Climate change turns Arctic into strategic, economic hotspot

Greenland is part of the Danish realm along with the Faeroe Islands, another semi-autonomous territory, and has its own government and parliament. (AFP)
Updated 23 August 2019
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Climate change turns Arctic into strategic, economic hotspot

  • The race to the Arctic is an incredibly challenging marathon, not a sprint

TASIILAQ, Greenland: From a helicopter, Greenland’s brilliant white ice and dark mountains make the desolation seem to go on forever. And the few people who live here — its whole population wouldn’t fill a football stadium — are poor, with a high rate of substance abuse and suicide.
One scientist called it the “end of the planet.”
When US President Donald Trump floated the idea of buying Greenland, it was met with derision, seen as an awkward and inappropriate approach of an erstwhile ally.
But it might also be an Aladdin’s Cave of oil, natural gas and rare earth minerals just waiting to be tapped as the ice recedes.
The northern island and the rest of the Arctic aren’t just hotter due to global warming. As melting ice opens shipping lanes and reveals incredible riches, the region is seen as a new geopolitical and economic asset, with the US, Russia, China and others wanting in.
“An independent Greenland could, for example, offer basing rights to either Russia or China or both,” said Fen Hampson, the former head of the international security program at the Center for International Governance Innovation think tank in Waterloo, Ontario, who is now a professor at Carleton University.
He noted the desire by some there to secede as a semi-autonomous territory of Denmark.
“I am not saying this would happen, but it is a scenario that would have major geostrategic implications, especially if the Northwest Passage becomes a transit route for shipping, which is what is happening in the Russian Arctic.”
In April, Russian President Vladimir Putin put forward an ambitious program to reaffirm his country’s presence in the Arctic, including efforts to build ports and other infrastructure and expand its icebreaker fleet. Russia wants to stake its claim in the region that is believed to hold up to one-fourth of the Earth’s undiscovered oil and gas.
China sees Greenland as a possible source of rare earths and other minerals and a port for shipping through the Arctic to the eastern US It called last year for joint development of a “Polar Silk Road” as part of Beijing’s Belt and Road Initiative to build railways, ports and other facilities in dozens of countries.
But while global warming pushes the cold and ice farther north each year, experts caution that the race to the Arctic is an incredibly challenging marathon, not a sprint.
The melting of the Greenland ice sheet creates uncertainty and danger for offshore oil and gas developers, threatening rigs and ships.
“All that ice doesn’t suddenly melt; it creates icebergs that you have to navigate around,” said Victoria Herrmann, managing director of the Arctic Institute, a nonprofit focused on Arctic security.
On the other hand, while mining in Greenland has been expensive due to the environment, development costs have fallen as the ice has melted, making it more attractive to potential buyers, she said.
Strategically, Greenland forms part of what the US views as a key corridor for naval operations between the Arctic and the North Atlantic. It is also part of the broader Arctic region, considered strategically important because of its proximity to the US and economically vital for its natural resources.
Hampson noted it was an American protectorate during World War II, when Nazi Germany occupied Denmark, and the US was allowed to build radar stations and rent-free bases on its territory after the war. That includes today’s Thule Air Force Base, 1,200 kilometers (745 miles) south of the North Pole.
After the war, the US proposed buying Greenland for $100 million after flirting with the idea of swapping land in Alaska for parts of the Arctic island. The US also thought about buying Greenland 80 years earlier.
Trump “may not be as crazy as he sounds despite his ham-fisted offer, which clearly upset the Danes, and rightly so,” Hampson said.
Greenland is part of the Danish realm along with the Faeroe Islands, another semi-autonomous territory, and has its own government and parliament. Greenland’s 56,000 residents got extensive home rule in 1979 but Denmark still handles foreign and defense policies, with an annual subsidy of $670 million.
Its indigenous people are not wealthy, and vehicles, restaurants, stores and basic services are few.
Trump said Sunday he’s interested in Greenland “strategically,” but its purchase is “not No. 1 on the burner.”
Although Danish Prime Minister Mette Frederiksen called Trump’s idea to purchase Greenland an “absurd discussion,” prompting him to call her “nasty” and cancel an upcoming visit to Copenhagen, she also acknowledged its importance to both nations.
“The developments in the Arctic region calls for further cooperation between the US and Greenland, the Faeroe Islands and Denmark,” she said. “Therefore I would like to underline our invitation for a stronger cooperation on Arctic affairs still stands.”
Greenland is thought to have the largest deposits outside China of rare earth minerals used to make batteries and cellphones.
Such minerals were deemed critical to economic and national security by the US Interior Department last year, and as demand rises “deposits outside of China will be sought to serve as a counterbalance to any market control that could be exerted by a single large producer,” said Kenneth Medlock, senior director at the Center for Energy Studies at Rice University.
Off Greenland’s shores, the US Geological Survey estimates there could be 17.5 billion undiscovered barrels of oil and 148 trillion cubic feet of natural gas, though the remote location and harsh weather have limited exploration. Around the Arctic Circle, there’s potential for 90 billion barrels of oil.
Only 14 offshore wells were drilled in the past 40 years, according to S&P Global Analytics. So far, no oil in exploitable quantities has been found.
“It’s very speculative, but in theory they could have a lot of oil,” said Michael Lynch, president of Strategic Energy & Economic Research Inc. “It’s perceived as being the new Alaska, where the old Alaska was thought to be worthless and turned out to have huge reserves. And it’s one of the few places on Earth that’s lightly populated, and it’s close to the US“
Michael Byers, an Arctic expert at the University of British Columbia, suggests there are better approaches for Washington than the politically awkward suggestion of purchasing Greenland.
“There’s no security concern that would be dealt with better if Greenland became a part of the United States. It’s part of the NATO alliance,” he said. “As for resources, Greenland is open to foreign investment. Arctic resources are expensive and that is why there is not more activity taking place. That’s the barrier. It’s not about Greenland restricting access.”
That’s been the approach taken by China, which has had mixed success. Greenland officials have visited China to look for investors but Beijing’s interest also has provoked political unease.
In 2016, Denmark reversed plans to sell Groennedal, a former US naval base that the Danish military had used as its command center for Greenland after a Hong Kong company, General Nice Group, emerged as a bidder, according to defensewatch.dk, a Danish news outlet.
Last year, then-US Defense Secretary James Mattis successfully pressured Denmark not to let China bankroll three commercial airports on Greenland, over fears they could give Beijing a military foothold near Canada, The Wall Street Journal reported.
Beijing’s biggest Greenland-related investment to date is an ownership stake by a Chinese company in Australia-based Greenland Minerals Ltd., which plans to mine rare earths and uranium.
“People talk about China, but China can access Arctic resources through foreign investment,” Byers said. “And foreign investment is a lot cheaper than trying to conquer something.”


Oil prices surge after attacks hit Saudi output

Updated 16 September 2019
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Oil prices surge after attacks hit Saudi output

  • The Houthi attacks hit two Aramco sites and effectively shut down six percent of the global oil supply
  • President Donald Trump said Sunday the US was ‘locked and loaded’ to respond to the attacks

HONG KONG: Oil prices saw a record surge Monday after attacks on two Saudi facilities slashed output in the world’s top producer by half, fueling fresh geopolitical fears as Donald Trump blamed Iran and raised the possibility of a military strike on the country.
Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 percent — while WTI jumped more than $8, or 15 percent.
Both contracts pared the gains but were both still more than 10 percent up.
The attack by Tehran-backed Houthi militia in neighboring Yemen, where a Saudi-led coalition is bogged down in a five-year war, hit two sites owned by state-run giant Aramco and effectively shut down six percent of the global oil supply.
Trump said Sunday the US was “locked and loaded” to respond to the attack, while Secretary of State Mike Pompeo said: “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”
Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.
“Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning,” said Jeffrey Halley, senior market analyst at OANDA.
Trump authorized the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.
But the strikes raise concerns about the security of supplies from the world’s biggest producer.
Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.
“One thing we can say with confidence is that if part of the reason for last week’s fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton’s sacking ... and thoughts this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid,” said Ray Attrill at National Australia Bank.