A Rare Arctic Land Sale Stokes Worry in Norway

By ANDREW HIGGINSSEPT. 27, 2014

Arnstein Martin Skaare, left, and Ole Einar Gjerde, in Longyearbyen, Norway, where, across the fjord, a large tract of land is for sale. Farther south, a Chinese tycoon bought a $4 million property. Credit Kyrre Lien for The New York Times

LONGYEARBYEN, Norway — For anyone in the market for a majestic waterfront property with easy access to the North Pole, Ole Einar Gjerde has a deal. “We will throw in the polar bears for free,” said Mr. Gjerde, pitching the attractions of a huge tract of Arctic land two and a half times bigger than Manhattan but considerably less noisy. It has a human population of zero.

But the sale of the property, across a frigid fjord from Longyearbyen, the capital of Norway’s northernmost territory, has kicked up a noisy storm fed by alarm over the Arctic ambitions of a Chinese real estate tycoon with deep pockets, a yen for ice and a murky past working for the Chinese Communist Party.

The tycoon, Huang Nubo, was rebuffed last year in an attempt to buy a tract of frozen wilderness in Iceland and has turned his attentions to Norway. This summer he reached a preliminary deal to buy a large waterfront plot for about $4 million near the northern city of Tromso and, according to Norway’s state-owned broadcaster, is also eyeing a much bigger and even more northerly property here on Spitsbergen, the main island in the Svalbard archipelago.

Mr. Huang’s company, Beijing Zhongkun Investment Group, denied reports in the Norwegian news media that it wants to buy land here in the high Arctic, and said it is focusing instead on plans for a luxury resort complex in Lyngen, a mountainous area on the Norwegian mainland near Tromso. That project, though centered on land much farther south than Svalbard, still puts Mr. Huang’s company inside the Arctic Circle and has set off a heated debate about his intentions.

“No need to doubt that billionaire Huang Nubo is a straw man for the Chinese Communist Party and the country’s authorities,” warned a commentary in Nordlys, northern Norway’s largest newspaper.

Ola Giaever, the seller of the property near Tromso, said he had “100 percent confidence” that Mr. Huang was a straight-up businessman with no hidden agenda. “This is a business deal. Nothing else is going on,” Mr. Giaever said in a telephone interview.

Such assurances, however, have done little to calm a frenzy of speculation about China seeking a permanent foothold in the Arctic, a region of growing geopolitical and economic significance as global warming opens new and cheaper shipping routes from Asia and also expands the prospects for exploiting the Arctic’s abundant natural resources.

“For anyone interested in geopolitics, this is the region to follow in years to come,” said Willy Ostreng, the president of the Norwegian Scientific Academy for Polar Research. Mr. Huang, he added, “might be just another smiling businessman” genuinely interested in simply developing tourism, but “we are talking about perceptions here.”

“And the perception is that China wants a foothold in the Arctic.”

Hungry for energy, China has “openly declared its Arctic ambitions,” said Mr. Ostreng, noting that Beijing had invested in an icebreaker, the Snow Dragon; sent scientists to Svalbard to join teams of international researchers; and successfully lobbied to become an observer at the Arctic Council, a grouping of nations with Arctic land, including Norway, Russia and the United States. It has also tried, so far without success, to get permission to build a large radar antenna on Svalbard.
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China has even declared itself a “near Arctic state,” a big stretch as even its northernmost region lies more than 1,000 miles from the Arctic Circle. But, Mr. Ostreng said, “When you are a big country, you can claim to be whatever you want, and people believe you.”

Wariness of China’s intentions have been fueled in part by the widespread bewilderment here over China’s relentless efforts to punish Norway over the Norwegian Nobel Committee’s decision to honor Liu Xiaobo, a jailed Chinese dissident, with the Nobel Peace Prize in 2010. Furious at the award, China has been on a four-year diplomatic tantrum, repeatedly snubbing Norwegian officials, slashing imports of Norwegian salmon and hectoring Norway for showing insufficient contrition for an award over which the government had no control.

Mr. Huang first attracted attention and suspicion in 2012 when he tried to buy a desolate, 100-square-mile tract of land in northern Iceland, saying he wanted to build a golf course and a high-end hotel for Chinese tourists. The project fell apart after baffled Icelandic officials invoked laws restricting foreign ownership of land.

In the case of Svalbard, however, Norway is barred by the 1920 Svalbard Treaty from imposing any such restrictions. The treaty granted Norway “absolute sovereignty” over the Arctic Archipelago, but also committed it to grant “complete equality” in the purchase and development of Svalbard land to the nationals of all the countries that signed the original treaty, or, like China, joined it later.

When the treaty was signed as part of the Versailles negotiations after World War I, the main economic activities on Svalbard were coal mining and fur trapping. Global warming and new technologies, however, mean that Svalbard now sits in the middle of what, in coming decades, is expected to be an Arctic gold rush.

The Arctic region, according to the United States Energy Information Administration, holds around 13 percent of the world’s undiscovered oil and 30 percent of its natural gas, reserves that have been untouched because of the difficulty and high cost of their development.

Russia, which recently announced plans to invest $400 billion on extracting Arctic resources over the next 20 years, believes the region has even more promise, though these plans could be disrupted by Western sanctions imposed over Ukraine.

Igor Sechin, the head of Rosneft, Russia’s state oil company, has said the Arctic holds over 20 percent of the world’s oil reserves. He also indicated that Russia, despite its increasingly warm relations with China, was uneasy about Beijing’s push into the Arctic, warning that Russia faced “plenty of competition,” not only from nations with well-established Arctic claims like Canada, Norway and the United States, but also “countries which seem to be far from the Arctic,” including China and “even Singapore,” a tropical nation 4,500 miles from the Arctic. “The struggle for resources is getting tougher,” Mr. Sechin said.

The land now up for sale, owned by the descendants of a Norwegian shipper who acquired it in 1937, is the first property on Svalbard to go on the market since 1952, and is the only privately held territory left. All the rest is owned by the Norwegian state; a Norwegian state coal company, Store Norske; and a Russian state-owned coal company, the Arctic Coal Trust.

“This is a once-in-a-lifetime opportunity. It is unique,” said Mr. Gjerde (pronounced gyer-DA), a friend of the family that owns the land and a board member of Austre Adventfjord AS, a company set up last year to manage the property. Henning Horn, a Norwegian industrialist and farmer who owns the property along with other descendants of the original purchaser, is the chairman. Mr. Horn declined, through his lawyer, to be interviewed.

When Norwegian news media first reported the planned sale in April and then named Mr. Huang as a possible buyer, the government immediately came under pressure in Parliament and in the news media to make sure the land did not fall into foreign hands.

“Norway cannot take this risk. This is a matter of strategic importance for us,” Liv Signe Navarsete, a former minister and member of the Norwegian Parliament said in an interview. Norway, she added, is open to foreign investment, but after being browbeaten by Beijing for so long over the Nobel Peace Prize, it has no reason to roll out the welcome mat for a Chinese investor in the Arctic.

Norwegian officials, she said, have bent over backward to calm Chinese fury over the prize, accepting China as an observer in the Arctic Council, a position denied to the European Union, and refusing to meet Tibet’s exiled spiritual leader, the Dalai Lama, during a visit to the Norwegian capital, Oslo, in May. But China has still kept Norway in the deep freeze “to show the world that if you don’t do what they want, you will suffer,” Ms. Navarsete said.

Amid a rising clamor against any foreign sale, the government announced in May that it would work to ensure that the Svalbard property remained in Norwegian hands. “The government has decided to work for a solution involving a state takeover,” the trade minister, Monica Maeland, said in a statement. “It is entirely natural and right that the state is committed to taking over the property.”

Efforts to secure state control have yet to bear fruit.

Christin Kristoffersen, the mayor of Longyearbyen, Svalbard’s administrative center, said she supported a purchase by the Norwegian state to make sure the region’s fragile wilderness areas do not get swept up in a chaotic rush to exploit Arctic resources. “This is not an area for a new Klondike. We have to tread carefully,” the mayor said. “We should own this island. This is not anti-Chinese, but pro-Norwegian.”

Svalbard’s governor, Odd Olsen Ingero, also wants the state to step in, but stressed that even a private buyer would have to abide by strict zoning and environmental regulations. “Starting a hotel over there is unthinkable,” the governor said.

Representatives for the owners say the state is welcome to submit a bid but must follow market rules. “We are not in politics or geopolitics. We are in business. We will sell to the highest bidder,” said Arnstein Martin Skaare, a board member of the company managing the sale. “If Norway thinks this land is important for Norway, then it will buy it for a fair market price.”

What this price might be is a mystery, with estimates ranging from a few million dollars to over a billion.

“You can’t put a price on something that is unique,” said Mr. Ostreng, the polar research expert, noting that property came for sale so rarely in the high Arctic that there was no functioning market to establish even its approximate worth. The property’s immediate economic value, he said, is minimal, as its principal asset, coal, has only lost money for those mining elsewhere on Svalbard.

“But if you add in strategic value,” he said, “the price of this land is incalculable.”