Drilling is under way at an oil field on the Arctic peninsula of Yamal. This is part of the Yamal liquefied natural gas project under the cooperation between China and Russia.

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The “Polar Silk Road” refers to routes running through the Arctic Circle that connect the three major economic centers of North America, East Asia and Western Europe. It consists of but is not limited to the Northeast Passage across Russian waters, the Northwest Passage across Canadian sea area and the Central Passage across the middle of the Arctic Ocean. With climate change and economic globalization, the launch and commercial operation of Arctic shipping routes come true.

 

Implications for China
The building of the Polar Silk Road will boost the integration of economies in Eurasia. To China, the polar route is significant in three major ways.

First, Arctic shipping routes will considerably reduce economic costs. To coastal areas in northern China, sailing along shorter Arctic routes will save both time and freight costs. From China’s coastal ports to Murmansk, Russia, it is estimated to be 4,000 to 7,000 sea miles shorter on average than along traditional shipping routes, saving 36 to 55 percent of voyage. The distance to Reykjavik, Iceland; Hamburg, Germany, and the port of the Baltic Sea will be shortened by 1,370 to 4,600 sea miles. In the direction of North America, the distance from the Chinese coast to St. John’s, Canada, will be cut short by 3,500 sea miles and by more than 2,000 sea miles to Boston and the New York City.

Sea transportation costs generally depend on the time spent on the ocean, charterage and insurance expenses. Sailing the Arctic will incur added expenditures for ships built to special standards alongside icebreaking costs, but these costs are offset by reduced expenses on insuring against trouble from pirates and the demurrage for heavy traffic.

It is predicted that if Arctic shipping routes are thoroughly opened up, China will save from $53.3 million to $127.4 million on shipping costs while securing more sea lanes and diversifying its international shipping.

Second, Arctic routes will assure China a safer, stabler energy corridor. Due to its high dependence on foreign energy resources, the turbulent Middle East and safety risks in southern routes, speeding up the construction of a stable, diversified energy supply channel has great implications for China’s energy security.

There is rich oil, gas, methane hydrates and vast quantities of minerals in the Arctic and on the continental shelf of the ocean floor. Exploiting resources in the region will create an overseas energy base for China.

According to the 2008 United States Geological Survey, the Arctic is estimated to hold about 22 percent of the world’s undiscovered conventional oil and natural gas resources, which amounts to about 30 percent of the world’s undiscovered natural gas and 13 percent of the world’s undiscovered oil. Of these resources, 84 percent are expected to be offshore and mostly in shallower waters on the continental shelf. Moreover, the natural gas reserve, which is concentrated in Russia, is three times larger than that of oil.

In addition, the Arctic also boasts rich ore, forest and fishery resources. Countries along the Arctic Ocean have all incorporated the exploration of Arctic energy resources into their strategic planning and strived to cooperate with China in exploiting oil and natural gas.

In addition to pipeline transportation, Arctic routes represent a safe lane for the sea transportation of oil and natural gas, serving as a vital guarantee for resource exploitation and utilization in the region.

Third, the development of Arctic shipping routes has a direct bearing on the economic layout in China’s coastal areas, especially on the division of labor and industrial distribution.

The “Belt and Road” initiative has spurred an economic takeoff in southern, southwestern and northwestern China. The opening up and commercial use of Arctic routes will further entrench the predominance of its eastern coast, spur economic and foreign trade growth in northern ports and refresh the layout and planning of supply sources in the inland, bringing opportunities for the economic development of landlocked areas.

 

Cooperation on polar routes
China’s international cooperation in Arctic affairs has made steady progress, involving such fields as environmental protection, scientific research, economic development and the building of a governance mechanism. The construction and advancement of the Polar Silk Road will inject vitality and new elements into its cooperation with other countries in the Arctic.

Currently, the partnership between China and Russia on the Northeast Passage, also called the Northern Sea Route, is the most representative of international cooperation on the Polar Silk Road. On July 4, 2017, when meeting Russian Prime Minister Dmitry Medvedev in Moscow, Chinese President Xi Jinping proposed  the two countries to carry out the Northern Sea Route cooperation to realize a Polar Silk Road.

With the translation of bilateral cooperation from consensus to action, a number of major projects have been unfolded. The Yong Sheng, owned and operated by COSCO Shipping, was the first Chinese cargo ship to sail the northern route in 2013. The corporation has since completed many voyages on the Northeast Passage and actively explored the normalized operation of Chinese merchant ships on Arctic waters.

Chinese and Russian ministries of transport are also negotiating a memorandum of understanding concerning maritime cooperation on polar water areas and the further improvement of policy and legal bases for cooperation on Arctic development.

Enterprises of the two countries have cooperated in oil and gas exploration and development in the Arctic and discussed projects of transportation infrastructure construction along Arctic routes, such as the Yamal liquefied natural gas project and the deepwater port project in Arkhangelsk.

Moreover, the Chinese Ministry of Commerce and the Russian Ministry of Economic Development have jointly instituted a special working mechanism to coordinate the exploitation and utilization of Arctic routes.

The building of the Polar Silk Road will likewise enrich China’s cooperation with other Arctic nations. The collaboration with Nordic countries like Iceland in Arctic scientific investigation, academic research and economy is under way.

For example, the Polar Research Institute of China worked with the Arctic Institute of Iceland to build an aurora observatory, which is open to scientists from all over the world. The China-Nordic Arctic Research Center was founded in 2016 as a platform for pragmatic cooperation in scientific research and academic exchange.

Enterprises of China and Iceland have also reached cooperative intentions in the exploitation and utilization of geothermal energy resources. And the China National Offshore Oil Corporation has gained the approval of oil exploration in the waters of Iceland and Norway.

Arctic cooperation between China and the United States is also progressing. Collaboration with Alaska in energy, fishery and tourism in particular is expected to deepen.

 

Prospects of Polar Silk Road
As navigation along Arctic routes and economic activities in the Arctic are subject to bad weather conditions in the region, difficulties and challenges loom large in the building of the Polar Silk Road.

When it comes to opening Arctic routes and sailing, the International Maritime Organization has formulated the instructional Polar Code, but there is room to improve related rules and regulations in detail as well as the implementation by countries along the routes. Furthermore, oil and gas development in the Arctic and other economic activities face challenges in terms of environmental protection, economic costs and technical feasibility.

The building of the Polar Silk Road is a strategic move that falls under the “Belt and Road” initiative. It can engage more countries to push ahead with the construction of the Belt and Road, enhance economic interconnectivity in the Arctic and contribute to the further integration of the Arctic into the international community, bringing substantive economic benefits and development opportunities to participating nations.

 

Sun Kai is a senior research fellow from the Institute of Polar Law and Politics and the Institute of Marine Development at the Ocean University of China.

(edited by CHEN MIRONG)