With the Arctic ice cap in full-meltdown mode, Russian President Vladimir Putin last year announced an ambitious plan to dominate a wider Arctic Ocean. Calling the Arctic a "top defense priority," Putin said he will add 40 warships to the Russian navy, including:
- a Borey-class nuclear-powered ballistic missile submarine
- a Varshavyanka-class diesel-electric submarine
- the advanced search-and-rescue ship Igor Belousov
- the refurbished Kirov-class nuclear-powered missile cruiser Admiral Nakhimov, and three refurbished nuclear-powered attack submarines
Russia even floated plans to build a nuclear-powered aircraft carrier for Arctic duty -- all in the interests of asserting ownership of oil and gas deposits under the ice cap. But, as it turns out, that's not all.
Russia is building an Arctic air force as well.
Look! Up in the sky! That's not Superman -- it's a Su-35!
As reported on DefenseNews.com, Col. Igor Klimov of the Russian Air Force announced plans earlier this month for the service to invest billions of dollars to buy 150 new aircraft for Russia's Arctic forces. According to Russian news agency ITAR-TASS, these will include:
- Sukhoi Su-34 fighter-bombers
- Su-30SM and Su-35S fighter jets
- Kamov and Mil combat helicopters
- Yak-130 advanced jet trainers
- Ilyushin Il-76MD-90 transports
Already, NORAD has noted increased activity by Russian warplanes in the Arctic. In September, the Canadian press reported that Canadian and U.S. fighter jets scrambled twice to intercept Russian patrols near Canadian and American airspace.
What it means to investors
Here at The Motley Fool, we're as interested as anyone else in keeping up with current events -- but what we really enjoy is figuring out how such news events affect investors' portfolios. So what might Russia's plans to beef up its Arctic forces mean to investors?
Potentially, they might not mean much at all. The recent collapse of oil prices could reduce Arctic deposits' attractiveness to Russia. Even "de-iced," this oil would still be located in some very difficult climes. At the same time, because it depends heavily on high oil prices to fund its military, Russia's plans to build up its forces in the Arctic might prove prohibitively expensive.
That said, tight budgets have not prevented Russia from increasing probes of NATO defenses in recent months. If the Putin government presses ahead with plans to increase the nation's military presence in the Arctic, this could require a response from the West.
What's at stake
Already, Russia's naval plans have prompted the U.S. Navy to draw up an $8.4 billion plan to "harden" up to 10% of the fleet to permit operations in an Arctic environment. The U.S. Coast Guard is talking about spending a further $7.8 billion to build new Arctic ice breakers. An additional Russian buildup of military air assets could provoke reciprocal enhancements by Western militaries -- with multibillion-dollar implications for U.S. defense contractors Boeing and Lockheed Martin.
Four NATO nations -- the U.S., Canada, Norway, and Denmark (via Greenland) have interests in the Arctic that could collide with Russia's. All four are also current or potential buyers of Lockheed's F-35 stealth fighter jet (Canada is evaluating a plan to buy 65 F-35s at a total cost of up to $30 billion, Denmark 30 F-35s, and Norway 52 more). The F-35's high price tag has spurred Canada and Denmark to consider cheaper aircraft such as Boeing's F/A-18 -- but at the cost of stealth.
However, the more Russia keeps up its antics in the Arctic, the more likely it becomes that these countries will ultimately cut checks to Lockheed Martin.
Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.