One Belt, One Road, and Now One Circle – Analysis

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(Image Courtesy: Daily Outlook Afghanistan)

Last August, a Russian-owned LNG tanker with a unique reinforced steel hull became the first vessel to travel from Norway to South Korea, through the Northern Sea Route (NSR) along the Russian Arctic coast, without the aid of an ice-breaking vessel, and that too in merely 19 days. US president Trump, within his first 100 days, signed an executive order calling for a review of the former president’s plan that blocked offshore drilling in the polar regions. Finland and Norway are studying the viability and profitability of an Arctic Railway project that would connect the Nordic region to the Arctic coast, offering pathways into Europe all the way to the Mediterranean Sea, and along the Russian NSR to Asian markets.

China, too, has staked claim. A non-Arctic littoral — or, as it calls itself, a “Near-Arctic state” — China released its official Arctic policy at the end of last month, coming on the heels of increasing activity and visibility in the region in question that is raising eyebrows and anxieties. The white paper declares China as “an important stakeholder in Arctic affairs” and reveals an expanding playground in which China sees itself as a legitimate actor. Retreating ice in the Arctic and its repercussions — effect on local climate and environment and domestic agriculture and marine industries, waterway and resource development in the Arctic — are matters “vital to the existence and development of all countries and humanity, and directly affect the interests of non-Arctic States including China.”

Motivations

These interests are both economic and strategic. Reduced shipping costs given shorter routes between Asia and Europe, as compared to the traditional Malacca Strait and Suez Canal route, benefit foreign trade and strengthen energy security for China. Indeed, as the policy document states: “The utilization of sea routes and exploration and development of the resources in the Arctic may have a huge impact on the energy strategy and economic development of China, which is a major trading nation and energy consumer in the world.” 90% of China’s trade is seaborne, so even small differences in time taken could mean big savings and greater profits. For instance, it normally takes 48 days for container ships to reach Rotterdam from China. Passage through the Arctic would reduce Europe to Asia distances by anywhere between 20% to 40%. There are even time and cost savings if ships set course from southern Chinese ports — the distance between Hong Kong and Northwestern Europe is still shorter by as much as 14%.

An important, inter-related factor is China’s ever-enhancing shipping power and increasing role in shipping finance. China’s state-owned shipping company, Cosco, is the largest shipping company outside of Europe, and China today lays claim to the third-largest merchant ship fleet in the world. This is reflective of not only the shipping industry’s importance to China’s economy, but also the key role China’s growing merchant fleet and shipping finance industry are set to play in the rolling out of China’s maritime trade and infrastructure vision — including in the Arctic — in a bid to better control its maritime trade.

The Arctic also allows transportation through a more politically peaceable environment and is thus a more secure alternative to bottlenecked waters prone to piracy and which are dominated by a strategic competitor. Close to 70% of China’s energy needs are met by seaborne imports. The lure of undiscovered oil and natural gas resources — anywhere between one-fifth and a quarter of untapped fossil fuel resources, potentially altogether worth as much as $35 trillion — throw up alternative energy sources that China can tap and thus bolster its energy security. The US Geological Survey pegs 30% of the world’s undiscovered natural gas and 13% of undiscovered oil reserves in the Arctic. Not to forget what are thought to be considerable deposits of mineable minerals — gold, silver, diamond, copper, nickel, titanium, graphite, uranium — and, crucial for the manufacturing of high-tech products like electric cars and smartphones, rare earth elements, such as lithium and cobalt. Clearly at play is a longer-term vision to secure future trade routes to markets and resources.

The other strategic motivation implied is of course the desire to play a bigger role in trans-regional and global issues — and not just as a permanent member of the UN Security Council, a fact that is included in the policy document as a rationale for China jointly shouldering the cause of peace and security in the Arctic, or under a vision of “shared future for mankind,” also liberally invoked throughout the document. The Arctic is a new sphere — previously inaccessible — where China wants to play a leading role, “since the traditional areas are already taken by the old powers,” as notes Jin Canrong at Renmin University.

Critically, given the continued reality of climate change in the Arctic, the development of this region will see new technologies and ‘economic biomes’ come to the fore. This will not only catapult the Arctic as a major theatre of activity — economic and geopolitical — in the coming future, but will also define science and sustainability in the 21st century.

Engagement

Given this context, it is hardly surprising that the Chinese white paper on the Arctic advances a “Polar Silk Road” under the ambit of its broader Belt and Road Initiative (BRI), considering the starring role the BRI is already playing in advancing “Xiplomacy” (think the Two Centenaries and the “Chinese Dream”). At first glance, the Chinese mandate primarily encourages its enterprises to develop shipping routes, including infrastructure construction, conduct commercial trial voyages, and operation of these shipping routes. Other areas, such as energy cooperation, blue economy, and tourism, are not directly linked to the Polar Silk Road. But these are already existing fields of Chinese engagement under the BRI. Digital connectivity is also specifically mentioned. China is likely to use the BRI as a key vehicle to fulfill its stated policy goals (“to understand, protect, develop and participate in the governance of the Arctic”).

While Beijing has been active in the Arctic since it bought its first icebreaker from Ukraine in 1994, recent years have seen an uptick in Chinese engagement. Not only has China’s only icebreaker now navigated the three major shipping routes through the Arctic, a Chinese ship carrying 19,000 tonnes of cargo became the first container vessel ever in 2013 to transit the NSR to reach Rotterdam from Dalian — and that too in a month’s time compared to the 45 days it normally takes through the Suez Canal. China also became an observer in the Arctic Council, the highest-level body governing the Polar North, in 2013. In fact, Chinese president Xi Jinping even referred to China as an “upcoming ‘polar-region power” during a state visit to Australia in 2014.

Research of navigational routes, as well as that of climate and environmental changes in the Arctic, and exploration of the region’s potential resources are part of the ambit of this blue economic corridor. (An earlier paper by the State Oceanic Administration referred to the Northwest Passage as a “northern link” in BRI.)

On the ground, Russia’s NSR is already a strategic area of cooperation between China and the largest Arctic state as part of the BRI — Xi and his Russian counterpart Vladimir Putin signed a joint declaration in July last year that invoked an “Ice Silk Road,” under which the NSR Route will be developed. (But note that the Chinese Arctic white paper does not highlight the NSR or any particular Arctic route as the preferred shipping route Chinese companies will pursue.) The Yamal LNG project is the primary and largest Sino-Russian venture in this regard, which is expected to supply China with four million tonnes of LNG per year, transported through the NSR and reaching China in just 15 days, less than half the time it would take using the traditional shipping route around Europe and through the Suez Canal. The Silk Road Fund holds a 9.9% stake, and the China National Petroleum Corporation, 20%; Chinese banks have partly funded the project; and 60% of the equipment has been contributed by Chinese companies. Cosco is all set to send six ships to transport equipment, steel, pulp, and other items along the NSR. Engagement in Russia’s Far East, including in oil and gas fields; construction of ice-class cargo vessels; and a deepwater port on the northwestern Russian coast are Sino-Russian projects on the cards.

At the same time, China has also approached other Arctic littorals. While none of the other Arctic states are officially part of the BRI, they are members of the Asia Infrastructure Investment Bank (thus firmly within the scope of the BRI) and are actively engaged in Arctic projects that are likely to be subsumed under the BRI umbrella. For instance, Chinese mining companies are active in the Canadian Arctic and Greenland. Last year saw China particularly amplify its interaction with Finland, which is currently chair of the Arctic Council until 2019. Xi became the first Chinese president to visit the Nordic state in 22 years. The first China-Finland iron silk road began operating last November, the first railway to link China with the Nordic region. Both are jointly building a second Chinese icebreaker, to be completed in 2019. And recently, China began discussing a 10,500-km fibre optic across the Arctic to create the fastest digital highway between Europe and China as early as 2020. The proposal involves Finland, Norway, Russia, and Japan. Xi has even reached out to Alaska, making an unexpected stop on his way back home post the China-US bilateral summit in April last year. There, he was apparently offered “a generation’s worth” of LNG supply by the governor.

BRI and international law: Convergence or clash?

China’s Arctic policy — insofar as the ambition and the policy goals are concerned — is not a surprise. The inclusion of the BRI as a means of fulfilling China’s stated aims in the Arctic necessarily means the appearance of similar parameters and principles — and indeed, “respect,” “cooperation,” and “win-win result” undergird Chinese activity in this specific geography as well. “Sustainability” is understandably given greater weight in this policy document.

In practice, what does pursuing an Arctic policy through BRI as a primary vehicle mean? The Chinese trade and infrastructure initiative has already gained nomenclature as the “hardware” of Chinese — pick one — hegemony/power projection/Sino-centric Asian and world order. As such, the Arctic, too, is being hardwired into a hub-and-spokes architecture, with China at the centre, that can then be supplemented with policies, norms, and practices. Indeed, as political scientist Michael Byers has said, “They (Chinese companies) are starting to do in Arctic what they are doing elsewhere: they are investing in infrastructure, they are buying foreign companies, they are competing for leases in oil and mineral extraction.”

Against this context, the repeated stress on abiding by international law is noteworthy in the policy document. Given that China is a non-Arctic state, it has clearly used the principles of international law to justify an uncontested and unbarred entrance into the Arctic region: “States from outside the region do not have territorial sovereignty in the Arctic, but they do have rights in respect of scientific research, navigation, overflight, fishing, laying of submarine cables and pipelines in the high seas and other relevant sea areas in the Arctic Ocean, and rights to resource exploration and exploitation in the Area, pursuant to treaties such as UNCLOS and general international law.” The reiteration that Arctic shipping must be conducted in accordance to international law further seems logical when taking into account existing territorial disputes among the Arctic littorals — such as the Northwest Route, which Canada sees as its internal waters, but the US claims as an international waterway. Clearly, for China to pursue its interests in this region, an understanding of Arctic waters as international commons — and thus freely navigable — is critical. Such an interpretation is possible through the UNCLOS framework.

China’s implementation of the BRI on the ground and the intended use of the BRI to carve a different world order (“all roads lead to Beijing”) stands as a counterpoint to the understanding of the Arctic as an international commons where, as indicated by the policy document, China will abide by all international legal instruments, treaties, and mechanisms of pertinent institutions, like the International Maritime Organization. Indeed, as Chinese and polar politics specialist Anne-Marie Brady states, “China’s focus on becoming a polar great power represents a fundamental reorientation — a completely new way of imagining the world” — and the polar region is one new strategic playground where China will build and prove its burgeoning power. Will this alternative world vision give appropriate right of way to international law and treaties? The short shrift given to UNCLOS closer home in the South China Sea could very well bely any true commitment on the part of China to accepted norms beyond, perhaps, an opportunity to allay concerns of revisionist designs.

Responses to China’s official Arctic policy run to both extremes. Some are crying wolf and calling it a cover for a more subversive strategy; others believe China is only stepping up as a responsible nation, and any irresponsible activity will undermine its credibility – and that the policy itself is a clear statement against which to measure its behaviour. While China’s capital is in high demand among the Arctic states as well — infrastructure investment needs are to the tune of USD 1 trillion over the next 15 years — commercial shipping through the Arctic is unlikely until at least 2040 given existing environmental, technological, and financial challenges. Matters of environment and sustainability, navigation security, and dual-use infrastructure will become salient in the meantime. Chinese behaviour and actions will ultimately determine whether BRI implementation practices converge with the upholding of international law that China promises in its official Arctic policy.

(Source: Observer Research Foundation)

Sea News, March 6