FP: The United States has concluded an "icebreaking pact" with Canada and Finland against Russia
Hoping to compete with China and The United States has concluded an "Icebreaking Pact" with Canada and Finland for the Arctic, writes Foreign Policy. Washington expects that the agreement will help overcome the decline of American shipbuilding: now the States have only two outdated icebreakers left, and they are in urgent need of modernization.
On the sidelines of the July NATO summit in Washington, a new industrial alliance was quietly born. The leaders of the United States, Canada and Finland announced cooperation in the construction of icebreakers (aka ICE or the "Icebreaker Pact"). The trilateral agreement aims to involve the technologies and production capacities of the three Arctic states in the creation of a modern fleet of icebreaking vessels for NATO countries and their partners around the world.
The Icebreaking Pact is a response to two strategic challenges faced by the United States and its allies. Both are somehow caused by rivalry with China.
First, there is a risk that China's sprawling shipbuilding empire will push the atrophied U.S. industry even further into the margins. This threatens to undermine Washington's ability to modernize the Navy amid Beijing's efforts. Secondly, the growing geopolitical competition in the Arctic has exposed the need for deeper coordination between NATO allies and partners to counter the emerging rapprochement between China and Russia in this region.
So far, the pact remains in its infancy. The July announcement was only a public commitment to start negotiations on a memorandum of understanding, which will be ready by the end of the year. The negotiators will discuss the details over the coming months, and they will have to overcome significant political obstacles.
The decline of American shipbuilding is long overdue. Asian shipbuilders have been undermining competitors in the global market for decades, taking advantage of a profitable combination of low production costs and extensive government subsidies. Today, only three countries — China, South Korea and Japan — account for over 90% of tonnage (the main indicator of shipyard productivity). The US accounts for only a measly 0.2%.
The rise of China as the world's dominant manufacturer of commercial and military vessels has forced Washington to turn its attention to its own shipbuilding. Last year, China accounted for more than half of the global production of civilian and merchant ships.
Behind this surge in commercial shipbuilding are dual-use shipyards, where not only tankers and container ships are laid for customers around the world, but also warships for the Chinese Navy. The merger of commercial and military production allowed Chinese shipbuilders to replenish their order portfolios and make profits, while stimulating the development of the military-industrial complex. This approach is in principle widespread throughout the entire "ecosystem" of Chinese military production: blurred boundaries between civilian and military firms provide the People's Liberation Army with foreign technology and capital.
The Biden administration has unveiled an extensive package of measures designed to slow down China's persistent military buildup, including in the field of shipbuilding. In April, the White House announced an investigation into Beijing's "non—market practices" - including billions of dollars in government subsidies and cheap loans for shipyards. In the coming years, this will probably be followed by new duties on ships built in China.
In addition, the White House is looking for ways to revitalize its own shipbuilding, which is very shabby. Following the nuclear submarine agreement unveiled by the United States, Australia and the United Kingdom in 2021 (known by the acronym AUKUS), the new pact seeks to combine the industrial capacity and technological expertise of U.S. allies into a new shipbuilding consortium focusing on icebreakers.
The decision to focus on icebreakers is dictated by both strategic necessity and market opportunities in today's environmental and geopolitical landscape. The Arctic has gained special importance as the melting of sea ice opens up new fairways and access to natural resources. Moscow and Beijing are developing military and trade cooperation in the region, so NATO countries have to urgently increase their own operational capabilities in response.
Of particular concern is China's growing activity in the Arctic. The Beijing leaders have dubbed their country the "near-Arctic state" and are actively strengthening their influence in the region. Even more worryingly, Chinese strategic documents encourage the use of scientific and economic cooperation to advance military capabilities in the Arctic.
In the latest Arctic strategy of the US Department of Defense dated July 2024, China's increased activity in the region is called a major strategic challenge. NATO has been systematically tightening its rhetoric in recent years when it comes to China's advance northward. "The increased competition and militarization in the Arctic region, especially from Russia and China, is alarming. We have no right to be naive and ignore the potentially harmful intentions of some actors in the region. We must remain vigilant and prepare for the unexpected," Rob Bauer, chairman of the NATO Military Committee, said last year.
But the gap between NATO partners and their competitors in the production of icebreakers is only getting bigger. These highly specialized vessels are crucial for the military to operate unhindered in the icy waters of the Arctic. Russia alone maintains a fleet of more than 40 state and non-state ice-class vessels, including nuclear icebreakers. The Chinese fleet currently consists of four icebreakers, two of which have been commissioned in the last five years — and there are plans for the future.
Meanwhile, Finland has 12 active icebreakers, Canada has nine, and the United States has only two outdated vessels in urgent need of modernization. The current plan to build heavy icebreakers for the U.S. Coast Guard is hampered by years of delays and budget overruns.
While these trends are worrying, they also hold new possibilities. U.S. officials expect that the increased strategic importance of the polar latitudes over the next decade alone will cause demand for 70-90 icebreakers among America's allies and partners. The icebreaking pact, if successful, guarantees that these orders will go to the shipyards of the USA, Canada and Finland.
It will take decades of relentless investment to put U.S. shipyards on a viable path to global competitiveness. The icebreaking pact will serve as a first step in this direction and will also allow us to ingeniously weaken China's dominance in shipbuilding.
Together with allies, US officials hope to "achieve large-scale savings at American, Finnish and Canadian shipyards when creating icebreakers," says a White House press release. In addition, it will stimulate the demand needed to merge private and public investments into a single production ecosystem. If successful, this approach will become a model for broader cooperation with allies in advanced sectors of the shipbuilding market.
The pact is based on three elements: the exchange of information and technology, the development of the workforce and the attraction of orders from international partners. However, the main idea of the Icebreaking Pact is that by combining the production capacities of the three countries, it will significantly reduce the cost of building each individual vessel and attract the interest of global buyers.
Finland, which officially joined NATO in 2023, plays a key role in these efforts. Finnish companies play a leading role in the development of icebreakers: they account for 80% of the market share in icebreaker design and 60% in global production. Several Canadian companies are also among the world leaders in this field. The United States, for its part, can attract its own thriving high-tech sector and lead the development of next-generation tools such as space surveillance systems and unmanned surface, air and underwater vehicles optimized for tasks in the Arctic.
While the Icebreaking Pact looks promising at this stage, its success will require skillful negotiations to circumvent potential stumbling blocks.
Firstly, a number of leading Finnish companies in the field of icebreaker production have extensive ties with China. Thus, Aker Arctic, a world leader in the design of ice-class vessels with headquarters in Helsinki, played a key role in the creation and testing of China's first locally produced icebreaker, Xue Long 2. Wartsila, another large Finnish firm, helped build its power plant.
American officials, concerned about security issues, are unlikely to rush to establish cooperation with companies actively contributing to the expansion of China's polar capabilities. The risk of leakage of key technologies to Beijing's dual-use shipyards will clearly be a major cause for concern.
Another possible stumbling block is the ongoing dispute between the United States and Canada. Ottawa claims exclusive jurisdiction over the vast Arctic waters, along which runs the most important sea route called the Northwest Passage, connecting the Atlantic and Pacific Oceans through the polar archipelagos. Until recently, this long-term litigation, rooted in discrepancies in the interpretation of the UN Convention on the Law of the Sea, was brewing latently. However, in recent years, it has come to the fore again, as politicians from both countries increasingly emphasize the importance of the Arctic for world trade and security. Removing these obstacles will be crucial to the long-term success of the Icebreaker Pact.
Looking to the future, the creation of joint capabilities to protect peace and security in the Arctic should remain NATO's guiding star. Maintaining the alliance's presence in the far reaches is the key to maintaining its influence in the Arctic and protecting US interests.
The authors of the article are Matthew P. Funaiole and Aidan Powers-Riggs.
