Business
Moscow as Beijing’s ‘Useful Partner’ in the Arctic Region
By Sergey Sukhankin, EDM 20/519
May 22, 2019 - 10:43:11 AM

Speaking at the Belt and Road Forum, in Beijing (April 25–27), President Vladimir Putin stated that Russia is “considering a merger between the Northern Sea Route [the segment of the Northeast Passage running along the Russian coast] and the Chinese ‘Maritime Silk Road’ initiative,” which will result in the “emergence of a global competitive route, connecting Northeast, East and Southeast Asia with Europe” (Vpk-news.ru, April 27). Several weeks earlier, during the fifth international “Arctic: Territory of Dialogue” forum (April 9–10), held in St. Petersburg, Putin stated that the authorities are working on a new framework to govern the development of the Russian Arctic until 2035. He stated that this economically depressed and infrastructure-poor region might experience an economic surge thanks to an influx of foreign financial capital, which could be attracted with the right mix of necessary legislative amendments (YouTube, April 9). In turn, Dmitry Kobylkin, the minister of natural resources, hinted that Russia might soon claim an additional 1.2 million square kilometers of continental shelf in the High North and could, given the domestic lack of necessary technologies, consider allowing foreign companies to work in this area (Vpk-news.ru, April 23). Given the strained economic and political relations between Russia and the West, the main addressee of these calls for foreign investment is arguably China.

The narrative of a “privileged strategic partnership” with Beijing, actively promoted since 2014, has largely replaced previous, much less optimistic, Russian commentary on the subject (Sibirmi.ru, June 28, 2012). For instance, in his book Battle for the Arctic (2010), Artur Indzhiev openly stated that China was “one of those players primarily interested in promoting an idea that Russia has no resources and technologies to explore the Arctic… So [the Chinese] are dreaming about trilateral joint enterprises to extract our [Russian] natural resources with the application of [Chinese] financial capital and Western technologies…”

Unlike Russia, Norway, Finland, Sweden, Denmark, Iceland, Canada and the United States, China is not an Arctic state and thus cannot be a full-fledged regional stakeholder (despite its observer status in the Arctic Council). As such, Beijing claims “[W]e are not meddling in [the Arctic], yet we will not stay aloof” (Polit-mir.ru, February 6, 2018). Chinese strategy in pursuing its key objective—gaining access to the Arctic’s natural resources and pathways—is based on a combination of various elements, ranging from property/territory acquisition to cultural diplomacy, and bilateral deals. Chinese rhetoric, which has not always been soothing and conciliatory, has dramatically changed over time in response to growing concerns both in the West and Russia (Regnum, June 6, 2017).

Beijing’s first attempt to use “economic leverage” as a lure in the Arctic was made in the mid-2000s, when Chinese billionaire Huang Nubo expressed willingness to acquire nearly 300 square kilometers in northern Iceland to build “golf courses” (Komsomolskaya Pravda, August 30, 2011), and he later attempted to purchase a similarly large plot in tiny Kirkenes, in the Norwegian Svalbard archipelago (Barents Observer, May 23, 2014). Moreover, in 2016, Chinese businessmen tried to buy a former Danish military base (closed down in 2014), causing alarm among Western governments (Gazetaprotestant.ru, February 7, 2018). The growing concerns in European and North American capitals forced Beijing to reconsider its strategy. Over the past decade, Chinese businessmen/entrepreneurs, diplomats and politicians have paid multiple visits to Denmark, Sweden, Iceland (Nord-news.ru, October 2, 2012) and Finland, offering exceptionally lucrative business deals. Nevertheless, local political considerations and the North Atlantic Treaty Organization’s (NATO) own growing focus on the Arctic reduced China’s room for maneuver in the region.

Russia, on the other hand, presents a different case: its ongoing confrontation with the West, lack of economic resources and Moscow’s embrace of the “turn to the East” policy (see EDM, December 14, 2018) have created strong incentives to pursue Sino-Russian cooperation in the Arctic. That said, despite the high hopes Russia has pinned on China, the reality paints a somewhat less rosy picture. According to Andrey Ostrovskii, the deputy director of the Institute of the Far East of the Russian Academy of Science, Russia is increasingly turning into a mere source of raw materials for China: today, 85 percent of China-bound Russian exports are mostly unprocessed natural resources. Ostrovskii sees the Chinese-Russian economic partnership as “somewhat odd”: despite visible growth (currently $108 billion), bilateral trade is lower than China’s trade balance with Vietnam ($148 billion), even though “[Russo-Chinese] political relations are said to be much better than between [China] and Vietnam.” Ostrovskii has also expressed a great deal of scepticism about Russian-Chinese partnership in the Arctic, which will require “huge financial expenditures” that could be “split 50/50 […] but Russia has no money for this” (Svpressa.ru, April 27, 2019). Indeed, despite a great deal of hype (especially from the Russian side), the much-celebrated Yamal liquefied natural gas (LNG) plant (Sabetta, the Yamal Peninsula) has attracted waves of criticism over the last few years. The project has been panned as unprofitable (Vedomosti, Aril 8, 2019) and for allegedly serving the interests of foreign, not domestic enterprises (RBC, December 11, 2017; Komsomolskaya Pravda, December 11, 2018).

Meanwhile, some Russian experts have begun to express concern that China might (in the future) be willing to establish military bases of its own along transit corridors built as part of its ambitious Belt and Road Initiative. Indeed, a Chinese military outpost appeared several years ago in Djibouti (as part of the prospective maritime route of the Silk Road). According to Russian military expert Vasily Kashin, the Djibouti base “should be seen in the context of Chinese growing naval-military presence in the Indian Ocean and the Mediterranean Sea, suggesting that the role of China in global and regional security will be changing” (Nezavisimaya Gazeta, May 3). The Arctic region should be looked at in the same context—i.e., Beijing’s interest in the Northern Sea Route and its role in linking China with the European market.

It seems that while Russia is trying to justify its “turn to the East” policy course, Beijing is using Russia to achieve its own (and, from Moscow’s point of view, presumably contradictory) strategic objective—becoming a stakeholder in the Arctic region.