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13% of the world’s undiscovered oil;

The heart of the conflict lies in the

Even a proper geographic analysis

in 2000, the United States Geological

application of the UN Law of the Sea.

will not solve this issue. Since all of the

Service suggested that number may be

According to it, all nations are given a

Earth’s Crust is connected at some point,

as high as 25%. The Shtokman gas field

200 mile exclusive economic zone (EEZ)

Canada’s connection to Lomonosov and

in the Barents Sea, currently under $20

from their coasts. This arrangement


bn Russian development, is believed

works well in the lower latitudes, where

would mean, under the Law of the Sea’s

to house double all of Canada’s gas

overlaps between countries are minimal

logic, that Canada could claim the entire

reserves. Large amounts of minerals are

and the seabed is fully mapped. But like

Eurasian subcontinent as an extension of

believed to be located on the seabed.

a pumpkin, where the different pieces

its shelf. There are considerations for the

In a world of falling supplies and hostile

of the shell start off wide and distinct

environment to be taken into account.

suppliers, the Arctic may prove to be a

but grow increasingly narrow towards

The North Pole is one of the most

“Black” Gold Rush.

the top, the lines separating territorial

fragile environments, any introduction

claims begin to overlap more intensely in

of drilling and commerce would be

regions around the North Pole.

highly disruptive. Oil spills would be a

Russia is well positioned to win this race. 80% of oil extraction and nearly all





pressing concern, as the conditions of

done by Russian companies. Russia has

involved in light of the 10 year UN

the Arctic Ocean would slow response

significantly more Arctic coast line than


times. Maintenance of pipes would be

any other country. Its national champion,



extremely difficult; should a pipe rupture

Gazprom, is well capitalized, fully supported

missed, and the exemption given to

oil would be much harder to remove

by the government, and has already begun

“extended continental shelves.” Under

than in most warm water zones. Such


gas extraction in the Arctic are currently

claims limit which

become to






The North Pole is one of the most fragile environments, any introduction of drilling and commerce would be highly disruptive. exploration and drilling in many areas.

this exemption those countries that can

a disaster occurred in 1994, where a

Russia appears ready to back its claims,

show the underground terrain linked to

pipeline in Russia’s Komi region ruptured,

planting a flag on the seabed of the North

their coasts extends past the 200 mile

spilling over 100,000 tons of oil.

Pole in 2007 and declaring it annexed.

limit can claim up to 150 additional

And with the degree of uncer-tainty

miles for their EEZ. But this is hardly a

surrounding many estimates of Arctic

But Russia faces major opposition. ordered

clear issue to resolve, as much of the

wealth, there is concern that the rush for

$7 bn dollars of naval patrol vessels

North Pole remains uncharted due to

resources will come at great cost with

to “defend its sovereignty over the

the ice covering the surface. Most bids

significantly lower benefit. The possibility

Arctic,” according to Prime Minister

for territory past 200 miles are based

of cost overruns as companies move

Stephen Harper. The United States



into a more demanding environment is

is using Alaska as a spring board,

scientific statement. Lomonosov

field has cost $8.8 billion dollars, 50%




while The Commission on the Limits

various For



substantial; the Norwegian Snøhvit gas the

above original estimates.

of the Continental Shelf, run by the

Ridge, lying beneath the North Pole and

UN, has suggested Norway may have

extending over 1100 miles, has been

This is an issue unlikely to be

geographical claim to much of the

claimed by Russia to be connected

resolved for some time. The rate of the

Arctic Ocean, including parts Russia

to the Eurasian Continent, claimed by

ice’s recession is uneven, and it may take

has claimed. Even Denmark ordered a

Denmark to be connected to Greenland,

years for lanes to open to shipping and

$20 mn investigation to see whether its

and claimed by Canada as part of North

drilling. The murky legal situation may

possession of Greenland’s continental

America. The high altitude observation

postpone full use for years after that.

shelf extended far enough to give

and sonar that discovered the Ridge are

But the riches here measure in trillions of

it control of all the vital parts of the

blocked by the remaining ice from making

dollars, setting the stage for a saga best

Arctic land regions.

a more accurate picture of the geography.

referred to as “The New Cold War.” iBR

i n t e r n at i o n a l bus i n ess r e v i e w


International Business Review - Spring 2010  

The Spring 2010 edition of the IBR.