Teeing Off At Edge Of The Arctic? A Chinese Plan Baffles Iceland

Courtesy of The New York Times, an article on China’s curious interest in Iceland:

It was 11 a.m., and a pale sun had only just crawled sluggishly into the sky. The snow, which began falling in September, will probably continue until May. Even for Icelanders accustomed to harsh weather and isolation, Grimsstadir is a particularly desolate spot.

But thanks to a poetry-loving Chinese tycoon with a thing for snow, it has become the setting for a bizarre Icelandic saga featuring geopolitical intrigue, tens of millions of dollars and a swarm of dark conspiracy theories. At the center of the drama is Huang Nubo, a former official in the Chinese Communist Party’s Propaganda Department who, now a property developer in Beijing, wants to build a luxury hotel and an “eco golf course” for wealthy Chinese seeking clean air and solitude.

“It never seemed a very convincing business plan,” said Iceland’s interior minister, Ogmundur Jonasson, who last year rejected a request that Mr. Huang be exempted from Icelandic laws that restrict foreign ownership of land. “I put many questions and got no answers,” the minister added.

Prodded by diplomats from the United States and other countries to take a hard look at Mr. Huang’s intentions, Mr. Jonasson questioned what might lie behind China’s curious interest in Grimsstadir. “One has to look at this from a geopolitical perspective and ask about motivations,” Mr. Jonasson said.

Rebuffed in an initial attempt to buy a vast area of wilderness covering more than 100 square miles, Mr. Huang’s Beijing-based company, the Zhongkun Group, is now pushing for a long-term lease arrangement instead — and counting on the prospect that elections in Iceland next month will lead to a new, and perhaps more welcoming, government.

The current government in Reykjavik, a left-of-center coalition, has mostly given Mr. Huang the cold shoulder. Even ministers who favor Chinese investment wonder what is really going on.

Foreign Minister Ossur Skarphedinsson said that he saw no reason to block Mr. Huang’s hotel venture, which is expected to cost more than $100 million, but that he was puzzled by Mr. Huang’s desire to build a high-end resort in a place so isolated that “you can almost hear ghosts dancing in the snow.” As for playing golf, Mr. Skarphedinsson added, “that doesn’t seem very sensible.”

Such bafflement has stirred much speculation about what the Chinese tycoon and perhaps the Chinese authorities are up to. A proposal by the Zhongkun Group to renovate a small landing strip in the Grimsstadir area and buy 10 aircraft led to anxious talk of a Chinese air base. The area’s relative proximity to deep fjords on Iceland’s northeast coast near offshore oil reserves fueled speculation about a Chinese push for a naval facility and access to the Arctic’s bountiful supplies of natural resources. Far-fetched rumors about Chinese missiles and listening posts led to worries about military personnel pouring in disguised as hoteliers and golf caddies.

Mr. Huang could not be reached for comment: he was off climbing a mountain, his company said. In response to written questions, Xu Hong, a vice president at the company, dismissed speculation of a military purpose or other ulterior motives as “the guesswork of post-cold-war thinking.” Ms. Xu said Grimsstadir had been chosen because “there is market demand in China” for peace and quiet. “Most Chinese now don’t like to travel to dirty, noisy places,” she said.

Mr. Skarphedinsson scoffed at a widely held belief here that Mr. Huang is leading a plot by Beijing to secure a strategic foothold in Iceland, a NATO member that is entirely bereft of military muscle. Iceland also sits astride what will become important shipping lanes as ice-choked Arctic waters warm.

China has openly declared its interest in shipping routes through the Arctic and in using Iceland as a future transport hub, Mr. Skarphedinsson said. But these goals, he added, have been hurt, not helped, by the cloud of suspicion generated by Mr. Huang.

“One thing the Chinese Communist Party never failed at since Mao is public relations, but the P.R. in this venture has failed miserably,” Iceland’s foreign minister said.

Beijing’s keen interest in Iceland, nearby Greenland and the wider Arctic region is well known. China is negotiating a Free Trade Area accord with Reykjavik, its first with a European nation, and last year it sent its prime minister at the time, Wen Jiabao, for a two-day visit. A Chinese icebreaker, the Snow Dragon, stopped off last year as part of a push by Beijing to gain entry as an observer to the Arctic Council, a body comprising the United States, Canada, Russia, Iceland and Nordic states in or near Arctic waters.

China has also opened what, physically at least, is the biggest foreign embassy by far in Reykjavik, even though it has only seven accredited diplomats.

“Nobody knows what the devil they are up to,” said Einar Benediktsson, Iceland’s former ambassador to Washington and a critic of his country’s expanding ties with Beijing. “All we know is that it is very important to China to get a foothold in the Arctic, and Iceland is an easy prey.”

“Golf here is difficult,” said Mr. Benediktsson, who is 75. He has been seesawing on whether to sell his land, but is mindful of his age. “When the hotel goes up, I’ll be down in the ground.”

Mr. Huang’s enthusiasm for Iceland at first stirred little concern. Nobody paid much attention when, in 2010, he suddenly popped up in Reykjavik to renew a long-dormant friendship with Hjorleifur Sveinbjornsson, a translator of Chinese literature he had roomed with at Peking University in the 1970s.

Mr. Sveinbjornsson doubts his old roommate is part of an elaborate gambit by China. “If we had not shared a room he would never have even heard of Iceland,” he said. He is not sure that Grimsstadir will work as a resort: “It is not the first place I would have chosen.” But, noting that Mr. Huang “is not an idiot,” Mr. Sveinbjornsson said that “maybe it takes somebody from the outside to see the potential.”

During his first trip to Iceland in 2010, Mr. Huang made no mention of any business plans but focused instead on poetry, announcing that he would put up $1 million to establish and finance the China-Iceland Cultural Fund. Led by his former roommate, the fund has since organized two meetings of poets, the first in Reykjavik in 2010, the second a year later in Beijing.

A third planned in Norway for last year was scrapped after Mr. Huang’s company declared Norway unacceptable as a site. Mr. Sveinbjornsson said no reason had been given, but he linked the move to Beijing’s continuing fury at Norway over the 2010 Nobel Peace Prize, awarded in Oslo, which went to Liu Xiaobo, a jailed dissident Chinese writer.

Less than a year after his first visit, Mr. Huang returned to Iceland and offered Mr. Benediktsson, the sheep farmer, $7 million for his land and that of some relatives and a second family. A business plan submitted later to the government by the Zhongkun Group said “the location fitted perfectly with our strategic plans for developing environmentally friendly eco resorts in remote locations.” The company said it would build a 100-room five-star resort hotel, luxury villas and the golf course.

While exotic golf courses are all the rage now, this one seemed to many here a long shot. “I’ve looked at this very closely and gone through all the documents, and I’m just aghast,” said Edward Huijbens, director of the Icelandic Tourism Research Center in Akureyri, the main town in northern Iceland. “The whole project is fundamentally not credible.”

But Mr. Huang’s business strategy has apparently impressed the state-owned China Development Bank, which, according to the Zhongkun Group, last year reached a “cooperation agreement” with the company worth about $800 million. Ms. Xu, Zhongkun’s vice president, said the Chinese bank “will provide loans and financial support to concrete projects by Zhongkun, including, but not exclusively, in Iceland.”

There is now talk that some local mayors will buy the Grimsstadir land — with money provided by Zhongkun — and then lease a portion of it to Mr. Huang, but Mr. Jonasson, the interior minister who refused to give a green light to Mr. Huang’s plans last year, is still suspicious.

“There are so many loose ends,” the minister said. Changing a purchase into a lease does not change the fact that the hotel-golf complex “makes very little sense,” he added. Mr. Jonasson said Mr. Huang “is not just a simple poet wanting to find peace of mind in the mountains of Iceland.”

Mr. Benediktsonn, the sheep farmer, has been swinging back and forth on whether he wants to sell his property. He does not like the idea that the area would be flooded with Chinese tourists and golf carts, but doubts that the resort will ever materialize, and, mindful of his own advanced age, calculates that if it does he will not be around. “When the hotel goes up, I’ll be down in the ground,” he said.

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Seeds Of A Revolution is committed to defining the disruptive geopolitics of the global Farms Race.  Due to the convergence of a growing world population, increased water scarcity, and a decrease in arable land & nutrient-rich soil, a spike of international investment interest in agricultural is inevitable and apt to bring a heretofore domestic industry into a truly global realm.  Whether this transition involves global land leases or acquisitions, the fundamental need for food & the protectionist feelings this need can give rise to is highly likely to cause such transactions to move quickly into the geopolitical realm.  It is this disruptive change, and the potential for a global farms race, that Seeds Of A Revolution tracks, analyzes, and forecasts.

Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has long held a keen interest in natural resource policy and the geopolitical implications of anticipated stresses in the areas of freshwater scarcity, biodiversity reserves & parks, and farm land.  Monty has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas.  Monty writes about freshwater scarcity issues at www.waterpolitics.com and frontier investment markets at www.wildcatsandblacksheep.com.