Overview
The Arctic is gaining geoeconomic relevance amid the US war in Iran and US-China trade tensions. These geopolitical disruptions have put global shipping, international energy markets, and critical raw materials at the center stage of global competition. The Arctic has the potential to contribute to solutions in all three areas. However, over the last several years, the Arctic has become increasingly contested in the security realm in the wake of Russia’s full-scale invasion of Ukraine. Moreover, the Trump administration’s approach, specifically its policy towards Greenland, has upset the region’s traditional geopolitical equilibrium. The region’s rising importance creates significant upside risks for businesses involved in the Arctic, as well as increasingly constrained global supply chains. On the other hand, the region’s geography and dynamics expose it to logistical difficulties, as well as geopolitical and reputational issues in the era of climate change.
Arctic Resources, Shipping Lanes, and Geoeconomic Competition
Since the beginning of Russia’s full-scale war in Ukraine, the Arctic has shifted from a zone of general international cooperation between the eight states with Arctic territory to one of growing security and military concerns between NATO and Russia. However, two recent events are underscoring the Arctic’s geoeconomic value: the Iran war and China’s use of critical minerals as a pressure point.
The war in Iran has shocked the global energy market, restricted supply, and severely disrupted international shipping and energy transit around the Strait of Hormuz. The Middle East’s overall geopolitical instability likewise creates high levels of risk for shipping chokepoints, such as the Bab el-Mandeb Strait in the Red Sea. Meanwhile, China’s dominance in critical mineral extraction and processing presents a separate bottleneck affecting most advanced technologies, triggering US and allied efforts to diversify supply.
Arctic powers see the Far North as an opportunity to derisk from these strategic bottlenecks. According to estimates, the Arctic is home to significant untapped energy resources of oil and natural gas, up to 30% of undiscovered natural gas and 13% of undiscovered oil. The region also offers potential new shipping routes, which are gradually opening due to climate change.
Norway announced in May that it had approved a plan to resume energy production at three natural gas fields in the North Sea and that Oslo intended to offer 70 new blocks in the Barents, Norwegian, and North Seas for companies to explore for oil and gas. Simultaneously, Oslo has lobbied Brussels to drop its opposition to new drilling in the Arctic, to which the EU has signaled its potential openness. The Trump administration has also embraced Arctic energy policy in Alaska with new auctions for drilling and exploration rights. Russia already generates significant oil and gas output in the Arctic from the Yamal and Gydan peninsulas. However, further development of Russia’s Arctic energy resources requires specialized skills and knowledge, as well as capital, which Russia is unable to access due to Western sanctions.
Beyond oil and gas, the Arctic is home to reserves of rare earth elements and critical minerals that Arctic states are interested in tapping. Sweden’s mine in Kiruna has the potential to produce all 17 rare earths, and Canada has announced new investments in its Arctic infrastructure and critical minerals supply chains.
The Arctic also offers potential new shipping routes—the Northern Sea Route (NSR) along Russia’s coast and the Northwest Passage (NWP) along Canada’s. Although they are gradually opening because of climate change, both are already subjects of development by Russia and Canada, respectively. The Arctic and the NSR form a cornerstone of Russian economic development strategy, and Moscow hopes to develop the NSR into a major global trade route. At the recent St. Petersburg International Economic Forum, the head of Russia’s state-owned Rosatom corporation, Alexey Likhachev, declared that the NSR will be ready to transit more than 100 million tons of goods by 2030. Canada’s investments in Arctic infrastructure, defense, and connectivity support the NWP’s development as an Arctic trade and shipping lane, but it is significantly less developed as a safe and operational transit route compared to the NSR.
Security in the Arctic and Evolving Geopolitics
While the Arctic has the potential to support energy, critical minerals, and shipping diversification, it is an increasingly securitized region shaped by geopolitical tensions. Russia’s Northern Fleet, which includes Moscow’s nuclear submarine forces, is based on the Arctic Kola Peninsula. Likewise, as Russia looks to the Arctic as a central element of its economic future, the Kremlin has taken steps to build military infrastructure in its Arctic territory to defend the NSR and to deny hostile countries entry to the region. NATO has also bolstered its presence and domain awareness in the Arctic through initiatives like Task Force X-Arctic and Arctic Sentry.
China and Russia also cooperate significantly in Russia’s Arctic territory. China declared itself a “near Arctic state” in 2018 and has expanded cooperation with Russia militarily and economically. Beijing and Moscow have an MoU on joint oversight of the NSR’s traffic, and they have conducted joint naval and coast guard exercises in the Bering Sea. China is likewise a major investor in Russian Arctic economic development—a relationship that has become more important for Moscow since 2022 due to Western sanctions. Novatek’s Arctic LNG 2 project, which had faced significant complications due to Western sanctions, is reportedly importing key construction modules from China for the project's third production line for the first time in years.
The US has also embraced a security-oriented approach to the Arctic. The US’ ambition to acquire Greenland from Denmark is connected in great part to the Trump administration’s Golden Dome missile defense project, although the administration has also shown interest in Greenland’s mineral resources. This is because the Arctic presents the shortest distances for Russian nuclear missiles to reach the US. Under most conceptions of the Golden Dome project, missiles stationed in Greenland would better enable both the physical interception of missiles and the space-based intelligence architecture to detect incoming threats.
President Trump’s second term has disrupted many of the traditional dynamics in the region. Washington’s persistent rhetoric on acquiring Greenland, including not ruling out military force, turned Greenland and the Arctic into one of the most sensitive flashpoints in the transatlantic relationship. Friction in the US relationship with Ottawa also contributes to tension in the Arctic, given Canada’s large Arctic coastline. Differences on the Arctic open up room for divergence inside the transatlantic community, combined with the Trump administration’s more critical approach to NATO and European concerns about the administration’s policy on Russia and commitment to Ukraine.
For its part, Moscow has tried to court the Trump administration with promises of natural resources and Arctic cooperation. This first emerged during the Trump administration’s early efforts to broker a peace agreement between Russia and Ukraine, which culminated in the Anchorage Summit in August 2025. However, the head of Russia’s Sovereign Wealth Fund, Kirill Dimitriev, who has been closely involved in US-Russia negotiations, has continued to raise the prospect of cooperation in the Arctic and has claimed the existence of a project for a tunnel between Alaska and Russia. The US reportedly developed plans for reintegrating Russia into the global economy in 2025. However, there has so far been no public engagement on Arctic cooperation from Washington, although Secretary of State Marco Rubio recently stated in Congressional testimony that Washington expects friendlier relations with Moscow after the Ukraine war ends.
US-China relations are likewise in flux after President Trump’s recent visit to Beijing. Although the administration has criticized China’s investments and presence in the Arctic, specifically in Greenland, there is now more impetus for limited cooperation and détente than for escalating confrontation. Whether this would extend to the Arctic is unclear, but the shifts in the US-China relationship have the potential to affect myriad policy areas.
The Risk Environment
Evolving Arctic dynamics offer opportunities for business. New international shipping lanes can support diversification and enhance the resilience of global supply chains. Likewise, alternative sources of oil, gas, and critical minerals help mitigate the impacts of supply chain disruptions. As they open due to climate warming, the NSR and the NWP will shorten transit times between the Atlantic region and Asia. The Arctic also has strategic geography. Many of the Arctic states, such as Canada, the US, and the Nordics, offer stability for long-term planning, strong governance, and educated workforces, enabling good transit and governance. Production in the Arctic, in conjunction with the development of Arctic shipping lanes, could make more efficient routes from production sites to markets. There is also, for the moment, potential political interest in developing Arctic resources and economic value.
However, downside risks are also present. There are legal questions about Arctic territorial delineation and the legal status of shipping lanes. Canada and Russia have both historically claimed that the NWP and NSR, respectively, are territorial waters rather than international waterways, although Canada has recently softened its stance. In the NSR, Russia has taken steps to assert its control over commercial transit throughout the NSR. Infrastructure in the Arctic is often lacking, and logistics for major projects can be difficult due to the remote geography and infrastructural deficiencies. Arctic waters are covered by ice for much of the year, which means that icebreaker vessels are required to operate in the region, most of which are owned by Russia. There are also reputational risks to operating in the Arctic due to potential ramifications for the environment and local governance by indigenous communities.
Finally, the geopolitical dynamics of the Arctic among the US, Europeans, and Russia are changing. For example, US-Russia economic cooperation in the Arctic could be a carrot for a final political settlement in Ukraine, as exemplified by the original Witkoff-Dimitriev peace plan from November 2025. US-Russia cooperation in the Arctic would likely jeopardize US-European shared approaches to Arctic governance and strategic projects. Given the potential hurdles, such a scenario is highly unlikely, but it demonstrates the dynamic nature of Arctic geopolitics.
