China's imperial mission in Iceland

Who is Huang Nubo?

He's a former Communist party propaganda official who is now one of China's best-known property-developers, worth $890m, according to Forbes' rich list. Through his Zhongkun Group, the 55-year-old owns resorts and hotels across China. Now he has just agreed subject to government approval a $9m deal to buy a vast tract of north-eastern Iceland and spend $100m developing it. Huang says he's a nature lover who wants to build a luxury hotel and golf course. Others aren't convinced.

Why are others concerned?

Sceptics, including some Icelandic politicians, fear the investment is a Trojan horse for China's rapidly escalating strategic interest in the island nation. Its importance notwithstanding its recent economic turmoil is set to grow as global warming opens up the Arctic region to new shipping routes and the exploitation of energy resources. Iceland's interior minister, Ogmundur Jonasson, is one of those expressing caution over the deal, saying that "I want to take care of Icelandic interests, to guard our country, and not take anything at face value".

What's the area like?

"You don't need to buy 0.3% of Iceland to build a hotel," as one Reykjavik business leader told the FT. On the face of it, the desolate Grmsstair Fjllum area where Huang wants to build is not ideal tourist territory: mostly barren, volcanic rock and scrubland in an inaccessible area with year-round ice and exceptionally short summers. So a $100m-plus investment in a luxury hotel development looks like a high-risk kind of punt. Huang, a keen mountaineer and poet, counters that it's an eco-travel development where the wilderness is the point: guests will be flown in on two small, private planes.

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Why Iceland?

Huang has kept up a friendship with Hjrleifur Sveinbjrnsson now the husband of Iceland's former foreign minister since meeting him at Peking University in the 1970s. Sveinbjrnsson is now Huang's informal representative in Iceland. The pair, and another Icelandic friend of Huang's a senior diplomat at the Beijing embassy travelled to the North Pole together earlier this year. Before leaving, the diplomat, Ragnur Baldursson, told an economic conference in Beijing: "We believe there will be a new shipping route between the Pacific Ocean and the North Atlantic that would shorten the distance between China and the old economies around the North Atlantic ocean. That is one field where we have started discussions with China."

Is this likely to happen?

The Icelandic government's final approval of the scheme has not yet been secured. However, the president, lafur Ragnur Grmsson, is a warm supporter. "Nobody talked about geopolitical implications when Iceland flooded its valleys to create hydroelectricity for Western aluminium companies," he told the FT last week. "But when a Chinese poet wants to build a hotel, everyone goes crazy." Grmsson has visited China a number of times in the past six years to promote Iceland as a potential Arctic logistics hub and provider of geothermal energy. "China and India lent Iceland a helping hand in many constructive ways, whereas Europe was hostile and the US was absent," he argues. Chinese investment has surged since the economic collapse of 2008, including in the key emerging field of geothermal energy, and last year Beijing agreed a $500m currency swap deal with Reykjavik.

Why is China interested in the Arctic?

For the same reasons everyone else is. Climate change has opened up the potential for a shipping route that shaves 7,000km off the distance between Europe and east Asia. The retreat of the ice opens up the possibility of exploiting the high north's energy resources: the US Geological Survey reckons about 13% of the world's undiscovered oil reserves and a third of natural gas deposits lie in the area. The predicted mass migration of fishing stocks to warming Arctic waters is certain to attract trawlers from China, Japan and South Korea, where fish consumption is high. In recent years all these opportunities have led to geopolitical rumblings over Arctic sovereignty (particularly from Russia and Canada), which have so far been contained through a series of bilateral agreements and the setting up of an eight-member Arctic Council to smooth co-operation.

But China isn't an Arctic power, is it?

No, and so far its request for observer status on the Arctic Council has been rebuffed. Beijing is constantly looking for ways to expand trade links around the world. Iceland, conveniently situated between North America and Europe, could function as a cargo hub if climate change opens up the Arctic to global shipping in the next two decades.

NORCs: the new global superpowers?

Laurence Smith, author of The New North: The World in 2050, reckons Northern Rim countries Canada, Alaska, Greenland, Norway, Sweden, Iceland, Finland and Russia (NORCs) will be dominant global powers by mid-century due to an abundance of unexploited oil and water. These commodities will drive geopolitics as they become more scarce. "NORCs are sitting on a black gold mine. Climate change will reveal those riches." He says that when he visited the native communities in the north, "I expected to hear tales of climate-change-related woe". Instead, the indigenous people sense an economic boom is coming and they want a piece of the pie.