China gains major Arctic foothold as Russia turns to Beijing more, report finds

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China is gaining a major foothold in the Arctic as Russia, facing a severe budget crunch from its military assault on Ukraine, increasingly relies on Beijing and unprecedented levels of Chinese corporate and state investment to develop the northern region.

A new report by Strider Technologies, a leading U.S. strategic intelligence firm, says Russia has been forced to shift conventional defence spending away from the Arctic and to the war in Ukraine. In doing so, it has turned to China to help maintain its military and economic presence in the Arctic after years of seeking to limit Chinese involvement in the Far North.

Using proprietary data, Strider found that during the 18 months from January, 2022, to June, 2023, 234 Chinese-owned companies registered to operate in Russian-controlled Arctic territory, an 87-per-cent increase compared with registrations in the two years prior. As of June, 2023, 359 Chinese-owned companies operate in the region, Strider said, the result of a surge in investment over the last three years. Strider proprietary data are aggregated from across corporate, transaction, and open-source data sets.

Russia and China are also deepening their security ties, signing an agreement in April, 2023, to co-operate on maritime law enforcement. In August, 2023, they conducted joint exercises in the Bering Sea off the coast of Alaska – remaining in international waters. The Bering Sea is a gateway between the Arctic and Pacific oceans.

Chinese-Russian collaboration in the Arctic is a scenario Canada’s military intelligence has warned MPs about. “I would definitely agree that if Russia and China were to co-operate in the Arctic, it would pose significant threats to Canada’s ability to protect its sovereignty,” Major-General Michael Wright, Commander of Canadian Forces Intelligence Command and Chief of Defence Intelligence, told the Commons defence committee in October, 2022, more than six months after Russia’s assault on Ukraine began.

In response to Western sanctions, Russia has opened up the Arctic to China like never before, Strider said. This includes investment to develop Russia’s Northern Sea Route, an alternative global shipping channel along the top of its mainland, and energy exploration.

“Our findings reveal a strategic pivot by Russia, marked by decreased government spending and a remarkable policy shift to include the People’s Republic of China [PRC],” said Eric Levesque, COO and co-founder of Strider. “This pivot underscores the diplomatic and economic isolation Moscow is experiencing in the wake of its invasion of Ukraine and growing reliance on the PRC for its economic and security goals.”

In releasing the report, Strider said “the escalation in activity is a stark departure from Russia’s previous efforts to limit PRC involvement in the region.”

“The PRC has established a major foothold in the region by providing investment and support Russia needs to further develop the Arctic while waging war in Ukraine,” it said.

China has helped Russia weather Western-led sanctions by providing Moscow with international banking services and buying its oil and other commodities. In February, 2022, just weeks before Russia’s all-out attack on Ukraine, Chinese President Xi Jinping and Russian President Vladimir Putin met to inaugurate what they called their “friendship without limits” partnership.

Opinion: China is on a relentless mission to control Canada’s Arctic waters

In October, 2022, Canada’s top soldier, Chief of the Defence Staff General Wayne Eyre, predicted Russia would grow increasingly dependent on China as the Ukraine war dragged on, and fall under its sway, becoming “much more of a vassal state” of Beijing’s.

China, which has declared itself a near-Arctic state, wants to use the Northern Sea Route through Russia’s Arctic to import energy and export goods. If Sweden succeeds in its bid to join the North Atlantic Treaty Organization, Russia would be the only non-NATO country in the Arctic.

Strider data also show increasing Chinese involvement in Russian resource-development projects, especially in liquefied natural gas, mineral extraction and infrastructure. Beijing stepped in, for example, to provide crucial technology, including gas turbines, when the Biden administration imposed sanctions to try to kill Russia’s Arctic LNG 2 project in northern Siberia.

In 2023, China Communications Construction Company (CCCC), a massive state-owned conglomerate, signed a deal with Russian Titanium Resources for mineral exploration and to expand the Indiga deep-water port and the Sosnogorsk-Indiga railway. Back in 2018, Canada blocked CCCC from acquiring Aecon, one of this country’s largest construction companies, on national-security concerns.

At least 11 ships transported Russian crude oil to China through the Northern Sea Route in 2023, up from one trial voyage in 2022. As sea ice melts due to climate change, Arctic waters are an increasingly attractive shipping route between the Atlantic and Pacific. The Arctic thoroughfare can cut travel time for vessels sailing between Asia and Europe.

Strider said the number of private-sector investors in Kremlin-backed special economic zones in the Arctic increased to more than 4,000 in 2023, from approximately 230 in 2016.

The Russians have built modern military bases in their Arctic region and are building a new fleet of 13 polar icebreakers, while China has two medium-strength icebreakers and is building an even larger, more powerful vessel.

Beijing’s activities in the Far North are becoming of increasing concern to Washington and Ottawa. Beijing’s designs on minerals in Canada’s North in part prompted the development of a joint U.S.-Canada strategy to reshape global critical mineral supply chains and reduce reliance on China. Beijing has moved aggressively in recent years to tighten its control of rare earth minerals, which are crucial for manufacturing high-tech and military products.

In December, 2020, Ottawa rejected a takeover of an Arctic gold mine that would have given a Chinese state-controlled company a foothold in the Northwest Passage. Ottawa turned down Shandong Gold Mining Co. Ltd.’s purchase of junior miner TMAC Resources Inc. over concerns about national security in the Arctic.

The mine site is a little more than 100 kilometres from a NORAD North Warning System radar station in Cambridge Bay, Nunavut, part of a chain of installations across the North that gather information and transmit it to military operation centres.