Arctic Enterprise: The China Dream Goes North

Journal of Political Risk, Vol. 7, No. 9, September 2019

By Jonathan Hall

Arctic Ocean, ship on Barents Sea. Getty.

Until recent years, harsh weather and unmanageable navigation routes have precluded all but the most determined crews from venturing through the Arctic. As climate change continues to take effect, however, warming temperatures are opening up the region to new opportunities. In 2017, for example, merchant ships were able to pass through a shipping lane, known as the Northern Sea Route (NSR), for the first time without icebreaker escort.

The NSR has since been discussed as a logistical windfall that will revolutionize the world of international shipping. The often-cited reasoning is the potential 5,000 mi (8,000 km), or 10-15 days saved in transit, as compared to more traditionally used routes such as the Strait of Malacca, or the Suez Canal. While the NSR is only open three months per year, climatologists predict it will be traversable for 9 months out of the year by 2030, and completely ice free within the next two decades. As these changes are coming into effect, no state seems to understand the geopolitical advantage a strong presence in the Arctic will bring more so than the People’s Republic of China (PRC).

Loosely involved in the region since 1925, when it signed the Spitsbergen Treaty, Beijing’s most recent Arctic white paper makes it clear that China intends to redefine its presence moving forward. Declaring itself to be a “Near-Arctic State,” the paper points to the UNCLOS and general international law as legal justification for China to operate. China has further implied an almost natural right, as Arctic affairs are “vital to the existence and development of all countries and humanity.”

The attempt to formulate this unassailable position, however, has been questioned by some actors in the region, such as the United States. Unconvinced of China’s aims toward peaceful development, Michael Pompeo, the U.S. Secretary of State, raised his concerns by asking, “Do we want the Arctic Ocean to transform into a new South China Sea, fraught with militarization and competing territorial claims?” While the statement is perhaps hyperbolic, such apprehension is warranted given the legitimate security concerns a strong China in the Arctic will raise.

Chinese Investment

Before we can properly gauge China’s aims and motivations, a basic understanding of logistical realities facing Beijing is required. The NSR may substantially reduce transit times, but for Beijing this only holds true for particular destinations, such as Northern Europe — which represents only a small portion of Chinese exports. Furthermore, these estimates only apply to those shipments which depart from one of China’s northern ports. China’s most heavily-used ports are located in its southern provinces, resulting in a mere 10-15% reduction in transportation time. In the future, it is unlikely that China will undergo the paradigm shift that some claim an ice-free Arctic will bring. Researchers instead anticipate trade with partners in the Asia-Pacific and southern hemisphere will only increase.

Although it is necessary to assuage claims that the Arctic will overtake the southern trade routes, the viability of the region does not end with shipping. The Arctic is home to roughly 15% of the world’s remaining oil, 30% of its natural gas, and 20% of its liquefied natural gas (LNG). Additionally, rare earth metals, a recent source of concern in the US-China trade war, are found in abundance. Approximately 70% of these natural resources, however, fall within the exclusive economic zones (EEZs) of the six Arctic littoral states: Canada, Greenland, Iceland, Norway, Russia, and the United States. To profit from resource extraction China must, therefore, cement bilateral cooperative agreements. While Beijing is cooperating with many states in the region, the Russian Federation has thus far attracted the majority of investment.

As Russia attempts to revitalize the area for shipping and resource extraction, it has attempted to do so within the framework of China’s Belt and Road Initiative. Due to western sanctions, Russian companies have been forced to turn eastward, and acquire investment from China. Since the initial sanctions in 2014, several large ventures have been initiated. For example, the Chinese National Petroleum Corporation (CNPC) has signed contracts for $400 billion with Gazprom, $500 billion with Rosneft, and in perhaps its most publicized venture, currently holds a 20% stake in the Yamal LNG Plant.

Dual-Purpose Enterprise

Beyond resource extraction, many of Beijing’s initiatives bring with them the potential for dual-usage. While they may be advertised as scientific or economic endeavors, and indeed may serve those purposes, they may also be utilized by Chinese military and intelligence services.

For example, last December, China’s Ministry of Natural Resources announced its “Arctic Environment Satellite and Numerical Weather Forecasting” project. Additionally, plans are underway with the Finnish government to install an undersea telecommunications cable. While the data collected by these projects may be used as intended, it may also be leveraged for nefarious purposes.

The potential for military applications can be attributed to shipping as well. Port infrastructure will provide Chinese state-owned enterprises (SOEs) which own them control over most everything in the supply chain: imports and exports, electricity grids, and digital infrastructure. The main competitor in this area is China COSCO Shipping — China’s largest maritime logistics company and active supporter of Chinese naval forces. PRC military strategists have remarked that “the growing network of commercial ports will someday serve as bases for Chinese naval vessels.” As COSCO solidifies its position in the region for “logistical” purposes, China’s ability to utilize these ports as nodes in a network will prove immensely valuable for both traditional power projection, as well as cyber operations.

Forecasting the Future

China understands that the Arctic will not revolutionize the world of international trade. Its leadership, however, knows that beyond economic utility lies geostrategic opportunity. Achieving a first-mover advantage in seemingly cooperative domains such as shipping, resource extraction, and scientific research will provide Beijing the option to redouble its efforts through the creation of dual-purpose infrastructure. These projects, which are legitimate under international law, grant Beijing the ability to conceal alternative usage and provide opponents a fait accompli following their completion.

By inserting itself in each area of possible cooperation, China may seek to slowly build its ability to change the status quo. Harkening back to an ancient Chinese stratagem, Beijing’s future activities could be characterized through the idea of fan ke wei zhu 反客为主, or “make the host and the guest exchange roles.” More aptly put, the principle guides a ruler to “usurp leadership in a situation where you are normally subordinate. Infiltrate your target. Initially, pretend to be a guest to be accepted, but develop from inside and become the owner later.” The proverb serves as a hypothetical framework to assist future analysis of Chinese policy and infrastructure projects.

Scientists may be able to forecast how warming temperatures will alter the Arctic’s physical landscape. Anticipating the corresponding security implications is, unfortunately, not so simple. While the Arctic may never reach the level of contestation that exists in the South China Sea, Beijing will likely utilize a similar repertoire of subversive tactics and operational concepts. An awareness of these risks is fundamental to understanding China’s Arctic ambitions both today, and as climate change takes hold well into the future.

Jonathan Hall is a security and political risk analyst focused on Eurasian geopolitics, military affairs, and emerging technologies. He can be found on Twitter @_JonathanPHall.