When, in 2018, the People’s Republic of China published its first Arctic strategy, claiming that the Middle Kingdom is a ‘near-Arctic state’, many a snigger could be heard throughout the world of Arctic diplomacy. Yet, it is quickly becoming clear that China has built a geostrategic presence in the Arctic that is not to be sniggered at. It is already reshaping circumpolar politics in fundamental ways. Therefore, this Clingendael report aims to answer the following questions:

What are the long-term drivers behind China’s growing presence in the Arctic?

How is China currently shaping Arctic relations?

How should Europe and the Netherlands engage with China’s growing presence in the Arctic?

Presence before power: what are the long-term drivers behind China’s growing presence in the Arctic?
China’s engagement with the Arctic was born as a geopolitical conundrum: in the midst of the Cold War the Arctic was seen as a vital part of China’s security environment, over which it had no control. Following China’s policy of opening up, China’s Arctic engagement was further fuelled by commercial interests developed within the context of its maritime strategy, and led to China playing an increasingly influential role in scientific exploration and Arctic governance. Since Xi Jinping took office in 2012, China’s Arctic policy has adopted an explicit geopolitical purpose, within the context of China’s geo-economic expansion, maritime ambitions and its changing relations with the US and Russia. China, in short, aims to build a significant geostrategic presence, not to dominate the region, but to be able to translate that presence into power if and when the geopolitics of the Arctic heat up.

The presence of voids: how is China currently shaping Arctic relations?
Indeed, the geopolitics of the Arctic are already heating up. The stakes are long term, but high: to China, the Arctic is one of the arena’s in which its fate as a superpower will be decided. China’s focus on the Arctic lies first and foremost in the opening-up of the Northern Sea Route, which trails the Russian coast. Due to climate change, it is expected to be fully operational as a shipping route, meaning it will be ice-free throughout the year by 2030. A fully operational Northern Sea Route (NSR) provides China with a unique commercial and geostrategic opportunity, creating a major shipping hub between Asia and Europe free from US dominance.

In parallel, Huawei Marine is hired as part of a joint venture to lay down communication cables along the NSR in a Finnish project called Arctic Connect. Experts warn that this would enable China to increase its defensive and offensive intelligence-gathering capabilities, because its data transfers would no longer flow through foreign cables. Moreover, as data cables can also be used for gathering military surveillance information, there are worries that Arctic Connect could be turned into an undersea surveillance system.

Above all, Iceland and Greenland are focal points in China’s long-term Arctic strategy. The two countries share general geostrategic features. Both have a close yet contested relationships with the EU and with non-EU European countries. Of all Arctic countries, Iceland and Greenland have invited the highest levels of Chinese investments as a percentage of GDP. More fundamentally, China has slowly built an impressive geostrategic presence in both territories, using the voids left by European policy.

With respect to Iceland, China’s story began in 2008, when the global financial crisis hit the Icelandic economy hard, leading to a deep economic depression. As Iceland’s application for EU membership failed over the issue of fishing quotas in 2013, the country was not eligible for recovery financing from the EU’s structural fund. In that same year, Iceland wrote history by becoming the first European country to sign a free trade agreement with the People’s Republic of China (PRC), by which China has become the number three export destination for Icelandic goods. Sino-Icelandic cooperation has taken flight ever since, with China building one of its largest embassy buildings in the world in Reykjavik.

In Greenland, China began building its strategic presence following the adoption of the Self-Government Act of 2008, which gave the territory of Greenland an increasing level of autonomy, including the ability to conclude agreements with foreign states. While for China the focus of its presence in Greenland lies in polar research, natural resources and infrastructure, Greenland is looking for investments that allow the territory to diversify its economy and become less dependent on the Kingdom of Denmark. Greenland is attractive for its abundance of scarce materials, and the US is also stepping up its influence by means of increased financial support, after its failed attempt to buy the island.

The power of presence: how should Europe engage with China’s growing presence in the Arctic?
China’s Arctic strategy, in particular as it materialises in Iceland and Greenland, leads us to conclude that China’s growing presence in the Arctic is not a direct threat to European countries but rather a long-term strategic issue of great importance, but not great urgency.

Above all, China shows the power of presence by claiming a seat at the table in the Arctic Council and by investing in strategic sectors and diplomatic relations with Arctic states. Europe's challenge will be to re-engage with Iceland and Greenland, and China's presence there, in a similar multi-layered way, coordinating short-, medium- and long-term strategies. Specifically, European countries should:

Take opportunities in the short term: China’s growing presence in the Arctic provides a huge opportunity, especially in the short term, for European research as well as for the economies of the European Arctic countries.
Prepare for competition in the medium term: In the medium term, European countries should prepare for commercial competition with China, the US and Russia over the potential gains of an ice-free Arctic.
Build presence in the long term: China challenges European countries to rebuild a strong geostrategic presence in the High North, (re)embracing issues of security and great power competition, not to aggravate but to lower tensions between China, the US and Russia.

The Netherlands should advocate for a more pronounced EU Arctic policy. It should support strategic adjustments to the EU’s raw materials policy and its support for Overseas Territories (like Greenland), fisheries and (digital) connectivity policy. It should step up its diplomatic ties with Iceland and Greenland. The Netherlands should also consider how it can reinforce its direct ties with Iceland and Greenland, for instance through intensified science cooperation. The Netherlands could also enhance dialogue with other Arctic states (e.g. with Finland) on China’s growing presence, reconsider how EU policy towards Russia may have unintended consequences for intensified Sino-Russia relations in the Arctic and start a debate on an inclusive forum to discuss the geopolitics of the Arctic and think about confidence-building measures.