But while serious international disputes between Iceland, Denmark and Norway over the Arctic's natural resources are very unlikely, there are already serious disagreements closer to home. Not only is there a bitter controversy in Norway between environmentalists and the supporters of the oil lobby but, as an earlier chapter has noted, a growing political conflict over who has a right to rule Greenland.25
The disagreements between Greenlanders and the government of Denmark have hitherto been a relatively low-key affair but have the potential to become politically explosive. While successive Danish prime ministers have said that they will not stand in the way of independence if the people desire it, in practice talks over how much freedom they should enjoy, and on what terms, have often proved protracted and at times almost intractable. But the issue has become all the more contentious and difficult over the past few years because Greenland is now thought to harbour huge deposits of oil and natural gas, whose exploitation would offer a Danish, or Greenlandic, government huge revenues.26 So the political question of whom the reserves and their proceeds belong to is suddenly looming very large indeed.
Although the signs of real political crisis have long been evident to most visitors to Greenland (for some years the Danish flag has been rarely if ever seen in the streets of its capital, Nuuk, whereas the Greenlandic flag is almost everywhere), bitter disagreements are likely to emerge after June 2009, when Greenlanders assume even more powers from Denmark. As a result of a referendum held the previous November, in which more than three-quarters of the population voted in favour of the changes, the people of Greenland take control over the local police, courts and coast guard and are given a greater say in the formation and conduct of foreign policy. And on an island where English, Danish and several dialects of Greenlandic are spoken, the Inuit tongue also becomes the island's official language. Crucially, Greenlanders are also allowed a greater share of revenues from the sale of any oil discovered in the region. 'Taking advantage of what nature has provided us when it comes to non-living resources has become closely related to our political quest for more economic self-sufficiency as well as the opportunity to someday establish our own nation-state', as one Greenlandic minister told an international conference on the Arctic in January 2009.27
Disagreements over this issue have previously caused major political storms elsewhere in the world and could in the same way easily ignite tensions between Denmark and Greenland. The vote could whet the appetites of those who favour independence while the lure of a vast quantity of petrodollars is stiffening the resistance of those who oppose it. 'Whether the Greenlanders can take over more political institutions themselves depends heavily on the natural resources. It could well be thirty to forty years', as Per Oerum Joergensen, a member of Denmark's ruling Conservative party and one of the key negotiators in Greenland's new autonomy deal, pointed out at the time.28 Aleqa Hammond, Minister for Finance and Foreign Affairs in the home rule government, is equally upbeat: 'If Greenland becomes economically self-sufficient, then independence becomes a practical possibility. We know that we have gold and diamonds and oil and great masses of the cleanest water in the world. It may be closer than we think.'29
The Danes argue that they not only have a strong historic link with this massive 850,000 square mile landmass but also provide it with vast annual subsidies of around 3.2 billion Danish kroner ($600 million) that make up half of its domestic budget and bestow Greenlanders with a very generous welfare system modelled on Scandinavian lines. So if commercial quantities of oil and gas are discovered, then they point out that Danish taxpayers should either get a share of the proceeds or at the very least stop forking out so much money. 'Greenland can't both earn a bundle on oil and keep its block grant', as Danish negotiator Frank Jensen told journalists recently.
Resolving the political conflict between the two sides could take years, and is likely to become even more difficult if, in the years ahead, the price of oil and gas climbs high and thereby raises the financial stakes involved. So when commodity prices soared in the summer of 2008, the dispute became more bitter as both sides dug in their heels. As Kuupik Kleist, one of two Greenlandic representatives to the Danish Parliament and a leading member of the negotiations, told journalists, 'on the Danish side, they have gone from being almost indifferent about the future of Greenland to being very, very much focused on not giving up Danish rights on mineral resources'.30
The most likely scenario is that Greenland will eventually become independent but retain close links, both formal and informal, with Denmark. This is partly because, as Chapter 10 has pointed out, many Greenlanders harbour a deep-seated mistrust of the United States and would regard the Danes as their natural political and diplomatic ally. As Svend Auken, a veteran Danish politician and former energy minister, has argued, 'in the long run, the ideal would be for them to be recognized as an independent state in the United Nations, but in close contact with Denmark', still stamping the image of the Danish queen on their currency and cooperating closely with the Danish military. If Greenlanders fail to do this, he adds, then 'they will be very dependent on the Americans'.31
One other country that could acquire a very important presence in the Arctic region over the coming years is China, even though its own borders lay thousands of miles south of the Arctic Circle and its government therefore has no unique legal right to any natural resources there. Under the 1982 Convention, which it signed in 1996, China only has the same rights as any other country to navigate 'the Area of high seas' in the Arctic Ocean and exploit its natural resources, which are 'the common heritage of mankind', in conjunction with the rules laid down in the treaty.
Beijing first showed signs of real interest in the region in the summer of 1999, when the Snow Dragon (RV Xuelong), a polar icebreaker that had been specially designed and built a few years before, took a team of scientists to the Bering and Chukchi Seas to investigate the impact of climate change and look more closely at local geology and fishing conditions. The Snow Dragon made other expeditions there in 2003 and 2008 to follow up on its earlier findings. 'An important task is to observe the effects of the polar ice surface changes upon the climate of our country', proclaimed Zhang Haisheng, the chief scientist for the 2008 mission and a leading director of a research institute in Hangzhou, just before he set sail. He and his team would do 'comprehensive research' on local geology and meteorology, and planned to use a helicopter, a yacht and an underwater robot to get the data they needed.
The Chinese have also established a permanent presence in the Arctic, founding a scientific research post, known as the Arctic Yellow River Station, in Ny-Alesund on Spitsbergen. This is just a very small base, which can accommodate no more than about 25 people at any one time, and merely allows Chinese scientists to constantly update their information on the local climate and conditions.
Beijing is of course quick to claim that its ambitions in the region are entirely peaceful and honourable: 'Natural resources in the region belong to all peoples of the world', proclaim the authorities. 'China has the responsibility, duty and the ability to take part in the peaceful exploration and protection of natural resources there.' But despite such assurances, it is tempting to think that darker motives lie behind the rhetoric and that the Chinese government could somehow be tempted to deploy, or risk using, military force to seize the Arctic's natural resources.
What is certainly plausible is that when the Chinese economy recovers from the global economic downturn that began in earnest in 2008, it is likely to grow at a steady, perhaps rapid, rate. This may not match the dramatic expansion that began in the mid- to late 1990s and lasted for more than a decade, during which time its rate of growth, at one stage averaging more than 9 per cent every year, was the highest of any large economy in the world. But it could well be high enough to generate enormous domestic demand for the raw materials of growth - oil, natural gas and minerals - which the the country lacks and has to import. By 2007 China had already become the second-largest oil consumer in the world, superseded only by the United States, and some forecasts predicted that its consumption could easily increase in the years ahead.32 And while the price of some precious metals, such as iron ore, copper, aluminium, manganese, zinc and lead, had subsided in late 2008, they are widely expected to recover when the Chinese economy picks up and gathers pace.
Some of the more pessimistic observers might be tempted to argue that the Chinese government could potentially adopt a highly aggressive approach to the Arctic. If Beijing is desperate to acquire 'security of supply' that will guarantee a fuel source to power its economy, it is perhaps plausible to claim that Chinese-owned companies could get to work in a disputed or unclaimed area of the Arctic Ocean and threaten military force to guard its operations there. For example, there is one sliver of the seabed in the High North that neither Russia nor Norway claims as part of their outer continental shelves, although it is possible, if highly unlikely, that Denmark will make such a claim. If it belongs to no particular country, this area is due to be administered by the International Seabed Authority as the 'common heritage of mankind', but could then nonetheless plausibly make a tempting target for the Chinese government.
The difficulty with this argument is that any such move by Beijing would be wholly impractical and in all likelihood quite unnecessary. It would be impractical to risk using military force partly because of the enormous distances involved - its armed forces would have extremely long supply lines that would be highly vulnerable to enemy disruption - and because they would in any case have to cross waters or move through international straits, such as the Bering Strait, over which other countries could exert strategic control.
This would also be unnecessary because, like the Russians, Chinese oil and gas companies generally lack the sophisticated technology and expertise of their Western counterparts to develop underwater reserves. Therefore, they are dependent on signing up Western contractors, notably service companies such as Schlumberger and Halliburton, to help them out, which is not only time-consuming but also very expensive. So even if the Arctic does have the resources that some experts claim, and even if they do ever become commercially recoverable, then there are likely to be other parts of the world - notably unexplored areas of the Middle East such as Iraq and offshore Iran, or in Africa and South America - that the Chinese would be likely to find much more fruitful and where their moves would be politically less controversial. There are many Chinese nationals living in Cabinda, the oil-bearing province of Angola, but their presence is little noticed by locals and hardly known about at all anywhere else in the world.
However, there are some parts of the Arctic region, such as Greenland, Russia, and northern Canada, where Chinese oil companies would be in a position to search for and exploit any deposits. They could either bid directly to buy a stake in a field in the same way that in early 2009 Sinochem, the country's fourth-largest oil group, paid Soco International $465 million for a stake in a field in Yemen. Or they could even buy whole oil companies outright, thereby seizing in a single move all the reserves that belong to them, just as in 2004 the American company Unocal was the target of a takeover bid by a state-owned Chinese company.33 The Chinese oil industry had been quiet in 2007, but activity picked up again the following year when Sinopec, the second-biggest listed oil company on Beijing's stock exchange, purchased Tanganyika Oil, a Canadian company operating in Syria, and was said to be hunting around for more commercial bargains. Sinopec was also rumoured to be in talks with Urals Energy, another company operating in Russia, about a possible takeover.34
All these Chinese organizations are nationalized and therefore have a distinct competitive advantage over their privately owned Western rivals. This is because they have access to the vast foreign exchange reserves of the Beijing government, and because they are not susceptible to any short-term pressure from private shareholders, who often demand not a long-term strategy but quick profits that will reap handsome dividends.
This could also help the Chinese companies that are likely to start viewing the Arctic as a highly productive and profitable source of mineral wealth and to gradually increase their commercial presence in the region in order to exploit them. Mirroring their approach to other parts of the world, Chinese mining organizations could start to buy up newly discovered deposits, known in the business as 'early-stage development assets', or else invest in existing mines that have long had a high output. Greenland is one relatively undiscovered place that might strongly tempt these investors, who with the same entrepreneurial spirit have in recent years also struck deals to exploit the newly located reserves of Congo and Zambia. If, on the other hand, the Chinese decide that later-stage assets offer more value, then they might put more emphasis on buying distressed companies in any of the Arctic countries, including Russia. In early 2009, for example, Chinese companies were using their considerable cash resources to purchase mining assets in Canada. 'The Chinese realize there are massive opportunities in the market', as one investor told a British newspaper.35
It is quite easy to imagine a situation in which this could eventually lead to international controversy. Elsewhere in the world, most notably in a number of African states, Beijing has not only been able to establish a close commercial relationship with various governments but has also used these ties as a basis upon which to build a much broader political association. The Chinese armed forces, for example, have in recent years closely supported the governments of Congo, Sudan, Zimbabwe and Zambia as part of what President Hu has called 'strategic and mutual friendship' with Africa.36 So in the event that at some future point Greenland becomes independent from Denmark, it is plausible to argue that the Chinese could, in the same way, acquire a strong commercial and political relationship with its government that other countries, most obviously the United States, might regard as a possible threat.
This is a scenario that could very easily become real, although any tension between Washington and Beijing would not, strictly speaking, reflect any rivalry over resources. Precious and plentiful as Greenland's mineral wealth promises to be, it is no more likely to be the cause of conflict than the resources found in any other part of the world, most notably Africa. Any rivalry between these, and other countries, would be much more likely to prompt them to spend more money and resources finding and exploiting new, untapped deposits than to risk provoking a clash of arms that would be extremely costly and which could easily escalate.
The possibility of disagreement between Beijing and other countries here, as elsewhere, is enhanced by China's tendency to try and skewer the terms of the 1982 Convention. It has previously tried to assert its ownership of the South China Sea, for example, by making exaggerated claims about both how baselines can be drawn around an archipelago and about the geography of its coast in a way that would extend its borders more than 1,000 miles from the Chinese mainland.37 Any such unilateralist tendency might mean that Beijing is particularly likely to disregard disputed, or even settled, claims made by some countries in the Arctic region, such as Canada's assertion that the waters of the Northwest Passage are 'internal'.
But the United States would certainly be very alarmed to watch the rapidly growing presence of a 'strategic competitor' in what it regards as its own backyard. In other words, even if Greenland, or any other part of the Arctic region, was known to be wholly devoid of any natural resources, then Washington would, in all likelihood, still be seriously concerned about its national security. The same is equally true of the Northwest Passage and the key waterways, such as the Bering Strait, that have such overwhelming strategic significance. If, decades hence, Chinese warships should constantly traverse these sea lanes and effectively impose a permanent military presence in the region as a result, there would be considerable international tension between Beijing and Washington. The presence of natural resources can only accentuate these tensions by bringing even more international maritime traffic into the region.
It became easier to imagine such tensions when, in the spring of 2009, the Chinese government unveiled plans for a big overhaul and expansion of its naval forces. Admiral Wu Shengli said that the plans included a bid to develop a new generation of warships and submarines, as well as fighter aircraft and long-range missiles, and did not rule out the construction of China's first aircraft carrier. The plans were a clear sign that for the first time the republic had ambitions to extend its naval reach far beyond its shores. China has 'expanded' national interests, explained the admiral, and needs to 'boost the ability to fight in regional sea wars' using high-tech weaponry.38 Some American commentators predict that 'by sometime in the next decade, China's navy will have more warships than the United States', and point out that the writings of Alfred Thayer Mahan, the great American military theorist who argued that the power to protect merchant fleets has always been a determining factor in world history, have become highly influential in Beijing.39
The type of incident that could flare up in the Arctic, or elsewhere, had also taken place the previous month, when five Chinese ships shadowed and then manoeuvred dangerously close to a US Navy vessel, the USNS Impeccable, in the South China Sea. Although the American ship claimed to be making 'innocent passage' through China's exclusive economic zone, Beijing argued that its presence was 'illegal' because it was undertaking surveillance of a secret Chinese military site. The incident caused a diplomatic spat between the two capitals.
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