On the sidelines of July’s NATO summit in Washington, a new industrial alliance quietly came to life. The leaders of the United States, Canada, and Finland announced the Icebreaker Collaboration Effort, or ICE Pact, a trilateral deal on polar icebreaker production. The agreement aims to leverage the technological expertise and production capacity of these three Arctic states to build a modern fleet of icebreaking vessels for NATO countries and their global partners.
The ICE Pact is a response to two strategic challenges facing the United States and its allies. Both are tied to growing competition with China.
First, the United States’ atrophying shipbuilding industry risks being pushed further into irrelevance by China’s sprawling shipbuilding empire; this could also hamstring Washington’s ability to compete with Beijing’s naval modernization efforts. Second, rising geopolitical competition in the Arctic has laid bare the need for deeper coordination among NATO allies and their partners to counter the growing alignment between China and Russia in the region.
The deal remains in its early stages; July’s announcement was merely a public commitment to begin negotiations toward a memorandum of understanding that will be announced by the end of the year. As negotiators shape the pact over the coming months, they will need to overcome considerable political obstacles.
The decline of U.S. shipbuilding is a crisis long in the making. For decades, foreign shipbuilders in Asia took advantage of low input costs and leveraged state subsidies to undercut competitors in the global market. Today, just three countries—China, South Korea, and Japan—build over 90 percent of global tonnage, a metric used to measure shipyard output. The United States accounts for a meager 0.2 percent.
China’s rise as the dominant global producer of both commercial and naval vessels has refocused minds around shipbuilding in Washington. Last year, China alone accounted for over half of the world’s production of civilian and merchant ships.
This surge in commercial production has occurred in dual-use shipyards, which are built not only to construct tankers and container ships for global clients, but also warships for China’s navy. Combining commercial and military production has helped China’s shipbuilders keep their orderbooks full and revenues flowing, turbocharging the country’s naval-industrial development. The practice is common across China’s military production ecosystem, where blurred lines between civilian and defense firms help the People’s Liberation Army access foreign technology and capital that may otherwise be restricted.
The Biden administration has introduced an expansive slate of policies aimed at slowing China’s ongoing military buildup, now including its shipbuilding prowess. In April, the White House announced an investigation into Beijing’s use of non-market industrial practices, including billions of dollars in state subsidies and cheap credit for its shipyards that will likely result in new tariffs on Chinese-built ships in the coming years.
Now, the White House is searching for ways to revitalize the United States’ own battered shipbuilding industry. Taking a cue from the nuclear submarine agreement unveiled between the United States, Australia, and Britain in 2021 known as AUKUS, the ICE Pact seeks to fuse the combined industrial capacity and technological expertise of U.S. allies into a shipbuilding consortium focused on polar icebreakers.
The decision to home in on icebreakers was prompted both by strategic necessity and market opportunity in today’s environmental and geopolitical landscapes. The Arctic has grown in importance as melting sea ice unlocks new sea lanes and access to natural resources. With Moscow and Beijing tightening their military and commercial cooperation in the region, NATO countries must urgently boost their operational capabilities there, too.
China’s growing role in the Arctic is of particular concern. Leaders in Beijing have dubbed the country a “near-Arctic state” and are actively seeking to boost its influence over the region’s governance. More worrying, high-level Chinese strategic documents promote the use of dual-use scientific and economic engagement to make inroads for its military to operate in the Arctic.
The U.S. Department of Defense’s most recent Arctic Strategy, published in July 2024, identifies China’s increased activities in the region as the top strategic challenge, and NATO has taken an increasingly hard rhetorical line against China’s northern advances in recent years. “The increased competition and militarization in the Arctic region, especially by Russia and China, is concerning. … We cannot be naïve and ignore the potentially nefarious intentions of some actors in the region. We must remain vigilant and prepare for the unexpected,” Rob Bauer, the chair of NATO’s Military Committee, said last year.
But there is a widening gap between NATO partners and their competitors in icebreaker production. These highly specialized vessels are crucial for enabling military forces to reach and operate in the Arctic’s frozen waters. Russia alone operates a fleet of over 40 state- and nonstate-owned ice-class vessels, including several nuclear-powered icebreakers. China now has four in operation—two were put to service in the last five years—and has plans to build more.
Meanwhile, Finland has 12 operational icebreakers, Canada boasts nine, and the United States has just two aging hulls in dire need of upgrades. Yearslong delays and cost overruns have plagued an existing plan to build several new heavy polar icebreakers for the U.S. Coast Guard via the Polar Security Cutter program.
Although these dynamics are concerning, they also create opportunities. The expanding strategic importance of the world’s polar regions is expected to spur a demand for 70 to 90 icebreakers among U.S. allies and partners over the next decade, according to U.S. officials. If successful, the ICE Pact will ensure that this demand flows into orderbooks at U.S., Canadian, and Finnish shipyards.
It will take decades of sustained investment to put U.S. shipyards on a viable path to global competitiveness. Yet the ICE Pact serves as a creative first step in chipping away at China’s shipbuilding dominance.
By working with allies, U.S. officials hope to “build economies of scale in American, Finnish, or Canadian shipyards to create polar icebreakers,” according to a White House press briefing, and spur the demand needed to incentivize private and public investment into a shared production ecosystem. If successful, this approach could offer a model for broader collaboration with allies on advanced sectors of the shipbuilding market.
The deal has three components: information and technology exchange, workforce development, and attracting orders from international partners. The ICE Pact’s core wager, however, is that by combining the three countries’ production capacities, it can sufficiently reduce the costs of building each vessel to attract interest from global buyers.
Finland—which officially joined NATO in 2023—will be a critical partner in this effort. Finnish firms lead the world in polar icebreaker development, boasting an 80 percent market share in icebreaker design and 60 percent share in global production. Several Canadian companies are likewise global powerhouses in design and production. The United States, for its part, can take advantage of its thriving high-tech ecosystem to lead on the development of next-generation technologies, such as space-based monitoring systems and unmanned surface, air, and undersea assets optimized to support polar missions.
While the ICE Pact so far shows promise, its path to success will require deft negotiation around several potential sticking points.
First, several top Finnish firms involved in icebreaker design and production have significant operations in China. Aker Arctic, a world leader in ice-class ship design based in Helsinki, played a critical role in design and testing for the development of China’s first domestically produced polar icebreaker, the Xue Long 2. Another major Finnish firm, Wartsila, helped build the ship’s power system.
Security-minded officials from the United States may be hesitant to partner with companies that are actively supporting the buildup of China’s polar capabilities. The risk of sensitive technology transfer to Beijing’s dual-use shipyards will likely prove a particularly strong point of concern.
Another possible stumbling block is the ongoing dispute between the United States and Canada over the latter’s claims to exclusive jurisdiction over vast swaths of Arctic waters along the critical Northwest Passage sea route, which connects the Atlantic and Pacific oceans through the islands of northern Canada. Until recently, the decades-old dispute—rooted in differing interpretations of the U.N. Convention on the Law of the Sea—had remained on the back burner. It has returned to the fore in recent years as politicians on both sides increasingly turn their attention to the Arctic’s rising importance to global trade and security. Addressing these roadblocks is critical to the ICE Pact’s long-term success.
Looking forward, building collective capabilities to safeguard peace and security in the Arctic must remain one of NATO’s north stars. Maintaining a NATO presence in this remote frontier is key to preserving the alliance’s Arctic influence—and protecting U.S. interests.
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