Property Rights and the Arctic Contest

In recent years, the Arctic has re-emerged as a focal point of global interest, fueled by a variety of factors: the renewed attention on Greenland, the gradual opening of new maritime routes due to ice melt, and territorial claims over regions such as the Svalbard archipelago. These developments signal that Arctic policy is poised to remain in the spotlight.

On the matter of the Svalbard archipelago, situated in northern Norway, Norwegian Deputy Foreign Minister Eivind Vad Petersson articulated a sentiment that reflects a growing concern:

• “For too long Svalbard has been seen by other nations as a kind of Wild West, and anyone who wants can come and do pretty much whatever they want. That’s not the case. This is sovereign Norwegian territory. So, we are making it a little bit clearer.”

In recent actions, Norway has tightened restrictions on land sales to foreigners and asserted claims over hundreds of miles of sea surrounding the archipelago. These steps represent clear attempts to delineate rights and boundaries in a region where ambiguity has previously reigned.

The significant changes occurring in the Arctic, highlighted by an intensified competition for resources and strategic advantage, invite a multitude of interpretations. Analysts may emphasize military rivalries, climate security issues, international legal disputes, or economic potentials. Yet, I suggest we apply a less frequently discussed theoretical lens: Harold Demsetz’s theory of property rights. According to Demsetz, property rights are not static entities but rather evolve as institutions shaped by the increasing value of resources, making the benefits of exclusivity outweigh the costs of their definition and enforcement. In scenarios where a resource holds little value or exclusion is impractical, an open-access regime might prevail. Conversely, as the anticipated value rises—due to technological advancements, market dynamics, or environmental changes—there emerges an incentive to establish rules for resource management and to enforce them effectively.

Demsetz’s historical example is particularly illustrative. Some Indigenous communities in North America operated under an open-access regime for beaver hunting, but the arrival of external traders increased demand for furs, prompting overhunting that threatened the species. To avert resource collapse, certain communities instituted exclusive territorial rights, thereby transforming property into a tool for conservation. Those who could exclude others were incentivized to monitor beaver populations and limit hunting when necessary. Similarly, where geographical challenges hampered the delineation and enforcement of rights, private property arrangements struggled to take hold.

While Demsetz’s example pertains to societies with informal institutions, the current Arctic situation is not a mere “commons.” Sovereignty over land is largely established, and the legal frameworks governing exclusive economic zones, continental shelves, and maritime routes are clearly defined. Nevertheless, Demsetz’s insight transcends the presence of formal institutions, offering a lens through which to understand the dynamics of incentives—the interplay between value and exclusion costs that remains relevant in highly institutionalized contexts.

His principal argument—that the formation or reinforcement of property rights responds to shifts in the value and costs associated with exclusivity—finds resonance in contemporary international frameworks, mineral rights, fishing rights, and territorial disputes. Examples abound, from the introduction of transferable fishing quotas to the technological advancements enabling hydraulic fracturing, which unlocks new oil and gas reserves, to the renegotiation of mining rights and the extension of continental shelves. These institutional adaptations emerge as responses to rising resource values and the enhanced ability to exclude and monitor activities.

What ties back to Demsetz’s historical case, to be taken with an appropriate degree of caution, is that external changes—like global warming or the influx of new economic stakeholders—can amplify the value of previously underutilized resources, prompting a reassessment of existing rights and incentivizing actors to refine, expand, or reinterpret their claims. Thus, in the Arctic, we observe not the emergence of entirely new rights but rather their redefinition, coupled with stricter enforcement.

However, this intensification of institutional frameworks raises critical questions regarding legitimacy, justice, and sustainability that must not be overlooked.

The first issue is political and distributive: who crafts the rules, and who reaps the benefits of these new opportunities? In Greenland, rights stem from a complex interaction of international norms, Danish legislation, and protections for the Inuit. If local communities are sidelined in decision-making processes, the redefinition of rights could translate into the expropriation of wealth and social unrest.

Secondly, the environmental stakes are alarmingly high: the Arctic is a delicate ecosystem vital for global climate stability. The surge in extraction activities and maritime traffic poses tangible risks of pollution, habitat destruction, and resource overexploitation, with consequences that may be irreversible. The irony isn’t lost: the melting of the Arctic, driven by climate change, is creating new opportunities for the very actors whose activities contribute to its degradation.

Demsetz’s theoretical framework remains insightful, enhancing our comprehension of the conditions under which property rights can foster peaceful stewardship rather than conflict. His theory suggests that well-defined ownership can facilitate sustainable management, but only if two stringent criteria are met:

• Rights holders must adopt a long-term perspective, prioritizing ecological preservation over immediate financial gain; and
• Robust, transparent institutions must be in place to enforce regulations impartially and curb exploitative behavior.

In the Arctic scenario, this necessitates the establishment of governance structures that are clear, legitimate, and capable of effective monitoring and response.

Absent such a solid regulatory foundation—one that relies on scientific oversight, defined accountability, and equitable benefit-sharing with Indigenous and local populations—the rise in resource value may merely trigger a frenzied competition for claims and extraction. This would externalize significant costs onto the vulnerable Arctic environment and its inhabitants, resulting in pollution, habitat degradation, and the erosion of traditional lifestyles.

Another layer of irony emerges: the very mechanisms intended to instill order (the establishment of exclusive rights) risk leading to a reverse tragedy of the commons, where enclosure results not in stewardship but in reckless extraction.

Thus, while the adage that “good fences make good neighbors” holds some geopolitical truth—clear boundaries and regulations can mitigate interstate tensions—the nature of these institutional ‘fences’ is crucial. To promote peace and sustainability, they must be designed equitably, through inclusive processes that emphasize environmental durability and the rights of affected communities. Otherwise, they risk becoming tools of exclusion and geopolitical exploitation, entrenching inequalities and intensifying disputes. In the direst scenarios, they could become the legal and territorial fissures along which conflicts ignite.

Through this lens, the escalating rhetoric and power posturing of major nations in the Arctic serve not as mere bravado but as warning signs of a system veering towards instability. They reveal a geopolitical landscape where the soaring values of previously inaccessible resources have outstripped the development of reliable, shared institutions. Proposals to tackle these challenges not through existing frameworks and negotiations but via financial transfers for territorial sovereignty signify a worldview that commodifies territory, alliances, and security. In Demsetzian terms, such approaches reflect an effort to unilaterally redefine rights—through monetary valuation and power, rather than the social consensus that grants legitimacy to property regimes.

This mindset extends to a broader geopolitical patronage system, where the implicit message to allies is: security comes at a price, whether that be political loyalty, tariffs, basing rights, or strategic concessions. Such behavior undermines the cooperative conditions that Demsetz deemed vital for the evolution of rights, replacing them with coercive reallocations that elevate transaction costs and erode trust. This trend diminishes multilateral frameworks, reducing them to bargaining chips in zero-sum negotiations and accelerating the deterioration of shared governance. It incentivizes a race in which power—not law, not ecological considerations—emerges as the defining currency.

The rising nationalism surrounding Arctic claims is thus not merely a symptom of instability but a manifestation of a great-power mentality that renders rules disposable. Without a collective recommitment to just, ecologically sound governance, the logic of property rights—distorted by a transactional, might-makes-right philosophy—will not only risk conflict but also steer the region toward prolonged confrontation.