Arctic shipping and China Governance structure and future developments Hjalti Þór Hreinsson 60 ECTS thesis submitted in partial fulfillment of the degree of Master of Arts in Polar Law (M.A.) Advisor Rachael Lorna Johnstone Faculty of Law School of Humanities and Social Sciences University of Akureyri Akureyri, April 2014 Arctic Shipping and China Governance structure and future developments 60 ECTS thesis submitted in partial fulfilment of the degree of Master of Arts in Polar Law (M.A.) Copyright © 2014 Hjalti Þór Hreinsson All rights reserved Faculty of Law School of Humanities and Social Sciences University of Akureyri Sólborg, Norðurslóð 2 600 Akureyri Telephone: 460 8000 Bibliographic information: Hjalti Þór Hreinsson, 2014, Arctic Shipping and China – Governance structure and future developments, Master’s thesis, Faculty of Law, University of Akureyri. Printing: Stell Akureyri, April 2014 Abstract The goal of this thesis is to study China’s shipping ambitions in the Arctic and the pertinent governing instruments. Arctic shipping poses significant challenges for Arctic governance with increased access to its oceans for shipping companies. Arctic transit is driven by demanding world markets in the West and the rising economic powers of the East, looking for the most cost-efficient routes. Rapid ice melt leads to better access for vessels, but other obsticles await those interested in Arctic shipping as the shortest route might not be the optimum choise. The Arctic shipping routes; the Northwest Passage; the Northern Sea Route; and the Central Arctic Ocean Route, are all at different phases when it comes to access for ships and governance prowess. The main governing bodies of Arctic shipping; UNCLOS; the International Maritime Organization; and Russia‘s and Canada‘s coastal state governance, must strike a balance between environmental protection and a feasible route for shipping companies worldwide. This is especially relevant to China‘s advancing economy and its need to diversify current shipping lanes. China has heightened its interest in the Arctic and now looks for economic opportunities in the North. This thesis brings together three elements of Arctic shipping: its prospect and feasibility, and China‘s interest and Arctic governance, with speculations whether the Arctic Ocean is a feasible transit route for China. Table of contents Acronyms ...................................................................................................... xi Acknowledgements .................................................................................... xiii Introduction ................................................................................................. 15 Chapter overview ........................................................................................ 18 Methodology ................................................................................................ 22 Literature review ........................................................................................ 25 1 Arctic Shipping: Prospect and Threats .................................................. 29 1.1 Global shipping operations ................................................................ 30 The Suez Canal .............................................................................. 32 The Panama Canal ......................................................................... 36 The Malacca Strait ......................................................................... 39 Alternatives for trade between Asia and Europe ........................... 41 1.2 The future of Arctic shipping ............................................................ 42 Challenges and the unknown ......................................................... 44 1.3 Navigating the Arctic ......................................................................... 51 Northwest Passage ......................................................................... 52 The Northern Sea Route ................................................................ 56 The Central Arctic Ocean Route ................................................... 62 1.4 The Environmental effect .................................................................. 66 Marine pollutants ........................................................................... 67 Reducing risk with insurance ........................................................ 75 1.5 Case studies for the future of Arctic shipping ................................... 76 Survey: Arctic shipping will be overwhelmingly destinational, not trans-Arctic ........................................... 77 Case study: Projected 21st-century changes to Arctic marine access ................................................................................ 78 Figure: Assessment of future changes in the peak Arctic shipping season ................................................................. 82 2 China and Arctic shipping: Needs and ambitions ................................ 89 2.1 China’s trade partners ........................................................................ 91 2.2 Chinese Arctic research ..................................................................... 96 2.3 China’s growing need for imported resources ................................... 99 2.4 Political aspects of China’s shipping interests ................................. 103 2.5 The Malacca dilemma and the need to diversify import routes ....... 106 2.6 Case study: Are Chinese companies interested in Arctic shipping? ...................................................................................... 108 2.7 Conclusions ...................................................................................... 111 3 Governance of Arctic shipping: Balance between feasible routes and a strong regulatory framework ................................................... 117 3.1 UNCLOS: The overarching legal framework on the law of the sea ................................................................................................ 118 History and development of UNCLOS ........................................ 120 3.2 Arctic shipping and UNCLOS ......................................................... 122 Coastal state jurisdiction and control ........................................... 124 Article 234 and shipping limitations in the Arctic ....................... 134 UNCLOS and Arctic straits ......................................................... 135 United States and lack of UNCLOS ratification .......................... 141 3.3 IMO and Arctic shipping ................................................................. 142 SOLAS 144 Guidelines for ships operating in Polar areas .............................. 145 Standards of Training, Certification and Watchkeeping for Seafarers .......................................................................... 147 Convention on the International Regulations for Preventing Collisions at Sea .............................................................. 147 The Polar Code ............................................................................ 148 3.4 The Arctic Council ........................................................................... 153 3.5 Environmental shipping governance ................................................ 155 UNCLOS and vessel pollution .................................................... 155 MARPOL ..................................................................................... 158 Environmental damage liability ................................................... 161 3.6 Coastal state governance in the Arctic ............................................. 163 Canada and governance of the Northwest Passage ..................... 164 Russia and governance of the Northern Sea Route ..................... 167 Governance of the Central Arctic Ocean Route .......................... 178 3. 7 China and Arctic governance .......................................................... 179 The China-Arctic cooperative mindset ........................................ 182 China and marine environmental protection ............................... 190 3.8 Conclusions ...................................................................................... 194 Summary of conclusions ........................................................................... 201 References .................................................................................................. 207 Acronyms ASPPR - Arctic Shipping Pollution Prevention Regulations AWPPA - Arctic Waters Pollution Prevention Act CLCS - Commission on the Limits of the Continental Shelf CNARC - China Nordic Arctic Research Centre CNOOC - China National Offshore Oil Corporation COLREGs - Convention on the International Regulations for Preventing Collisions at Sea COSCO - China Ocean Shipping Group DNV - Det Norske Veritas (Norwegian company) dwt – deadweight tonnage EEZ - Exclusive economic zone GDP - Gross domestic product GESAMP - The Joint Group of Experts on the Scientific Aspects of Marine Environmental Protection Gtoe - gigatons of oil equivalent ICJ - International Court of Justice ILC - The International Law Commission IMO – International Maritime Organization IPCC - Intergovernmental Panel on Climate Change (IPCC) ITF - International Transport Workers Federation ITLOS - International Tribunal for the Law of the Sea MARPOL - International Convention for the Prevention of Pollution from Ships nm – Nautical mile OWW - Open water vessels PC - Polar Class PRIC – Polar