Page 55 - BNE_magazine_bne_July2019_20190707

bne July 2019
Opinion 55
extraction projects in northern Siberia, becoming the main foreign investor in Russia’s attempts to become a leading player in the supply of Liquefied Natural Gas (LNG).
In April, two Chinese state oil majors each acquired 10%
“China already owns close to a third of the $27bn Yamal LNG project on the Yamal Peninsula”
stakes in the $20bn Arctic LNG 2, a major new production plant on the Gydan Peninsula, scheduled for launch in 2023. The deals were announced at the Second Belt and Road Forum in Beijing. China already owns close to a third of the $27bn Yamal LNG project on the Yamal Peninsula, currently the principal facility, which came into operation in late 2017.
China’s contribution to natural resource exploration is also significant. In May, a Chinese drilling rig, which has been engaged in the Russian Arctic for over a decade, brought
its total discovery of natural gas in the region to 1.2 trillion cubic metres with a large find in the Kara Sea, to the east of the Barents Sea.
Beijing has explicitly linked its $1 trillion Belt and Road Initiative, a series of economic and transport corridors running between China and the West, with the NSR and has channelled foreign direct investment into Arctic littoral states, such as Greenland and Iceland, as part of what it has dubbed the ‘Polar Silk Road’.
For now, the NSR is seemingly the focus of Beijing’s attention, as it will serve as a conduit for both Russian LNG exports to China and Chinese commercial shipping to northern Europe. The channel, which is only navigable for a few months of the year, carried a modest 20mn tonnes of freight last year, but Russia expects the figure to quadruple by 2025. China’s biggest shipper, COSCO, has already indicated that it will make more use of the Arctic route
Should global warming continue to go unchecked, navigation will be possible for longer periods, helping Moscow to achieve its goal. So too will Russian investment in essential infrastructure – including the expansion of
a fleet of icebreaking vessels and the restoration of Soviet-era military bases along the shipping lane.
Russia’s administration of the NSR, which sits within
its Exclusive Economic Zone, is already quite advanced and controversial. It issues permits for use of the route, requires transiting foreign ships to have a Russian pilot, and reserves the right to refuse passage and employ force to ensure compliance with regulations. The Chinese are also building icebreakers and working with Russia on a joint
research centre, part of whose mandate will be to forecast ice conditions along the NSR and provide recommendations for Arctic economic development.
Some commentators have suggested that Russia and China’s cooperation in the Arctic has its limitations. For the moment, so the argument goes, theirs is a marriage of convenience, particularly given Russia’s sanctions-enforced isolation and China’s trade war with the US. But in the long term, tensions may arise if Moscow’s territorial claims begin to clash with Beijing’s desire to derive significant economic benefits.
For the Americans, who have been slow to recognise the strategic importance of the Arctic, their rivals’ growing footprint there is ringing alarm bells. In early May, at the Arctic Council – a body representing littoral states, including China, which holds observer status – US Secretary of State Mike Pompeo railed against both Moscow and Beijing, and dismissed the latter’s claim to be a “near Arctic state”.
Pompeo spoke of Russia’s “pattern of aggressive behaviour
in the Arctic”. He described as illegal the demand for foreign ships to request permission to pass through the NSR and threat against those who fail to comply. Additionally, Pompeo said China’s economic investments masked national security ambitions, suggesting that Beijing’s militarisation of the South China Sea could be replicated in the Arctic Ocean.
In what looks like an emerging new ‘Great Game’ in the Arctic, he said that the Trump administration would strengthen America’s presence there, remarks echoed by US National Security Adviser John Bolton also in May. Bolton
“In what looks like an emerging new ‘Great Game’ in the Arctic, he said
that the Trump administration would strengthen America’s presence
told US Coast Guard Academy graduates that the service, supported by new icebreaking vessels, will lead the way in “reasserting American leadership” in the Arctic.
Quite how America’s renewed interest in the region will play out is hard to predict. As a major littoral state, the US has legitimate concerns about Russia and China’s accelerating plans. But, notwithstanding its difficult relations with both, constructive engagement will likely be central to ensuring that its economic and security interests are protected.
Rebecca Emerick and Yigal Chazan are analyst and head of content respectively at Alaco. Alaco Dispatches is the business intelligence consultancy’s take on events and development shaping the CIS region.
www.bne.eu