China started 2018 with a growing appetite for power in all senses. Unveiled in 2013, China’s Silk Road Economic Belt and the 21st-century Maritime Silk Road is a modern and bigger version of the iconic silk road, and includes 68 countries representing 65 percent of the world’s population, three quarters of world’s energy resources and 40 percent of its GDP. This project of unprecedented scale puts the Asian dragon at the very centre of a commercial, economic and indeed political network. Chinese capital will be used to build, railways, pipelines, ports or expand and modernize existing infrastructure in regions that cover half the world: from East Asia to Africa and Western Europe up to the North Pole. Given Beijing’s already demonstrated determination to advance its interests, namely in the South and East China Seas, some see this gargantuan project as a Chinese Trojan Horse. Indeed, China stops at nothing to provide for its growing market and to assert its power; nothing seems too hard, remote or extreme to be reached by this economic giant. The race for first to the moon has already been won but the contest for the Arctic is still ongoing.
As always, China slowly but surely builds its nest and eventually imposes itself as a major player in the game. The Arctic is no exception to the rule. China’s participation in Arctic affairs dates back to 1925 when it signed the Spitsbergen Treaty, recognising Norway’s sovereignty over the Spitsbergen Arctic archipelago and the rights and freedom of its signatories to exploit resources on an equal foot. In 1996 China reinforced its presence in Arctic affairs by joining the International Arctic Science Committee. The 2000s marked further Chinese involvement in the region. By 2004, pursuant to the Spitsbergen Treaty, China had built its first research station on Svalbard. Later on in 2008, China gained a new friend in the Arctic: Iceland was hit hard by the credit crunch of the same year and welcomed Chinese capital. This is a small but highly strategic partner for China. Indeed, Iceland not only enables China to grow its presence in the region by letting the Asian giant conduct research in Icelandic waters, it also possesses a stably growing fishing industry whilst Chinese fishing farms cannot cope with the growing domestic demand. 2010 saw China entering into annual meetings on Arctic affairs with the USA and 2012 was the year Chinese holding Shenghe Resources bought 12.5 percent of Greenland Minerals and Energy Ltd. The next year it opened a joint venture with Russia on the Yamal peninsula and received the status of accredited observer on the Arctic Council.
Chinese interests in the Arctic grew stronger in the past decade as 21st century China is facing new challenges such as economic slowdown, growing domestic demand for energy and the government’s commitment to reduce coal consumption. Other challenges include pressure to fulfil international obligations to tackle climate change. China signed the Paris Agreement, wanting to show it is a responsible emerging power and as such should be treated with respect; meanwhile the world’s leading economic and military power withdraws from this agreement, losing face on the global stage. Its interest for a region that holds 30 percent of the world’s undiscovered natural gas and 13 percent of its undiscovered oil reserves is therefore not a coincidence. This situation has raised concerns amongst Arctic states since China has already shown its readiness to secure its economic interests in other regions of the world with territorial disputes, namely the South China Sea. However, China is unlikely to impose as much in the Arctic as it does in the South China Sea, given that the world’s two superpowers and both have territorial claims in the Arctic. Often compared to the race to the moon, the race for the Arctic is also a geopolitical endeavour.
In its pursuit of its economic, commercial, strategic and political interests, China has again turned towards its neighbour, major energy supplier and long term ally: Russia. A perfectly logical choice since these two states have long benefited from each other in various sectors, including energy.
The world’s biggest energy consumer represents an potential market without parallel for Russia, which owns the world’s largest energy reserves. Although China is the world’s 6th largest gas producer, its production meets only 50 percent of its growing domestic demand. In its war against carbon emissions, the Chinese government decided to raise gas usage, so both domestic production and imports are soaring to meet demand. In 2017 gas imports had increased by 28 percent, and China ranked second amongst LNG importers for the year. Russia and China have struck some of the world’s biggest energy deals ever, including a $400 billion gas deal securing Russian deliveries to China through direct pipelines over the next 30 years and a $174 billion oil deal, making Russia China’s top supplier for the next 25 years. Suffering the effects of US and EU sanctions – reduced access to foreign investments and growing tensions with the European market – Russia turned east and welcomed Chinese capital.
Further joint cooperation in Russian oil and gas fields in the Arctic is therefore the natural pursuit of common interests. The two countries teamed up in joint venture JSC Yamal LNG with Chinese investment amounting to $14.23 billion, a figure double that of the Russians’ investment, in addition to the Chinese also providing technical support. The Yamal LNG project not only reinforces China’s status of global energy player, it also advances the Chinese One Belt and One Road Initiative. China seeks to build a polar silk road along the Russian Arctic border to circumvent the pirate-infested Strait of Malacca, and this joint venture is another step towards its completion. It must be noted that Russia does not usually leave much leeway to foreign investors who are only allowed to invest in Russian projects but not to extract and sell Russian resources. With China, however, the stakes are very high and not just on an economic level. Russia cannot close its door to its biggest ally on the international stage. As stated by MEF audit Tax Disputes Director Alexander Ovesnov, changes are possible “through the adjustment of the Russia-China agreement.”
The Arctic race represents the perfect alignment of both countries’ economic and geopolitical interests. In the last decade, the two powers have strengthened their relationship and joined forces on the international stage by connecting the Chinese One Belt One Road Initiative to Russia’s Eurasian Economic Union, and taking part in multilateral organisations which exclude the USA, such as the Shanghai Cooperation Organization. The two neighbours’ cooperation dates back to 1950 when the Soviet Union and the People’s Republic of China faced the same enemy – the USA and its Asian ally Japan – and signed the Sino-Soviet Treaty of Friendship, Alliance and Mutual Assistance, according to which both signatories had the obligation to render military assistance “in the event of one of the contracting parties being attacked by Japan or any state allied with it”. The treaty expired but the stakes remain the same.
China and Russia have had their disagreements, but they have also “often found common ground politically as they increasingly assert themselves on the international stage,” states Newsweek. Both Russia and China have openly supported the idea of a multipolar world and taken a united stand against US agendas in North Korea, Syria, Libya, Iraq, Iran and other countries and regions. On the one hand, the alliance allows China to take a stronger stance against the USA and their Asian allies. On the other hand, it represents a unique opportunity for Russia to challenge NATO’s expansion and what it sees as a direct threat. The two countries demonstrated their alliance during yearly joint military exercises since 2012 in regions where tensions are intensifying including the South China Sea and the Baltic Sea.
Their cooperation in the Arctic represents a reminder to the USA and other NATO Arctic states that, together, Russia and China are a growing alternative power with military might. In 2017, Chinese companies made investment proposals to strategic ports for Arctic maritime traffic in Lithuania, Norway and Iceland. It is easy to see the commercial, but also the underlying military benefits that port ownership provides. China has clearly expressed its commitment to “maintaining peace and stability […] and ensuring the security of maritime trade, operations and transport in the region”, which could be interpreted as China envisaging military recourse to secure access to the polar silk road. In fact, in its white paper China’s Arctic Policy, China describes itself as a “near-Arctic state” protecting the common interests of all countries in the Arctic.
With its newly self-attributed role of international protector, China gives itself full legitimacy “to participate in the governance of the Arctic, in regulating and managing the affairs and activities relating to the Arctic.” The country, although a non-Arctic state and outsider to the developed countries’ club, is imposing itself in a region with international stakes for maritime trade, resource exploitation (fossil, renewable but also fisheries) and the environment. As its white paper states, Chinese presence and active contribution to the development of the Arctic is done in the framework of international law and agreements, “to build and maintain a just, reasonable and well-organized Arctic governance system.” In doing so China opens doors to other developing countries to have their say in the Arctic and other regions of the world with international stakes. China’s desire to participate in the region’s development is more likely to be tolerated and even supported by other non-Arctic nations, as well as Russia not only because of its large capital reserves, but also because it presents itself as “a polar explorer without the colonial baggage that European and North American nations have,” as suggested by the Maritime Executive.
Diane Pallardy studied an MA in Politics and International Relations at the University of Kent, and MA in World Politics and Fossil Energy at the Higher School of Economics, in Moscow.
