Beijing-Moscow Relations Will Cool As the Arctic Heats Up

President Putin and President Xi. Photo Credit: AP

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By: Ezra Shapiro, Columnist

In recent years, Russia and China’s growing collaboration on energy and shipping projects in the Arctic has caused some consternation among U.S policymakers. Despite the countries’ current cooperation, Moscow and Beijing’s long-term ambitions are fundamentally at odds with each other. Russia places a high premium on its Arctic territory and guards it fiercely. China, on the other hand, seeks deeper penetration into the High North to benefit from the region’s emerging opportunities. So, while Moscow and China see working together in the Arctic as temporarily beneficial, divergent long-term objectives dim the prospects for a lasting alliance between the countries.

Russian-Chinese Cooperation in the Arctic

Moscow and Beijing cooperation has centered on increasing energy extraction in the Arctic and developing the Northern Sea Route (NSR) – which runs along the Russian coast and gives quick access to Asian and European markets – as a shipping lane. As rapid warming causes sea ice to recede in the Arctic Ocean, new opportunities have emerged in both sectors. Up to 22 percent of the world’s remaining undiscovered hydrocarbon reserves lie on the Arctic seabed, a majority of which is in Russian territorial waters.^[i] The Northern Sea Route’s viability as a shipping lane is likewise increasing, with shipping volume jumping by double-digits in low-ice years.^[ii]

Moscow has sunk substantial resources into exploiting these new opportunities. On its Arctic coastline, Russia is financing massive natural gas extraction megaprojects on the Yamal Peninsula.^[iii]At sea, it possesses the largest fleet of icebreakers by far and is looking to build up its infrastructure along the NSR to facilitate shipping along the sea lane; Russian policymakers see maintaining the route and charging fees for its use is a potentially lucrative opportunity.

China also has a stake in developing the Arctic. Its appetite for energy has grown rapidly in recent years; it’s now the world’s largest importer of crude oil and natural gas. Developing projects in and a reliable route from the Arctic could help China fill that demand.

To that end, under the auspice of the Belt and Road Initiative (BRI), Chinese companies have contributed up to 60% of the capital to finance the Yamal, and China’s National Petroleum Corporation now owns a 20% stake in project.^[iv][v]

While its investment in NSR infrastructure has been sporadic, Beijing has rapidly enhanced its own polar maritime capabilities, most notably by adding an icebreaking ship to its fleet, with another, nuclear-powered one on the way.^[vi]

For Russia, the timing of the BRI capital infusion could not have come at a better time. When the Yamal project began in the mid-2000s, initial financing and technological know-how came from western energy companies like ExxonMobil. But following Russia’s 2014 annexation of Crimea, Western sanctions caused these companies to pull out of the projects, leaving Yamal without the requisite funding or technology to make it viable.

China’s intervention, though, kept the project alive. On top of Chinese financing of the Yamal project, a number of other trends seem to indicate a convergence of strategic interests. Russia is now China’s largest supplier of crude oil;^[vii] sanctions against Russia and the ongoing China-U.S. trade war could draw the countries closer together; the two have also staged a number of large military drills—including near the Arctic.

The cooperation currently on display in the Arctic is unlikely to last, however. Beijing and Moscow have a long history of short-term partnerships coming apart, undone by historic mistrust, territorial disputes and fundamentally different approaches to engaging with the world.^[viii]

Divergent Objectives in the High North – and Beyond

Moscow’s strategic relationship to the Arctic is highly proprietary. It sees its far north as a source of national pride, economic bounty and geopolitical leverage – all of which depend on its control over a large swath of the Arctic.^[ix] So, while a cash-strapped Russia may accept limited Chinese equity in Arctic energy and infrastructure development, it remains protective over its northern territory, and suspicious of China’s long-term intentions—for instance, the notion floated in China that the NSR should be an international trade route. Russia has therefore resisted efforts by non-Arctic states to increase their role in regional governance institutions like the Arctic Council, and rapidly built up its military presence across its northern coastline.^[x]

China, however, wants to increase the role outside states play in the Arctic. To that end, it lobbied for permanent observer status on the Arctic council, which it was granted in 2013. China also conducts scientific research in conjunction with Arctic littoral states and gives significant foreign direct investment to those same states—in the cases of Iceland and Greenland, FDI in 2017 equaled 5.7% and 11.6% of their GDP, respectively—as part of its Polar Silk Road initiative to purchase regional influence.^[xi] Its investment in Russian Arctic projects should be seen as part of the same initiative.

Thus, while Beijing and Moscow have temporarily overlapping goals, their long-term objectives are at odds. China’s interest in gaining political and economic influence over the Arctic is unlikely to square well with Russian territorialism.

China’s growing economic influence threatens Russia’s traditional sources of income. In Central Asia, for example, Beijing is quickly eclipsing Moscow as a trading partner, reducing crucial trade flows into Russia.^[xii]

Overall, Beijing’s rising star seems set to erode Russian influence regionally and globally. And while China will doubtless continue to import Russian hydrocarbons, its long-term ambition of diversifying its trading network should worry Russia: it could end up relying on exports to China and without leverage to negotiate.

For its part, China is unlikely to sustain its engagement with Russia’s Arctic projects if the political or economic costs grow. Already, Chinese investment has slowed since 2014 in the face of ongoing international sanctions against Moscow, Western concerns about Russia’s Arctic militarization, and its resistance to greater Chinese control over projects there.^[xiii]

Conclusion

While Beijing and Moscow see one another as partners of convenience, their partnership is unlikely to grow in the Arctic or globally. China sees Russia as a necessary, if risky, source of energy, but its ultimate goal is to build a more diversified import network. As Chinese influence grows, Russian suspicion of China’s intentions could translate into increased efforts to reduce China’s Arctic presence. While Russia may be unable to stop China’s rise on the world stage, it will do everything in its power to ensure the Arctic remains Russian.