Part I: The top of the world is melting even faster than scientists thought. Here’s how we know.
Part II: Vladimir Putin thinks the North Pole belongs to Russia. Find out why he may be right.
Part III: Greater wealth is a consequence of Arctic warming. Here are the riches that await.
By Eric RostonEric Roston

As the Arctic Circle’s ice melts away, people of the High North feel their top-of-the-world economy heating up. Gold mines, roads and a full spectrum of energy projects dot the horizon—with Russia leading the way and other Arctic countries scrambling to catch up. There’s much to do, and not enough capital to go around. That means countries with deep pockets, deep ambition and no Arctic coastline—namely China—can get a seat at the table, too.

Investing at the top of the world isn’t easy. The remoteness of the region, and a lack of basic infrastructure means the Arctic is simply not wired into the rest of the global trade system. Arctic financial data are scarce. But the global asset manager Guggenheim Partners has shed some light on what’s likely to come next in the Arctic. They’ve spent the last seven years studying the region and the last three amassing a database of 900 planned, in-process, finished, cancelled and desired Arctic infrastructure projects.

Some of the projects reflect grand ambitions to upgrade national, industrial and social systems. Others are smaller scale and meant to connect remote places into larger patterns of trade. Taken together, they would require as much as $1 trillion in investments.

So far, Russia's oil-and-gas money has underwritten a lot of the work, giving President Vladimir Putin a leg up as changing conditions grant access to new riches. Russia has an overwhelming lead over its neighbors with nearly 250 potential projects. Finland, the U.S. and Canada follow in the number of wish-list items. Underscoring many of these initiatives is careful maneuvering by China—whether through Arctic trade deals or strategic financing.

Who can build their projects first, and who funds them, will go a long way in determining which countries are best positioned to exert economic dominance in the region over the coming decades.

Development in the Arctic

From roads to new mines, these are some of the largest projects on each country’s wish list, according to Guggenheim Partners:
Transportation
Fossil Fuel Energy
Renewable/Nuclear Energy
Mining
Power
Economic
Civic
Source: Guggenheim Partners

Mining, road-building, renewable energy and service businesses make up the greatest number of individual projects in the infrastructure inventory by sector, at least in part because most of those are smaller-scale items that all communities need.

Oil and gas production projects require the biggest overall potential investment—as much as $200 billion—or more than the next three categories combined (mining, renewable energy and railroads). The Arctic Circle may hold more than a fifth of the world's undiscovered oil and gas, most of it offshore. However, with oil around $60 a barrel, not all will be worth pursuing.

Potential Projects, and Their Estimated Cost, by Country

Source: Guggenheim Partners

There’s at least one big reason why Russia is poised to remain a dominant player in the region: the country is rich in natural resources, a disproportionate amount of which lie in the Arctic. That’s why the north already makes up about 20 percent of the Russian gross domestic product, and Russia contributes about two-thirds to the overall Arctic economy. President Vladimir Putin has presided over financially and technically ambitious energy exploration goals. He officially opened a $27 billion liquefied natural gas plant, called Yamal LNG, the first week of December on northwestern Siberia’s Yamal Peninsula.

Russia’s Arctic list is heavily populated with hydrocarbon projects, from new or expanded gas fields to refineries and the ports, pipelines and rail needed to move the product.

Drilling opportunities are expanding in the U.S. The Trump administration is preparing to open Alaska’s Arctic National Wildlife Refuge along with the Chukchi and Beaufort seas to drilling. The administration in November issued the Italian company Eni SpA in November an exploratory-drilling permit, the first since Royal Dutch Shell pulled out of its $7 billion Chukchi Sea venture in 2015.

Coal mine in Svalbard, Norway.
Footage: Elise Coker and Flemming Laursen

Developing Arctic hydrocarbons is not universally considered a safe or moral decision, given the treacherous working conditions and the overdetermined dangers of further carbon dioxide pollution. Norway is out ahead of its northern neighbors in thinking through this complexity. Amidst public concern about climate change, its $1 trillion sovereign wealth fund—built by oil profits—may divest from fossil fuels. However, its state oil company has been moving ahead on new exploration despite obstacles.

The Arctic also offers hydropower, wind, geothermal, tidal and solar energy. There’s even a floating Russian nuclear power generator for Bilibino, an eastern town that is shuttering aging reactors—the world’s most northern. Miners have long desired to extract Arctic gold, silver, graphite, nickel, copper, titanium, iron, lead, coal, diamond, uranium and the rare earth metals critical to high-tech devices. And there are Arctic power grids, railroads, highways, subsea telecom fiber, satellites and aviation corridors to pin down so that everyone and everything can get anywhere anytime.

The energy and minerals that feed industry are paralleled by a volume of fish that can potentially feed people for decades, or, if caught sustainably, forever. Some species are already following warmer waters northward. It’s a complex picture, though: Changing temperature, salinity, sea-ice behavior and ocean acidification all have an effect on fish populations, and scientists have yet to draw firm conclusions about what future Arctic fisheries may look like. Accordingly, nine countries and the European Union decided in November to leave international waters at the top of the world in its under-fished state for at least 16 years. The pause is intended to allow scientists to better understand the regions fisheries and how they may change as sea ice vanishes.

Building the Arctic Infrastructure Inventory has led Scott Minerd, Guggenheim Partners’ global chief investment officer, to a counterintuitive conclusion: The firm is looking past its Arctic inventory, as much as it’s looking at it.

Oil rig in the Beaufort Sea.
Photographer: Stockbyte/Getty Images

“It’s a slow-go but it’s definitely accelerating,” Minerd said of northern investment. Updating the inventory is keeping his thought “ahead of the curve relative to most investment firms,” he said. “Most investment firms don’t even have the Arctic on their radar. Eventually they will.”

Instead of energy, bellwethers for Arctic development may include Finland's Hotel Santa Claus, Norway’s Kolos data center, which is aiming to be the world’s largest, Sweden’s NorthVolt battery plant and Finland’s North European BioTech Oy, which will make advanced ethanol and other products from forestry-industry waste, like recycled wood, sawdust.

Most tantalizing, however, for Minerd and many others, is the oft-promised, and yet never quite present, opening of ice-free shipping lanes.

A New Ocean at the Top of the World

Marine transportation may take most direct advantage of the unique geophysical calamity of melting Arctic sea ice. Just not quite yet.

The expanse of ice in September 2017 was 25 percent lower than the 1981-2010 end-of-summer average, putting the 10 lowest sea-ice area measurements all in the last 11 years. “There are many strong signals that continue to indicate that the Arctic environmental system has reached a ‘new normal,’” scientists concluded in their annual Arctic Report Card in December.

The ice is diminishing but may not disappear entirely in summers for another 25 years, which makes affordable and safe Arctic shipping a slow boil.

It’s also among the most difficult economic challenges. Even without ice, it’s colder up there than people might prefer, costlier to insure vessels and the region lacks adequate maritime services. Sparse satellite coverage makes navigation and tracking more difficult. There were just 19 trips between Europe and Asia through the Northern Sea Route in 2016, according to the Centre for High North Logistics, lower than average since Russia opened it to other nations in 2009.

The promise is real, which is why the world’s largest nation is upgrading its ports and its overwhelming fleet of icebreakers.

Each Country’s Icebreaker Fleet

Current

Building

Planned

Russia

Finland

Canada

Sweden

U.S.

Denmark

Estonia

China

Germany

Norway

Japan

South Korea

U.K.

Current

Building

Planned

Russia

Finland

Canada

Sweden

U.S.

Denmark

Estonia

China

Germany

Norway

Japan

South Korea

U.K.

Current

Building

Planned

Russia

Finland

Canada

Sweden

U.S.

Denmark

Estonia

China

Germany

Norway

Japan

South Korea

U.K.

Current

Building

Planned

Russia

Finland

Canada

Sweden

U.S.

Denmark

Estonia

China

Germany

Norway

Japan

South Korea

U.K.

Source: U.S. Coast Guard

The sea lanes above Russia cut as much as 40 percent off the distance between east-west routes through the Suez Canal. Russia already maintains at least 16 ports along the 3,000-mile route.

A commercially viable trade route is an attractive proposition for a country that’s hungry for income and power status. As recently as mid-November, Putin endorsed allowing only Russian-flagged vessels to carry and store hydrocarbons along the Northern Sea Route, signaling a strong interest in developing his own northern shipping companies and generating revenue to upgrade infrastructure along the coast.

The Northwest Passage, which weaves from the Davis Strait between Canada and Greenland to the Bering Strait, will likely remain essentially unpassable for regular commercial shipping for even longer. Its ice is more dangerous and the route itself, while about 30 percent shorter than existing routes, is underdeveloped even compared with the facilities north of Russia.

British researchers in 2016 used climate models to gain insight about how disappearing ice may enable Arctic shipping to evolve.

As the Ice Melts, Arctic Shipping Routes Expand

Overwater shipping routes
Icebreaker shipping routes
Sea ice thickness:
0–0.5
0.5–1.0
1.0–1.5
1.5+ meters
Source: Melia, N., K. Haines, and E. Hawkins, Sea Ice Decline and 21st Century Trans-Arctic Shipping Routes

The same British authors in July published analysis showing advances in predicting months beforehand how passable Arctic routes will be in the summer, which will be an increasingly useful skill.

Other countries aren’t ready to cede all of the Arctic’s potential riches to Russia and its Arctic neighbors. For China, which may be playing the shrewdest and longest-term hand in the Arctic, avoiding Russian tolls and territory may be less a pie-in-the-sky dream than an eventuality, as a third shipping channel—the Transpolar Sea Route—opens traffic straight over the North Pole, the fastest and shortest route.

It’s a real option, but in a future that only Chinese leaders appear to be contemplating.

The World, Turned on Its Side

China’s Arctic vision stretches out past 2049, the centennial of its revolution. The nation is playing an incredibly slow, cautious and high-stakes strategy to build itself up as a leading Arctic (and Antarctic) power, according to Anne-Marie Brady, a global fellow at the Wilson Center’s Polar Initiative, executive editor of The Polar Journal and author of a 2017 book, China as a Polar Great Power.

China’s ambitions in these regions have not received due attention, in part, Brady says, because so few Western journalists speak and read Chinese. The country has deployed what she calls “two-track messaging,” sending alternative signals to domestic and international audiences. President Xi Jingping in November 2014, for example, spoke in Hobart, Australia, where for the first time he stated that his country will be “joining the ranks of the Polar great powers,” which Western media largely missed.

In June, the government broadened its ambitious Belt and Road Initiative for trade to include the Arctic.

China cannot physically claim Arctic territory, but it can buy stakes and influence wherever it seems wise.

“China’s thinking on the polar regions and global oceans demonstrates a level of ambition and forward planning that few, if any, modern industrial states can achieve,” Brady writes.

China has undertaken a soft-power campaign, first focused on scientific collaboration, with financial interests not too far behind. The nation struck a free-trade pact with Iceland in 2013, and it has held free-trade discussions with Norway since 2008. Finland has jointly called for greater cooperation with China, in the context of European Union trade policy. Canada and China in December extended exploratory free-trade talks after being unable to launch a formal round.

Chinese agencies are already common financiers of Arctic projects, including several Russian initiatives. They have placed early bets on resources in Greenland, which have yet to pan out. And when President Donald Trump visited China in November, the oil giant Sinopec, China Investment Corp., and Bank of China Ltd. pledged to help finance Alaska LNG, a $43 billion gas-export project.

Along with finance, Chinese executives and tourists are beating a path to Scandinavia. Passengers can now fly direct to Stockholm from Beijing and Hong Kong. From Helsinki, travelers can get back and forth between at least four additional eastern Chinese cities, too.

The returns on an Arctic strategy are not only financial.

Containers stacked at a port in Nuuk, Greenland.
Photographer: David Goldman/AP Photo

Before Russia’s Yamal LNG opened in December, officials made a big show of dispatching the first shipment to China, whose $12 billion financing made the facility possible after the U.S. imposed sanctions in 2014. As fate would have it, a logistical complication forced them to reroute the shipment, and it was redirected to the U.K.

The cover of Brady's book features a China-centric "vertical world map."
Anne-Marie Brady; Cambridge University Press

The symbolism of the first shipment’s intended destination raises thought-provoking questions about how relationships among Arctic and other nations may evolve. How much power does financing Arctic business give China? Russia is grateful to Chinese investors who helped make Yamal LNG possible. But that also gives its southeastern neighbor leverage that’s difficult to quantify. And throwing too much money at Russia may sour China’s Western trade partners who are less amenable to the Putin regime.

If the Alaskan LNG infrastructure will eventually be built with Chinese help, would Americans be similarly beholden to Chinese soft power? To what extent might the Russian Arctic, the Greenland Arctic or the American Arctic actually become the Chinese Arctic when it comes to writing checks? What are the national security implications of China cultivating financial and maritime influence on shores and in seas that belong to other nations?

Free trade earns participants soft power. Militarization is hard power. As the U.S. and other nations have reversed long-standing free-trade ideas, that may put more onus on hard power, Minerd said.

The melting of the Arctic itself is so disorienting, and China’s ambition is so palpable that it requires a different worldview—literally. A map developed by a Chinese geophysicist, and used for more than a decade by scientists and military, Brady writes, shows both the scope of the nation’s ambitions and just how concentrated this seemingly far-flung part of the world really is. The map was first made public in 2014.

The Arctic makes up only six percent of the Earth’s surface, and yet neighbors feel like they live on the other side of the world from each other. China’s vertical map projects a view of the world few westerners have considered. But it’s a world that has China squarely at its center and is marked conspicuously by a lack of ice at the North Pole.

With China rising, just how much power Russia retains over Arctic affairs is a future much harder to project than even how fast the temperature is rising.