Who Owns the North Pole - Part 82

The People’s Republic of China has systematically increased its activity in the Arctic high north through various avenues. The region’s massive resource reserves, China’s growing presence, Chinese challenges to regional Arctic governance, and the current standoff between Russia and the West are a potentially potent combination. China’s wealth and capital make it an important partner for Arctic nations in developing the high north. China declares itself to be a “near Arctic state” and an “Arctic stakeholder,” even though its northernmost territory lies more than 1,000 miles south of the Arctic Circle. As the most populous country in the world, China claims that it should have a say in Arctic policy and disagrees with Arctic issues being decided by Arctic states alone. More broadly, given the region’s resource reserves, shipping lanes, and implications for global warming, China argues that Arctic state interests and claims must be balanced against international interests in the seas and resources of the region. Very prominent and influential Chinese scholars and officials push this rhetoric. For example, the head of the European department of the China Institute for International Studies recently pronounced: “Countries closer to the Arctic, such as Iceland, Russia, Canada, and a few other European countries may tend to wish the Arctic were private or that they had priority to develop it, but China insists that the Arctic belongs to everyone just like the Moon.” Similarly, the director of the Chinese Arctic and Antarctic Administration has stated that “Arctic resources…will be allocated according to the needs of the world, not only owned by certain countries.” And in response to Russian Arctic territorial claims, Chinese Rear Admiral Yin Zhuo declared that “the Arctic belongs to all the people around the world as no nation has sovereignty over it.” In the context of the country’s quest for natural resources, Chinese attitudes toward the Arctic are unprecedented. While it has been aggressive in pursuing resources around the globe, China has also maintained a clear respect for sovereign claims in doing so. Its rhetoric concerning the Arctic diverges from this practice.

China’s growing physical presence in the Arctic, the statements of prominent government officials, and the region’s significant potential benefits encourage the sense that China may label its activity in the region as a core interest. The introduction of such a large actor into Arctic international relations with interests beyond mere investment and trade – i.e., claims and ownership – is a recipe for elevated conflict in a region that already possesses its share of tension due to the often incompatible claims of Arctic littoral states. The economic dependence being nurtured between China and certain Arctic nations has the potential to hasten the arrival of the situation noted above. This dependence could give China an amplified voice in northern affairs and an ever-deepening Arctic presence. For Iceland and Denmark, Arctic trade with and investment from China are significantly more important to them than the reverse is for the PRC. This gives those countries a strong incentive to support China’s regional ambitions and, accordingly, affords China significant leverage. As Russia becomes increasingly isolated and its economy suffers due to its actions in Ukraine and resulting sanctions, it will find itself in a similar position in Arctic interactions. Russian support for Chinese Arctic ventures and interests will begin to grow in attractiveness out of a desire to gain investment and trade, and not to offend its sole significant partner.

The Arctic offers China diversity, security and savings. Despite significant inroads with Russia, China is largely dependent on oil imports from the volatile Middle East that must pass through the chokepoint of the Strait of Malacca in Southeast Asia. In 2011, approximately 85 percent of China’s oil imports transited this passage. The source and travel path for these resources, and China’s current lack of alternatives, are not ideal. Arctic energy sources and shipping lanes provide attractive diversity and security.

Arctic shipping would also substantially reduce transport costs. The distance from Shanghai to Hamburg along the Northern Sea Route over Russia is approximately 30 percent shorter than the comparable route through the Suez Canal. Such a reduction in shipping time and distance will yield large savings on fuel and increase China’s export potential to Europe. In 2013, 71 vessels sailed the Northern Sea Route, moving 1,355,897 tons. This is a substantial increase over the four vessels that did so in 2010. China hopes to send 15 percent of its international shipping through the Arctic by 2020.

 China has taken substantial steps toward establishing a financial and physical presence in the Arctic and placing itself in the conversation on Arctic affairs. China is spending approximately $60 million annually on polar research (more than the U.S., which actually controls Arctic territory), runs the Chinese Arctic and Antarctic Administration, opened the China-Nordic Arctic Research Center in Shanghai in late 2013, and plans to dramatically increase its Arctic research staff. China’s physical presence in the Arctic has also increased considerably in the past decade. In 2003, it completed the Arctic Yellow River Station, a permanent research facility on Norway’s Spitsbergen Island. China also currently possesses one icebreaker directed toward Arctic operations, with another to be completed by 2016. Despite being a non-Arctic nation, it will soon have the same number of Arctic icebreakers as Arctic littoral states Norway and the U.S.

In the realm of international organizations and politics, China has joined a litany of international Arctic scientific groups. In 2013, it also became a permanent observer to the Arctic Council – the eight-member intergovernmental forum that is the center of international Arctic policy formulation. Similarly, with respect to bilateral relations, the PRC has actively courted northern states, and made substantial progress with both Iceland and Denmark. Following Iceland’s 2008 economic crash, China provided it with large aid packages. In 2012, then Chinese Premier Wen Jiabao began his tour of Europe in the small country, and a Chinese-Icelandic free trade agreement was inked in 2013. China is also seeking energy projects in Greenland and courting Danish leaders. The targeting of small countries in great need of capital, investment and labor allows China to use its wealth and resources to cultivate economic entanglement and, ultimately, degrees of dependence. As a result, Iceland and Denmark have become very supportive of China having a louder voice in Arctic affairs and policy.

Now, something similar is developing between China and Russia. While energy trade between Russia and China has been steadily advancing since the mid-2000s, early 2013 saw the first major Arctic cooperative deal between the countries. The China National Petroleum Corp. (CNPC) contracted with Rosneft to survey three areas of the Arctic in the Pechora and Barents Seas. Later that same year, CNPC announced it would partner with Novatek, Russia’s largest independent natural gas producer, and take a 20 percent stake in the Yamal Project tapping the resource rich Arctic South Tambey gas field. Although Russia’s turn east has thus far been largely on its terms, this year’s sanctions are changing the dynamic. Compared to smaller countries, Russia has traditionally not been as susceptible to foreign influence. Yet the sanctions are taking a significant toll and severely limiting its potential Arctic partners, leaving Russia with few places to turn. When it comes to its needs and bargaining stature with China on Arctic issues, Russia is progressively finding itself in an even weaker position than that which Iceland and Denmark occupy: in need of capital and funding but severely limited in partner choice.

The resource rich Kara Sea is likely the first place where Western sanctions will significantly benefit China. Exxon and Rosneft jointly discovered a massive reserve in the region estimated to contain 11.9 trillion cubic feet of natural gas and 750 million barrels of oil. After completing the much more complex tasks of exploration and drilling but before pumping any gas or oil, Exxon was forced to pull out. Now, Russia is faced with an expensive undertaking that necessitates a partner – and China is in an excellent position to assume Exxon’s stake in the resource operation for several reasons. For one, Russia has already begun talks with China to sail rigs from the South China Sea to the Arctic Ocean to replace exiting Western installations. Rosneft, which is currently studying Arctic offshore cooperative offers from Asia, has also contracted to sell a 10 percent percent stake in one of Russia’s largest oil fields and “Rosneft’s biggest production asset” to China, evidencing its readiness to partner with China on nationally important projects to ease sanctions-related burdens. In addition, Chinese prospecting areas in the Pechora and Barents Seas in the Russian Arctic directly abut the Kara Sea. Just as with Iceland and Denmark, China will slowly increase its trade and Arctic partnerships with Russia to substantial levels. This will breed a level of economic dependence. Trade between Russia and China was already trending upward before Western sanctions were levied; these measures will serve to speed up this process. Russia’s lack of alternative partners gives China a distinct advantage in any negotiations, and the PRC has displayed this new dynamic by driving hard bargains in energy deals reached with Russia since the Ukrainian crisis began.

What is concerning about the impact of Western sanctions on China’s entry into the Arctic is not the PRC potentially “locking up” a substantial portion of the Earth’s untapped resources. Rather, the issue is the introduction of a large, assertive, and potentially combative actor into already tense Arctic relations where Arctic states have a host of conflicting claims to the region that will likely only be exacerbated as global warming opens it up.

http://thediplomat.com/2015/01/russian-sanctions-china-and-the-arctic/