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non-Arctic state

Greenland’s mines could finally attract Chinese investment

Written by Jichang Lulu.

Conditions might be ripe for Chinese investment to finally reach Greenland. Once a hot media topic, Chinese interest in Greenland mining was rather tepid when I surveyed it last March for this blog. Media attention has however remained largely orthogonal to the actual evolution of serious Chinese interest in Greenland: as two projects progress towards production, China Nonferrous, an integrated miner owned by the central government, might be about to become the major player in Greenlandic mining. One of these projects will mine a rare-earth deposit of global importance. The other, a zinc mine, would become the world’s northernmost settlement on dry land. If developed, they could open the door for more investment. As a major SOE, China Nonferrous is explicit about such pioneering role, one that goes beyond its primarily economic motivations.

The Far North

The mining project that looks closest to coming to fruition is the Citronen Fjord zinc and lead deposit. The owner of the license, Australia’s Ironbark, has already applied for an exploitation permit, and a public consultation process that involves meetings in several towns is underway. Vittus Qujaukitsoq, the Greenlandic minister (naalakkersuisoq) whose portfolio includes natural resources, has expressed optimism on the mine’s prospects and hopes it will bring much-needed jobs and tax income.

The mine is planned to employ a few hundred people. Although around 80% will be foreigners initially, documents submitted by Ironbark as part of the permit application claim that they will be “progressively replaced” with local workers. A planned influx of foreign, specifically Chinese, was precisely what made another mining project controversial enough to create a political crisis in 2013, but the smaller foreign workforce demanded at Citronen Fjord, likely to be flown in directly from abroad and hardly spotted in Greenlandic towns, should not generate that level of opposition.

China Nonferrous (中色), through its listed arm NFC (中色股份) entered a partnership with Ironbark through a non-binding agreement that envisages the Chinese company building the mine, facilitating Chinese financing for around two thirds of the cost, and possibly buying a stake in the project. Ambitious though that sounds, China Nonferrous’ commitment to the project will likely depend on zinc and lead prices. These have recently reached multiyear lows, and decreasing Chinese demand for basic metals doesn’t suggest a miraculous recovery is on the way.

If the project goes ahead, China Nonferrous and its partner Ironbark will share the title of world’s northernmost miner. The Citronen site is on Peary Land, at around 83°N and just 800 km from the North Pole. Staff at the mine thus would be staying the world’s northernmost settlement.

The Not-so-far North

Down at the opposite end of Greenland, at a tropical latitude by comparison, near the town of Narsaq, the Kvanefjeld uranium and rare-earth project is also moving towards the exploitation stage and has already started trial production. Kvanefjeld is owned by another Australian company, Greenland Minerals and Energy, also under a similar non-binding agreement with China Nonferrous’ listed arm NFC. The foundations of the partnership seem solid, given that the mine’s output should be a good match for the massive REE separation plant a China Nonferrous subsidiary is building in Xinfeng 新丰, Guangdong, expected to be ready by the end of next year.

China Nonferrous’ little-reported interest in the Arctic also extends to Iceland. Last July, NFC signed a MOU with local company Klappir Development on an aluminium smelter in Hafursstaðir, some 100 km west of Akureyri. The plans have enjoyed the support from the Chinese embassy for a few years now: already in 2013, then-ambassador Ma Jisheng 马继生 (eventually removed from his post, allegedly suspected of spying for Japan) had voiced support for the project; Ma’s successor, Zhang Weidong 张卫东, has discussed the project with local officials, and recently visited China Nonferrous headquarters in Beijing, extolling abundantly the plant and its significance as China’s first major investment of its kind in Iceland.

Pioneers

China Nonferrous’ northerly foray accounts for about all serious Chinese interest in Greenland’s ores for the time being. The other two Chinese-owned mining licenses on the island are all but dormant: Jiangxi Copper’s Wegener Halvø copper site, though historically  significant, is unlikely to see much action in the short term given current copper prices; General Nice (俊安集团) can be expected to keep sitting on its exploitation permit for the Isua iron mine. China Nonferrous is still the largest company with a serious interest in Greenland’s mines. The fact that the Citronen and Kvanefjeld projects are approaching production is a significant for the island, a place where, despite the importance attached to mining as key to economic development, exactly one mine is currently active, and has only been for a few days.

With the important proviso that all its agreements in the region are so far non-binding, and its degree of commitment will surely depend on fluctuating metal prices, China Nonferrous could help open the way for more Chinese investment to flow into Greenland (and Iceland). Such a a pioneering role would suit China Nonferrous, whose endeavours abroad, as chairman Zhang Keli 张克利 recently put it when discussing the Hafursstaðir project, “are not only economic activities, but also represent the country’s image” and shoulder a degree of “social, economic, political and foreign-relations responsibility.”

Jichang Lulu is an independent researcher with interests in China’s engagement with the North. Image credit: CC by Greenland Travel/Flickr.

China’s Emerging Interests in the Arctic

Written by Nong Hong.

During the Cold War, the Arctic was a security flashpoint with nuclear submarines from the United States and the Soviet Union patrolling deep below the polar ice of the Arctic Ocean and bombers airborne over the region. Today, the Arctic may be disassociated from great power politics, but new geopolitical realities are taking shape, arising from the melting Arctic. Countries with military/security interests and naval capacity in the Arctic include Russia, Canada, the U.S., Norway, and Denmark. But the exclusivity of the region has been challenged by the activities of major powers from outside the region, such as the United Kingdom, France, Germany, China, Japan, South Korea and India, as they are taking special interest in many aspects of the Arctic that focus on scientific research, shipping and resource development. It is important to explore the growing interests of China, among a select group of non-Arctic states, in the Arctic and examine the nature of its interests and motivations in wanting to maintain both its involvement and presence in the region. The interests of China range from participating in Arctic governance affairs and accessing potential resources to exploiting shipping opportunities and undertaking polar research.

Seeking participation in the Arctic Council

Since 2007, China has participated as an ad hoc observer at Arctic Council meetings, allowing it to gain a better understanding of the Council’s work. In 2008, it also began officially expressing its intentions to become a permanent observer to the Arctic Council. Although China has yet to articulate an official policy for the Arctic, different voices in China’s academic circles have expressed views on how China should approach Arctic governance. Some hold that China has great strategic interest in the Arctic, but rather than adopting a “neutral” position as an outsider, it should push for the internationalization of the region instead. Some other scholars believe that the idea of internationalizing the Arctic might risk damaging China’s image in the international community, as taking such a stance would not conform to its consistent position of a principle of “non-interference”. In May 2013, the Arctic Council granted China, Japan, South Korea, India and Singapore an observer status.

Besides participating in multilateral mechanisms, China is also active in promoting bilateral relations with Arctic states for strategic purposes. In this way, China will have much more leeway for strategic operations. This one-by-one model is similar to China’s stance in the South China Sea issue, where China insists on bilateral rather than multilateral negotiation. In order to advance bilateral diplomacy in the Arctic region, China is making two separate but simultaneous efforts. First, China is focusing on resource acquisition in the Arctic region through resources-oriented diplomacy. Second, China is trying to expand its influence by bolstering relations with five countries in North Europe. Besides Iceland and Russia, Canada is also featured in China’s cooperation agenda in terms of resources-oriented diplomacy. Another focus of China’s bilateral diplomacy is five specific North European nations: Iceland, Denmark, Norway, Sweden and Finland. Cooperation with these countries is not only intended to acquire resources, but also to expand China’s influence in the Arctic region.

Interests in shipping

China, Japan and South Korea, in particular, see the melting Arctic Ocean as a unique opportunity for international trade and potential access to resources. Any events that affect international shipping will have a measureable effect on the Chinese economy, along with its dependence on shipping. The changing physical landscape of the Arctic region will certainly have a major impact on China’s economic future. China is 4000 nautical miles closer to the European Union and the east coast of North America, when sailing across the Arctic Ocean, and currently there are no vessel size restrictions and other regulations, unlike in the Suez or Panama Canal. Despite the great economic benefit from shipping through the Artic, there still exist many challenges. For China, and other non-Arctic states, one fundamental question is what their position is on the legal status of the Northwest Passage and the Northern Sea Route. Sooner or later, they have to adopt a clear position on whether these two passages enjoy the status of international waters for navigation, as the United States and the EU hold, or whether they are internal waters, as Canada and Russia insist.Other challenges include the risks of economy, environment and safety.

Interests in resource development

The non-Arctic states have interests in the exploration and exploitation of the natural resources in the seabed beyond the jurisdiction of any Arctic states in this region. However, the general conduct of states in relation to the Area shall be in accordance with the provisions of the United Nations Convention on the Law of the Sea (UNCLOS), the principles embodied in the Charter of the United Nations and other rules of international law in the interests of maintaining peace and security and promoting international cooperation. Outside the EEZ (200 nautical miles), the waters in the Arctic Ocean are considered to be the High Seas under Part XI of the Law of the Sea Convention. To this purpose, these non-Arctic states, with no sovereignty claims and coasts, can only have interest in resource access in the Area. But until the Commission on the Limits of the Continental Shelf (CLCS) comes out with recommendations to the Arctic states who have submitted applications, it is too early to define what the boundary between national jurisdiction and the Area will be.

Interests in polar research

China is taking a much more active role in intensifying research in both the Arctic and Antarctic and maintains an active polar research program. Viewing itself as a “near Arctic state”, China perceives the environmental changes and economic development happening in the Arctic as having “a significant impact on [its] climate, ecological environment, agricultural production as well as social and economic development” China has taken steps to augment Arctic scientific cooperation and governmental dialogue with Norway and relevant cooperation with Canada and United States. While it has enjoyed Arctic scientific cooperation with Russia, there has not yet been any formal governmental dialogue between the two countries. Norway has welcomed China’s increased involvement in polar research.

The challenges facing China

China’s March towards the Arctic region is a low profile one. China has gained some success since it has become a permanent observer with the Arctic Council, bolstered its bilateral relations with Arctic states and participated in the development of resources in the region. However, China’s Arctic strategy is just beginning and still faces many challenges, including dispute over territorial sovereignty, vigilance among certain countries, constraints from the UNCLOS, challenges from the natural environment in the Arctic region and the limits of China’s current technology.

Cooperation between Arctic and Non-Arctic states

The gradual disappearance of Arctic sea ice cap raises serious sovereignty and security issues, some of which are increasingly evident in the evolving relationships between the eight Arctic states and non-Arctic states such as China, Japan, South Korea and India. In the same vein, there is a strong and practical need to strengthen international cooperation on Arctic matters. The interrelations among the Arctic states involve sovereignty issues, jurisdiction claims, resource competition and military capacity expansion, while emerging non-Arctic interests in the region draw into the picture new elements such as access through international shipping, seabed resources exploitation, environmental concern and scientific research. The involvement of non-Arctic states will have a significant effect on the nature of Arctic governance. Given that not all of the eight Arctic states hold the same position regarding the level of participation and future involvement that non-Arctic states should and can have in the region, the effectiveness of the Arctic Council will no doubt be tested in the near future.

Some of the most critical Arctic issues are national, but many of them are regional or trans-regional, concerning environmental impacts of climate change, shipping and resource development, which require a more comprehensive understanding of the causes and impacts of natural variability and human-induced environmental changes in the Arctic. The areas of international Arctic cooperation are continuously expanding, creating enormous potential as well as significant challenges. Arctic cooperation began in the early 1990s with a focus on environmental protection and scientific research, but quickly expanded to encompass sustainable development. Cooperation between Arctic and non-Arctic states has continued to develop on a number of levels, either bilaterally or within the existing frameworks of regional forums and international organizations, on scientific research, environmental protection and sustainable development.

Nong Hong is an Executive Director at the US-based think-tank Institute for China-America Studies and a Director of the Center for Oceans Law and Policy, National Institute for South China Sea Studies, China. Image Credit: CC by Florian Seiffert/Flickr.

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