China Policy Institute: Analysis


China and the Arctic

Shock and ore: Chinese interest in Greenland’s mines

Written by Jichang Lulu.

Chinese mining in Greenland has triggered a political crisis and a good deal of geopolitical speculation, complete with indignant responses from the Chinese government and state-owned press. All that attention without any operations actually existing.

While interest in Greenland’s ores from government institutions and both state-owned and private enterprises reached a high point in 2012 or 2013, it has since receded. What remains is Jiangxi Copper’s low-key involvement in a copper project being explored since 2011, and China Nonferrous’ non-binding agreements with the owners of two different mines. One of these, the Kvanefjeld uranium and rare earth project, is moving towards production, but so far not a clod of commercial ore has left Greenlandic soil thanks to Chinese investment. The much-talked-about Isua iron mine near Nuuk lost whatever near-term prospects it still had with the demise of its operator. Last December it was sold, reportedly for a pittance, to General Nice (俊安), a private company whose Party connections once helped it navigate the Shanxi coal rush and emerge as a major iron trader in a market dominated by state-owned players.

Isua, from hot issue to cold asset

Although not a Chinese company, London Mining, the mine’s previous owner, had useful Chinese connections and had operated in China. The mine attracted considerable interest from both private and state-owned companies, and its prospects were praised by Chinese geologists who surveyed it. In 2013, however, talk of a large influx of Chinese workers to develop the mine brought about a media brouhaha and political crisis that likely set off the political-risk alarm for potential Chinese investors. London Mining’s other major asset, the Marampa mine in Sierra Leone, became nearly worthless after being hit by Ebola, eventually sending the company into administration in late 2014.

With current iron prices making the mine unattractive, Chinese industry voices have wondered about the motivations behind General Nice’s acquisition of Isua. Importantly, the company paid little for it, and not entirely in cash. Several signs suggest that General Nice might be going through a tricky liquidity situation: slow days for iron traders in China; a failure to complete a share subscription to IRC, who mine for iron in Siberia; another investment, Australian iron miner Pluton Resources, in trouble; their Hong Kong-listed arm losing more money than it made during its three years under General Nice’s aegis, and forced to diversify away from coal, historically its core business.

General Nice, originally a Tianjin trading company, joined the Shanxi coal rush around 1997, through a partnership with a local businessman and official who, among other positions, has held that of Party secretary of his village for 39 years. Political connections were indeed crucial to help the partnership navigate the free-for-all of the coal boom, occasionally supplemented with the odd bribe. Political clout might also have helped the group survive the state-ordered restructuring of the coal industry, one major goal of which was to fight the widespread corruption and environmental practices that put Shanxi towns like Xiaoyi 孝义 and Linfen 临汾, where General Nice operated, among the world’s most polluted. But General Nice too, eventually fell victim to the cleanup: the Hong Kong-listed company’s troubles largely stemmed from a failure to get environmental permits for a new plant, and state media shamed the company as a polluter as late as 2014. A move away from coal seems to be in order.

The Isua mine, a visible asset that fits a sought-after image as an integrated miner, can help General Nice pivot away from its crumbling core business without letting its diversification (from real estate to vineyards) blur its profile excessively. Indeed, the Hong Kong-listed arm’s recent acquisition of oil rights in the US, also for a bargain price mostly paid in company shares, suggests a similar motivation. At any rate, cheaply-gotten Isua could be worth cashing in at some point in the future.

Jiangxi Copper’s studied low profile

Although Chinese interest in Greenland mining goes back over a decade, the first actual deal was signed in 2009. Nordic Mining, the license holder for the Wegener Halvø copper site near Ittoqqortoormiit in east Greenland, turned to China after touting the project to Australian miners. Anthony Duckworth, a director with the company, travelled to Nanchang in 2009 and starred an event attended by high provincial officials, potential financial backers, and, crucially, Jiangxi Copper (江西铜业), the country’s top copper producer. The deal, however, was signed with a go-between, Jiangxi Zhongrun 中润 Mining.

Plans for Jiangxi Copper to get involved, though hard not to suspect and indeed talked about from early on, were not aired back then. Local journalists trying to ascertain who was behind Zhongrun were told the matter was “extremely sensitive“. Jiangxi Copper formally entered the project through a joint venture in 2011, but as late as 2012 Greenland’s Sermitsiaq newspaper was refused an interview by company representatives. Scattered Chinese sources, and seemingly none in the West, mentioned Jiangxi Copper’s involvement before my article on the topic in May 2013. The Greenlandic public had to wait until November that year to learn about the major actor behind the first Chinese project on the island.

Will the last be the first?

The Greenland project with Chinese participation most likely to start producing actual ores in the short term is not Wegener Halvø, the oldest, or Isua, the most talked about, but Greenland Minerals and Energy’s Kvanefjeld uranium-rare earth project in the island’s south. A partnership with national state-owned China Nonferrous (CNMC, 中色) began with a non-binding agreement signed in early 2014, and has been moving towards a more concrete form through multiple meetings between the companies since then. China Nonferrous had earlier signed a similar agreement with Ironbark, an Australian miner, for the Citronenfjord zinc project at the opposite end of Greenland.

Since the repeal of a ban on uranium mining in 2013, the project has been moving quickly and GME has recently announced that trial production could start before the end of this year. The company has also secured funding from a Hong Kong-based investor with Mainland connections. The partnership with China Nonferrous seems made in heaven: output from Kvanefjeld would be a perfect input for a colossal REE separation plant China Nonferrous is building in Xinfeng 新丰, Guangdong. China has a near-monopoly in global rare earth production, but a moderate amount of Chinese interest in REE deposits abroad (as recently seen in Greece) exists and fluctuates along with state policies affecting the industry. The close match between Kvanefjeld and China Nonferrous’ needs suggests a partnership with firmer foundations and somewhat less sensitive to such fluctuations.

Jichang Lulu is an independent researcher and blogger. Tweets @jichanglulu. Image Credit: CC by mariusz kluzniak/Flickr.

Russian perceptions of China in the Arctic

Written by Alex Calvo.

The debate on Russo-Chinese relations in the Arctic has become more intense in the last few months as western sanctions have prompted Moscow to rely more on China in the energy arena. News of greater scope for Chinese corporations to invest in the Arctic have been accompanied by reports of other agreements on the energy issues, while at the same time, although perhaps not so loudly, we kept hearing about Russia’s desire for diversification not only away from the West but also from China, in a bid to avoid becoming too dependent on Beijing. Since the Arctic is of the greatest importance for both powers, and it is one of the areas where they seem to be engaging in a complex mixture of cooperation and competition, no look at the region is complete without examining the relationship between Moscow and Beijing.

For Russia, the Arctic is many things. A source of energy for sure and also the chance for better communications, contributing to the development of some of the country’s coldest regions, yet entailing the danger of an additional invasion route. The Arctic offers the promise of closer relations with countries like Japan and South Korea. Arctic seas are also connected to Russia’s self-image and soft power as a nation of scientists and explorers. The Arctic could also become an area where to rebuild a military presence without directly clashing with neighbouring countries. For China, the Arctic is a potential source of energy and commodities, and together with overland routes like the “New Silk Road” it could contribute to diversifying away from SLOCs (Sea Lanes of Communication) dominated by countries like India, the US, and Japan. It also features in the country’s image as a scientific power, and as a region still not fully explored and integrated into the global economic system, thus offering opportunities for a major power that painfully feels to have been subjugated for more than a century following the Opium Wars. It is no coincidence that China brands itself a “near-Arctic nation”, while multiplying its commercial and scientific presence in the region.

With Western sanctions targeting Russia’s energy industry, European moves to diversity away from Moscow in this area, and the US re-emerging as a net energy exporter, Beijing seems to be gaining additional room for manoeuvre in the Russian Arctic. Hence, Deputy Prime Minister Arkady Dvorkovich recently told the media that Russia would welcome a Chinese presence in both new and existing exploration projects, where Beijing may hold a majority share except in the case of continental shelf exploration projects. He added that China has not yet requested any such controlling stake but that there were “no political obstacles”. The withdrawal from Russia of companies like Exxon Mobil, which had been working with Russia’s biggest oil producer, Rosneft, has taken place in parallel with some agreements and ongoing negotiations with Chinese companies. Rosneft has announced that China National Petroleum Corporation (CNPC), China National Offshore Oil Corporation (CNOOC), and Sinopec, were interested in exploring its Arctic reserves, with experts believing they may replace Statoil, Eni, and ExxonMobil. In the case of CNPC, it already signed in November 2014 a framework agreement on a 10 percent share in the development of Vankorskoye field, Russia’s largest, providing 4 percent of the country’s oil production and holding up to 500 million tons of crude oil according to some estimates.

The question is how Moscow views Beijing’s Arctic presence. Is this narrative of partnership and replacement of Western companies all that there is to tell? Or are we facing a more complex story, albeit one not usually reflected in official Russian and Chinese sources? There are some reasons to lean toward the latter. These include both the logic of national security and international relations, and Russian practice concerning Chinese moves in the region. Concerning this logic, a key perennial word is “diversification”, colloquially known as not putting all of one’s eggs in a single basket, with Indian and Kazakh sources using more elaborate expressions such as “multialignment” and “multi-vector”. All protestations of eternal friendship to the contrary, it is difficult to imagine Russians feeling comfortable with overreliance on China for energy technology and markets. Leaving the realm of theory and speculation to enter that of Russian state practice, we can see how Moscow has indeed not only sought to diversify Arctic partners, with Vietnam and India recently entering the picture, but has also sent a clear signal to Beijing whenever the Xuelong (“Snow Dragon”) has entered Arctic waters. As noted by Shinji Hyodo (National Institute for Defense Studies), “When China’s icebreaker “Xue Long” headed for the 5th Arctic exploration in 2012, Russia practiced a large-scale military drill off Sakhalin as well as in the Sea of Okhotsk and this is partially viewed as a check put on China”.

Given the uncertainty over the nature of China’s maritime claims in the East and South China Seas, and the possibility that Beijing may be pushing for a departure from the legal categories (territorial waters, EEZ, continental shelf) provided for in UNCLOS, Moscow may wish to avoid any similar developments in the Arctic, emphasizing her rights as a coastal state. Russians are keenly aware that there is no reason why China’s desire to recover lost status should be limited to warm waters, and if we add to that the danger of escaping from over reliance on European energy markets just to fall into a similar trap to the East, there are reasons to expect Moscow to try to strike a balance. This is what Russian experts like Nadezhda Filimonova and Svetlana Krivokhizh expect Moscow to do, suggesting that “the most efficient policy for Russia will be to balance its energy exports between West and East” in order to diversify and “avoid the inherent security risks”. They caution, however, that in the short term China is “most likely” to keep in place her “cautious Arctic policy”, Beijing is “likely” to become “more assertive” in the region in the longer run as she increases her “involvement in Arctic projects”.

We should also note that Russian views on China’s presence cannot be seen in isolation from other areas of interaction between the two powers. The fact that Beijing may re-deploy some of the oil rigs it has been using in the South China Sea toward the Arctic serves as a reminder of the connections between the two bodies of water, already mentioned when discussing China’s bid to reformulate the law of the sea. If Beijing loses this weapon, it may demand in exchange support from Moscow in the South China Sea. However, Moscow’s cautious attitude there and support for Hanoi is proof that the much touted Sino-Russian Alliance is not an exclusive alignment, despite the stream of adjectives constantly flowing from both Moscow and Beijing. Realities on the ground are much more complex, while not easy for any participant, as the Vietnamese, seeking continued support from Russia and a rapprochement with the United States, can attest.

At the end of the day, Russia is bound to feel uncomfortable with an excessive Chinese presence in the Arctic, in particular if in addition to economic hegemony it leads to a strong role by Beijing to the detriment of coastal states, and even new rules and institutions moving the Ocean away from a de facto condominium of coastal states under the umbrella of UNCLOS into something closer to Antarctica from a legal perspective, with fora featuring Beijing as a major power, and Chinese corporations ruling the ice and waves. Right now Moscow’s options seem limited, given the winds of war blowing in Eastern Europe, and the inability both from a historical and national security perspective to see the Ukraine move away from her sphere of influence. The need to deal with Beijing from a stronger perspective, however, not just in the Arctic but first and above all there, may push Russia to try to achieve a quick settlement in Europe, although this could turn out to be rather a tall order. In the meantime, or should that goal not be achieved, other options for Moscow are Asian countries like Vietnam, India, and Japan, with sizeable energy needs and a shared mistrust of China. We should note that all of them rely on some lesser or greater extent on the United States, while at the same time not being eager to provoke China. We can thus see how complex the situation is, for all parties involved. Beijing cannot simply expect Moscow to open the gates to the Arctic as a reaction to Western sanctions, given Russian suspicions and the existence of other actors, but the extent to which the latter can play a meaningful role is unclear. In addition to technological and financial issues, how far can Tokyo go to accommodate Moscow, when she is first and foremost dependent on US military protection? Hanoi’s position is not that favourable either. Unless Washington decides to play the Nixon card, this time against Beijing, prompting a massive realignment of the likes not seen since the 1970s, the most likely scenario is one where China tries to elbow her way into the Arctic, overcoming Russian suspicions, and Moscow seeks some accomodation with the West and greater diversification with other Asian partners.

Alex Calvo is a guest professor at Nagoya University. He tweets @Alex__Calvo and his work can be found at his page. Image Credit: CC by U.S. Geological Survey/Flickr.

How China’s interests fit with the Arctic States’

Written by Kai Sun.

With the melting of the sea ice at the top of the world, and the driving forces of globalization, the Arctic has moved from periphery towards the center of world politics. The eight Arctic states have issued or updated their strategies/policies in the region over the past few years, elucidating their interests in the Arctic and clarifying what their plans in the Arctic are. Because of the transboundary nature of some problems, not all Arctic issues are confined to the Arctic region, either because the causes originate from outside the Arctic or changes happening in the Arctic have an impact outside the region. Thus, it is natural for some non-Arctic states to start paying more attention to the region. China, as the biggest developing country, is no exception. In the past decade or so, China has started engaging more in the Arctic through scientific research, business engagement, and diplomatic efforts. Because of China’s size and appetite for energy and resources, the world is also keeping a closer eye on China’s engagement.

The Changing Arctic and China: Why China Looks North

China is not an Arctic nation by any sense geographically, but in this interdependent world, what is happening in the Arctic increasingly has greater impact on the rest of the world, including China, and vice versa. China is looking towards the north mainly because of the following four reasons:

  1. Environmental Impacts. Climate changes in the Arctic can have great impacts on China’s precipitation pattern and China’s weather, which in turn may have great influence on China’s agriculture, and consequently living conditions.
  2. Sea Passages. The opening and commercial use of the Arctic passages have great potential for China’s economic development, overall economic arrangement, and China’s import/export business interests.
  3. Resource Opportunities. The melting of the Arctic sea ice offers the possibilities of the development of resources, once covered under the ice and unavailable for human use. Beijing is also looking to join the development of Arctic resources to fuel China’s economic engine.
  4. Strategic Interests. With the growing salience and importance of the Arctic in world affairs, and the development of China in the world, engaging in the Arctic also has some important strategic interests for China’s economic development, and even national security.

China’s Engagement in the Arctic

Arctic issues are becoming more and more salient for China, this is evident from flourishing research done in this field, newly established business connections, and better diplomatic relations with most Arctic states. A substantive presence and enhanced influence over the discourse on the Arctic are among the goals that China pursues in the Arctic. China, along with 5 other countries, was accepted as observer to the Arctic Council in 2013. This was interpreted as a sign that China was accepted as a legitimate stakeholder in the Arctic by the Arctic states. China is engaging in the Arctic mainly in the following three areas:

  1.  Scientific Research. China has conducted six scientific expeditions in the Arctic since its first one in 1999, and has routinized the once in two years scientific expeditions since the fifth one in 2012. The goals of China’s scientific expeditions to the Arctic has shifted from single environmental concerns to more comprehensive goal, which includes economic impacts of the changing Arctic on China and the world. In 2004, China’s research station “Huang He” was built in Spitsbergen, Norway, which is an icon of China’s “substantial presence” in the Arctic. China is also building a second icebreaker, which is expected to be in service in 2016.
  2. Business Cooperation. Business opportunities are one of the most important aspects for China’s looking to the north, and Chinese companies are spearheading the movement. Chinese businessman Huang Nubo’s (eventually aborted) deal with Iceland to buy (later was reported to rent) a piece of land for development of tourism is a media-catching example of Chinese businessman’s interest in the region. In the energy field, Chinese national companies are also tapping opportunities with counterparts in the Arctic countries for oil and gas development. Mining is also happening with joint development projects in Canada, and Greenland. The shipping industries are not lagging behind with the trial trip of a tanker from COSCO in 2013, though the commercial use of the Arctic passages might not be operationalized in the near future.
  3. Diplomatic Relations. China has realized from day one that cooperation with the Arctic countries is the only way for China’s engagement in the Arctic. Therefore, friendly high-level political relations with Arctic countries is a precondition for the further engagement of Chinese businesses. In 2012, then Premier Wen Jiabao visited Iceland, and signed deals with Iceland for a joint project in China Nordic Arctic Cooperation, a Memorandum on Marine and Polar Scientific Cooperation, and other agreements on a Free Trade Zone, joint ventures, etc. The same year, President Hu Jintao visited Denmark as the first Chinese presidential visit to Denmark in 62 years. These all paved the way for China’s smooth acceptance into the Arctic Council as an observer.

Prospects for China’s Further Engagement in the Arctic

A closer look at China’s interests and activities in the Arctic suggests it is reasonable to conclude that China’s engagement does not present any threat to Arctic states nor the rest of the world. China’s interests in the Arctic are, if not fully congruent, then quite complementary to those of Arctic states. Canada as the current Arctic Council Chair and its motto is “Development for the people of the North.” Its stress on business development as the main task is well in line with China’s agenda in the Arctic. Looking towards the incoming US chairmanship in the Arctic Council (2016-18) under the theme “One Arctic, shared opportunities, challenges, and responsibilities”, with responses to climate change as the top priority, there is an opportunity for cooperation between China and the Arctic states’ joint effort to tackle the challenges facing the Arctic and the world.

Kai Sun is an associate professor at the Ocean University of China. Image Credit: CC by arctic_council/Flickr.

The inevitable dilemma of China’s Arctic adventure

Written by Jingchao Peng.

The number of seats in the Arctic Council expanded in 2013, when China and five other states (Japan, India, Singapore, South Korea and Italy) were granted permanent observer status to the institution. Yet, it was China’s participation that generated the majority of media and scholarly attention cast on Arctic Council’s latest enlargement. Back at home, Beijing seems to savour the Council’s decision as a diplomatic success, coming after a strenuous application. In an attempt to further strike a tone of relevance and highlight China’s interests in the Arctic affairs, people with backgrounds in both academia and policy-making openly referred to China as a ‘near-Arctic’ state.

Outside China, a deep degree of suspicion still hovers over Beijing’s Arctic agenda. The government is obviously fully aware of some local hostility whenever a Chinese firm demonstrates an interest in investing in Arctic resources. This might explain why Chinese officials and some scholars have been insistent in the past few years on defending China’s Arctic move as a spontaneous and legitimate reaction to combat a global commons threat–climate change. How persuasive this argument has been in dispersing fear of China is hard to grasp, and the degree of trust surely differs among different Arctic actors.

Regardless, Beijing already expressed a quasi-official view that China’s Arctic policy is geared towards promoting inter-state cooperative measures to address climate change. Meanwhile, Chinese businesses continues to arrive in the Arctic region, slowly but steadily. The latest news is that a private Chinese mineral importer, General Nice, will now run Greenland’s Isua project, one of the island’s largest iron mines. Prior to this, a Chinese cargo ship sailed through the Northern Sea Route in the summer of 2013. CNOOC, a Chinese state-owned oil company, inked a partnership with a Russian firm, Novatek, to explore Arctic gas. Besides commercial endeavours, China conducts regular Arctic expeditions every few years. In terms of bilateral relationships, Beijing has the closest ties with Iceland, which has led to a number of joint projects, including one port facility and several scientific research projects. China’s Arctic posture right now is for the government to step back from the frontline while letting private and state-owned enterprises search for business opportunities.

Should we still fear such a seemingly pragmatic and progressive policy stance? Naturally it depends on how one interprets Chinese intentions. One can downplay the China threat by arguing that Chinese presence in the Arctic still amounts to no more than a few scattered projects and that Chinese officials and analytical community rarely speaks assertively about its Arctic interests. The low price of oil and other critical minerals are also nipping out the near prospect of profiting from exploring Arctic resources, let alone inviting a flux of Chinese investment.

However, many of the concerns over China’s true intentions in the Arctic, in spite of some being pure unfounded media bias, reflect increasing distrust of Chinese ventures overseas, especially in regions where China has no obvious strategic stake but appears eager to make inroads. The distrust derives from a mixture of sources. Among them the most outstanding are understandably China’s image as a one-party state, it’s poor record of rule of law, and the longstanding suspicion of dodgy ties between overseas business and the central government. When it comes to the Arctic, the image problem comes down to two policy inconsistencies and they have not yet been properly answered.

First, China falls short of acting in accordance with its own policy rhetoric. Beijing’s official line on the Arctic depicts itself as a humble student and a partner on climate issues. But if we take a closer look at Chinese adventures on Arctic soil, it is evident that economic prospects attract China as much as the environment. China’s increasing energy appetite and a number of oil pipeline projects it has built around it’s neighbours to divert oil imports from the Malacca Strait, suggest that it is rational to assume Beijing’s intentions in the Arctic encompass an energy agenda that the official rhetoric has neglected.

China’s opaque policy-decision mechanism makes it difficult for Arctic stakeholders to predict the trajectory of Beijing’s policy in the long term. Especially on issues concerning maritime governance. Here I mean the worrying signals sent by Chinese behavior in South China Sea and East China Sea in recent years. How China handles maritime disputes and the principles and rules China upholds in these waters have implications for the future of Arctic governance. The Arctic Ocean, as with China’s bordering seas, is subject to UNCLOS, an international convention that governs activities on the world’s ocean spaces. China adopts an arguably unconventional interpretation of UNCLOS. Its interpretation on certain UNCLOS provisions runs at odds with those of Arctic states. For example, China and the US dispute the extent to which freedom of navigation can be applied in the Exclusive Economic Zone. Another example is the Air Defense Identification Zone (ADIZ). While ADIZ is an international norm that many other air powers adopted prior to China, the Chinese interpretation treats ADIZ airspace essentially as its territory, in contrast to other states. China, as evidenced in many reports, is believed to be unilaterally seeking dominance over small powers, thus altering the status quo in South China Sea. Many commentaries have described Chinese behavior on it’s home ocean fronts as “assertive”.

For the time being, the Arctic seems to be immune from Chinese assertiveness since China does not have territory in the Arctic Ocean. But urging cooperation in the Arctic region while championing exclusion in its home seas sends to the world the worrying signal that it does not value consistency in rules and that Beijing’s policy paradigms are calculated purely on the basis of its own interests and the extent of its power in different environments. Caution must be exerted when asking the question why China adopts two opposite sets of rules for ocean governance. From the Arctic, it is evident that China can abide by international norms, participate in multilateral efforts and promote cooperation in ocean affairs on a wide spectrum. But if the Arctic experience does not stimulate China to restrain it’s behavior in its border seas, the suspicion that China faces in the Arctic is unlikely to go away. For China this is a dilemma to solve and for Arctic states an issue that cannot be overlooked.

Jingchao Peng is an independent researcher based in Tokyo. Jingchao tweets @jingchao_peng. Image Credit: CC by Coast Guard News/Flickr.

Sino-Russian collaboration on the Northern Sea Route development

Written by Svetlana Krivokhizh & Nadezhda Filimonova.

In recent years interest in commercial navigation through the Northern Sea Route (NSR) has grown significantly among Arctic and non-Arctic states alike. The main reason relates to the retreat of ice in the Arctic Sea, which creates opportunities for the use of a viable sea route for shipping and trade. In economic terms, navigation through the NSR reduces the length of customary sea route navigation through the Panama or Suez Canals and, therefore reduces costs and time. In terms of security interests, the NSR is free from high sea piracy and terrorism compared to the existing major shipping lanes; at least for now.

Over the last few decades China has demonstrated increasing interest in development of the passage. The first cargo vessel to sail from the port of Dalian to Rotterdam via this Arctic route was the Chinese Yongsheng in 2013. This event not only proved the viability of the route for commercial shipping but also marked China’s commitment to active participation in the Arctic projects. According to the forecast of China’s Polar Research Institute, by 2020 up to 15% of China’s international trade could be transferred via NSR.

China’s broader interests in the Arctic have provoked much discussion. Even though Beijing’s official stance remains quite cautious, China has already become an active participant in all kinds of Arctic forums, and has developed close ties with numerous Northern countries. It has even managed to secure permanent observer status in the Arctic Council. Cooperation with Russia on the NSR development can bring China almost all the benefits it seeks from involvement in Arctic affairs, namely access to raw materials, development of national ports (since a great volume of goods and resources would be transported through Chinese ports), diversification of it’s shipping routes (that could help to resolve so called “Malacca Strait dilemma”) and finally it will ensure China’s position as an active stakeholder in the region.

As for Russia, the Northern Sea Route has always been of a great strategic importance. First, due to its significance as a transport artery for supplying the Russian Arctic regions with provisions and equipment and second, for carrying mineral resources produced in the region to the other parts of the world. However, for a long period of time, because of the economic and political problems that followed the collapse of the Soviet Union, Russia paid little attention to development of the passage. In recent years the situation has started to change due to the overall increase of economic activity and launch of oil and gas exploration and production projects, in particular. For instance, development of Russia’s mega-project Yamal LNG is aimed at shipping gas to European and Asian markets, which in return will inevitably give impetus to the development of a national shipping fleet and infrastructure along the NSR. Russia’s Ministry of Transport forecasts that up to 25% of cargo between Europe and Asia could be shipped through the passage by 2030. At the same time Russia’s rebuilding military capacity in the High North has encouraged arguments for restoring of military bases and airfields and opening search and rescue centres along the route.

However, while developing the NSR, Russia faces a number of serious physical, legal and economic challenges. In particular, to guarantee safe navigation through the NSR, the Russian state needs to build search and rescue services, port infrastructure and a greater number of icebreakers. These arrangements naturally require huge investment. However, the falling oil prices (caused by the western sanctions relating to the Ukrainian crisis) and economic crisis have hindered implementation of the Arctic project, forcing the country to find new partners to replace its dependency on western technology and investment. In political and economic terms China could become an important partner for Russia, and current state of affairs pushes two countries to closer cooperation. Collaboration with China provides Russia with an opportunity to receive financial support for its Arctic projects and also to strengthen bilateral cooperation with China in general. Possible areas for cooperation could be, for instance, joint research related to ice conditions and meteorological forecast that goes in line with China’s Arctic scientific ambitions and joint exploration and shipping of natural resources ( in 2010 the  Russian shipping company Sovcomflot and CNCP signed an agreement to establish cooperation in shipping natural resources from Russia to China, and in 2013 CNCP bought 20% shares of Yamal LNG project and annual supply of 3,5 tons of LNG to the country).

However, there are a number of challenges for a full-scale cooperation on the NSR development between the two countries. One of the main obstacles for China to invest in the Russian projects is the uncertainty about the economic profitability of navigation through the NSR and lack of important port infrastructure. Another issue is the legal status of the Northern Sea Route which is not recognized as Russian internal waters by several countries. China has not yet made any official statements concerning this issue, but with the possible increase of navigation through the route it is likely to take a more assertive position on the route’s legal status. Finally, Russia is quite cautious about China’s increasing involvement in Arctic affairs due to the traditional security concerns in the region.

Therefore, in the short-term, due to the existing uncertainties it is unlikely to expect large-scale cooperation between Russia and China on NSR development. However, in the long-term, one of the possible scenarios could be financial cooperation based on mutual benefits, which implies China’s investment in exchange for economic benefits, such as low tariffs for shipping.

Svetlana Krivokhizh is a researcher at the Saint-Petersburg State University. Nadezhda Filimonova is a head of World Meteorological Organization Relations Department, Russian State Hydrometeorological University. Image Credit: CC by NOAA Photo Library/Flickr.

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