Last October, Xi JinPing established the importance of becoming an “Ecological civilization” as the main requirement to achieving the “Chinese Dream.” In his address, China was also described as the “torchbearer” of sustainable development for all, expanding their ambitious dream far beyond the Chinese borders and towards what the the report describes as a “global ecological civilization.” This vision of globalization with Chinese characteristics works under the “Belt and Road” cooperation framework. The program started in 2013 and can be briefly described as a foreign investment scheme where China aims to provide capital and technologies for infrastructure development that connects back to China. In exchange, they expect capital, labor mobility or trade contracts.
China’s dream is quickly becoming a reality, and due in large part to Trump’s “United States First” agenda, China now set to occupy a leadership role in global sustainability. Currently the “Belt and Road” scheme involves over 270 international agreements and it is promoted as a tool to inspire both developed and developing countries in their paths towards low-carbon growth.
China’s new position requires clear long-term vision for the management of environmentally sensitive regions such as the Arctic, where currently two contrasting events are taking place. On one side, the thawing effect of Arctic permafrost leads to global concerns due to the expected rise of sea levels, increased greenhouse gas emissions and many other potentially irreversible environmental issues. At the same time, as ice retracts the incentives for exploration and consequential exploitation of Arctic resources continue to entice new willing participants, starting an international discussion regarding if or by whom they should be exploited. Both events require immediate attention from the international community.
As China aims to become an active participant in the international Arctic debate due to their new role in environmental discussions, it is no surprise that a long overdue white paper has been presented in which the future interests in the region are clarified. Published in both Chinese and English the 26th of February, the white paper, “China’s Arctic Policy,” provides guidance for future policy implementation and potential goals concerning China’s involvement in areas beyond scientific research such as Arctic governance and resource exploitation.
When focusing on the content of the white paper, the previously mentioned effects of permafrost thawing are described as the “Arctic situation.” The potential for global catastrophes turns the Arctic situation into a debate concerning the “shared fate of mankind,” including both Arctic and non-Arctic states. Utilizing such narrative, China identifies itself as a “near Arctic state” and an important stakeholder in the future management of the “Arctic situation” from both direct and indirect effects to their own economy.
After briefly reviewing the history of China’s involvement in Arctic research and other non-commercial activities, the white paper introduces the corresponding international laws that manage the territory, such as the UN Convention on the Law of the Sea (UNCLOS, 1982) and the Spitsbergen (Svalbard) Treaty (1920). These provide the existing legal framework it is using to determine China’s “legitimate interest” in areas beyond its exclusive economic zones. The white paper utilizes the UNCLOS framework to acknowledge both the sovereign rights of Arctic nations as well as the rights of non-Arctic nations with respect to possible exploitation and exploration of the expected resources found in Arctic high sea waters.
The white paper proposes Arctic development in different areas that can potentially change current logistics of global trade and diversify global energy supply. The proposed guidance is constructed by guidelines and goals directed towards, as described by the white paper, the “historic opportunity in the development of the Arctic.”
Guidelines:
China intends to achieve the before-mentioned progress through following four key guidelines:
First, create “reciprocal respect” relationships between all involved states. Non-Arctic states should respect Arctic states’ sovereignty, traditions and culture. At the same time, Arctic states should also respect non-Arctic state activities as long as they are in accordance with the law;
Second, “multi-stakeholder involvement” promotes the participation of Arctic and non-Arctic states, international organizations and non-state entities in the dialogue for Arctic development;
Third, work under a “win-win” framework, which the report describes as “harmony between natural conservation and social development” from which benefits should be equally distributed;
Fourth, achieve “sustainability”. Identified in the white paper as the fundamental goal of China’s participation in the Arctic, sustainability is described as the creation of intergenerational equity through environmental protection and responsible human activities.
Goals:
As described by the white paper, Chinese activities in the Arctic will extend beyond scientific research and are divided in four categories: Understand, Protect, Develop and Participate in Arctic affairs.
To Understand the Arctic region:
First, Understanding will focus on improving scientific research on the Arctic. China promotes scientific expeditions and research in the Arctic through cooperative research in which all states, private sector entities, and academic institutions alike, are invited to participate. As described by the white paper, China urges the international community to cooperate and develop an understanding of the Arctic region and the creation of the boundaries between exploitation and conservation.
To Protect the Arctic region:
Second, to protect the Arctic means to take action against the negative effects of climate change and promote the resilience of Arctic biodiversity and regional cultural heritage. Scientific guidance will provide information on how to manage the threats from global climate change and other potential human activities in the Arctic in an effort to increase adaptability and resilience of its unique ecosystem.
When addressing other environment issues, the report calls for stronger environmental management and cooperation from the international community. The white paper mentions that China aims to protect the Arctic marine environment by motivating environmental awareness. Both Chinese citizens and enterprises will be required to reduce pollutants from land-based sources, ship discharge, offshore dumping and air pollution.
To Develop the Arctic region:
Arctic development is described by the report as the utilization of “applied Arctic technology” for environmental protection, for resource exploitation, for development of shipping routes and for the improvement of local living conditions.
When focusing on possible development, China encourages all forms of human activities in the Arctic region as long as they comply with the standards set by the scientific community and authorized by international legal frameworks.
China encourages international cooperation for the exploration and “rational utilization” of Arctic resources while promoting partnerships in which China could provide inputs of capital, technology and opening their growing consumer market.
The possible developments are divided in different areas: Shipping, non-living resources, living resources and tourism.
Polar Silk Road
The first area describes the development of commercial shipping routes along the Arctic. China encourages the international community to cooperate under the “Belt and Road initiative” as a framework for infrastructure development and operation of new shipping routes relabeling the Northwest passage to “Polar Silk Road.”
The white paper stresses the lack of search and rescue capabilities, meteorological support, hydrographic surveys, security and logistical capacities yet to be developed. Investment in infrastructure will be required to support more trial voyages that would pave the way for stable commercial transportation. Accidents have already been documented as increased transportation and resource exploitation continues to be developed. Last November, for example, “Chukotuka Plus,” a Russian oil tanker, had to request assistance after being trapped by ice.
The proposal of creating a stable shipping lane has already met positive answers from several Arctic nations, alongside the expected approval from Russia. Canada welcomes the utilization of the route as long as their maritime sovereignty and laws are fully respected. Norway recently presented a proposal for developing a strategic hub-port in Kirkenes. According to the report, the projected harbor will become a distribution hub that is expected to manage 10% of the north-Europe bound shipping traffic from Asia by 2040. As described by the Norwegian report, the utilization of the “Polar Silk Road” shipping lane could potentially reduce costs, with a 20 to 30% cost reduction compared to current sea freight transportation. New technologies might offer solutions to potentially reduce both environmental and financial costs. For example, advancements in electric engines and sea-water based lubrication. Electric-powered vessels are already utilized inside China for shipping purposes, ironically to transport coal.
Non-living resources:
Second, the white paper talks about the utilization of non-living resources, such as oil, gas and mineral resources alongside the possible exploitation of renewable energy sources from geothermal, wind and other clean energy sources. China aims for “low carbon development” of the region, yet the white paper doesn’t address how to develop contradicting technologies, particularly in current context of low oil and gas prices.
Currently China National Offshore Oil Corporation (CNOOC) and China National Petrochemical Corporation (CNPC) are the main Chinese stakeholders for resource development in the Arctic.
CNOOC was the first Chinese company to enter the Arctic region. Their participation in the region cannot be considered a great success. In 2013, CNOOC signed partnerships for oil and gas exploration in the Dreki area with Icelandic and Norwegian counterparts. Since 2017, all participants besides the CNOOC relinquished their exploitation rights, signaling the failure of the project.
In contrast, CNPC, the largest Chinese energy company, is looking forward to increasing their participation in the Arctic. CNPC is partnered with Russia’s Novatek to develop Liquified Natural Gas (LNG) production infrastructure. Last December, Novatek inaugurated the Yamal LNG production facility in Siberia, one of the most ambitious projects to exploit Arctic resources. More than a third of the investment came from Chinese capital: CNPC accounts for 20%. China and the “Belt and Road” initiative fund account for another 10%. The Chinese energy market, currently the second largest importer of LNG, is expected to take the lion’s share of the 16,5 million tons of production per year. CNPC is also expected to partner with Novatek for a similar project, the Arctic LNG 2, which is expected to produce 18 million tons of LNG per year and to become operational in 2023. Ambitious future prospects for developing a LNG distribution hub in Kamtchatka are also being discussed.
Living resources:
The third area is living resources such as marine fisheries. China not only is the world’s largest consumer and exporter of fish, but their domestic fish consumption is twice the global average. China’s interest in developing fisheries away from their polluted and over-fished coasts is well documented in their domestic policies. China’s fishing industry enjoys subsidies for fuel, ship purchase and provision of navigation aids for long-distance navigation, all factors that can increase the future presence of Chinese fisheries in the Arctic.
When focusing on Arctic fisheries, the white paper mentions that the loss of permafrost will create new fishing areas, opening a legal discussion on the ownership and management on the high Arctic seas. Combined with northwards movements of fish stocks as water becomes warmer, the Arctic seas have the potential to become a strategic fishery in the future. In the white paper, china acknowledges their interest in “transparent and reasonable” exploration as fisheries become available.
China mentions that both Arctic and non-Arctic nations possess the right to research and develop in the high seas of the Arctic ocean, therefore an international agreement on fisheries management should guarantee equitable shares of the available resources. Discussions regarding fisheries in the Arctic high seas are already taking place. Last November, China participated in the development of the agreement which prevents commercial fisheries in the central Arctic ocean for the next 16 years.
Tourism:
The report also talks about the development of Arctic tourism. For China, Arctic tourism is an emerging industry and acknowledges the growing number of Chinese tourists. China aims to continue to develop “responsible low-carbon tourism” as an opportunity for sustainable development from which “Arctic residents, including the indigenous peoples, will truly benefit.”
In the past, Chinese investors tried to develop tourism projects in the Arctic. In 2011, Chinese billionaire Huang Nubo attempted to buy land in Iceland with the intention to establish a hotel resort. After delays, he was finally denied due to restrictions on foreign ownership. Later in 2014, he aimed to purchase 218 km of land for tourism infrastructure in Norway, specifically in the Austre Adventfjord of Svalbard. After a two year review, the transaction was denied, and the area was finally acquired by the Norwegian government in 2016.
To manage the Arctic:
Governance:
“To participate in the Arctic” represents China’s aim to complement and improve the governance of Arctic management. Although the white paper recognizes the current Arctic governance system and the Arctic Council, it also looks forward for the development of international rules about Arctic development aiming to safeguard the interest of the international community.
The white paper divides their Arctic involvement in Governance into three levels. Global, Regional, and state-based.
At the global level, the white paper describes China’s growing importance on global discussions regarding the creation of international regulations. The section highlights China’s new leadership role and their fulfillment of international agreements such as the UN Convention of Climate Change, International Maritime Organization, etc. At the regional level, China highlights their participation in the Arctic council. After being denied two times, China was accepted as an observer member of the Arctic Council in 2013. The white paper highlights the inclusion of China as sign for future cooperation for regional development. At the state-based level, the white paper cites the many bilateral agreements regarding the Arctic region that China has with both the Arctic and non-Arctic states. Besides annual dialogue forums between China and Arctic nations, an important case to be highlighted is the 2012 “Framework Agreement on Arctic Cooperation” between China and Iceland, the first of its kind between China and an Arctic Nation.
Peace and stability:
Arctic nations have long-term disputes regarding territory. With the prospects of the development of resources and a commercial shipping lane, those disputes are expected increase.
In this section, the white paper states China’s intentions to keep the Arctic region demilitarized through peaceful settlement of present and future disputes regarding the Arctic region to guarantee both a secure and stable governance.
Conclusion:
The white paper mentions China’s priority in the Arctic is driven by scientific research, but it also focuses on many more directly economic interests which they assess as “sustainable development” of the Arctic.
China bases their main objective for their participation on sustainability, yet many of the proposed development can only be considered sustainable based on their good intentions, not necessarily the foreseeable outcomes. When focusing on fisheries, the before-mentioned subsidies and their potential negative effects make it very complicated to envision sustainability. Chinese distant water fisheries have a reputation that is far from sustainable, with Chinese fishermen often prosecuted and ships sunk far away from their shores due to illegal activities. The fact that they take these actions while subsidized by the state highlights the discrepancies between China’s foreign agendas and its domestic policies. China has stated an intention to revise the subsidy policies for distant water fisheries, yet no concrete measures have been taken.
With respect to the possible development of Arctic tourism, currently Arctic states themselves are developing eco-tourism projects in the region through sustainable infrastructure development, so the concept itself is not far-fetched. The proposed solutions of increasing environmental awareness of tourists while including and equally sharing the benefit with all stakeholders falls short of the expected negative impacts on the environment, however. Furthermore, the contradiction of promoting “sustainable tourism” in such a sensitive region brings up several questions beyond the initial assessment of sustainability.
The “Polar Silk Road” is a complex concept. The prospects of changes in the dynamics of the sea freight industry may be great when considering potential gains from efficiency driven solutions for the highly unregulated and pollutive sector. Large scale implementation of electric powered vessels and international cooperation towards a highly integrated development of both sea and land logistic infrastructure could potentially change the dynamics of international commerce. On the other hand, a profit-seeking mentality for utilization of Arctic shipping lanes would only worsen our current problems. The net outcome will depend on external forces; currently, reports predict the IMO may significantly tighten the emission standards for shipping vessels next April. IF this happens, potential solutions for the industry, which the Chinese might be able to offer, will be surely welcomed. The decision in the IMO, however, will be taken with shipping interests of over 170 signatories in mind, which may delay or reduce the effectiveness of the regulations.
Even after all the sustainability considerations stated in the white paper, fossil resource exploitation remains the most successful endeavour for Chinese capital in the Arctic, with little participation in the renewable energy sector. Fossil fuel based projects in the region are becoming bigger as more Arctic states are open to Chinese investments. Development of non-renewable energy in foreign territory is at odds with China’s domestic current effort to decarbonize their economy, but the contrast fits economically – local and regional costs of carbon emissions, including air pollution and related health impacts, are higher than those that occur if emissions occur elsewhere. Incentives to stop investment in non-renewable energy in the Arctic should be expected to dovetail more with China’s international climate change policy than with local emissions decisions and concerns.
As concluding remarks and in a more positive note, the preliminary vision presented by the white paper, even if conflicting and sometimes vague when compared to real world results, will assist both Arctic and non-Arctic states to better understand and negotiate China’s role in the Arctic region. This should translate into positive results as the more participants are willing to cooperate through research and overall transparency on their intentions, the higher are the chances for a solution of present challenges and a possibility for future development of a more resilient Arctic region.
Mereconomics 