Gwynne Dyer: Heated battle for oil lies beneath frigid Arctic waters

Photo / Wairarapa Times-Age

First, the good news. Tomorrow Russian Foreign Minister Sergei Lavrov and Norwegian Foreign Minister Jonas Gahr Stoere will sign an agreement in Murmansk that resolves the long dispute between the two countries over their Arctic seabed.

So there will be no military confrontation in the Barents Sea between Russia and Norway, a Nato member, over who owns which part of the seabed, even if oil is discovered there.

Now for the bad news. Tomorrow Russian Foreign Minister Sergei Lavrov and Norway Foreign Minister Jonas Gahr Stoere will sign an agreement that resolves the long dispute between the two countries over their Arctic seabed rights.

That means drilling for oil can get under way in the Barents Sea, in waters that are deeper than the BP well that blew out in the Gulf of Mexico. Also colder waters in which an oil spill would linger for many years.

Two years ago, the military and the think tanks in Moscow were obsessed with the prospect of a military confrontation with Nato over Arctic seabed rights.

Mention climate change to them, and you would immediately get a lecture about Russia's right to seabed oil and gas in the Barents Sea and American plots to steal those resources.

About 175,000sq km were at stake. Geologists believe that there may be large oil and gas reserves in the area, but there has been no drilling because for 40 years the two neighbours were unable to reach a deal on their seabed frontier.

During the Cold War the area was tense, with Nato maritime patrol planes regularly overflying the area claimed by Russia. Even after the collapse of the Soviet Union the tension continued, leading Norway to carry out a recently completed modernisation of its Navy that effectively doubled its capacity to operate in Arctic waters.

Russia and Norway have now resolved the disagreement by dividing the disputed seabed evenly between them.

Now that the confrontation is over, the two countries will probably work together to develop the region's resources, since Russia needs Norway's more advanced drilling technology. The returns may be huge, as the Arctic basin is thought to hold up to 20 per cent of all the world's remaining undiscovered oil.

But the downside of this development is that drilling will take place in an environment where storms are fierce and frequent, and sea-ice is a regular seasonal phenomenon. The polar ice-cap is retreating as global warming proceeds, but there will still be ice in the area in winter.

The risk of a major oil spill is hard to calculate, but it certainly exists. Norway has a good reputation for minimising environmental damage when drilling in Arctic waters: Russia's reputation is less impressive.

This is the first part of the Arctic Ocean where large-scale exploitation of hydrocarbons is likely to happen, because the other two promising areas, in the Bering Strait between Russia and the United States and on the seabed north of Alaska and Canada's Yukon territory, are still in dispute. Sporadic negotiations take place between the US and Canada, but the US-Russian seabed boundary is not even being discussed.

This is because back in 1990, when the old Soviet Union was stumbling towards collapse, Soviet Foreign Minister Eduard Shevardnadze made a deal with US Secretary of State James Baker that accepted almost all of the American claims in the seabed area in dispute between Alaska and Siberia.

It was an agreement made at Russia's moment of maximum weakness, and the Russian Duma (parliament) has never ratified it, and never will.

A compromise like the one just worked out between Norway and Russia is the only way to settle the issue, but which US politician would take the responsibility for giving up seabed territories that belong to the United States under the 1990 accord, however unjust it was?

So we may get the worst of both worlds: deepwater drilling in the environmentally vulnerable region of the Barents Sea, and a new cold war over US and Russian claims to the seabed in the Bering Strait.

There is also the possibility that the global response to the threat of runaway warming will be so rapid and effective that the demand for oil and gas will fall faster than existing reserves are depleted.

In that case, it might never be economically sensible to start drilling for oil and gas on the Arctic seabed at all. But I wouldn't bet the farm on it.

* Gwynne Dyer is an independent journalist based in London.