MAY 6, 2016
While China’s economic and geostrategic interests are more commonly associated with such bodies of water as the South China Sea or the East China Sea, the Arctic represents another area where Chinese maritime interests and investments have been growing. In 2013, China signed with Iceland its first free-trade agreement with a European nation and is involved in an oil exploration project, with Norway and Iceland, in the Dreki area. Chinese firms areprospecting for copper in Greenland and have considered investing in iron ore mining.
China’s Arctic ventures are quickly multiplying. The (mostly) state-owned PetroChina owns 20 percent in Russia’s Yamal LNG project, which will bring Siberian gas to Asian markets through the Northern Sea Route. In 2013, Rosneft and China National Petroleum Corporation signed a deal for joint exploration and production in the Barents and Pechora Seas. Further south, the two countries also agreed to build a 4,000 kilometer gas pipeline (baptized “Power of Siberia”) from Siberia to the border with China—a project estimated to cost $21 billion. China is not just interested in Russia’s energy resources, but also in its coastline: 2013 saw the first Chinese merchant ship use the increasingly navigable Northern Sea Route that promises to connect Asia to Europe in fewer days than through the Suez Canal, and without the hazards commonly found in the Malacca Straits. Russia stands to benefit directly, since it collects fees for the right to transit as well as to use its icebreakers for escort.
Such endeavors must be seen in the context of warmer relations between Moscow and Beijing that go far beyond the Arctic. Russia is a key member of the Shanghai Cooperation Organization, a political, economic, and military forumspearheaded by China that should soon count India and Pakistan among its members. Their bilateral trade has increased by an estimated 37 percent between 2002 and 2008 and in 2011 the Russian and Chinese presidents set a bilateral trade goal of $100 billion by 2015. Politically, they share the same distaste for outside intervention in states’ internal affairs and have found themselves in full agreement at the United Nations Security Council on such issues as Libya, Zimbabwe, Myanmar and Sudan. Between 1974 and 2008, the two countries cast similar votes at the UN General Assembly more than 70 percent of the time.
The crisis in Crimea and the war in Eastern Ukraine have brought Russia closer yet to China. As sanctions closed access to key financial markets, suspended joint projects, and dried out investments from the West, Russia has “pivoted” to China hoping to make up for some of these losses.
Russia’s rebalancing toward China is particularly important in the Arctic, a region in which Russia has great ambitions, but also struggles with major vulnerabilities. While the Northern Sea Route and Arctic energy resources represent clear strategic advantages for Russia, they have so far not provided the expected economic windfall. The route is still treacherous to navigate and too uncertain to attract shipping companies whose clients expect just-in-time deliveries. Low commodity prices have made it unrealistic for energy companies to explore and exploit areas that are hard to reach and unforgiving. Western sanctions have pushed prospects for Russia’s Arctic development even further into the background. Key energy exploration projects with European and American companies have been called off and 68 percent of the offshore Arctic drilling equipment Russia needs is subject to sanctions. In this context, Russia needs China as an investor, as a technological partner, and also as a key consumer of energy to support its flagging, energy-dependent economy. If China can be all these things, then the West should worry that its sanctions will be of lesser impact on Russia’s ability to pursue its investment projects and fail to compel it to adopt a more cooperative stance in Ukraine.
Yet in many ways, the Sino-Russian relationship remains very much a marriage of convenience. While describing China as a partner in its new national strategy, Russia is also actively planning for the possibility of war with China, as it has for decades. This is particularly clear in Russia’s Eastern Military District, where Moscow maintains military capabilities for major ground operations, provides advanced equipment, and organizes the largest military exercises.
Fear of China’s intentions and capabilities are not circumscribed to the Far East, however, and Russia remains wary of seeing too much of its southern neighbor in the Arctic as well. As the polar ice cap melts, the natural line of defense that protected Russia’s northern coast is disappearing too, leaving one of Russia’s most strategic areas exposed. The Russian Arctic is home to the Northern Fleet, Russia’s nuclear deterrent, as well as important energy infrastructure. Russia sees these critical infrastructures as potentially vulnerable to state-sponsored or terrorist attacks. The opening of the Northern Sea Route also presents environmental risks from accidents and oil spills that would threaten its northern communities, which are not insignificant: with 300,000 inhabitants, Murmansk is the most-populated city north of the Arctic Circle.
Russia historically has tried to limit the involvement of non-Arctic states. In February 2015, Russian Defense Minister Sergey Shoigu made clear his irritation at how some non-Arctic nations “obstinately strive for the Arctic.” Moscow was long reluctant to include observer states in the Arctic Council and only relented in 2013 (China is now one such observer state). Its Arctic region has special ideological significance for Russia, as Moscow sees it as a unifying theme for Russians, a resource-rich bounty, and a source of geopolitical leverage.
It is not difficult, then, to see why Russia is reluctant to see a formidable rival show interest in a region that means so much. China’s promotion of freedom of circulation in the Arctic and its view that the Northern Sea Route is international waters, have clashed with Russia’s vision of the route as its internal waters. In 2012, Russian border guards fired at, disabled, and boarded a Chinese vessel illegally fishing in the Russian exclusive economic zone. It remains to be seen whether a similar incident could happen today, now that Russia is in a much more desperate situation and needs China’s support. Yet, Russia has also made a principle of reacting strongly to incursions near its infrastructure and its coast, as it demonstrated by throwing in jail the Greenpeace activists who attempted to climb the Prirazlomnoye oil rig in the Pechora Sea in September 2014.
And encroachments are becoming more likely as China is building its Arctic capacity and presence. Its icebreaker Xuelong (Snow Dragon) frequently travels to the Arctic and Antarctic regions and a second one is under construction. China is also investing in ice-capable planes and helicopters. The first time it was spotted having a military presence in the Arctic was in September 2015, when five vessels from its Navy coincidentally sailed in the Bering Sea while President Barack Obama was visiting Alaska. China’s presence may also materialize in other sectors, such as distant-water fishing (which has grown tremendously over the past few years in Antarctica) and mining, particularly in Greenland, where Chinese firms already have started exploring for copper.
Yet despite the posturing and the investments, the Arctic is not, at this point, a priority for China. China has no announced Arctic strategy, even though it certainly has an Arctic policy. It has favored cooperation in the Arctic so far and there is no indication it intends to revisit that position in the short term. In that regard, the members of the Arctic Council played a very smart move in 2013 by giving it observer status. China, which had been promoting the view that the Arctic should be a global common, now stands in solidarity with an organization that has committed to abiding by the U.N. Convention on the Law of the Sea, which, overall, largely benefits Arctic coastal states. Finally, unlike Russia, China has no ideological or nationalist commitment to the Arctic: it will go where its economic and security interests are and these interests are limited at the moment in the Arctic. The complexity and uncertainty of Arctic travel makes frequent use of these routes by China’s merchant ships unlikely in the near-term. And while ice is thawing, extracting oil and gas from the Arctic remains, at this point, prohibitively expensive and technologically difficult.
The Sino-Russian relationship in the Arctic is fragile. As with most marriages of convenience, changes in circumstances can alter the cost-benefit calculation of either partner and lead to a renegotiation of the terms of the relationship, if not a breakup. In the short term, the Sino-Russian relationship could deteriorate if an energy partnership with China in the Arctic proves a poor replacement of the West,. For instance, China cannot help with technology for offshore drilling, which was largely provided before 2014 by Norwegian companies that have since pulled out of joint projects with Russia. Finally, as both Russia and China are experiencing economic slowdowns —with important consequences on their bilateral trade — opportunities for cooperation may decrease as well.
Prospects for a mutually beneficial relationship are even more uncertain in the medium- to long-term. The Northern Sea Route will become more and more accessible and no easier to control, making Russia increasingly nervous about a foreign presence along its coast. Russian or Chinese ties with the West may warm up, reducing their incentives to find a friend in each other. And China may distance itself from Russia if Russia becomes more aggressive in the Arctic, threatening Chinese investments and access. This could happen if Russian President Vladimir Putin decides to respond forcefully to some perceived encroachment from the West in the Arctic, or if he responds with a coup de force to a negative outcome to Russia’s submission to the U.N. Commission on the Limits of the Continental Shelf, which overlaps with similar claims from Denmark and Canada.
As Arctic partners go, China is probably one of the last that Russia would choose if given a choice. As Beijing slowly but steadily invests in a region that clearly represents a long game, a lot can happen to derail a relationship that is built on little more than fleeting mutual interests.
Stephanie Pezard is a political scientist at the nonprofit, nonpartisan RAND Corporation. 1st Lt Timothy Smith is a graduate of the U.S. Air Force Academy and a doctoral candidate at the Pardee RAND Graduate School.
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