It seems like things are heating up in the Arctic, and it’s not just global warming.
Earlier this week, China and Iceland announced they had signed a free-trade agreement, the first formal agreement of its kind to be entered between China and an European country. I must admit that at times, events out of China can hit you with a ‘mental whiplash’ of sorts. However, China’s steady overtures to increase its influence in the Arctic is well-documented, and does not come as a surprise given its track record for creative diplomatic forays into other regions.
China has plenty to write home from the Arctic. According to The Economist,
…a US Geological Survey estimated that some 30% of the world’s undiscovered reserves of natural gas, and 13% of the undiscovered oil, lie in the Arctic. It also contains coal, iron, uranium, gold, copper, rare earths, gemstones and much more, including, of course, fish. […]
So too is the hope that the North-East Passage above Russia, also known as the Northern Sea Route (NSR), as well as the North-West Passage from the Atlantic over the top of North America, will become navigable for several months each summer. The NSR cuts the voyage from Shanghai to Hamburg by 6,400km (4,000 miles) compared with the southern journey through the Strait of Malacca and the Suez Canal. It will be even shorter when it is possible to break the ice across the North Pole.
The gradual melting of the polar ice cap will increase Arctic sea lane traffic volumes:
Here’s another map showing China’s view of Arctic sea lanes:
China’s interest in the Arctic actually go back a few decades. While its involvement in the Arctic started with scientific polar expeditions in the mid-1990s, its efforts kicked into high gear over the last five years. Since eying for the seat of Permanent Observer in the Arctic Council in 2009, China actively courted Iceland with energy agreements during Wen’s stopover in April 2012, and sent its snowbreaker Xuelong to sail the Arctic Ocean in August 2012. There is also an ongoing bid by an eccentric Chinese real estate tycoon to build a luxury golf resort in Northeast Iceland since 2011 that is raising more than a few eyebrows.
Given that the Arctic Council is deciding on whether to grant China with permanent observer status in May 2013, China is taking a comprehensive approach to cozy up individually with other voting members of the Council, which include Canada, United States, Russia, Denmark (Faroe Islands and Greenland), Norway, Iceland, Sweden, and Finland. Beyond its charm offensive with Iceland, China elevated its economic status with Denmark/Greenland, while Canada –which will hold the chairmanship in 2013— is provoking the ire of Washington after it embraced China’s deals to extract Alberta’s tar sands. Though Norway’s relationship with China remains frosty since its Nobel Peace Prize snub in 2010, with an additional nudge from Russia, China’s bid is steadily gaining traction in the Arctic frontier.
This flexing of China’s diplomatic muscles show a very pragmatic strategy as well as an increased sophistication in its two-pronged approach. On one hand, the government is downplaying its ambitions to the alarmed members of the Arctic community, and are making active overtures to participate in regional governance programs. On the other hand, the state-owned enterprises (SOEs) are swiftly establishing their claim to the last frontier in bilateral deals with member countries. There is no mistake in China’s intentions; with a voracious appetite for energy resources, these SOEs are applying the lessons of energy diplomacy and resource extraction of the last decade from their work in non-western friendly countries in Africa and Latin America. Armed with a $3.44 trillion forex reserve war chest, its Arctic overtures includes all elements of its resource shopping checklist. As mentioned above, these include bids to replenish depleted coffers of currency-starved countries, the establishment of oil-for-loan programs, and the signing of energy and infrastructure contracts for non-conventional energy extraction ventures. Additionally, its foray into the Arctic will likely be a test bed for the government’s support in the development of offshore and ultra-deepwater technology, including offshore ship-building, deep-sea drilling, and deep-sea mining.
As members of the world keep close watch to regional developments, it’ll be interesting to watch whether the Council will accept the inevitability of Chinese interests in the Arctic Ocean and choose to find ways to involve or exclude the newcomer on the block in the coming decades.