Melting Arctic to Open Up New Trade Routes and Geopolitical Flashpoints

Bradley Intelligence Report

Client Alert


The Ukraine war has refashioned alliances, isolating Russia from the West and pushing Moscow and Beijing to closer cooperation. Citing national security, the U.S. and allies are securitizing trade policies with China, restricting access to key developing technologies and friend-shoring critical supply chains. In what some foreign policy experts are calling a new Cold War, geopolitical competition between western liberal democracies and the China-Russia authoritarian axis is super-charging a race to shape technology standards, economic rules of the road and political norms of the Fourth Industrial Revolution. The Arctic Circle, once the isolated habitat of polar bears, rich marine life and small indigenous communities, is now being drawn into the realm of geopolitics, with melting polar ice caps promising to open its waters to navigation and tensions. 

New Trade Routes, New Economic Opportunity

The Arctic region has been warming four times faster than the rest of the world over the past four decades, according to a 2022 study by Finnish and Norwegian scientists. Scientists are projecting that by 2035, parts of the Arctic will be free of ice during summer months, opening up prospects for commercial shipping to ply these waters and shorten transit time between the U.S., Europe and Asia. Some studies project that Arctic routes could be 30% to 50% shorter than the Suez Canal and Panama Canal routes, with transit time reduced by an estimated 14 to 20 days.  Beyond commercial shipping, the new routes could attract cruise ships and adventure tourists.

Access not only creates opportunities for the maritime sector, but the region is rich in fossil fuels, critical minerals and marine life. Commercial industries potentially will gain access to billions of dollars of untapped resources. Unlike Antarctica, a land mass, there is no treaty protecting the Arctic from international development. This makes control over the waterways and natural resources ripe for dispute and potential conflict. The race to build infrastructure to support and control navigation has already begun.

Northern Sea Route, Northwest Passage and Future Trans-Arctic Shipping Route

The Northern Sea Route (NSR) was first opened by the Soviet Union in the 1930s but has not been a reliable transit route due to ice coverage. Climate change is changing that. Russia claims that the NSR lies within its territorial waters, giving it exclusive rights to develop the area and patrol ships. The U.S. and other countries dispute this claim, saying it runs through international waters. Seeing the emerging opportunity, Russia has been refurbishing more than 50 Soviet bases, providing them with strategic ports and sending a political message that the NSR is under Russian sovereignty.

Canada claims the Northwest Passage (NWP) is located in internal Canadian waters and subject to Canadian law and sovereignty. The U.S. and Europe disagree, arguing it also is an international strait and subject to freedom of navigation under the Law of the Sea. To date, there are very few ports along the NWP, with Churchill being the only deep-water port with shelter and berthing facilities. There are no deep-water ports along the North Slope of Alaska or throughout the Canadian Archipelago. But this is changing. The U.S. has plans to build its first deep-water Arctic port in Nome, Alaska, and Canada is planning a deep-water port in Qikiqtarjuaq, Nanuvut, which is located at the entrance to the NWP.

The Trans-Arctic Route, which cuts straight across the North Pole, avoids the territorial waters of Arctic states and lies in international high seas. Currently, and probably until mid-century, it is only navigable by nuclear icebreakers. But the possibilities are being discussed today, foreseeing thousands of ships a year passing between North America and Asia, with a hub at Alaska’s Dutch Harbor. The ships would not have size restrictions, as the Central Arctic Ocean’s depth is not as limiting as the NSR and NWP.

Arctic Portal, Northern Sea Route Information Office 

(Source: Arctic Portal, Northern Sea Route Information Office)

National Security a Top Line Concern

The Biden administration released its National Strategy for the Arctic Region in October 2022. It has four pillars: national security, economic development, infrastructure development, and environment. National security is the first priority. In light of Russia’s full invasion of Ukraine, the strategy cites the requirement to protect the homeland and ensure that the Arctic region is peaceful, with guardrails to manage competition and resolve disputes without force or coercion. The strategy also draws attention to China’s efforts to increase its influence in the Arctic, doubling its investments with a focus on critical mineral extraction and using scientific engagements to conduct dual-use research in military or intelligence applications in the Arctic.

These worries are not purely theoretical. The military balance in the Arctic is heavily weighted towards Russia. It has more bases than NATO and is upgrading air strips to improve operability. Russia’s icebreaker fleet vastly outnumbers NATO states, even with the addition of Finland. Despite the Ukraine War, Russia is continuing to invest, maintain and exercise its forces in its Northern Region, which is home to many Russian strategic military assets (ballistic missile submarines, strategic test sites, advance radar systems, etc.). The shortest distances for a Russian missile or bomber attack against the U.S. is over the polar cap.

China also seeks to become a polar great power. Beijing has declared itself a “near-Arctic state,” claiming rights to freedom of navigation and overflight, scientific research, fishing, and resource development. China’s intelligence-gathering activities became front page news this year with the detection and eventual downing of a Chinese balloon first detected near St. Matthew Island in the Bering Sea.

Moscow has historically pushed back against Beijing’s interest in the Arctic to protect its sensitive military assets. However, the war in Ukraine has changed the strategic landscape. In June, Russian and Chinese vessels conducted a joint exercise near Alaska’s Aleutian Islands. The U.S. Coast Guard warned the ships off when they entered U.S.-regulated waters. The U.S. military views this as a test of U.S. readiness. Since then, there have been other Russian-Chinese patrols in the area, and the U.S. has made a show of tracking them.

While commercial opportunities remain over the horizon, geopolitics will play an important role in determining what the opportunities are and for whom.