During his recent state visit to China, US President Donald Trump was accompanied by an “Alaska energy delegation”. That should not be a surprise. As the largest state in the United States, Alaska has a lot of potential to assume a bigger and more decisive geopolitical role in the 21st century, and is definitely a place to reckon with.
Though it is one of the coldest and most sparsely populated areas on the planet, Alaska ranked 15th back in 2007 among all American states in terms of GDP per capita, thanks to its rich natural resources, particularly its gigantic crude oil reserves.
Its state government has set up a permanent public fund for overseas investments using the surplus of its oil revenues, and to date the fund has accumulated a cash balance of US$50 billion, making it one of the richest states in the US.
Thanks to the fund’s impressive yields over the years, permanent residents of Alaska, like their counterparts in Macau, receive cash handouts from the government almost every year: 10 years ago, each Alaska resident received US$3,269 from their state government, something that no other US state was able to grant.
In order to minimize the amount of tax it has to pay the federal government, Alaska has allocated a big portion of its oil revenues to its state fund.
Alaska is among the very handful of American states that don’t levy state income tax, sales tax and estate tax. The huge economic benefits enjoyed by Alaskans as a result of these favorable tax policies and their strong sense of indigenous identity are to a large extent correlated.
Like any other American state which relies on agriculture or natural resources for revenue (e.g., Texas), Alaska has long remained a traditional conservative and Republican stronghold, with its voters being staunch supporters of low tax rates, small government, big market, and reductions in public spending.
Except in 1964, Republican candidates always carried Alaska in presidential elections, including Donald Trump in the 2016 race.
The Tea Party, an ultra-conservative faction within the GOP, is also strongly connected with Alaska. The party’s spiritual leader, Sarah Palin, served as governor of Alaska from 2006 until her resignation in 2009, and was the running mate of Arizona Senator John McCain in the 2008 presidential election.
Perhaps the people who are most envious of Alaska’s wealth and economic success are the Russians. The state used to be a part of the Russian Empire, only to be sold by Czar Alexander II to the US in 1867 for just US$7.2 million.
It didn’t take long before the Russians began to deeply regret their decision because it wasn’t until after the deal had been sealed that the Russians suddenly realized Alaska was so rich in oil.
If Moscow hadn’t sold Alaska to Washington, the former Soviet Union would definitely have had a huge strategic, military and geopolitical advantage over the US during the Cold War. In fact, the sale of Alaska had forever cost Moscow its strategic leverage over the US mainland.
If Alaska had remained Russian territory, the way the entire Cold War played out in North America could have been completely different.
Nevertheless, as Arctic ice continues to melt amid the global warming and opens up new shipping routes, Alaska may not only find more untapped natural resources within easy reach but may also emerge as a key shipping hub that connects the Arctic Ocean and the Pacific.
And given Alaska’s enormous potential for another economic boom, Russia is now once again eyeing the state, and is working aggressively to develop its Far Eastern region in an apparent effort to enhance its influence in Alaska.
Meanwhile, China and Japan have also shown great interest in seizing business opportunities presented by the new Arctic sea routes.
In the past, Alaska wasn’t always on the best of terms with the US mainland. However, since the Republicans seized control of Congress, relations between Alaska’s state government and Washington have continued to improve.
President Trump’s recent introduction of cash-flush Chinese energy investors to the state has further reinforced the Republicans’ good ties with the Alaskans.
The question of how to fully utilize Alaska’s geopolitical and strategic value to serve the best American interests is certainly a good food for thought for Washington.
Options include developing free trade zones and special economic regions in key coastal cities of Alaska, as well as stepping up efforts at boosting shipping and natural resources industries, together with tourism, in the state.
With another huge Arctic landmass, Greenland, well on its way towards full independence, I wouldn’t be surprised at all if the Alaskans went on to demand more autonomy from Washington in the days ahead.
This article appeared in the Hong Kong Economic Journal on Nov 29
Translation by Alan Lee with additional reporting
[Chinese version 中文版]
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