Geopolitical Report ISSN 2785-2598 Volume 19 Issue 13
Author: Fabio Tiburzi
Due to its strategic position and natural resources, China has elaborated a Polar Silk Road to play a leading role in the Arctic zone, attempting to develop joint projects with local actors, especially the Russian Federation, opening a new transit route for its goods.
Last year, from October 14th to October 17th, 2021, in the Icelandic capital Reykjavik, the Assembly of the Arctic Circle discussed the development of the new polar routes, paying close attention to both China and Russia as leading actors in the area.
The Polar Silk Road refers to the navigable Arctic Sea routes connecting three major economic centers, North America, East Asia, and Western Europe, via the Arctic Circle. As the melting of sea ice is making it possible to open the region to navigation, creating significantly reduced sea routes, such as the North Sea Passage, thus promoting the overall growth of the economy in the circumpolar north, which will lead to significant changes in the global business and maritime models.
Due to its geographical position, the People’s Republic of China has been defined as a ‘Near Arctic-State’. Indeed, Beijing became a vital stakeholder in this region, and in 2018 China published its first white paper where it stated its desire and strategy to join the exploration and exploitation of oil, gas, minerals and other non-living resources, using these resources lawfully and rationally. Beijing also added that it would be necessary to understand the Arctic area, develop the fishing and tourism sectors, together with other biological resources, protect the eco-environment, jointly address climate change, and participate in Arctic governance within the Belt and Road Initiative. Also, in July 2018, China completed the first LNG delivery from the Arctic.
The Arctic has a unique geographical position and comprises land and sea area north of the Arctic Circle (about 66 degrees 34 minutes N), for about 21 million square kilometres. In international law, the Arctic thus encompasses the northernmost landmasses of Europe, Asia and North America, adjacent to the Arctic Ocean and relevant islands. It comprises marine areas subject to national jurisdiction, high seas and the Arctic Ocean Area. Therefore, there is currently no single comprehensive treaty for all that pertains to Arctic affairs.
According to the Chinese White Paper published in 2018, Beijing’s initiative offers stakeholders the opportunity to build a Polar Silk Road by facilitating connectivity and sustainable economic and social development in the Arctic. During his mandate as the President of Iceland and the Chairman of the Arctic Circle, Olaf Ragnar Grimsson stressed that China, as every nation beyond the Polar region, should have been involved in Arctic dynamics. Stating that “It is a wrong scenario to think that this will only be of concern to those people living in the Arctic. It will be a concern to every nation”, Grimsson practically invited Beijing to expand its interests in the region five years before the People’s Republic of China elaborated its strategy in the area.
Russia and China’s possible cooperation in the Arctic region
Russia is interested in the Arctic region due to its proximity and direct involvement. Indeed, the Russian Federation has expanded its military and commercial capabilities in the area and has cooperated with China in the liquefied natural gas (LNG) projects since the global demand has rapidly increased. For instance, Beijing and Moscow have collaborated on the Yamal LNG project located on Russia’s Arctic coast, near Sabetta in the Yamal Peninsula. The 27 billion dollars integrated LNG project encompasses the development of the giant South Tambey (Tambeyskoye) gas field, a 17.4 million tonne per annum (Mtpa) LNG plant consisting of four process trains and shipping facilities at the purpose-built Port of the Sabetta, for supplying LNG to the Asia-Pacific and European gas markets. It is the first cooperation project on the Polar Silk Road between the two countries and the largest LNG project in the world in operation since 2017. Yamal LNG project, also known as the South Tambey LNG project, is one of the world’s most extensive and complex LNG projects.
Power of Siberia is the second pipeline of China-Russia cooperation, and it is expected to go live in mid-2022 to alleviate China’s current energy shortage. In August 2021, China Communications Construction Company won the contract to build an LNG terminal on the Kamchatka Peninsula, Russia, further extending Russian LNG shipments to Asia.
Much of the initial project of the Polar Silk Road will focus on the North Sea Passage, thus reducing the time and cost of shipping goods between Europe and Asia by 35%. For this reason, after declaring the Russian Arctic a completely free trade zone in 2020, Russia has encouraged companies and individuals to settle there, such as in Murmansk. The Murmansk government has declared that it will transform the city into the ‘capital of the Arctic’ through tax benefits.
Russia is therefore carrying out new railway, port and airport upgrades, often with Chinese and even Indian investments, to ensure the safety and logistics of supply chains throughout the region. Therefore, it is Moscow’s priority to exploit this vast and complex project of the North Sea route because the Arctic summarises vital state interests: economic, defence, geopolitical, scientific and environmental, which all depend on the functioning of the Northern Sea Route (NSR), also linked to the economic development needs of the far north of the Russian Federation. In this area, it is possible to exploit coastal and offshore oil and gas fields in the province of Timan-Pechora, the basins of the Ob’e Yenisei rivers, the gas condensate fields of the Kara and Barents seas, the Yamal field and others still.
The NSR, therefore, has enormous geo-economic potential if the Kremlin would manage to attract domestic and foreign investments, especially Chinese and Indian ones, which in turn will be carried out based on improving the capacity of the icebreaker fleets, fiscal and customs policies and credit lines as well as guaranteeing the safe seaworthiness of goods.
China is gradually increasing its interest in Arctic projects, becoming the leading foreign partner in the Russian Arctic territory. The oil and gas company CNPC (20%) and the Chinese Silk Road Fund (9, 9%) are among the shareholders.
President Vladimir Putin and President Xi Jinping agreed to carry out the Polar Silk Road project and the Russian NSR since one cannot be achieved without the support of the other. Then, the joint projects could become an important opportunity for geo-economic expansion in a highly strategic area. Thus, Eurasia might become a transcontinental shipping corridor if Russia and China achieve their joint projects, although the Russian Federation might face internal economic problems due to the Ukraine conflict and Western sanctions. In this context, Moscow might face the potential fear of becoming dependent on Chinese investments and financial support in developing projects.
Considering the different projects and strategic plans which interested the region, the Arctic zone will become a test for all the nations directly involved through phases of cooperation-competition, from the political-commercial to the financial sector and international law, even the military-technological one, precisely because of the vastness of the territory and its enormous energy resources, which will be disputed between the various actors of the Arctic chessboards.
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