Why the Arctic Economic Council is Needed: The People of the Arctic Deserve Our Full Attention and Opportunity to Develop

The Arctic Economic Forum is the preferred partner for the ⁦Arctic Council⁩ in discussing issues on responsible economic development in the Arctic. Heidar Gudjonsson, new Chair of the AEC to the right. Tero Varuaste, former Chair, to the left. Credits: Petter Löppönen

Now, more than ever, Arctic businesses need to work together, says the new Chair of the Arctic Economic Forum, Heidar Gudjonsson. 

In an interview with High North News, he explains why: “We need to increase collaboration in the area. Because we have mutual challenges, but also mutual solutions. The Arctic is connected by the Arctic Ocean, but we are also very much connected when it comes to our common resources." 

Full attention to the people

Gudjonsson will serve as the AEC Chairman during the Icelandic business community’s chairmanship from 2019-2021 and has been working in business in the Arctic for the last 20 years. His goals for the upcoming two-year chairmanship: “The people of the Arctic deserve our full attention. In the international debate, the environment gets all the attention. But there are important cultures that have been persistent in the Arctic for thousands of years, and they deserve to get attention and opportunity to develop economically like the rest of the world”. 

Mr. Gudjonsson is also the CEO of Sýn hf. (Vodafone), Deputy Chairman of HS Utility and Chairman of the first infrastructure investment fund in the Arctic, Innviðir fjárfestingar slhf. He has also spent many years in other parts of the world. Economic studies at the University of Iceland Business School led him to work in New York, London and Zurich for nearly to two decades, though always with one foot firmly placed in Iceland.

“Most people outside the Arctic know less about the Arctic than about the moon. That’s unfortunate. And what they do know, is usually not what it is. I think, for instance, the history of the Arctic, as the most responsible and sustainable area of the world for developing natural resources, that’s a well-earned fact that people in general have no idea of”. 

Closer ties to the Arctic Council

During the Arctic Council Ministerial Meeting in Rovaniemi in May, the AEC signed a Memorandum of Understanding (MoU) with the Arctic Council. The aim of the MoU is to provide a framework for cooperation and to facilitate collaboration between the Arctic Council and the Arctic Economic Council. This strengthens the AEC’s position as the Arctic Council’s preferred partner in issues related to responsible economic development.

When questioned on what footprint he wants to set during his period as Chair of the AEC, Gudjonsson answers: “I want to work towards even closer collaboration with the Arctic Council. We have already taken the first step with the Memorandum of Understanding signed at the Ministerial Meeting, but from now on, we will also have joint meetings between the SAO’s and the AEC”. 

Building the bridge 

Former Chair of the AEC, Tero Vauraste, told High North News just before he stepped down as Chair that he wants a more holistic approach towards the well-known Arctic dilemma preservation versus use: “When you talk to people who live in the Arctic and indigenous people, they often say that “we are not a museum to be preserved - we are part of society and want part in the development”. We also know that there are different opinions within indigenous people. Some of them are saying they have been able to adjust, other want everything to stay as it has been for centuries. Nobody is right and nobody is wrong. But I think that in order to be able to take part in the development, good collaboration is required, and this sort of black/white approach, saying that we are either going to preserve the flora and the fauna or do dirty business is just too black and white.” 

“Unfortunately that is how many people see it, and often also how the media presents it. As a contradiction. But there are good development and good discussions in terms of having more size of the cube to look into”, he added. 

This work is something the new Icelandic Chair will continue. Heidar Gudjonsson marks it as one of the most important topics for the next two years. The AEC has endorsed the intent of the Arctic Investment Protocol (AIP), originally a product of the World Economic Forum Global Agenda Council on the Arctic. The work on these responsible investment principles will be a key issue during the Icelandic businesses’ chairmanship.  

“We want to build a bridge between those who want to preserve the Arctic and turn it into one big national park, and those who live here and want to be able to develop it economically. To do so, we think the Arctic Investment Protocol is an important tool, but we also believe that closer participation in the dialogue with environmental agencies, NGO’s etc., will help highlight some facts that are very important, as the world is changing and we continue to see a growth in consumption. Where are we going to find the resources to meet this demand?” he asks. 

And answers: “Instead of overexploiting what we are already using, we should open up the Arctic, [see] who has the best track record, and has been responsibly and sustainably developed, and develop it further”. 

The US making noise 

The day before the Ministerial meeting in Rovaniemi, President Donald Trump tweeted that he would increase tariffs on Chinese imports, unexpectedly setting what appears to be a new deadline to produce a comprehensive deal or trigger an escalation of the year-long U.S.-China trade war. Later on that same day, Secretary of State Mike Pompeo entered the stage in Rovaniemi and launched a head-on verbal attack on Russia and China.

Gudjonsson is not very worried that Pompeo’s speech or the ongoing trade war will have consequences for the AEC’s work. “To me it is all about people. If we can help mankind to live a better life, then we should do it, no matter where they live; in China, Thailand, Korea or anywhere. If we help them with economic development, they help us, because this is a mutual beneficial relationship. I don’t think we should mark people with a national flag. And it's important to know that the world is not coming to an end. Mankind has never had a better life. So instead of focusing om the negative things, we should see that life expectancy, child birth, those who die in child birth; all those numbers are changing for the better. Things are in fact not very bleak. And we should not paint them as being that as we are on the verge of a heated disagreement”, he says. 

When asked what Mr. Pompeo’s speech could be a sign of, he answers: “Maybe is just local politics. Maybe it is just for US political purposes? As we could see, the rest of the members of the AEC could not  support this in any way and were disappointed. So I just hope they come to terms with the fact that we are all living here together and we need to behave diplomatically. They might have a trade war with China. But what does that have to do with the Arctic?” 

Fears more protectionism

While Gudjonsson does not seem to be very worried, his predecessor is. “When we created the AEC five years ago, we selected some focus areas, where the first one was the so-called freedom of trade and market access. That showed to be very timely, when we see what has happened in the world since, with more protectionism”, Vauraste says.

He believes protectionism is very harmful for development and competition in general, but even more in the Arctic areas because the businesses there are more vulnerable than businesses in other parts of the world. 

And he has no doubt that an escalation of the trade war between the USA and China will affect Arctic businesses:

"Absolutely. If you think of the importance of Chinese investment powers globally, but also in the Arctic, they have bilateral agreements, for example between Iceland and China. If this balance gets more unbalanced, that definitely means that the vulnerable structures we have may suffer even more." 

Varuaste fears that smaller and medium-sized enterprises that are part of a bigger chain might be tuning down their investments, and that bigger enterprises with bigger money might become cautious: “If this trend continues, the development in general will slow down. And of course, we can’t forget what’s happening between the EU and Russia and the USA and Russia, how the sanctions hit. It is picking up again, but we are not where we were yet. So yes, international politics affect Arctic business,” he concludes.