Sharing energy resources

To avoid any disagreements that may arise in areas of disputed land or waters such as the Barents Sea, or the Svalbard archipelago, rival claimants could devise a formula for sharing in a fair and equitable way any energy resources that are discovered there. Trying to determine the exact terms upon which this is done is of course very difficult, but a model might be the agreement that Norway and Iceland struck over the Jan Mayen Islands in 1981. When the two countries were unable to agree upon the exact maritime borders, a conciliation commission established by both governments proposed a compromise deal that gave each party a 25 per cent share of any petroleum discovered on the other's continental shelf in an area covering 12,000 square miles.6 Another model is an agreement struck in June 2008 between China and Japan over the disputed East China Sea, under which each country agreed to work together to explore and develop gas fields and then share the proceeds. A similar deal might be the best solution to determine the ownership of any natural resources found in the 'Grey Zone', the 'Loophole', the Beaufort Sea and the Svalbard archipelago.

There are all sorts of different variants of the 1981 agreement that might have the makings of lasting agreements in each case, or at the very least, diplomats would have nothing to lose by considering. One possibility is that instead of taking a fixed quarter share of any petroleum, each coastal state could receive a proportion that is determined by the location of any discovery: the closer any reserves lie to the shores of a coastal state, the greater its share of the proceeds. In the very centre of the Grey Zone or the Loophole - however that centre is defined - both Russia and Norway could take an equal share, while a sliding scale based on distance could determine how discoveries in any other area of the disputed seas are apportioned. One advantage with this approach is that it means that different claimants could work together to discover resources instead of having a vested interest in scrambling to get there first.

Such an approach does not represent any radical departure from what coastal states are in any case supposed to do with non-living natural resources that are discovered in the waters of their outer continental shelves. Under Article 82 of the 1982 Convention - a clause that looks likely to be the subject of heated debate and dispute between lots of countries the world over in the coming years - these states are obliged to make 'payments or contributions in respect of the exploitation of non-living reserves' in these waters.7 The Convention adds that these payments should be made annually and, after 5 years, should start off at 1 per cent 'of the value and volume of production at the site' and should increase by the same amount every subsequent year until they reach a capped rate of 7 per cent.8 This provision is vital for the simple reason that it reiterates the essential principle that no coastal state can just assume that it has any necessary claim over the sea's resources, beyond those that are found in their immediate vicinity. On the contrary, the further away any such resources are found, the stronger the case that a coastal state should to some degree share them, whether it is with the ISA or with other claimants.9

Sharing a fixed percentage of the proceeds of any discovery may also be a better solution than the 'Svalbard formula'. Under the terms of the Spitsbergen Treaty of 1920, each signatory state is only granted 'conditions of equality to the exercise and practice of all maritime, industrial, mining or commercial enterprises both on land'. But the trouble with this approach is that each country not only lacks an incentive to work with others, but also has a vested interest in working quickly, scrambling hard to discover any natural resources before anyone else does. This undermines a considered, level-headed approach and could instead even be conducive to panic. It also means that the bigger states could try to bully the weak: Russia or the United States, for example, could try to use veiled or explicit threats of military force to dissuade others from searching for oil, natural gas or precious metals. Such an arrangement would even allow the Barents Sea, and elsewhere, to become the 'sea of cooperation' that the Norwegian government has called for.10

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