The opening of the Arctic to resource exploration has created the need for a unified response from the six Arctic nations exposed to both the benefits and the risks of accelerating development in the region. This is the conclusion of CNA Senior Vice President and General Counsel Mark Rosen and Research Specialist Cara Thuringer in "Unconstrained Foreign Direct Investment: An Emerging Challenge to Arctic Security."
Their study draws on a wide range of sources to compile a list of 21 Arctic investments of more than $1 billion by Chinese companies and banks as well many other smaller investments. The authors estimate that Chinese investment in the Arctic and near-Arctic above 60 degrees latitude has reached roughly $90 billion.
The paper also examines the legal frameworks for foreign direct investment in the six Arctic nations — Canada, Iceland, Greenland, Norway, Russia and the United States — to reach the conclusion that the national laws alone are not sufficient to protect the sensitive region from harm to the marine environment that would spread well beyond national boundaries. "The current legal structure is too diverse to monitor and regulate inbound foreign investments in large projects such as mines, and oil and gas facilities," Rosen and Thuringer write.
Rosen and Thuringer propose that the Arctic nations work together toward the creation of three cooperative mechanisms for the safe development of the Arctic:
- An Arctic Development Bank that would fund responsible development, with lending conditions to reinforce environmental and financial standards. This would act as a counterbalance to the overwhelming availability of inexpensive Chinese capital for Arctic resource extraction projects.
- An Arctic Development Code that would improve compliance with environmental and development standards chiefly through transparency. Arctic nations would independently approve and monitor foreign direct investment on their own territories, but would meet certain requirements for environmental assessments that would be made publicly available in a common repository.
- A set of multilateral Arctic foreign direct investment review criteria administered by each nation
The coming years present a window of opportunity for Arctic nations to address these issues. Low commodity prices and the remaining difficulties of operating in the harsh Arctic climate probably preclude an Arctic "gold rush" in the near term. But the aggressive pace of climate change in the Arctic virtually assures that "one of the few remaining final frontiers" will become accessible at an accelerating rate. It will be far easier to make agreements on Arctic development before too many outside investments in drilling and mining have already been established.
"There is a way forward where the Arctic environment can be sufficiently protected while its resources are extracted," says Rosen, an expert in maritime law and policy. "But taking that path will require cooperation and coordination between the Arctic nations in advance of resource development."
The opinions in the paper are those of the authors and do not necessarily reflect the views of CNA, a non-profit research organization based in Arlington, Virginia, or any of its sponsors.
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