The US needs to develop a strategic partnership with Canada in order to access Arctic oil reserves and gain better energy security.

In a surprising move, President Barack Obama’s administration recently rejected TransCanada’s Keystone XL pipeline proposal – a proposal that would have shipped one of Canada’s most prominent natural resources from Alberta’s oil sands all the way to Texas.

The White House’s decision has Canada looking for new markets to which it can export its oil. Canadian Prime Minister Stephen Harper was in China last week to explore how ties between the latter and his country can be deepened.

Although many are quick to exaggerate the consequences of the decision, the current reality is but a temporary space in which American politics take centre stage. With the November presidential election fast approaching, the incumbent Obama needs to secure his political base – which includes environmentalists – before voting time.

Canada and the US recently signed a “Beyond the Border” perimeter security deal that will see the two sides “draw a line” around the North American continent in order to speed up trade flow across the 49th parallel. A natural follow-up to this deal would include negotiations about North American energy security, possibly in tandem with a common environmental standard being established between the two nations.

An international oil pipeline is in the fundamental interest of both Canada and the US, and seems inevitable. The only question is: When? 90% of Canadian exports – including 97% of Canadian oil - are currently sent to the US.

Despite its efforts to diversify its export market, the reality remains that Canada is dependent upon the US. The question that needs to be asked now that Canada will begin to seek closer integration with Asian markets is, “How will the Canada-US security relationship be affected?”

This potential Canada-US tension may play out in the most unlikely of battlegrounds: the Arctic. As much as 25% of the world’s crude oil reserves are believed to be located in the Arctic. Furthermore, as climate change causes the Northwest Passage to thaw, demand for access to this key international shipping lane will increase.

China has demonstrated its interest in gaining access to key chokepoints in the international shipping system, having already secured the support of key players in the Pacific Island and Panama Canal regions. Canada’s Arctic region is sure to be on Beijing’s radar as the latter continues to expand the capabilities of its navy.

A Canada with deeper ties to Asian markets is a Canada that will be able to act as interlocutor between China and the US in the Arctic. Canada therefore comes away from the recent Keystone XL incident as a big winner.

The US, on the other hand, will have to go beyond reviving pipeline discussions in order to regain its neighbor’s confidence. If America maintains its current position that the Northwest Passage remain an international strait rather than revert to Canadian sovereignty, Western interests will regress at an inopportune time.

Whoever the President of the United States happens to be on January 20, 2013, he will have considerable work ahead of him to get the Canada-US security relationship – of which energy security is a key component – back on track.

This president will, without question, approve the construction of an oil pipeline emanating from Canada. What needs to take place thereafter, however, is twofold.

First, negotiations on a common environmental standard pact and energy zone between Canada, the US and possibly Mexico, need to begin. This will ensure the sustainability of the Canada-US energy relationship for decades to come – both in terms of the environment and the price of energy. Furthermore, it will protect Canada’s energy sources from the wrath of American bureaucracy seeking to exploit loopholes in the Canada-US Free Trade Agreement.

Second, Canada and the US need to begin sorting out their differences over the Northwest Passage. If they do so, they can together hold much more leverage in negotiations with Russia and China over the territory in question. Together, Canada and the US can ensure that the only interactions between Western and Eastern powers in the Arctic are economic - not military.

The Keystone XL pipeline dilemma isn’t isolated; rather, it forms an integral part of North American security. With American energy interests in the Middle East being jeopardized by Iran’s bellicose rhetoric, and with China’s rise coinciding with that of climate change, American leaders had better put partisan politics aside sooner rather than later.

*[A version of this article was originally published by The Sentry, JINSA.]

The views expressed in this article are the author's own and do not necessarily reflect Fair Observer’s editorial policy.