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Arctic Deal Between Oil Giants And Climate Threats

By Peter Custers

21 September, 2011

The deal has been described as a coup, but then the question is: what kind of a coup is this? On August 30, two well known oil giants, i.e. the US private corporation Exxon-Mobil and Russia’s state owned company Rosneft, signed a strategic deal. It notably paves the way for cooperation between the two oil companies in Russia’s Kara sea, but also for mutual cooperation elsewhere around the globe. Even at first sight, the deal presents itself as a major strike aimed at outflanking other companies in the world’s oil sector. Exxon-Mobil has been on top of the list of the world’s largest privately-owned oil giants for years. In 2010 it officially earned a revenue of 382 Billion US Dollars. From its side, Rosneft reportedly is responsible for no less than a fifth of all crude extracted by the world’s premier oil producing country, Russia. Furthermore, the deal replaces a deal Rosneft had previously sought to clinch with the British owned corporation BP. The latter deal mainly backfired because of internal opposition within BP’s Russian subsidiary. Nevertheless, the ExxonMobil-Rosneft deal may be considered a kind of coup. For there were other Western oil giants such as Shell that had vied for a deal with Rosneft, even as negotiations between ExxonMobil and Rosneft were on. Strikingly, the giants’ deal cuts strait across the divide between privately owned and state-owned oil giants in the sector. It puts ExxonMobil and Rosneft in a strategic position to compete for undiscovered and unexplored oil reserves, at a time when world oil production has reached its historical peak.

If this were the end of the story, the Rosneft-ExxonMobil deal could perhaps be bypassed. It could be put aside as one more example of the endless struggle which monopoly companies wage to gain the upper hand over global competitors. But then the principal target of the deal between the American and the Russian giant, as indicated, is not to drill oil wells in de desert or in clay-covered earth, but in the Kara sea, an icy sea located not far from the North Pole and within the Arctic circle. During a part of the year, especially during winter time, large parts of this sea are covered by a layer of ice, as is true for much of the Arctic ocean. At a time when the melting of glaciers, ice bergs and ice sheets has become a global issue, - this immediately raises questions on the implications of the ExxonMobil-Rosneft deal for climate change. During the last four decades, i.e. since the 1970s, both the extent of horizontal coverage, and the thickness of ice in the Arctic has dramatically decreased, making it one of the regions on earth where climate change is most visible. Data on ice coverage in the warm season are particularly telling. In 2007, the ice area of the Arctic during summer time was a reported 4 million square kilometers. It was roughly half the ice coverage registered three decades earlier when satellite measurements started. Whereas the Arctic ocean has not been ice-free in 8 hundred thousand years, some computer models have predicted it might be entirely free from ice during the warm season by the thirties of this century!

These concerns, however, are very distant from the minds of the two mentioned oil companies. Instead, their deal in one gigantic blow re-sets the parameters of ongoing conflicts between the Arctic states. During the last decade, conflicts between the five main Arctic states, the US, Canada, Denmark, Russia and Norway, have escalated rapidly. So far, the central part of the Arctic, the North Pole, was considered a common human heritage. It was a region over which no Arctic state had any territorial rights. Yet Arctic states have strenuously been trying to extend their rights, by claiming an extension of their national sovereignty to portions of the Arctic in the past considered humanity’s commons. Russia for one, has sought to prove that its continental shelf in the far North, the so called ‘Lomonosov’, naturally extends to sections of the North Pole. Other states have followed suit. Again, as tensions between the Arctic states have risen, individual states have flexed their muscles. Russian bombers are reported to have undertaken reconnaissance flights above the North Pole, and both Canada and Norway have announced plans to built military bases at points bordering the Arctic. These conflicts evidently are very closely related to the appetite for fossil fuels and minerals, at a time when the melting of Arctic ice opens lucrative prospects for their future extraction. Western observers have speculated on a resumption of the Cold War.

From the latter perspective, the coup staged by Rosneft and Exxon might appear to be a healthy coup. For in one single blow, the American and the Russian oil giant have successfully superseded some of the tensions between the two most powerful Arctic states. Reacting to growing speculation over the risks of a military conflict in the Arctic, - Russian spokespersons in recent months have repeatedly insisted that it is quite well possible to contain tensions between Arctic states. With the Rosneft-ExxonMobil deal patronized by the Kremlin they seem to have proven their point. But then recent tensions between the Arctic states have bypassed what to all accounts is the very largest danger looming on the horizon. Extraction of fossil fuels in the Kara sea and the Arctic can only be started in consequence of the climate change that has been caused by these same fuels. Moreover, the Arctic is not just a region of the globe where climate change is highly visible; it’s a region where a future catastrophe threatens to be unleashed. Two of the factors which climate scientists have pinpointed as future ‘tipping points’, as points setting the transition from climate change to a climate catastrophe, will be played out in the Arctic and its adjoining areas. One is the release of huge quantities of the potent greenhouse gas methane, once hitherto frozen earth in areas bordering the Arctic melts. The other is the end of the ‘albedo’, which is the reflection of the sun’s rays back into outer space by the ice. Once all this happens, the Arctic’s main ice-mass in Greenland will disintegrate faster, and the world’s coastal areas will see a deluge!

In short, the corporate deal over the Kara sea is a deal with global implications in more than one sense. It changes the balance of forces between giant corporations in the oil sector, and it heralds a new phase in the efforts of Arctic states to open up the region for exploration of fossil fuels, at the risk of an acceleration of climate change. There is thus the need for formulation of an agenda that is clearly alternative to the Rosneft-ExxonMobil deal, at a time when the world is preparing to hold its next climate summit, in November next. Russian environmental organizations have been highly critical of any oil exploration in the Kara sea from well before the Rosneft-ExxonMobil deal was sealed. Again, ExxonMobil has been the target of US environmental organizations for long, notably since it caused an oil spill in the US’s northernmost state of Alaska. There now emerges the need for a global alliance of American and Russian environmental organizations and Southern states, so as to combat any fossil fuel exploration in the Kara sea or the Arctic. Such an agenda is by nature positive, for it seeks to protect humanity and the earth from a climate catastrophe. But it could include additional points, such as the demand for a complete clean-up of nuclear debris previously dumped in the Kara sea. In any case the stakes for Bangladesh, for other coastal nations and island states most vulnerable to climate change are huge. They can only survive if they develop a common agenda which inter alia includes a prohibition on any fossil fuel extraction in the Arctic.

Dr. Peter Custers , Leiden, the Netherlands
antimil@hotmail.com ,





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