Chinese to invest in industrial park in Yakutia

Construction just begun at the Kangalassy industrial park near Yakutsk, capital of the Sakha Republic, also known as Yakutia, in far eastern Russia. Out of ten projects scheduled to begin this year, one is a joint venture with a Chinese partner, a company alternatively called (a Cyrillisation of) ‘Songyang’ or ‘Hongyang’ and said to be from Liaoning. Whatever the name, the Chinese partner will use local raw materials (including refuse from a nearby coal mine) to make ceramic blocks and bricks.

Kangalassy recently gained recognition as one of the federal-designated ‘areas of priority socio-economic development’ (территории опережающего социально-экономического развития, ТОР) in the Far East. So far there are nine of them, meant to transform crumbling Soviet ‘monotowns’ (моногорода) into ‘locomotives‘ of local development, through federal government investment and tax benefits. That’s likely to make the priority areas more attractive to foreign investors, and they are receiving increasing attention from China. One consequence would be a certain influx of foreign workers. In the specific case of the Chinese brick factory in Kangalassy, the park’s director promises those would’t outnumber the local workforce (“for each Chinese worker, [there will be] one of our locals”).

There’s also been talk of investment in Kangalassy by a larger player, Baoli Bitumina, a Singapore-based joint venture of Bitumina Group and the Shenzhen-listed Baoli International (宝利国际), until recently called Baoli Asphalt (宝利沥青), whose chairman and biggest shareholder is Zhou Dehong 周得洪. I haven’t seen Chinese reports on their involvement in Kangalassy (Russian media say they would build two factories there), but at any rate Baoli are going big into Russia, looking towards building an integrated asphalt production chain for federal road infrastructure in the nortwest and the Far East with up to $2bn investment. Baoli are also expected to become the first foreign investor in another ‘priority development area’ in Khabarovsk.

Chinese potential investors keep showing up to Kangalassy, with two visits in the last two months, so you wouldn’t be surprised to see more Chinese companies as denizens of Kangalassy in the near future. Yakutia isn’t historically a focus of Chinese investment, that has tended to concentrate on border regions, but contacts have dramatically increased after the Ukraine crisis, especially at the Russian federal subject-Chinese province level. Over the last half a year or so there have been multiple contacts and events between Yakutian officials and potential investors in Heilongjiang, Jilin and Jiangxi (not to mention Japan and South Korea, which I wrote about some time ago).

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new article: a General Nice backgrounder

While no one seems to be expecting to see much actual mining at the Isua project in Greenland any time soon, I thought its new Chinese owner, General Nice (俊安集团), was worth a closer look, since so little has been written about the company. So I’ve put together a ‘backgrounder’ with highlights from my recent, and not so recent, research on General Nice for everyone to enjoy. Admittedly Isua, an asset which, by all accounts, its new owner plans to simply sit on for the time being, isn’t the hottest topic in the grand scheme of things, but I think the story makes up for that medium-to-low hotness with a flashback to the Shanxi coal rush, with its polluted skies and wild bribing, and a showdown with the ousted ruler of Burkina Faso. Go read the whole thing (still being edited but already up) and confound your fellow dinner-party guests with more General Nice trivia than a barrel of General Nice wine can wash down.

Svalbard plot: gov’t hopes to buy soon

Norwegian minister of trade and industry Monica Mæland, who today started her first visit to Svalbard, told Svalbardposten she hopes her government will soon be able to purchase Austre Adventfjord, a privately owned 200 km2 plot put on sale a few months ago. The owners, the Horn family, are involved in a dispute with Store Norske, Norway’s state-owned coal miner on Svalbard, and say they only decided to look for a private buyer when negotiations with the government failed. The possibility of that chunk of Svalbard ending up in foreign hands (citizens of all Svalbard treaty signatories can own property on the islands) has unnerved some in Norway and might motivate part of the government’s interest in buying it themselves.

One Svalbard treaty signatory is China, and at a point Norwegian broadcaster NRK aired an interview with Chinese real-estate tycoon Huang Nubo about his interest in purchasing Austre Adventfjord. After the Horns categorically rejected having had any contact with Huang, the interview was referred to a misunderstanding NRK blames on Huang.

More on Austre Adventfjord here.

so yes, Huang Nubo does want to buy that chunk of Svalbard

Huang Nubo 黄怒波 tells NRK in Beijing that he’s the only potential buyer for Austre Adventfjord, a 200 km2 plot of land in Svalbard, which he estimates could set him off some $4m (i.e. less per hectare than what he was willing to offer for Grímsstaðir á Fjöllum in Iceland). He says he wants to set up a holiday resort there and to offer fishing excursions and cruise trips to nearby fjords, to cater mainly to Chinese tourists (like the ones who already go to Svalbard).

The current owners of the plot had said they wanted to mine for coal there, even if the land itself ends up being sold.

More on the Svalbard sale, with and a bit of background, in my two recent posts on the topic.

more on Svalbard plot up for sale

VG has just published an interview with Henning Horn, who owns (together with two siblings) Austre Adventfjord, a 200 km2 plot near Longyearbyen, Svalbard, and has recently announced he’ll try to sell it, possibly to a foreign entity, after failing to reach a deal with the Norwegian government. Mr Horn dismisses fears of political tensions if part of Svalbard is sold to foreigners. “Norway should be more humble towards the Svalbard treaty,” he says, quoting the forty-nation agreement that gives all signatories equal rights to engage in economic activities on the islands. “Norway’s position isn’t higher than that of the other signatory states. There’s no reason for Norway to own 99 percent of the archipelago.” The idea that Svalbard is “primarily Norwegian” is a “misconception” that could lead to a loss of credibility and possibly a renegotiation of the treaty.

Regardless of who ends up owning the land, Horn plans to develop coal mining there, together with his partners, among them Bjørn Fjukstad, an engineer formerly with coal miner Store Norske and once chairman of the Longyearbyen community council. There’s a lot of coal there, they claim. The 20m tonne figure quoted recently refers only to the reserves in Operafjellet. The whole plot might contain up to 170 million tonnes, and they envisage an operation with 85 employees and a wharf within the property.

Coal mining in Svalbard has long been more a matter of asserting a presence in the region than of profitability, for Norway as well as for Russia, the only other state with an economic activity on the islands. Norwegian state-owned coal miner Store Norske reported losses of $65m in 2012 and $13m last year. Almost all coal from Svalbard is exported to Europe (mainly Germany), while Norway, which produces no coal on the mainland, imports it from other sources, as shipments from Svalbard aren’t available year-round. While coal mining there makes relatively little economic sense, many in Norway (including some who otherwise oppose coal mining as damaging to the environment) advocate for its continuation based on “sovereignty” and “national security” grounds.

The Russians stay there for arguably similar reasons. Arktikugol, the company that exploits the Russian coal mines in Svalbard, is the only remaining state-owned coal miner in Russia, and in 2012 had losses of half a million dollars. Their coal is not particularly needed in Russia and is sold to Western Europe instead. Despite a history of accidents and tense relations with the Norwegian authorities, Arktikugol’s activities are planned to continue, and to be expanded into developing tourism (something they have attempted, unsuccessfully, in the past) with trips possibly departing from Murmansk.

In the meantime, speculation that someone from China might be interested in buying Austre Adventfjord continues, as reports and opinions about the potential sale bounce back and forth between Norwegian, Hong Kong (now also in the Wen Wei Po), Icelandic and other media sources. So far, the closest to a display of ‘interest’ from Chinese state sources has been a news item on the website of the Chinese trade representation in Norway, as I noticed a couple of days ago.

China’s trade representation in Norway reports on Svalbard plot up for sale

The website of China’s trade representation in Norway, a subdomain of MOFCOM‘s, relays the news (originally from Norwegian newspaper VG 《世界之路》) that Austre Adventfjord, one of the two privately owned plots in Svalbard, covering over 200 km2 and coal deposits, is being put up for sale by their Norwegian owners. The article adds that China has a right to engage in commercial activities on the islands on an equal footing with the other thirty-nine Svalbard treaty signatories. Among those are Norway, who enjoys sovereignty over the territory, and Russia, the only other state that has so far made use of such rights.

Although nothing so far indicates that any Chinese entity is interested in buying the land, the sole mention of such a possibility by a Norwegian polar expert has already triggered speculation about a Chinese purchase, from Hong Kong to Iceland.

China has had a research station in Svalbard for around a decade: the Yellow River Station (中国北极黄河站), its entrance guarded by two stone lions.