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President Obama and the Icebreakers: Great Name for a Rock Band -- or How the U.S. Plans to Catch Up in the Arctic

By Rich Smith - Sep 5, 2015 at 10:13AM

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Touring Alaska, the president renames a mountain, visits a glacier... and demands a new icebreaker.

Mount McKinley has a new name -- and America may soon get a new icebreaking Coast Guard vessel. Image source: Nic McPhee via Wikimedia Commons.

The United States has two icebreakers, one of which is classed as "heavy." Russia has 40 icebreakers -- six of which are nuclear-powered. In other words, Russia has three times more nuclear-powered icebreakers in its fleet than we have icebreakers, period.

There. In just two sentences, I've explained to you why Russia is dominating the race to control the Arctic Ocean.

Trouble in Santa Claus-land
Over the past two years, we've written several times about Russia's massive military buildup within the Arctic Circle. Less than a year ago, Russia's President Putin promised to send 150 military aircraft north, including:

  • 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

At the same time, the Russians are building and returning to service as many as 40 new warships, including the nuclear-powered missile cruiser Admiral Nakhimov, three nuclear-powered attack submarines, and two nuclear-powered icebreakers -- the Arktika and the Sibir -- to expand their capabilities north of the Arctic Circle.

Russia's Yamal nuclear-powered icebreaker leads a procession of Canadian and U.S. icebreakers through the polar ice in 1994. Image source: U.S. Coast Guard.

In the face of this massive military buildup, President Barack Obama traveled to Alaska this week, promising to accelerate the construction of America's third icebreaker, moving the completion date from 2022 to 2020, and asking Congress to fund additional icebreakers. In a statement, the White House declared that "the United States [needs to] develop and maintain capacity for year-round access to greater expanses within polar regions."

Why is everyone suddenly so interested in polar bears?
The U.S. Coast Guard says commercial traffic through Alaska's Bering Strait roughly doubled between 2008 and 2012. (Traffic declined in 2014 due to a short summer.) Canadian government sources say that the number of vessels transiting the Northwest Passage likewise hit a new record in 2012. 

That same year, there was 1 million square miles more of ice-free water than has been the historic average in the Arctic. While 2014 was a bit icier, it was still about a half-million square miles more ice-free compared to the past three decades. Essentially, a body of water four times the size of Texas has become navigable to commercial traffic and drillable by the global oil industry. And the Arctic is believed to contain 25% of the world's undiscovered oil and gas deposits.

Like a bear to honey, Russia has been attracted by the prospect of Arctic light sweet crude oil. Russia recently petitioned the United Nations, claiming 463,000 square miles of Arctic sea shelf, and extending its territorial claims 350 miles out from Russia's coast -- nearly twice the legal exclusive economic zone to which states are entitled. If approved, Russia's claim threatens to limit access to the Arctic for the four NATO nations with competing claims: Canada, Norway, Denmark, and the United States.

America's only "heavy" icebreaker, the USCGC Polar Star (WAGB-10). Image source: U.S. Coast Guard.

And that's why we need icebreakers
Obama's plan to accelerate construction of America's third polar icebreaker aims to get more U.S. ships in the area, contesting Russia's claim. What's really needed, though, is a major infusion of funds from Congress.

As investors, we want to be ready to invest in the right companies at the right time, if and when those funds materialize. But who are these companies? As we discussed last year, there are three "usual suspects" that investors should focus on:

  • Lockheed Martin (LMT 0.55%), which built the only U.S. heavy icebreaker currently in service, the USCGC Polar Star (pictured above). Although ordinarily considered more of a plane maker than a shipbuilder, Lockheed Martin is one of just two companies currently building America's fleet of Littoral Combat Ships (LCS). It has the expertise to build these vessels. All it needs is a contract to do so.
  • Huntington Ingalls (HII 0.49%), currently our only builder of nuclear aircraft carriers, would be a shoo-in to build a nuclear-powered icebreaker, should Congress elect to buy one. Not coincidentally, Huntington also built the only other icebreaker in the Coast Guard fleet, the medium icebreaker USCGC Healy.
  • And finally, General Dynamics (GD 0.66%). Best known as a builder of main battle tanks, General Dynamics has also helped to build LCS vessels. Along with Huntington Ingalls, General Dynamics also has expertise in building nuclear-powered submarines. Conceivably, the Pentagon might find all-ocean submarines a more economical solution to the "Arctic problem" than building icebreakers restricted to Arctic duty.

At what cost?
Should Congress decide to increase funding for icebreakers, though, how much money are we talking about? According to Alaska Senator Lisa Murkowski, Congress budgeted just $4 million for icebreaker construction last year and $8 million this year. Even at this year's higher rate of spending, this will be enough money to buy approximately one icebreaker every hundred years.

But U.S. Navy and Coast Guard officials believe we need to build at least 10 new icebreakers and to "harden" approximately 10% of the U.S. Navy's warships so that they can endure Arctic conditions. It's unclear how much money the president will ask Congress to pony up for this effort, but building the icebreakers could cost taxpayers about $7.8 billion. Hardening the Naval fleet: $8.4 billion more.

At current funding levels, we should be done "winterizing" the U.S. Navy and Coast Guard by approximately the year 4040 A.D. 

Nuclear attack submarine USS Hampton, surfacing from beneath the ice of the North Pole in 2004. If we don't build icebreakers, maybe we'll build more submarines instead? Image source: Wikimedia Commons.

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