China: We are a 'Near-Arctic State' [ha ha ha ha] and we want a 'Polar Silk Road'

China: We are a 'Near-Arctic State' and we want a 'Polar Silk Road'

• China's new Arctic Policy was outlined by its first official white paper, released on Jan. 26.
• China, which self-identified as a "Near-Arctic State," sought to establish exactly how it believes the region should be governed and utilized.
• That's raised fears about a Chinese takeover of the region, but experts cautioned that a geopolitical standoff over the Arctic isn't necessarily coming.

Wed, 14 Feb 2018

CNBC.com

Hu Kaihong, a spokesman of State Council Information Office, shows China's new Arctic Policy at a news conference on January 26, 2018 in Beijing, China.

China announced its official Arctic policy to the world late last month, promoting Beijing's ambitions for the region and raising fears about a Chinese takeover of the polar zone.

But while the world's second-largest economy, which self-identified as a "Near-Arctic State" in its new white paper, may have it's own economic and foreign policy interests in mind, experts cautioned that doesn't mean a geopolitical standoff is coming.

Still, Beijing's new document does seek to establish exactly how it believes the region should be governed and utilized.

The paper explains that China's interests in the Arctic can be narrowed down to two categories. On the one hand, Beijing is "closely involved" in activities in the area like scientific research, resource exploration and exploitation, shipping and security. And separately, climate change and its potential consequences on the region are expected to affect much of the world, so China is naturally concerned.

"China wants to be included in economic benefits here, that is the reason for their involvement even if they do not possess legitimate geographical reasons or logic to be considered a member of the region."-Zhang Zhixing, senior East Asia analyst at Stratfor

"The Arctic situation now goes beyond its original inter-Arctic States or regional nature, having a vital bearing on the interests of States outside the region and the interests of the international community as a whole, as well as on the survival, the development, and the shared future for mankind," the white paper said.

Of note, China's emphasized in the white paper that countries should respect "the rights and freedom of non-Arctic States to carry out activities in this region in accordance with the law," specifically pointing multiple times to the United Nations Convention on the Law of the Sea. Those references to international laws, however, aren't totally congruent with Beijing's history with such rules.

China's strategy

China — which is no closer to the Arctic than Poland is — has been working on its strategy for an extended period of time, with its induction as an observer state on the Arctic Council approved in 2013.

The Arctic policy is a consolidation of the world's second-largest economy's activities in the Arctic for the past five to 10 years, according to Zhang Zhixing, a senior East Asia analyst for geopolitical intelligence firm Stratfor.

According to the white paper, China wants to tie the Arctic to its Belt and Road Initiative, encouraging joint efforts to construct a "Polar Silk Road" or "blue economic passage" that would link China and Europethrough the Arctic Ocean.

The Belt and Road Initiative aims to connect Asia, Europe, the Middle East and Africa with vast logistics and transport networks. While Beijing has touted the project as a mutual economic development initiative, it's widely seen as an attempt by China to construct a massive, multi-national zone of economic and political influence that has Beijing at its core.

The addition of the Arctic into the initiative has raised red flags for some, as the wider project is seen by some experts as an important component of China's foreign policy.

While the Arctic hasn't always been an accessible part of Chinese policy, global warming has increased the rate of the region's ice cap melt in summer, which is raising its economic potential as a commercial maritime route in future.

According to the World Trade Organization's 2017 statistical review, about 88 percent of global merchandise trade occurs between Asia, Europe and North America — some of which could conceivably pass through the Arctic Ocean in the future.

"The white paper is an official statement to ensure China has a foothold in the Arctic and the activities that are ongoing," Zhang told CNBC.

China wants to make sure its point of view is reflected in the region, through involvement in Arctic governance and by shaping its agenda, she said.

"China wants to be included in economic benefits here, that is the reason for their involvement even if they do not possess legitimate geographical reasons or logic to be considered a member of the region," Zhang said.

A glacier is seen from NASA's Operation IceBridge research aircraft on March 29, 2017 above Ellesmere Island, Canada.

A challenge

The crux of the issue, according to many analysts, is that the Arctic could tip the already rising tensions between the U.S. and China, but the situation may have been exaggerated, according to Zhang.

"Many experts are pointing to the South China Sea dispute as the eventual outcome to China's Arctic involvement, but the strategic value of the Arctic simply does not make sense for China to engage in confrontational behavior," Zhang said.

This is because "even though the Arctic Circle contains large amounts of untapped resources, as well as being a potential trade route, the full potential of the Arctic to become commercially viable seems to be at least a decade away," the Stratfor analyst said.

In the South China Sea, a resource-rich and strategic region where several nations have claims, China has ignored maritime law and a legally binding tribunal ruling by building islands there.

"If anything, Russia poses more of a threat in the Arctic to American interest."-Andrew Holland, director of studies and senior fellow at the American Security Project

Another reason why fears of dispute may be unfounded is the fact that China lacks any semblance of geographical claim in the Arctic, unlike in the South China Sea, said Andrew Holland, director of studies and senior fellow for energy and climate at non-partisan research organization American Security Project.

"China poses a challenge, not a threat, to the U.S." Holland said of the Arctic. "There has not been any confrontational behavior from China, and we don't expect to see it escalate to a confrontational stance at any point."

"If anything, Russia poses more of a threat in the Arctic to American interest," Holland said.

Polar partnerships

Through the promise of investments and trade growth, China made sure to take diplomatic steps in courting the Arctic Council.

The country entered into joint ventures with Russian gas companies, it built a large embassy in Iceland, it helped finance the Kouvola-Xi'an train in Finland, it thawed its relations with Norway and it invested into Greenland.

The influx of investments is important to Greenland's goal to become less reliant on Denmark. In exchange, China wants access to the mines in Greenland, Holland said.

The behavior echos the language used in the white paper, which is careful to emphasize cooperation (a word used 45 times in the English version) — allaying the international community's concerns about China's intentions in the polar region.

A gas derrick at the village of Sabetta in the Kara Sea shore line on the Yamal Peninsula in the Arctic circle on April 16, 2015.

Holland told CNBC that China is also talking about collaboration as a way to leverage its position in Arctic affairs with the promise of Belt and Road funds.

"China is able to provide financing for Arctic countries, their activities and expeditions," Zhang said, adding that "China may even act as a balance, to stop reliance on any single country and to encourage collective decision making."

Although Beijing may ultimately have self-interested motives, its work in the Arctic may actually prove beneficial since the Chinese are able to provide capital and joint venture opportunities to countries that lack the necessary funds, Holland said.

Still, the U.S. should step up its investments and diplomacy efforts in the Arctic in the face of China's influence challenge, Holland said. The American Security Project expert added, however, that he did not anticipate any big response from Washington D.C., as the Arctic is not high on the priority list for the country.

Other American foreign policy priorities he cited were Syria and the South China Sea: "The Arctic does not hold enough strategic value, nor is the issue pressing enough to warrant a big response from the U.S."