Strategic land in Arctic archipelago up for sale, stirs up China-Norway tensions

The last piece of privately owned land in the strategic Svalbard archipelago in the Arctic is up for grabs for 300 million euros ($326 million), spurring China-Norway tensions.

But why China?

China's 2018 white paper on the region is seen as a sign of Beijing’s Arctic ambitions. Since then, the country has defined itself as a "near-Arctic state" and envisages to play a growing role in the strategically valuable geography of the region.

The archipelago is located halfway between mainland Norway and the North Pole, in an Arctic region that has taken on greater geopolitical and economic importance over the years.

As the sea ice melts, new shipping routes open, increasing its strategic value, while relations grow ever frostier between Russia and the West.

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Spanning 60 square kilometres (23 square miles), the Sore Fagerfjord property in southwestern Svalbard is home to mountains, plains, a glacier and nearly five kilometres of coastline, but no infrastructure.

"It's the last private land in Svalbard, and, to our knowledge, the last private land in the world's High Arctic," said lawyer Per Kyllingstad, who represents the sellers.

"The Chinese are naturally potential buyers since they've been showing a real interest in the Arctic and Svalbard for a long time," he said, adding that he had received "concrete signs of interest" from the country.

The 1920 Svalbard Treaty

Svalbard is governed by a 1920 international treaty that recognises Norway's sovereignty over it. However, citizens of all signatories, including China, are equally entitled to exploit the region's natural resources.

Russia, for example, has maintained a coal mining community on Svalbard, via the state-run company Trust Arktikugol, for decades.

But times have changed.

Norway keen on protecting its sovereignty

Any mention of possible Chinese interest in Svalbard property raises "a red flag to force the Norwegian authorities to do something."

Norway’s intelligence services say that the Sore Fagerfjord property falling into Chinese hands poses the biggest security risk to the Scandinavian country after Russia.

Norway's Attorney General has therefore ordered the owners-- a company controlled by a Russian-born Norwegian, according to local media -- to call off the planned sale.

The Norwegian state owns 99.5 per cent of Svalbard and has declared most of the land, including the Sore Fagerfjord property, protected areas where construction and motorised transport, among other things, are prohibited.

Nevertheless, the sellers cite the 1920 treaty. “They are obliged to treat all the parties to the treaty equally,” said Kyllingstad.

"The land can't be sold without the Norwegian authorities' approval," said Cecilie Myrseth, Trade and Industry Minister of Norway.

"Nor is it possible to hold negotiations about the property," she added.

That argument is based on clauses of an old loan granted by the state in 1919. However, Kyllingstad insists the clauses' statute of limitations has expired.

In 2016, the government paid 33.5 million euros to acquire the second-last piece of private land on Svalbard, near Longyearbyen, which was also reportedly being eyed by Chinese investors. Critics subsequently accused the government of being misled over unsubstantiated arguments.

In 2018-2019, the state had already engaged in negotiations to buy Sore Fagerfjord but the talks collapsed over the price.

Trade and Industry Minister Myrseth said the option was still open if the terms were "realistic".

While the sellers thought it fair to offer the land to the Norwegian government, they will ultimately sell to the highest bidder on the open market, said Kyllingstad.

(With inputs from agencies)