Coeuraj identified Arctic competition as one of the top issues to watch in Canada in 2022. With attention shifting to the Polar North following Russian aggression against Ukraine, Coeuraj is offering its insights on where things are headed—and what to keep an eye on over the coming months.
The Arctic is Getting Hot
From a security perspective, in 2020 Russia conducted three days of high arctic combat training, which Rob Huebert, a defence expert at the University of Calgary, interpreted as a message from Russia to NATO about military dominance in the Arctic. Russia conducted more Arctic military exercises in 2021 including test firing a hypersonic missile, a technology meant to put Moscow ahead of any modern arms race and that President Putin has dubbed “invincible.” It isn’t just Russia that Canada needs to keep an eye on. In 2018, China declared itself a near-Arctic state and in 2021 the US Coast Guard unexpectedly encountered Chinese warships in the American Exclusive Economic Zone off the coast of Alaska.
The United States has been preparing for increased Arctic aggression from Russia and China. In 2019, the United States’ Department of Defense released an Arctic Strategy focused on asserting American military strength in the Arctic. Not long after, in 2020, the Trump Administration released a memorandum on safeguarding American circumpolar interests, which included directions to acquire a polar security icebreaking fleet. That same year the United States released an Arctic Strategy for the Air and Space Force.
Canada sits in an awkward spot. On one hand, Canada shares a strong relationship with the United States. Both countries have signalled their commitment to cooperation on defense and security, including modernization of the North American Aerospace Defense Command (NORAD). Furthermore, Canada is a member of NATO and has begun ongoing military exercises in northern Norway. Canada has just also participated in Arctic air defence operations with the United States.
However, Canada’s ability to meaningfully collaborate internationally is a function of its capabilities at home. Canada’s northern defences and investments into the arctic communities—a cornerstone of Canada’s argument for Arctic sovereignty—are woefully inadequate. Canada has not met its NATO spending target of 2% of GDP, and its intentions to do so in the near future are not clear. As noted in a 2021 article in The Walrus, Canada has seemed uninterested in investing in the North while its geopolitical rival, China, has been making inroads.
The stakes are high. A growing focus on security could be at the costs of northerners’ socio-economic needs. Conversely, the changing security scenario is a risk to Canada’s Arctic sovereignty and potential challenge to Canada’s traditional role as a peacekeeping nation that focuses on diplomacy over military. Whatever pathway Canada ultimately takes, if it cannot thread the needle with its Arctic counterparts, the world risks losing a major theatre for peaceful cooperation, scientific collaboration, and global goodwill.
The Arctic also sits on the frontline of climate change with impacts described by the IPCC as unprecedented and irreversible. Amongst many worrying developments, retreating sea ice and glacier melt are opening international shipping corridors while endangering the traditional routes relied on by Indigenous peoples. Changes are expected to be dramatic across Arctic communities and coastlines. Permafrost thaw and extreme weather events are threatening existing community infrastructure, which is inadequate to begin with. Our domestic investment and regulatory regimes will need to keep up with this pace of change.
So where might Arctic collaboration go from here?
Leadership Without the Arctic Council
After 25 years of peaceful collaboration, the work of the Arctic Council is on “pause” in response to Russian aggression. That pause could be indefinite. However, the need for Arctic cooperation is greater than ever. Arctic countries, minus Russia, intend to continue cooperation on science, climate change, and establishing east-west Arctic economic ties. They no longer have an Arctic-exclusive multilateral forum to do so, let alone a body that includes Arctic Indigenous peoples, and there’s no obvious successor or leader to fill the vacuum.
So what’s next? We will be keeping an eye on what multilateralism looks like in the months to come; how Arctic Nations collaborate with one another and harness the economic power in their southern cities to promote northern east-west ties; how they include Arctic Indigenous peoples; and whether they include non-Arctic nations. And above all, we will be looking for indications about how Canada will position itself in the emerging paradigm for collaboration without Russia. The next forum for multilateral relationships to emerge—if there’s one at all—will signal how Canada and other Arctic nations will position themselves for the future.
Investments & Economic Relationships
This year, a panel discussion at the Arctic360’s annual conference in Canada highlighted a major issue for the Canadian Arctic: groups looking to work in the North cannot access capital, and investors incorrectly perceive the Arctic as a riskier environment than it really is. Closing the gap between Bay Street and the 60th Parallel is mission critical for building the multipurpose infrastructure called for by Northerners and Indigenous peoples, as well as businesses who want to do more in the North.
However, even if Bay Street takes more interest in Baffin Island, east-west economic relations between Arctic neighbours will likely be required for Northerners to enjoy greater socio-economic benefits. These relationships could take many shapes, from revitalized Indigenous trade networks building on traditional ones between Greenland and Nunavut or Alaska and the Canadian western Arctic, through to greater investment from Wall Street into the territories or enhanced transportation networks across Arctic population centres.
Over the next few months, we’ll be watching investment patterns, airline announcements, infrastructure projects, and policies from public governments including those that impact trade and investment in order to understand what the future of Arctic economic relationships look like.
The Government of Canada has been unequivocal that the military is part of Canada’s solution to reinforcing sovereignty over the Arctic. And yet, Canada has struggled to open its keystone Arctic naval station, and during the height of the COVID pandemic NAVCanada, an independent nonprofit, considered pulling 24-hour air traffic control at the Inuvik airport which serves as a NORAD forward-operating base.
Canada’s allies have offered to provide military support. The United States has committed to ongoing Arctic dialogue with Canada on issues including continental security. Canada and the United States are now collaborating to modernize NORAD as well. In September of 2021, the UK offered greater military partnership as well as nuclear-powered submarines.
Importantly, although all Arctic nations are united in their abhorrence to Russian aggression, not all Arctic Nations are NATO members. This dynamic opens significant questions about Arctic military alliances and the trajectory of Arctic militarization.
Over the next few months, we’ll be keeping an eye on major military announcements, especially related to NORAD or NATO activities in the North. Additionally, we’ll be watching for whether the North American arctic countries open greater military collaboration with non-NATO Arctic allies Sweden and Finland.
Pursuing reconciliation in the Arctic is uncontroversial—in fact, it forms the backbone of Canada’s Northern and Arctic Policy Framework, which was co-developed between Canada, Indigenous peoples and governments, and subnational governments with Arctic marine and/or territorial interests.
To date, Indigenous peoples and governments have focused on major win-win themes, like infrastructure which is critical for the economy and for Canada’s assertion to sovereignty. Improved relationships have also helped to overhaul regulatory regimes and create more certainty.
There is still work to be done between public governments and Indigenous peoples, however, especially related to languages, procurement, and other priorities for Indigenous communities. What that work looks like may change as geopolitical realities change as well.
Overall, reconciliation may lower the level of perceived political risk to doing business in the Arctic and position Canada to better capture its share of the over $100 billion in estimated Arctic investment over the next decade—something that would advance national sovereignty and the socio-economic wellbeing of Indigenous communities at the same time.
Over the next few months, we’ll be monitoring for advancements in the Inuit Nunangat and arctic policy spaces, as well as the priorities put forward by Indigenous leaders.
The Resource Economy
The resource economy has been a huge contributor to northern economies. But what the future of that contribution looks like depends on how we navigate some competing trends.
On the one hand, many existing operations are reaching the end of their life spans. The three operating diamond mines in the NWT that contribute to almost 1/3rd of the territorial GDP are currently expected to close over the next decade. Interest holders in the region are collaborating on how to reimagine a new economy. Similarly, the Norman Wells oil fields may be reaching the end of their economic lifespan.
On the other hand, the need for critical minerals to drive the green economy transition will reinvigorate exploration. There are two prospects in the NWT at Nico and Nechalacho that could make real contributions to integrated Canadian supply chains if developed and brought to scale. And there are other deposits to be found. How do we help this happen? How do we build coalitions of interest?
There are also base and precious metal mines in all three territories that either have opened or are at advanced stages of the permitting process. Are conditions aligned to successfully see these mines to development while securing community and ecological benefits? We are watching forthcoming decision processes attentively, especially on Mary River on Baffin Island and Kud Ze Kayah in South Central Yukon.
The Arctic both onshore and offshore is also home to significant oil and gas reserves and the offshore is subject to an indefinite moratorium. With energy security emerging as an important feature of geopolitics today, will northern reserves find a niche as greener fuel sources are developed?
Over the months to come, we’ll be watching for policy, investment and regulatory announcements signaling where opportunities lie for the Northern resource economy. The overarching question though is this: How does development in the north outgrow the classic boom-and-bust cycle of the industry and set the groundwork for enduring regional prosperity? Answering that question requires imagination and collaboration.
What could, and should, multilateralism look like in the Arctic in the wake of the Arctic Council? What should impacted communities, organizations, and governments have on their radar this year and beyond? We’d love to hear your insights as the world navigates this next chapter.