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Trump, Putin, and the Race for Arctic Oil

Russia and the U.S. are both eager to drill in the polar region. What does that mean for the environment?

Sergei Karpukhin/Getty Images

Last March, Russian President Vladimir Putin posed for a photo beside a large Arctic glacier. Later, he asserted his country’s claim to the oil underneath it. “Natural resources, which are of paramount importance for the Russian economy, are concentrated in this region,” he said in remarks to Russian state media. Without supporting evidence, Putin claimed that $30 trillion worth of black gold lay beneath his country’s portion of the Arctic. Oil companies from other countries would be welcome to help extract these reserves, he said, but they would be extracted one way or another. And the riches would flow to Russia.

Easier said than done. Putin has long dreamed of reaping profits from Arctic oil. But sanctions, low oil prices, and the weather have proven significant obstacles. Now, with Donald Trump as president, Putin faces yet another potential speed bump—one he didn’t face when Barack Obama was in the White House. He has to compete with the United States for business in the polar region.

Over the last month, Trump has moved to open more of the U.S. Arctic to oil development. On Friday, he took the first step of “an aggressive effort to drill for oil in the Arctic National Wildlife Refuge, one of the country’s most pristine and environmentally sensitive areas,” according to The Washington Post. The 19 million-acre portion of Alaskan coast had been off-limits to oil developers since 1980, when Congress designated it as protected wilderness. But that changed in December, when Congress passed a tax bill that included a provision allowing drilling in ANWR’s coastal plain. Now, Trump has started the process of leasing that plain to oil and gas companies. He plans to formally issue leases as soon as next year.

This alone wouldn’t be problematic for Russia; there’s enough oil to go around. But at the same time Trump has been making it easier for oil companies to develop in the U.S. Arctic, he’s making it harder for them to develop in Russia’s portion. In early April, he placed tough new sanctions on Russia that targeted some of the country’s richest men—many of them oil executives. Under the terms of the sanctions, American companies cannot conduct business with those men or their companies.

More important, Trump’s sanctions make Western oil companies broadly wary to invest in Russia, said Victoria Herrmann, president of the The Arctic Institute, a think tank. The Obama administration and the European Union had already placed sanctions on Russia in 2014 that prohibited the country’s use of drilling equipment and technology from America and Europe. “These new sanctions are an indication that the general relationship [between Russia and the U.S.] is not going to improve in the coming years,” Herrmann said. “And you don’t want to invest in something that’s uncertain, because oil takes a long time to extract and sell.”

Oil companies are already leaving Russia as a result of the sanctions. In February, ExxonMobil announced it was leaving a valuable venture with Rosneft, Russia’s largest oil company, to drill millions of acres on and offshore in Russia’s Arctic. This was a huge blow to Putin, who had “personally blessed the arrangement, which envisioned decades of exploration in some of Russia’s richest, untouched fields,” according to Bloomberg. ExxonMobil cited sanctions as the reason for its withdrawal.

Those companies leaving Russia are also seeing new opportunity in America—specifically the Arctic National Wildlife Refuge, Herrmann said. “The opening of ANWR has definitely changed the conversation, and changed where companies are pursuing business,” she said. “With an administration that’s not just pro-oil, but pro-oil in Alaska specifically, you have a revitalization of companies that didn’t see the appeal now being quite eager.”

These aren’t the makings of a brewing oil war between Russia and America, though. Neither the opening of ANWR or Russian sanctions were done with the explicit purpose of gaining a competitive edge in the Arctic oil race. Trump opened ANWR to appease fossil fuel interests and Alaska Senator Lisa Murkowski. He sanctioned Russia for interfering in the 2016 election.

But the notion that such a race exists could benefit Putin. Arctic oil extraction is important to Russia’s economy and its self-image. So sanctions or not, Russia will continue to aggressively pursue it: The country announced on Monday that it will begin active offshore drilling in the Arctic next year. “State media can now showcase how strong Russia is in the face of the Untied States,” Herrmann said. “Despite the sanctions, despite Exxon pulling out, Russian oil hasn’t stopped. It’s hit a speed bump, but they’re still opening up new fields.”

Unlike Russia, though, America doesn’t need the oil from its Arctic territory to sustain its economy. So luring oil companies to Alaska only comes at the expense of one of America’s most wild, pristine environments—and may further contribute to climate change. “The United States can develop in ANWR and Russia can simultaneously do the same there; this isn’t a zero sum game,” Herrmann said. “The likely outcome here is that Russia and the U.S. both ramp up oil.”