China’s strategic interest in the Arctic

Dr. Angelos Kaskanis

Project Manager - Tactics Institute

Beijing has long considered the Arctic to be important to its strategic, economic, and environmental interests. In accordance with international legal treaties, particularly the United Nations Convention on the Law of the Sea and the Spitsbergen Treaty, China has rights in the Arctic high seas such as scientific research, freedom of navigation and overflight, fishery, cable-laying, and resource development.

China has held observer status in the Arctic Council since 2013 alongside countries such as Japan, South Korea, Singapore, India, and Italy. Yet, it is only recently that Western politicians and media outlets have begun to take notice of the country’s role in the Arctic, often with scepticism. In particular, the idea that China is pursuing a revisionist agenda, including a grand military strategy.

Some Arctic states, on the other hand, have welcomed China’s involvement in the region and the potential role it can play as an investor. One such example is Russia, which considers China to be a key strategic partner. Two major Chinese companies: the China National Petroleum Corporation and the Silk Road Fund are both major shareholders in Novatek’s Yamal LNG project – a liquefied natural gas project located in northern Russia.

Only last week, Zhejiang Energy announced it will buy a 10% stake in a liquefied natural gas project in Russia, confirming China’s status as the world’s biggest LNG buyer. Both indicate that China will remain Russia’s main foreign partner in such megaprojects for the foreseeable future.

When China published its first Arctic strategy in 2018, claiming that the Middle Kingdom is a “near-Arctic state”, the world of Arctic diplomacy sniggered. Indeed, with Beijing being further away from the North Pole than, say, Berlin, it was a lofty claim to make. However, its symbolic significance in Chinese geopolitics is not to be dismissed. China’s history of Arctic engagement reveals a long-standing desire to be recognized as a great power in circumpolar politics.

China’s expanding influence

With China emerging as a major player in the Arctic, discussions and deliberations about China’s plans and policies have taken centre stage. Over the course of a decade, China has progressed from a marginal partner to an active member of the Arctic Council.

Global warming and the emergence of new economic and strategic opportunities have increased the Arctic’s prominence not only in Chinese policymaking but also in the policymaking circles of other major players such as the United States and Russia. Furthermore, from the standpoint of science and the environment, the Arctic region has emerged as a laboratory that every nation wishes to explore.

China’s National Petroleum Corporation (CNPC) purchased a 20% stake in the first Yamal LNG project in 2013, marking one of China’s first major upstream energy investments in Russia. In 2016, China’s Silk Road Fund purchased a 9.9 percent stake and loaned $813 million. The Export-Import Bank of China and the China Development Bank also made loans to Russia totalling $11 billion.

In April 2019, CNPC and China National Offshore Oil Corporation (CNOOC) each purchased a 10% stake in the Yamal Arctic LNG 2 project. Due to the difficulty of obtaining Western technology under the sanctions regime, several Chinese firms are among the subcontractors providing equipment for Arctic LNG2.

In many ways, Chinese policymakers have already identified and acted on this impetus, diversifying the country’s Arctic investment portfolio in recent years. For example, in 2016, China agreed to normalise diplomatic relations with Norway, giving Oslo the opportunity to negotiate a free trade agreement with Beijing.

China has also made significant investments in Icelandic geothermal energy production, and Chinese state-owned enterprises have financed a number of biorefinery projects in Finland. Chinese corporations have now invested around 12% of Greenland’s GDP, with cash flows primarily directed towards the island’s increasingly profitable mining sector.

China regards the Arctic, as well as the Antarctic, the seabed, and space, as ungoverned or under governed territories. While some of its external discourse emphasizes the need to limit competition in these domains, several others are more cynical, emphasizing the need to prepare for competition within them and over their resources.

As a permanent observer to the Arctic Council, China has discovered that cooperation is the key to gaining access to Arctic governance. The strategy outlined in China’s Arctic Strategy is primarily based on collaboration, which includes joint participation in scientific projects as well as adherence to the institutional and legal framework. The win-win strategy based on bilateral relationships established with Arctic States, on the other hand, is improving China’s standing in Arctic governance.

With its scientific prowess, China has been trying to call for partnerships with Artic states to better understand what is happening in this part of the world. It has also joined other multilateral scientific missions.

Aside from energy, China’s collaboration with Russia on establishing a global transport corridor via the Northern Sea Route, or NSR, has garnered a lot of attention recently. According to experts, this route would be approximately 40% faster than the same journey via the Suez Canal, significantly reducing fuel costs. With global warming and the resulting increase in ice-free periods per year, the prospect of opening up international Arctic shipping via the NSR becomes more appealing.

China’s ambitions in the region show no sign of slowing. As such, mounting tensions between the United States and China amid a battle for global influence and prestige, may put both countries on an inevitable collision course. China will need to tread carefully.

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