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TRADE WARS
New shipping route shows China's Arctic ambitions
by Staff Writers
Shanghai, China / China (AFP) Aug 16, 2013


Chinese tycoon still hopes to sign Icelandic land deal
Reykjavik (AFP) Aug 16, 2013 - A Chinese property tycoon who wants to build a resort in the Icelandic wilderness still hopes to clinch a deal with authorities in Reykjavik despite two failed attempts, his representative said Friday.

Huang Nubo, founder of Chinese property firm Zhongkun Group, is negotiating a deal that would see municipalities in northeastern Iceland buy the land and lease it to him, said his Icelandic representative Halldor Johannsson.

Huang's latest bid comes after Iceland in 2011 denied his request to buy 30,000 hectares (74,000 acres) of a wilderness area known as Grimsstadir a Fjoellum, citing foreign ownership laws.

He planned to build a tourist resort and create Europe's biggest nature reserve, a $200-million (150-million-euro) investment.

A 2012 request to lease a much smaller plot of land was left dangling, until a new centre-right government came to power in Iceland last May and said it would look more favourably on foreign investments.

Now Huang's company has developed a business model in which an Icelandic firm called Zhongkun Grimsstadir, which is owned by Beijing Zhongkun, would rent about one percent of the land in the Grimsstadir wilderness area as well as some 2,000 hectares of other land that is currently for sale, said Johannsson.

"We have had very good cooperation with the municipalities in northeast Iceland," he said.

"Ownership of the land now for sale will... be in an Icelandic company, owned by the municipalities in the area. Everything will be done in accordance with Icelandic laws and regulations," he added.

"The present government has emphasised economic growth and prosperity in its policies. We think that our plans go well with that emphasis."

Under Icelandic law, foreigners who own more than 20 percent in an Icelandic company cannot lease land for more than three years at a time unless the agreement can be terminated within a year.

Huang is seeking an exemption on that clause.

Icelandic Interior Minister Hanna Birna Kristjansdottir told public service radio RUV Thursday that her ministry was carefully studying the request but that no decisions were expected in the near future.

"I am definitely... more positive on foreign investment than the former government was," she said. However, she also noted that "the government is not going to tear up every single matter and reconsider them."

Iceland, still recovering from a 2008 economic collapse, in April became the first European country to sign a free trade agreement with China, as Beijing looks to gain a foothold in the resource-rich, strategically important Arctic.

The maiden voyage to Europe by a Chinese merchant ship through the "Northeast Passage" will help the world's biggest exporter speed goods to market and is a symbol of Beijing's strategic ambitions in the Arctic.

The emerging Arctic Ocean shipping route north of Russia has been opened up by global warming and cuts thousands of kilometres (miles) -- and many days -- off the journey from China to its key European market.

A vessel owned by Chinese state shipping giant COSCO left the northeastern port of Dalian last week bound for Rotterdam in the Netherlands, on a 5,400-kilometre (3,380-mile) voyage which state media said would take just over 30 days.

That is up to two weeks faster than the traditional route between Asia and Europe through the Suez Canal, according to COSCO.

"It's potentially going to change the face of world trade," said Sam Chambers, editor of SinoShip magazine.

"The Chinese will use the Arctic route in a very big way. It's all about having options, having alternatives in case of emergency," he said.

But China is also eyeing the Arctic for better access to resources to fuel the world's second largest economy, such as the natural gas reserves held by political ally Russia in the region.

China -- which does not border the Arctic and has no territorial claim to any of it -- also recognises the area's potential for scientific research and its strategic value as what one Chinese analyst who did not want to be named called "military high ground".

The commercial shipping route is currently only open for about four months a year as polar ice melting as a result of global warming makes it more accessible.

Three months ago, China gained observer status in the Arctic Council, a group of nations with interests in the region which is believed could hold rich mineral and energy resources.

The council's eight full member states are Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the United States.

"The opening of the new shipping route indicates China is participating more in Arctic Ocean affairs," said Zhang Yongfeng, a researcher at the Shanghai International Shipping Institute.

The European Union is China's biggest export destination with 290 billion euros ($385 billion) in goods sold last year and COSCO, China's largest shipper, described the new service in purely commercial terms, saying it will slash shipping times, thus cutting costs and fuel consumption.

"The Arctic route can cut 12-15 days from traditional routes so the maritime industry calls it the 'Golden Waterway'," COSCO said in announcing the journey.

The company's 19,000-tonne ship Yong Sheng -- which is carrying a mixed cargo, including heavy equipment and steel -- is expected to pass through the Bering Strait later this month and dock in Rotterdam in September, it said.

"It will change the market pattern of the global shipping industry because it will shorten the maritime distance significantly among the Chinese, European and North American markets," Dalian Maritime University professor Qi Shaobin told state media.

But analysts said developing the route would take time -- while lack of infrastructure raised worries over contingencies for potential emergencies.

"In the near term, the economic value for shipping is definitely not big," said Zhang, of the Shanghai International Shipping Institute. "The navigable period of the passage is relatively short... while the port and pier infrastructure along the route is incomplete."

China is seeking to grow markets in southeast Asia and Africa, so more trade might flow to the south, lessening the importance of the Arctic route, he added.

China's total foreign trade volume was $3.87 trillion last year.

But some Chinese estimates claim between five and 15 percent of the country's international trade could use the Arctic route within a mere seven years.

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