Why the Arctic Matters
Friday, 2/07/2025 09:01
Vast resources spur geopolitical scramble...
THIS investment story is unfolding far from Wall Street,
writes Frank Holmes at US Global Investors.
I recently spoke with Jonathan Roth, founder of ResourceWars.com and a veteran of capital markets. He highlighted an increasingly urgent issue: the Arctic.
As polar ice caps melt, new opportunities – and risks – are emerging in this increasingly contested region. Nations like the US, Russia and China are jockeying for influence, not only to access the Arctic's vast natural resources but also to secure strategic military and trading advantages.
Greenland, in particular, is shaping up to be a geopolitical hotspot, and it's no wonder that Trump has repeated his interest in acquiring the island.
During our conversation, Jonathan emphasized the Arctic's immense resource wealth. The region is home to some of the world's largest untapped reserves of natural resources.
A 2008 study by the US Geological Survey says that the Arctic holds 1,670 trillion cubic feet of natural gas and other fuels – equivalent to Russia's entire oil reserves and three times those of the US.
Greenland, the world's largest island that isn't a continent, is rich in critical minerals essential for modern technologies, including rare earth metals, graphite, niobium and titanium. These materials are vital for everything from smartphones to EVs to military hardware.
Ice loss in the Danish territory has also exposed significant deposits of lithium, hafnium, uranium and gold. A 2023 survey by the Geological Survey of Denmark and Greenland evaluated 38 raw materials on the island, most of which have high or moderate potential.
Jonathan also pointed out that Russia has been quietly building its Arctic presence for over a decade. It now has the most significant military presence in the region, with refurbished Soviet-era bases and a fleet of nuclear-powered icebreakers.
In 2024, some 38 million metric tons of cargo were shipped through Russia's Northern Sea Route (NSR), a record amount for a single year and a nearly tenfold increase from a decade earlier. The NSR is central to President Vladimir Putin's vision of a shipping lane that rivals the Suez and Panama Canal, but challenges like shallow, ice-filled waters and foggy conditions mean the route has a long way to go before becoming a global sea lane.
Annual Income of Cargo Transformation Through the NRS in Russia
The country's Arctic ambitions are about more than just trade. The region is a cornerstone of its strategy to secure military and economic power.
This poses a significant concern for the US and its allies, especially as climate change accelerates ice melt and opens up new access routes. Russia's dominance in the Arctic could disrupt global trade, heighten geopolitical tensions and undermine US strategic interests.
While Russia boasts dozens of icebreakers, including nuclear-powered vessels, the US is woefully behind. Jonathan highlighted that the last heavy polar icebreaker built by the US, the Polar Star, was commissioned nearly 50 years ago, in 1976. Meanwhile, the newer Polar Security Cutter (PSC) class of icebreakers, intended to bolster US capabilities, has faced years of delays and budget overruns.
Number of Major Icebreakers and Ice-Capable Patrol Ships, by Country
Recognizing this, the US has partnered with Canada and Finland under the ICE Pact to develop a new generation of icebreakers. Finland, which designs 80% of the world's icebreakers, brings valuable expertise to the table.
Greenland's importance extends beyond its resource wealth. Jonathan noted the island occupies a key position along two potential Arctic shipping routes – the Northwest Passage and the Transpolar Sea Route. As sea ice continues to melt, these routes could significantly reduce shipping times and bypass traditional chokepoints like the Suez and Panama Canals.
Greenland is also home to Pituffik Space Base (formerly Thule Air Base), a critical US military installation for missile early warning and space surveillance. The base's strategic value is compounded by Greenland's role in the so-called GIUK Gap (Greenland-Iceland-United Kingdom) – a naval chokepoint in the North Atlantic.
Investment in Pituffik has been inconsistent, however, and its importance has waned since the Cold War. Renewed attention to Greenland could help the US counter Russia's growing Arctic dominance and China's ambitions as a "near-Arctic" power.
The Arctic's significance isn't just about resources or shipping lanes. It's about power, influence and the ability to shape the future of global trade and security.
For investors, the region offers opportunities in sectors like energy, mining and infrastructure. Companies involved in rare earth mining, icebreaker construction and Arctic logistics could see significant growth as nations ramp up their Arctic investments.
As always, investors should keep a close eye on these developments. The Arctic may be cold, but the race for its riches is heating up.
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