Finland spent years on icebreaker deal before memorandum with US, Canada
A memorandum of understanding signed this month between Finland, the U.S., and Canada on the joint development of polar icebreakers is the culmination of years of efforts by the European partner to expand markets for its shipbuilding industry, sources told Arctic Today.
The MOU, signed Nov. 13, builds on the launch of the Icebreaker Collaboration Effort (ICE) Pact agreed to by Canadian Prime Minister Trudeau, Finnish President Alexander Stubb, and U.S. President Joe Biden on the margins of the NATO Washington Summit in July.
Born from a flurry of strategic partnerships after Finland joined NATO last year, the ICE Pact formalizes, for the first time, U.S.-Finland cooperation on icebreakers long in the making. A global leader in shipbuilding and ice flow navigation, Finland claims to have designed around 80% of the world’s icebreakers and constructed 60% of the world’s fleet.
For years, Helsinki has worked to develop the market for icebreakers in the U.S., which has seen its fleet dwindle. Finnish government officials and industry leaders alike have been involved in the effort to lease one of their most valuable assets to a buyer they knew needed it.
The U.S. fleet has stood at just three icebreakers for more than two decades: two 399-foot heavy icebreakers (Polar Star and Polar Sea, commissioned in 1976 and 1977, respectively) and one 420-foot medium icebreaker (Cutter Healy, commissioned in 2000).
A 2023 U.S. Coast Guard fleet analysis attests that the U.S. needs a total of eight to nine polar icebreakers to perform its polar mission in the coming years, including four to five heavy polar vessels and at least four medium polar ships.
Decade of Effort
As early as 2013, Arctia, the state-run enterprise that operates Finland’s icebreaking fleet, began meeting with U.S. officials on Capitol Hill to discuss the possibility of leasing two of its premier icebreaking vessels during the off-season to help the U.S. meet its polar objectives.
“The idea was that Finland had seven mid-heavy icebreakers which are used on the Baltic Sea during the winter,” said Tero Vauraste, the CEO of Arctia from 2009 until 2019, in an interview with Arctic Today. “They weren’t needed during the summer period when Arctic operations occurred in the U.S. and Canadian Arctic waters.”
He said he even brought the offer directly to President Barack Obama, thanks to a chance encounter in a hotel gym on the sidelines of an Alaskan conference in 2015.
The U.S. president “was receptive,” Vauraste said. “It was a very nice discussion, and he told me that it was a great day to discuss this because, on that particular day, he was going to urge Congress to proceed with decisions on icebreaking.”
Hours later, Obama issued a statement outlining a proposal for an accelerated acquisition of a replacement heavy icebreaker and planning for the construction of additional vessels. He also called on Congress to work on providing sufficient resources to fund the program.
For the remainder of his term in office, the Obama administration worked to advance the icebreaking initiative, including pushing through a 2017 budget request allocating $150 million to accelerate the acquisition of a new polar icebreaker to begin production activities by 2020.
While no new icebreakers were ordered, the president succeeded in placing the issue of icebreakers squarely on the defense agenda, a mantle his successor Donald Trump would also pick up. However, while the option of leasing Finland’s ships as part of the procurement process received positive responses from U.S. officials, no concrete steps were taken to move forward.
‘That’s Too Crafty’
Arctia, however, never gave up. Company officials believed they had an offer that would benefit both parties: The U.S.’s funding allotment, design, and construction process would take years to get a vehicle on the ice. In the meantime, Finland’s lease of two multipurpose heavy icebreakers (MSV Nordica and MSV Finnica) could help fill the operational void.
In October 2018, government officials and business elites from around the world attended a formal dinner on the sidelines of the Arctic Circle Assembly in Reykjavik. The event was typical of any dinner held during an international summit. The venue, however, was not.
Their host for the evening was the MSV Nordica.
The summit, where the leaders from nations and organizations in need of icebreaking services were all in attendance, presented an opportunity for Arctia to showcase Finnish expertise in the industry and attempt to drum up interest in its ships.
“The discussions had already been ongoing for a while,” said Arctia’s Vauraste. “The idea really was to showcase the Arctic capabilities of the Nordica and MSV Finnica. There were a number of dignitaries on board to have a look and get briefed about their capabilities.”
The gambit found at least one interested buyer. Following the dinner, then-U.S. Secretary of the Navy Richard Spencer immediately initiated a conversation with Anne Berner, Finland’s minister of transportation at the time.
“How can we engage?” Spencer recounted asking Berner, in an interview. “She was very much aware that the U.S. was down to two icebreakers, which I called 1.3 icebreakers, because of the maintenance on them. … They were so old, they were held together with spit and bailing wire. Having two up simultaneously was very difficult.”
Just a few weeks later, Finland submitted a formal proposal detailing Helsinki’s offer to lease the Polar-class icebreakers that the U.S. desperately needed. Finland was prepared to deliver the vessels by the following winter and gave the option of providing them “wet or dry,” either fully manned with personnel or as empty vessels for the U.S. Coast Guard to train and equip with their own crew.
The leasing proposal was brought directly to Capitol Hill for a meeting with the late Senator Jim Inhofe, then-chairman of the Senate Armed Services Committee. Spencer recounted a conversation with Inhofe, who he described as having “myopic vision.”
Spencer recounted the following conversation with former U.S. Senator Jim Inhofe (R-OK), who he described as having “myopic vision.”
Inhofe: “You know there’s no money in the budget for it. How do you expect to fund it?”
Spencer: “Well, it’s actually a lease.”
Inhofe: “You know that the United States government doesn’t lease because why should we pay interest charges? We should just buy the asset outright.”
Spencer: “Well, I’ll go back to your first point. We don’t have it in the budget.”
Inhofe: “So subject over, you can’t get them.”
Spencer says he recalls suggesting that as the icebreakers would be leased, rather than bought, the funds could come from the Navy’s Operations and Maintenance (OMN) account.
“You’re not going to do that,” Inhofe said. “That’s too crafty.”
Officials in Finland were told the U.S. would not be moving forward with the proposal. Imhof left the Senate in 2023 and passed away earlier this year.
Spencer attributed the lack of strategic consideration for the deal to a lack of understanding of the importance of the Arctic and how far behind the U.S. was when it came to an Arctic fleet.
With the leasing matter off the table, the U.S. again sought to move forward with the plans to buy new icebreakers set into motion by Obama.
On April 23, 2019, the U.S. Coast Guard-Navy Integrated Program office awarded Mississippi-based VT Halter Marine, now owned by Bollinger Shipyards of Lockport, La., a $746 million contract for the design and construction of the first Polar Security Cutter (PSC).
Trump’s polar push
At least three other shipbuilding firms placed offers for the contract, including a bid from Fincantieri Marinette Marine. FMM was joined in their bid by Norwegian shipbuilder Vard and Finnish shipbuilder Aker Arctic, all of whom were very experienced in the design and construction of icebreaking vessels.
VT Halter has no experience designing or building ice-capable ships. Beyond dollars and cents, the award was attributed to political pressure and the legal necessity of building the ship at home to comply with the Jones Act, which prioritizes domestic businesses in the maritime industry.
The contract included an option for as many as three PSC vessels, with delivery of the first lead vessel scheduled for March 2024. The contract incentivized early delivery and there was even initial optimism that the Coast Guard would receive the first vessel before the 2024 delivery date. [Spoiler alert: the first ship has yet to even pass the design phase].
With production seemingly rolling full steam ahead for the domestic shipbuilding of the icebreakers, the option of leasing from Finland appeared dead.
That is until June 2020 when Trump thrust the issue back to the forefront of the defense agenda.
The president issued a “Memorandum on Safeguarding U.S. National Interests in the Arctic and Antarctic Regions,” signaling an increased concern regarding Russian and Chinese activity in the far north.
Trump directed the relevant agencies to lead a review of the requirements for a polar security icebreaking fleet acquisition program to acquire and employ a suitable fleet of icebreakers.
While much of the memo called for work that was already in progress—including the construction of the three new PSCs—it also directed the Secretary of State to coordinate with the Secretary of Homeland Security to identify partner nations willing to provide polar security icebreaker leasing options to bridge the gaps in the American fleet while construction was underway and given the increasingly degraded capabilities of the USCGC Polar Star.
According to one former U.S. official serving as an attache to one of those partner nations, the memo set off a flurry of activity between the Trump administration and its Nordic allies.
Finland once again stepped up, looking for a second chance to unload at least one of its icebreaking vessels in return for U.S. dollars.
Peter Rybski, former U.S. attache to Helsinki, was actively involved in the second attempt in 2020 to look at a leasing deal but attributed the lack of momentum to the change in administration. He believes the Coast Guard has slowly begun to realize the error in dragging their feet on the matter.
“Over time, as the PSC delays mounted and costs increased, the USCG gradually warmed to alternative proposals that it had once rejected, such as the acquisition of a commercially available polar icebreaker,” Rybski wrote. “Perhaps USCG leadership will begin warming to other ideas also previously rejected, such as increased cooperation with foreign shipyards or the long-term lease or purchase of foreign vessels.”
As Spencer and other officials privy to these conversations attest, a deal with Finland would have brought the U.S. almost immediate relief to the technical and operational shortcomings of its outdated two-vessel fleet.
Now, more than a decade after Finland originally offered to lease its industry-leading ships, the U.S. still only possesses two Polar-class icebreaking vessels, both nearing the end of their operational lives.
Compounding the problem, the domestic ship-building endeavor led by VT Halter is now at least five years behind schedule with costs ballooning from the original estimate of less than $2 billion to $5.1 billion.
In the meantime, Russia has been steadily expanding its fleet and with it, its influence in the Arctic Circle. Moscow possesses more than 40 operational icebreakers and boasts the only nuclear icebreaker fleet in the world. It’s been using that fleet to carve out a new shipping route, the “Northern Sea Route,” as an alternative to traditional global shipping lanes.
“Simply put: Russia and China are strengthening their capabilities in the Arctic, and we cannot afford to allow our own United States Coast Guard and United States Navy to fall behind,” declared U.S. Secretary of Homeland Security Alejandro Mayorkas during the signing ceremony of the ICE Pact last week.
As Trump forms his next administration, early indications are that the just-signed MOU won’t lose momentum. He’s already had the Finnish leader on the phone talking about, you guessed it, icebreakers.
