China’s Belt & Road Initiative – Blog #4

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(Image credit: srilankabrief.org)

This is the fourth Blog in a series based on The Geopolitical Significance of the Chinese Belt and Road Initiative and What it may Mean for Supply Chain Operations Worldwide, a Whitepaper (35 pg, 171 endnotes) researched and written for RAAD360 LLC (raad360.com). The goal is to alert supply chain managers worldwide to the complex risks inherent in BRI. RAAD360 provides RAAD™, a cloud-based supply chain risk management platform.

Worldwide Supply Chain Risk Series

China’s Belt & Road Initiative

Blog #4 – The Arctic

China’s interests in the Arctic region go beyond expanding and utilizing new shipping routes opened by warming seas—the region is rich in many resources, especially oil and natural gas, and China wants to be able to exploit these.  The Arctic is estimated to have nearly one-third of the untapped natural gas reserves and 13% of undeveloped petroleum reserves.  China presently has a large stake in the Russian Yamal liquefied gas project in the Arctic[1] and has also been actively pursuing participation in a multilateral endeavor to lay telecom cable across the seabed in the Arctic Circle.  Other countries involved in the telecom venture are Finland, Russia, Japan, and Norway.[2]

QINGDAO AND CHINA’S POLAR SILK ROAD

Source: Mia Bennett, Cryopolitics

China is already extensively using the ‘Polar Silk Road’  shipping routes and intends to step up its Arctic maritime activity.  This will accelerate plans to develop the necessary infrastructure to support a rapid expansion in Chinese shipping and resource development in the Arctic.  Accordingly, China—as COSCO, the state-owned enterprise—is working with Russia to develop a deep water port on the Northern Dvina River near the northern Russian city of Archangelsk and a new railway that would carry natural resources from the Siberian heartland to China and other world markets.[3]

Source: Cryopolitics http://www.rcinet.ca/eye-on-the-arctic/2017/10/03/chinas-arctic-road-and-belt-gambit/

China is also developing ports at Klaipedia, Lithuania, Kirkenes, Norway and a deep-water port in Iceland.[4] Additionally, China’s state-owned oil company, Chinese National Petroleum Company (CNPC) and the China Development Bank have entered into agreement with the Russian firm, Novatek, to develop a logistics hub at Kamchatka, in Siberia, for the Yamal LNG project, in which China is also a partner with Russia.

China’s Arctic region partners now also include the State of Alaska’s Gasline Development Corporation (AGDC).   A $43 billion deal has been signed with Sinopec (a state-owned energy enterprise and the world’s largest LNG buyer), China Investment Corp., and  the Bank of China.  The project envisions an 800-mile pipeline to south central Alaska to supply the U.S. market and a liquefaction plant in Nikiski, on the Kenai Peninsula that will produce up to 20 million tons annually, for export to Asia, mostly to China.  Alaska will also gain about 12,000 temporary construction jobs.[5]  Producer revenue from the venture is estimated to be about $1 billion a year, of which Alaska would get 25%.[6]

Another Chinese Arctic interest is Greenland where China controls key mining projects—to extract rare earth minerals at Kvanefjeld, and potentially zinc, in the far north of the country. Greenland, an autonomous constituent country within the Kingdom of Denmark, is relatively poor and undeveloped.  It depends on an annual subsidy from Denmark, but many Greenlanders would like to see their country become economically self-sufficient.  Chinese investment and trade offers a possible path.  Greenland lacks roads connecting its settlements,[7] depending on small airports for connectivity. (The most prominent infrastructure is the Thule Air Base/Pituffik Airport and Thule deepwater port;  the airbase is part of the U.S.Air Force Space Command).  Greenland’s government has been trying to enlist Chinese help in infrastructure development.  China’s price for this is not yet known.  So far, despite trips by Greenland authorities to China to generate interest in this kind of development, no commitments from China are forthcoming.

In its official Arctic policy announcement, China couches its interest and intentions in terms of its desire to become a world leader in Arctic exploration and development for the benefit of mankind.  Much attention is given to plans to cooperate with other countries in scientific research, environmental improvement and alleviating poverty,[8] but China makes it very clear that it will aggressively pursue what it sees as its interests in the Arctic.

China’s Arctic push is already being incorporated into China’s overall “Belt and Road” visions—it is being referred to as ‘One Belt, One Road, One Circle,’ as in Arctic Circle.[9]  All Chinese companies are being urged to become active in Arctic enterprises, whether scientific or commercial endeavors.  China also intends to push for its own interests, within the objectives of its ‘Vision for Maritime Cooperation under the Belt and Road Initiative.’  For example, in Section 4.3 “Maritime Security” it states:

“China proposes an initiative for jointly developing and sharing maritime public services       along the Road, encouraging countries to jointly build ocean observation and monitoring networks, sharing the results of marine environmental surveys, and providing assistance to developing countries in this area. China is willing to strengthen cooperation in the application of the BeiDou Navigation Satellite System and remote sensing satellite system to provide satellite positioning and information services.”[10] (emphasis added). 

The promotion of the Chinese BeiDou system, a competitor to the U.S.’s GPS, the EU’s Galileo, and even the Russian Glonass systems, appears to be an attempt to impose the Chinese navigation system as the standard in the Arctic and elsewhere.  This could cause confusion and other navigational problems.

Questions –

Where does my supply chain intersect with China’s “Belt and Road” transportation network?

What about my supplier’s supply chain?

Can China’s monopoly power increase transportation times in my supply chain?

Can China’s monopoly power increase transportation costs in my supply chain?

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There is a wealth of information in the end notes to each Blog article.  Click the URLs to bring the sources onto your computer screen for review.

[1] “China unveils ‘Polar Silk Road’ in white paper on Arctic Policy.” The Strait Times. 26 January 2018. http://www.straitstimes.com/asia/east-asia/china-eyes-polar-silk-road-in-white-paper-on-arctic-policy

[2] Shih,Ting.  “As polar ice recedes, China plans for a massive telecom cable across the Arctic seabed.” National Post (Bloomberg News).  14 December 2017.  http://nationalpost.com/news/world/china-is-building-a-massive-telecom-cable-in-arctic-balancing-that-with-climate-change-is-now-in-its-hands

[3] Lateigne, Marc.  “Who  Benefits fromChina’s Belt and Road in the Artic?”  The Diplomat. 12 September 2017. https://thediplomat.com/2017/09/who-benefits-from-chinas-belt-and-road-in-the-arctic/

[4] Economist Intelligence Unit.  “China’s expanding investment in global ports.”  11 October 2017.  http://country.eiu.com/article.aspx?articleid=1125980496

[5] CNBC.  “Chinese companies agreed to develop LNG in Alaska as Trump visits.” 8 November 2017.  https://www.cnbc.com/2017/11/08/chinese-companies-agree-to-develop-lng-in-alaska-as-trump-visits.html

[6] Granger, Erin. “China backs landmark LNG  pipeline deal with Alaska.” Daily News-Miner. 8 November 2017. http://www.newsminer.com/news/alaska_news/china-backs-landmark-lng-pipeline-deal-with-alaska/article_6cbd6716-c509-11e7-a2aa-3f35507f1ce5.htm

[7] Bennett, Mia.  “With Siumut’s re-election , will Greenland welcome Chinese investments?” (Blog) Radio Canada International.  25 April 2018.    http://www.rcinet.ca/eye-on-the-arctic/2018/04/25/blog-with-siumuts-re-election-will-greenland-welcome-chinese-investment/

[8] China News Service.  Xinhua.   Ed. Gu Liping.  “Full text.  China’s Artic Policy.” 26 January 2018.     http://www.ecns.cn/2018/01-26/290236.shtml

[9] Moriyasu, Ken.  Op.cit.   https://asia.nikkei.com/Politics-Economy/Policy-Politics/China-expands-Belt-and-Road-to-the-Arctic

[10] Xinhua.  “Full text.  Vision for  Maritime Cooperation under the Belt and Road Initiative.” 20 June 2017.  http:// xinhuanet.com/english/2017-06/20/c_136380414.htm

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BRI Blog next Monday will be:

AFRICA, AUSTRALIA, SOUTH PACIFIC

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© Shirley M. Loveless, Ph.D. 2018

Dr. Loveless is a consultant, author, and educator in transportation systems, supply chain risk analysis, emergency management, and economic development.  She is a Member of the Transportation Research Board of the National Academies of Sciences, Engineering and Medicine, and an appointed member of several TRB Standing Committees.  She works with RAAD360 LLC as a supply chain transportation consultant.