PoP: The Arctic & Its Rising Importance
An Exploration of the Arctic and its Role in the Evolving Global Order
TOPIC: The Arctic & Its Rising Importance
This week we take a look at a narrower topic – the Arctic – which is a key area of focus for the Great Powers (for good reason) and is slowly capturing mainstream attention (mostly as it relates to Greenland). Byproducts of the warming temperatures and melting glaciers are new emerging opportunities…
TECHNOLOGY
The Battle for AI Supremacy – ‘Space Race 2.0’ within Cold War 2.0 – is composed of multiple building blocks (Semiconductors, Compute, Data, Algorithms) across multiple spheres (Arctic, Space, Ocean). While this is oversimplifying, it is a helpful way to break down the constituent parts – delving into the Arctic sphere today.
Just ahead of the Russian invasion of Ukraine (February 2022), key undersea communication cables were damaged in Svalbard (January 2022) – a Norwegian Archipelago in the middle of the Arctic Ocean in the far North. Who cares and why?
This type of undersea cable infrastructure is critical for the transmission of essentially all Internet data – particularly at this point in Svalbard, where there is a further key connection to Space and Satellites. Simplistically – this is a mission-critical hub (bottleneck / vulnerability point) that connects and controls GPS/Internet/Satellite communications. Without it, your Doordash meal or Amazon package wouldn’t be delivered…
Thankfully, the worst case was averted (all packages were delivered).
In a world built for efficiency over the last several decades, this is a further reminder of the importance of resilience – something Natural systems naturally do (why you have ants ‘standing around’ in colonies). We expect the pendulum will continue to swing back in the direction of resilience and redundancy (e.g., reshoring)...
The timing was not a coincidence. The control of communications is critical, not just for precious food-delivery apps, but for military operations like guiding missiles. It does not take too much imagination to see how important both the Arctic and Space are for National Security. If you control Space, you control Warfare (or at least a key component of it). And to control Space, control of the Arctic (and Ocean) is critical.
Since then, we’ve seen multiple instances of undersea cables being cut – in the Baltic Sea and the Taiwan Strait to name a few – typically by the Chinese conveniently dragging anchors.
It’s no surprise that over the last decade, China has built up its own communication system and network – BeiDou Navigation Satellite System (BDS) – removing its reliance on the West and Western GPS/Navigation/Satellite Systems. Another reason why Xi and co feel more confident challenging the US hegemony.
For the West, this further highlights the rising importance of accelerating the deployment of Starlink satellites to both increase resilience and upgrade Technological capabilities (i.e., speed, bandwidth). And we’ve already seen a live example – with Ukraine dependent on Starlink for communications in the War, as their system was essentially destroyed early on.
Overall, you can see quite clearly how all of these spheres – the Arctic, Ocean, and Space – are all interconnected and help enable the functioning of the base layers of Technology. The Arctic is a hub for global communication and information flow – enabled by prior Technological Revolutions (Internet) and powering the Future (AI)…
ENERGY
On the Energy front, the Arctic is certainly a land of opportunity.
On a simplistic level, given the consistently cold climate, it's a natural place to put Energy-hungry Data Centers – critical for the AI Revolution. Cooling of Data Centers is a major cost – 30-55% of Energy consumption – so any reduction there certainly increases the overall efficiency of the project.
But beyond the Data Center angle, as the ice melts it is becoming more obvious there is ‘liquid gold’ beneath the surface – ranging from Oil & Gas to critical minerals and resources.
“According to estimates from the US Geological Survey, the area north of the Arctic Circle is expected to store recoverable reserves of 90 billion barrels of oil, 1670 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids.”
In addition, the Arctic, and notably Greenland, is strategic for its largely untapped mineral resources – many of which are critical inputs for Technologies like batteries, essential for the non-carbon Energy supply chain (e.g., Solar). If the West wants to build up resilience and reduce reliance upon the East in the base input resource realm, this is a good starting point…
On the dependence topic – which happens to tie to the Arctic and Energy – is Nord Stream, natural gas pipelines between Russia and Europe (in the North/Arctic area) which were also cut in 2022. These pipelines exemplify Europe’s (prior?) dependence upon Russia for Energy – we’ll get into Europe and its (finally) evolving Agenda in a piece soon. Just as key undersea ‘Technology’ cables were damaged, so were key undersea ‘Energy’ pipelines – no matter the actor or incentive, the importance is clear.
Long story short, the Arctic is rich with a range of Energy resources.
MONEY
These Arctic Energy and Technology assets are clearly valuable – ‘Monetizable’ in and of themselves. We may see that sooner rather than later with a US/Greenland transaction. But on an even more fundamental physical level – these Arctic Assets have high and rising geostrategic significance for Trade and National Security.
With ice melting and breaking (icebreakers), new trade routes are emerging (pictured below) – which mean new opportunities for emerging multi-polar supply and trade routes, outside of the current security and trading (Money) system dominated by the West, and much more efficient paths for Powers like Russia and China.
These new trade routes and other exploratory activities are forged by nuclear-powered icebreakers – and Russia happens to be the only country in the World to have a fleet (another Technology/Energy Pillar overlap). Which is a big reason why Russia has some leverage in the China relationship – Russia is China’s ‘ticket’ into the Arctic, which holds a lot of what China needs.
The Trump administration is keenly aware of this asymmetric Arctic leverage point, and is utilizing it in trade, resource, and other negotiations with both Russia and China separately – attempting to slowly pry the two Powers apart.
Regardless, as laid out in the China/Xi Agenda piece, the Russia/China DragonBear – aptly coined by Velina Tchakarova – relationship is something that has been building for over a decade and is unlikely to crack overnight. Thus, security in the Arctic continues to ramp – Canada expanding its Arctic military presence, Norway building up its North Navy, and the US looking to expand their borders (and bases) with Greenland.
If your trade is no longer reliant upon US security and is outside of its typical patrol, it becomes easier to begin to transition to trade in currencies outside of the USD. The Money Pillar never sleeps.
CONFLUENCE
Just as the New World and the West were once brand new ‘unexplored’ opportunities, today the Arctic is a new frontier (similar to Space). Pippa Malmgren cleverly calls this a Hot War in Cold Places – as the Great Powers posture and position for the Future.
Part of the Trump administration’s modern Manifest Destiny plan (topic for another piece) is control of the Western hemisphere – from Greenland to the Panama Canal and beyond – which is flush with all of the resources for a fully self-sustaining system. We do not believe recent overtures are merely posturing. And we do not believe the DragonBear came about by happenstance. In the evolving Global Order, resources (notably Energy) and Productive capacity are rising in importance…
And the Arctic is a critical area that fully encompasses all of the interconnected Pillars of Power.
The High North News is likely to be busy over the coming decade…maybe now the Greenland opportunity makes a bit more sense.
Thanks for reading. If it was useful, share it. If it could be more useful – let me know how (info@aquavisadvisors.com). If you have any questions, comments, or want some resource suggestions to learn more – let me know.
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