The Dragon looks North: China’s emerging Arctic policy

The Dragon looks North: China’s emerging Arctic policy

The future potential of an Arctic shipping corridor has caught China’s attention, as Beijing increases its involvement in the region.

The Mandarin translation for the word ‘crisis’ is ‘危机’ (wei ji). The first character means danger and the second, opportunity. In the minds of the Chinese, there is not just danger but also an opportunity in every crisis. While climate change may have caused China to experience its harshest winter in 28 years a few months ago, it also brought an opportunity in the form of melting ice in the Arctic. Ships are already sailing during the summer periods and better days are expected ahead. Experts have said that Arctic waters could be almost ice-free in the warmest months by as early as 2050. The melting of the Arctic is particularly attractive to the Chinese and for good reasons.

The melting brings about the possibility of alternative and shorter shipping routes. One is the Northern Sea Route (NSR), which stretches from Northern Europe along the Russian coast and then to Northeast Asia. Via the NSR, the trip from Hamburg to Shanghai will be 6400 kilometres shorter than the route via the Suez Canal. The other is the North West Passage above Canada, shaving over 7000 kilometres off the present route between Western Europe and Asia.

The availability of such alternatives is important to the Chinese in two ways. Firstly, it could lead to reduced shipping cost and time. This means savings in fuel, which enhance protections again volatile price shocks and lower cost of insurance because shipping companies can now avoid the pirates-infested waters of the Gulf of Aden. Up to half of China’s economy is dependent on foreign trade and with a shorter route, that could mean faster and more volume of trade at lower cost. Secondly, the NSR forms part of China’s response to circumvent the choke points in the Indian Ocean and Straits of Malacca. The ‘Malacca Dilemma” – coined by former president Hu Jintao – highlighted Chinese’s sense of vulnerability as its economic lifeline is in the hands of the US Navy which patrols these areas. Alternative routes means lesser leverage for the US over China in case of conflict.

Northern sea route

Northern Sea Route (blue) versus the southern route (red)

The melting of the Arctic can also help to quench the Dragon’s thirst for energy. According to the US Geological Survey, the Arctic contains up to 30% of the world’s undiscovered gas and 13% of the world’s undiscovered oil (possibly the largest unexplored source of petroleum remaining on Earth). The Chinese’s endeavours to secure source of energy in Africa is already well known, so much so that they are even accused of being “neo-colonisers”. The immense energy wealth in the Arctic region is of huge interest to the Chinese government and also its state-owned enterprises, all armed with an insatiable appetite for oil/gas and fat wallets.

The opening of the NSR can aid in developing the Northeast region of China, which has lagged behind economically. Development could come in the form of port infrastructures and increase in economic activity. To do this, China needs a transshipment hub that could consolidate goods headed in its direction. Without a moment to lose, China found a likely candidate in Iceland and unleashed its ‘charm offensive’. The biggest embassy in Reykjavik belongs to the Chinese which cost $250 million to build and can staff more than 500 people. The two recently signed a trade agreement, evidence of the close ties they have fostered. Chinese investments are also flowing into this country that desperately needs it.

Recognising the immense benefits, China has upped its game to secure a spot on anything Arctic. The Chinese have not explicitly declared that they have an Arctic policy but there are signs of an agenda. China has sought for a permanent observer status at the Arctic Council – an intergovernmental forum for Arctic states on issues in the region – claiming that it is a Near-Arctic state (even though the shortest distance between China and the Arctic is a whopping 1600 kilometres). This has gained the support of Denmark, Finland, Iceland, Norway and Sweden. China is also forging closer relations with Russia, which controls much of the NSR. There is a boom of research institutes to increase Chinese’s technical knowledge and capacity in the Arctic. The existing icebreaker, Xue Long (Snow Dragon) has made five trips to the Arctic and will soon be joined by more. The rapidly improving capabilities of the People Liberation Army Navy can also be seen in the context of the Chinese exploring the possibility of having its military to protect the emerging Arctic routes. It seems like the Dragon is getting ready to be a major player.

The path, however, is not without obstacles for the Dragon. They key concern is that cost savings are uncertain. The Arctic is after all not a Winter Wonderland. Hazardous conditions such as uneven seabeds and icebergs remain factors that can keep the cost of insurance high, negating all cost benefits from lower fuel cost and absence of piracy. Higher costs can also arise due to the need to equip ships with stronger hull and charges for emergency support services in harsh conditions.

The high stakes involved have also led to political jostling between the various countries interested in the region. Canada, Denmark, Norway, Russia and the United States are trying to establish their presence firmly in the Arctic, with a mix pot of reasons ranging from ‘national strategic interests’, ‘disputed claims’ to ‘concerns for sovereignty’. The European Union also jumped onboard by identifying the Arctic as the new Northern Dimension of the common policies for climate change, energy, environment, transport and fisheries. As a result, the security climate in the Arctic is rapidly destabilising. Similarly, countries like Japan, South Korea, and Singapore are also in the game for a slice of the pie. The more players there are in the game, the more difficult it is for any one country to forward their agenda.

Domestically, China faces the same issue. As the benefits that can be accrued from the Arctic become increasingly obvious, it is likely that more domestic players (each with their own interests and agenda) would want to have a share of it. These would include various ministries and powerful state-owned enterprises in the energy, trading and transportation industries. Still without an apparent foreign policy co-ordinator (think Kissinger) at the top, China’s foreign policy in the Arctic runs the risk of being undermined and pulled in different directions.

As Li Zhenfu of Dalian Maritime University wrote: “Whoever has control over the Arctic route will control the new passage of world economics and international strategies”. China is well aware of the importance of the Arctic for its strategic and economic interest and has been pouring in huge amount of money and effort to bolster its position. Yet, like in the other parts of the world the prevalence of the ‘China threat’ continues to lead the others to view it in suspicion, reducing likelihood of cooperation in the Arctic. The Chinese would hope for the thawing of such icy perceptions to be faster than that of the Arctic ice.

About Author