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Race Is On as Ice Melt Reveals Arctic Treasures

With Arctic ice melting at record pace, the world’s superpowers are increasingly jockeying for political influence and economic position in outposts like this one, previously regarded as barren wastelands.

Trans-Alaska Pipeline near Fairbanks
Catherine Corrigan | CNBC
Trans-Alaska Pipeline near Fairbanks

At stake are the Arctic’s abundant supplies of oil, gas and minerals that are, thanks to climate change, becoming newly accessible along with increasingly navigable polar shipping shortcuts. This year, China has become a far more aggressive player in this frigid field, experts say, provoking alarm among Western powers.

While the United States, Russia and several nations of the European Union have Arctic territory, China has none, and as a result, has been deploying its wealth and diplomatic clout to secure toeholds in the region.

“The Arctic has risen rapidly on China’s foreign policy agenda in the past two years,” said Linda Jakobson, East Asia program director at the Lowy Institute for International Policy in Sydney, Australia. So, she said, the Chinese are exploring “how they could get involved.”

In August, China sent its first ship across the Arctic to Europe and it is lobbying intensely for permanent observer status on the Arctic Council, the loose international body of eight Arctic nations that develops policy for the region, arguing that it is a “near Arctic state” and proclaiming that the Arctic is “the inherited wealth of all humankind,” in the words of China’s State Oceanic Administration.

To promote the council bid and improve relations with Arctic nations, its ministers visited Denmark, Sweden and Iceland this summer, offering lucrative trade deals. High-level diplomats have also visited Greenland, where Chinese companies are investing in a developing mining industry, with proposals to import Chinese work crews for construction.

Western nations have been particularly anxious about Chinese overtures to this poor and sparsely populated island, a self-governing state within the Kingdom of Denmark, because the retreat of its ice cap has unveiled coveted mineral deposits, including rare earth metals that are crucial for new technologies like cellphones and military guidance systems. A European Union vice president, Antonio Tajani, rushed here to Greenland’s capital in June, offering hundreds of millions in development aid in exchange for guarantees that Greenland would not give China exclusive access to its rare earth metals, calling his trip “raw mineral diplomacy.”

Greenland is close to North America, and home to the United States Air Force’s northernmost base in Thule. At a conference last month, Thomas R. Nides, deputy secretary of state for management and resources, said the Arctic was becoming “a new frontier in our foreign policy.”

In the past 18 months, Secretary of State Hillary Rodham Clinton and President Lee Myung-bak of South Korea have made debut visits here, and Greenland’s prime minister, Kuupik Kleist, was welcomed by President José Manuel Barroso of the European Commission in Brussels.

“We are treated so differently than just a few years ago,” said Jens B. Frederiksen, Greenland’s vice premier, in his simple office here. “We are aware that is because we now have something to offer, not because they’ve suddenly discovered that Inuit are nice people.”

Chinese activity in the Arctic to some extent mirrors that of other non-Arctic countries, as the region warms.

The European Union, Japan and South Korea have also applied in the last three years for permanent observer status at the Arctic Council, which would allow them to present their perspective, but not vote.

This once-obscure body, previously focused on issues like monitoring Arctic animal populations, now has more substantive tasks, like defining future port fees and negotiating agreements on oil spill remediation. “We’ve changed from a forum to a decision-making body,” said Gustaf Lind, Arctic ambassador from Sweden and the council’s current chairman.

But China sees its inclusion “as imperative so that it won’t be shut out from decisions on minerals and shipping,” said Dr. Jakobson, who is also an Arctic researcher at the Stockholm International Peace Research Institute. China’s economy is heavily dependent on exports, and the polar route saves time, distance and money to and from elsewhere in Asia and Europe, compared with traversing the Suez Canal.

So far there has been little actual exploitation of Arctic resources. Greenland has only one working mine, though more than 100 new sites are being mapped out. Here, as well as in Alaska, Canada and Norway, oil and gas companies are still largely exploring, although experts estimate that more than 20 percent of the world’s oil and gas reserves are in the Arctic. Warmer weather has already extended the work season by a month in many locations, making access easier.

At one point this summer, 97 percent of the surface of Greenland’s massive ice sheet was melting. At current rates, Arctic waters could be ice-free in summer by the end of the decade, scientists say.

“Things are happening much faster than what any scientific model predicted,” said Dr. Morten Rasch, who runs the Greenland Ecosystem Monitoring program at Aarhus University in Denmark.

Ownership of the Arctic is governed by the United Nations Convention of the Law of the Sea, which gives Arctic nations an exclusive economic zone that extends 200 nautical miles from land, and to undersea resources farther away so long as they are on a continental shelf. The far northern Arctic Ocean belongs to no country, and conditions there are severe. In a place where exact boundaries were never much of a concern, haggling over borders has begun among the primary nations — between Canada and Denmark, and the United States and Canada, for example.

The United States has been hampered in the current jockeying because the Senate has refused to ratify the Convention of the Law of the Sea, even though both the Bush and Obama administrations have strongly supported doing so. This means the United States has not been able to formally stake out its underwater boundaries. “We are being left behind,” Deputy Secretary Nides said.

But experts say boundary disputes are likely to be rapidly resolved through negotiation, so that everyone can get on with the business of making money. There is “very little room for a race to grab territory, since most of the resources are in an area that is clearly carved up already,” said Kristofer Bergh, a researcher at the Stockholm Institute.

Glacier Ridge
Photo by: Doug Miller
Glacier Ridge

Even so, Arctic nations and NATO are building up military capabilities in the region, as a precaution. That has left China with little choice but to garner influence through a strategy that has worked well in Africa and Latin America: investing and joining with local companies and financing good works to earn good will. Its scientists have become pillars of multinational Arctic research, and their icebreaker has been used in joint expeditions.

And Chinese companies, some with close government ties, are investing heavily across the Arctic. In Canada, Chinese firms have acquired interests in two oil companies that could afford them access to Arctic drilling. During a June visit to Iceland, Premier Wen Jiabao of China signed a number of economic agreements, covering areas like geothermal energy and free trade.

In Greenland, large Chinese companies are financing the development of mines that are being developed around discoveries of gems or minerals by small prospecting companies, said Soren Meisling, head of the China desk at the Bech Bruun law firm in Copenhagen, which represents many of them. A huge iron ore mine under development near Nuuk, for example, is owned by a British company but financed in part by a Chinese steel maker.

Chinese mining companies have proved adept at working in challenging locales and have even proposed building runways for jumbo jets on the ice in Greenland’s far north to fly out minerals until the ice melts enough for shipping.

“There is already a sense of competition in the Arctic, and they think they can have first advantage,” said Jingjing Su, a lawyer in Bech Bruun’s China practice.

The efforts have clear political backing. Greenland’s minister for industry and mineral resources was greeted by Vice Premier Li Keqiang in China last November. A few months later, China’s minister of land and resources, Xu Shaoshi, traveled to Greenland to sign cooperation agreements.

Western analysts have worried that China could leverage its wealth, particularly in some of the cash-poor corners of the Arctic like Greenland and Iceland.

But Chinese officials have cast their motives in more generous terms. “China’s activities are for the purposes of regular environmental investigation and investment and have nothing to do with resource plundering and strategic control,” the state-controlled Xinhua news agency wrote this year.

Michael Byers, a professor of politics and law at the University of British Columbia, said the Chinese were unlikely to overstep their rights in a region populated by NATO members. “Despite the concerns I have about Chinese foreign policy in other parts of the world, in the Arctic it is behaving responsibly,” he said. “They just want to make money.”

Next February, the Arctic Council is scheduled to choose the countries that will be granted permanent observer status, which requires unanimity vote. Though Iceland, Denmark and Sweden now openly support China’s bid, the United States State Department, contacted for comment, declined to say how it would vote.

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