing international law … As an example, I want to mention the recently signed Russian-Norwegian treaty on the delimitation of the maritime area and cooperation in the Barents Sea. The negotiations were exhausting. They went on for decades and sometimes reached deadlocks. However, we finally found a way out, the treaty was concluded; I believe that it is a very good example of the possibility of finding a compromise acceptable for all parties. In the given case, both parties really wanted to produce a result and were making steps to meet each other halfway. The Arctic is a special
159 Ibid. 160 Johnson’s Russia List, 2013. Medvedev’s $30bn giveaway. Available at: http://russialist.org/medvedevs-30bn-giveaway. 161 Government of the Russian Federation, 2010. Prime Minister Vladimir Putin addresses the international forum ‘The Arctic: Territory of Dialogue’. Available at: http://archive.premier.gov.ru/eng/events/news/12304/print/.
- 216 - region that requires responsible balanced solutions. And mutual trust, of course. 162
The changing economic landscape affected the Norway-Russia Shtokman development venture in 2012. Norwegian state-owned Statoil walked away from the consortium claiming the shale gas revolution was decimating Shtokman’s potential market base. Gazprom shelved the project in 2014, citing low gas prices. In June 2015, the remaining consortium partner, France’s Total, pulled out of the project. Total expressed interest in cooperating further should the project enter an active phase, but this is unlikely to occur while the gas price is low, shale and LNG gas are in oversupply, and the required technology is so expensive.163
As a result of Russia’s actions on the Crimean Peninsula and in eastern Ukraine in 2014, Western relations with Russia had changed profoundly. In February 2015, Norway’s Defence Minister, Erkisen Soreide, noted that when it came to Norway-Russia ties, ‘there is no going back to some sort of normality or back to normal business, because that normality does not exist’.164 This would appear to have been the case when Norway responded to Russia’s actions in April 2014. Not being an EU member, Norway imposed independent sanctions on Russia following its Ukrainian aggression. Best described as ‘restrictive measures’, these sanctions have no time limit, unlike the EU and US variants.165 In August 2014, Norway adopted further restrictive measures on Russia similar to those of the EU. Norway’s measures include freezing of assets and travel restrictions for some individuals, a ban on imports from Crimea, an
162 Ibid. 163 The Economic Times, 2015. Total pulls out of Russia’s Shtokman natural gas project. Available at: http://economictimes.indiatimes.com/news/international/business/total-pulls-out-of-russias- shtokman-natural-gas-project/articleshow/47801641.cms. 164 CNN, 2015. Norway: We are faced with a different Russia. Available at: http://edition.cnn.com/2015/02/25/world/amanpour-norway-ine-eriksen-soreide/ 165 EU sanctions were extended six months until 31 July 2016; whereby Norwegian measures will stay in force simply until lifted. See: European Council, 2015. Russia: EU Prolongs economic sanctions by six months. Available at: http://www.consilium.europa.eu/en/press/press-releases/2015/12/21-russia- sanctions/
- 217 - import/export ban on arms and defence-related products, and bans on financial investment.
Significantly for the Barents Sea issue, Norwegian restrictive measures also covered the export of products to be used for deep-water oil exploration and production in the Arctic. It is important to note that the small print of such measures included a caveat around the Russian petroleum sector—which notes authorisation from Norway’s Ministry of Foreign Affairs is available where necessary. This represents a concession to Russia in that Norway’s Ministry of Foreign Affairs can, at discretion, still approve contracts in the energy sphere with Russia.166 This stated ‘room for discretion’ was utilised in early 2016 when bilateral discussions began for joint Barents Sea exploration. It was thus apparent that some sense of normality in Norway-Russia relations was possible given the two were ‘back to business’ in the Barents Sea.
Technically, Norwegian sanctions ban the export of products to Russia for deep-water, shale or Arctic exploration. The measures do not ban the import of Russia’s technology, nor do they restrict Russian capital or joint venture partnership in such projects. In May 2016, the Norwegian Government awarded prospecting licenses to 13 oil firms in the Norwegian territory of the previously disputed Barents Sea zone. Despite low oil prices, future planning is well underway in the Norwegian resource sector. The previously disputed region has been off-limits to eager firms for almost 40 years, but is thought to hold the richest deposits of hydrocarbons in the Barents Sea. The firms who picked up the licenses include Norway’s Statoil, Sweden’s Lundin Petroleum, and the US’ Chevron and ConocoPhillips. Norway also awarded licenses to Russia’s Lukoil and DEA. DEA is a German-based firm, owned by Russian oligarch Mikhail Fridman. Russia’s Lukoil was offered a 20% stake in two separate blocks located on the Norway-Russia maritime border. The award, the first joint venture with Russia since the 2014 sanctions, came shortly after Norwegian Prime Minister Erna
166 Government of Norway, 2015. Restrictive measures against Russia. Available at: https://www.regjeringen.no/en/aktuelt/Restrictive-measures-against-Russia-/id765896/
- 218 - Solberg stated she sought cooperation with Russia in the High North because ‘we have a long history of cooperating with Russia, even in times of political differences’.167
Norway’s business relationship with Russia in the Barents Sea is inconsistent with its vocal dismay over Russian aggression in Ukraine. It is also at odds with Norway’s position as a NATO member. And it is curious, given Norway’s increase in defence spending and focus on the High North, with the reopening of its previously closed northern Cold War military bases. Evidently, the economic windfall in the Barents Sea trumps strategic concerns elsewhere. Deeper analysis of Norway’s Barents Sea stake proves that there is simply too much to lose for Norway if it were to deny Russia partnership in this Arctic region. The Barents Sea licence sale was also the first time since 1994 that Norway had offered foreign access to its Barents Sea region. These Arctic blocks are an attempt by Norway to maintain its resource output after Norwegian crude production peaked back in 2000. Norway is Western Europe’s biggest oil producer and in a bid to maintain its primacy, it was necessary to open the Barents Sea in order to make up for falling production from ageing fields. The Barents Sea region is estimated to hold almost 50% of Norway’s unexplored 18 billion barrels of oil and gas.168
In many ways, the 2010 Barents Sea agreement was about Russia tying up loose ends in regards to its outstanding territorial disputes in the Arctic region. It is likely that although Medvedev was the face of the agreement, Putin played a key role in the background. Not only did the agreement provide precedent for Russia adhering to the norms of international law, it signalled Russian interest in engaging with neighbours over disputed territory. The Barents Sea agreement was important for Russia’s broader aim of maintaining UNCLOS as the sole avenue for legal governance within
167 The Maritime Executive, 2016. Norway offers Barents Sea licenses. Available at: http://www.maritime-executive.com/article/norway-offers-barents-sea-licenses 168 Bloomberg, 2016. Norway opens Arctic oil exploration in Russian border area. Available at: http://www.bloomberg.com/news/articles/2016-05-18/norway-awards-new-oil-licenses-along-arctic- border-with-russia
- 219 - the Arctic. As Chapter Four sought to demonstrate, Russia has a strong legal claim under UNCLOS when it comes to the overlapping region around the North Pole. Hence, it appears more than plausible that Russia wanted the Barents Sea agreement to reflect the fact that it does adhere to the principles of international law in the Arctic.
The fact remains that Russia conceded claimed territory to a weaker Norway. This represents a clear divergence from Russia’s overall foreign policy under Putin since 2000. The Barents Sea resolution ultimately indicates that the Arctic is viewed by Putin as a siloed special region of Russian foreign policy. The historical reasons for confrontation in the Barents Sea, namely the Cold War strategic environment, had abated and cooperation based primarily on mutual interest had emerged. Since the 2010 agreement, this cooperation has been tested—notably by Russia’s 2014 actions on the Crimean Peninsula—and yet pragmatic cooperation and strong dialogue between Norway and Russia in the Arctic has continued.
- 220 - 5.2 Case study two: Rosneft and the Russian Arctic
This second case study examines Rosneft’s offshore Arctic ventures since 2000. As discussed in Chapter Four, Putin passed new legislation in 2008 allowing offshore licensing. Any new offshore licenses could only be granted to companies with a state majority holding and at least five years experience already working on the Russian continental shelf. This rendered Rosneft one of only two companies that met these new criteria. Putin found an avenue to ensure all future Arctic offshore exploration and production would fall under the jurisdiction of the Kremlin, with foreign firms only able to gain access to the resource bounty via joint ventures with the Kremlin’s two preferred firms.
This case study explores Rosneft’s attempts to secure joint venture partnerships with Western firms for its key offshore Arctic projects in the Kara Sea and the Barents Sea. Rosneft requires joint venture partnerships for its offshore Arctic projects, given that the firm lacks the advanced technological know-how to operate in such a challenging environment. Further, the Kremlin lacks the funds to go about the ventures independently. Russia’s cooperative agenda and the reasons for it emerge clearly in reviewing Rosneft’s corporate endeavours to partner with foreign firms in the Arctic.
5.2.1 Introduction
In 2010, Rosneft formally launched its key Arctic projects in the Kara and Barents Seas. The Kremlin awarded the firm four prime licences to explore Russia’s offshore Arctic shelf. Three of these licences are for ‘blocks’ in the Kara Sea—named East Prinovozemelsky 1, 2 and 3. The fourth licence was for a block in the Pechora Sea (the south-eastern section of the Barents Sea). As explained in Chapter Four, the Pechora Sea is also home to Gazprom’s Prirazlomnoye Arctic field. Figure 35 shows the
- 221 - geographic location of the Kara and Pechora Seas in the Russian High North. Combined, these four areas are estimated to hold some 21.5 billion tonnes of oil.169
Figure 35: Map of Pechora, Kara and Barents Seas.170
The Kara Sea region is an extension of the West Siberian hydrocarbon area—an area that accounts for 60% of Russia’s oil production. Operationally, the Kara Sea is an arduous environment. With almost year-round ice cover (up to 300 days per year) and temperatures in winter as low as –46 degrees Celsius, the Prinovozemelsky blocks are an operational challenge before development has even started. Rosneft has explored
169 Rosneft, 2016. Russia’s Arctic seas. Available at: http://www.rosneft.com/Upstream/Exploration/arctic_seas/ [Accessed 4 January 2015]. 170 ‘Pechora, Kara and Barents Seas’. Energy Offshore Today. Available at: http://www.offshoreenergytoday.com/china-rosneft-cnpc-execs-sign-deals-on-arctic-seas- exploration/. Reproduced with Permission.
- 222 - the blocks and estimates immediately recoverable oil reserves amount to 6.2 billion tonnes, with further hydrocarbon resources equivalent to 20.9 billion tonnes of oil.171 The three Prinovozemelsky field blocks are illustrated in Figure 36.
Figure 36: Rosneft’s Prinovozemelsky field172
Prinovozemelsky block 1 is estimated by Rosneft to hold 3.33 billion tonnes of oil, block 2 is estimated to hold 1.82 billion tonnes of oil and block 3 is believed to hold 1.12 billion tonnes of oil.173 Prinovozemelsky is a key field for Rosneft and the focus of this case study given the tumultuous joint venture negotiations with Western firms.
Rosneft’s Pechora Sea shelf exploration is underway following a joint venture established in 2014 with PetroVietnam. The venture focuses on two key blocks in the Pechora Sea—Yuzhno-Russky and Zapadno-Matveevsky. In this joint venture, Rosneft
171 Rosneft, 2016. Russia’s Arctic seas. 172 ‘Rosneft’s Prinovozemelsky fields’. Rosneft. Available at: https://www.rosneft.com/about/Rosneft_today/Operational_structure/Exploration/ArcticSeas/ [Accessed 6 June 2015]. 173 Rosneft, 2016. Russia’s Arctic seas.
- 223 - maintains a 66.67% share and PetroVietnam holds 33.33%.174 The partnership focuses on ‘general cooperation’ for geological exploration and production on the Pechora Sea shelf. Recoverable hydrocarbon reserves are estimated to be 367 million tonnes of oil and 64 billion cubic metres of gas. The estimated cost for the geological exploration of the two blocks is $1.5 billion.175
In the past five years, Rosneft has actively secured further licences in the offshore Arctic, this time further afield in the Laptev and East Siberian Seas. Rosneft owns about 75% of all drilling rights and licences available in the offshore Arctic. The remaining rights are with Gazprom, in which Rosneft holds a 10% share. Commercial negotiations surrounding Russia’s offshore Arctic licences have been interesting given the numerous shifts and changes in Rosneft’s joint venture partners. This case study focuses on Rosneft’s commercial venture with ExxonMobil in the Kara Sea’s Prinovozemelsky field, as well as in the emerging Laptev and East Siberian fields.
5.2.2 The Rosneft-BP Arctic partnership
In January 2011, Rosneft announced a strategic partnership with BP to explore and develop the Prinovozemelsky field. The two firms established a consortium for the joint venture with Rosneft holding a 66.67% share and BP holding the remaining 33.33% share.176 In line with Kremlin objectives, BP was to finance the exploration stages of the venture and provide all necessary technology to do so. The partnership involved a US$16 billion asset and share swap. Touted as a ‘global strategic alliance’ it was the first of its kind to create an equity-partnership between a state owned firm and an international oil company.177 Beyond the share swap, the agreement included
174 Ibid. 175 Ibid. 176 Ibid. 177 BP, 2011. Rosneft and BP form Global and Arctic strategic alliance. Available at: http://www.bp.com/fr_ch/switzerland/medias/communiques-aux-medias/pm-rosneft-joint- venture.html [Accessed 18 May 2014].
- 224 - the establishment of an Arctic technology research centre to develop offshore technology and safety capabilities.178
In March 2011, the deal was blocked by BP’s Russian subsidiary TNK-BP. TNK-BP was a consortium of Alfa Access Renova (AAR), which comprised Russian oligarchs, and BP, each with a 50% stake. Oligarch Mikhail Fridman (mentioned in the previous case study as a successful licensee of the recent Norwegian Barents Sea sale) led the challenge to the Rosneft-BP Arctic partnership. Under the TNK-BP deal, BP was required to offer any commercial opportunities to TNK (AAR) first. Fearing exclusion from future Arctic ventures, AAR sought legal recourse through an arbitration tribunal. The tribunal ruled in favour of AAR and prevented the $16 billion deal from going ahead.179 In an attempt to salvage the deal, BP agreed to let TNK hold a stake in the deal, which was welcomed by TNK. However, Rosneft opposed the inclusion of TNK, primarily because of the stake it would hand AAR. The Kremlin evidently did not want AAR to have a stake in the venture and as with all Arctic projects, it did not want a private Russian interest in state business.
The BP-Rosneft deal could not be saved, for the Kremlin was not willing to negotiate further on the inclusion of TNK in the deal. Eventually, BP sold its Russian joint venture with TNK to Rosneft for a 19.75% stake in Rosneft. BP was keen to walk away from the embarrassment, coming so soon after its 2010 Gulf of Mexico spill. Reactions to the spectacular commercial failure were varied. When Putin was asked why Russia opted to negotiate with the firm tainted so publicly by the Gulf of Mexico disaster, he cited the Russian proverb ‘the man who’s been beaten is worth two who haven’t’.180 In the US, Washington publicly voiced concern for the attempted partnership, with the Congress’ House of Representatives Natural Resource Committee noting ‘BP once
178 Ibid. 179 The Guardian, 2011. BP’s Russian deal with Rosneft blocked by court. Available at: https://www.theguardian.com/business/2011/mar/24/bp-russian-deal-rosneft-blocked-court 180 Bloomberg, 2011. Putin proverb seals BP’s Arctic deal after Hayward woos Russia. Available at: http://www.bloomberg.com/news/articles/2011-01-18/putin-proverb-seals-bp-arctic-oil-drilling-deal- after-hayward-wooed-russia
- 225 - stood for British Petroleum, it now stands for Bolshoi Petroleum’.181 Possibly as punishment for derailing the BP deal, Rosneft absorbed TNK-BP in 2013. Rosneft struck a deal to purchase AAR’s remaining stake in TNK-BP for $55 billion, utilising funds from the Chinese prepayment of $60 billion for Rosneft’s 2013 $270 billion deal to double oil supplies to China.182
5.2.3 The Rosneft-ExxonMobil Arctic partnership
In August 2011, just months after the Rosneft-BP deal fell apart, Russia announced a partnership between ExxonMobil and Rosneft for Arctic exploration. Despite Washington’s concern over commercial energy ventures with Putin’s Russia, it is widely known that ExxonMobil’s CEO, Rex Tillerson, has for some time had a close personal relationship with Putin.183 The deal was valued at $3.2 billion and focused on the exploration and development of the Prinovozemelsky field in the Kara Sea, as well as the Laptev and East Siberian Seas. Figure 37 illustrates the extent of the Rosneft- ExxonMobil Arctic partnership.
181 The Guardian, 2015. BP ditched Arctic concerns for strategic deal with Russia. Available at: http://www.theguardian.com/environment/2015/may/20/bp-ditched-arctic-concerns-for-strategic- deal-with-russia 182 Reuters, 2013. Rosneft to double oil flows to China in $270 billion deal. Available at: http://www.reuters.com/article/us-rosneft-china-idUSBRE95K08820130621 182 Interview, Washington, November 2014. 183 Interview, Washington November 2014.
- 226 -
Figure 37: Rosneft-ExxonMobil Arctic agreement areas.184
184 ‘Rosneft-Exxon strategic cooperation areas’. ExxonMobil. Available at: http://www.ogj.com/articles/print/volume-111/issue-4/exploration---development/exxonmobil- rosneft-expand-artic.html. Reproduced with permission.
- 227 - For ExxonMobil, the partnership was significant because the Russian Arctic is ‘the most promising and least explored offshore area globally’.185 For Rosneft, this strategic alliance was even more momentous given the fact that ExxonMobil surrendered a stake in its projects in Texas and the Gulf of Mexico. Remaining from the Rosneft-BP partnership, an Arctic research centre was also a key part of the Rosneft-ExxonMobil deal. ExxonMobil and Rosneft assess the reserves in the Kara Sea’s Prinovozemelsky field as more than those of the whole of Saudi Arabia. Drilling in the Kara Sea was slated for a 2015 start. The joint venture is currently on hold.
The 2014 sanctions outlined in Chapter One for Russia’s actions in Ukraine brought Rosneft-ExxonMobil Arctic exploration to a halt. Sanctions meant ExxonMobil was blocked from working with Rosneft in the Russian Arctic. In December 2014, the two firms cancelled contracts for exploratory service vessels (operated by Norway’s Siem Offshore Inc.) when it became apparent the sanctions were to be extended. ExxonMobil’s annual report for 2014 stated the sanctions have led to losses of upwards of $1 billion dollars. The report noted that ‘in compliance with the sanctions and all general and specific licensees, prohibited activities involving offshore Russia in the Arctic regions have been wound down’.186 Some flexibility in the sanctions was evident in Exxon’s ability to press Washington successfully for a two-week extension in order to safely wrap up exploration before sanctions took hold. Rushing a halt to its Arctic activity was never an option for risk-averse Exxon, ever keen to avoid another disaster like Valdez.
While Exxon appears to toe the sanction line, it is unlikely the firm will cede its commercial endeavours with Russia entirely. By all accounts, the partnership with ExxonMobil is long-term and simply ‘on ice’ while sanctions are in place.187 It is
185 Upstream, 2011. ExxonMobil in $3.2bn Rosneft Arctic pact. Available at: http://www.upstreamonline.com/live/article1214445.ece 186 United States Securities and Exchange Commission, 2014. Form 10-K Annual Report pursuant to Section 13 of 15(d) of the securities exchange act of 1934. Available at: http://www.sec.gov/Archives/edgar/data/34088/000003408815000013/xom10k2014.htm 187 Interview, February, 2015
- 228 - important to note that ExxonMobil is deeply wedded to Russian oil and gas. ExxonMobil is also a stakeholder in Russia’s Far East Sakhalin-1 project, in which ExxonMobil owns a 30% stake of the oil field through the subsidiary Exxon Naftegas Limited. Rosneft holds a 20% stake, and oil firms from Japan and India share the remaining 50%. The Sakhalin-1 project is managed by the Sakhalin Consortium and began production in late 2013.188 However, given the sanctions in place, ExxonMobil has been unable to claim revenue from Sakhalin-1. This lost revenue is factored into the 2014 report Exxon tabled over the effect of sanctions on business. In April 2015, ExxonMobil filed arbitration proceedings against Russia, claiming its subsidiary Exxon Neftegas had overpaid $500 million in VAT on the Sakahlin-1 project. The VAT rate in Russia was reduced from 35% to 20% in 2008, a change largely only known to national firms.189 A compromise is believed to have been reached outside court, in which ExxonMobil was reimbursed for half the overpaid amount and all future VAT payments were to be held at 20%.
Despite the suspension of the Kara Sea and further offshore Arctic projects, ExxonMobil and Rosneft have ensured the continuation of their Arctic ventures. This has been bolstered by reports that ExxonMobil continued to purchase joint venture licences with Rosneft to develop the Russian Arctic. Despite the sanctions, ExxonMobil boosted its Russian energy assets in 2014 by 450%. ExxonMobil also increased its stake in Russian energy fields from 11.4 million acres to 63.7 million acres in 2014.190 While this is a signal that ExxonMobil believes the sanctions against Russia will not be extended much beyond 2017, the purchase is also smart long-term commercial planning. Licences are limited in the Russian offshore Arctic and with some states avoiding Russian business altogether, ExxonMobil hopes in the long-term to reap what remains.
188 Forbes, 2015. Here’s what Exxon ‘lost’ from Russia sanctions. Available at: http://www.forbes.com/sites/kenrapoza/2015/02/27/heres-what-exxons-lost-from-russia- sanctions/#101ee22156b3 189 Natural Gas Europe, 2015. ExxonMobil files SCC Claim against Russia. Available at: http://www.naturalgaseurope.com/exxon-mobil-files-claim-against-russia-scc-23015 190 RT, 2015. ExxonMobil boosts Russian oil assets by 450% in 2014 despite sanctions. Available at: https://www.rt.com/business/237637-exxon-russian-oil-exploration/
- 229 -
That said, the Kremlin is not short of international oil companies (IOCs) looking for joint venture opportunities with Russia in the Arctic. There has been some commercial discussion of Russia approaching China to replace ExxonMobil in Russian Arctic ventures. This notion gained momentum in late 2015 when the Russian Deputy Energy Minister, Anatoly Yanovsky, confirmed Rosneft was in talks with China over potential participation in the development of the Russian Arctic shelf.191 This followed the September 2015 partnership between Rosneft and China Oilfield Services Limited (COSL) to explore the Sea of Okhotsk—the region which was earlier delineated by the CLCS in Russia’s favour.
5.2.4 Current state of affairs for Rosneft’s Arctic ventures
As with the Kremlin, Rosneft is highly vested in the development of the Arctic. The Arctic is crucial for the firm because of the vast potential (and discovered) resource base it represents for the company’s future bottom line. There are no licences left for large onshore projects for Rosneft to buy, leaving the firms future tied largely to the Arctic region. Further, offshore Arctic projects are important to Rosneft in order to develop its technical expertise and major project management skillset further and remain competitive within the industry.
The continuation of Western sanctions has severely delayed Rosneft’s Arctic ambitions due to complications with foreign partnership. For now, Rosneft is busy assuring the West that it is willing to proceed with offshore Arctic exploration despite ExxonMobil seemingly being restrained on the sidelines. When discussing the fallout of Western sanctions on Arctic progress, Igor Sechin announced ‘we will do it on our
191 Sputnik News, 2015. Rosneft, Beijing in talks on China Arctic energy participation. Available at: http://sputniknews.com/business/20151116/1030170034/rosneft-china-arctic.html
- 230 - own, we’ll continue drilling here next year and the years after that’.192 In October 2014, Putin approved the creation of a new state-owned and operated energy services firm, RBC.193 RBC’s mission is to reproduce services provided by Halliburton and Schlumberger. Such services include, but are not limited to, managing geological data, drilling technology, rig construction and completion, project management, sub-sea testing, and spill prevention and clean-up.
There is Russian pride at stake, illustrated by former Prime Minister the late Yevgeny Primakov’s remarks that the necessary technology to develop the Arctic will be developed ‘first of all in our own industrial base’.194 But while Russia’s ambition may be to proceed independently in the Arctic, its actual capabilities will limit Russia’s success. Without the advanced technology or finance required to start rapidly developing it, Russia is reliant upon joint venture partnerships for offshore Arctic development. Rosneft has not explained how it will make up for the tens of billions of dollars required for further exploration in the Arctic region that it lost from ExxonMobil, Italy’s Eni and Statoil walking away from various joint ventures.
Sanctions are not solely to blame for the delay in Rosneft’s Arctic exploration plans. The situation is compounded heavily by the 2014 oil price dive. Figure 38 illustrates the price fall from above $100 a barrel to below $30 a barrel. With prices still struggling to lift much above $50 a barrel at the time of writing, it is evident the global energy market is still in a difficult position.195 It is not commercially viable to bring Arctic oil and gas on line while the oil price is under $130 a barrel.196 Although almost impossible to predict, analysts agree oil will remain under $50 a barrel for 2016, rising slowly to
192 Financial Review, 2014. Russia vows to drill alone in the Arctic. Available at: http://www.afr.com/news/policy/climate/russia-vows-to-drill-alone-in-arctic-20141029-11e652 193 New York Times, 2014. The ‘Russification’ of oil exploration. Available at: http://www.nytimes.com/2014/10/30/business/energy-environment/russia-oil-exploration- sanctions.html?_r=0 194 Ibid. 195 As at July 25, 2016. See oilprice.com for up to date Brent Crude pricing. 196 Laruelle, M, 2013.
- 231 - $60 a barrel in 2017.197 Such oil price estimates are notoriously unreliable as they are dictated by variables beyond anyone’s control and often defy solid prediction. The only certainty in the oil price game is that in the longer term the price will inevitably rise, due in part to the basic global supply-demand realities. How long this will take, or for how long they will stay high, on the other hand, are constant unknowns for the industry.
Figure 38: Oil price (2014–16)198
In the case of Russia’s sole operational offshore Arctic project, Prirazlomnaya in the Pechora Sea, it is evident that the oil price is affecting profitability. The base cost per barrel of oil from Prirazlomnaya is $40. The high transport costs drive up the overall
197 The Sydney Morning Herald, 2016. Citigroup says oil prices ‘have turned a corner’. Available at: http://www.smh.com.au/business/energy/citigroup-says-oil-prices-have-turned-a-corner-20160524- gp338r.html ; current at Jul 2017 X 198 Author’s research. Data sourced and compiled online at: macrotrends.net.
- 232 - production cost to the point that oil prices below $80 a barrel make the project unprofitable for Russia.199 Nevertheless Gazprom has increased oil production by two and a half times in 2016, compared to 2015.200 In 2015, the platform produced more than 800,000 tonnes of oil. In March 2016, Prirazlomnoye produced its 10 millionth barrel of oil.201
For Rosneft, the pace of its Arctic ventures slowed after the price dive, but they have not been abandoned. Most projects in the offshore Arctic have been put on hold for five years. For instance, exploration drilling in the Kara Sea will re-launch in 2020 following forced suspension after ExxonMobil withdrew due to Western sanctions.202 Since the 2014 sanctions and oil price dive, Rosneft has demonstrated its ‘untouchable’ standing the Russian energy industry as a result of its close Kremlin ties. March 2016 reports indicate a slight increase in Rosneft’s net profit, rising 2%, or some $6.1 billion in 2015.203 Given that oil revenues are a key contributor to the Kremlin’s budget (as explained in Chapter Two), it is evident that there is a state interest, as well as a corporate interest, in Rosneft weathering the low oil price. Not only did the Kremlin provide ample tax-breaks for Rosneft in the form of a lowered mineral- extraction tax rate, but with the ruble also weakening along with the oil price, the result was that the ruble price per barrel of oil fell less steeply than it did in dollars. Rosneft Chief Executive, Sechin, stated in June 2015 that despite sanctions and low oil prices, ‘no projects have been derailed’ in the offshore Arctic.204
199 Klimenko, E, 2014. 200 For further discussion on how viable this is see: Krutikhin, M, 2016. The Russian oil industry in the era of cheap crude. Moscow: Carnegie Endowment for International Peace. 201 The Maritime Executive, 2016. Production milestone for Russia’s Prirazlomnoye field. Available at: http://www.maritime-executive.com/article/production-milestone-for-russias-prirazlomnoye-field 202 Reuters, 2015. Russia seen restarting drilling for oil in Kara Sea not before 2020. Available at: http://www.reuters.com/article/russia-oil-arctic-idUSR4N11002L20150915 203 Wall Street Journal, 2016. Rosneft shows crude resilience, shielded by weak ruble. Available at: http://www.wsj.com/articles/rosnefts-fourth-quarter-profit-down-more-than-50-on-low-oil-prices- 1459413479 204 The Moscow Times, 2015. Sechin says Rosneft on schedule in the Arctic but gives no timeframe. Available at: http://www.themoscowtimes.com/business/article/sechin-says-rosneft-on-schedule-in- arctic-but-gives-no-timeframe/523832.html
- 233 - Rosneft will continue to seek foreign partnership and cooperation for its Arctic ventures. Asian firms appear to be of increasing interest due largely to Western sanctions. However, Western firms are finding ingenious ways to remain relevant in the Russian Arctic market. US and European IOCs are in fact still able to bid publicly for Russian Arctic tenders despite the current sanctions. The loophole they are exploiting is that the sanctions do not apply to IOC foreign subsidiaries. As long as they are part of a consortium with a foreign firm, they are not technically doing business directly with Russia by developing joint ventures or bidding on emerging Arctic licences. Both the low oil price and sanctions have slowed Arctic development in the short to medium term. In the long term, IOCs are eager to have a stake in Russian Arctic projects. Whether or not Russia is bluffing about its ability to explore the offshore Arctic alone remains to be seen—certainly they will endeavour to do so. With Chinese interest in the Russian Arctic growing, and firms like ExxonMobil playing the long game from the sidelines, it is evident that the Russian Arctic is still very much open for business.
5.3 Conclusion: a neoclassical realist explanation of Russian cooperation in the Arctic
These two case studies provide evidence of Russian efforts to seek cooperative arrangements in the Arctic, whether by state-state agreements or state-Western IOC partnerships. As for the Barents Sea agreement, Russia did not necessarily have to strike a deal with Norway because some six years later, there has been very little development in the former ‘grey zone’, with Norway only in March 2016 releasing a small area for tender. There must have been simpler, economically viable resource pockets in the Far East, Kara or Laptev Seas on which Russia could have focused. Furthermore, many of the discovered hydrocarbon fields in the Russian section of the Barents Sea are located far to the east in any case. Delimiting the disputed zone and thus ceding claimed territory to Norway was evidently the result of an actively concessionary policy on Russia’s part. Chapter Four explained, by geographical default, Russia has a legitimate claim to the largest offshore Arctic territory. Not only
- 234 - did the agreement afford Russia a cooperative precedent in the Arctic, it also bolstered the legitimacy of UNCLOS as the governing legal framework in the region.
The commercial dealings of Rosneft in the Arctic also indicate a strong interest in cooperating with non-Russian firms. This is, however, largely a position forced upon the Kremlin given Russia’s financial and technological deficits in offshore exploration and production. Nonetheless, Rosneft has consistently overlooked other Russian firms in Arctic projects, opting instead for Western IOC partnerships. The 2014 sanctions and low oil price have complicated the commercial operational environment for all, but this has not stopped Western IOCs from lining up partnerships with Russia in the Arctic via their subsidiaries. Those with pre-existing ventures have opted to wait sanctions out, although at great financial cost. The fact that ExxonMobil is still pursuing its Rosneft joint venture points to the realities of our global energy security situation. The Arctic’s reserves will one day, perhaps in another 30 or 40 years, be required in accordance with the basic supply-demand rule. IOCs plan for the long-term and are aware of the need to develop Arctic ventures decades before they become profitable.
These case studies have demonstrated the lengths to which Putin’s Russia has gone to seek cooperation in its Arctic endeavours. The popular neorealist framework for analysis of Russian foreign policy under Putin fails to account for such cooperation. It fails to explain why Russia—the more powerful state—agreed to split claimed territory with Norway. However, a neoclassical realist reading of the Barents Sea resolution allows for the inclusion of ‘perception’ as a variable in the foreign policymaking process. Russia’s perception was that there was a relative gain involved in simply splitting the zone with Norway for the greater Arctic territorial push still to come near the North Pole. By demonstrating a cooperative approach to the dispute, Russia was showing that it expected that the ‘new Cold War’ thesis would lose steam and that Russia’s global standing as a cooperative player would be strengthened.
- 235 - A neoclassical realist framework further accounts for Russia’s ongoing interest in forming joint partnerships with foreign IOCs in the Russian Arctic. A traditional neorealist reading of this would suggest that Russia would, at all costs, avoid cooperating through partnerships with foreign IOCs in its offshore Arctic. However, as the second case study in this chapter demonstrates, Putin’s Russia actively seeks such cooperative joint ventures. This reality is well accounted for by neoclassical realism. As per Figure 2, a range of independent variables may account for deviations in traditional inter-state relations. Here, domestic state constraints stemming from Russian failure to invest in the necessary offshore Arctic technology has made foreign IOC partnership necessary. The sheer cost of exploration and production in the offshore Russian Arctic prevent the Russian firms cleared to operate in the region from working solo. By a clearly perceived necessity, cooperation with foreign IOCs is occurring.
Russia’s economic woes have resulted in no alternative being available to sourcing project financing from foreign IOCs. The 2014 sanctions, which barred Russian access to Western foreign capital, is a further variable this time essentially pushing Russia toward Chinese IOC partnership in various Arctic ventures.205 Certainly, Russia’s array of joint ventures with foreign IOCs is manipulated by Putin for domestic political gain. By demonstrating continued foreign IOC interest in accessing Russia’s offshore Arctic, Putin is able to exploit the sentiment of Western (and Eastern) eagerness for doing business with Russia, despite sanctions, for domestic gain. As the case study highlights, this cooperation and partnership is largely on Russian terms and largely works in Russia’s favour.
205 For further discussion see: War on the Rocks, 2016. Friends if we must: Russia and China in the Arctic. Available at: http://warontherocks.com/2016/05/friends-if-we-must-russia-and-chinas- relations-in-the-arctic/ [Accessed 17 July 2016].
- 236 - Chapter Six: Conclusion
‘It is analytically interesting that the great anxiety about the forthcoming Arctic resource conflicts blossomed with no connection to the estimates of extraction costs on the already evaluated oil and gas fields’
Pavel Baev 1
6.1 Introduction
It is unlikely military conflict will eventuate in the Arctic between Russia and the West. Russian Arctic strategy under Putin is driven for the most part by routine factors which do not necessarily reflect an expansionist agenda. Unlike Russia’s foreign policy approach elsewhere, for example its near abroad, Putin’s Russia has consistently approached the Arctic in a broadly cooperative manner. Given Putin’s foreign policy style, there is potential for Russia to throw its weight around in the Arctic. A more assertive Arctic strategy will be driven by a hyper-nationalist, largely domestic agenda, but the notion of a ‘Russian Arctic’ (an Arctic wholly dominated by Russia) is an exaggeration of Russia’s capabilities, and probably, its intentions.
Economic pressures have slowed the development of major offshore Arctic projects, and sanctions have limited Russian access to foreign capital and Western partnership. These are adverse outcomes which Putin can only overcome by reverting to a more moderate and cooperative approach overall, especially in the Arctic. This cooperative agenda is driven by the fact that Russia needs foreign capital and technology for offshore Arctic projects. For Russia, cash flow, investment and technology from foreign firms are vital to getting new offshore projects off the ground.
1 Baev, P, 2012. From European to Eurasian energy security: Russia needs and energy Perestroika. Journal of Eurasian Studies, 3.
- 237 -
In fact, Russia’s securitization agenda is not too dissimilar from other A5 powers. Moreover, there is precedent of cooperation between Russia and its A5 neighbours, as explained in Chapter Five. There is evidence of continued commitment by A5 powers to upholding the existing cooperation with Russia in the Arctic. Russia is by far the largest Arctic power and has a strong legal basis for its Arctic claim. This chapter argues against the increasingly popular ‘new Cold War’ narrative of the Arctic, contending that this approach represents a misreading of Russian Arctic strategy.2
This chapter begins by tying together and discussing the central themes of the thesis. Next it seeks to demonstrate the strengths of neoclassical realism as the most useful lens through which to view Russian Arctic strategy under Putin. A traditional neorealist approach to Russian foreign policy fails to account for Russia’s cooperative behaviour and overall modus operandi in the Arctic. For a neorealist, Georgia, Ukraine and Crimea follow a distinct pattern of Russian foreign policy. However, Russia’s Arctic strategy represents a distinct deviation from the neorealist framework. Neoclassical realism therefore serves as a more useful explanatory framework with which to assess Russian Arctic policy. And finally, this chapter tries to provide an outlook for Russia- West relations in the Arctic and looks to areas for future research.
6.2 Discussion
The Arctic is a unique challenge in that it is at once both a major regional geopolitical theatre and a crucial global environmental issue. Not only are they key strategic issues for the A5 powers, but Arctic environmental developments are also of great concern to the planet as a whole. This section will draw together the two key themes of this
2 See for example: Blank, S, 2011; Lucas, E, 2009. The New Cold War. United Kingdom: Bloomsbury Publishing; Stulberg, A, 2007. Well-Oiled Diplomacy. New York: State University Press; Sakwa, R, 2008; Borgerson, S, 2013. The Coming Arctic Boom. Foreign Affairs, July; Gupta, A, 2009. Geopolitical Implications of Arctic meltdown. Strategic Analysis, 33:2.
- 238 - thesis: first, the relationship between Putin’s Russia and energy markets and the prospects for Russia’s future as an energy superpower; and second, whether Russia and the West are headed for conflict or cooperation in the Arctic.
As Figure 39 indicates, there has been growing interest within Russia in the Arctic. The evidence shows a consistent increase in media and academic coverage of Russian Arctic affairs since Putin’s first term in 2000. Three leading online platforms covering Russian foreign policy were selected in order to compile this data.
250
200 euractiv.com
rferl.org
150 russialist.org Number 100
50
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year
Figure 39: Incidence of the term ‘Arctic’ in reportage covering Russian foreign policy3
These three platforms were selected to represent different political positions towards Russia. Broadly speaking, Johnson’s Russia List favours Kremlin-friendly material. On the other hand, Radio Free Europe is generally anti-Putin whilst Euractiv sits
3 Author’s research, sorted with google analytics. Data sourced from russialist.org; www.euractiv.com and rferl.org.
- 239 - somewhere in between. As Figure 39 illustrates, following the 2007 planting of the Russia flag on the seabed, coverage of Russia in the Arctic began to increase. Unsurprisingly, during the midpoint of the Medvedev Presidency (2008–2012), Radio Free Europe’s coverage of Russia in the Arctic flatlined. Certainly, following the 2010 Barents Sea agreement, its coverage dipped significantly, from roughly 60 items in 2010 to some 25 items in 2011, whereas the centralist Euractiv platform continued to cover Russian Arctic developments, rising from 60 items in 2010 to roughly 80 items in 2011. This was driven by rising global interest in the Arctic, and submissions by A5 powers of their prospective Arctic territorial claims. All three platforms have seen a steady increase in their coverage of Russian Arctic affairs following Russia’s formal 2012 territorial submission.
As set out in Chapter Two, Putin’s energy diplomacy is a central component of his quest to rebuild Russian great power status, reverse the humiliation associated with the collapse of the Soviet Union, and restore Russia’s great power status. For Putin, energy is a hallmark of Russian resurgence and an important foreign policy tool. Russia’s strategic manipulation of the FSU’s overreliance upon Russian gas is a well- known occurrence. As discussed in Chapter Two, the intricate web of pipelines across the FSU tie them to Russian supplies, enabling Moscow to ensure that those who actively seek an exit from Russia’s orbit are punished with sudden supply cuts or price hikes. However, the effectiveness of this strategy is set to wane with Europe moving to diversify its energy supplies.
A key development in Putin’s energy diplomacy is the diversification of Russia’s customer base away from Europe. In what has been described as a pivot toward Asia, Russia’s process of diversification began long before the 2014 sanctions, although it has gained momentum since.4 Although signed in 2014, the Sino-Russia 30 year gas
4 By May 2016 it was reported that China was importing 1.24 million barrels of Russian oil every day, surpassing Germany to become the largest importer of Russian oil. See: The Moscow Times, 2016. China imports record volume of Russian oil. Available at:
- 240 - deal had been under negotiation for over ten years. Despite the deal promising the annual delivery of 38 bcm of gas from Russia to China, commencing in 2018, it is unlikely the necessary pipeline infrastructure will be ready. With the two sides arguing over who would finance the vast infrastructure development, and given the current low oil price, there is not much incentive to rush the project along. Despite the deal pointing to more constructive working Sino-Russian relations, tensions are still a feature of the bilateral relationship, which is set to remain coloured by mutual suspicion. Since 2015, however, there has been some marked progress in the Russia- China relationship.5 Although not entering a formal military alliance, the two nations agreed to increase bilateral military cooperation and to increase joint military exercises.6 Further, in May 2016 a new model of economic cooperation was announced in which Beijing and Moscow agreed to increase bilateral trade to $200 billion by 2020. However over-ambitious this proves to be, the shifting relationship between Russia and China is championed as ‘an example of international cooperation’ by Foreign Minister Lavrov.7
However, Russia’s pivot East does not necessarily spell trouble for Europe. Europe is set to remain Russia’s most important energy customer for the medium term.8 China’s 38 bcm per annum pales in comparison to the 160 bcm per annum delivered to Europe. Moreover, the bulk of Russia’s Western European customers are locked in with long-term (20 to 30 year) supply contracts. Much of Western Europe’s domestic gas infrastructure is owned and operated by Russia’s Gazprom. There are simply no
http://www.themoscowtimes.com/business/article/china-imports-record-volume-of-russian- oil/573115.html 5 For detailed discussion of the changing relationship between Russia and China post-Ukraine see: Gabuev, A, 2015. A soft alliance? Russia-China relations after the Ukraine crisis. ECFR EU Policy Brief, 126. 6 The Moscow Times, 2016. China and Russia to hold joint military drills. Available at: https://themoscowtimes.com/articles/china-and-russia-to-hold-joint-military-drills-52745 7 The Moscow Times, 2016. Russia and China to agree to target 200$bln bilateral trade. Available at: http://www.themoscowtimes.com/business/article/russia-and-china-agree-to-target-200bln- bilateral-trade/571080.html 8 Interview, Canberra, 2015. Note, this is a short-term window given that in the long-term (15-20 years) 75% of world’s population is set to reside by 2040 in the Asia Pacific and African regions. The demand for oil is set to remain a long-term reality given that heavy duty transport in the Asia Pacific region is set to grow by 65% by 2040.
- 241 - short-term alternatives to Russian gas for Europe. The EU is trying to reduce its dependency on Russian gas, but has failed to develop a common energy strategy largely because some EU powers such as Germany have existing bilateral energy deals with Russia. For Germany, there is little incentive to develop a EU common energy strategy.
Throughout the early years of Putin’s presidency, Russia effectively had a number of former Soviet Union republics under its thumb with the sustained selective application of its energy ‘weapon’. As Chapter Two explained, the effectiveness of employing energy as a foreign policy ‘weapon’ has decreased over the past few years. However, Russia still has much of Western Europe locked into long-term contracts and starved of any viable short-term alternatives. For Russia, the incentive behind developing the Arctic is less about employing energy as a foreign policy ‘weapon’ and more about investing in the region as a future economic base. That is how the Arctic represents a divergence for Russian foreign energy strategy under Putin. Yet, under Western sanctions, Russia is cornered with relatively few avenues for access to the foreign capital it needs for its various energy projects. In this context, China has the upper hand in energy contract negotiations with Russia. China has already secured a reduced price for Russian gas given the Kremlin’s current isolation stemming from its aggression against Ukraine.
Notions of Russia as a future energy superpower, however, overstate Russian capabilities. As discussed in Chapter Four, without access to foreign capital and technology, Russia’s offshore Arctic exploration has had to be delayed. Sanctions have been extended from July 2016 by six months out until January 2017 despite the growing sentiment within the EU against the sanctions.9 10 For the short term, it is
9 See Rettman, A, 2015. EU preparing to extend Russia sanctions for six months. Available at: https://euobserver.com/foreign/131219 10 At time of submission, Sep 2017, sanctions are still in place.
- 242 - plausible that Russia will have no alternative but to welcome China as its formal Arctic partner, possibly on much less favourable conditions than with West countries.
Russia’s status as an ‘energy superpower’ is also problematic given the serious domestic political issues within Russia.11 The widespread lack of investment in new exploration and production technologies, coupled with an energy sector riddled with corruption forces Russia into the position of having to continue down the path of partnering with foreign firms in the Arctic.12
Russia is following the vexed path of most petrostates. For example, Venezuela’s ‘resource curse’ means it is over-reliant on energy rents, and given the 2014 oil price dive, economically crippled by factors beyond its control. Venezuela’s trouble is largely self-inflicted through mismanagement and for now Russia has been able to avoid going the way of Venezuela. This is largely due to the management and economic direction provided earlier by Kudrin and Gref, as well as Putin’s reforms to the sector. Therefore, Russia is in a similar, though not yet as dire, position. Figure 40 illustrates the fluctuation in oil prices over the 16 years of Putin’s reign. Russia is still in a position to alter its petrostate trajectory—but in order to do so, it must diversify its economy.
11 Note that Russia’s ‘petro revenue’ increase of the early 2000’s ‘generated vision of an energy superpower among the Russian political elite’. For further discussion see: Baev, P, 2013. 12 See: Medvedev, S, 2016. The Kremlin’s Arctic plans: more gutted than grand. PONARS Eurasia.
- 243 -
Figure 40: Oil prices (2000–2016)13
It is evident that Putin’s first two terms coincided with a period of high oil prices. Figure 40 also illustrates an important point about the patterns of low oil prices, in that in Putin’s time at the top, prices have at the very outset and most recently been below $40 a barrel. During the global financial crisis, prices fell from over $140 a barrel to $45 a barrel, before rising to $70 a barrel some 12 months later. Russia weathered the oil price collapse and although economically strained for some time, managed to muddle through the period. By most accounts, following the 2014 oil price dive, Russia is again struggling through the current economic recession. No one can accurately predict when the oil price will bounce back and begin to rise, though at time of writing it is still below $50 a barrel.14
13 Author’s research. Data sourced and compiled online at: macrotrends.net. 14 Interview, Canberra November 2015.
- 244 -
The central roadblock to Russia’s energy superpower status is its structural weakness driven by an over-reliance on energy rents. It is becoming more apparent as the Russian economy sinks deeper into recession and inflation spikes higher the further the oil price falls.15 Further, the structural brittleness of Russia’s energy sphere is evident from the fact that in 2008 Gazprom was valued at $360 billion, but today is valued at $55 billion.16 Although the 2014 sanctions have had an impact on Russia’s energy industry and curtailed hopes of achieving energy superpower status the 2014 oil price dive had at least twice as much impact on the industry. It would appear that sanctions were causing less than a third of Russia’s economic losses, with the oil price slump causing two thirds of it.17 Russia’s GDP began to shrivel in late 2014 following the oil price fall, not in early 2014 following the sanctions. In terms of Arctic exploration, Arctic oil is simply not economically viable at anything lower than $130 a barrel.
Basic supply and demand economics mean that global energy needs will eventually continue to grow, and in doing so, will drive prices back up. For most IOCs this is not a matter of if, but when.18 For these companies, long-term strategic planning is key and this brings the Arctic back into the picture. Given Russia has the largest Arctic stake, it follows that Russia has the most to gain (and lose) from the development of the Arctic. In fact, the lure of Arctic resources doesn’t threaten stability, it enforces it.19 Sanctions might sideline Western firms from developing their Arctic portfolio in partnership with Russia, but this is only for the short term.
15 Whitmore, B, 2015. Putin gets caught in his own trap. The Atlantic. 16 Bloomberg, 2015. Putin’s energy giant falls on hard times. Available at: https://www.bloomberg.com/view/articles/2015-07-30/putin-s-energy-giant-falls-on-hard-times 17 Russia Beyond the Headlines, 2015. Sanctions not responsible for Russia’s falling GDP, say experts. Available at: http://rbth.com/business/2015/08/24/sanctions_not_responsible_for_russias_falling_gdp_say_exper ts_48709.html 18 Interview, Canberra November 2015. 19 Brigham, L, 2010. Think again: the Arctic. Foreign Policy, October.
- 245 - Despite sanctions, there is no shortage of foreign IOCs seeking to partner with Russia in the Arctic. There is also a political process underway in Europe of seeking ‘business as usual ties’ with Russia.20 Despite discussion of ending Europe’s over-reliance on Russian energy, many European nations have struck bilateral energy deals with Russia. A striking example of Europe’s weakening common energy security strategy is Greece, a traditional ally of Russia. In 2015, Greece and Russia agreed to extend the TurkStream pipeline to Greece, providing a further 47 bcm of Russian gas to Southern Europe in a long-term contract.21
Russia will remain a leading regional energy powerhouse. Although Russia has earmarked the Arctic as the future resource base for the Russian economy, it is yet to be seen how effectively the region will be explored and developed to achieve these ends. For now, it would seem that Russia cannot operate alone in the Arctic as its ambitions are limited by its technology and capital shortcomings. But ultimately Russia will be able to fill the gap between ambition and capability with capital and technology from foreign partners—whether they be from the East or West.
As outlined in Chapters Four and Five, cooperation with the West is a consistent and key facet of Russian Arctic strategy. Table 9 illustrates the extent of Russia-West cooperation in the Arctic. It highlights the reality of widespread, persistent cooperation between the A5 powers within the Arctic. The UNCLOS debate for the US predates the Putin presidency and is not a response to Russian Arctic ambitions as examined in Chapter Four, hence it is not considered a signal of an uncooperative Arctic agenda. In terms of the Security Forces Roundtable, Russia has suspended its participation since events surrounding Ukraine in 2014.22 This thesis has sought to counter the notion that Russia and the West are headed for military conflict in the
20 Carnegie Europe. 2015. Europe’s energy companies go back to business with Russia. Available at: http://carnegieeurope.eu/strategiceurope/?fa=61207. [Accessed 13 June 2016]. 21 Politico. 2015. Putin triggers EU energy rethink. Available at: http://www.politico.eu/article/natural-gas-supply-turkstream-canete-russia-ukraine-gazprom- commision-energy-union/. [Accessed 17 May 2016]. 22 Klimenko, 2016.
- 246 - Arctic. As Chapter Four explained, Russian Arctic strategy consists of relatively unsurprising drivers. The securitisation of Russia’s vast open and increasingly active Arctic border, as well as protection of its economic assets are central to Russian strategy. It is this securitisation process which continues to attract international media attention.
Russia US Norway Denmark Canada Example Arctic Council X X X X X IMO X X X X X IASC X X X X X Arctic Security X X X X Forces Roundtable Agreement on X X X X X Polar Bear conservation Agreement on X X X X X Marine Oil Pollution Agreement on X X X X X Preparedness and Response in the Arctic Arctic Council X X X X X SAR Agreement UNCLOS X X X X SAREX X X X X X Greenland Sea Polar Code X X X X X Table 9: Precedent of A5 cooperation within the Arctic.
However, as explained in Chapter Four, the military bases in question are largely Soviet-era bases that have undergone necessary modernisation. These are arguably necessary to serve as service providers and search and rescue posts along the Russian Arctic shoreline. Likewise, ageing Russian military hardware required modernisation after the dormant 1990s period. Although Russia’s Arctic strategy calls for a revamped military focus, much of the reasoning behind the modernisation of Russia’s military was beyond mere Arctic function. Furthermore, comparison of other A5 securitisation processes demonstrates that Russia’s Arctic military investment is not too dissimilar. While Russia is often cast as the bully in the Arctic narrative, as set out in Chapters Three and Four, Russia has pursued cooperation in the Arctic.
- 247 -
The militarisation issues that are causing concern to other countries appear to originate largely from outside the Arctic rather than from within. Russia’s 2014 actions on the Crimean Peninsula and in eastern Ukraine are the most salient of those issues. The ensuing sanctions cut Russia’s access to much needed foreign capital and the offshore drilling technology necessary to unlock its Arctic shelf.23 Whereas once Moscow was driven to block Chinese offshore Arctic involvement, it is now scrambling to partner with Beijing. Building upon the existing partnerships in the Arctic region, such as the Yamal LNG project for which Beijing agreed to lend Russia $12 billion in 2016, Russia is now looking to China to finance joint exploration ventures in the Barents and Pechora Seas—both key Russian offshore Arctic projects. Although the Yamal project allows Russia to show its capacity for Arctic innovation despite Western sanctions, it does lock Beijing and Moscow together via 15-year loan contracts.24 For Russia, this appears to be the lesser of two evils. However, the Sino-Russian relationship is still fragile and characterised by mutual suspicion.25
In the short term, issues beyond the Arctic will continue to fan tensions between Russia and the West. However, strong precedent exists for cooperation within the Arctic, despite external tensions prevailing elsewhere. Despite the fact that Russia-US relations are at their lowest point since the end of the Cold War, there is still an avenue for communication and dialogue within the Arctic context. Russia set a cooperative precedent through its adherence to international law in the region, demonstrated by its two formal UN territorial claims; various search and rescue activities with its A5 neighbours; and joint military activities with Norway.26
23 See Chapter Two for discussion of 2014 sanctions in detail. 24 Financial Times. 2016. Chinese lend $12bn for gas plant in Russian Arctic. [ONLINE] Available at: https://next.ft.com/content/4ca8886e-0e14-11e6-ad80-67655613c2d6. [Accessed 20 June 2016]. 25 Interview, Canberra October 2015 26 See for Arctic Council search and rescue agreements: The Arctic Council, 2015. Agreement on cooperation on aeronautical and maritime search and rescue in the Arctic. Available at: http://www.arctic-council.org/index.php/en/our-work/agreements; Barents Observer, 2010. Russian- Norwegian naval exercise in Arctic waters. Available at: http://barentsobserver.com/en/sections/topics/russian-norwegian-naval-exercise-arctic-waters. Note that Russia-Norway Arctic ‘war games’ continued throughout 2008 Georgian war.
- 248 -
Russia has maintained its commitment to fostering a cooperative Arctic environment, as indicated by the July 2015 fisheries agreement.27 The Arctic fisheries agreement was signed by Russia, the US, Norway, Canada and Denmark—despite the souring relations between Russia and the West. The agreement which bans commercial fishing in the North Pole region had been under negotiation since early 2014 until Russia’s actions in Ukraine brought discussions to a halt. The signing of the agreement signals the reopening of Arctic dialogue between Russia and the West. The 2014 creation of the Arctic Coast Guard Forum is a further indication of the ongoing dialogue and cooperation within the Arctic between Russia and the West on securitisation issues.
Russia’s military drills in the Arctic as well as elsewhere, and the overflights of Western airspace by military aircraft are reactions to Russian displeasure over NATO expansion. Such events are in reaction to events beyond the Arctic. Yet these are misread as indicative of Arctic politics. Currently, there appears to be a mini-thaw in Russia-West tensions, facilitated by a Russian peace offensive.28 As examined in Chapter Two, Russia’s actions in Syria have been met with increased calls in Europe to drop sanctions. Time will tell how long this renewed peace offensive will last. Arctic strategy is not a short-term issue. It is still a long way from the top of the international agenda, attracting bursts of ‘new Cold War’ anxiety from time to time. As this thesis has argued, for Russia, the Arctic represents a conduit for international prestige and international relevance. Russia’s Arctic strategy is informed like its overall foreign and strategic policy by the desire to consolidate what the Russian political class believes is its rightful great power status, but is not the aggressively military version evident in other theatres.
27 BBC News, 2015. Arctic deal bans North Pole fishing. Available at: http://www.bbc.com/news/world-europe-33549606 28 For discussion on the mini-thaw between Russia and the US following September 11 2001 see: Rywkin, M, 2003. Russia and the Near Aboard under Putin. American Foreign Policy Interests: The journal of the National Committee on American Foreign Policy, 25:1. FOR THAW ON OBAMA
- 249 - Deploying a long-term perspective, there are nations beyond the A5 powers which find the Arctic alluring. Asia-Pacific and Indo-Pacific powers signalled their interest early—Singapore, South Korea, China, Japan, and India are all formal Arctic Council observers. First, there is an environmental interest, in that climate change is melting the Arctic ice cap. This is a security concern for the coastal Asia-Pacific nations. Second, there is a security component in terms of access to energy resources through Arctic hydrocarbon imports. Third, Asia-Pacific nations have a strong economic interest in the Arctic. As the world’s largest exporter, China has a strategic interest in the development of the Northern Sea Route—potentially cutting shipping routes between Asia and Europe from 11,200 nm to 6,500 nm. For Singapore, the Arctic represents an emerging market for its satellite technology and shipping management technology.
This thesis has argued that Russian Arctic strategy is not driven by a military- expansionist agenda. It would seem that Russian aggression elsewhere has coloured this common reading of Russia in the Arctic. But by virtue of geography, Russia has a solid claim to the vast majority of the Arctic.29 The process of securitising Russia’s Far North territory should not of itself be deemed aggressive. At the time of writing, a section of Russia’s 2015 territorial claim overlaps with claims by Denmark and Canada. Yet, Russia has opted to await the CLCS ruling on the matter. Figure 41 illustrates the competing Arctic claims as at July 2016.
29 See: Kaplan, R, 2013. The Revenge of Geography. New York: Random House
- 250 -
Figure 41: Territorial claims in the Arctic as at July 2016.30
It is likely that Canada will alter its Arctic claim when the time comes to formally submit it to the UN. The Trudeau Government is taking a different approach to the Arctic, compared with the more anti-Russian policies of the Harper administration. Trudeau values international cooperation and environmental conservation.31 It is important to note, as examined in Chapter Three, Canada is yet to formally submit an Arctic claim—although a notice of the prospective Arctic claim was tacked onto a separate UN document. It is therefore likely that only Denmark and Russia will have overlapping claims to the North Pole. With both nations providing evidence of their continental shelves being extensions of the underwater Lomonosov Ridge, the CLCS is
30 ‘Arctic territorial claims’. BBC. Available at: http://www.bbc.com/news/world-europe-32380101 . Reproduced with permission. Note: illustrated claims as at July 25 2016. 31 Interview, Canberra, February 2016.
- 251 - unable to swiftly rule. Instead, the claimants will likely be asked to resolve the overlapping claims bilaterally.
Denmark’s claim extends far beyond the North Pole into Russian-claimed Arctic territory. Both Russia and Denmark are planning ahead, with the Russian Foreign Ministry flagging the likelihood of the CLCS alone taking upwards of 10 years to hand down its decision. In a formal response to the overlapping claim by Denmark, Russia noted that the two nations had cooperated at all stages of the claim process. The 2015 statement by Russia, addressing the overlapping claim between Denmark and Russia, states that the issue will ultimately be decided upon via bilateral talks ‘in negotiation and on the basis of international law’.32
Of course, should bilateral talks fail, it is unlikely Russia will cede territory to Denmark. Clearly, Denmark is not in a position to enforce its claim in the Russian Arctic by military means. In any case, it appears unlikely that Denmark would test Russia in such a way.33 The hyper-nationalist atmosphere in the Russian political class would not allow Putin to cede Russian territory to Denmark. Certainly, a neoclassical realist framework would account for the likely policy shift by imputing this domestic variable. Despite the bleak economic outlook given the low energy prices, Putin is still maintaining high approval ratings. This is evidently the result of a population resilient to economic hardship as a result of effective Kremlin propaganda.
For now, Putin’s relationship with the West is marked by high levels of mutual distrust. But that does not mean the West cannot work with Putin. Afghanistan, Iran, and Syria are all cases in which Putin’s Russia has worked with the West—all of which cooperation has come as a result of Kremlin peace offensives, timed usually close to
32 Ministry of Foreign Affairs of the Russian Federation, 2015. Comment by the information and press department on Russia’s application for Arctic shelf expansion. Available at: http://www.mid.ru/foreign_policy/news/-/asset_publisher/cKNonkJE02Bw/content/id/1633205 33 Barents Observer. 2015. Russia ready to talk with Denmark over North Pole. Available at: http://barentsobserver.com/en/arctic/2015/08/russia-ready-talk-denmark-over-north-pole-05-08. [Accessed 22 December 2015]
- 252 - acts of aggression creating facts on the ground. The Arctic, on the other hand, remains an area of open dialogue between Russia and the West; even if tensions increase elsewhere, it will likely represent one of the few remaining spheres of relatively amicable communication.
Australia, although traditionally playing a bit part in the US-Russia relationship, was thrust into the Russia-West standoff following the downing of Malaysian Airlines flight MH17 in July 2014. It was following this event that the second wave of sanctions against Russia was implemented. Arguably this wave was the most damaging, being focused on Russia’s access to international credit markets and its energy industry. The continuation of the cooperative narrative in the Arctic relies heavily on adherence to the legal regime in the Arctic. Yet, a question still remains as to the capacity of international law to weather the uncertainty of the overall international geopolitical context in which the Arctic finds itself. Should we expect Russia to continue to adhere to a cooperative Arctic agenda, particularly if it were no longer to Russia’s advantage to do so? Perhaps not.
6.3 The Arctic as conduit for Russia–West cooperation
The Arctic has been sheltered from external ‘ups and downs’ between Russia and the West primarily because the A5 powers have successfully branded the Arctic as a global zone of peace and cooperation.34 The Arctic might serve as a blueprint for US engagement and cooperation with Russia. With overwhelming areas of shared interest in the Arctic, the region has remained more or less safeguarded from tensions prevailing outside the High North. In 2015, the US took up its two-year Arctic Council Chairmanship, and despite the 2014 Ukraine events, the key objective was to maintain a window for cooperation with Russia. Beyond the desire to maintain dialogue with Russia, however, the relatively cooperative Russia-US relationship in the Arctic may
34 Rowe, E & Blakkisrud, H, 2014.
- 253 - point to the emergence of a certain Western fatigue in dealing with Putin’s Russia in general and the Ukraine issue in particular.
At the same time there has been a marked increase in anti-Western sentiment in Russia. This is overwhelmingly the result of Kremlin efforts to cultivate distrust for the West through blanket propaganda. In a 2014 Duma speech, in which Putin addressed the Crimea referendum, the sentiment was obvious:
Like a mirror, the situation in Ukraine reflects what is going on and what has been happening in the world over the past several decades. After the dissolution of bipolarity on the planet, we no longer have stability. Key international institutions are not getting any stronger; on the contrary, in many cases, they are sadly degrading. Our Western partners, led by the United States of America, prefer not to be guided by international law in their practical policies, but by the rule of the gun. They have come to believe in their exclusivity and exceptionalism, that they can decide the destinies of the world, that only they can ever be right. They act as they please: here and there, they use force against sovereign states, building coalitions based on the principle ‘if you are not with us, you are against us’. To make this aggression look legitimate, they force the necessary resolutions from international organisations, and if for some reason this does not work, they simply ignore the UN Security Council and the UN overall.35
Here, Putin is saying that whilst Russia does not see itself as part of the West, it does adhere to and promote international law. Yet Russian foreign policy under Putin appears at its core to be simultaneously desperate for inclusion by the West as having equal standing. The two ideas appear to be constantly at odds.36 This comes through also in Sergey Ivanov’s comments following Russia’s expulsion from the G8 for the annexation of Crimea. Ivanov stated, ‘some must have thought we would get very
35 Putin, V, 2014. Address by President of the Russian Federation. Available at: http://en.kremlin.ru/events/president/news/20603 36 For discussion of the West rethinking its approach to Putin’s Russia – noting the necessity to view in terms of ‘neither with us nor against us’ see: Trenin, D, 2006. Russia leaves the West. Foreign Affairs, July.
- 254 - much upset. But the G8 is certainly not the place where we would like to (go) back. Honestly!’37
Recent geopolitical developments, in Ukraine and Syria, have meant the US and EU appear weak in Russian eyes. The Kremlin points to the EU’s political challenges— namely, the Greek debt crisis, the 23 June vote for ‘Brexit’ and the refugee influx—as indicators that the EU project is failing. In the Arctic the EU is practically non-existent. The EU is lagging behind the rest of the world in this respect and is at risk of being relegated to the sidelines of the Arctic narrative. This is problematic for the EU in the long term given the range of EU interests, such as fisheries, energy resources and the environment, that are increasingly bound to the Arctic trajectory. Besides securing its Arctic interests and carving out a role in the Arctic, the EU could possibly seek to begin restoring its ties with Russia. One possible aspect of bringing Russia in from ‘the cold’ could be to avoid Cold War stand-offs in the Arctic by signalling the ability to detach from events beyond the Arctic, such as Ukraine. The Arctic may even have unique potential to serve as a blueprint for warming Russia-West ties. Likewise, the Arctic could possibly provide Russia with a potential exit ramp off its current route towards an entire inward turn and increasingly anti-Western agenda.
The 2014 events in Ukraine altered the security landscape of Europe. It now appears questionable that the earlier security architecture will ever be reinstated. In many ways, Ukraine is a litmus test for Russia-West relations. A traditional realist reading of the conflict might run as follows: the West was to blame for Ukraine because US, EU and NATO attempts to expand influence into Russia’s traditional sphere of ‘special interest’ caused Putin to defend Russian interests by annexing East Ukraine and seizing Crimea.38 For Alexander Motyl, traditional realism fails to explain Russia’s actions in Ukraine. He argues that NATO has lacked purpose since the end of the Cold
37 Sergey Ivanov, S, 2015. Sergey Ivanov: Don’t think the Kremlin always decides everything, sometimes it doesn’t. Available at: http://tass.ru/en/politics/829778. 38 Motyl, A, 2015. Five fatal flaws in realist analysis of Russia and Ukraine. Available at: https://www.washingtonpost.com/blogs/monkey-cage/wp/2015/03/03/five-fatal-flaws-in-realist- analysis-of-russia-and-ukraine/
- 255 - War and with member states reducing their defence expenditure, it is implausible that the West’s engagement with Ukraine posed a strong enough threat to Russia to elicit the response that it did. Instead, he claims, it was Russia’s perception of Western engagement with Ukraine that drove Russia’s Ukraine strategy. The same logic is applied in this thesis when assessing Russian Arctic strategy. This thesis applied a neoclassical realist reading of Russia’s Arctic policies and found that perception is key to deciphering the drivers of, and translating into clear English, Russia’s actions and ambitions in the Arctic under Putin.
For NATO, Russia’s actions in Ukraine signalled ‘a stark rejection of Euro-Atlantic integration’ in that Russia had ‘shattered the vision of a stable, secure and economically healthy Europe’ that had guided NATO policy for more than two decades.39 NATO arguably has a history of dissecting Russia-related issues rather than focusing on a comprehensive long-term strategy for Russia-West ties.40 NATO-Russia ties have become too frayed for cooperation, as is evident from the NATO-Russia Council (NRC) meeting in April 2016.41 Reconvening after a two-year hiatus, the parties did not reach an agreement on the normalisation of relations. Russia flagged ‘discontent with the military and political containment by NATO’ and essentially shifted the blame for the poor state of bilateral relations onto the Alliance. Established soon after Russia flagged its support for the US following September 11, the NRC served to identify emerging global problems in their infancy and implement joint action.42 In accordance with Russia’s peace offensive at the time, the period following September 11 and the establishment of the NRC coincided with Putin’s cooperation agenda with Europe. Today, the situation is at odds with the political environment in which the NRC was created and there is a deep divide between the partners.
39 Oliker, O, 2015. NATO needs a comprehensive strategy for Russia. US: RAND Corporation. 40 Ibid. 41 Intersection Project, 2016. NATO-Russia Council Relations: too frayed for cooperation. Available at: http://intersectionproject.eu/article/russia-world/nato-russia-council-relations-too-frayed- cooperation 42 Ibid.
- 256 - NATO, it can be argued, has failed to counter Russia, actively avoiding any show of force. Currently, the security discussion in Europe appears geared to not escalating conflict with Russia. This reflects a deepening desire in Europe for appeasement towards Putin’s Russia. This tendency towards appeasement could lead to sanctions being lifted and Russia’s Arctic exploration once again gaining momentum. The Obama Administration, like the Carter Administration, began by seeking to appease Russia and while applying sanctions steadfastly enough, it avoids any confrontation.
In Europe, France, Italy and Hungary have overtly indicated they do not wish to extend sanctions and some other member states appear to share that point of view. They value trade relations with Russia and the economic impacts of Russian counter- sanctions are also beginning to take their toll. France cites the supposed need for Russian assistance in the Syrian crisis as a reason to drop sanctions. Berlin has continued to protect its existing energy investments with Russia and there are powerful forces in Germany that favour returning to business as usual. The April 2016 Dutch referendum, which voted down Ukraine’s association agreement with the EU, indicated clear disagreement in Europe on how to deal with Russia. On the other hand, Poland, the Baltic and Nordic countries and others are against easing sanctions. Essentially, under present leadership, the West has no stomach for standing up to Putin’s Russia. In turn, Russia is pushing the envelope. For instance, NATO member countries as far as the UK had to intercept Russian jets threatening their airspace some 400 times in 2014, up 50% from 2013.43
From a purely commercial standpoint, Russian joint ventures with the US in the Arctic are ‘thriving’ despite being sidelined given the complicated international political context. Igor Veselov, head of the Russian Emergencies Ministry’s representation in the European Union, recently confirmed that ‘despite the difficult international situation, we have good relations with the United States and with other neighbours
43 Kyiv Post, 2014. NATO jets scrambled more than 400 times this year for Russian intercepts. Available at: http://www.kyivpost.com/article/content/russia-and-former-soviet-union/cnn-nato-jets- scrambled-more-than-400-times-this-year-for-russian-intercepts-372727.html
- 257 - regarding Arctic cooperation’.44 This sentiment is echoed by Admiral Robert Papp, the US State Department’s Special Representative for the Arctic, who stated in January 2016:
Our cooperation is very strong. The Secretary of State [John Kerry] and [Russian Foreign] Minister Lavrov often hold talks. We hope that Minister Lavrov will attend our events in the future. I don’t know any problem in the world that can be solved by stopping communication.45
Ultimately, US-Russia cooperation in the Arctic remains strong despite tensions outside the Arctic.46 The Arctic Council serving as an intergovernmental forum has facilitated the continuation of cooperation and dialogue.
6.4 Neoclassical realism and Russian Arctic strategy
The evolving nature of the Arctic geostrategic system, Russian foreign policy more generally and energy economics are all forces constantly updating, shifting and impacting developments in Russian Arctic strategy. Neoclassical realism furnishes a framework designed to take into account the impact of such independent variables on foreign policy. Neoclassical realism accounts for potential changes to Russia’s Arctic approach, and ultimately provides some capacity to predict its trajectory.
Neorealism fails to provide such flexibility and fails to account for Russia’s adherence thus far to cooperation in the Arctic. This being the case, it would seem that this framework could only ever be fully explanatory in times of conflict. Neorealism offers
44 Sputnik News, 2016. Russia confirms international Arctic projects thriving despite political situation. Available at: http://sputniknews.com/world/20160407/1037653060/arctic-political-situation.html 45 The Russian Geographical Society, 2016. Russia-US cooperation within the Arctic Council remains successful. Available at: http://arctic.ru/international/20160126/276745.html 46 Sputnik News, 2016. US-Russia cooperation in Arctic Remains successful – US envoy for Arctic. Available at: http://sputniknews.com/politics/20160126/1033754313/us-russia-actic-cooperation- successful.html
- 258 - no insight into understanding the decision-making processes inside the black box that is Russia, and therefore provides no real guidance for Western policy-makers seeking to understand Russia. However, neoclassical realism allows a peek inside the black box, for independent variables are tested and resulting foreign policies—cooperative or not—are accounted for. Neoclassical realism allows us to look at the ‘transmission belt’ of decision-making at a unit level to account for like Arctic powers approaching the region with different policies. Table 10 illustrates the ability of neoclassical realism to account for deviations in Arctic strategy resulting from a range of potential variables.
Variable Impact Outcome System threats Reduction in relative Increase in militarization power of Russia in the aspect of Russian Arctic international community policy. could elicit a push by the Kremlin towards a show of force in the Arctic.
Interstate competition Russia safeguards its vast Rejection of international within the Arctic Arctic border open to law principles in the external threat. Increases Arctic to safeguard militarization of region Russian interests in the and resorts to a display of region. Emergence of a force to protect economic military escalation. assets and sovereignty. Reduction in Putin’s Fall in opinion polls could Putin to present the domestic power spark a show of strength Arctic as economic future in the Arctic. An increase base for Russian people, in anti-Western demonstrate information wars seeing modernization of Russian the West as responsible military machine and for undermining political macho powerful image of stability. himself. A sway towards a conflict-geared strategy in the Arctic. Rising nationalism within Rise in nationalist Unlikely CLCS will rule in Russia sentiment towards the Russia’s favour in the Arctic could result with short term and if need be, Putin using the region as Putin is ready to defend a political tool to secure Russian Arctic stake from his popularity at home. To any competitor. please those in the Emergence of militarized Eurasian camp of Arctic policy.
- 259 - government, seeking international acceptance of Russia’s Arctic claim is paramount. NATO stiffens its position Perception of Russia to increase encirclement for Russia. militarization efforts and Use as part of anti- defend stake, if Western information war necessary, perhaps as evidence of Russian preemptively. besiegement by the West. Increase in economic Oil price bounces back Cooperative Arctic incentives and continues to rise, agenda continues as then stabilizes long term resources are still at above $130 per barrel. untapped, and the Russian economic woes technology to explore are resolved and and produce them is still international investment out of reach due to is re-attracted. Putin able sanctions. Russia attracts to sell narrative to finance and technology domestic population as from powers not party to ‘end of struggle in sight’. sanctions – such as China. Climate change pace may China takes advantage of quicken and the NSR is ice NSR, Russia gains from free all year round Arctic tariffs. Domestic interest groups Rosneft, for example, may Rapid expansion in Arctic increase their long term seek further partnerships projects with additional focus on the offshore with Western firms not technological and finance Arctic party to sanctions as well backing from as firms based in the East. international firms may see an increase in Russian military presence to protect investments. Government agencies Ministries jockeying for Depending on which compete over Arctic leadership over the Arctic stakeholder garners most policy agendas policy agenda. Majority of control of agenda, Ministries with stakes in multiple approaches to the Arctic are headed by the Arctic may be taken. individuals trusted by Security Council or FSB Putin so are likely to find Border Service might hold it straightforward to more power than the influence the agenda. National Resource and Environment ministry – therefore expect an Arctic policy which largely focuses on protecting Russian sovereignty as
- 260 - well as protecting economic assets.
Shifts in Russia’s One of Russia’s three With Westernisers perception of its IR detectable schools of IR shaping policy expect an identity thought gains prominence Arctic policy continuing in policymaking processes commitment to within the Kremlin. international law and cooperative Arctic agenda. If Civilizationists determine strategy we could see the emergence of a conflict agenda for the Arctic. Eurasianist shaping of Arctic strategy might see a continuation of cooperative policy. Changes in global energy Russia may perceive its Russia solidifies a security customers to be stronger partnership with diversifying supplies away Asia as seen in the from Russia and therefore emergence of a Russian the Kremlin will look for Arctic policy which builds ways to diversify commercial ties with customer base. China in region.
The global energy security situation might become so dire that nations head Russia expects North to tap offshore competition over Arctic reserves. resources in Arctic, strengthens military position in the Arctic to safeguard reserves.
Table 10: Application of neoclassical realism to Russian Arctic strategy
Neoclassical realism was a useful framework for assessing Russian Arctic strategy given the reality that the Russian world view is shaped by perceptions of the international system and Russia’s position in it. Allowing for domestic variables makes the framework more flexible and able to accommodate changes in Russia’s foreign
- 261 - policy trajectory. This theoretical flexibility is useful as it allows for the exploration of the relationship between cooperation and realism.47
6.5 Area for further research
The ‘moving target’ nature of Russia’s external relations makes it difficult to draw firm conclusions in any study on Russia in the Arctic. During the course of this research a number of additional research questions were identified. Given time and scope constraints they necessarily became areas for further research. One such area is the comparison between Russian Arctic and Antarctic strategy. Despite being similar polar environments, with emerging security concerns, there is little research into the concept of Russian polar strategy more broadly. This was a point raised during fieldwork, when a Russian academic observed:
The real clash for Australia isn’t north; it’s south. The Arctic is an ocean, the Antarctic is a landmass; there is more to fight over. Are you interested in Russian policy in the Antarctic? As an Australian you must be. We are very active down there, and certainly aren’t the only ones.48
It would be interesting to assess if a cooperative North Pole strategy translates into a cooperative South Pole strategy. The partnership dynamic between Beijing and Moscow in the Arctic might also eventuate in joint resource ventures in the Antarctic—or perhaps within 20 years, tensions with the West may have dissipated and Moscow will find itself back in direct competition with Beijing. A study examining the drivers of Russian polar strategy more broadly is necessary to better understand the potential implications for the South Pole.49
47 For further discussion on the tension between realism and cooperation see the work of Ken Oye (1989) in Cooperation Under Anarchy, Princeton: New York. 48 Interview, Moscow April 2014. 49 In January 2007, FSB Director Patrushev travelled to the South Pole and erected the Russian flag.
- 262 - There is also an emerging area of interest related to the political philosophy underlying Russia’s Arctic interest. An in-depth assessment of the drivers of all A5 powers’ Arctic strategies was beyond the scope of this thesis. Chapter Three pointed to a clear divergence between A5 and non-A5 strategies—in which the A5 strategies embodied a securitisation framework, and the non-A5 strategies reflected a rights-based framework.
6.6 Conclusion
This thesis has argued that Russia has actively and consistently sought cooperation with the West in the Arctic. The question remains, how long can this be expected to continue? In 2011, Putin signalled clearly that Russia would ‘defend [its] own geopolitical interests firmly and consistently’.50 Commitment to cooperation and a determination to vigorously defend Russia’s perceived national interest in the Arctic appear to be two sides of the same coin. Neoclassical realism accounts for the domestic level variables which shape Russia’s Arctic policy.
This thesis provides two contributions to the field. It is the first study to apply a neoclassical analytical framework to the question of what is driving Russian Arctic strategy. It contributes to the growing body of neoclassical realist literature aiming to widen traditional IR theoretical approaches to the study and assessment of Putin’s Russia. And second, this study provides evidence of a continuing cooperative climate in the geopolitics of the Arctic. But it must be noted that research was conducted prior to and during the Ukraine conflict. The fall-out from Ukraine acted as an independent variable potentially impinging on East-West cooperation in the Arctic. The thesis
50 Rowe, E & Blakkisrud, H, 2014.
- 263 - hypothesis can thus be further tested against the backdrop of deepening tensions outside the Arctic. 51
The thesis examined the relationship between energy and Putin’s Russia. The thesis found that despite a history of employing energy as a foreign policy weapon, in the Arctic, Putin’s Russia has continued to voice a hardline neo-imperialist rhetoric and yet deliver a softer cooperative approach to the region as compared to its behaviour in the near abroad. This seems wholly at variance with the narrative which depicts the region as an emerging flashpoint of international conflict over access to, and control of, its resources. Such an approach seems to imply that energy is more likely to be a conflict amplifier than a direct cause of conflict.52 Generally, Russia aims to regain international standing using energy and has continued to use resources in a coercive way in the near abroad. However when it comes to the Arctic, Russia seems to prefer measured cooperation. Again, neoclassical realism accounts for this foreign policy divergence via the use of independent variables at a domestic level.
The global community should expect to see Putin’s Russia continuing to cooperate, albeit on Russian terms, in the Arctic. Russia lacks the technology required for Arctic energy exploration and has failed to invest adequately in that field to date, leaving no alternative to joint ventures with foreign energy firms. Externally, the changing global energy mix, spurred by the shale revolution, complicates the current balance and will provide Russia’s customers with more options in the future. Nonetheless, in the long- term, Arctic hydrocarbons might yet be tapped. 53
51 As noted in Preface, the research hypothesis was tested by continued tensions between Russia and the West beyond the Arctic, yet Arctic cooperation has been maintained. 52 Harris, S, 2010. 53 Interview, Washington November 2014.
- 264 - This thesis has argued that the international community should not expect to see a ‘new cold war’ or any serious military confrontation in the Arctic.54 By the end of 2014, Russia had complete military control of its Arctic border. This military deployment and infrastructure is modest compared to Soviet levels. Discussion of militarisation of the Arctic is therefore misleading: if anything, we are returning to normalisation of Russia’s military presence in the Arctic.
Arctic ice cover is melting and will continue to provide easier access to the region’s resource endowment. Just how large the hydrocarbon prize is, or whether the NSR will be a viable option for global transit, are points of continuing uncertainty.55 Likewise, with shale in the energy mix, can Arctic oil compete given the exorbitant barrel price it involves? As the 2014 oil price dive has demonstrated, Arctic oil is a long-term prize.56 Further, there is an overlap of claims to the continental shelf by Russia, Denmark and Canada. While Canada lately is taking a much less assertive approach to this issue, the CLCS cannot make a recommendation on overlapping claims unless all parties can agree on a compromise.57 Will Denmark and Russia carve up the contested region privately and amicably, or could Russia reinforce its claims with military hardware and refuse to negotiate?
Cooperation between Russia and the West in the Arctic has persisted. Signals at the time of writing suggest Russia is drawing back from its aggressive posture of 2014- 2015 and some thawing in relations could be in prospect for Russia-West relations. A range of variables examined in this thesis have created the necessary conditions for Russia’s cooperative approach to the Arctic. As Chapter Four explained, not only does
54 See NATO report which states ‘the threat of armed conflict in the Arctic is still very low’: NATO Parliamentary Assembly Science and Technology Committee, 2015. The High North: Emerging challenges and opportunities. Available at: http://www.nato-pa.int/default.asp?SHORTCUT=3788 55 Inozemtsev, V, 2016. Russia’s northern sea route ambitions. Available at: https://jamestown.org/program/russias-northern-sea-route-ambitions/ 56 Important to note the ‘luck’ of the oil price throughout Putin’s leadership – when he was Prime Minister between 1998-2000 oil was between $10 and $20 a barrel. 57 Baev, P, 2015. Russia’s Arctic Illusions. Available at: http://www.brookings.edu/blogs/order-from- chaos/posts/2015/08/27-russia-arctic-geopolitics-baev
- 265 - Russia have a strong legal claim to the Arctic as the largest Arctic power it also holds a vast majority of Arctic resources. As argued in Chapter Five, Putin’s Russia has demonstrated a precedent of cooperation with foreign firms. In pursuing what is something of a marriage of convenience, IOCs are interested in Russia’s Arctic reserves and Russia lacks the technology and finance such firms offer. Neoclassical realism accounts neatly for the resulting Russian foreign policy in the Arctic via the input of domestic level variables.
It is important for continued cooperation in the Arctic that what happens outside the Arctic remains there, avoiding any spill over of tensions between Russia and the West into the Arctic. Should cooperation ultimately fail and conflict emerge between Russia and the West in the Arctic, the neoclassical realist framework would explain the shift.58 Here, relevant independent variables - for example, Putin’s perception of a strengthening West in the Arctic, Russian nationalist ambition for an Arctic show of force, or an oil price boom well above $100 a barrel, could be invoked to explain, potentially even predict, the trajectory of Russian Arctic strategy. The findings of this thesis are offered in a matrix illustrated by Figure 42.
58 Rose, G, 1998.
- 266 -
Figure 42: A neoclassical realist reading of Russian Arctic strategy, 2000-2016.
As the matrix illustrates, this thesis has found Russia approaches the Arctic region with a broadly cooperative foreign policy. Therefore, the scenario of Russia-West conflict within the Arctic or over Arctic issues is unlikely. A neoclassical realist lens allows us
- 267 - to assess the impact of changes in Russia’s Arctic capabilities on Russian policy, by accounting for shifts and changes in the independent variable – Russia’s perception of its relative power. As the matrix suggests, shifts in the Russian leadership’s perception of Russian state power from low to high must coincide with a shift of Russian capability in the Arctic from low to high, in order to elicit a conflict outcome between Russia and the West in the Arctic.
This thesis examined Russian Arctic strategy under Putin and found that since 2000, despite various shifts in the Kremlin’s perception of Russia’s relative power as well as its offshore Arctic extraction capabilities, we have seen a cooperatively geared foreign policy towards the Arctic. Chapter Two examined Putin’s renationalisation and recentralisation efforts to rein in Russia’s resource sector. During this period Russia had a lower offshore extraction capability as investment and focus was only starting to turn to the region. This coupled by a relatively weak perception of relative state power, resulted in a cooperative Arctic policy. Yet during the 2004-2008 period, we saw the rapid rise in global oil prices which accounted for increased interest and activity in the Russian Arctic. With foreign investment and technological exchanges, Russia’s offshore extraction capabilities began to increase, and necessarily so did the Kremlin’s perception of its relative state power.
The Putin-Medvedev ‘tandemocracy’ saw increased capabilities thanks to his modernization agenda and push for Russian technological development. Variables including the Georgian War and another Ukraine gas ‘war’ helped increase Russia’s perception of its relative state power. Finally, this thesis illustrates the impact of the oil price crash variable as well as the sanctions stemming from events on the Crimean Peninsula and eastern Ukraine on Russia’s offshore Arctic extraction capabilities. Sanctions curtailed funds and technological exchange with the West, accounting for Russia’s swerve towards China in the Arctic. At the same time, relatively little pushback from NATO and the West more broadly over its actions in Ukraine have bolstered Russia’s perception of its relative state power. The neoclassical realist framework holds rich explanatory abilities when it comes to accounting for policy deviations for Russia in the Arctic. Although the end result has for the time been a cooperative approach, the neoclassical realist lens allows us to better understand the
- 268 - rationale behind foreign policy development. Understanding this better also provides avenues for anticipating possible sharp deviations in Russian foreign policy in the Arctic towards conflict. As this matrix illustrates, an increase in Russia’s relative state power, coupled by a shift from low to high offshore Arctic capabilities could cease cooperative agendas.
That said, despite overlapping claims dating back to the 1920s, to date there has been no military conflict between the A5 over Arctic territory. Rather, there is clear precedent for cooperation between Russia and the West in the Arctic. Russia’s alarming 2007 flag plant occurred prior to the 2008 Ilulissat Declaration in which A5 powers agreed to cooperatively determine any overlapping territorial claims.59 Furthermore, in preparation for submitting formal claims, Canada and Denmark jointly mapped their overlapping territory around the North Pole.60 Russia’s revised Arctic claim will be considered from August 2016, although it will take many years for the CLCS to make a judgement. It is therefore likely that discussions between the three claimants will take place. Keeping in mind that a swift and peaceful outcome is in all claimants’ best interest, and based on the evidence presented here, it is unlikely conflict will eventuate. This work investigates how Russia’s Arctic strategy has informed Russian foreign policy under Putin. It is evident that Arctic strategy under Putin illustrates a clear departure from broader Russian foreign policy since 2000.
This thesis shifts the focus on Russian Arctic strategy from what Russia could do in the Arctic, to the realities of what Putin’s Russia will do in the Arctic. A neoclassical realist framework accounts for Russia’s consistently cooperative Arctic approach. Variables examined in Chapters Four and Five such as Russia’s strong legal claim, the requirement for foreign technology and capital and the precedent of cooperation all help to account for Russia’s cooperative Arctic approach. Despite Russia’s assertive
59 Norwegian Government. 2008. THE ILULISSAT DECLARATION. Available at: https://www.regjeringen.no/globalassets/upload/ud/080525_arctic_ocean_conference- _outcome.pdf. [Accessed 8 February 2016]. 60 Globe and Mail, 2011. Dispute over Hans Island nears resolution. Now for the Beaufort Sea. Available at: http://www.theglobeandmail.com/news/politics/dispute-over-hans-island-nears- resolution-now-for-the-beaufort-sea/article1884187/
- 269 - foreign policy elsewhere, it is likely the Arctic will remain a foreign policy anomaly for Putin. Russia appears set to continue its cooperative approach to the Arctic frontier.
- 270 -
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