Cold Calculation

Strategic Vision vol. 6, no. 35 (October, 2017)

Beijing eyes Arctic as solution to dwindling resources, risky shipping routes

Lu Wen-hao

Ice Camp Sargo, located in the Arctic Circle, hosts Ice Exercise (ICEX) 2016 and will house more than 200 participants from four nations.

photo: U.S. Navy

The arctic environment is undergoing dramatic environmental change. According to scientists at the NASA-supported National Snow and Ice Data Center, Arctic sea ice reached a record low wintertime maximum extent in 2016. The Arctic Ocean and coastal areas once barren and frozen under a dense sheet of ice are slowly coming to life with industry and commerce brought about by the receding ice conditions. The melting Arctic region not only brings new opportunities for the eight Arctic nations (Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the United States) that ring the North pole and are competing for rich resources, but it also attracts countries which covet its great potential. Furthermore, the receding ice is creating four additional maritime trade routes, which are the Northern Sea Route (NSR), the Transpolar Sea Route, the once-legendary Northwest Passage, and the Arctic Bridge Route, that will significantly shorten the time and enormously reduce the cost of global maritime shipping.

Observer status

Although the northernmost territory of the People’s Republic of China (PRC) is at least 14,000 km away from the North Pole, it has been active in the Arctic for many years, conducting climate research and assorted scientific expeditions. In 2013, China was granted observer status in the multilateral Arctic Council, which signaled its active intent to become more involved in Arctic affairs and governance and closer collaboration with the Arctic nations. As the most populous country in the world, China has good reasons for seeking more resources in order to sustain its economic growth and maintain domestic stability. China’s interests in the Arctic are driven primarily by the need to fuel and feed the world’s largest population. In addition, China’s search for new sources of oil, natural gas, minerals, and fish, stem from this desire, as does its quest to secure additional maritime trade routes.

The Chinese icebreaker Xue Long stops in the Port of Fremantle, Western Australia, after the conclusion of an expidition to the Antarctic.

photo: Bahfrend

Resource rich

According to the US Geological Survey, the Arctic region contains approximately 90 billion barrels of oil, 1.7 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids. China imported an average 8.55-million barrels a day in the first half of 2017, above the 8.12-million barrels a day imported by the United States, and has become the world’s biggest crude oil importer. China currently gets half of its oil supply from the Middle East via tankers and is also a leading importer of natural gas. Middle East conflicts and interruptions in the sea-lane supply routes would adversely impact the Chinese economy, which has led the PRC to seek more secure sources of oil and natural gas. The Arctic offers a source of energy in a more politically stable area and closer to China than its current Middle East suppliers.

“Greenland’s ores are so plentiful that they can meet a quarter of the world’s demand for uranium and rare earth metals.”

The Arctic is a potential source of mineral resources that China needs for its robust manufacturing sector. Greenland, which is under Denmark’s authority, holds large reserves of copper, uranium, and other minerals that make it an area of keen interest for Chinese companies and the Chinese government. Greenland’s ores are so plentiful that they can meet a quarter of the world’s demand for uranium and rare earth metals needed for manufacturing in China.

As the second largest economy in the world and a world leader in global maritime commerce, China’s gross domestic product heavily relies on ocean shipping. Nevertheless, the traditional trade routes that China depends on are challenged by chokepoints, vulnerable maritime highways, and congestion. For example, 80 percent of China’s crude oil imports transits through the Strait of Malacca near Malaysia, the most important maritime lifeline for China. PRC ships constitute roughly 60 percent the vessels passing through this region.

Alternate route

Should the Strait of Malacca fall under the control by Beijing’s rivals, this would pose a great risk to the PRC’s energy security. The possibility of a resurgence of piracy in the area likewise poses a threat to this vital route. As a result, Chinese shipping companies view the Arctic as a viable trade route, at least during the ice-free months. The Northern Sea Route in particular runs along the Arctic coasts of Russia and Norway. Vessels traveling the NSR can realize significant savings in sailing days (and fuel costs) between Northern Europe and Asia and avoid the risk of piracy associated with the Strait of Malacca. The traditional warm-water route through the Suez Canal requires on average 48 days and 11,300 nautical miles for oil tankers and large container vessels. That same voyage along the NSR is shortened by 13 days and 4,000 nautical miles.

A US Air Force F-16 F and four F-35A Lightning IIs from Hill Air Force Base, Utah, approach the runway during exercise VIGILANT ACE 18 at Kunsan Air Base.

photo: Colby Hardin

In addition to energy resources and opening Arctic water routes, the receding ice in the Arctic region also unveils the rich fishery resources. With the world’s largest population, China has a great demand for food. Most Chinese, especially those who live near the coast, have historically relied on fish as a source of protein. The growing Chinese middle class places increasing demand on China’s commercial fishing industry to find new fish stocks.

Given the rapid depletion of global fish resources, the potential of the fish stocks of the Arctic Ocean will no doubt be a main objective in this regard. Although the five Arctic nations (Canada, Denmark, Norway, Russia, and the United States) signed a ban on commercial fishing in the Arctic Ocean to protect the living marine resources of the thawing region in 2014, the PRC considers the ban, and the active enforcement of national fisheries regulations, as denying its right to the so-called “global commons.”

In recent years, China has become more dependent on energy resources because of its rapid economic growth. The issue of energy security has been placed as a vital strategic position on China’s economic development, social stability, and national security. Undoubtedly, the rich energy reserves in the Arctic allow China to weather any possible energy blockade by the West. Therefore, the primacy of Beijing’s Arctic strategy is focusing on the nation’s energy security, by carrying out scientific research and seeking the technology which would lower the cost of exploitation and by conducting mergers, acquisitions, and investment of foreign mineral and oil companies that operate in the Arctic region. Currently, China has been a crucial participant in energy- and resource related industries in the Arctic.

Growing desire

China has shown a growing desire to become more deeply involved in Arctic affairs. In 2006, Beijing applied for permanent observer status in the Arctic Council. After three denials, the council finally granted permanent observer status to China in 2013. Though as an observer, Beijing has only limited influence and right of speech compared to full members, it prevents China from being marginalized in Arctic affairs. Furthermore, the PRC’s economic ties with Nordic countries further heightens Beijing’s influence in Arctic affairs.

In contrast to the powerful countries in the Arctic region, the Nordic countries seem to be able to offer a shortcut to China’s Arctic ambitions. China’s relationship with two world superpowers in the region is complicated. On the one hand, Beijing and Washington have disputes over a number of geopolitical issues. On the other, Moscow is concerned and suspicious of its powerful neighbor. Canada, another big player in the Arctic, is a traditional ally of the United States in international politics. Hence, the Nordic countries appear a more pliable channel for Chinese access to the Arctic, since Nordic countries are in critical need of foreign financial support, which China can provide.

New corridors

The initial structure of the Belt and Road Initiative (BRI) involved creating sea corridors through the Indian and Pacific Oceans to Africa, Europe, the Middle East and South Asia, as well as land corridors connecting China with Central Asia, Eastern Europe and Russia. The Arctic did not feature in early maps and outlines of the BRI. However, in June 2017, a policy paper co-produced by China’s National Development and Reform Commission and the State Oceanic Administration provided new insights into how the Arctic can be more closely tied to Beijing’s ambitious trade policies, including the BRI.

China’s main focus in the Arctic will be on its strategic interests, and the measures it takes will seek to avoid embroiling itself in regional conflicts in the Arctic.

This paper formally linked the Arctic to the BRI when it named three specific sea routes which would be essential for China to develop a “blue engine” of economic growth: Namely, the Indian Ocean-to Mediterranean Sea route, the South Pacific region, and the Arctic Ocean. Regarding the Arctic, the paper outlined China’s interest in working with other actors in the region to augment sea-transit conditions, survey for new resources, and promote clean energy and mutual development. Additionally, China and Finland are discussing a proposal for a US$3.4 billion “Arctic Corridor” railway that would connect Northern Europe and Arctic Ocean deep-water ports with China. The idea is considered a part of the development of the BRI in the Arctic Region.

In short, Beijing knows it has disadvantages as a non-Arctic state, and so compared to the assertive behavior that China engages in to safeguard what it calls its national core interests in the South China Sea and East China Sea, Beijing has been taking a different approach in its Arctic strategy. Beijing is not seeking the status of a powerful actor in the region. Instead, it is looking for partnerships and keeping multilateral and bilateral cooperation with the Arctic nations in all respects. In doing so, it seeks to be able to reduce Arctic nations’ concerns about China’s ambitions in the Arctic.

image: Susie Harder

Global commons

Moreover, China will continue to promote the idea that Arctic resources are a “global commons” and will urge joint development with Arctic nations by using its economic power. Meanwhile, in order to further its interests, China will likely encourage multilateral solutions to territorial disagreements in the Arctic. Simply put, China’s main focus in the Arctic will be on its strategic interests, and the measures it takes will seek to avoid embroiling itself in regional conflicts in the Arctic.

Taiwan, as an island state, is heavily reliant on export trade and maritime affairs. Since the opening of additional maritime trade routes in the Arctic has a demonstrated benefit to global shipping, Taiwan has no reason to ignore the development of the Arctic region. Taiwan should also actively seek opportunities to involve itself in Arctic affairs. Taiwan could apply for observer status in the Arctic Council, as observer status is not limited to states. If Taiwan does not take advantage of opportunities in the Arctic, the country’s economic competitiveness may be weakened at a time when many trading nations are including the Arctic in their plans.

Colonel Wen-hao Lu is an instructor at the ROC War College at the National Defense University. He can be reached for comment at luwenhao73@gmail.com