The Arctic Silk Road

Is China Shaping the Future of Maritime Transport?

China is investing billions of dollars in infrastructure projects around the world. The Addis-Ababa - Djibouti Railway project, a hydroelectric power plant in Ecuador, or a technology park in Belarus. However, Beijing also directs its attention to less accessible places, but of no lesser strategic importance. Such a place is the Arctic. With the Polar Silk Road running there, this potentially brings about radical changes in global flows of goods and raw materials.

Near-Arctic State

Unless actions to stop global warming are taken immediately, the Arctic Sea could become open to free shipping by 2030. This opens up a number of opportunities for the creation of new sea communication routes that would significantly shorten the path between the main civilization centers of the western hemisphere and eastern Asia - primarily China. Thus, it would make the transport of goods much cheaper.

In January 2018, Beijing published a white paper called "China's Arctic Policy", which defined China's approach to the Arctic and was part of the flagship Belt and Road initiative. We can determine from it that China's goal in this area is "to understand, protect, develop and participate in the governance of the Arctic, so as to safeguard the common interests of all countries and the international community in the Arctic, and promote sustainable development of the Arctic."

Moreover, in the white paper, Beijing states that it respects the sovereign interests of eight states belonging to the Arctic Council. These are Finland, Iceland, Canada, Norway, Russia, the United States, Sweden, and finally also Denmark, which also represents the Faroe Islands and Greenland. However, one should hold the praise for China’s seemingly altruistic approach. Because later in the text, the Middle Kingdom defines itself as a 'near arctic-state'. Which, among other things, means that China has legitimacy for claims in the region. These include scientific research, freedom of navigation, air routes, fishing, laying underwater cables and pipelines, and even exploring and extracting natural resources in the Arctic.

And the stakes are serious. Up to 13% of the world's oil reserves and 30% of gas reserves are located in this area. Beijing explains that it is an international space and it should be shared for the good of mankind, while the claims are based on the international right to freely use the open sea.

The approach presented in Beijing's policy paper is in fact a deliberate and clever strategy. All the put forward by China are based on international law. In addition, Beijing stresses that any disputes should be settled and managed by international organizations and treaties such as the United Nations and its Convention on the Law of the Sea, or the International Maritime Organization and its Polar Code. What distinguishes the above-mentioned institutions from the Arctic Council is that China is a member and signatory of them, unlike the Arctic Council, where the Chinese are merely an observer.

As a result, China's Arctic policy can be compared to building a house in which the Chinese have a central place at the table, rather than watching the situation unfold from the back seat. However, the Arctic-Council countries do not intend to submit to this rhetoric and intend to protect their national interests. Mike Pompeo, secretary of state in the Trump administration, has almost ridiculed Beijing's interpretation of itself as a near-arctic country. “There are only arctic states and non-arctic states, no third category exists and claiming otherwise entitles China to exactly nothing,” Pompeo said.

Fight Against Geography

The American secretary of state is correct here, because China's opponent in this fight is... geography. The northernmost point of China is located nearly 1,500 kilometers south of the Arctic Circle. For comparison, the northernmost point of Poland is closer to the Arctic than the northern tip of China. As a non-Arctic country, China has limited possibilities of directly influencing the region. Therefore, in recent years, the Chinese tried to create a perception of the presence in the Arctic to convince the 8 Arctic countries that they are a player in the region.

China's involvement in this area has clearly increased in the last decade, but this began many years ago. At the beginning in the scientific sphere, China signed the Svalbard Treaty in 1925, and since the 1990s Chinese scientists have conducted a series of scientific expeditions targeting the Arctic and Antarctica. Currently, China has research stations in Svalbard (Yellow River Station, est. 2004) and Iceland (the China-Iceland Arctic Science Observatory, est. 2018). In Sweden, on the other hand, the Chinese have the first foreign satellite station (the China Remote Sensing Satellite North Polar Ground Station, est. 2016). Therefore, Beijing implemented its plan both on a bilateral level, through joint ventures with Finland, Sweden and Iceland; as well as multilaterally, which in 2013, finally resulted in China becoming a permanent observer in the Arctic Council, a crucial legal body for this area. In addition, in 2019 the Chinese commissioned the first domestic-made icebreaker - Xue Long II, and there are plans for a nuclear-powered unit.

Copernican Revolution in Maritime Transport?

Remember that maritime shipping is the core of world trade. It is responsible for 70% of the value and 80% of the volume of global exchange. In turn, the two centers between which the largest trade exchange in the world takes place are Europe and East Asia. For the most part, this transport takes place via the southern sea route, which stretches through the South China Sea, the Strait of Malacca, the Red Sea, the Suez Canal, and on to the Mediterranean Sea and Gibraltar to the mighty ports of Western Europe. This is the most important sea route in the world. However, the constantly warming climate means that this principle route, which has been without any alternative for several hundred years, may soon have one. Since, the cargo may sail north now.

We can divide the northern road into two corridors. The first is the “northwest” corridor connecting the northeast coast of China with the east coast of the USA. The second "Northeast" corridor connects East Asia with Europe. It starts in the East China Sea, runs through the Sea of Japan, the Sea of Okhotsk, the Bering Strait, then continues along the northern coast of Russia, and finally flows into Europe passing the Scandinavian Peninsula. The Northern Sea Route would cut the traditional southern route by almost 20 days, or by 30% of the current travel time. Moreover, the northern route does not have the choke points, the Strait of Malacca or the Suez Canal, that Chinese container ships currently must pass through. Blocking these would be a disaster for Chinese shipping.

A Chance for Russia?

Beijing knows that it is essential for the success of this project to build a comprehensive technical and logistics base along the northern Russian coast. Hence, for a long time we have been observing increased cooperation between Moscow and Beijing, mainly in the areas of logistics and hydrocarbon extraction. First of all, it is necessary to mention the LNG gas terminals located in the Gulf of Ob in the Russian Far North. The Chinese have a 30% stake in Yamal LNG and 20% in the Arctic LNG II, which is under construction. The value of Yamal LNG is estimated at USD 27 billion, while Arctic LNG II is to be 30% cheaper at about 19 billion. In June 2020, Novatek, the company that operates the Yamal terminal, completed the first delivery of liquefied gas to China with the first LNG tanker and icebreaker at the same time. The journey took 25 days and it was the earliest and fastest such delivery ever. Currently, half of Chinese LNG imports come from Russia.

The potential development of the Russian port of Zarubino, located south of Vladivostok, is also noteworthy. With the help of the Chinese, within the next 18 years it is to become the largest port in Northeast Asia. Roads connecting the port with the mighty heartland of China are already being built. Another planned port is the deep-sea port in Arkhangelsk, located in the European part of the Russian Federation, near the border with Finland. China is also expected to contribute to its creation. The port itself is ultimately to generate 40,000 jobs and activate this part of the country by improving communication with Siberia. An additional connectivity initiative is the "Arctic Connect" project, which intends on laying an 8,000 kilometer, undersea line of fiber optic cables along the bottom of the Russian coast connecting China and Northern Europe. The initiative has been signed by companies from Finland, Russia, and China.

Nevertheless, it is still a drop in the ocean. Much greater systemic investments are needed, but the suspicion on both sides holds back the rapid development of Russian-Chinese cooperation in the Arctic. The 2020 epidemic also cast a shadow on the economic side of the initiative.

US Navy Arctic Fleet

From an American perspective, it is hard to challenge the Chinese right to navigate international waters, but Washington recognizes the security risks that come with Beijing’s proactive presence in the Arctic. Hence, the approach of the United States is likely to come down to cooperation where possible and competition where necessary. Americans in particular fear close Sino-Russian cooperation. However, it should be noted that the Russians, wishing to protect their independence in the Arctic, are very vigilant of China's policy in the Arctic. Moscow initially opposed granting permanent observer status to China by the Arctic Council. Similarly, the Russians' fears were confirmed when one of the scientists conducting research in the Arctic was accused of treason for allegedly relaying information to the Chinese about submarine detection systems.

Thus, Washington, observing this cooperation, will try to use the points of dispute between Beijing and Moscow. American analysts, however, primarily point out that the US Navy needs to have the ability to project power in the Arctic. In mid-2020, Donald Trump signed a memorandum calling for the creation of a fleet of icebreakers within the US Navy to be ready for service in 2029. What’s more, it is also important to present a competitive counter-offer to northern European countries as an alternative to Chinese financing. Following this lead, Washington recently opened a consulate in Greenland's capital, Nuuk, and donated $12 million aid to Greenland. This seems to be Plan B after Donald Trump's failure to buy Greenland, which he previously presented to the Danes.

The Polar lane of the New Silk Road has the potential to reverse the widely accepted rules for the transport of goods between Europe and Asia, which would be a huge breakthrough in world trade. Geography is turning the center of attention back to Russia, which controls most of the coastline along the northern route. Moscow is well aware of its pivotal position and is trying to play this game safely, because the rising power of the Middle State hangs over the project. It manifests itself not only economically, but potentially also militarily, e.g. through the forward presence of submarines. The melting of the Arctic ice is a great opportunity for the currently economically barren, apart from mining investments, Russian Far North. However, in order for the Arctic silk route connecting Europe with East Asia to become operational, the huge logistical, infrastructure, and pro-social investments activating these areas are crucial. This, in turn, could help Russia to recover from the endless recession consuming the country.

At the same time, the very high dependence on Moscow is a weak point in the Chinese plan. China is geographically isolated from the Arctic. The fact that China is far away from the Arctic while the region is bordered by powerful players, led by the United States, means that Beijing does not have much control over the development of this initiative. And future investments run the risk of being used by the always opportunistic Moscow. Nonetheless, the prospects of melting Arctic ice make it hard to imagine that in 10-15 years' time the "northern route" would not play a much more important role in global trade than it does today. Yet, the future may not necessarily follow the carefully planned Chinese scenario.

Sources:

China’s Arctic Policy
http://english.www.gov.cn/archive/white_paper/2018/01/26/content_281476026660336.htm
China and its Arctic Trajectories: The Arctic Institute’s China Series 2020
https://www.thearcticinstitute.org/china-arctic-trajectories-the-arctic-institute-china-series-2020/
'Polar Silk Road': Study says China showing 'most interest' in future Arctic sea route
https://www.wionews.com/world/polar-silk-road-study-says-china-showing-most-interest-in-future-arctic-sea-route-329338
China's "Arctic Silk Road"
https://www.maritime-executive.com/editorials/china-s-arctic-silk-road
The Twists and Turns of the Polar Silk Road
https://overthecircle.com/2020/03/15/the-twists-and-turns-of-the-polar-silk-road/
“Polar Silk road”: project implementation and geo-economic interests of Russia and China
https://iopscience.iop.org/article/10.1088/1755-1315/434/1/012009/pdf
CHINA IN THE ARCTIC
https://www.uaf.edu/caps/our-work/Bowman%20and%20Xu_2020_China%20in%20the%20Arctic_Final18Feb2020.pdf
China’s Arctic Endgame
https://www.americansecurityproject.org/chinas-arctic-endgame/
China & the Arctic: Why the focus on international law matters
https://www.arcticcentre.org/blogs/China--the-Arctic-Why-the-focus-on-international-law-matters/ne2t4glg/cb324fd9-7981-4181-85a4-b9f583822512