ENVS-496-001 & ENVS-696-001--The Arctic: Exploring the World’s Last Frontier
RESEARCH PROJECT GUI DANCE
DR. CANUEL
The research project for ENVS-496-001 and ENVS-696-001 consists of three graded components:
Research Paper outline and bibliography (20 percent of grade): Wednesday, March 6th
Research Paper, 14-18 pages (30 percent of grade): Monday, April 15th
In-class research presentation (15 percent of grade): Wednesday, April 17th and
Wednesday, April 24th
PROJECT OBJECTIVE
The overall project will improve each student’s ability to read critically, think conceptually, conduct
rigorous research, engage in critical analysis, gain mastery in his/her chosen topic, and communicate
effectively. The final paper should be of a quality/type suitable for publication in an undergraduate
or graduate journal, as applicable.
TOPIC SELECTION
The research project requires you to conduct a rigorous study that is relevant to the themes explored
in the Arctic, thereby giving you the opportunity to become an expert on your chosen topic.
Ultimately, you should choose a topic that you find interesting and manageable.
PAPER OBJECTIVE
Social scientists answer “why?” – type questions. Why did a particular event happen (or is
happening)? Why did we observe particular outcomes? Why did a country pursue a particular
policy? While it is always important to provide sufficient narrative of background information in
explaining why a particular event took place, this is not a primarily descriptive paper explaining what
happened or how it happened.
As such, the overall objective of the research paper is to conduct rigorous and in-depth
research in order to answer your “why” question. This will require extensive empirical research
on the details of your case as well as thorough theoretical research on the broader phenomenon to
which your case belongs. Doing so will allow you to write a research paper that is backed up with
strong empirics. Accordingly, you must use at least one theory (generally accepted in the social or
natural sciences, or law) to provide a needed framework/area for analysis in the paper.
PAPER PROPOSAL, OUTLINE, AND BIBLIOGRAPHY (20 PERCENT)
Your submission should be 5-6 pages in length (including bibliography) and must do the following:
Present your research topic in the form of a “why?” question.
Explain why this topic is generally important in the field of Arctic knowledge.
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Discuss your tentative expectations of what you think the answer to your question is
Identify at least 5 scholarly sources you will use for your paper, including at least one general
theoretical source from outside the course readings.
This submission must additionally provide a detailed outline of your complete paper, along with a
bibliography, in hard and electronic copies. Be careful: outline does not mean a series of
phrases/bullets. You should have a well-ordered product written in paragraph form. Your grade will
be based on the completeness and level of detail provided. For each section, subsection, subsubsection, etc. of your paper, you should note which sources you will be using—and why you are
using them. The literature review in this submission should be done to such high quality and
completeness that the student would feel content with submitting it as a final paper.
RESEARCH PAPER (30 PERCENT)
The research paper should be 14-18 pages in length. A hard copy AND electronic copy (emailed)
must be submitted by the deadline in order to avoid substantial penalties for later papers.
Your paper should meet the paper objective outlined above. It will be evaluated on its content,
organization, style, and mechanics in assessing its success in meeting the paper objectives. Your
grade will also be dependent on the rigor of your research, as evidenced by a wide variety of
appropriate sources cited throughout your paper.
The formatting requirements are as follows:
12-point Garamond Font
1-inch margins
Double-spaced lines
Last name and page number in bottom right corner of every page
Statement on cover page acknowledging that the submission is your work: “My document
identifies all sources used and assistance received in completing this assignment.”
SOURCES AND CITATIONS
All sources, collaboration, or assistance must be properly cited in the paper and on a works cited
page. You should use a parenthetical in-text citation style (Chicago 16th B; MLA; APA) OR footnote
citations (Chicago 16th A). The Bluebook system of citations will also be accepted. Please do not
use endnotes for your citations. You must also include source page numbers for all in-text/footnote
citations. The Works Cited list at the end of the paper (not part of the page count) should list only
those sources cited in the paper.
Under no condition are Wikipedia or similar sources, blogs, encyclopedias, or non-scholarly web
pages acceptable. The following are acceptable outside sources:
Books: The most relevant books are generally scholarly books published by university
presses, or books in which the author provides citations for his/her evidence.
Additionally, Google Books or other such online book catalogs are not acceptable
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sources as they do not provide access to the complete resource and you may only gain
partial context of the author’s argument, logic, or evidence. You should use the library
to access the actual book.
Academic journal articles: These articles should primarily come from political science,
public policy, or other academic discipline journals to be most relevant. Do not just
select the first article with the name of your theory or topic that comes up in a Google,
Google Scholar, or JSTOR search; some articles are more relevant and/or authoritative
than others. Good places to start your search for resources (books, journal articles,
primary sources, and news or magazine articles) are the citations in readings from the
course.
Think tank papers: Major think tanks, such as the Council on Foreign Relations (CFR),
Brookings Institution, the Center for Strategic and International Studies (CSIS), The
RAND Corporation, the Congressional Research Service (CRS), etc. publish scholarly,
topical articles or reports on contemporary international relations challenges. You
should be aware of potential political biases or agendas that may color the perspective of
some think tanks.
Primary sources: Some examples are government documents, memoirs, interviews, etc.
News or magazine articles: You should use major national papers, such as the New York
Times, Washington Post, and Wall Street Journal, and major magazines, such as The Economist,
Foreign Affairs, and Foreign Policy.
Failure to properly cite sources will significantly lower your paper grade. Suspected acts of
plagiarism will be handled as a violation of American University’s rules and procedures.
IN-CLASS RESEARCH PRESENTATION (15 PERCENT)
Students will prepare an approximately 15-minute presentation of their research project.
Presentations will be graded critically and rigorously based on the content and style of the
presentation. Each presentation should include the following:
Introduction of the talk
Presentation of the research question
Appropriate background of the topic
Presentation of the topic/answer to the research question
Consequences/implications/lessons learned from the topic
Good presentations should be well-organized and well-rehearsed. Students should avoid
excessive reliance on notes/outlines, and under no circumstances should you read information off
your slides. You should also avoid the common trap of including too many slides and putting too
much text/information on each slide. Slides should include only a few brief bullet points to help
focus the discussion.
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Student’s Name
Professor’s Name
Course
Date
China’s Strategy in the Arctic
Introduction
The research paper explores China's strategy in the Arctic. China has several ambitions
on the Arctic which have created international attention with countries like Canada getting
concern on the business strategies implemented by Chinese people. Recently, China has
expanded the economic and political systems to ensure they match with global demands.
Transforming business operations from regional to global standards was a step that had a great
impact on Chinese people. Change strategies in China are guided by the open-door policy which
supports foreign and internal affairs relevant to citizens of China. The peaceful international
environment created in China helps the country attain a better position in the Arctic(Whitney et
al., 27). In the Arctic region, China collaborates with citizens from Canada, Russia, Finland, and
Alaska to develop domestic trade and produce trade goods which are competitive in the Western
international market. In China, the economy is growing at a higher rate making the country
famous globally, but the government of China decided to focus on regional powers like the East
Asian Affairs rather than American and European economic interests. However, China has not
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limited its business operations to East Asia alone but other polar regions like Latin America and
Africa.
Why China Emerged with an Arctic Strategy
China decided to have an Arctic strategy that will protect her growing political economy
from the interference of international backdrop in the economy. China first considered the impact
of Arctic countries to her economy before exploring further investments in African regions. In
2013, China was seen staggering with her developments after incorporating the interests of the
Arctic region and the European region. Before the end of 2013, a survey was conducted and
indicated that GDP in China was $13.39 trillion. The population of China had increased up to
1.335 billion after the country recovered from the global economic crisis of 2008. After 2008
global economic crisis, China-focused on competing with the United States when still a member
of Arctic region and such strategies motivated China to focus in developing its relations with
Arctic countries where trade goods were exchanged at an affordable price. The trading activities
between China, Canada and other countries in East Asia improved the economy of China and
currently, China contributes 1/3 of economic growth globally(Whitney et al., 28). Therefore,
China had a strategy to empower its economy when it was joining the Arctic where there were
friendly countries like Finland to conduct business with.
In the Arctic, China is ranked as the country with well-developed military and in 2013
allocated a budget of $114.3 budget to the defense system for the purpose of protecting the
Chines boundaries. China budgets highly on its military to catch up with the military
developments in other countries like the United States where autonomous military systems were
first invented and used in World War II. The position of China in the Arctic is also strategic to
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help the country assert territorial and maritime properties which were taken during the World
Wars(Whitney et al., 28). Therefore, the event of China situating its operations in the Arctic
before expanding them to Africa and Latin America was to first prepare for military
empowerment, economic growth, and creation of better relationships with neighboring countries
in the Arctic region. By first focusing in East Asia, China could be recognized to have a great
military power that defends its dynasties. Having a position in the Arctic will enable easier
management of its seaports.
To protect its seaports, China came up with a grand strategy that promoted domestic
developments. For China to develop domestically as a member of the Arctic region, the
government focused on protecting some parts of the Arctic ocean, Iceland, adjacent seas and
frozen underground ice. After China organized events to defend its grand strategy and lost
maritime and territories, government officials moved their focus from regional business to
international investments(Whitney et al., 30). However, China remains strategic in the Arctic
region for it has business partnerships with people of Alaska, Canada, and Russia. The current
foreign policy adopted in China is to cater for security, sovereignty, and economic developments
both in Arctic and Western countries.
In 2010, Dai Bingguo recognized China as a country enjoying political stability and has
the socialist ideology in maintaining peace in a state. Canada as a state in Arctic region created
interest in the operations of the Chinese people. Other countries classified under Arctic region
like Finland also agree with the territorial integrity, social development, sovereign security and
national unification efforts adopted by Chinese citizens(Whitney et al., 31). Since China proved
to be the developing country in Arctic region, countries gained more interests with its business
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partnerships with some countries like Beijing criticizing the economic efforts of the Chinese
people. Beijing, for instance, organized events claiming that China is not yet developed and
requires more change strategies that will revolutionize its military and trade. As Beijing
criticized the economic developments in China, members of the Arctic celebrates the efforts of
the Chinese government to help people from poverty in Arctic desert by offering relief food and
funds to import more foods.
China recognizes East Asia especially Arctic region as important in settling its
commercial activities. Chinese strategists propose business suppliers from China to working with
residents of the Arctic first, then native Africans before accepting Europeans. In adopting a better
global situation, the Chinese government decided not to ignore the business operations in Arctic
region. No matter the level of global affairs organized by Chinese people and the Western
Europeans, investors from China first explore the economic conditions in Arctic before
expanding business operations to Europe and America. In case Finland or Russia strains in
raising agricultural products, Chinese governments takes it as a state responsibility to fund for
basic needs of such people before focusing on European imports and exports. China likes
working with states in the Arctic region to help them deal with desert disasters in the region and
develop their economy(Whitney et al., 33). The United States supports capitalism and China
uses socialism and this sometimes become a factor pushing the Chinese government to work
with Arctic countries more easily or spend less time than western country.
China focuses on national strength guided by the strategies of the “reform era”. The
foreign policy in China ensure military forces is created for defense purpose. Also, the pragmatic
foreign policy improves power status in China and ensure there is a balanced strategy for
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measuring the developments of China if compared in the demands of the international
community. In modern days, china has transfer its attention on domestic development such as
manufacturing and focused on relating to western powers like Britain who organizes trade based
on demands of their international community. The arctic ambitions of China are still active and
coordinate with countries in Arctic region to control the anonymous military systems.
Implementation of treaties like the Nuclear Non-Proliferation Treaty cannot be possible through
efforts of China solely but require support from Canada, and other members of the Arctic
region(Whitney et al., 34). After coordinating with Arctic states, China embraces international
understanding to ensure the operations in Arctic do not limit its foreign investments in Africa.
In 1984, China was motivated by the interests of the Arctic to join the agencies which
provided advanced nuclear plants like the International Atomic Energy Agency. By joining
IAEA, China authorized its chemical engineers to work with the agency to understand the
working of the autonomous military weapons, aerial robots and other sophisticated inventions in
the military. China uses an instrumental approach when strategizing on matters related to
international organizations. After working for long with Arctic countries, China was trusted by
many countries and allowed by Brazil and Argentina to participate in nuclear developmental
programs. Further activities of China in Arctic allowed the country to join the Missile
Technology Control Regime in 1992 to help in regulating foreign exchanges for development of
its economy(Whitney et al., 34). International perceptions still motivate China to invest in
autonomous military systems, foreign trade and struggle to meet the demands of Cultural
Revolution.
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Chinese activities in the Arctic are still studied by the Arctic scholars. By use of regional
diplomacy, China connects with political organizations in the Arctic and cope with international
politics while maintaining the demands of Arctic communities. China is ambitious to have
political influence on regional politics in the Arctic. Chinese people try all available
opportunities that will enable them to pursue political and economic interests. China has utilized
several strategies to form economic partnerships in the Arctic which help the country maintain its
territories especially the near seas. Economists from Beijing argue that China is lulling the
operations of states in the Arctic claiming they are bringing commercial benefits and improving
security(Whitney et al., 34). However, China uses a pragmatic strategy to explore the global and
regional energy market that will benefit its citizens now and in the future.
China's ambitions in the Arctic are focused to extract energy, and the Chinese leaders
organize events with native leaders from the Arctic region to discuss opportunities for economic
developments. In all discussions or events organized by Chinese leaders with politicians from the
Arctic, China targets convincing local people to extract oil and get other raw materials for their
developing industries. The role of China in the Arctic has developed its economy and survey
made at the end of 2017 revealed that China has the largest economy globally. Economic
prosperity experienced in China is as a result of its focus in oil and other raw materials which are
sources of energy.The procurement of affordable commodities is a global priority for Chinese
investors(Whitney et al., 34). Therefore, the situation of China in the Arctic region is to acquire
affordable products that will benefit its citizens and maintain its relations with foreign investors
from US and United Kingdom. In 1993, China while still, a renowned state in the Arctic used
pragmatic strategy to explore African regions and its efforts made it an active marketer of oil in
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the arctic region. Developing the Chinese energy industry after taking an active business role in
Arctic region indicates that China is focused on avoiding economic fluctuations in Arctic region.
China is the cures territories in Arctic region to protect oil fields and gas reserves until
they mature. While importing oil, China ignores the seaways controlled by the US navy and uses
routes in the Arctic which are less prone to insecurity. Therefore, most of the secure reserves
China depends on for exportation and importation purposes are in the Arctic, and this explains
why China is focused on working with Arctic states. The grand strategy by Chinese people helps
them behave appropriately in the Arctic region(Whitney et al., 35). Chinese investors behave
well in their coastal seas and when exploring Arctic regions to maintain their reputation. The
economic order of China is currently adopted by Arctic states, and any effort to work with
Chinese investors in the Arctic involves the adoption of their grand strategy. Grand strategy is
concerned with product quality, technological innovation, environmental protection, and
economic efficiency.
In the Arctic, China's principle interests include shipping, extraction of resources,
scientific research, and evaluation of climate change. Before China organized to coordinate with
international powers, it first worked with leaders from different regions in the Arctic. Therefore,
global economic systems found in Arctic were in some ways influenced by the Chinese investors
who had explored the region to protect their maritime and territorial boundaries in East Asia
while in East Asia, China focused on extracting affordable raw materials for use in developing
their industries(Whitney et al., 35). Currently, China is viewed by several leaders in the Arctic as
a multilateral country which focuses on issues of food security, environmental protection, and
post-disaster reconstruction. Arctic region is covered by deserts, and lack of disaster
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reconstruction measures increases the health risk of the local people. Chinese government actors
who are concerned with the Arctic Affairs include Cheng and Wang who were past leaders and
were concerned with the foreign relations of the Chinese government. The concern of China in
Multilateral institutions influenced its operations in the Arctic region. Having a grand strategy
directs Chinese investors to create business relations in the Arctic and ensure principle interests
like environmental protection are catered for.
Why Observe the Outcome of China’s Rising Demand
China’s rising demand in the North Pole is after using Arctic resources to develop its economy
and preserve them for future benefits. China is viewed as the country with the most apprehensive
Arctic ambitions. China is still improving its reputation and increasing the demand for raw
materials in the Arctic by the help of its powerful communist dictatorship. The outcome of
economic prosperity witnessed in China is therefore after the country explored the Arctic region
with the aim of resource extraction and need to change its status from a net exporter to largest
importer in the world. It was in China that state-owned enterprises were first prioritized to
support economic growth. Largest state-owned oil companies in the Arctic were funded by the
Chinese government to help increase the demand for Chinese operations in the Arctic region. In
2013, China released $53.3 billion to support rapid growing industries in the Arctic and
transform imports and exports to various states in the Arctic region. China did not start investing
in State Owned Enterprises in 2013. For instance, $8.2 billion was released by the government of
China to support SOEs in 2005(Whitney et al., 100). As China supports developments of
industries in Arctic and other developing regions, it exploits the remaining gas, minerals and gas
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for developing Chinese-owned projects. Arctic resources therefore played an important role in
attracting more leaders in East Asia to coordinate in projects that develop the economy.
The development of Canadian policy was an outcome after Canadians developed more
interests in China’s resource strategy. China over years had interest in developing Arctic and
Canada after a while also needed recognition as a factor in Arctic development. However, China
continues to manage the world-class artic resource and is guided by its grand strategy. Canadian
policy aims at compering with China to regulate commodity prices in Arctic region. Canadians
claim that if China balances the prices of all commodities, capital outflows will reduce and end
up becoming less beneficial to local residents in Arctic regions. Therefore, the Canadian policy
was to convince several states in Arctic region to exclude China from business of the Arctic
coastal states claiming that China has an aim of exploiting all minerals and natural resources in
Arctic region(Whitney et al., 102). However, Canada did not succeed in preventing operations of
Chinese government in Arctic region because China earlier created a good reputation with Arctic
states, helping them invest in their local industries.
Resource development in Arctic region was the main target of the Canadian policy.
However, China through a grand policy convinced several investors in Arctic regions to work
together and develop industries especially along the Arctic coats. Canada in the past aimed at
expanding foreign investments ignoring the local business in Arctic regions and such weakness
makes Chinese investors to remain more trustworthy in their investments in Arctic region. After
Canada realized the importance of Chinese State Owned Enterprises, it agreed to form
partnerships that will ensure the two countries equally participate in development agendas of
Arctic region(Whitney et al., 103). Some of areas China and Canada were to coordinate is in
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developing better manufacturing industries and in discussing the prices of commodities to
prevent inflation.
In Arctic region, China remains as the best investment partner for the government
allocates funds to benefit smaller investors who operate around the Arctic coastal states. Some of
the Arctic resources that China and Canada target include gold, zinc and other minerals like the
natural gas and oil. China has a plenty of industries to process minerals acquired in different
Arctic regions. China explores different parts of the world to improve its mining sector(Whitney
et al., 105). Chinese presence in North Pole is dependent on the mining industry which relies on
minerals extracted from local regions in Arctic states. Canadian policy ensures that China and
Canada invests in energy industry together to ensure they benefit from Arctic trade. Canada in
modern days is copying from Chinese investments. For instance, Canada has expanded mining
operations in Greenland as an effort to develop its economy and compete with mining
corporations from China like the Jiangxi Union Mining. Canada over the years has faced
difficulties as it tried to compete with China in extracting minerals in Arctic region. As a result,
Canada turned its attention to Greenland and focused in full-scale mining.
Why Canada and China Purpose a Particular Policy
Canada developed a policy to compete with China in mining operations in Arctic region.
However, China had strategies like the grand strategy and that directed the country to focus in
developing East Asia especially in Arctic coats because Chinese investors had earlier identified
the strategic position of the Arctic coast in international trade policies help a state empower its
strategies for current and future benefits(Olga et al., 63). Policies by China to the Arctic region
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were also to protect the country’s boundaries and secure the maritime regions which had been
occupied by European colonialists.
The policy developed by Chinese government also served to cater for economic
prosperity in Arctic region whereby all resource extraction processes were to be guided by the
government of China. The Chinese policy was also to change economic status of the country and
ensure importation and exportation processes are diversified. In 20th century, China started stateowned enterprises that helped Chinese residents and local people in Arctic coastal areas benefit
from the economic growth(Olga et al., 64). The advanced state-owned oil companies operating in
Arctic were started by the government of China after policies were implemented pressing on
economic prosperity and the need to improve the living standards of Chinese residents in the
present and in the future.
Structural Functionalism Theory
Canadian policy was not as successful as that of China because it targeted to compete
with China in extraction of minerals in Arctic region but failed. However, the policy had a
purpose of developing the Canadian economy, providing job opportunities for Canadian
residents and organizing on how Canada could partner better with several states in Arctic
region(Olga et al., 65). The purposes of state policies can further be explained by use of
structural functionalism theory. The structural functionalism theory advocates for the macrokevel orientation whereby an individual or a organization organizes unique social strategies
which are utilized for developmental purposes. The theory advocates for cohesiveness in a
system. For instance, grand strategy by Chinese residents in Arctic and Canadian Policy were to
focus on cohesiveness to ensure all of their mining operations run smoothly with minimal
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weaknesses. Therefore, Structural functionalism does not encourage failures or giving up in a
particular project. China targets completing its projects successfully and Canada should follow
the same example, and the route to come up with effective projects starts with development of
good policies.
Conclusion
In conclusion, China’s grand strategy in the Arctic has helped the country explore
potential mining sites and start the process of exploiting minerals which are beneficial to their
economy. China has unmeasurable ambitions concerning Arctic regions which started earlier and
have influenced Canada to be anxious on such ambitions which have pushed for several
developments both in local and international investments. Chinese government has witnessed an
expansion in its economic and political systems after adopting policies and change strategies that
currently match with international market demands. China with its grand business strategy has
promoted business operations both in regional and international level to ensure its demand rises
among the local and international investors. Grand strategies in China adhere to demands of
open-door policy that ensure all business conducted inside or outside Chinese boundaries are
accepted by international entrepreneurs and diplomats working with foreign embassies under
department of trade. China ensures there is always a Peaceful international business environment
created within its boundaries to help the country meet international business standards and be
under Arctic regulations. In the Arctic region, Canada and China works with Russian investors to
ensure all minerals extracted locally are exported with a better price. In China, the rate of
economic development is high and this allows the government to invest in foreign regions like
Africa and Latin America to support them in developing their local industries. In every country,
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policies serve the role of influencing economic developments and guide investors to be focused
on development agendas while exploring new business opportunities. The structural
functionalism theory is applicable in explaining the situation of Chinese investors as they
organize business operations in Arctic region.
Works Cited
Olga V., et al. "The Snow Dragon." China's Strategies in the Arctic, 2018, pp. 61-69.
Whitney L., et al. "China's Arctic Ambitions and What They Mean for Canada." Arctic
Resources and China’s Rising Demand, 2018, pp. 99-118,
www.jstor.org/stable/j.ctvf3w20h.10.
Whitney L., et al. "Situating the Arctic in China’s Strategy." University of Calgary Press, 2018,
pp. 27-35, www.jstor.org/stable/j.ctvf3w20h.7.
University of Calgary Press
Chapter Title: Arctic Resources and China’s Rising Demand
Book Title: China's Arctic Ambitions and What They Mean for Canada
Book Author(s): P. Whitney Lackenbauer, Adam Lajeunesse, James Manicom and Frédéric
Lasserre
Published by: University of Calgary Press. (2018)
Stable URL: https://www.jstor.org/stable/j.ctvf3w20h.10
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4
Arctic Resources and China’s Rising Demand
Speaking about the North Pole, it’s obvious that its significance is
not limited by scientific research only. Now it is called a “global
construction site.” What does this mean? It means that economic
activities there are not clearly described by the international
agreements. So, the one who starts first will most likely ensure
one’s advantages for the future. As we know, the planet’s
resources are limited. This means it’s impossible to turn a blind
eye to the natural deposits in the area of the North Pole. One
can say, it’s the [Middle East] of the future or the second
[Middle East].
Colonel Le Li,
PRC Army (2012)1
With the possible exception of Russia, there is no country whose Arctic ambitions are viewed with more apprehension in the Western world than China.
Wealthy and increasingly assertive, China’s interest in the region’s resources
is growing, raising the spectre of a powerful communist dictatorship controlling strategically vital elements of the circumpolar economy. Since the
early 1990s, the rapid growth of Chinese industry has transformed the country from a net exporter of raw materials into the world’s largest importer, a
transition that resulted in the formation of some of the world’s largest stateowned mining and oil companies, which were sent overseas to secure new reserves. Over the past decade, these state-owned enterprises (SOEs) have spent
billions establishing themselves as leaders in global resource extraction. In
2013 alone, China’s overseas resource investments soared to $53.3 billion, up
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from $8.2 billion in 2005, and a rapidly growing percentage of this investment
is being funnelled into the Arctic.2 The attraction is obvious: the circumpolar
region is one of the last, largely undeveloped regions in the world and is purported to hold a significant share of the planet’s remaining minerals, oil, and
gas.3 In the years to come this investment will almost certainly increase and
China’s role in northern development will become even more pronounced. In
spite of this, China’s role in Arctic resource development should not be exaggerated. China has been cautious in moving forward on risky Arctic ventures
and many of Chinese-owned projects have stalled in the face of low resource
prices. This chapter examines China’s growing interest and investment in
Arctic resources and places these activities into context to show the role and
intent of Chinese companies, and to demonstrate that popular fears of a “resource grab” are largely unfounded.
Canadian Policy and Chinese Resources
One of the most prominent aspects of China’s resource strategy, and one that
reinforces its Arctic interests, is its effort to diversify the geographical source
of its imports so as to mitigate the risks associated with supply disruption.4
China thus has a natural interest in developing the Arctic and has been particularly active in cultivating new economic ties with Greenland, Iceland, and
Russia.5 This is not to say that China’s aim is to control these nations’ resources per se, but rather to play a role in bringing them online (or at the very least
to have that option). A Chinese-owned mine in the Arctic may not necessarily export its product to China; nevertheless, controlling world-class Arctic
resource deposits will strengthen Chinese companies by increasing revenue
and reserve life. From a broader Chinese national perspective, Arctic production will increase supply, thereby lowering commodity prices, reducing
capital outflows, and positively affecting China’s balance of payments.
According to Taiwanese scholar Wang Kuan-Hsung, China’s “nightmare
scenario” is one in which the Arctic coastal states divide the region’s resources among themselves and exclude Chinese companies.6 In the West this approach has some supporters – commentators who point to the participation of
a communist dictatorship in circumpolar development as a potential threat.7
Yet, in spite of its history of caution when it comes to China, Canada’s federal
government has recognized that foreign (including Chinese) investment is
an essential part of its development strategy in the Arctic. Canada’s Northern
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CHINA’S ARCTIC AMBITIONS
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Strategy and its Statement on Arctic Foreign Policy both uphold resource development as a main conduit to “unleashing the true potential of Canada’s
North.”8 Likewise, it is recognized that this development hinges on foreign
capital and that these new economic ties will improve Canada’s trade relations “not only with our immediate Northern neighbours but also with other
states such as those in central Asia and Eastern Europe.”9 Details are scant
on how this might play out in practical terms, but a desire to attract foreign
capital is clear.
While Canadian policy does not single out China as a partner in Arctic
development, the fact that Chinese SOEs are some of the best funded in the
resource industry makes the connection inevitable. China is now Canada’s
second largest trading partner10 after the United States, and has shown keen
interest in the Canadian energy and resource sector. Public opinion polls also
indicate that a solid majority of Canadians view Asian economies as vital
to Canada’s economic well-being, and that a majority believe Canada will
benefit from increased Asian investment. Polls also suggest that, while many
Canadians view China with suspicion, they also consider it important to
Canada’s prosperity (second only to the United States and far ahead of other
Asian countries).11
China is clearly an important customer and investment partner – but
do its Arctic interests present a risk to Canada and other circumpolar states?
The evidence suggests that fears of a Chinese resource grab are unfounded,
at least in the short to medium term. The simple fact remains that, at present,
all of the Arctic’s commercially viable resources are either onshore or (in the
case of oil and gas) in waters well within Arctic coastal states’ respective jurisdictions.12 Chinese participation will thus occur under the laws of the Arctic
states – unless of course China aspires to conquer one of these states, which
are all either armed with nuclear weapons, members of NATO, or both.
Arctic Resources: Speculation and Anticipation
The theoretical resource potential of the Arctic is huge. The US Geological
Survey estimated in July 2008 that 90 billion barrels of oil, 1,670 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids may remain undiscovered in the Arctic, with 84 per cent lying in offshore areas.13
The region also contains virtually every strategic or commercially important
mineral, including iron ore, zinc, rare earth elements, gold, base metals, and
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diamonds. Interest in northern fisheries, tourism, and freshwater are also expected to expand as global warming opens up easier access to the region.
As a result, the notion that this treasure-laden frontier may hold the key to
Canada’s future prosperity has reentered the popular consciousness.
Development issues are intrinsically both domestic and international. As
the wild price fluctuations of 2014 demonstrated, oil and gas exploration and
production is driven by international energy supply and demand, as well as
issues of energy security and diversity of supply. Mineral prices are likewise
determined by volatile international markets, leaving the North susceptible
to the same “boom and bust” cycles that have short-circuited past attempts at
development.14 Adding to this uncertainty is the Arctic’s position as a highcost environment, where operations are difficult and infrastructure is either
poor or non-existent. Investment in the region requires a great deal of capital,
a long timeframe, and comfort with risk. While resource prices have been
unpredictable in recent years, longer-term international demand for energy
and raw materials will likely continue to rise as China, India, and many of the
world’s developing countries industrialize and aspire to higher standards of
living. Meanwhile, traditional resource bases remain unstable. The rise of the
Islamic State in Syria and Iraq (and a host of other militant groups) has put
Middle Eastern oil supplies in jeopardy while the Russian invasion of Ukraine,
and the subsequent Western sanctions, has called into question the long-term
viability of relying on Russian oil and gas. In the midst of Middle-Eastern
civil wars and broader geopolitical strife, Canada (and much of the Arctic)
remains a safe haven for resource investment; as former NWT Premier Floyd
Roland noted, “the bottom line is that Canada’s Arctic remains one of the last
politically stable places on Earth with abundant energy resources.”15
China and the Mining Sector
Over the past thirty-five years China’s resource consumption has risen in
tandem with its massive industrial growth. In the twenty-first century, the
country became a major importer of raw materials and Chinese overseas investment skyrocketed as its SOEs financed new mines and purchased existing
operations around the world. Canada has been the recipient of $3.3 billion of
this investment in the past decade – a substantial sum, but a tiny percentage
of China’s broader investment program. Chinese companies have spent the
lion’s share of their raw materials capital in Australia ($31.9 billion), South
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America ($23.51 billion), and Africa ($26.73 billion). In Canada, Chinese investment has been directed at the energy sector (and the oil sands in particular), where these SOEs have invested over $34 billion in the past decade.16 This
investment history has built a certain level of comfort operating in Canada,
and Chinese mining companies are beginning to pay attention to the longterm potential of the Canadian Arctic. In April 2011 Patricia Moore, a commodity specialist with Scotiabank, told the Nunavut Mining Symposium that
she saw “no end” to the “tsunami” of Chinese money flowing into Canada’s
energy and mining sectors, with Chinese investors “eyeing Nunavut with far
more interest than before.”17
Complicating the picture for Western nations, Chinese investment has
not only been growing, but replacing that of the world’s private mining companies. The recession of 2008 and the soft recovery that followed severely
damaged many mining companies, slowing merger and acquisition activity, deferring major capital expenditures, and limiting companies’ ability to
finance on good terms.18 As a result, many firms have entered a period of
retrenchment and consolidation. In a 2013 survey of mining companies undertaken by the Fraser Institute, over 90 per cent responded that they found
it more difficult to raise capital for new projects.19 Consequently, only 46 per
cent of companies surveyed planned to increase their exploration budgets
in 2013 – down from 68 per cent in 2012 and 82 per cent in 2011.20 North
America’s junior exploration firms have been hit the hardest. These companies have long relied on the multinationals to acquire them or on private
investors to fund them. With capital being held back, many now face bankruptcy.21 In a response to the Fraser Institute survey, the manager of one exploration company stated that, while there is money in the West to develop
new mines, it simply is not flowing to the companies that need it. “Eastern
countries,” meanwhile, “have a more optimistic outlook and hence dominate
investment in the mining industry.”22 When asked about Chinese money
replacing European or American funds, Jens-Erik Kirkegaard, Greenland’s
minister of industry and minerals, likewise noted that there were simply no
Western investors coming forward to support Arctic projects and that “the
more risk-friendly money is in Asia.”23 Chinese money is, therefore, not only
coming to the Arctic, it is moving in when many of the private sector mining
firms are limiting their own expansion.
In Canada this trend has led to a greater Chinese presence in the north.
Quebec, for instance, is looking to China for investment to realize its Plan
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Nord (an $80-billion, twenty-five-year plan). China’s third largest steel
company is already involved in a joint venture with a Canadian company
to build an iron mine at Lac Otelnuk in Nunavik (northern Quebec).24 In
the Raglan District on the Ungava Peninsula, Jilin Jien Nickel Industry Co.
spent $735 million building a mine and the accompanying infrastructure
to produce nickel, copper, platinum, and palladium.25 In September 2014,
the first shipment from this mine moved through the Northwest Passage to
China.26 In the Yukon, Yunnan Chihong Zinc and Germanium have finalized
a $100 million joint venture proposal with Selwyn Resources to develop the
Selwyn lead and zinc project.27 And, in the northern reaches of the territory,
the Wolverine zinc and silver mine is in operation after being taken private
by Jinduicheng Molybdenum Group Co. Ltd. and Northwest Nonferrous
International Investment Company Ltd. 28
The most significant Chinese mining investment remains on the drawing board: the Izok Lake (or Corridor) project, proposed by MMG Minerals
– an Australian company that is 75 per cent owned by Chinese state enterprise Minmetals Resources Ltd. The project includes plans for two mines in
Nunavut and several joint ventures between the Wuhan Iron and Steel Group
Corporation and Century Iron Ore in northern Quebec.29 In 2012, MMG submitted its project description to the Nunavut Impact Review Board (NIRB) to
initiate the environmental review and permitting process for the project. The
proposed plan includes a mine and mill at Izok Lake, a mine at High Lake,
and a port at Grays Bay. Infrastructure to service the project will include a
350-kilometre all-weather road, with seventy bridges stretching from Izok
Lake to Grays Bay on the central Arctic coast. MMG also plans to construct
a processing plant able to handle 6,000 tonnes of ore a day, tank farms for 35
million litres of diesel, two permanent camps totalling 1,000 beds, airstrips,
and a port that could accommodate ships that would make sixteen round
trips annually (both east and west) through the Northwest Passage during an
eighty-day window from mid-July to October.30
The company originally planned to submit a revised project description
to the NIRB in late 2013, but has requested that the review be halted in the
wake of declining resource prices. Since that time, low resource prices have
placed the project in limbo as MMG seeks alternate financing for the infrastructure needed to develop the mine. In an attempt to restart the process,
the government of Nunavut has pushed for a federal contribution. Nunavut
Senator Dennis Patterson has called the plan a “nation-building project”
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and has asked for $34 million from Ottawa in order to complete the permitting and engineering process.”31 If MMG secures government assistance
the Nunavut Resources Corp. – a wholly-owned subsidiary of the Kitikmeot
Inuit Association – would build and own the road and port in a partnership
with the Government of Nunavut. The Kitikmeot, thanks to a change in federal policy in 2015, is now eligible for large amounts of federal infrastructure
money through the P3 Canada Fund and the New Building Canada Fund.32
If the territorial and federal governments became involved it would represent
not only a major Canadian gamble on the economics of the project but also
the largest and closest tie-up between the public sector and a Chinese SOE in
Canadian history.
For MMG the payoff from the project would be one of the largest copper
and zinc mines it the world, capable of producing 180,000 tonnes of zinc and
50,000 tonnes of copper in concentrate per year. The quality of the resource
is as significant as quantity: the reserve’s 12 per cent zinc and 2.5 per cent
copper grade make it twice as rich as other major projects now going forward
around the world. As the world’s largest consumer of zinc (a key ingredient in
making galvanized steel), China is anxious to see large new deposits brought
online. For MMG, Izok Lake could also be the large hole in production that
will be left when the company winds down its massive Century mine in
northern Australia.33
Mining in Greenland
Canada’s eastern neighbour, Greenland (population 57,000), is also looking
to resource development as a way to transform its economy. Dozens of international mining companies – including several Chinese – are exploring
the island for minerals they hope will become more accessible as the ice cover retreats on both Greenland and its surrounding waters. In 2009, Jiangxi
Zhongrun Mining joined Britain’s Nordic Mining to search for gold on the island’s south. That same year Jiangxi Union Mining became the first Chinese
mining concern with operations inside the Arctic Circle. In 2014 China NonFerrous Metal Industry’s Foreign Engineering and Construction Co. Ltd. entered into two memoranda of understanding, with Ironbark Zinc to finance
70 per cent of the Citronen Zinc project in northern Greenland, and with
Greenland Minerals and Energy Limited to develop its massive Kvanefjeld
rare earths deposit, and to ship those raw materials to China for processing.34
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These developments are particularly interesting in light of the 2009 Act on
Greenland Self-Government, the preamble of which recognizes Greenlanders
(who are predominantly Inuit) as a people with rights to self-determination
under international law. “A principal objective of introducing self-government has been to facilitate the transfer of additional authority, and thus responsibility, to Greenlandic authorities in fields where this is constitutionally
possible and based on the principle of accordance between rights and obligations,” the Danish Statsministeriet notes. Although foreign, security, and
defence policy remains with Copenhagen, the Greenlandic government will
assume greater responsibility for law enforcement and transportation. Most
significantly, the act has “radically changed” Danish-Greenlandic relations
regarding mineral resource activities. The Greenland Self-Government authorities assumed the right to use the mineral resources found in the subsoil
effective January 1, 2010, and will accrue revenues from these activities.35
In their study on new strategic dynamics in the Arctic, Charles M.
Perry and Bobby Andersen note that most commentators believe that full
Greenlandic independence remains decades away. Most Greenlanders take a
long view as well and assume that “the long-term objective of independence
relies almost mechanically on harnessing the region’s enormous mineral potential on land and at sea.”36 When Ove Karl Berthelsen, Greenland’s minister of industry and mineral resources, led a delegation of Greenlanders to
the China International Mining Conference in November 2011 in search of
Chinese investment, he indicated that mining was key to the island’s economic development and to realizing its desire to “shake off its Danish dependency.” Berthelsen told Chinese reporters that “our goal is to change Greenland
into a land of mining resources.”
In recent years China and Greenland/Denmark have made every effort
to strengthen relations. In April 2014, Queen Margrethe II of Denmark paid
a state visit to China and was received by President Xi Jinping. During the
visit the two states signed maritime technology and energy conservation
agreements to strengthen ties.37 In a sign of how highly China values this
developing relationship, Denmark was also offered a loan of two pandas. “It’s
the ultimate symbol of the friendship” said Danish Foreign Minister Martin
Lidegaard, “and something that only happens on very rare occasions.”38
Chinese “panda diplomacy” is often used to mark important occasions or cement strategically important ties; Mao Tse-tung offered bears to North Korea
and the Soviet Union in the 1950s, and Premier Zhou Enali presented two
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to Richard Nixon as a symbol of China’s Cold War rapprochement with the
US. While this remained unspoken, China’s interest in Denmark likely has
more to do with Greenlandic resources than with securing strategic supplies
of LEGO and wooden shoes.
As with Canada, Denmark and Greenland see this relationship as mutually beneficial. Greenland is resource rich but capital poor and China is
the obvious suitor. For many in Greenland, however, the fear is that Chinese
investment will overwhelm this tiny aspiring nation. With less than half the
population of Prince Edward Island, Greenland will not be able to provide the
necessary labour for this new industry. Foreign companies have, therefore,
accepted the need for imported workers (including Chinese labour crews) to
operate the mines. Although the Greenlandic government has “stressed that
mining projects should provide jobs for the nation’s workers,” Greenland’s
population primarily consists of Inuit hunters, fishers, and educated professionals – making local labour hard to come by.39
Greenland is no longer subject to the European Union’s labour laws and,
in 2012, its parliament passed a law facilitating the opening of large mines,
including procedures to permit migrant workers. London Mining, a British
company now operating in administration, spent years trying to develop one
of the most promising greenfield sites on the island and was the first to include foreign workers in its plans. The company began negotiations in 2011
with Sichuan Xinye Mining Investment Co., a company owned by a provincial
mining bureau, to finance its Isua iron ore project. Sichuan Xinye estimated
that it would need 700 workers for the project – and as many as 3,000 during
the peak construction period. Even when this financing agreement fell apart,
London Mining maintained its foreign-worker requirement, estimating that
only 10 per cent of the construction jobs and 55 per cent of the mining positions would go to Greenlanders (and this only after five years of operations).
The remainder of the positions would go to foreign employees of as yet undisclosed nationality.40 Broader estimates for all of Greenland’s future projects
put the island’s requirement at a staggering 10–20,000 imported labourers.41
Greenland’s March 2013 parliamentary elections reaffirmed the controversial nature of this issue. The Guardian reported that “voters in Greenland
feared that ministers were surrendering their country’s interests to China
and foreign multinationals and called an end this week to the government
of Kuupik Kleist.”42 The pro-development Kleist was replaced as premier by
Aleqa Hammond and her center-left Siumut party who promised a more
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careful scrutiny of foreign investment and its impact on Greenlandic lifestyles
and human rights.43 Hammond’s victory reaffirmed the controversial nature
of the resource issue and demonstrated how uneasy many Greenlanders remain with major resource projects. Still, Hammond’s election did not represent a decisive change in direction. In October 2013, the Siumut government
took the critical step of removing Greenland’s long-standing ban on uranium
mining. This move not only allows the construction of uranium mines but
smoothes the way for mines like Kvanefjeld, where uranium is produced as a
by-product.
This pro-development stance was reaffirmed in another Greenlandic
general election in 2014. The Inuit Ataqatigiit, Greenland’s leading opposition party, campaigned against uranium production and pledged to reinstate
the ban.44 The victory of Simut, which formed a government with the support of pro-mining parties Demokraatit and Atassut, represents a significant
vote of confidence in resource development.45 While the island’s course is
not decisively set, this position will help to attract foreign investment. Still,
it is recognized that a more concrete regulatory framework will eventually
have to be put in place. Interim Premier Kim Kielsen expressed these concerns in October 2014, saying: “If we change the policy every time a new government takes office, then we lose all foreign investment. We need a stable
arrangement.”46
In spite of China’s obvious interest in Greenlandic resources, and the reciprocal Greenlandic interest in Chinese money, fears of a flood of Chinese
workers and influence into Greenland are unwarranted thus far. While
Chinese companies have financed some projects, the vast majority of investment in the island still comes from North American and European sources.
In 2013, for instance, the Greenlandic government approved over 120 requests for permission to undertake oil, gas, and mineral exploration – and
none went to Chinese companies.47
Dampening the Optimism
In both Canada and Greenland, optimistic projections of resource growth
have been tempered by the costs and difficulties of Arctic operations, as well
as by the changing dynamics of global supply and demand. In 2011 Jorn Skov
Nielson, Greenland’s deputy resources minister, predicted that full-scale mining operations could begin as early as 2012, and “five or six mature projects
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for extracting iron, zinc, and rare earths” might be under way within five
years.48 In retrospect, such assumptions can only be called wildly ambitious.
In 2014, iron ore prices fell from roughly $140 to $74/ton, and then by
early 2016 to $50, with few analysts projecting a strong recovery in the near
future. In large part this drop was caused by an oversupply in ore production
and a build-up of stocks in China, as well as a move away from infrastructure
investment towards consumption, reducing demand for steel.49 Analysts at
Wood Mackenzie also point to new environmental controls in China and the
fear that these will negatively impact steel production.50 This has resulted in
iron and other mineral prices that are low enough to cancel or delay most of
the major Arctic mining projects in both Canada and Greenland.
In Canada, Baffinland’s $4 billion Mary River iron mine opened in
September 2014 – though at only 20 per cent of its initially planned capacity. Elsewhere in Nunavut, the Izok Lake mine remains in limbo while West
Melville Metals cancelled its Fraser Bay iron project in December 2014.51
Cliffs Natural Resources is also shutting down its Bloom Lake mine in northern Quebec (jointly owned with Chinese steelmaker Wuhan Iron and Steel)
and its Wabush mine in Labrador. The closure of Bloom Lake, one of the
larger operations in the region, has even called into question the viability of
Plan Nord.52 In Greenland, development has been slow to materialize for the
same reasons. The island’s flagship project, the Isua mine, is now stalled after
its original owner, London Mining, entered bankruptcy protection and was
forced by creditors to sell off its only producing asset in Sierra Leone.53 In
January 2015, the Isua project was taken over by the General Nice Group,
a private Chinese trading company. The buy-out has been estimated at $2
billion though the group has not yet released any detailed plans to develop
the mine.54
The reality is that none of these mines have moved forward because both
Western and Chinese companies operate to make a profit. Without high
mineral prices, developing the Arctic remains an unattractive proposition.
Mining and shipping costs at Isua, for instance, are estimated at roughly $80
per ton of concentrate.55 Cliffs’ Bloom Lake mine faces similar costs.56 While
Arctic reserves are often world-class, extraction costs are now higher than the
price of the resource. They are also uncompetitive when compared to rapidly
expanding production from other mining jurisdictions – principally Brazil
and Australia. Operating costs for BHP Billiton’s iron ore mines average
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less than $20, Rio Tinto produces at $20.40, and Vale SA at $24.71 per ton of
concentrate.57
In spite of these hurdles, it should be kept in mind that delays and cancellations in the wake of price fluctuations are common for resource projects in
high-cost jurisdictions and developing the Arctic has always been a long-term
enterprise. Over the long term, the advantage possessed by many of these
deposits is their purity and size. Mineral concentrations at Mary River, Izok
Lake, Isua, Kvanefjeld, and others are world-class and, with better infrastructure, can present excellent economies of scale. When resource prices justify
activity, many of these projects will almost certainly be revisited.
The quality of certain Arctic resources may even expedite development
if China chooses to aggressively push new environmental reforms. In March
2014, Chinese Premier Li Keqiang “declare[d] war” on pollution, saying it
was “nature’s red-light warning against the model of inefficient and blind
development.”58 China’s major industrial cities are choked by smog, often
containing airborne particulate matter at high enough levels to cause serious
health problems; Li cited particulate matter known as PM 2.5 and PM 10
as a special concern.59 As part of this fight, steel plants (the country’s main
producer of PM 2.5/10 emissions) were targeted and more stringent emission
controls are being imposed. Mills in China’s key steel-making provinces of
Hebei and Jiangsu are under particular pressure to lower emissions and, although this move has created concern for future iron ore demand, it has also
increased the premium for high-quality feed for China’s smelters.60 Sintering,
the process of agglomerating low-quality iron ore fines to create a product
that can be used in a blast furnace, is the most polluting process within a
steel plant, responsible for 80–90 per cent of total dust and soot emissions
and more than 60 per cent of total sulphur emissions from the industry.61 A
newfound concern for air quality means that many plants will look to replace
sintering with more expensive, higher quality, and environmentally friendly
ore – like that found in the Arctic. Already, premiums for higher quality iron
are rising – sometimes reaching $40 per dry metric tonne62
From the second quarter of 2013 to the second quarter of 2014, as iron
ore fines prices fell 22 per cent, the higher quality pellets fell only eight per
cent.63 London Mining’s initial plans for the Isua mine involved production
of 70 per cent iron content (FE) pellets, significantly better than the baseline
high-grade 62 per cent FE currently favoured by Chinese buyers.64 Mary River
produces lump iron, another form of high grade product that can be used
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without sintering. If pollution becomes a big enough problem, domestically mined Chinese ore (which averages only 21 per cent FE)65 may be slowly
phased out, thereby increasing demand for foreign supplies. It is far from certain that China will remove a significant amount of domestic, low-quality ore
from the market, or that its environmental regulations will drive premiums
for the Arctic’s higher quality ores high enough to justify development. As air
pollution worsens, however, it is conceivable that the political pressure to act
will have an effect that will trickle down (or up) to the Arctic.
While the largest of China’s overseas mining projects are base metals
like iron ore, the resources that have garnered the most attention (and raised
the most concern) are rare earth elements (REEs). This basket of metals consists of seventeen chemical elements in the periodic table, specifically the fifteen lanthanides plus scandium and yttrium, that are essential components
in modern technology – in everything from solar panels and wind turbines to
smartphones, hybrid cars, and smart weapons. Contrary to what their name
implies, rare earths are not particularly rare, but they are seldom found in
concentrations great enough to justify extraction. A common concern in the
West has been that China enjoys a near monopoly on their production. After
closing most of its REE mines in the 1990s because environmental regulations
made their production cheaper in China, North American and European
countries found themselves hostage to Beijing, which has occasionally used
its monopoly as a political weapon.
In September 2012, for instance, China halted shipments of REEs to
Japan during a heated dispute over Japan’s detention of a Chinese fishing
trawler that rammed two Japanese coast guard vessels near disputed islands.66
In October 2010, China also halted some shipments of raw rare earths to the
United States and Europe after the Obama administration opened an investigation into Chinese violations of international free trade rules, including
China’s restrictions on rare earth exports. These restrictions caused a dramatic spike in REE prices from mid-2010 to 2012.67
Given the importance of rare earths to Western industry, many commentators have pointed to Greenland’s major REE deposit at Kvanefjeld as
a “diplomatic flashpoint.”68 In February 2013, Paula Briscoe, the national
intelligence fellow at the Council on Foreign Relations in Washington, highlighted a European Union request to Greenland to restrict Chinese access
to Greenlandic rare earths for strategic reasons. The premier of Greenland
Kupik Kleist rejected this overture, proclaiming that “Greenland is open
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for investments from the whole world.”69 In 2016 the state controlled mining company Shenghe Mining purchased a 12.5 per cent share of Greenland
Minerals and Energy Limited, with the option to acquire up to 60 per cent
of the Greenlandic company if it so desires in the future. Coupled with a
2014 strategic partnership, signed with China Non-Ferrous Metal Industry’s
Foreign Engineering and Construction Co. Ltd., it is certain that the island’s
rare earths will be at least partially Chinese-owned, and will be sent to China
for processing.70
While this arrangement will strengthen China’s hold on global REE supplies, the economic and geopolitical situation has changed significantly from
the monopoly scares of 2010–13. Ironically, the fear generated by Chinese
export restrictions provided fertile ground for Western companies to finance
new mines outside of China, which began coming online in 2012. The two
largest, Mt. Weld in Australia and Mountain Pass in the US, together have
a production capacity of roughly 41,000 tons/annum – which is almost the
entire REE demand of the world outside of China.71 These mines have never
operated at capacity, largely the result of the crash in REE prices following
the addition of new supply. In 2014, China’s share of REE fell to around 75
per cent and could easily fall further if prices rise again. In fact, any attempt
by China to limit access to its domestic supply of REEs (or those it controls in
Greenland) will simply erode its position by encouraging Western investors
to fund new mines (some of which would be in the Canadian Arctic).72
Longer-term issues – related to the defence and security of an independent Greenland, its alliance commitments, and the increased tempo of
Chinese development activities on its territory or in its waters – are beyond
the scope of this study. Given the geographical proximity of Greenland to
Canada, and the relationship between Canadian and Greenlandic Inuit, the
situation should at least be monitored. As Briscoe notes, “if Greenland manages the development properly and takes the time needed to ensure it can
effectively oversee development, then the people of Greenland will be on the
road to a prosperous future where many native Greenlanders are better educated, more skilled, and generally better off than they are now.” On the other
hand, Chinese influence in Greenland “could help buy Beijing a proxy vote
in Arctic matters … If Greenland, lured by the promise of investments and
earlier autonomy from Denmark, allows itself to be overwhelmed by foreign
companies, then China could use its influence to Beijing’s advantage.”73
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Chinese Activities in Iceland
China’s relationship with Iceland is an oft-cited example in the Western
media of Beijing’s growing geopolitical interest in the circumpolar world.
Icelandic officials recognize that should the central Arctic Ocean ever open
to transpolar shipping, their small island holds a strategically significant location as a potential hub – and this position would clearly be of interest to
major trading nations like China. President Ólafur Ragnar Grímsson noted
in June 2011 that China had sent high-level delegations to the island during
each of the previous six years – and not a single such delegation to the United
States.74 Likewise, reports in the Icelandic and Western news media circulated
after 2012 that China’s “super-embassy” in Reykjavik staffed 500 diplomats
(while its embassy in the US was staffed by seventy).75 Although less than
ten full-time Chinese embassy staff actually occupy the massive building,76
the persistence of this alleged example of China’s incomparable interest in
Iceland – a myth with no empirical grounding – is telling.
Nevertheless, China has been preparing the ground for a more strategically important Iceland since initiating bilateral free trade talks in 2006. The
foreign affairs ministers of both countries discussed options for enhanced
Arctic cooperation in 2012,77 with China indicating its interest in establishing a second Arctic research base in Iceland.78 The two states signed a free
trade agreement the following April, and in March 2014 China’s largest oil
company (CNOOC) partnered with Iceland’s Eykon Energy to explore for
oil in a large block of Iceland’s northeastern coast.79 Meanwhile, Iceland’s
aluminum industry is receiving Chinese financing while Orka Energy of
Iceland and China’s Xianyang Municipal People’s Government and Sinpoec
Star Petroleum have signed an agreement to develop the island’s geothermal
resources. Preliminary discussions are also ongoing between Icelandic and
Chinese shipping companies about trans-Arctic partnerships.80
These strengthening ties between China and Iceland have worried some
Western officials. “Nobody knows what the devil they are up to,” said Einar
Benediktsson, Iceland’s former ambassador to Washington and a critic of his
country’s expanding ties with Beijing. “All we know is that it is very important
to China to get a foothold in the Arctic, and Iceland is an easy prey.”81 From a
Chinese perspective, this sort of involvement is seen as a cooperative way of
allaying suspicion and cementing the nation’s position in regional affairs by
being a provider of resources or service.82
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Like Greenland, Iceland is a small country, with a population of only
323,000 (less than that of London, Ontario). Its economy was also disproportionately damaged by the financial crash of 2008, leaving it very receptive to foreign investment. In spite of this, the country maintains a robust and largely corruption free government (rated twelfth of 174 states by
Transparency International) that will not be influenced as easily as others in
the developing world.83 Indeed, there are few signs that Chinese investment
has led to the sort of strategic penetration feared by some commentators.84
In September 2011 for instance, Chinese businessman Huang Nubo’s plan to
purchase Grímsstaðir á Fjöllum (comprising about 30,639 hectares in northeast Iceland) for 1 billion ISK (about $200 billion USD) was rejected by the
Icelandic government. Fears that this land might be used for a naval facility
or a listening post, and that military personnel might pour in, disguised as
hoteliers and golf caddies,85 were almost certainly exaggerated. Still, despite
the generally positive attitude towards China among Icelanders, the idea
of selling land remains an uncomfortable one.86 Icelandic policy is best described as a balancing act, whereby the small island seeks economic benefit
from Chinese investment while being careful to avoid surrendering too much
influence to a much larger country.87
China and Arctic Energy: The Case of Russia
Over the past thirty years, China’s consumption of oil has increased as quickly as its consumption of raw materials. As a result, its state-owned oil companies have spent billions buying up assets around the world, and one of the
most promising new development regions is the Russian Arctic. The area’s
potential is huge. In 2008 a US Geological Survey estimate placed sixty per
cent of the Arctic’s undiscovered oil and gas reserves in Russian territory or
its EEZ.88 Unlike Canada, Greenland, and the US, Russian Arctic exploration
is already well advanced. Moscow has spent billions developing the region,
which it intends to use as its “foremost strategic base for natural resources”
by 2020.89 Russian state energy producer Gazprom, for instance, plans to start
extracting offshore deposits in the Barents, Okhotsk, Kara, and Pechora seas
before 2030, while Rosneft drilled its first exploratory well in the Kara Sea in
September 2014.90
Because Russian state law classifies these reserves as a strategic sector of
its economy, foreign ownership is limited to minority status. Accordingly,
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CHINA’S ARCTIC AMBITIONS
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UNDISCOVERED OIL
(billion barrels)
>10
0.1–1
Area not quantitatively assessed
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