Assistant Professor, Department of Political Science, University of Copenhagen, Denmark
Visiting at: Tongji University
Period: 1 month
Research Theme: Evolving trilateral Greenland-Denmark-China relations
Dr Camilla T. N. Sørensen, Assistant Professor at the Department of Political Science, University of Copenhagen, with research expertise on Chinese-Russian cooperation in the Arctic, took opportunity of CNARC Fellowship program to conduct a one-month fellow visit from January to February in 2017 at the Centre for Polar and Oceanic Studies, Tongji University in Shanghai China.
Texts below are the summary of an academic report of CNARC fellowship that Dr. Camilla T. N. Sørensen has submitted.
CNARC Fellowship Report, Emerging Chinese - Russian Cooperation in the Arctic, Possibilities and constraints
Cooperation on developing energy resources and sea routes in the Russian Arctic at first glance looks like an objective where Russia and China could work closely together and have complementary interests. Russia is one of the world’s largest energy exporters and China is one of the largest energy importers. The Russian Far East and the Russian Arctic are rich in energy resources and minerals yet lack infrastructure, capital and technology, which are all areas where China has something to contribute.
In the past decade, China has increased its focus on and engagement in the Arctic. Meanwhile, Russia increasingly focuses on developing the Russian Arctic as a way to strengthen its economic base, which primarily worked with European countries to develop its energy resources. However, long-term trends in energy markets, stagnation in the European market and the recent conflict in Ukraine resulted in Western companies’ involvement in energy projects in the Russian Arctic. This situation motivated Russia to look even more to Asia for potential investors and technology partner.
Looking at the overall picture and especially at the joint statements and rhetoric coming out of Russia and China in recent years, it can be said that relations between the two countries are at an all-time high, such as the China–Russia Joint Statement on Strengthening Global Strategic Stability in 2016.
However, China and Russia do not agree on how to deal with this growing US pressure, and there is still a high degree of strategic mistrust as well as clear tensions and differences between them in terms of specific core interest areas. And there are still not many concrete results, either in general terms or in relation to the Russian Arctic.
This report examines the evolving roles, interests and activities of China and Russia in the Arctic, using these analyses as a departure point for detailed discussions of the possibilities for and constraints on stronger cooperation between the two countries in the region.
2. The evolution of China's Arctic policy since 2010
Recent years, China has clearly expressed a desire to be involved in the development of Arctic affairs and to be acknowledged and included as an ‘Arctic stakeholder’ . In the Third Arctic Circle meeting in 2015, the Chinese Foreign Minister, Wang Yi, further described China as a ‘near Arctic state’ and referred to China’s long history of Arctic interests stretching as far back as China’s signing of the Spitsbergen (Svalbard) Treaty in 1925.
The drivers of China’s growing interests in the Arctic
The drivers of China’s growing interests in the Arctic can be expressed in the following four aspects.
(1) China is taking an active part in the general science diplomacy in the Arctic, such as Aurora Observatory in Iceland and Russian–Chinese Polar Engineering and Research Centre, contributing to strengthening the image of China in the region and Chinese relations with the Arctic states, thereby gradually building trust and integrating China into Arctic governance structures.
(2) The second driver behind China’s growing activities in the Arctic region relates to economic interests and concerns about securing and diversifying its energy supply. China has built strong economic partnerships with Iceland, especially relating to the fishing industry, aquaculture development and renewable energy. Also, Norway is a significant state for China because of its resources, Arctic sea routes and high-level technologies.
(3) The sea routes become the third important Chinese interest in the Arctic region. Arctic sea routes could give China alternatives to the longer and strategically vulnerable routes currently in use, especially addressing its reliance on the Malacca Strait. The state-owned shipping company China Ocean Shipping is planning to launch regular services through the Arctic to Europe by way of the Northeast Passage.
(4) China is interested in the Arctic region owing to its importance in relation to global and regional governance and institution building. On the one hand, China respects for the inherent rights of the Arctic states as well as the ‘overall interests of the international community’, presenting itself as a collaborative and attractive partner in the Arctic. On the other hand, China will be more actively engaged and will seek to play a bigger role in the near future. For example, China is developing its own categories, such as ‘near Arctic state’.
China’s role, interests and activities in the Arctic are growing, although overall China is still careful and hesitant. China often referring to its scientific interests and interest in the new sea routes rather than the investment. This approach could prove difficult to maintain for China if economic and strategic cooperation and coordination with Russia inside and outside of the Arctic region continue to grow. Russia does not have the same image concerns and, in contrast to China, seems to have no reservations about directly challenging and confronting the USA.
China’s views on and relations with Russia in the Arctic
China acknowledges that the support of Russia is needed especially in relation to its broader ambitions to ensure a seat for itself at the table when future Arctic governance and institutional arrangements are debated and developed, for example in the Arctic Council. China is well aware of Russian hesitation about including non-Arctic states in Arctic governance affairs, and therefore China has generally sought to downplay its political and strategic ambitions in the Arctic and has stressed scientific interests and scientific and economic partnerships. However, China also seeks to take advantage of current Russian geostrategic and geo-economic vulnerabilities and of Russia’s need for China as a partner to develop the Russian Arctic to gradually strengthen its presence and relationships in the Arctic.
In relation to more concrete Chinese interests in ensuring access to energy resources and sea routes in the Arctic, Russia also stands as the ‘unavoidable’ partner. China’s demand for energy resources and minerals continues to grow, and Chinese SOEs are constantly encouraged to identify and establish new areas for exploration and extraction. However, Chinese Arctic scholars emphasize the importance of avoiding an intensification of US–Russian tensions. They fear a return of what they call ‘cold war mentality’ and the ‘melon effect’, whereby sovereignty issues due to intensified US– Russian tensions start playing a stronger role in dividing the Arctic between the Arctic states, isolating non-Arctic states, which in turn will make Chinese activities more difficult.
3. Russia's Arctic aspirations
According to President Vladimir Putin, the ‘Arctic is a concentration of practically all aspects of national security— military, political, economic, technological, environmental and that of resources’. Recent Russian official strategy papers identify the development of energy resources and shipping routes as being the country’s main policy interests in the region. Despite the fact that Russia has tried to diversify its energy partnerships, challenges like fluctuation on world energy markets, geopolitical confrontation with the West and the increasingly difficult economic situation in Russia underlined Russia’s need to diversify.
The Russian Arctic as a resource base for the 21st century
The Russian economy is largely dependent on revenues from oil and gas, and the geography of production has been shifting to new regions, including the Arctic. Development of the offshore and onshore resources of the Russian Arctic differs significantly. Whereas Russia has a considerable history of developing oil and gas in the northern regions onshore, the offshore projects are a new area of exploration. More than 90 per cent of circumpolar offshore gas and more than 45 per cent of circumpolar oil is concentrated in the Russian sector of the Arctic shelf. However, the Arctic shelf is largely unexplored because Russian companies are lacking investment and technologies. Therefore, Rosneft and Gazprom focused their efforts on finding partners.
The Northern Sea Route
The second goal of Russia’s Arctic strategy is to develop the Northern Sea Route (NSR). Shipping along the NSR has been steadily increasing, which is closely linked to domestic shipping and the hydrocarbon resources in the AZRF and on the Arctic shelf. The Russian Government used Article 234 of UNCLOS on ice-covered areas to establish its own rules of navigation along the NSR as well as established the Administration of the Northern Sea Route, clarifying the legal status of the NSR. One of the main current obstacles to the full-fledged functioning of the NSR is the absence of necessary infrastructure, and federal projects aimed at developing the NSR and infrastructure remain on paper. To date, the only viable project is construction of the seaport of Sabetta on the Yamal Peninsula.
Is Russia ‘turning East’ in the Arctic?
A series of factors, such as the US shale gas revolution, the EU’s plans to prioritize the diversification of gas suppliers and the fall in oil prices, have made it more difficult for Russian energy firms to finance new projects. The main decisive factor behind Russian companies’ need to diversify their partnerships has been geopolitical tensions between Russia and the West in the wake of the Ukraine crisis. After that, the USA and EU introduced sanctions against Russia that had significant implications for the transfer of technologies. Consequently, Russian companies had to stop loads of geological exploration of the Arctic shelf and the Kremlin’s openness to non-Western, participation in Russian energy projects has increased. Asian countries have always been seen by Russia as potential destinations and consumers of the NSR. However, Russian officials are now talking about attracting Asia not just as a user of the NSR but also as its codeveloper together with Russia.
4. Recent developments in overall Chinese - Russian cooperation
Drivers behind and limits to Chinese–Russian strategic rapprochement
Although China and Russia increasingly strengthen cooperation on several international political and security issues, a strategic alliance includes mutual military assistance and collective defense commitment is still not expected.
Besides a strong interest on both sides over energy resources and investments flows, Chinese and Russian government have different attitudes when facing with the USA. Compared with ‘loud dissenter’ Russia, China does not challenge the USA directly. The reason is that Chinese leaders need to get along with the USA—China’s most important trading partner. Further, China also needs to coordinate and cooperate closely with the USA to solve domestic challenges.
As a way to reassure Russia about China’s so-called win–win approach, President Xi Jinping suggested integrating China’s high-profile ‘One Belt, One Road’ (OBOR) initiative, connecting China with vital European markets via train routes, for example, central Asia and Russia—with Russia’s Eurasia Economic Union (EEU) initiative. But China is still cautious and sought to stay out of ongoing international security crises and conflicts where Russia is involved.
The reasons to explain the limits to the Chinese–Russian strategic rapprochement can be summarized like the mistrust rooted in historical grievances and strategic cultural differences and the growing concerns particularly on the Russian side about the long-term implications of the ongoing shift in relative power.
It seems that Chinese–Russian strategic relations not as an long-term alliance but as a flexible strategic partnership in which the two partners pragmatically seek to tactically identify mutual strategic interests and ways to coordinate and cooperate on them on an issue-by-issue basis.
Russian oil and gas cooperation with China
Since 2014 the Kremlin has been eager to show that it has viable economic and political alternatives to the West, including in energy cooperation with China. However, Russia’s turning east progressed very slowly and brought only limited results.
As for the oil cooperation, although Rosneft’s rapid expansion promoted the relatively smooth and streamlined process of getting agreements with the Chinese and pushing the Russia–China projects through Russian bureaucracy, cooperation has slowed down since 2014. The reason is that Chinese companies have proceeded with caution since they have a very strong bargaining position and other Asian companies like Oil Indi have joined in the upstream projects.
When it turning to the gas cooperation, gas delivery remained on paper owing to disagreements over price. Facing sanctions and increasing international isolation, Russia has needed to prove that it had technological and investment alternatives for Russian oil and gas companies. One of the immediate results of this is that Gazprom and the CNPC signed a 30-year contract for the supply of natural gas on the eastern route through the Power of Siberia pipeline in 2014. However, there is no progress on finalizing it—the construction of the Power of Siberia pipeline delays and Chinese commercial banks are very cautious about opening credit lines for Russian companies.
5. Recent developments in Chinese - Russian cooperation in the Arctic
Oil and gas cooperation in the Arctic
Although the offshore projects between China and Russia remain doubtful for the future, the onshore gas cooperation in the Arctic is advancing. In 2013, Novatek and the CNPC signed a contract for the sale of a 20 percent stake in Yamal LNG. The agreement includes a long-term contract for the supply of LNG to China in an amount of not less than 3 million tons per year. After the Ukraine crisis, Yamal LNG announced the signing of agreements with the China Exim Bank and the China Development Bank on two 15-year credit line facilities for the total amount of €9.3 billion and ¥9.8 billion to finance the project, meaning that China has provided up to 60 per cent of the capital to implement this project.
The current unstable political and economic situation has made the Russian market less appealing to Chinese companies. Moreover, Chinese companies work on projects that they are interested in only under conditions that they find acceptable. Thus, Russia is no longer a gatekeeper for the Chinese; it has to offer good conditions to actually attract the Chinese and develop Russian–Chinese energy cooperation.
Shipping and NSR infrastructure cooperation
China has made a number of experimental voyages along the NSR since 2012. In 2012 the icebreaker Snow Dragon was the first Chinese vessel to successfully navigate the NSR and in 2013 the first commercial vessel Eternal Life, owned and operated by COSCO, sailed from Dalian to Rotterdam. In 2016, a total of five COSCO vessels passed along the NSR. However, there is no official agreement between COSCO and any of the Russian companies to make the voyages a regular occurrence. Thus, there is no guarantee that China’s shipping frequency along the NSR will remain at the same level in 2017.
In a Joint Statement signed by Chinese Premier Li Keqiang and Russian Prime Minister Medvedev in December 2015, possibilities for investing in projects of NSR have been discussed. Currently, a few NSR infrastructure projects have Chinese participation. Some Russian experts worried that stronger Chinese involvement in NSR infrastructure construction might spur further debate over the extent to which this route remains under Russian jurisdiction and the extent to which Russia has the right to establish its own rules of navigation.
Military developments and search and rescue capabilities
Over the past five years Russia has increased its security presence in the Arctic, restored military bases and deployed additional Russian military forces in the Arctic, setting up a new central unified Arctic strategic command. A stronger and upgraded Russian military presence might provide enhanced Arctic governance ability, especially if it enhances the search and rescue capabilities of the Russian coastguard in the Arctic. While China is worried that tensions between the USA and Russia will further intensify and start seriously affecting the Arctic; in particular China fears the return of a cold war mentality.
Currently, owing to its geostrategic location, the Arctic region is becoming of more interest to China and specifically to the Chinese military—the People’s Liberation Army. In 2015 ships from the People’s Liberation Army Navy were for the first time spotted passing through the Bering Sea after finishing joint military exercises with Russia in the North Pacific. A recently released Chinese military White Paper also mentions ‘polar regions’ as an area of concern. It is likely that the Chinese military presence in the Arctic will grow as the Arctic opens up, which may lead to potential frictions and mistrust in the Chinese–Russian strategic partnership.
Russian and Chinese views on and interests in Arctic governance
China respects the inherent rights of Arctic states, and it also calls for respect for the legitimate interests and rights of non-Arctic states. China seeks to enhance its presence and influence in Arctic governance carefully and gradually by applying an increasing number of instruments. Chinese scientific engagement with all the Arctic states helps legitimize and facilitate its growing Arctic presence and interests, thereby gradually building trust and integrating China into Arctic governance. Russia, for its part, insists on Arctic states’ privileges in setting the rules of the game in the Arctic, and prefers to strengthen the established Arctic legal and political institutions, which ensure the rights of the Arctic states. Russian leaders see the Arctic as a unifying national theme, a resource-rich basin and a source of geopolitical leverage, hence it sought to avoid the development of alternative and potentially competitive Arctic governance forums that would be more inclusive and allow room for more influence by non-Arctic states. Therefore, Chinese efforts are met with resistance in Russia.
In addition, Chinese and Russian interpretations of UNCLOS are contradictory. China claims the right to explore the area of the Arctic Ocean that is within international waters and it has previously suggested that (part of ) the NSR is in international waters, which potentially conflicts with Russia’s policy that the route is in its internal waters. What is more, UNCLOS grants Arctic states the possibility of expanding their territory by claiming a continental shelf extending 200 nautical miles (370 km) from a state’s coastal baseline, which would diminish the high sea area or international waters in the Arctic and leave less ‘common heritage’ for non-Arctic states to explore.
Despite the stream of positive adjectives flowing from both Russia and China in recent months about partnership and friendship, cooperation in the Arctic has not progressed much. Except for cooperation on the Yamal Peninsula, Russian and Chinese companies have not yet found further mutual ground for energy cooperation in the Arctic, because Russian companies are not entirely comfortable allowing Chinese companies to play too big a role in Russian energy projects while Chinese companies would not agree to anything less than a significant control and management role.
The difference between anticipation and reality can be explained by looking at differences in the main Chinese and Russian concerns behind efforts to improve their overall strategic relationship. Whereas China is primarily seeking to pursue economic goals, especially access to Russian energy resources in order to secure and diversify its energy supply Russia is looking to strengthen its strategic relationship with China in a geopolitical and security-driven context. On the one side, faced with the case of heightened tensions between the West and Russia, China fears of a melon effect which may negatively influence its position in Arctic governance. On the other side, Chinese scholars argue that Russia is trying to diversify its partnerships with Asian states in the Arctic, in order to lessen the risks of locking itself completely to China. And it seems probably that Russia will turn towards Europe again as soon as sanctions are lifted.
There is a significant degree of uncertainty about how the development of Chinese–Russian cooperation in the Arctic will develop, especially after Trump in power. There are indications that the Trump Administration is considering lifting sanctions, which would allow Russia to cooperate again with Western companies in developing the Russian Arctic and slow down the efforts of recent years to strengthen Chinese–Russian cooperation. The Chinese–Russian relationship also depends on how China will approach the different legal regimes in UNCLOS concerning territorial and maritime disputes and rights because Russia will not expect a looser Arctic governance with non-Arctic states playing a stronger role.