The Arctic region finds itself once again at the epicentre of enflaming big power dynamics, marked by recent developments including the imposition of fresh sanctions on Russia in the third year of the Ukraine conflict, Sweden’s accession to NATO, and the eastward expansion of the Atlantic Alliance. Meanwhile, the Kremlin is in the midst of a reevaluation of its role within the Arctic Council and the formulation of a strategic approach to the High North. These developments appear to intensify the already volatile situation in the North Pole, dictating Russia’s need to expand its activities in the region, notwithstanding the various influences exerted by the geopolitical factors.
Over the past two years, the US has continuously expanded the scope of sanctions imposed on various entities within Russia’s military industrial complex. These regulatory measures have affected important defence firms, importers of machine tools, evaders of sanctions from third countries, and manufacturers of semiconductors. The driving force behind these actions is the assumption that Russia’s focus on its war economy has led to the redirection of essential resources away from non-defence sectors, endangering the economic prosperity of the Russian population.
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Fresh round of US sanctions
Foreign financial institutions involved in substantial transactions or providing services to Russia’s military industrial complex across technology, defence, construction, aerospace, and manufacturing sectors are now susceptible to sanctions imposed by the Office of Foreign Assets Control (OFAC). The measures instituted by the treasury department form part of a sustained initiative aimed at disrupting and weakening Russia’s war efforts. These sanctions extend to individuals and entities operating across various segments of the Russian economy, constituting a comprehensive strategy designed to curtail support for Russia’s military capabilities across a diverse range of industries.
President Joe Biden declared 500 new sanctions, addressing concerns about resource diversion from non-defence sectors and the incarceration of Mr. Navalny, who met his demise in an Arctic penal camp. The United Kingdom and the European Union have also taken significant actions, freezing assets, imposing travel bans, and announcing sanctions on organisations involved in facilitating Russia’s weapon acquisition or interference in Ukrainian affairs.
Since Russia attacked Ukraine in 2022, the US, the UK, EU, Australia, Canada, Japan, and other nations have collectively imposed over 16,500 sanctions on Russia, impacting its financial resources, foreign currency reserves, and key industries, particularly the oil sector. Major corporations like McDonald’s, Coca-Cola, Starbucks, and Heineken have ceased operations in Russia, contributing to the economic repercussions. Despite these measures, Russia has devised strategies to circumvent sanctions, including selling oil above price caps and utilising intermediary countries such as Georgia, Belarus, and Kazakhstan, with support from China.
While Russia’s economy initially contracted in 2022, it witnessed growth in 2023 and is projected to expand further in 2024, according to the International Monetary Fund. Nevertheless, the US treasury contends that sanctions have still shaved 5% off Russia’s potential economic growth over the past two years. Economic challenges, coupled with the ongoing conflict, have prompted over a million individuals, particularly the young and highly educated, to emigrate from Russia. The government’s reallocation of funds from health spending to support the war has disproportionately impacted rural areas, as noted by insights from the UK’s ministry of defence and the foreign affairs think tank Chatham House.
The US and the UK jointly announced a third round of sanctions targeting Russia’s Arctic LNG 2 project, focusing on ship construction in Russia and South Korea, as well as Novatek’s Belokamenka assembly yard. The objective of these sanctions is to impede the project’s progress, specifically delaying the inaugural shipment. In this recent manoeuvre, the US treasury has imposed sanctions on a South Korean shipyard and Russia’s Zvezda shipyard, limiting Novatek’s ability to procure Arctic LNG carriers and constraining domestic vessel construction. These sanctions also extend to holding companies associated with vessels constructed by the South Korean shipyard Hanwha Ocean, hindering their transfer to new owners or to Novatek through legal loopholes. The United Kingdom has echoed some of these measures, sanctioning the Arctic LNG 2 project and its affiliated entities.
Russia’s reaction and evolving strategy
Against the backdrop of sanctions, Russia asserted its Arctic strategy, a move articulated by President Vladimir Putin during his address to the Federal Assembly on February 29, 2024. This speech occurred just days after the second anniversary of Russia’s military intervention in Ukraine, in the midst of heightened tensions marked by fresh US sanctions. Putin outlined a comprehensive strategy to tackle emerging geopolitical challenges, focusing particularly on key regions like the Arctic and the Far East in response to evolving threats, including NATO’s eastward expansion and the addition of Sweden and Finland to the alliance.
The President underscored the necessity to fortify forces in the Western strategic theatre as a countermeasure against perceived risks associated with NATO’s extended reach. Highlighting these geopolitical concerns, he elucidated decisions related to financial support, economic growth, and regional development. Special programmes for various regions, including the North Caucasus, Kaliningrad Region, Donbass, Novorossiya, Crimea, Sevastopol, the Arctic, and the Far East, have been extended until 2030, with ongoing master development plans for 22 Far Eastern cities and Arctic communities.
Putin also presented a comprehensive vision for enhancing transportation infrastructure, emphasising the importance of the North-South transport corridor connecting Russia with the Middle East and Asia. The plan involves substantial investments in motorways and rail connections, extending from Baltic and Barents Sea ports to the Persian Gulf and the Indian Ocean. The goal is to optimise the carrying capacity of southbound railways, maximising the potential of Azov and Black Seas ports.
In response to evolving global dynamics, the President highlighted the Northern Sea Route, inviting foreign logistics companies and countries to utilise this global transport corridor. The Northern Sea Route experienced a significant increase in freight volumes, reaching 36 million tonnes last year, surpassing the Soviet-era maximum by fivefold. Putin unveiled plans to operationalise the Northern Sea Route year-round, expanding northern ports like the Murmansk transport hub and bolstering the Arctic fleet.
Addressing maritime developments, Putin provided details on progress in icebreaker construction, including the Severny Polyus (North Pole) research icebreaking platform, the Leningrad nuclear icebreaker at the Baltic Shipyard, and the upcoming Stalingrad. Notably, the Zvezda Shipyard in Russia’s Far East is actively working on the Lider (Leader), a new-generation icebreaker with double the power of its predecessors. Russia’s shipyards are also slated to upgrade the commercial fleet, encompassing tankers, gas carriers, and container ships, aligning with the evolving logistics landscape and global economic shifts. This comprehensive approach aims to bolster Russia’s standing on the international stage while addressing multifaceted challenges arising from geopolitical dynamics and recent developments.
China’s overtures and the West
Even as Novatek commenced LNG production at its flagship project in December, actual shipments are yet to commence. The newly imposed sanctions introduce further complications, possibly impeding deliveries and complicating efforts to secure buyers for the LNG. While the US and the UK try to reinforce obstacles for Novatek, Chinese enterprises have proven to be steadfast partners, aiding in overcoming Western technology restrictions. As long as China remains supportive of the project, the Western powers face considerable challenges in completely thwarting its progress.
Simultaneously, China opposed the US sanctions on Chinese enterprises for Russia-related reasons, as asserted by the Chinese commerce ministry. The ministry declared its commitment to take necessary measures to staunchly protect the legitimate rights and interests of Chinese enterprises, a stance outlined in a statement on its official website. The Biden administration’s announcement of new trade restrictions on 93 entities from Russia, China, Turkey, the United Arab Emirates, Kyrgyzstan, India, and South Korea, aimed at supporting Russia’s war effort in Ukraine, essentially amounted to a ban on US shipments to the targeted entities. Notably, this included eight from China, 63 from Russia, 16 from Turkey, and four from the UAE.
Russia, heavily reliant on hydrocarbon exports constituting 15% of its GDP, views the Arctic LNG 2 project as crucial, especially given the anticipated 40% rise in global demand for LNG by 2040. Despite international sanctions, Russia is driven to identify buyers. Japan, a consistent purchaser of Russian LNG, continues to depend on LNG for 70% of its energy needs and collaborates with the US on sanctions. While the European Union has not directly sanctioned Arctic LNG 2, it has constrained the transfer of liquefaction technology, although some EU companies persist in providing services to Novatek without official scrutiny. The intricate geopolitical landscape and economic interests delineate the delicate equilibrium between sanctions and Russia’s unwavering determination to advance its strategic energy projects.
A recent intelligence report from Strider Technologies revealed Russia’s strategic recalibration in the Arctic while facing financial and diplomatic repercussions of the Ukraine conflict. Confronting economic and diplomatic fallout, Russia, under President Vladimir Putin’s leadership, is deepening collaboration with China in the Arctic, signifying a major departure from previous exclusions and indicating an increasingly robust partnership between the two nations.
The report highlights a considerable surge in new companies with Chinese ownership registering to operate in the Arctic from January to July 2023. Collaborative efforts between Russia and China in various Arctic and Far East projects, particularly in liquefied natural gas, mineral extraction, and infrastructure, have been evident since 2013. The data further indicates a rise in Russia-China trade through the Northern Sea Route of the Arctic Ocean. While Russian defense spending in the Arctic remains static, private commercial investment from both Russia and China is on the ascent.
Economic realities, coupled with Russia’s dependence on China for oil and technology, stand out as major factors behind the increased access granted to China in the Arctic. The report highlights Russia’s significant lead over the U.S. in Arctic investment and development, highlighting Russia’s long-standing prioritisation of the region in contrast to the U.S. The report calls for a reassessment of strategies by Western nations, NATO, and other Arctic stakeholders to counter Russia’s activities in both Ukraine and the Arctic. It emphasises the need for adaptive and balanced efforts to prevent a lag in Arctic security and economic benefits.
Members of the House Homeland Security Committee and expert witnesses echo these concerns, urging the U.S. to bolster its presence in the Arctic to safeguard national security interests. The evolving dynamics in the Arctic, shaped by Russia’s strategic manoeuvres and collaboration with China, demand a proactive response from the West to maintain influence and effectively address emerging challenges in the region.
India’s Arctic Dilemma
India, a key strategic partner for Russia in South Asia, finds itself in a predicament. Two years ago, India formulated a comprehensive Arctic policy with the intention of leveraging its influence in Moscow for the advancement of its High North interests. However, the strategic position that New Delhi has adopted regarding the Ukraine War, which appears to have displeased the West, coincided with a gradual undermining of the strategic partnership that facilitated the flow of Russian oil to India via shipping. Substantial sanctions, primarily directed at Sovcomflot and 14 vessels crucial for transporting Russian oil to India, have had a profound impact on trade.
Since January 2023, the tankers newly subjected to sanctions have managed to deliver only around 6% of the total Russian crude imports to India, approximately amounting to 48 million barrels. The heightened enforcement of U.S. sanctions is disrupting India’s oil trade, compelling processors to explore alternative sources. Despite Russia maintaining its position as the primary supplier, there are indications that Indian refiners are increasingly contemplating diversifying their options. In the face of such developments, Russian envoy Denis Alipov emphasised Moscow’s enduring ties with New Delhi, even in the midst of U.S. attempts to strain the relationship through sanctions. Alipov noted that U.S. officials have explicitly aimed to create distance between New Delhi and Moscow, employing threats of secondary sanctions. While some Indian partners proceed with caution, others find this approach untenable. Despite these challenges, India adeptly navigates its strategic ties in the Indo-Pacific amid the complexities of ongoing geopolitical dynamics.
Russia’s High North and Far East strategy
Expressing dissatisfaction with the West’s strategy to contain both Russia and China, Moscow declared the suspension of its annual payments to the Arctic Council. This move signifies a temporary hiatus until ‘real work’ involving the participation of all member countries resumes. The decision follows the cessation of cooperation within the Arctic Council in the aftermath of Russia’s full-scale invasion of Ukraine two years ago.
The repercussions of Moscow’s suspension of cooperation are substantial, placing approximately a third of the council’s 130 projects on hold last year. This has impeded the initiation of new projects and the renewal of existing ones. While Russia currently has not signalled an intention to exit the Arctic Council, recent statements hint at a potential reassessment of its position. Maria Zakharova, spokesperson for the Russian foreign ministry, suggested that if the Arctic Council evolves into an institution perceived as unfriendly to Russia, Moscow may reconsider its membership.
Adding to the complexity, the speaker of the Duma, Russia’s lower house of parliament, announced plans to vote on Russia leaving the Organisation for Security and Co-operation (OSCE), with considerations for withdrawing from other international organisations. These developments showed a growing willingness within Russia to reconsider its involvement in international bodies, raising questions about its commitment to collaborative efforts in various regional and global forums.
Kremlin spokesman Dmitry Peskov addressed the potential withdrawal from the Arctic Council, emphasising that, at present, Russia remains actively engaged within the organisation. However, Peskov highlighted that if Russia’s participation were to deviate from its interests or be perceived as ineffective, unfair, or inappropriate, the country might consider making special decisions regarding its continued involvement.
The Arctic Council, comprised of Arctic states such as Denmark, Iceland, Canada, Norway, Russia, the USA, Finland, and Sweden, serves as a forum for addressing various issues in the Arctic region. Russia assumed the two-year chairmanship in 2021, later transferring the role to Norway in 2023. Peskov’s comments suggest a measured stance, allowing room for a likely reevaluation and strategic decisions based on Russia’s assessment of its interests and the effectiveness of its engagement within the Arctic Council.
Washington’s proactive arctic strategy
The Biden Administration introduced the National Strategy for the Arctic Region (NSAR), a comprehensive ten-year agenda aimed at updating its 2013 predecessor. This strategy places urgency on climate action, directing investments toward sustainable development for Arctic residents and environmental conservation. Crucially, it positions the United States to address the delicate balance between cooperation and strategic competition, especially considering Russia’s conflict in Ukraine and China’s expanding Arctic ambitions.
Simultaneously, the U.S. Administration published the Implementation Plan for the NSAR (NSARIP), outlining over 30 objectives and 200 actions. This detailed blueprint, developed with stakeholder input, designates lead agencies, establishes timelines, and remains adaptable to the evolving conditions in the Arctic region. President Biden emphasised the United States’ commitment to deepening cooperation with Arctic Allies and partners, underscoring the need to manage risks of militarisation or unintended conflict, particularly in the context of geopolitical tensions with Russia and China.
While aiming to undertake calibrated and coordinated activities with NATO Allies and Arctic partners, Washington seeks to defend NATO’s security interests, reduce risks, and prevent unintended escalation. Current challenges in cooperating with Russia in the Arctic stem from Russia’s involvement in the war in Ukraine.
The United States continues to prioritise collaboration with allies and partners in the Arctic, building on its integral role in the development of governance architecture. This includes the creation of the Arctic Council and the Arctic Coast Guard Forum over the past quarter-century. The comprehensive approach outlined in the NSAR and NSARIP reflects the administration’s commitment to addressing the myriad challenges in the Arctic region while fostering cooperation and managing strategic complexities.
In the wake of Russia’s military intervention in Ukraine and escalating geopolitical tensions marked by extensive US sanctions, the Arctic and Far East have emerged as strategic focal points for major global powers. While Vladimir Putin emphasises regional development across the Arctic and Far East, including the ambitious Northern Sea Route, the U.S. and its Atlantic allies are resolute in containing Russia’s overarching strategy and thwarting China’s expansive aspirations, particularly in the context of its Polar Silk Road vision. The High North has thus become considerably warmer, not only due to the environmental impact but also due to the intensifying strategic manoeuvres of powerful nations seeking to assert dominance in this critical geopolitical theatre.
(The author, ICSSR Senior Fellow, is Academic Advisor to the International Centre for Polar Studies (ICPS) and Director, Inter University Centre for Social Science Research and Extension (IUCSSRE), Mahatma Gandhi University, Kerala, India. He was earlier Professor of International Relations and Dean of Social Sciences, MGU.)
The author is ICSSR Senior Fellow and Director, Inter University Centre for Social Science Research and Extension (IUCSSRE), Mahatma Gandhi University, Kerala. He also served as Dean of Social Sciences and Professor of International Relations and Politics at Mahatma Gandhi University.