Climate change and climate-induced emergencies and crises are also creating newly contested, geopolitical arenas. In February 2021, OODA CTO Bob Gourley reported on the Blueprint for a Blue Ocean:

“In January 2021, the Department of Navy released its Strategic Blueprint for a Blue Arctic. The document outlines their plan to prepare for an increasingly available and navigable Arctic Region. Signed by the Chief of Naval Operations, the Secretary of the Navy, and the Commandant of the Marine Corps, it looks forward twenty years and envisions the requirements to protect American interests in the Arctic.

The Arctic Region has one of the world’s smallest oceans, but because of where it is situated, it has the potential for connecting nearly 75% of the world’s population. When you consider that 90% of all trade travels across the world’s oceans, this can be either a tremendous opportunity or an emerging vulnerability. Additionally, the Arctic is home to 30% of the world’s undiscovered natural gas reserves, 13% of the global conventional oil reserves, and one trillion dollars’ worth of rare earth minerals. And tons of FISH! There is a lot at stake here.

OODA Loop Sponsor

Russia is WAY ahead, with decades of experience in this environment. They are investing heavily in their northern flank through modernization and infrastructure improvements. China considers the Arctic a critical link in its One Belt One Road initiative and is building polar-capable cargo vessels, liquefied natural gas tankers, and nuclear-powered icebreakers. Both China and Russia have increased their military activity in the region and have made numerous attempts to alter the existing Arctic governance.”

The recently released Exploring the Relationship between China’s Investment in the Arctic and Its National Strategy by CNA provides a federally mandated update on Chinese activities in the arctic and the “Chinese Dream.”

About the Report

“Exploring the Relationship between China’s Investment in the Arctic and Its National Strategy” is part of a series that CNA produced to fulfill requirements outlined in the fiscal year (FY)2020 National Defense Authorization Act (NDAA), Sec. 1260E.

About the Series: Chinese Foreign Direct Investment [FDI] in the Arctic

The FY 2020 NDAA mandates that a federally funded research and development center “complete an independent study of Chinese foreign direct investment [FDI] in countries of the Arctic region, with a focus on the effects of such foreign direct investment on United States national security and near-peer competition in the Arctic region.”

Congress mandated that a federally funded research and development center independently study Chinese foreign direct investment (FDI) in the Arctic. The Department of Defense selected CNA to conduct this analysis, for which CNA produced four reports addressing the following research questions:

1. What is the nature and scope of current FDI in the Arctic?

The research paper answering this question addresses NDAA tasking related to quantifying Arctic FDI, including providing a survey of Arctic projects that are funded by People’s Republic of China (PRC)-based investors in critical industries such as public infrastructure; minerals, oil, and gas; shipping; and telecommunications.

2. What are the legal conditions that govern FDI in the Arctic?

The research paper answering this question addresses NDAA tasking mandating an analysis of the regulatory environment for FDI in the United States, Russia, Canada, Greenland, Norway, and Iceland. That analysis includes a discussion of the efficacy of mechanisms for screening FDI, transparency measures in FDI, and FDI evaluation criteria.

3. How does PRC Arctic FDI relate to the PRC’s strategic regional objectives?

The research paper answering this question addresses NDAA tasking requiring a review of PRC Arctic policy documents. This analysis describes China’s strategic objectives in the Arctic from military, economic, territorial, and political perspectives, as well as whether any active or planned infrastructure investments are likely to result in a regular PRC Arctic military presence. (1)

From the Report

In this report, the CNA examined “the relationship between FDI in the Arctic by entities based in the People’s Republic of China (PRC) and the PRC’s strategic national objectives.”

The report “also identifies potential implications of the PRC’s Arctic investments for the United States and its allies and partners. China’s coordinated efforts to advance its interests in the Arctic employ multiple elements of state power. China’s coordinated efforts to advance its interests in the Arctic employ multiple elements of state power:

Sustaining economic development. Authoritative PRC writings describe the Arctic’s abundant energy and mineral resources as important to China’s economic development. They also note that Arctic shipping routes would drastically reduce the time and distance—and therefore shipping costs—of transporting goods between Northeast Asia and Europe and North America.
Defending national sovereignty, security, and development interests. People’s Liberation Army (PLA) strategic thinkers have noted several reasons that the Arctic is important to China’s security objectives, including the deterrent value of deploying nuclear missiles to the Arctic and the fact that Arctic shipping routes offer potential alternatives to the Suez Canal, Panama Canal, and the Strait of Malacca, all of which are potential chokepoints.
Reforming the global system to align with PRC interests. PRC leaders seek to restructure the international system in ways that suit China’s interests and afford it great power status. PRC policy statements describe the Arctic as part of the“community with a shared future for mankind”—a community in which Beijing hopes to play a leadership role.”

What Next? Conclusions and Recommendations from the Study

Conclusions

Chinese FDI in the Arctic is largely concentrated in energy and mining and sectors related to Arctic shipping routes.
Moderate levels of Chinese FDI contrast with much higher levels of general Chinese economic activity in the Arctic. Investment generates different risks than other forms of economic activity and requires different correctives, so it is important to distinguish between the two.
Based on Beijing’s stated policies…expect the Chinese pursuit of Arctic FDI to grow and the scale of such efforts to present concerns on a case-by-case basis given their potential scale.
The moderate level of Arctic FDI detected from Chinese firms suggests that existing FDI screening mechanisms are broadly effective and afford policymakers a window of opportunity to address risks associated with specific investments.

Recommendations

Use the US government’s (USG) unilateral buying power:
- Increase USG Arctic commercial investments
- Increase US foreign aid to select Arctic communities
Foster multilateral Arctic investment ecosystems
- Launch an Arctic Foreign Direct Investment (FDI transparency initiative
- Encourage allied and partner state-affiliated policy banks to invest more in the Arctic
Pursue institutional FDI frameworks.
- Pursue an intra-Arctic investment fast-track
- Establishing an Arctic Development Bank

Further Resources

Arctic Foreign Direct Investment – Interactive Map

The full reports (four total) in the CNA Chinese Foreign Direct Investment [FDI] in the Arctic Series (all of which were published in January 2022) can be found at:

Stay Informed

It should go without saying that tracking threats are critical to inform your actions. This includes reading our OODA Daily Pulse, which will give you insights into the nature of the threat and risks to business operations.