June 14, 2013

Somewhere in Chinese Arctic. Beijing crawling to the Arctic riches. Over the recent years, more and more countries start allocating their forces and resources for the analysis and assessment of the situation in "Great Arctic game". Circumpolar regions attract attention first of all due to the possibility of using the sea routes for transportation of goods between Europe and Asia, and due to the mineral deposits. China is the world's largest consumer and importer of energy, but its vast geographical distance does not allow it to directly qualify for equal status in the region in comparison with the countries of the Arctic Council, which includes Denmark, Iceland, Canada, Norway, Russia, the USA, Finland and Sweden. However, Beijing has found a way to achieve the desired, using the roundabouts.

Every year lots Arctic riches are becoming more accessible due to the global warming and movement of polar ice farther to the North. According to U.S. Geological Survey the estimates of oil reserves in the Arctic amount to 13 percent of the global undeveloped reserves, natural gas - 30 percent, and liquefied petroleum gas - 20 percent. In quantitative terms it is 90 billion tons of oil and 1.67 trillion cubic meters of gas and 44 billion barrels of liquefied natural gas.

Commercial element of cargo transportation through the Arctic compared to the route via the Suez Canal also looks economically attractive. In August and September of 2009, the first foreign ships have passed through the Northeast Passage - two dry-cargo vessels “Foresight” and “Fraternity” owned by the German company “Beluga Shipping Group” transported the cargo for the CHP (combined heat & power station) in Surgut. A year later, the Arctic passage was used by four vessels. In 2012, 46 ships transported over a million tons along the Northern Sea Route, increasing the volumes of cargo transportation by 53 percent compared with the year of 2011. According to the researchers’ estimates by 2020 50 million tons of cargo will be transported along the Northern Sea Route, which proves the attractiveness of the route for private carriers. And in the longer term the North-West Passage, located in the Canadian Arctic archipelago also has the commercial potential.

Assessing the opening frontiers, China was the first Asian country, which started breaking into the membership of the Arctic Council. Beijing holds the view that the Arctic Ocean is the common area for shipping. In addition, there are claims that the global warming will have a detrimental effect on the country's food security; in particular, there will be increase of threat of flooding in the coastal regions, where the main crop areas are located.

In this regard, China has become to focus heavily on research of the Arctic and Antarctic. From 1985 to 2012, Beijing initiated five Arctic and 28 Antarctic expeditions, opened its own Arctic research station "Huang He". Besides, the Finnish shipbuilders by the year of 2014 will deliver the new icebreaker in addition to the already existing one named "Snow Dragon", bought in 1993 from Ukraine. Chinese representatives participate in work of the International Arctic Science Committee, in the project of "International Polar Year" and in other organizations and programs engaged in the study of the Arctic in terms of the climatic changes and environmental protection.

At the moment, the Chinese actions in terms of the Arctic clearly show that Beijing is trying to camouflage their true interests in the region while monitoring the environment, protecting the Arctic animals and caring about the indigenous population. Beijing's rhetoric is aimed at positioning the Arctic as an international zone, which changes affect all the countries. China highlights the fact that climate change threatens the global security. Along with France and Germany, China not without reason believes that the second oil spill in the Arctic, similar in its scenario to the 2010 disaster in the Gulf of Mexico, will lead to catastrophic consequences for all countries of the world. That is why China annually spends 49 million euros for polar research, is building the Shanghai Center for the Study of the North and quintuple the number of scientists involved in polar issues, up to 1000 people.

However, sometimes, Beijing allows a number of researchers suggesting in the press that China does not intend to put up with the current distribution of power in the region. The most significant event in the controversy, which proves Beijing's ambitions in the Arctic race, is naming of the PRC as "near-arctic state." This term is already firmly established in the lexicon of Chinese researchers who study the Arctic. However, such a bold name has caused the ironic reaction in the German newspaper “Spiegel”. The publication noted that, if we follow the logic of the Chinese ambassador in Norway, who said that China is the near-arctic state, as most of the PRC territory reaches 50 degrees of north latitude, then the German island “Sylt”, located on the 54^th latitude should also be considered “near-arctic”.

The current position of the PRC looks rather cautious, given the close attention of the U.S.A. and Canada to Russia's actions in the region (publication of the new Arctic strategy, combat duty of Russian Air Force and Navy in the border area, setting the flag on the North Pole in 2007), which are regarded as the sign of aggression. In this regard, Beijing is likely to leave the image of the dangerous player for Moscow, and will maintain the image of a peaceful country and concentrate on neutral topics: sponsoring the expeditions, the study of climate change, promoting social and economic development of the local population, pollution of the environment and tourism.

With strong positionы in the above areas, China will have the opportunity not only to accumulate knowledge of the international scientific community and provide strong arguments in support of the theory on the effects of melting Arctic ice over China, but also to interact with the organizations representing the local population and having the status of permanent members of the Arctic Council. This will allow China to lobby for their interests in the Council not directly, but using a special channel, which has already proven to be effective.

The scientific debate is necessary for China to achieve the true objectives in the Arctic, and they lie in the economic sphere. First of all, it includes the diversification of the main transport routes. As is known, the main channel of supply to China –the Strait of Malacca - is unreliable because of piracy and is a potential target for the terrorists. In this regard, Arctic sea route will allow China, first, to reduce the cost of transportation, secondly, to obtain additional trade route, and thirdly, to reduce the risks of closing the Strait of the U.S. Navy in the event of a potential conflict. Former President of China Hu Jintao realized the vulnerability of China supplies. According to Chinese analysts 5-15 % of China's foreign trade turnover will be through the Northern Sea Route by the year of 2020. According to the Norwegian shipping company “Tschudi Shipping Company”, freight transportation through the Arctic from Kirkenes and Murmansk to Shanghai will allow reducing the time by 16 days.

The growing consumption makes Chinese companies to invest heavily in the production and transportation of oil, for example, from Africa and Brazil. In this regard, the forecasts regarding the deposits of natural resources in the Arctic encouraged China to act in this matter so that not to be on the periphery of big politics. Thus, the China National Petroleum Corporation (CNPC) has become the third partner of "Rosneft" (along with Italy's “Eni” and Norway's “Statoil”) for exploration of West Prinovozemelsky (Barents Sea), the South Russian and Medynsko-Varandeisky (Pechora Sea) deposits. Obviously, in addition to access to new deposits and oil supply, China will seek to obtain modern drilling technologies as well, which it currently does not have.

The second most important strategic resource after oil and gas production is the iron ore. China has already agreed with Greenland, that starting from 2015 “London Mining” together with “Sinosteel” and “China Communication Corporation” will produce 15 million tons of iron ore from the mine “Isua”, and in case of a contract signing for the development of the deposit Kvanefjeld, China represented by the state-owned Company “Inner Mongolia Baotou Steel Rare Earth” will only strengthen its market position as a leader.

The third element in Beijing's economic strategy in the Arctic will be striving to get part of the region's marine resources, particularly fish. So far, the major operators of fishing waters are Greenland, which 90 percent of export includes fish and Iceland (33 percent). At the same time, trade in seafood brings Norway and Russia only six and one percent, respectively. However, these volumes are significant in absolute monetary terms. For example, in 2011 Norway received $ 1.8 billion from the sale of codfish and $ 4.8 billion - from the sale of salmon.

China is actively developing bilateral economic ties with some small member states of the Arctic Council, to ensure the support when voting for a permanent seat. This tactic actively worked in the Asia-Pacific region, where China has lobbied a free trade zone with ASEAN not within the organization, but establishing stable investment relations with individual states that led to the desired results in 2010.

As for the Arctic, in May of 2010, Denmark and China signed agreements for $ 740 million dollars in the sphere of energy, "green economy", and agriculture and food security. In 2008, China granted the currency swap to Iceland for 406 million euros for support of the banking system.

As a result, in 2011 the Danish ambassador to China spoke in support of granting China the status of permanent observer. A similar statement was made by the Prime Ministers of Greenland and Iceland. In January 2013 at a meeting of the Arctic Council in Tromsø representatives of Sweden and even Norway (despite the scandal award of the Nobel Peace Prize to dissident Liu Xiaobo) also expressed willingness to discuss China's role in the organization. These efforts were crowned with success. May 15, China was granted observer status however together with potential competitors: India, Italy, Japan, South Korea and Singapore.

Further, it should be noted that the policy of China in the framework of financial aid to small countries in the region will allow Beijing to participate in the development of infrastructure, which is vital in the case of year-round operation of the sea route through the Arctic. It is about creating ports, ship-repair yards, transport hubs (for example, in Iceland Ísafjörður), rescue centers.

Short-and medium-term strategy of Chinese foreign policy in the Arctic will only pursue pragmatic goals, because the image of China as a potential world leader have been laid on the line. While debate focus solely on the influence of warming on the Chinese environment and food safety, as well as opening up the Arctic over the world, Beijing methodically and purposefully continue developing economic dependence on China small Arctic states (for example the signing of the agreement on free trade zone with Iceland) to become a full member of the Arctic Council.

In addition expensive projects for the development of new oil fields in the Arctic indicate the need to attract investors, which opens the possibility of China's presence in the region and ensure energy supplies. But in this case Beijing will have to negotiate with Moscow on profitable for him tariffs for the transit of ships and do not forget about the competitors. In recent years Japan and Singapore (the most powerful player in the construction  of ports)  stepped up efforts to explore investment attractiveness of the Arctic Sea Route.  

Source: http://lenta.ru/articles/2013/06/14/chinarctic/