The Arctic Prize
As melting glaciers open up new territories, the Arctic has emerged as the latest geopolitical hotspot with a race for its minerals and rare earth riches.
The Arctic region is undergoing a profound environmental transformation. Warming at a rate four times faster than the global average has led to an annual loss of an area of ice comparable to the land area of Austria. Arctic ice volume has declined by approximately 70% or more since the 1980s; projections indicate that the first ice-free day in the region could occur before 2030. By 2035, the Arctic Ocean may experience a complete loss of summer ice cover.
This reduction of cover is driving increased economic activity in the region. The potential for resource extraction and the resulting strategic advantages have also heightened geopolitical interest in the Arctic. Nations and corporations are making significant infrastructure investments in the region, as exemplified by China’s recent launch of a 58,000-tonne, polar-class cargo vessel. Political discussions on the Arctic have even included proposals for territorial claims, underscoring the high development stakes there. However, substantial challenges persist. Norway has temporarily halted plans for deep-sea mining, and Russia’s Arctic initiatives have faced delays. These developments raise critical questions about the feasibility and timeline for fully unlocking the region’s potential.
Geography and Governance .
The governance of the Arctic is currently shared among the eight members of the Arctic Council (the “Arctic Eight”): Canada, Denmark (via Greenland), Finland, Iceland, Norway, Russia, Sweden, and the United States (via Alaska). These countries collectively oversee approximately 3.2 million square miles of land and an additional 2.7 million square miles of seabed within their exclusive economic zones (EEZs), which extend 200 nautical miles from their coastlines.
The Arctic is also governed by the United Nations Convention on the Law of the Sea (UNCLOS), a comprehensive legal framework for all marine and maritime activities, including those related to the international governance of the ocean floor. It classifies areas beyond a nation’s continental shelf, the underwater extension of its landmass that gradually slopes towards the seafloor, as international waters that are not subject to national claims. This regulation ensures that significant portions of the Arctic Ocean remain unclaimed and designated as international territory. UNCLOS also defines the sovereign rights of coastal nation-states within specific maritime boundaries. These states exercise sovereignty over a 12-nautical-mile territorial sea, which includes the seabed, subsoil, and airspace. Beyond this is an EEZ that extends up to 200 nautical miles from the coastline, granting states sovereign rights for resource exploration, extraction, and environmental management. UNCLOS also permits states to claim an extended continental shelf of up to 350 nautical miles from their shores, provided they submit scientific evidence demonstrating the natural prolongation. Norway, Canada, Denmark, the United States, and Russia have already submitted such claims for the Arctic.
Arctic treasures.
One benefit emerging from environmental shifts in the Arctic is the potential for increased fish catches. Some species, such as snow crab and king salmon, are struggling as waters become warmer and more acidic; however, this is offset by the migration of commercially valuable species (e.g., Atlantic cod) from southern and temperate regions into areas such as the Barents and Bering Seas. Nutrient-rich waters may accelerate fish population growth as receding ice opens new fishing grounds and extends fishing seasons. A clear illustration of this shift is mackerel’s arrival off Greenland in 2011; by 2014, the species accounted for 23% of the island’s total export earnings.
The benefit of resource potential is another major driver of interest in the Arctic. Melting ice unveils new areas of the region spanning approximately 21 million square kilometres, with 40% comprising land and about 33% consisting of continental shelves. The remaining portion falls under international waters beyond national EEZs.
The International Seabed Authority—a UN agency that regulates exploration for and exploitation of deep seabed minerals in the seabed and subsoil of international waters—has approved 30 exploration contracts covering 1.3 million square kilometres of seabed across 22 countries. These contracts authorise deep-sea prospecting for polymetallic nodules, sulphides, and cobalt-rich ferromanganese crusts. They also raise concerns about potential environmental degradation and the weakening of Arctic protections.
The resource potential of the Arctic also includes access to minerals essential for renewable energy and advanced technologies, which is important as major global powers are seeking to reduce their current reliance on China for rare earth minerals. These minerals, available in the Arctic, include cobalt, graphite, lithium, and nickel for electric vehicle batteries; zinc for solar panels and wind turbines; copper for electrical infrastructure; and the rare earth elements neodymium, praseodymium, terbium, dysprosium as well as others crucial to green and military technologies.
Greenland, in particular, has reserves of 43 out of 50 minerals deemed critical by the U.S. government, including 42 million tonnes of known rare earths. This is approximately 120 times the global mined output in 2023. Greenland also hosts both the largest rare-earth deposit in the Western Hemisphere and the most significant reserves of nickel and cobalt in the Northern Hemisphere. There are also significant deposits of copper, gold, lead, uranium, and other valuable resources in Greenland, Arctic Russia, and the Canadian Shield.
Furthermore, according to the U.S. Geological Survey, the Arctic is estimated to hold 90 billion barrels of oil, 1,669 trillion cubic feet of natural gas, and 44 billion barrels of liquid natural gas, accounting for approximately 22% of the world’s undiscovered fossil fuel reserves. However, although the region is estimated to contain 13% of the world’s undiscovered oil and 30% of untapped natural gas, extraction costs are high, and market shifts toward cleaner energy sources may limit demand. All of this underscores the growing importance of the Arctic in global supply chains and energy transitions.
Furthermore, although the ownership of these resources is largely uncontested within national boundaries and EEZs, unresolved claims and strategic competition persist in international waters. Thus, geopolitical dynamics can intensify the urgency of resource exploration. For example, Russia’s symbolic act of planting a titanium flag on the North Pole seabed in 2007 underscored its ambitions, reinforcing its claim to over a million square kilometers of Arctic seabed. In addition, the fact that seven of the Arctic Eight nations are North Atlantic Treaty Organization (NATO) members could potentially limit external involvement in the region.
This highlighted the geopolitical complexity of managing this area, as nations navigate the dual imperatives of environmental preservation and the pursuit of strategic and economic interests. The timeline for Arctic mineral exploitation may extend beyond a decade as detailed geological surveys remain incomplete. However, technological advancements such as artificial intelligence for deposit identification, ice-capable drilling rigs, and autonomous mining vehicles may accelerate progress.
New shipping routes Emerge.
Global shipping lanes are facing significant disruptions. Seven of the world’s ten largest shipping companies have suspended transit through the Red Sea due to attacks on commercial vessels by the Houthis, a Yemeni rebel group. Traffic through the Suez Canal, a critical shortcut connecting the Indian Ocean to the Mediterranean, has declined sharply. Trade volumes through the Panama Canal, which links the Atlantic and Pacific Oceans, are under strain. Amid these challenges, an intriguing alternative for long-distance maritime trade has emerged: Arctic shipping routes that could reduce journey lengths by up to 40% compared to the Suez Canal. Three primary routes are under consideration:
The Northern Sea Route (NSR): Tracing the Russian coast, this route connects the Barents Sea to the Bering Strait. Open to ice-resistant ships in the summer since 2005, sections of the NSR are now navigable year-round with icebreaker assistance. Despite the associated costs, traffic has steadily increased; a record 92 ships navigated the route in 2017 compared to 19 in 2016. The NSR is particularly promising for transporting resources from Russia’s northern regions, given the potential to facilitate year-round liquefied natural gas (LNG) shipments to Europe and Asia (geopolitical complexities notwithstanding).
Utilising the NSR could also reduce the distance between Rotterdam and Shanghai by 25% (5,000 kilometres), cutting transit time from 30 to 14 days and potentially boosting overall trade between Asia and the European Union by 6%, according to estimates from the World Trade Organization.
The North-West Passage (NWP): Running along the Arctic coastline of North America, the NWP faces significant logistical constraints, including narrow, winding channels, limited port infrastructure, and territorial disputes between Canada and other nations. These factors and slower ice melt may delay the route’s viability for large-scale commercial use.
The Transpolar Sea Route (TSR): Crossing the Central Arctic Ocean, the TSR covers the shortest distance between the North Atlantic and Pacific Oceans, bypassing territorial waters and reducing geopolitical friction. However, even after a complete ice melt, persistent icebergs will likely restrict navigation to icebreaker-supported vessels, with full commercialisation unlikely before 2050.
These routes traverse ice-covered waters, raising questions about their viability for commercial shipping, but despite their limitations, they also hold significant promise. Though starting from a low base, Arctic shipping activity is gradually increasing. The Russian-controlled NSR is the most prominent Arctic route, with trade volumes surging by 755% between 2014 and 2022. Russia aims to increase traffic tenfold from 2022 levels by 2035 and has partnered with DP World, an Emirati logistics firm, to develop Arctic container shipping. In October 2023, NewNew Shipping Line, a Chinese company, completed its first round-trip voyage on an Arctic route between Shanghai and St. Petersburg.
Despite these developments, Arctic shipping remains marginal on a global scale. In 2022, fewer than 1,700 ships entered the Arctic, compared to over 23,000 and 14,000 transiting the Suez and Panama canals, respectively. Arctic routes are also predominantly seasonal, with most voyages occurring in summer. The NWP has more ice than the NSR and sees even less traffic, while the TSR remains navigable only by heavy icebreakers until further ice melt occurs. These factors make insurers cautious. Arctic navigation also demands specialised expertise and vessels, both of which come at a premium. Furthermore, poor mapping, extreme weather, and unpredictable conditions heighten the risk of accidents, while time savings are uncertain. A 2023 study in Geophysical Research Letters found that sea fog delays accounted for 23-27% of sailing time on the NWP and 4-11% on the NSR. Environmental concerns further complicate Arctic shipping. In 2021, the International Maritime Organization, a UN agency, adopted a ban on heavy fuel oil in the Arctic that mirrors similar restrictions in the Antarctic. This measure, set to take effect in 2029, aims to mitigate the risks of oil spills and harmful pollutants. However, shipping activities still threaten the environment and local communities through air, water, and noise pollution. Some companies have already committed to avoiding Arctic shipping on environmental grounds.
While the Arctic is unlikely to rival established shipping routes in the near term due to extreme seasonal conditions and operational challenges, its waters are expected to become busier as ice cover diminishes. Russia, in particular, is poised to expand its use of these routes by leveraging its strategic control over the NSR. Nonetheless, the role of the Arctic in global shipping will remain constrained by environmental, logistical, and economic factors.
Big power rivalries.
The Arctic region is experiencing intensified geopolitical activity as China and Russia assert their strategic interests with increasing determination. Traditionally, regional governance was overseen by the Arctic Council, which was established to facilitate cooperation among Arctic states. However, the suspension of the Council’s meetings following Russia’s invasion of Ukraine created a diplomatic vacuum where the Arctic is concerned. China and Russia are strategically exploiting this void to advance their respective objectives.
Russia views the Arctic as a natural extension of its sphere of influence and is focused on securing access to the region’s abundant natural resources ahead of Western competitors. Simultaneously, China, which self-identifies as a “near-Arctic state”, is pursuing an assertive agenda to enhance its global influence. Central to this is the development of the “Silk Road on Ice,” a network of Arctic shipping routes facilitated by nuclear-powered icebreakers. This initiative aims to substantially reduce maritime transit times between Shanghai and Europe, bypassing the Suez Canal and reinforcing China’s strategic position in global trade.
The strategic alignment between Moscow and Beijing has been formalised through an agreement to safeguard their mutual interests in the Arctic. While specific details of this “maritime law enforcement” pact remain limited, it underscores the deepening collaboration between the two nations. Concurrently, Russia has announced plans to expand its military infrastructure in response to Finland’s recent accession to NATO. These plans include the construction of new deep-water ports and airfields to bolster its operational capacity in the region. China stands to benefit significantly from this partnership by gaining enhanced access to Arctic resources and expedited shipping routes; both of these present substantial economic and geopolitical advantages. In contrast, the United States has shown relatively limited engagement in Arctic competition, partly due to its access to ice-free ports on the Atlantic and Pacific coasts. This contrasts sharply with Russia’s strategic reliance on a limited number of ports that remain operational throughout the year.
China’s Arctic strategy is marked by a long-term, strategic investment approach whereby individual projects, though seemingly disparate, form interconnected components of a broader geopolitical vision. Beijing has proposed the establishment of both a research station and a satellite ground station in Greenland, alongside offers to modernise the country’s airport infrastructure. Additionally, China constructed a satellite station in northern Sweden, invested in infrastructure projects on the Svalbard archipelago, and played a pivotal role in stabilising Iceland’s banking sector during the 2008 financial crisis.
This systematic approach underscores China’s intent to position itself as a key Arctic stakeholder, leveraging economic investments and strategic partnerships to reinforce its influence in one of the world’s most geopolitically significant frontiers.
Synergia Takeaways:
• The transformation of the Arctic presents both substantial opportunities and formidable challenges. As the region becomes more accessible, careful consideration of environmental sustainability, geopolitical stability, and technological capabilities will be essential in determining the future trajectory of Arctic development. Policymakers, scientists, and industry leaders must collaborate to balance economic ambitions with the need to preserve the Arctic’s fragile ecosystem.
• Establishing a comprehensive framework for resource diplomacy is imperative to harmonising economic development with geopolitical stability. Such a framework would provide a structured approach to ensure that corporations and nations adhere to universally recognised guidelines, thereby mitigating the risk of conflict and promoting sustainable governance in the Arctic region. This initiative would be particularly critical in light of evolving global power dynamics, as it would facilitate the cooperative management of resources while reinforcing long-term regional stability.
