Apr 29, 2014, 5:46 PM ETConference Presentation, Panel

The Arctic: The New Frontier

Jared Carney (Moderator) frames the Arctic as the world's last great frontier for physical infrastructure, economic development, and human capital at the 2014 Milken Institute Global Conference.
Terry Audla (President, Inuit Tapiriit Kanatami) represents approximately 60,000 Inuit in Canada, whose homeland spans an area equivalent to India and holds land title comparable to Spain and Portugal.
Guðni Th. Jóhannesson (President of Iceland) notes he is the longest-serving democratically elected leader in the world and highlights that over half of the G20 nations are now formally involved in Arctic affairs.
Torben Møller Pedersen (CEO, Pensions Denmark) represents a pension fund with $30 billion USD in assets under management and emphasizes the high risk-adjusted return requirements for Arctic investment.
Lawrence Smith (Chair of Geography, UCLA) presents 22 years of research confirming that physical changes in the Arctic are unequivocal and accelerating public and business interest.

Sea Ice Retreat: Summer ice melt is creating viable shipping routes via the Northern Sea Route and Northwest Passage, with potential for "polar class 6" vessels to cross the North Pole directly.
Permanent Ice Loss: The top of the Greenland Ice Sheet, once a snow plain, is now covered with flowing blue rivers; a melting of just one-quarter of the sheet could raise global sea levels by nearly two meters.
Permafrost Degradation: Thawing permafrost threatens land-based infrastructure, causing structural failures in buildings and pipelines, and threatens the viability of seasonal winter roads essential for Arctic economic activity.
Traffic Shifts: Satellite data from 2004 shows a dramatic seasonal shift in ship traffic; while winter traffic is minimal, summer traffic surges to include local resource extraction, tourism, and community resupply rather than just trans-oceanic transit.

Shipping Routes: Shorter shipping lanes (e.g., Costco's Shanghai-Rotterdam route took 10 days less) are attracting major commercial fleets; Singapore and Germany are actively positioning hubs in the region.
Resource Reserves: The Arctic holds vast untapped reserves of minerals, rare metals, oil, gas, and hydropower, which are expected to be the primary income source for regions like Greenland for the coming decades.
Hydropower Potential: Greenland possesses the largest reservoir of untapped hydropower in the Western world, with proposed transmission cables to Iceland, the UK, and potentially the US to act as a "battery of Europe."
Tourism Growth: Arctic tourism is a rapidly growing sector, with Iceland reporting annual increases of up to 20% in tourism and record profits for airlines like Icelandair due to high demand from Asia and Europe.
Fishing Industry: The purity of Arctic oceans offers a premium value for environmentally conscious consumers as fish stocks in other regions decline due to pollution and overfishing.

Land Tenure: In Canada, modern treaties have granted the Inuit title to vast lands, making them one of the world's largest private landholders with full control over development terms.
Development Principles: The Inuit have issued a "Declaration on Resource Development" emphasizing respect for indigenous rights, environmental stewardship, and the need for projects to be sustainable and conducted on their own terms.
Socio-Economic Status: Inuit face significant challenges, including a median income of $16,000 (vs. $60,000 for non-aboriginal populations), high underemployment (4x higher), and reliance on imported food due to a lack of road infrastructure.
Greenland Self-Rule: Granted in 2009, Greenland's self-rule provides full control over natural resources, though political conflicts persist regarding foreign policy, security, and the potential export of uranium.

Commodity Price Sensitivity: High extraction costs in the Arctic (specifically Greenland) mean that oil exploration becomes non-viable if prices fall between $60–$80 per barrel.
Operational and Environmental Risk: There are currently undefined procedures for dealing with oil spills in the Arctic, posing severe reputational risks to institutional investors.
Regulatory Stability: Investors require stable tax and royalty regimes for 20–40 year horizons; retroactive changes to these regimes are a primary barrier to attracting private capital.
Infrastructure Deficits: The region lacks ports, search-and-rescue capabilities, and all-weather road connections, creating safety risks and high costs for logistics and community transport.

G20 Engagement: The Arctic Council now includes more than half of G20 nations, driven by the strategic significance of the region for 21st and 22nd-century economies.
US Leadership: The United States will assume the rotating chairmanship of the Arctic Council next year for the first time since it became a treaty-making organization.
Law of the Sea: The US is the only Arctic nation to have not ratified the UN Convention on the Law of the Sea, placing it at a disadvantage regarding claims to extended offshore sovereignty, though US sovereignty is not seriously challenged.
Russian Engagement: President Putin has shifted the Arctic from a regional to a national priority, engaging directly in conferences; Russia has recently invited major American oil companies to cooperate on northern exploration.
Security Concerns: Despite general low political risk, the US has acknowledged the need for increased icebreakers and aircraft to monitor the "open border" in Alaska during summer months, where customs enforcement is currently over 1,000 miles away from the nearest port.

Time Horizon: Successful Arctic investment requires a 20–30 year horizon; President Grimson notes that even this period will pass quickly given the rapid pace of recent geopolitical and economic shifts.
Scientific Imperative: Melting Arctic ice drives extreme weather globally, necessitating intense international scientific cooperation to prevent costly societal planning errors.
Himalayan Parallels: The panel draws parallels between Arctic and Himalayan cooperation, suggesting successful Arctic diplomatic models can help manage resource and water disputes among nuclear-armed nations in the Himalayas.
Investment Vehicles: The World Economic Forum has recommended the creation of a circumpolar sustainable investment vehicle to facilitate cross-border, sustainable infrastructure financing.
Warning to the US: Panelists urge the American corporate and political community to aggressively engage now to avoid being marginalized by Asian and European entities that are already establishing positions in the Arctic.