The Evolving Arctic Economy

This report presents the findings of the task force’s economics track. Findings from the task force’s security track will be published separately.

The Arctic has become a critical arena for geostrategic and geo-economic competition. Rising temperatures, melting sea ice, and thawing permafrost are exacerbating regional security risks and vulnerabilities. Changing environmental conditions are also reshaping patterns of economic access and resource availability. New economic prospects are fueling interest in the region from Arctic and non-Arctic states.* Economic activity in the Arctic is expanding across several areas, including resource development, infrastructure investment, commercial shipping, and sectors such as fisheries, tourism, and information technologies, all of which are examined in this report. 

China’s expanding interest and activity in the Arctic since 2013 has prompted closer scrutiny of Beijing’s role in the region. This, alongside deteriorating relations between Russia and NATO since 2014, and more acutely since 2022, has contributed to growing perceptions of the Arctic as a theater defined by great-power competition, where interests between Russia and China on the one hand, and the United States and its NATO allies on the other, increasingly diverge. In addition, recent US policy debates on Greenland and broader alliance coordination have underscored the challenges of maintaining trust and coherence among Arctic partners.

Recognizing the importance of collaboration and cooperation in the Arctic, the German Marshall Fund (GMF) launched in 2025 an Arctic Geopolitics Task Force to identify pathways that the Arctic 7, together with Indigenous communities and key allies and partners, can follow to navigate a shifting economic landscape, foster sustainable development, and strengthen defense and deterrence in an increasingly contested strategic arena. 

The Arctic Geopolitics Task Force’s agenda has thus far comprised two interconnected and mutually reinforcing security and economics tracks that assessed key challenges and opportunities in each field and explored the interplay between them. The economics track, which provides the primary basis of this report, addressed a less explored but increasingly consequential set of issues related to local and cross-Arctic economic development, and the governance and investment conditions that shape it. The track aimed to answer this key question: How can NATO Arctic states and their partners strengthen governance and investment conditions to enable economically viable, environmentally sustainable, and socially responsible development in an increasingly competitive Arctic?

Discussions drew on input from policymakers, investors, private-sector actors, local and Indigenous rightsholders, and subject-matter experts from NATO Arctic states and key partners. Participants focused on ongoing barriers to investment and explored avenues to address them through stronger coordination, clearer frameworks, and approaches that support sustainable, long-term engagement.

While focus on national priorities is growing, the region’s vast geography, harsh climate, and limited infrastructure continue to impose economic burdens that no state can adequately address alone. GMF consequently focused on fostering a coordinated transatlantic strategy. 

The Arctic’s Economic Potential

Economic opportunity in the Arctic is increasingly a driver and a multiplier of strategic competition. Decisions about resource development, infrastructure, and connectivity shape long-term access to and resilience in the region, influencing states’ ability to operate and to project soft and hard power. Arctic economic activity is subsequently no longer separable from geopolitics.

Local realities also shape Arctic economic development. For those who live and work in the region, priorities include their livelihoods, reliable transport, affordable energy, food and job security, health care, and the viability of their communities, which are facing rapid environmental change. Most Arctic communities are in remote and sparsely populated territory. This raises the cost of infrastructure, transportation, energy, and public services, while limiting economies of scale. Climate change intensifies these pressures. Thawing permafrost is already affecting roads, airports, pipelines, and housing; coastal erosion threatens settlements; and changing ice conditions affect food sources on which long-standing cultural and subsistence practices rely.

For Arctic communities, development is not an abstract strategic debate. The future of many local and Indigenous communities’ long-term resilience depends on increased and sustained investment, particularly in infrastructure, transport links, energy access, and essential services. As a result, debates on Arctic economic potential intersect directly with questions of community viability.

Resource Development and Extraction

The Arctic’s economic promise is rooted in its extensive natural resource endowments, many of which are becoming more accessible as sea ice retreats and technology improves. The Arctic is estimated to hold approximately 13% of the world’s undiscovered conventional oil and 30% of its undiscovered conventional natural gas resources (much of which is concentrated in Russia). It also holds significant deposits of ores and critical minerals relevant to civilian and military technologies, including renewable energy systems and digital infrastructure. However, high costs, technical and permitting complexity, and substantial environmental riskscontinue to challenge resource development. Thawing permafrost undermines mining infrastructure, while pollution from extractive and refining activity must be managed to prevent damage to air and marine ecosystems. 

Fisheries are a core component of Arctic economic activity. They underpin livelihoods in many regional communities and are central to economic sustainability and societal resilience. Fisheries governance in much of the Arctic is robust, but it faces growing strain. Climate change is rapidly altering fish stocks and migratory patterns. Sustainability and traceability requirements increasingly originate outside the region. Global seafood demand, shaped by large consumer markets, links Arctic fisheries directly to geopolitical and supply chain risk. These connections highlight the impact of demand far beyond the Arctic on regional economic development. As the fisheries become more deeply integrated into global markets, predictable governance and long‑term stewardship are needed to manage shifting ecosystems, external demand pressures, and rising exposure to geopolitical risk.

Infrastructure, Investment, and Constraints

Arctic economic potential remains closely tied to infrastructure availability and investment conditions. Investors have shown interest in the region, but the lack of traditional infrastructure immediately raises the cost and complexity of operating there. Task force participants repeatedly underscored the chicken-and-egg dilemma between infrastructure and investment: Infrastructure is essential to attract capital, but capital is needed to build it.

In a world in which economic and national security are ever more closely linked, Arctic civil and commercial infrastructure is also seeing heightened interest in its potential to function as a security node. A lack of vetting of potential investors can lead to unintended economic and political consequences, and uneven or externally driven development that exacerbates local tensions.

Critical infrastructure such as ports, airstrips, energy systems, and digital networks often has dual‑use characteristics. It can support civilian activity and military or coast guard operations. Economic and social considerations influence investment, but gaps in foundational infrastructure contribute to challenges in international and domestic security environments. As such, these issues are crucial to the Arctic’s future economic prosperity and security.

Arctic projects may offer great potential and access to highly sought resources but often entail high upfront costs, regulatory complexity, and limited transport, energy, and digital options. The potential, in many cases, remains more attractive than reality. Successful investors explained in task force meetings that project financing had to include construction of all necessary infrastructure, including airstrips, ports, and worker housing. Most Arctic nations are wealthy, but the region faces challenges to attract and retain government funding and private investment since it competes with more populated areas.

Task force discussions revealed that Indigenous corporations have achieved notable successes by prioritizing investment in their own communities and by approaching perceived challenges with long‑term commitments and a dedication to local responsibility. One example of this involves an Indigenous consortium, Sixty North Unity, that is purchasing Northwestel, a major telecommunications and broadband provider in Canada’s north, for $1 billion (approval pending). This investment is expected to boost high-speed internet access and local economic development while delivering returns for investors.

The Arctic’s economic future is, however, not a single growth story. It depends on how capital is raised and deployed, and where government resources are directed. This drives decisions about financing and public spending, and, ultimately, economic opportunity.

Shipping

The Arctic is often discussed as a promising region for shipping. Arctic maritime activity occurs along key routes connecting the Atlantic and Pacific: the Northeast Passage along Russia’s northern coast (within which the Northern Sea Route (NSR) forms the core) and the Northwest Passage through the Canadian Arctic archipelago. A future Transpolar Sea Route across the central Arctic Ocean may spur further activity. Each route faces distinct operational, infrastructural, and seasonal constraints.

To date, Arctic shipping has expanded primarily in specific regions, with most traffic concentrated along the NSR, and for transporting specific resources, primarily those energy-related. Most activity is destinational, meaning it transports goods to and from the Arctic; such shipping continues to dwarf transit trade, despite the latter’s steady gains. Transit times are theoretically attractive (20 days from Asia to Europe versus 40 days via the Suez Canal) and have become more appealing due to geopolitical and military tensions in the Gulf and Suez Canal. However, limited Arctic port infrastructure, ice variability, search-and-rescue capacity, and the absence of reliable year-round operations continue to restrict scale, predictability, and commercial viability.

Arctic routes cannot serve as full substitutes to established global shipping corridors in the near term, but they may be able to incrementally expand capacities as regional development, resource extraction, and community connectivity increase. The drivers of regional maritime growth vary significantly, but they are dominated by state‑backed hydrocarbon and mineral exports along the NSR, more diversified commercial and tourism activity in the European and North American Arctic, community resupply activity, and project‑based development. The long‑term sustainability of these drivers depends on safeguarding Indigenous environmental and cultural rights, and ensuring Indigenous communities’ meaningful participation in maritime governance.

Challenges in Harnessing Sustainable Economic Potential

Although Arctic economic development has long focused on addressing the aforementioned challenges of supporting sustainable livelihoods and strengthening community resilience, it is increasingly being linked to broader geopolitical trends relevant to national security and supply‑chain resilience. Recent policies, particularly for transportation, energy, and critical minerals, reflect an effort to align investment that supports northern communities with broader strategic considerations. Canada’s 2025 announcement of a $1 billion Arctic Infrastructure Fund exemplifies this trend. Ottawa is explicitly framing the fund’s investments in northern ports, airports, and all-season roads as dual-use assets that serve civilian communities and defense objectives. 

Similar dynamics are evident in the United States, where federal port infrastructure grants of $115.4 million to Alaska are justified as measures for economic development and strengthening supply‑chain reliability. Digital infrastructure is part of this same logic. US federal funding of more than $629 million for Alaska’s Broadband Equity, Access, and Deployment (BEAD) initiative underscores how connectivity is seen as essential infrastructure for economic participation, resilience, and strategic presence in remote Arctic regions. 

In Europe, the Nordic Investment Bank has expanded its Arctic‑related financing, including support for energy and transport infrastructure in the High North. These aims also surface in platforms and convening spaces such as the Arctic Circle’s Business Forum. Task force participants underscored that the Arctic’s value is increasingly framed in commercial and strategic terms, with the latter reflecting the importance of economic activity to new concerns about geopolitical resilience and stability.

Progress in coordinating broader Arctic economic development is, however, limited. Task force participants emphasized that economic considerations are still addressed primarily through national and subnational strategies, bilateral arrangements, sector‑specific mechanisms, and private-sector networks. Initiatives such as Canada’s Arctic Infrastructure Fund signal a growing willingness to mobilize public capital at scale, but such efforts remain embedded in national policy frameworks. As a result, economic activity develops incrementally and unevenly, with limited ability to aggregate demand, mobilize capital at scale, or systematically align investment with long‑term regional, environmental, and community priorities. 

More structured international coordination on inherently transboundary economic challenges and opportunities—including those related to transport corridors, energy and digital connectivity, labor markets, and the environment—could help align national initiatives, de-risk investment, and ensure that economic development advances shared Arctic objectives. Existing institutions such as the Arctic Council’s Sustainable Development Working Group and the Arctic Economic Council already provide platforms for information‑sharing and best‑practice exchange, but they have limited mandates and tools for shaping investment pipelines or pooling capital at scale.

The uneven pace of development across the Arctic reflects different national priorities but common structural constraints such as small and dispersed populations, high infrastructure costs, limited access to long‑term financing, and fragmented markets. An Organization for Economic Co-operation and Development analysis of the European Arctic finds that stronger regional coordination, particularly on infrastructure planning, workforce development, and green investment, can help overcome scale limitations without undermining local or national control. Similarly, researchers at Nord University found that cooperation across Alaska, Greenland, and northern Norway could contribute to a more resilient and sustainable Arctic blue economy.

Regulatory and legal uncertainty further complicates investment decisions. Task force participants cited complex and overlapping permitting regimes and unclear land‑access rules as major deterrents, especially for smaller and mid‑sized firms facing long timelines and high upfront costs. Participants broadly supported strong environmental and social safeguards but emphasized the need for greater regulatory clarity, predictability, and transparency, including improved access to scientific data to reduce early-stage risk.

Arctic economic and infrastructure development is inseparable from the leadership and interests and Indigenous peoples, who as rights-holders are central to driving sustainable development. A strong consensus emerged in task force discussions for durable economic activity to be grounded in Indigenous consent, participation, and benefit‑sharing. Importantly, participants emphasized that, where governance structures and access to capital are aligned, Indigenous‑led models already demonstrate the results of effective Arctic economic development. Indigenous‑run investment corporations have leveraged settlement agreements and pooled capital to become influential investors in sectors ranging from infrastructure and telecommunications to mining and fisheries. 

These considerations collectively underscore that unlocking Arctic economic potential is not primarily about resources or local capacity but about governance, leveraging scale through investment coordination, and transforming proven models into sustained, impactful outcomes. This requires long-term planning and predictability. It also increasingly depends on coordination beyond individual projects or national policy frameworks.

Recommendations

Strengthening the Arctic’s economic foundations is a prerequisite for long-term resilience and sustainable development. While commercial interest in the region is increasing, structural factors that cut across sectors and national boundaries constrain economic growth. The recommendations below focus on improving coordination, mobilizing capital, and translating investment into infrastructure that is durable in Arctic conditions. Progress on all three goals depends on approaches that respect environmental protection, Indigenous rights and leadership, and national decision-making prerogatives.

Establish an Arctic Economic Area

A joint framework is needed to address Arctic economic and investment issues that increasingly transcend national and sectoral boundaries. To establish such a framework, the Arctic Council should explore creating an Arctic Economic Area (AEA) by building on existing regional cooperation mechanisms. An AEA would resemble other macro‑regional coordination structures by bringing together subnational regions to align investment, infrastructure, and economic priorities without creating a trade bloc or constraining national sovereignty. By helping to aggregate demand, reduce fragmentation, and align investment priorities across jurisdictions, an AEA could support more coherent economic governance in sectors including shipping, fisheries, resource development, and emerging seabed activities.

An AEA could also be a platform for discussions about voluntary coordination on economic and non-military security-related issues, including information‑sharing on investment risks and transparency standards for strategic Arctic assets, without encroaching on national screening authorities.

Establish an Arctic Infrastructure Fund

Dedicated public capital is required to overcome the chicken-and-egg dilemma and the Arctic’s persistent infrastructure deficit while spurring private investment in high-cost, long-horizon projects. An Arctic Infrastructure Fund, capitalized by governments and supported by national development banks, could provide early-stage and risk-sharing financing for strategic infrastructure. By lowering risk and improving coordination across jurisdictions and sectors, the fund could help mobilize patient capital and translate long-term demand into viable investment pipelines.

Prioritize Dual-Use and Resilience-Enabling Investment

Investment efforts should focus on infrastructure that simultaneously supports economic activity, community resilience, and sustained security presence. Priority areas include (deep-sea) ports, runways, subsea cables, housing, digital connectivity, and resilient energy systems designed to meet civil, commercial, and defense requirements. Clear, long‑term demand signals from governments can contribute to the planning and predictability required for industry to invest in Arctic‑capable infrastructure and supply chains that strengthen economic and security resilience.

Conclusion

As Arctic economic activity becomes ever more entwined with geopolitical competition and security considerations, strengthening its foundations is essential to support communities and sustainable livelihoods, and to reinforce long‑term resilience and stability across the High North.

Unlocking that potential requires moving toward more systematic coordination that can align priorities, aggregate demand, mobilize patient capital, and translate investment into durable infrastructure. Progress ultimately depends on approaches that respect environmental safeguards, uphold Indigenous rights and leadership, and preserve national decision‑making authority, all while fostering the scale and predictability needed for sustained economic engagement in an increasingly competitive region.

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  The eight countries with territories in the circumpolar Arctic are: Canada, the Kingdom of Denmark, Finland, Iceland, Norway, Russia, Sweden, and the United States. Together, they form the permanent membership of the Arctic Council. Apart from Russia, these states (sometimes referred to as the “Arctic 7”) are NATO members.