China’s Arctic Ambitions Take Shape in Remote Iceland Valley

In this Monday, Oct. 31, 2016 photo construction workers at the site of the Aurora Observatory in Karholl, northern Iceland. Construction workers are building a research facility to study the Northern Lights, whose spectacular streaks of color light up Iceland’s winter skies. Funded by China’s Polar Research Institute, the facility will house Chinese, Icelandic and international scientists when it opens next year. (AP Photo/Dorothee Thiesing)  (The Associated Press)

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LAUGAR, Iceland — In a remote valley near the Arctic Circle where the wind whips the coarse yellow grass, China and Iceland are preparing to look to the sky — and a shared future.

Construction workers are building a research facility to study the Northern Lights, whose spectacular streaks of color light up Iceland’s winter skies. Funded by China’s Polar Research Institute, the facility will house Chinese, Icelandic and international scientists when it opens next year.

.In this Monday, Oct. 31, 2016 photo, Zejun Hu, scientist at the Polar Research Institute of China, stands outside the construction site of the Aurora Observatory, a research facility to study the Northern Lights, in Karholl, northern Iceland. Construction workers are building a research facility to study the Northern Lights, whose spectacular streaks of color light up Iceland’s winter skies. Funded by China's Polar Research Institute, the facility will house Chinese, Icelandic and international scientists when it opens next year. (AP Photo/Dorothee Thiesing)In this Monday, Oct. 31, 2016 photo, Zejun Hu, scientist at the Polar Research Institute of China, stands outside the construction site of the Aurora Observatory, a research facility to study the Northern Lights, in Karholl, northern Iceland. Construction workers are building a research facility to study the Northern Lights, whose spectacular streaks of color light up Iceland’s winter skies. Funded by China’s Polar Research Institute, the facility will house Chinese, Icelandic and international scientists when it opens next year. (AP Photo/Dorothee Thiesing)  (The Associated Press)

This cement shell is a concrete achievement in the burgeoning relationship between the rising Asian superpower, population 1.37 billion, and this tiny North Atlantic island nation of 330,000 people. It may seem a lopsided friendship, but both countries perceive benefits. Beijing wants an Arctic ally as climate change opens up new sea routes and resource-extraction opportunities, while Iceland seeks heavyweight friends to anchor it against stormy economic waves.

“It is better to be a friend to everyone when you are small than be an enemy to anybody,” said Reinhard Reynisson, director of the nonprofit company building the Aurora Observatory.

Source: pric.gov.cn

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Reynisson speaks with the confidence of a country that has weathered earthquakes, volcanoes, famine and financial meltdown since it was settled by Vikings in the 9th century. But China’s growing interest has also aroused suspicions among some Icelanders, who are wary of big powers trying to grab their resources, whether fish, energy or land.

“We are a very small country, we are only 300,000 people, so we don’t look at our independence as an automatic thing,” said Asgeir Jonsson, an economist at the University of Iceland. “It’s something that you have to protect and look after.

“In our history, we have a long story of fighting with the bigger powers around us over fish and the resources that we have. That has left its mark on the population.”

Iceland was nudged in China’s direction by financial calamity. When the global credit crunch hit in 2008, Iceland’s banks — whose debts had ballooned to more than 10 times the country’s GDP — collapsed. Iceland’s currency nosedived, unemployment soared, and Iceland was forced to go the International Monetary Fund and the European Union for bailouts. It also began looking for new economic partners to help it rebuild — and China was willing.

In 2010, the two countries agreed currency swaps between Iceland’s krona and China’s yuan, and in 2013 they signed a free trade agreement — the first between China and a European country.

With Iceland’s support, China was granted observer status in 2013 at the Arctic Council, whose core members are Canada, Denmark, Finland, Sweden, Norway, Russia, the United States and Iceland.

It also attends annual Arctic Circle Assemblies hosted by Iceland — gatherings of politicians, officials, scientists and businesspeople to discuss the future of the region.

“China’s got a broad range of Arctic interests — economic, scientific, political, strategic,” said Anne-Marie Brady, editor in chief of the Polar Journal and a global fellow at the Wilson Center in Washington. “But the main thing it wants at the moment would be to make sure it has a seat at any decision-making table and has access to any rights that are up for grabs. So it’s great to have a friendly state like Iceland.”

Some of the plans discussed by the two countries have been grandly ambitious, such as making a deep-sea port in a northern Iceland fjord to create a major shipping hub on the Northern Sea Route.

It remains unbuilt, but the economic relationship between the two countries is growing steadily.

Iceland has granted the China National Offshore Oil Company permission to explore in Iceland’s waters, and Beijing has tapped Icelandic expertise in geothermal power, a major industry in volcanic Iceland and a potential source of clean energy for China.

Last year, Chinese automaker Geely — owner of Volvo — announced it was investing $45.5 million in Carbon Recycling International, an Icelandic company that operates the world’s first renewable methanol plant. Chinese telecoms giant Huawei is working with Icelandic mobile phone firms and a state-owned Chinese firm has signed a deal to fund a new aluminum smelter in northwest Iceland.

The Chinese Embassy in Reykjavik says bilateral trade, “though still small in terms of volume, is growing rapidly.” In the first nine months of 2016, Iceland’s imports from China were worth $330 million and its exports $77 million, a year-on-year increase of 12.6 percent.

In an email to The Associated Press, the embassy said China could benefit from Iceland’s “cutting-edge technologies in renewable energy, life-science (and) carbon-fiber industries,” as well as its fresh fish, meat, dairy products and mineral water. In return, China can provide Iceland with a wide range of Chinese-made goods.

Chinese tourists — whose numbers rose from 26,000 in 2014 to an estimated 60,000 this year— are helping to drive a tourism boom that has been the savior of Iceland’s economy since the financial crisis.

Cozying up to Beijing also gets tiny Iceland noticed by much larger nations. Brady notes that Iceland’s politicians have become adept at “playing the big powers off each other.”

“They are getting a lot more attention from the United States in recent years because of their perceived very good relationship with China,” she said. “And yet what the ordinary people think about that is often quite different from their government. … the population has some misgivings about this close relationship.”

Those misgivings reached a peak five years ago, when multimillionaire Chinese businessman Huang Nubo tried to buy a 300 square kilometer (120 square mile) chunk of remote northeast Iceland to build an eco-resort. Strong public opposition led the Icelandic government to block the purchase in 2011 — in part because no foreign buyer had ever bought so much land.

Suspicion lingered when the Aurora Observatory was announced for a sparsely populated region 250 miles (400 kilometers) northeast of Iceland’s capital, Reykjavik. Pascal Heyman, a former official at the Organization for Security and Cooperation in Europe, said in 2014 that the Chinese might want to use the equipment to keep an eye on NATO airspace.

Iceland is one of the best places in the world to observe the aurora borealis, or northern lights. The colorful phenomenon is caused when a magnetic solar wind slams into the Earth’s magnetic field.

Scientists hope the observatory will help them learn about the interaction between the sun and the Earth’s magnetic field, which could help predict space weather.

The observatory is behind schedule — in part due to a shortage of building contractors in booming Iceland — but is due to open next fall. It will include a visitors’ center, and local people have begun to capitalize on the upcoming economic opportunities, opening Aurora guesthouses and thermal baths.

Reynisson said the initial local skepticism about China’s intentions has faded.

“Now you might hear someone say, ‘They will never finish it’ — not that they are spying on us or doing something totally different from what is said to be done,” he said. “Why build a station here in the valley to spy on us? Much easier to rearrange some of their satellites to spy on us.”

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Lawless reported from Reykjavik, Iceland. Follow Jill Lawless on Twitter at http://Twitter.com/JillLawless

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See also:

China’s Polar Ascendancy: Exploring Beijing’s Rising Involvement in the Arctic

Source: http://natoassociation.ca/chinas-polar-ascendancy-exploring-beijings-rising-involvement-in-the-arctic/

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In the Race for Arctic Energy, the U.S. and Russia Are Polar Opposites

The Obama administration dithers while Moscow—with China close behind—revs up offshore oil production.

The Russian port of Sabetta on the Kara Sea in the Arctic circle, April 16.
The Russian port of Sabetta on the Kara Sea in the Arctic circle, April 16. PHOTO: KIRILL KUDRYAVTSEV/AGENCE FRANCE-PRESSE/GETTY IMAGES

In his message to the American people about his visit to Alaska next week, President Obama said “The alarm bells are ringing, and as long as I’m president, America will lead the world to meet this threat before it’s too late.” He was talking about climate change. But his words could just as well apply to the strategic moves that are being made in the vast Arctic region to secure its resources and potential.

Russia is taking the lead in Arctic offshore oil production. Russia began producing offshore oil at the Prirazlomnaya field in the Pechora Sea in 2014, and last year it delivered roughly 2.2 million barrels. Gazprom Neft expects to more than double oil production this year from the country’s only offshore Arctic oil project.

China isn’t far behind. Between 2009 and 2013, Chinese companies—mainly the big three, China National Petroleum Corp., Sinopec and China National Offshore Oil Corp. (Cnooc)—were the largest buyers of international oil assets. Several of these acquisitions were made with the Arctic in mind, such as Canada’s Nexen and Russia’s Yamal LNG. Early last year, Cnooc obtained an exploration license for Iceland’s Dreki region in the Norwegian Sea. The company is also expected to be involved in Norway’s 2016 licensing round in the Barents Sea.

Russian and Chinese activity goes beyond a scramble for resources. Russia has added a 6,000-soldier permanent military force, including radar and sensing networks, in the Arctic’s northwest Murmansk region. Russia recently submitted a large extended continental-shelf claim for the Arctic, which, if accepted, will give Russia rights to seabed resources beyond its 200 nautical-mile exclusive economic zone. China’s maritime activity in the region has increased, and it is making significant investments in Arctic research, infrastructure and natural-resource development. Although not an Arctic nation, China sees the value in building modern icebreakers to support its activity in the polar regions—north and south.

The dominant posture Russia and China are assuming with regard to Arctic oil and gas stands in contrast to the U.S. After holding a record-breaking lease sale in the Chukchi Sea in 2007, (and collecting billions of dollars for federal coffers), the federal government has failed consistently to demonstrate it has the political will and agency know-how to allow Arctic offshore oil-exploration to move forward.

Institute for Energy Research Distinguished Fellow Charlie Drevna explains why production is increasing, despite oil price declines. Photo credit: Getty Images.

It may be convenient to take a “why bother” approach. After all, the cost of energy is down and we see a bright future in the shale boom. However, the U.S. continues to import 40% of its crude-oil needs—nearly half of which comes from OPEC members—at a cost of $23.5 billion a month.

Alaskan energy production from the outer continental shelf can come online in 10 to 15 years, when experts predict shale-oil production in the lower 48 states will plateau and crude-oil production in the Gulf of Mexico will begin to decline.

 

But the dithering must end soon. According to a recent report by the National Petroleum Council (NPC) and a diverse group of government regulators, nongovernmental organizations, environmentalists, industry leaders and Alaska Native representatives, the federal government needs to facilitate exploration in the offshore Alaskan Arctic now. Failure to act immediately risks a renewed reliance on imported oil and jeopardizes America’s global competitiveness, leadership and influence in the Arctic.

President Obama did the right thing in August by finally allowing energy exploration to proceed in the Chukchi Sea. But the approved drilling permit for Royal Dutch Shellremains the only exploration activity in U.S. waters in the Arctic. Now is the time to ensure that responsible energy exploration and production in the region proceeds at a pace that matches Russia’s and China’s aggressive efforts.

The U.S. recently assumed a two-year term as chairman of the Arctic Council, the world’s primary intergovernmental forum on the region. The council focuses on a broad range of issues but not on defense and security. The U.S. can use its chairmanship to take a leadership position on shipping, resources and fisheries standards and practices. It can also set the stage for constructive regional engagement and cooperative investment to enhance overall maritime domain awareness in the Arctic, including joint search-and-rescue and environmental responses.

The U.S. should also use its leadership role to ensure responsible energy exploration and production in the region, bringing to bear America’s higher standards of operations, more-stringent safety standards, and a more finely tuned risk-management culture than is practiced on the other side of the Arctic Ocean.

As the NPC report revealed, the U.S. needs Arctic energy exploration. Yet by repeatedly putting the brakes on the development of natural resources in the Arctic, Washington has injected uncertainty into its Arctic policy and threatened the future energy security of U.S. citizens. If we subject energy companies to death by a thousand paper cuts that put stifling bureaucracy over national strategic needs, we will cede this critical strategic region to others with grave economic, security and environmental implications for generations to come.

Mr. Roughead, a retired U.S. Navy admiral and former chief of naval operations (2007-11), is a visiting fellow at Stanford University’s Hoover Institution.

http://www.wsj.com/articles/in-the-race-for-arctic-energy-the-u-s-and-russia-are-polar-opposites-1440542608

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