National Security – Real Consequences

August 21, 2015 in Blog

Former Secretary of State George Shultz once said that the opening of the Arctic is the greatest event in human history since the coming of the ice age. Mr. Shultz was referring to the new possibilities of human knowledge, ingenuity, and innovation – and the national security implications from our energy resources in the Arctic.

American energy development in the Arctic is central to U.S. national security for two main reasons: First, our nation’s foreign policy objectives are driven in large part by our need for a secure and reliable supply of energy, a need fulfilled in a very significant way by Arctic resources for decades. Second, harnessing our energy resources in the U.S. Arctic offers a strategic gateway for the U.S. to assert its leadership in the Arctic at a time when other countries are actively trying to assert their own regional dominance.

Energy is central to national security

America’s experience with the recent shale revolution greatly underscores the importance that energy plays in national security – how our ability to harness our own resources is a peaceful force multiplier in achieving U.S. foreign policy objectives. Technological advances like hydraulic fracturing and horizontal drilling have unlocked previously inaccessible energy resources, redrawing the American energy landscape from one of scarcity to one of abundance catapulting America to the coveted spot of the world’s top oil and gas producer. Net oil imports now account for only 27% of the oil consumed domestically, the lowest annual average since 1985, and the U.S. Energy Information Administration (EIA) expects energy imports and exports to come into balance between 2020 and 2030 – for the first time since the 1950s. Remember energy embargos from dictatorships causing chaos in the U.S. economy? Those days are behind us.

America’s shale renaissance is “why we call it the era of North American energy independence,” said Edward Morse, Citigroup’s head of global commodity research. Not only has the U.S. “broken free of its dependence on energy from unstable sources,” wrote former Secretary of Defense Leon Panetta, but the U.S. has overtaken the Organization of the Petroleum Exporting Countries (OPEC) to become the “vital global swing producer that determines prices.” As the New York Times described recently,

“The demise of OPEC as the price manipulator is what virtually every American president since Richard Nixon had in mind when they promised to find a way to make the United States energy independent, not chained to Middle East or OPEC oil…”

Energy security is so tightly intertwined with national security because energy powers our economy. Daniel Yergin, Vice Chairman of consultancy IHS, called energy security “one of the main challenges for U.S. foreign policy in the years ahead.” Then-Secretary of State Hillary Clinton considered energy “one of the defining issues of the 21st century” that “cuts across the entirety of U.S. foreign policy. Former National Security Advisor to the President Tom Donilon called energy “the foundation of our leadership in the world” that “matters profoundly to U.S. national security and foreign policy.”

Recent U.S. negotiations with Iran over its nuclear weapons program exemplify what Mr. Donilon meant when he said, “America’s new energy posture allows us to engage from a position of greater strength. … It also affords us a stronger hand in pursuing and implementing our national security goals.” Limiting Iran’s nuclear weapons program is no small feat, but the U.S., free from the threat of oil supply disruptions, was able to take a tougher stance during negotiations. “This new U.S. crude supply has allowed the West to put the squeeze on Iran without disrupting the global market or jacking up the price,” Bloomberg reported in an article titled “There Would Be No Iranian Nuclear Talks If Not for Fracking.” Julius Walker, a UBS Securities energy market strategist, explained, “I think it’s pretty clear that without the U.S. shale revolution, it never would have been possible to put this kind of embargo on Iran.”

But just as we are beginning to appreciate the benefits of our domestic energy resurgence, we must stay proactive, even though oil production hit a 32-year high this year, the EIA, in its 2015 Annual Energy Outlook, projects that U.S. total oil production will begin falling in the 2020s and continue declining through 2040, while net oil imports rise. Without the emergence of new technological innovations or the availability of new energy resources, there is little reason to expect that trend to change. Fortunately for America, untapped energy reserves in the U.S. Arctic represent a tremendous opportunity for the U.S. to extend its energy renaissance for many years to come.

U.S. Arctic: The next frontier of energy development

“While the rest of the world has already awoken to the region’s growing importance, the United States still seems fast asleep, leaving the playing field open to more competitive rivals.” – Foreign Affairs, August 2013

The U.S. Arctic holds approximately 35 billion barrels of oil in conventional resource potential, representing about 15 years of 2015 levels of U.S. net oil imports, and 76 billion barrels of oil equivalent (BBOE) of conventional undiscovered resource potential, of which 48 BBOE are offshore. President Obama acknowledged these resources back in 2011 when he said,

“We’re also exploring and assessing new frontiers of oil and gas development from Alaska to the Mid- and South Atlantic states, because producing more oil in America can help lower prices, can help create jobs, and can enhance our energy security…”

In fact, President Obama’s 2013 National Strategy for the Arctic Region spotlights America’s oil and gas resources in the Arctic:

“The Arctic region’s energy resources factor into a core component of our national security strategy: energy security. The region holds sizable proved and potential oil and natural gas resources that will likely continue to provide valuable supplies to meet U.S. energy needs. Continuing to responsibly develop Arctic oil and gas resources aligns with the United States ‘all of the above’ approach to developing new domestic energy sources, including renewables, expanding oil and gas production, and increasing efficiency and conservation efforts to reduce our reliance on imported oil and strengthen our nation’s energy security.”

But the only way our Arctic resources can truly contribute to this security is if development is started now. Because of factors ranging from a shorter drilling season to a more rigorous permitting process, the development of offshore Arctic resources requires much longer lead times: at least 10 years, and possibly more than 30 years. Therefore, even if Alaska saw a significant increase in offshore drilling during this decade, the new supply of crude oil will not become available until 2030s and 2040s – which is when the EIA expects production from the Lower 48 to decline, as a National Petroleum Council report concluded,

“If development starts now, the long lead times necessary to bring on new crude oil production from Alaska would coincide with a long-term expected decline of U.S. Lower 48 production. Alaskan opportunities can play an important role in extending U.S. energy security in the decades of the 2030s and 2040s.”

Energy development: A gateway for U.S. engagement in the Arctic

Even though the U.S. government has long acknowledged the strategic importance of the Arctic, America’s approach has been timid thus far. As engagement in the Arctic becomes increasingly urgent, accelerating energy development there will help position America as a leader in the region.

The 1983 National Security Decision Directive (NSDD-90) under President Reagan said the U.S. had “unique and critical interests in the Arctic region related directly to national defense, resource and energy development, scientific inquiry and environmental protection.” Similarly, the 1994 Presidential Decision Director (PDD/NSC-26) under President Clinton said, “Although Cold War tensions have dramatically decreased, the United States continues to have basic national security and defense interests in the Arctic region…in maintaining peace and stability…we must maintain the ability to protect against attack across the Arctic…”

But the thawing of the Arctic, and the increased access it has facilitated, heightens the region’s strategic significance – and the security risks – to a greater degree than ever before. As the ice-covered portion of the Arctic shrinks to its smallest size since record-keeping began in 1979, the newly open waters are multiplying U.S. security concerns, prompting the U.S. Coast Guard Rear Admiral Daniel Abel to state, “[J]ust the amount of new open water I have to deal with is the size of 45 percent of the continental U.S.” The “new security demands” triggered by this are so severe, cautioned the Council on Foreign Relations (CFR), that “territorial disputes and a competition for resources have primed the Arctic for a new Cold War.” For these reasons, a Brookings Institution report summarized, “There is consensus that the U.S. government should elevate the Arctic as a priority national interest.”

The Department of Defense’s 2013 Arctic Strategy, recognizing “the role that the Arctic region will play in shaping the global security environment in the 21st century,” warned,

“From the U.S. perspective, greater access afforded by the decreasing seasonal ice increases the Arctic’s viability as an avenue of approach to North America for those with hostile intent toward the U.S. homeland…”

Likewise, the May 2013 White House National Strategy for the Arctic Region explained,

“As an Arctic nation, the United States must be proactive and disciplined in addressing changing regional conditions and in developing adaptive strategies to protect its interests…”

More recently, Alaska Governor Bill Walker (I-AK) emphasized Alaska’s “critical role in supporting our national security” in a letter he sent President Obama on August 6, 2015:

“Alaska plays a critical role in supporting our national security, as we are in one of the most strategically important locations on earth. As the nation’s only Arctic state, our strategic location will become increasingly important with the rise of Arctic shipping lanes and competition for Arctic resources. Alaska’s border is less than three miles from Russia. The unprecedented buildup by the Russian military includes their reopening 10 military bases and adding four new bases, all focused on the Arctic.”

Yet, even though the understanding of the strategic importance of the Arctic spans decades, U.S. Arctic policy continues to be all talk and little action. Not only does America remain outside the overarching legal framework governing the Arctic, but it also lacks the infrastructure and equipment critically needed to support a strong American presence in the region. As CFR wrote, “[T]he U.S. government is unprepared to harness the potential that the Arctic offers, and “[n]eglecting the Arctic reduces the United States’ ability to reap tremendous economic benefits and could harm U.S. national security interests.” Brookings Institution agreed: “The changing Arctic is outpacing the government’s current policy and institutional structure to deal with it.” A Newsweek article summarized, “It’s a new kind of geopolitical cold war, and the U.S. is in danger of losing.”

The United Nations Convention on the Law of the Sea (UNCLOS)

The U.S. is the only Arctic country that has not ratified the 1982 United Nations Convention on the Law of the Sea (UNCLOS), which establishes sea boundaries and exclusive economic zones (EEZs) and designates sovereignty over natural resources, including fish stocks and hydrocarbons. All Arctic nations – Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the United States – own mineral rights in their EEZs, which extend out from shore for 200 nautical miles. But the UNCLOS allows countries to claim exclusive jurisdiction over their continental shelves beyond those 200 miles, and Russia, Norway, and Denmark have already put in claims (Denmark’s claim was for a “Texas-size area of international waters”). The area the U.S. could potentially claim under the treaty would be an extra 350,000 square miles of ocean – “an area roughly half the size of the entire Louisiana Purchase,” which covered 15 U.S. states and two Canadian provinces. But the U.S. is barred from filing such a claim, because it has not officially ratified the UNCLOS.

Despite support from the Bush and Obama administrations, the military, shippers, energy companies, the U.S. Chamber of Commerce, and environmental groups, the U.S. has yet to ratify the UNCLOS, even though it already follows the treaty’s guidelines. Failing to ratify the treaty has been a “real harm to the national interest,” said Dr. Scott Borgerson, a CFR fellow, and it has also discouraged exploration for oil and gas in the extended continental shelf as the U.S. stake in minerals there cannot be recognized by other countries.

Not only is the U.S. sitting on the sidelines from a legal perspective, but the state of its infrastructure and equipment, or the lack thereof, illustrates the passive stance the U.S. has taken toward the Arctic.

Inadequate infrastructure and equipment

“A general lack of infrastructure on both sea and land is perhaps the largest barrier to development in the Arctic, although some states, like Russia, are investing more money in the challenge than others.” – Council on Foreign Relations

A Department of the Interior inventory of U.S. resources in the Arctic found “few airfields, no major roads, no deep-water ports, and relatively little coastal infrastructure and personnel.” And when it comes to ice-breaker class vessels, the U.S. is significantly out-equipped by other countries. Russia, for example, has 30 and Canada has 15, but the U.S. only has two that are operational: one heavy icebreaker that was built in the 1970s and is now 40 years’ old, and a second, smaller icebreaker intended for scientific research.

Many have long articulated the need for more U.S. icebreakers. Back in 2006, the National Research Council warned, “U.S. icebreaking capability is now at risk of being unable to support national interests in the north and the south.” A Mission Need Statement approved by the Department of Homeland Security in 2013 said, “Coast Guard will need to expand its icebreaking capacity, potentially requiring a fleet up to six icebreakers (3 heavy and 3 medium) to adequately meet mission demands in the high latitudes…” A Center for American Progress report urged, “The U.S. government needs to start designing and building new heavy icebreakers to ensure that the Coast Guard retains capability to access the Arctic and fulfill its missions in this region…” Rep. Don Young (R-AK) explained, “Without access to heavy icebreakers, we will be unable to adapt to historic changes in the Arctic.”

But even if a new icebreaker is commissioned, the U.S. Coast Guard estimated that it would take eight to ten years – and $800 million to $925 million each in 2008 dollars – to build.

Other countries are treating the Arctic as a strategic priority

“In 2007, Russia planted its flag on the North Pole’s sea floor, and in the years that followed, other states also jockeyed for position, ramping up their naval patrols and staking out ambitious sovereignty claims.” – Foreign Affairs, August 2013

The absence of U.S. engagement in the region is made all the more obvious given the policies of other Arctic states, led by Russia’s hawkish Arctic program. Even non-Arctic countries have signaled their interest in the area, with India, Italy, Japan, Singapore, South Korea, and China becoming Arctic Council observer states in 2013. As the Department of Defense noted, “Arctic and non-Arctic nations are establishing their strategies and positions on the future of the Arctic in a variety of international forums.” Similarly, a CFR policy memo observed,

“Like the United States, the Arctic nations of Russia, Canada, Norway, and Denmark have geographical claims to the Arctic. Unlike the United States, however, they have each sought to exploit economic and strategic opportunities in the region by developing businesses, infrastructure, and cities in the Arctic. They have also renewed military exercises of years past, and as each nation learns of the others’ activities, suspicion and competition increase.”

Russia

“We’re not even in the same league as Russia right now. … We’re not playing in this game at all.” – Coast Guard Commandant Paul F. Zukunft

In 2013, Russian First Deputy Defense Minister Arkady Bakhin said, “[W]e have come [to the Arctic], and we’ll stay there forever. This is the beginning of a big journey.” The Russian government kept its word: not only is Russia reopening former Soviet bases in the area and sending over ships and equipment, it is even considering creating a new military district in the Arctic.

Russia’s interest in the Arctic is driven primarily by the potential of new maritime shipping lanes and its abundant oil and gas reserves there. Because the Arctic could be a shortcut for transit between Europe and Asia, Russian President Vladimir Putin said the Bering Strait between Alaska and Russia could be the “next Suez Canal,” an “international transport artery that will rival traditional trade lanes.” Already accounting for 20 percent of Russia’s GDP, the Arctic holds 95 percent of Russian natural gas reserves (over one quadrillion cubic feet of undiscovered natural gas, according to the U.S. Geological Survey) and 60 percent of its oil reserves. To develop these resources, Russia has signed Arctic exploration agreements with Italy’s Eni, Norway’s Statoil, and Exxon in the U.S. In February 2015, the Russian Energy Minister Alexander Novak said that the Russian Rosneft will invest $500 billion in exploring the Arctic over the next 20 to 25 years.

Russia’s ambitions are evident in the August 2015 claim it filed with the United Nations (UN) to extend its exclusive economic zone by about 1.2 million square kilometers, or about 463,000 square miles, under UNCLOS. This claim would entitle Russia to at least 5 billion tons of new oil and gas reserves, according to Russian Natural Resources Minister Sergei Donskoi. This is not the first time Russia has tried to do so – it submitted a similar claim in 2002, which was then rejected by the UN.

Russia has also made the Arctic a military priority. In 2013, Putin, as part of a seven-year strategy to “improve its military defense network in the Arctic,” ordered the Russian military to focus on the Arctic, because the country needed “every lever for the protection of its security and national interests there.” In 2014, Putin announced that Russia had been establishing an “integrated network of military facilities in the Arctic territories to bolster border defense,” and Russia’s latest military doctrine of December 2014 mandated a stronger military presence in the Arctic. Russian Chief of the General Staff Valery Gerasimov said, “In 2015, the Defense Ministry’s main efforts will focus on an increase of combat capabilities of the armed forces and increasing the military staff in accordance with military construction plans. Much attention will be given to the groupings in Crimea, Kaliningrad, and the Arctic.”

Russia’s new military division, the Joint Strategic Command North (JSCN), reflects Russia’s dedication to galvanizing its presence in the Arctic. JSCN was established as a “new Arctic command structure …to coordinate every military unit operating in the theater,” a “complementary unit to Russia’s existing four military districts,” with “high probability it…in the future…will be transformed into a fifth military district.” The new command features a naval infantry brigade, an air defense division, “bear bomber” military planes, a fleet of 40 surface ships, 40 submarines, and 30 icebreakers – including the world’s largest icebreaker – and naval aviation aircrafts and helicopters. Additional military resources Russia has planned for the region include a mechanized brigade, missiles, and missile defense systems, along with 10 Arctic search-and-rescue stations, 16 deepwater ports, 13 airfields, and 10 air-defense radar stations. These air-defense systems, according to an August 2015 report by the U.S. Army’s Foreign Military Studies Office, include a “short-to-medium range surface-to-air missile and antiaircraft artillery weapon system” that had been upgraded with “’serious modifications…for use in the Arctic zone,’” antiaircraft machine guns, and airborne interceptors. Additionally, a training center for Arctic units is expected to be created this year, in order to provide training for a specialized “polar” brigade for Arctic welfare, to be later supplemented by a second Arctic-warfare brigade in 2017.

According to Anton Lavrov, an analyst at the Center for the Analysis of Strategies and Technologies in Russia, “Russia is not facing any direct military threats from the north. Its military buildup in the Arctic pursues long-term goals rather than any immediate objectives.” The moves Russia has already taken to build up its Arctic military apparatus makes clear that Arctic development is an undisputed national priority.

During a Senate Armed Services Committee hearing in March 2015, Senator Dan Sullivan (R-AK) expressed concern about Russia’s military buildup in the Arctic while American plans remained starkly meager in contrast.

Non-Arctic countries

Even countries that do not have official stakes in the Arctic are active in their forays into the region. China, eyeing potential energy resources and maritime routes, has “begun a concerted effort to make inroads in the Arctic,” so much so that Chinese officials reportedly call China a “near-Arctic state.” China even has an official icebreaker, the Xue Long, or “Snow Dragon,” with another brand new $300 million icebreaker that is expected to become operational this year. China is also spending about $60 million a year on polar research, and it has signed a free trade agreement – its first with a European country – with Iceland, which it views as a gateway to the Arctic, and it is even building an embassy there that is going to be Reykjavik’s largest.

China is just one of the twelve non-Arctic countries that have been admitted as observers to the Arctic Council, an intergovernmental forum for Arctic states that the Financial Times now calls the “center of geopolitical intrigue.” Importantly, the United States has assumed chairmanship of the Arctic Council this year. Other countries are participating and observer states, including India, Japan, and Singapore, are allowed to participate in the determination of the future of policy in the region through working groups, and their participation ensures that “voices of countries a long way from the polar ice will be heard.”

 Conclusion

A Foreign Affairs article pronounced, “[T]he opening up of the Arctic offers a once-in-a-lifetime opportunity to develop a frontier economy sustainably.” With private oil and gas companies seeking to take on the challenge of responsibly developing U.S. Arctic resources, America is well-positioned to grasp that opportunity and turn it into an asset that will be envied the world over. How America responds to this opportunity will reflect its commitment to providing for a safer world for generations to come.