ANALYZING CHINA'S INCREASING MANEUVERS IN THE ARCTIC

•  Global warming has led to significant melting of ice in the polar regions, especially in the Arctic, where the ice coverage has shrunk by 12.6 per cent per decade between 1981 and 2010 (Figure 1). China perceives these changes as an opportunity to expand its trade routes and expand its maritime access through the Northern Sea route. The Arctic region also offers substantial energy resources, which are crucial for China as the world's largest energy consumer. Furthermore, geopolitics is another factor that makes the Arctic region so lucrative for many countries. Apart from the eight major Arctic countries (namely, Canada, the US, Russia, Denmark, Norway, Sweden, Finland, and Iceland), there are other non-Arctic countries that are also interested in the region, with China being one of the most active non-Arctic countries Thus, it is important to analyze China’s interests in the Arctic as it can potentially have major geopolitical implications as the race for acquiring Arctic sources intensifies.

Figure 1: The size/extent of the Arctic Sea ice each September since 1979

China’s Journey in Arctic Region

•  The first evidence of Chinese interest in the polar regions dates back to 1982– 83, when some Chinese scientists informally took part in the first International Polar Year. China’s interest in the polar region has grown significantly in recent years and has even gone to the extent of referring to itself as a "near-Arctic State" in its 2018 white paper on Arctic strategy. China’s interest in polar regions limits not only to geoeconomics but also connected with China’s energy security and geopolitical calculations. China’s official engagement in the polar region started in 1925, when the then-Republic of China ratified the Spitsbergen/Svalbard Treaty. In 1989, China established a polar region research institute known as the Polar Research Institute of China (PRIC), dedicated to polar research activities and monitoring of the poles. China has so far conducted 39 Antarctic scientific explorations and 12 Arctic expeditions since 1999. In 2004, China built its first research center in the Arctic region, known as Arctic Yellow River Station. China also received observer status at the Arctic Council in 2013.
• Since the beginning of its domestic economic reforms in 1978, while economic motives are the primary driver, China's engagement in the region also encompasses geopolitical goals, such as reducing dependence on potential chokepoints like the Malacca Strait, Hormuz strait and Suez Canal. Diplomacy and multilateralism are also part of China's engagement, with a desire to participate in a polar region bloc and strengthen bilateral relationships with respective Arctic countries that would have been otherwise challenging without common interests. In 2018, China's polar ambitions received a significant boost with the release of its first Arctic strategy. It positioned itself as a near-Arctic state and introduced the ambitious "Polar Silk Road" initiative.

China's Polar Silk Road Strategy

• The Polar Silk Road (PSR) initiative is an extension of China’s Belt and Road Initiative (BRI), which is a combination of overland routes analogous to the historical Silk Route and the Maritime Silk Route. The main objective of PSR, as claimed by the People’s Republic of China, is to facilitate connectivity and sustainable economic and social development of the Arctic. However, many experts believe that the primary objective of the PSR strategy is to establish China as a major stakeholder in the Arctic region, which will allow China to practice freedom of navigation, conduct scientific research, fishing, construction of pipelines and resource exploration in the region.
• The PSR strategy is China’s long-term policy aimed at 2050, when the Arctic will be ice-free for most of the year. Therefore, China has been focusing on infrastructure development and capacity building in the region under its PSR strategy. China’s State-Owned Enterprises (SOEs) have been targeting oil and gas deposits by investing heavily in these sectors through partnerships with Arctic states. China, being a non-Arctic state, depends on Arctic states to pursue its goal of establishing strong presence in polar region through foreign direct investments via SOEs. For instance, in 2013, Iceland became the first Arctic country to sign a free trade agreement with China, and now China is Iceland’s second largest importer with a share of 8.9 per cent in 2021. Similarly, in the case of Finland, the exports of China to Finland have increased by 10.9 per cent annually, from $347 million in 1995 to $4.61 billion in 2020, making China the third largest importer of Finland with a share of 9.6 per cent. The trend is similar with almost all Nordic countries, indicating China’s strong economic relations with European Arctic countries (Figure 2). China has invested more than USD 1.4 trillion in the economies of Arctic nations between 2005 and 2017, even before the PSR strategy was launched. The importance of developing sea routes by China can be understood by the fact that the distance from Northern Europe to China and vice versa is approximately 40 per cent shorter than via the Suez Canal or 60 per cent shorter via the Cape of Good Hope.

Figure 2: China’s share in trade with Nordic countries

 Figure 3: Arctic Shipping Routes

• Realizing the importance of the Northern Sea Route, China has invested heavily in research and development of the infrastructure required for the PSR initiative. For instance, recently, Sun Yat-Sen University in China has successfully completed the sea trial of a new icebreaker, ‘Zhong Shan Da Xue Ji Di.' ( 中⼭⼤学基地). China has so far built and launched four icebreakers, including the Xuelong, Xuelong 2, Haijian 50, and Haijian 3006. These icebreakers are important for China's polar ambitions, as they enable the country to navigate the icy waters of the Arctic Ocean. A successful Polar Silk Road will also provide China access to the undiscovered Arctic Shelf's 90 billion barrels of oil, 1,669 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids. Apart from natural resources and a shorter shipping route to Europe and America, an opportunity to boost diplomatic ties with Arctic countries, market access in Arctic countries, and strategic presence in the region are the other factors that encourage China to push for the Polar Silk Road.

 Geopolitical Implications of China's Growing Presence in the Polar Regions

•  Currently, more than 39 per cent of China’s total trade (2016 estimate) occurs through the South China Sea and Malacca strait which have become a strategic vulnerability for China. The Polar Silk Road will provide an alternative to the Strait of Malacca. Apart from lesser dependency, the Polar Silk Road will also reduce cost of trading with Europe as it has a shorter shipping route and hence reduced logistics costs. China already being a manufacturing hub will provide countries with much more cost-effective goods.
• The emergence of the Polar Silk Road as an alternative trade route for China could potentially disrupt existing trade patterns and affect the economies of countries in the region. As China becomes a preferred partner for trade, countries that previously relied on other trade routes may be forced to shift their focus to the Polar Silk Road, causing a decline in their trade volumes and economic activity. For instance, countries like Singapore and Malaysia, which have benefited greatly from the Malacca Strait's strategic location, may face a significant impact on their economies if China's trade via the Polar Silk Road increases substantially. Moreover, the availability of cheaper Chinese products in the Arctic region could lead to competition with local businesses, possibly resulting in job losses and other negative impacts on the economy. This could potentially create tension and conflict between China and Arctic states that perceive China's actions as a threat to their economic interests. The possibility of such confrontations could result in a further geopolitical shift in the region, with countries forming new alliances and partnerships to counterbalance China's growing influence. To counter future problems, the Arctic Council could play a pivotal role in framing rules and regulations and restricting the monopolies of any country in the region.

Challenges and Risks of China's Polar Silk Road

• The challenges and risks for China's Polar Silk Road are numerous and multifaceted. One of the biggest challenges is the harsh environmental conditions in the Arctic region, which could pose a constant threat to Chinese investments. While China is banking on reports of Arctic ice melting, unexpected environmental phenomena resulting from climate change could significantly impact the melting process in the long run. Another major challenge which China is facing is the ownership rights of the Arctic region. Various Arctic countries, including major powers like the US and Russia, have conflicting claims over the resource-rich region, making it difficult for a non- Arctic state like China to establish a strong presence in the region. For instance, in 2019, the US State Department released a statement rejecting China's claims to the Arctic, stating that China is not an Arctic state and there is no such definition as ‘near-Arctic state’ in Arctic Council’s lexicon. But Russia, on the other hand, has sought to strengthen its economic ties with China and has welcomed China's interest in the region. On the contrary to America’s reaction on increasing Chinese presence in the Arctic region, Russia’s stance has been relatively more favourable for China over the time, specifically post Ukraine crisis.
• In 2013, Russia's Novatek and China National Petroleum Corporation (CNPC) partnered for the Yamal liquified natural gas (LNG) project, of which CNPC purchased a 20 per cent stake, and later the Chinese Silk Road Fund purchased another 9.9 per cent stake in the Yamal project, increasing the total stake of Chinese ownership to 29.9 per cent. Apart from geopolitics, environmental impact in the region is another big challenge for China’s PSR initiative. Increased shipping activity in the Arctic has further contributed to climate change, leading to higher emissions of greenhouse gases. Shipping emissions in the Arctic could increase by 150-600 per cent by 2025, according to International Council on Clean Transportation. Additionally, infrastructure development like ports and roads could lead to habitat loss for Arctic species.

Conclusion

• China’s Polar Silk Road strategy is a long-term strategy to fulfill its energy needs in the future. It also provides China with huge trade opportunities and paves the way to reduce its dependency on strategic chokepoints. Apart from economic benefits, PSR will also pave the way for China to boost its diplomatic ties with countries in the Arctic region and establish its influence in the region. The major issue that China will face in the region is its participation the governance, as China is not an Arctic state and no existing member is keen to an additional claimant in the region. To address this issue, China has already begun to assert itself as a near-Arctic country and has strengthened diplomatic and economic ties with Arctic countries to become part of the bloc, but there is still a long way to go for China to establish presence in the Arctic region. The Polar Silk Road is thus a strategy which could propel China from a near-Arctic state to an Arctic state.