On January 26, 2018, the State Council Information Office of the People’s Republic of China published a white paper titled “China’s Arctic Policy.” The report outlined the nation’s overarching goal to “promote peace and stability in, and the sustainable development of, the Arctic.” China’s Belt and Road Initiative has transformed into a global paradigm of international development and governance. For China, the Arctic provides a new opportunity to expand the Belt and Road Initiative, which will undoubtedly have far-reaching consequences for the region. Specifically, China’s concept of a “Polar Silk Road” has the potential to reshape economic development and reorder the balance of power in the region.
Receding ice sheets and warmer waters have opened up around a quarter of the world’s deposits of fossil fuels, as well as a host of other minerals and resources, including gold, silver, diamond, copper, titanium, graphite, uranium and other rare earth elements. Altogether, the value of natural resources in the Arctic is estimated to exceed 35 trillion USD.
Additionally, new maritime and shipping routes could save both time and costs for transportation, which is crucial for an export-oriented country like China. Ninety percent of global trade occurs between North America, Europe, and Asia, and new Arctic maritime routes along the Northern Passage could cut transportation time by 40 percent. Currently, the Arctic is sparsely populated and lacks the conditions needed for sustained economic growth, a result of underfunded and underdeveloped infrastructure. This could all change, however, as more countries are beginning to take advantage of changing geographies. In the United States, President Donald Trump has overturned previous restrictions on exploration in the Arctic, and in Russia, President Vladimir Putin has prioritized Arctic development as a part of the country’s broader security strategy.
China’s Arctic ambitions have become clear to the rest of the world, and Beijing is already forging new partnerships with countries across Eurasia. In recent years, the Belt and Road Initiative has permeated European markets, creating new avenues for joint ventures in the Arctic region between China and European countries. In 2016, the Industrial and Commercial Bank of China announced the creation of a 10 billion EUR investment fund to help finance development projects in Eastern and Central Europe.
China’s presence in Europe has also attracted the Nordic countries, consisting of Denmark, Finland, Iceland, Norway, and Sweden. Not only do these Northern European countries border and have direct interests in the Arctic, they are also all members of the Asian Infrastructure Investment Bank, meaning that the Nordic countries and China could potentially engage in new partnerships through the Belt and Road Initiative. Finland will assume chairmanship of the Arctic Council in 2019, and has overseen new partnerships with a number of Chinese firms. Sunshine Kaidi New Energy Group, for example, plans to invest 1 billion EUR in Finnish industry by 2019. China happens to be an observer state within the Arctic Circle, and while observer states do not have voting power, closer ties to Finland are no doubt part of a larger strategic calculus of commanding a more assertive role in regional decision-making.
When examining China’s Arctic policy, it is impossible to ignore the immensely consequential partnership between China and Russia. Russia has not only been one of the largest players in Arctic development, but has also cemented itself as one of China’s most important investment partners in the Belt and Road Initiative. In fact, China’s first major Arctic infrastructure investment was in a Russian firm. In 2016, China’s Silk Road Fund acquired a 9.9 percent stake in the Russian Yamal LNG project, with the China National Petroleum Corporation assuming an additional 20 percent stake. At the time, Yamal LNG was Russia’s landmark liquified natural gas project in the Eurasian Arctic. China’s interest in Russia is centered around access to commercial shipping lanes that run through the Northern Sea Route along Russia’s coast, as well as access to liquified natural gas. China is especially interested in liquified natural gas because of rising domestic demand, and has been asserting itself in the Arctic region in part to meet that demand.
China’s Polar Silk Road, and the Belt and Road Initiative in general, is indicative of the fusion between geoeconomics and statecraft that drives Xi Jinping’s Chinese foreign policy. However, the use of economic tools to achieve geopolitical goals is risky, and the growing presence of China in the Arctic has the potential to dramatically reorder the balance of power in the region and reshape prevailing security dynamics.
Criticism of China’s Arctic ambitions stem from the fact that China is not an Arctic state and has no territory within the Arctic Circle; thus China’s desire to connect what it calls the “Northern Link” can be interpreted as a power move for geopolitical clout. For Arctic nations, greater Chinese influence presents two potential risks: an undermining of international maritime laws and potential militarization of the region.
A complex web of international laws and regional governance frameworks oversee inter-state relations, sovereignty disputes, and commercial zones in the Arctic. Over the last few years, China’s increasing maritime and naval presence has raised the possibility that Beijing may be unwilling to abide by prevailing norms. China has found itself in a plethora of naval disputes, and its response to international pressure has indicated that it would be willing, if necessary, to withdraw from maritime agreements such as the UN Convention on the Law of the Sea. However, despite Chinese assertiveness in these regions, China has kept its cool in the Arctic. Beijing has thus far adhered to international laws governing the Arctic, indicating a commitment to prevailing norms and institutions. Whether or not China abides by this in the future is uncertain, which continues to risk geopolitical stability in the Arctic.
It is important not to ignore the potential of militarization, especially given China’s track record in other security hotspots like the South China Sea. The United States possesses an Arctic base, and Russia has built up a plethora of airfields, naval ports, and military outposts in the last several years. Therefore, it is not unprecedented to assume that China too has military ambitions in the Arctic. While China has not publicly announced such plans as of yet, Chinese militarization of the Arctic could jump start another global arms race, this time including the three most powerful militaries in the world.
China’s Arctic ambitions are clear, with access to new markets and the expansion of the Belt and Road at the forefront. Overall, Chinese development finance in the Arctic has the potential to produce sustainable economic growth and development in the region. If China is able to successfully mitigate security risks and uphold international law, it will undoubtedly pave the way for a more interconnected and prosperous Arctic.