Hey everybody, Peter Zeihan here coming to you from central Colorado about 12,500 feet just below a fairly sizable snow field on a mountain I was climbing. I figured today was her this moment was the best time I could think of to talk about the Arctic, a lot of you have written in and wondering if we’re on the verge of a new era of exploration, and exploitation and development.
Kay ruled out. But a couple things to keep in mind. Number one, the Arctic is for the most part completely unpopulated. And so even if you have a wonderful mineral resource, you then have to go into tundra. In order to build roads or ports, were airstrips tundra is not great land to deal with.
In the summer, it tends to turn into a full on Swamp. So if you’re going to have a town, it has to be elevated. And if you’re gonna have a road, it has to be on a raised berm that stretches hundreds, if not thousands of miles, which is why most of the remote places in Russia and Canada for mining aren’t on the road network, you basically fly in and then the place is just a frozen version of hell in the winter.
Do you want to do offshore, you’re not just dealing with ice, you’re dealing with moving sea ice, which means that most of what you have to do has to be under the ice. And yet it still has to be pumped back to the shore, where it can be stored until the ice melts in the summer. So now you also need storage. So your cost for development for facilities up there is very high, the maintenance cost is extreme, and you’re not going to be able to have a regular income stream because you can only ship out seasonally then there’s the problem that we’re there are populations on the arc or above the Arctic Circle are very, very limited.

You basically have two categorizations. The first is you got the Russians, because during the Soviet period that the Soviets saw the entire Arctic zone is the zone for national security. And even though it made no economic sense, they settled people up there to the tune of a few million. Now, the vast majority of those people who have found ways to get back to warmer climes but there are still places like Murmansk, Norilsk that are way up there. Think yes, no one is going to sink the capital and technology that is necessary to develop the Russian Arctic. Exxon was doing a little bit on this in places like
Murmansk and Andre, I’m sure he mispronounced that sorry, Russians and the Yamal Peninsula, but in the aftermath of Ukraine war, that money’s gone away. And there aren’t a lot of companies on the planet that have any sort of experience in dealing with this sort of thing.

The Russians do have some limited skills, obviously, they’ve got plenty of experience. The problem is, is that the gutting of the Russian demographic structure is well underway. And the youngest people who were trained in the Soviet period with the full suite of technical skills necessary to do things like this, you know, they’re in their early 60s. Now, there just aren’t enough people out there to do it. And the Russians have never had the capital to do it in any sort of scale.

The other classifications are places where the normal rules of the Arctic do not apply. There are a couple of places in the polls where warm water currents wash up against the coastline of the continent, and making it a zone that is ice for year round. And the one that matters there the most is the North Atlantic drift going up to Northwestern Europe. So the entirety of the Norwegian coast is ice free year round. And that’s one of the reasons why Norway has become one of the world’s preeminent energy powers because they can go into the offshore oil and natural gas zones and produce your own, they still have to deal with the depth, they still have to deal with offshore, they still have to deal with relatively light population densities, they still have to deal with storms. But at least they don’t have to deal with smoothing sea ice. And as a first world country, they have capital access that the Russians simply can’t match.

The thing however, though, is it’s already ice free. If you want anything more than what you’ve got, right now, you’ve got to wait for the pole to melt out. And I have not seen a single estimate that suggests that the Arctic Ocean will be ice free in the winter, before the end of the century. Remember, the problem isn’t just ice, it’s seasonal ice that moves. And then the other issue is we’re not up to resources, you might be after transport, the idea that you can ship things from Europe to East Asia back and forth much more easily that you can go into southern route through Suez or around Africa and India. Well, technically, there might be something to that. But again, seasonal sea ice, you have to wait for the place to be ice free.

Otherwise, all the aids to navigation have to be redrawn and recharge at every single season. So against seasonal route, that even if you’re relying on an icebreaker, that icebreaker is going to be Russian. And in the current environment, there aren’t a lot of people who want to rely upon the Russians for safety in times when there’s distress because for several 1000 miles of empty, trackless ocean and ice, there is no one else you can call. Finally, if you’re going to do this, you’re connecting east Asia the most rapidly aging part of the planet, with Western Europe, which is the second most rapidly ageing part of the planet, so you’re making a long term bet on two regions that demographically are not going to be able to trade much at all for much longer because they simply don’t have any consumption that is going to be sustainable in the long run.

So I don’t think without a series of technological breakthroughs that are not very likely, we’re going to see a lot of development up there. Everyone will play everyone always plays. But this is one of those things at the top of the world that’s just gonna stay there. Alright, that’s it. Take care.