Thank you for the invitation and the opportunity to talk to you about Canada's sovereignty in the Arctic.
We cannot have a conversation about Canadian Arctic sovereignty, both protecting it and strengthening it, without turning our attention to the critical need for infrastructure investment in the Canadian north. The magnitude of infrastructure required, however, necessitates a new vision and strategy for the north. Rather than having a conversation about whether or not Russian battleships and submarines are making their way to Canada's north, the dual political conversation about Canada's Arctic sovereignty should be on building a strategy that lays out a long-term Canadian vision not only of the north in itself but as part of a grander vision of the future role of Canada in global politics and economics, and what the north has to offer in that respect.
Dave McKay, the president and CEO of RBC, repeated an interesting comment in numerous speeches about what Canada needs to do to remain competitive in the global economy following the April 2017 U.S. tax legislation. When I relisten to his words, it shouted “north” in every sense, yet I think we can fairly assume that the Canadian north was not on his mind at that time. In those speeches he said, “We need roads, rail and pipelines to continue to harness our natural resources, which pay for much of what we take for granted and connect our country together.”
In that vein, I'm going to begin today with my conclusion. I believe that Canada needs not only a northern strategy for the next 12 years but a Canadian version of China's road and belt initiative, a strategy of how the north fits into Canada's vision for its role in the world in the future.
There is an enormous opportunity for Canada to strengthen its sovereignty in the vast economic and geopolitical potential that is not yet being realized. There is a narrative to build that would both improve many Canadians' understanding of and interest in the north and that can be used for export that would reaffirm to the global community that Canada is a northern nation and takes its north seriously. I will explain where I'm going with this argument through the examples of Russia and China.
I'm going to begin with Russia. In 2009 Russia released its Arctic strategy and that strategy makes a case that the Arctic is critical to the future of the Russian economy. In part it's due to the abundance of natural resources that exist there and, particularly, oil and gas.
To exploit those resources and profit from them Russia is turning the northern sea route into a new maritime corridor so it can get its resources to global markets, for global markets such as shipping to pass through the NSR between Europe and Asia and for foreign ships to access Russia's resources. In addition the NSR has become a means for generating additional revenue through user fees paid by those who pass through the route. The user fees are for icebreaker escorts, which are almost always needed, and thus a fee is almost always paid.
The process to turn its northern sea into a viable and regulated maritime route included a grand vision, the completion of several economic feasibility studies, followed by a strategy. Accompanying this, Russia has and continues to make massive investments in icebreakers and other military equipment, human resources, ports, roads and the list goes on.
A maritime corridor that includes ships and tankers travelling across Russia's entire northern coast through waters where scattered ice is the norm, carrying people and products such as LNG or oil, requires civil-military investment from icebreaker escort services and search and rescue equipment, including surveillance, to identify, prevent and/or combat threats, whether they be terror-related or environmental. Thinking about the NSR in this context one could well argue that much of the military buildup in the Russian Arctic is to protect Russia's sovereignty in its own region rather than to challenge Canada's sovereignty.
Moving over to China, in 2013 China announced its new belt and road initiative, a long-term strategy for constructing a global infrastructure system where essentially all roads lead to Beijing. Sherri Goodman from the Council on Foreign Relations stated it well when she said that China is a like a spider and its road and belt Initiative is its web. Likewise China's strategy is not based on election cycles but on centuries.
Recognizing the geopolitical changes that climate change is already creating in the north, including enabling greater access to mineral and other natural resources, is compounded by interest in Arctic research to better understand the long-term impacts of climate change. In January of 2018, China released its Arctic strategy. The strategy included its polar silk road, which became China's vision to bring the Arctic into its road and belt initiative based on what it expects the Arctic will look like in the next 20, 30, 50 years and so on.
At the moment China's main focus is on the NSR, and it moved quickly to fill the investment gap when the Russian sanctions took effect. Russia has since made some significant investments into the Russian LNG as well as infrastructure investments. That is not to say that the Chinese are not interested in the Canadian and broader North American Arctic. Investments or active efforts to invest in resources and infrastructure have already taken place and many others are in the process of negotiation.
Though the Northwest Passage is not close to becoming a reliable alternative maritime route, it is reasonable to argue that it is nevertheless becoming increasingly navigable and navigated. There's also a growing consensus that at one point in the near distant future it will be possible to go over the pole.
China's polar silk road policy is based on the assumption that major maritime changes are coming to the Arctic and those changes have strategic value for its larger belt and road initiative. The Chinese are essentially preparing now for an open Arctic Ocean. They are also investing today in the resources and scientific knowledge that they need and want.
In the North American Arctic and Iceland, active investments range from ports and research stations in Iceland to rare earth minerals in Greenland, to a gas pipeline in Alaska, and several mining investments in Canada.
The social ills from the lack of northern infrastructure in the Canadian north are well documented, as are the implications of the infrastructure gap on the economic viability of mineral and other natural resource projects there, further undermining northern communities' abilities to benefit from the development of those resources. Likewise, the reality is that if the federal government wanted to build all of the infrastructure needed for the north, it just could not afford to do so. Subsequently, communities are competing to attract the good graces of the federal government's limited resources to fund individual projects.
Currently, much of Bay Street has no idea about the potential value of the Canadian north. If someone asks a question, I can bring more up about that. Most on Bay Street do not think there is a rationale to invest in northern infrastructure. This is partly due to ongoing negative stereotypes about the north, as well as the lack of incentives to make it attractive or that would provide adequate rates of return. They argue that northern infrastructure is a social development and not an economic opportunity and thus it's the responsibility of the federal government.
Consequentially, the northern territories, indigenous development corporations, etc., look to China for capital investment. What does that mean for Canadian sovereignty? It means nothing, perhaps. It's like Norway. Its institutions and economy are strong enough to stand on their own in the sense that Norway has the necessary bargaining power. Is that the case in Canada's north? That's something I'm not in a position to say, but I will just say that the Chinese see the critical value of the Canadian and North American Arctic. I think all Canadians should as well.
I have a good example of this with the Chinese version of Google Loon, if someone wants to ask me.
Can an opportunity be created when, according to the Financial Times, the Canada Pension Plan Investment Board plans to invest double the assets it allocates to the emerging economy of China over the next seven years? At the current moment there is not a single Canadian pension plan fund that invests even a small proportion of its money in northern Canada. Could some of its investment dollars go north instead of the north asking the Chinese for capital investment?
For Bay Street to be interested in the north, however, it first needs to know and understand the north. That includes seeing the region's human value and its economic potential. Essentially, Canada needs its own polar silk road strategy, which would result in decisions for funding infrastructure projects based on an overarching rationale, rather than made in isolation, precisely what is required to attract private capital.
Bay Street and global finance agrees that China is an emerging economy, but we need to do more to advance the recognition of the North American Arctic as also an emerging economy. That narrative really needs to start somewhere.
Rather than battleships and missiles to fend off the Russians or Chinese, the largest threat to Canada's north is a real overarching lack of vision to bring about investment to build critical infrastructure. The infrastructure gap profoundly undermines northerners' own security, their quality of life, and the ability to protect and strengthen our own sovereignty.
I think we also need to reflect on Russia's northern sea route system, in light of creating a North American Arctic seaway, which I think was discussed a little bit in a previous meeting. I hope to discuss this more in the question and answer.
To summarize, Bay Street and global capital will not invest in the region without a grand rationale and a strategic plan. China is an exception because they took the initiative on their own to make their own strategic plan for the Arctic. If Bay Street capital is preferred to Chinese capital investing and owning the infrastructure of the Canadian north, or at least if it is preferred that Canada sets the terms of engagement for that investment, or if Canada wants to talk about its Arctic security with Russia, or to others about Russia, I think we really need a Canadian “belt and road and polar silk” vision.
This would detail Canada's strategic role in the Arctic and in the world through the 21st century, and moreover, we need to put that vision into motion.
I look forward to answer your questions.