Center for a New American Security

The Washington Post published a must-read report this morning on the decline of Gazprom, Russia’s state-owned natural gas company.

Gazprom has long been Moscow’s instrument of choice for exerting influence over former Soviet bloc states in Eastern Europe, like the Urkaine, that have been moving too close to the West. But that could all be changing as a result of major structural shifts in global natural gas production, with hydraulic fracking jumping from the United States to Eastern Europe.

Last week, The Wall Street Journal reported that Central and Eastern European energy companies are exploring joint ventures with Western companies in order to develop the region’s potential shale gas resources. The move by these Central and Eastern European countries is in part driven by the need to diversify their own natural gas supply so that they are not as easily held hostage to Russian influence. In recent years, for example, Russia has used disputes over transit fees with countries like the Ukraine as the basis for cutting of gas supply during peak winter months.

Dr. Jay Gulledge is a Senior Scientist and Director of the Science and Impacts Program at the Center for Climate and Energy Solutions, and a Non-Resident Senior Fellow at the Center for a New America Security. He is a co-author (with Dr. Rob Huebert) of Climate Change & National Security: The Arctic as a Bellwether, a new study published by the Center for Climate and Energy Solutions. 

 
Today the Center for Climate and Energy Solutions – C2ES, formerly the Pew Center on Global Climate Change – is releasing a new report, Climate Change & National Security: The Arctic as a Bellwether. The lead author of the report is Dr. Rob Huebert, Associate Director of the Centre for Military and Strategic Studies at the University of Calgary.

Official military doctrine in the United States now holds that “climate change, energy security, and economic stability are inextricably linked.” Nowhere is this linkage more clearly illustrated than in the Arctic, and that’s why we think the region is a bellwether for how climate change may reshape global geopolitics in the post-Cold War era.

As the planet has warmed over the past few decades, temperatures in the Arctic have been increasing at about twice the global rate. And the Arctic sea ice cover has been shrinking much faster than scientists anticipated. The five smallest sea ice covers ever recorded have all occurred in the past five summers. As a result, the Northwest Passage through the Canadian Archipelago has opened up every summer since 2007, and the Northeast Passage along Russia’s coastline has opened up every summer since 2008.

New and expanded shipping routes through the Arctic can cut the distance to transport goods between Asia, North America, and Europe by up to 4000 miles. We’re seeing increased interest and investment in oil and gas exploration. The United States Geological Survey estimates that 30 percent of the world’s undiscovered gas and 13 percent of undiscovered oil lies in the Arctic. Russia likely possesses the largest share of any country. There’s also growing interest in tourism and fishing.

As the economic potential of the Arctic becomes more apparent, governments and militaries have begun to reposition themselves. What’s happening in the Arctic is the starkest example yet of the way climate change directly affects international security. 

A new report from the Stockholm International Peace Research Institute (SIPRI) finds that the build-up of Arctic military capabilities is limited, with few indications that conflict is looming. According to the study, all five Arctic states – Canada, Denmark, Norway, Russia and the United States – have increased their military capabilities in the Arctic in recent years in response to growing accessibly to the region owed largely to climate change.

Some of the increased military activity is likely a response to the changing geostrategic environment that will make military capabilities increasingly important for power projection that states need to maintain in order to secure access to lucrative natural resources and other national interests. According to the SIPRI study, for example, “Russia’s Arctic policy underlines the importance of the Arctic as a principal source of natural resources by 2020,” and “Denmark’s defence policy underlines the changing geostrategic significance of the Arctic.”

Despite the increased deployment of military assets, Arctic states are continuing to pursue new avenues of cooperation, mollifying concerns – at least for the time being – that tensions will worsen as the region becomes more accessible. Last year, the Arctic Council – an intergovernmental forum for Arctic states to address challenges in the High North – hosted a high-level forum that led to an agreement for countries in the region to increase search-and-rescue cooperation given the growing concerns surrounding increased eco-tourism and commercial shipping that could portend future law enforcement challenges. Some states’ newly deployed military assets are intended for search-and-rescue purposes, according to the SIPRI study. Canada, for example, will replace older C-130s and other aging aircraft with 17 new search-and-rescue aircraft in the next several years.

On December 1, 2011, the Government Accountability Office released a new report on the Coast Guard’s Arctic capability that is worth reading in full. The report cautions that “the most significant issue facing the Coast Guard’s icebreaker fleet is the growing obsolescence of these vessels and the resulting capability gap caused by their increasingly limited operations.”

It is particularly interesting to read the report in the context of the budget debate taking place on Capitol Hill. The authors of the report rightly acknowledge that expanding the capability necessary to accomplish the Coast Guard’s Arctic missions is particularly challenged by budget constraints and uncertainty about how much the Department of Homeland Security’s budget may decrease. According to the study:

Senior Coast Guard officials, based in Alaska, reported that resources for Arctic operations had already been reduced and were inadequate to meet existing mission requirements in Alaska, let alone expanded Arctic operations. These officials also reported a more than 50 percent year-to-year reduction between 2005 and 2009 in the number of large cutters available for operations in their region. Officials also expressed concern that the replacement of the 12 older high-endurance cutters with 8 new cutters may exacerbate this challenge. Given the reductions that have already taken place, as well as the anticipated decrease in DHS’s annual budget, the long-term budget outlook for Coast Guard Arctic operations is uncertain. The challenge of addressing Arctic resource requirements in a flat or declining budget environment is further underscored by recent budget requests that have identified the Coast Guard’s top priority as the recapitalization of cutters, aircraft, communications, and infrastructure—particularly with regard to its Deepwater program. Recent budget requests also have not included funding for Arctic priorities, aside from the annual operating costs associated with existing icebreakers.

Special Programming Note: The UN climate negotiations begin today in Durban, South Africa. The Natural Security blog will highlight the main takeaways from this week’s conference, but for a detailed play-by-play, follow former CNAS intern and Natural Security all-stark Alex Stark on her blog where she is reporting from South Africa on the climate talks for the Adopt a Negotiator Project.

On Friday, Moscow announced its plan to grant loans and discounted natural gas prices to Belarus in exchange for selling full control of its Yamal-Europe pipeline to Russia’s state-owned Gazprom, which already owned a 50 percent stake in the pipeline. Russia agreed to purchase the other half of Belarus’ pipeline for $2.5 billion. According to The Wall Street Journal, “Russia also was cutting the price Minsk has to pay for gas to less than half the average paid by other European states, from $244 per thousand cubic meters this year to $164 at the start of 2012. Belarus would then start paying Russia's own domestic price starting in 2014.”

The geopolitical implications of the deal are quite apparent. Media reports of the energy agreement suggest that the move is yet another in a series of steps taken by Russia to consolidate its influence in Eastern Europe and control over energy supplies to Western Europe. The deal ties “Belarus, Russia’s small, authoritarian neighbor, into an even tighter union with Moscow,” The New York Times reported. The Wall Street Journal added that “The agreement, signed in Moscow, marks an important victory for the Kremlin, which has successfully used its role as an energy supplier to buttress its clout in the former Soviet Union. Belarus, situated between Russia's eastern border and Poland, has long been a holdout against Russian influence…” Moreover, it is “a move that strengthens Moscow’s control over gas exports to the West,” The Washington Post noted.

Last Monday, Businessweek published an excerpt from a new book by David Fairhall, Cold Front: Conflict Ahead in Arctic Waters. Besides the provocative title (which, by focusing on conflict does not help further our understanding about the challenges and opportunities that lie in the Arctic), the book looks rather interesting.

In the excerpt from Businessweek, Fairhall describes in brief the history of polar icebreakers, including their evolution to nuclear propulsion in Russia. “Today, a dozen countries operate icebreakers. Canada needs them in large numbers to cope with winter, not only in the Arctic but also in the St. Lawrence River and Hudson Bay. Scandinavians use them to keep Baltic ports clear,” Fairhall writes. “The U.S. has strategic and scientific interests in both the Arctic and Antarctica, for which it has three polar-class vessels.”

Yet where it gets interesting – at least from a national security perspective – is the gap between U.S. and Russian icebreaking capabilities. As Fairhall explains, “Still, no one disputes the predominance that Russia achieved by adapting nuclear propulsion to icebreaking. These vessels need a great deal of power and the ability sometimes to remain at sea for long periods without refueling -- both things that a nuclear reactor can deliver.”

Yesterday’s announced deal between Exxon Mobile and Russia’s state-owned Rosneft came as a bit of a surprise. My initial reaction, to borrow Homer Simpson’s catchphrase: “D’oh!” For one, it seems like a rather off-balance arrangement, at least according to initial reports, that puts Russia on track to reap huge benefits while putting Exxon Mobile on risky footing. As The New York Times aptly put it, “the deal means wading deeper into Russia’s risky business environment.” Indeed, if past events are any indicator, Exxon Mobile will need to be very cautious if the deal moves forward. According to The New York Times report:

Russia has reneged on deals with Western oil companies before. In 2006, for example, it compelled Royal Dutch Shell to sell 50 percent of a Sakhalin offshore development to Gazprom, a state company — after Shell spent a decade and more than $20 billion of its own money and that of other investors to build the project’s infrastructure.

Some analysts are optimistic, however. “The deal also signals a thaw in U.S-Russian relations,” The Washington Post reported. “Cliff Kupchan, director of the Eurasia Group, noted that just three years ago, U.S. energy firms were shut out of deals in Russia. ‘Since then,’ he said, ‘we’ve had a reset in the relationship under President Obama, from cooperation on Iran to the START treaty, and we’re seeing that improved relationship seeping into energy.’”

Military activity is on the rise in the Arctic. The Canadian military, for example, is bolstering its presence in the region, in part to offset Russian influence and to prepare for the opening of the Arctic Circle to resource exploitation and commercial travel.  In fact, this week, the Canadian military is conducting the largest military exercise to-date – Operation NANOOK – with some 1,000 troops, air and naval assets and unmanned drones. “All of this is very much about enlarging the footprint and the permanent and seasonal presence we have in the North," Canadian Defense Minister Peter McKay said last month in Afghanistan. “Members of the Canadian Forces say military capabilities are growing and becoming more complex in the North – a key component of reasserting claim to the region,” The Toronto Sun reported last week. “The Canadian military is not looking at what the issues are today but what are the threats and hazards that Canadians could see, governments could see, not only today, but in the future, to see what capabilities we could need to address those threats and hazards,” said Canadian Lt.-Gen. Walter Semianiw, commander of Operation NANOOK. 

Russia has also taken steps to bolster its military presence in the Arctic. In July, Russian Defense Minister Anatoly Serdyukov announced that Russia would protect its territorial claims in the High North with an Arctic military force. Prime Minister Vladimir Putin made a similar pronouncement in July: “We are open for a dialogue with our foreign partners and with all our neighbors in the Arctic region, but of course we will defend our own geopolitical interests firmly and consistently." According to published reports, “Moscow plans to build at least six more icebreakers and spend $33 billion to construct a year-round port on the Arctic shores.” 

A potential energy deal between Russia and North Korea may alter the geopolitical balance in Northeast Asia. Over the weekend, North Korean leader Kim Jong-il visited the Russian Far East in what may be a sign that Pyongyang is willing to develop a lucrative energy deal with Moscow. Though no official deal has been announced, The New York Times reported Monday what the broad contours of an energy deal could look like:

For years, officials in Moscow and Seoul have urged North Korea to let the two countries build a pipeline through the North to carry Russian natural gas to meet the rising demand in South Korea and perhaps to also supply Japan. North Korea can expect to earn as much as $500 million a year in transit fees from the pipeline, according to South Korean analysts.

…

After years of hesitation, North Korea has recently shown interest in the proposals. Executives from the Russian gas firm Gazprom visited Pyongyang, North Korea’s capital, in July. This month, the Russian foreign minister, Sergey V. Lavrov, said that North Korea was “positive” about the pipeline project, and North Korea’s media acknowledged last week that Mr. Medvedev had called for greater cooperation involving energy and railways among Russia and the two Koreas.

An energy deal could change the geopolitical balance in a variety of ways. In particular, Russia would reap significant benefits from wielding its oil and natural gas reserves to develop its Far East. For years Moscow has struggled to maintain strong ties to its eastern hinterlands, in part because of the geographic distance (nearly 4,000 miles – or seven time zones – separate Moscow from its most eastern population). As a result, Russians in the Far East have looked to China for everything from agricultural goods to jobs. Indeed, Chinese influence in Russia’s east has steadily increased, worrying some in Moscow. A lucrative energy deal that would enable Moscow to invest in its Far East may help tip the balance of influence away from the Chinese.

Yesterday, coverage from The Washington Post and The New York Times on the soon-to-be-released Obama’ s Wars, Bob Woodward’s latest opus, generated a media storm by reporting on the internal debate within the Obama administration over what the country’s exit plan should be for Afghanistan. With all the attention on Woodward’s new book, you may have missed this other report on Afghanistan from The Washington Post which pointed to a serious challenge that could compromise our war effort there.

The Post reported that Kyrgyz President Roza Otunbayeva is exploring options that would prohibit U.S. contractors from supplying fuel to the U.S. military base in Kyrgyzstan – a base critical to the U.S. war effort in Afghanistan. “In an interview, Kyrgyz President Roza Otunbayeva said private companies handling supplies should be replaced by a joint venture between a Kyrgyz state company and Russia's state-controlled Gazpromneft, a major source of jet fuel in the region,” the Post reported on Wednesday. 

Northern fuel supply routes have become a more attractive option to Defense Department officials in recent months due to the fact that they are relatively more secure than shipping fuel in from Pakistan. In order to diversify its fuel supply sources and reduce the vulnerability of fuel convoys traveling in from Pakistan to insurgent attacks, the Department of Defense began “asking contractors to bring in more fuel supplies by northern routes,” according to a Washington Post report back in December 2009. 

The U.S. air base at Manas, Kyrgyzstan has played a crucial role in the recent surge of troops to Afghanistan. But, as the Post pointed out, “The base also houses a fleet of air-tankers that are used for in-flight refueling of American warplanes over Afghanistan.”