Environmental Hazards and Risk Identification in the Arctic Shelf Development as Part of China and Russia Energy Interests

Abstract

China and Russia have different interests in the Arctic but are forced to look for possible ways of cooperation in energy projects in the current external conditions. This changes the priorities of both countries and, accordingly, transforms the risks. Objectives of the research: to build an algorithm for identifying anthropogenic environmental risks in the context of two major players economic activities in the Arctic region: the Russian Federation and China. In the paper, we formulated an algorithm of environmental risk identification. We identified environmental hazards from the main parameter—the type of economic activity for the extraction of energy resources, premises, and factors for the occurrence of environmental hazards and compiled criteria for risk selection. Methods used: complex analysis (mixed method research): empirical and comparative methods, methods of expert assessments, the method of inductive statistics (inferential statistics) to compare the perception of risk at the level of different groups. Results: the algorithm has been formed for determining risks in the changed external conditions. Major anthropogenic environmental risks are identified from the perspective of the main players in the Arctic—Russia and China, which can help to make the necessary decisions on time and partially prevent environmental degradation. This makes it possible to identify the risks associated with conducting economic activities for the extraction of energy resources in the Arctic region. Therefore, this study contributes to a more accurate identification of anthropogenic environmental risks in the Arctic region.

1. Introduction

Over the past few decades, mankind has been trying to develop a planetary concept of reasonable consumption, the main reason for which is the rapid growth of anthropogenic impact on the environment. Economic activity is aimed primarily at the withdrawal of energy resources from the environment, and meanwhile emissions and material waste are the worst outcomes. Emissions invade the natural processes of circulation. The processes of degradation in the biosphere have become the reason for adopting a number of documents under the auspices of the UN, but still, every precaution taken cannot stop the steady trend towards the deterioration of the environment. They are of particular importance in connection with the close attention of the international community to the development of resource-rich Arctic territories. The issue is rather complex and multifaceted. When studying Arctic projects and development programs, the emphasis is mainly on the study of military, social, and related risks [1]. However, environmental risks in the Arctic are also increasing [2]. As a result of climate change, permafrost is melting—its thickness and total area are decreasing, which contributes to further “overheating” of the Arctic [3]. This process is creating threats to local infrastructure, increasing the risk of man-made disasters, coastal erosion, and the vulnerability of Arctic ecosystems [4].

For the quantitative and qualitative study of environmental risks in the extraction and transportation of energy resources in the Arctic, it is necessary, primarily, to conduct a detailed analysis of the prerequisites for their emergence. The contribution of this study lies in the fact that we study the premises and factors of environmental danger while developing the Arctic shelf by energy companies as part of Russia and China’s interests.

Companies engaged in the projects for the development and extraction of energy resources beyond the Arctic Circle face not only challenges caused by difficult natural and climatic conditions but also challenges related to the special status of the Arctic and the changing views of society in the context of the energy transition. Such projects are long-term and require large investments at the preliminary stages before the implementation stage, and also make a great contribution to ensuring the energy security of the participating countries.

The purpose of our study is to build an algorithm for identifying environmental hazards in the context of the activities of two major players: the Russian Federation as an Arctic state with the longest territory in the Arctic, which has huge reserves of fossil resources, and China, positioning itself [5] as an Arctic state with the ensuing goals and objectives.

The Arctic region nowadays is at the center of interest in both Arctic and “near-Arctic” states. The most significant player in the “near-Arctic” states is China. China has long been a consumer of Russian energy exports, mainly raw materials and energy resources with a low degree of processing. There are many issues associated with this process. Yet in the context of this study, we consider only the environmental aspect of the extraction of energy resources in the context of relations between China and the Russian Federation.

Literature Review

Looking at the studies on Arctic environmental hazards, we found their primary focus on the impact of climate warming and Arctic ecosystem deterioration. Observations of climate and the cryosphere show that the high latitudes of the Arctic have experienced the most rapid environmental changes in recent decades, and the rate of warming is much higher than the world average. Gamberg’s [6] research has shown that climate warming is occurring two to three times faster in the Arctic region than in other regions of the planet. On the one hand, climate change will have a direct impact on the Arctic ecosystem, on the other hand, the dynamic environment of the Arctic ecosystem will also increase the mobility and spread of pollutants during the extraction of energy resources. Studies by Mueller et al. and Veillette et al. [7,8] have shown that in the past few decades, the multi-year ice caps of several deep-sea lakes in the Canadian region at high latitudes have begun to thin and disappear. Berkes, F., et al. [9] studied Canadian maritime law in the Arctic, which emphasized that the impact of climate warming on the ecological environment is mainly concentrated in the following areas: fish resources and wildlife, cryosphere, vegetation, and water resources. Hirawake, T., et al. [10] studied the response of Arctic marine and terrestrial ecosystems and changes in biodiversity in response to global warming. Alabia et al. [11] investigated the impact of climate change on the distribution of marine fish and invertebrate groups in the Arctic over the past 24 years. Elias’s [12] research has shown that the impact of global warming caused by anthropogenic greenhouse gas emissions on the Arctic environment will be enhanced by the complex interaction between land, ocean, and ice. In scenario-based simulations in all but the most stringent greenhouse gas reduction scenarios, a complete transformation of the Arctic environment is likely to occur. Research shows that rising temperatures in the Arctic threaten permafrost melting, making relatively inaccessible carbon sources more likely to be mineralized by microorganisms. However, the majority of researchers believe that the study of anthropogenic impact on the Arctic region is still in its infancy and does not allow us to assess the risks to the Arctic region.

Research on the impact of mining on the Arctic environment mainly focuses on analyzing the environmental impact of oil spills and emergencies. In terms of environmental impact, Pančić et al. [13] analyzed the impact of leakages detection technology for oil spills on marine microorganisms in high-latitude areas of the Arctic. They showed that the reagents used can enhance bacterial growth, and the weathering of chemical dispersants reduces the biomass of microbial communities by 50%. Gulas, S., et al. [14] described existing pollution control technology developed in accordance with the regulations of pan-Arctic countries and highlighted the problems that can arise when associated oil spills are transferred to international waters. Focusing on the characteristics of Norway’s oil spill response system, Knol, M. and P. Arbo [15] showed that the Arctic Council is an important forum for international cooperation in countries’ response to oil spills in energy production and is particularly important for establishing an appropriate network with common guidelines and international standards. From an emergency response perspective, in order to achieve a successful response to oil spills in the Arctic marine environment, Wenning et al. [16] studied an oil spill risk assessment framework that can be accessed and applied to the Arctic ecosystem. The study proposes a strategy to respond to oil spills by assessing exposure, vulnerability, and restoration of Arctic ecosystems. In order to further consolidate the results of existing research and improve technologies and methods for responding to accidental oil spills in the Arctic, Camus and Smit [17] compared the relative social benefits and consequences of NEBA and similar comparative risk assessment (CRA) methods. This study will help to compare and use different strategies to respond to oil spills under different environmental and operating conditions. Arzaghi et al. [18] developed the dynamic Bayesian network (DBN) model to assess the environmental risks of marine oil spills. This model can not only estimate the environmental risk caused by aquatic pollution but also estimate the time-varying environmental risk of marine oil spills caused by seasonal changes. Similarly, Afenyo, M., C. Jiang, and A.K.Y. Ng [19] developed the Arctic Socio-Economic Impact Model (SEMA) for collecting and assessing the impact of Arctic shipping in terms of benefits, risks, uncertainties, and priorities associated with emergency preparedness and response. In contrast to sensitive issues such as sovereignty and resource exploitation, a number of Chinese scholars have recommended China focus on climate change in its Arctic policies [20]. Risks in the construction of infrastructure for the extraction of energy resources were studied by Evseev, V.O. [21], who proposed to use correlation–regression analysis for this.

Thus, there is little in the context of the energy interests of China and the Russian Federation in changing research on assessing the pre-prerequisites of environmental danger in the Arctic, as well as analyzing the prerequisites and factors for the formation of environmental danger in the development of the Arctic shelf.

Premises and factors form prerequisites, on the basis of which criteria are selected and risks are identified. Therefore, this study contributes to a more accurate definition and identification of environmental risks in the Arctic region (a premise is a true or false statement that helps form the body of an argument that logically leads to a true or false conclusion. A premise makes a declarative statement about its subject that allows the reader to either agree or disagree with the premise in question and still understand the logical assumptions of the argument).

2. Materials and Methods

This problem-oriented study is based on the use of the mixed method research approach using the following research methods [22]: empirical and comparative methods, methods of expert assessments, the method of inductive statistics (inferential statistics) to compare risk perception at the level of different groups. The fundamental point of the research design through the “mixed method” is the premise that their «kind of alliance» is nothing more than a combination of strengths. Consequently, data obtained from mixed studies with a combination of methods will provide a wider range of information than from using only one method.

The research carried out by the “mixed method” combines qualitative and quantitative methods. This both expands and restricts it to the framework in which these approaches are implemented. Quantitative research relies on deduction, verification, and explanation of put forward theories/hypotheses, a verifiable data bank, and statistical analysis. In turn, qualitative research involves inductive logic, the process of searching and researching a hypothesis/theory, and the constant collection and analysis of data. Thus, the researcher acts as a subject of evaluation, based on his own cognitive abilities. Quantitative information is still insufficient to assess environmental risks in the Arctic region.

Identification and risk analysis involves conducting a qualitative and then quantitative study of the risks faced by oil and gas companies (deterministic and probabilistic approaches). See

Table 1. The main methods of risk assessment in the framework of deterministic and probabilistic approaches.

Method	Advantages/Drawbacks of the Method
Deterministic approach [23,24,25,26,27]
Scenario method (scenario analysis)	Provides a sufficiently clear picture for different project implementation options (refers to expert risk assessment techniques). Depends on the accuracy of the experts chosen.
Sensitivity analysis	The drawback is that the change in one factor is treated in isolation, whereas in practice all economic factors are to some extent interrelated.
The discount rate adjustment	The method does not provide information on the probabilistic distributions of future flows and does not provide an estimate of them.
Certainty equivalent method	Calculation complexity of validity coefficient adequate to risk at each stage of the project, impossibility of analysis of probability distributions of key parameters.
Probability-based approach [28]
Simulation modelling (including Monte Carlo analysis of the first and second order)	It is useful for practical application by combining economic and statistical methods, as well as with game theory and other operations research methods.
Event tree analysis (ETA)	The method is particularly useful when decisions taken at any given time were heavily dependent on the previous decisions taken; the limitation of its practical use is a limited number of development options (related to graphical methods).
A fuzzy-multiple analysis	A fuzzy-multiple analysis directly links the uncertainty of input and output data.
Acaike information criterion	The method allows the most optimal choice from several statistical models, according to the information criterion. Used in small samples.
Probabilistic boundary analysis	Probabilistic boundary analysis is a combination of standard interval analysis and classical probability theory.
Bayesian analysis	Advantages: a priori information is enough, the obtained statements are not difficult to understand; the drawbacks: the definition of all interactions in Bayes networks for complex systems is not always feasible, requires knowledge of a set of conditional probabilities based on expert estimates (related to graphical risk assessment methods).
Hierarchy analysis	The method allows choosing the best alternative in cases where several alternatives are known. In the case of the opposite situation (many alternatives are unknown) the method is not applied.

.

The basis of a qualitative assessment is not figures, but text materials containing evaluative statements of experts. Quantitative assessment methods allow us to assess the measure of risk, which is understood as the product of the probability of occurrence of risk and probable relative damage, which is interpreted as a mathematical expectation of damage.

Due to the probabilistic nature of economic data, which are taken as the basis for the quantitative assessment of business risks, statistical methods of risk assessment are used, which serve as the basis for qualitative and quantitative statements about the objects under study. Therefore, risk determination, taking into account the conditional probability and the expected specific frequency of the occurrence of a specific event (for example, an accident), is carried out using the methods of probability theory and mathematical statistics [29].

Note that risk assessment from the perspective of the probabilistic approach, in contrast to the deterministic method, allows you to simultaneously take into account the integral effect of cumulative risk factors.

The initial data for the study were obtained from open sources, official websites of energy companies and international organizations, and regulators of energy markets. More than 400 sources on the Internet (press releases of Chinese and Russian energy companies, information from official websites of companies, developed and implemented strategic initiatives, as well as annual reports, reports in the field of sustainable development, integrated reports, etc.), of 23 leading energy companies (including the 3 largest Chinese companies—CNPC, CNOOC, Sinopec) were analyzed.

The tasks of the research: to identify the main prerequisites and factors of environmental hazards in Arctic region in the context of the two largest players—the Russian Federation and the People’s Republic of China. In conditions of high uncertainty and lack of information, traditional approaches and methods will not lead to the desired result. This circumstance is reinforced if the stakeholders disagree on the algorithm and evaluation tools. In any case, it is better to use several techniques for assessing possible risks, taking into account organizational and social values in the country, as well as the opinions of the parties involved. [30] We have divided our study into four steps.

Step 1. Defining parameters of environmental hazards that describe their impact on the Arctic environment.

Step 2. Identifying major premises for the occurrence of environmental hazards from the main parameter—the type of economic activity.

Step 3. Identification of the main factors, that is, the causes of environmental hazards on the basis of the identified premises.

Step 4. Premises and factors form prerequisites, on the basis of which criteria are selected and risks are identified.

3. Results

Step 1. Parameters of environmental hazards describing their impact on the Arctic environment.

In the context of the present research, we consider environmental risk as a probability of occurrence for negative changes in the environment or long-term adverse effects arising from a negative impact on the environment. Environmental risk can be caused by emergencies of a natural, anthropogenic, and man-made nature.

Quantitively, environmental risk is understood as a probable measure of the danger of causing harm to the natural environment in the form of possible losses for a certain period. The first step in the environmental risk assessment process is to identify environmental hazards.

Table 2. Anthropogenic environmental hazards classification in the development of the Arctic shelf.

Economic	Political	Social	Legal
- Operational - Resource - Energy - Social	- Lack of environmental policy - Political crises - Conflicts (including conflicts with the use of weapons) - Terrorism, extremism - Separatism	- Socio-economic - Informational - Research - Religious - Moral and ethical - Environmental illiteracy	- Immaturity of environmental law - Lack of environmental law - Legal nihilism

Source: Compiled by the authors.

presents a list of environmental hazards of anthropogenic nature, which is based on the factor’s classification in the monograph by Shmal [31].

As it follows that anthropogenic environmental hazards are extremely diverse. However, no less diverse are the natural factors of environmental danger. The simultaneous imposition of factors significantly increases the environmental risk. Let us dwell in more detail on the most significant factors of anthropogenic nature.

Operational factors of environmental hazard include man-made pollution of the environment, with a negative impact on the biosphere and humans. There are three major manifestations: emissions into the atmosphere, discharge of pollutants into the hydrosphere, and excess physical field generation (electromagnetic, vibration, noise, etc.).

Emissions and discharges. Drilling in offshore fields is accompanied by a large number of discharges, primarily into the hydrosphere, as well as emissions into the atmosphere. The standard volume of discharges into the hydrosphere is 5000 m³ per well in both liquid and solid form (spent drilling fluid and sludge). Liquid discharges contain a huge number of toxic impurities, heavy metals, and clay suspensions, which increase the turbidity and toxicity of the water. Oil drilling is also accompanied by drilling fluid and the discharge of reservoir water from the well. Due to the strong mineralization, the hydrochemical regime in the discharge area could deteriorate. When developing oil and gas fields, accidental oil spills occur. The reason may be howling equipment failure, human factor, and others. The first type of accident is a major blowout from wells with abnormally high pressure of liquid and gaseous hydrocarbons. The second type is regular emissions, with a chronic impact on the marine environment. Both one-time and regular accidents worsen the chemical composition of water, as well as its physical characteristics (transparency, temperature, etc.), leading to the death of living organisms.

Noises. When determining the shelf reserves by marine seismic exploration, a hydro blow effect occurs leading to the death of juvenile and full-grown fish. Seismic exploration noises disorient aquatic wildlife on the feed and communication. Fish schools leave the exploration areas, and next—larger predators—the shelves inhabitants.

Resource factors of an environmental hazard. By 2025, the shortage of fresh water may increase to 2 trillion cubic meters. m./year. 40% of the world’s population will suffer from a shortage of drinking water. The largest supply of fresh water (about 90%) is in glaciers. Though glaciers and Arctic snow are the largest reservoirs of fresh water, they are non-renewable. Global warming, as a consequence of the anthropogenic factor, contributes to the rapid melting of multi-year ice. As a result, freshwater reserves irretrievably disappear, the composition of seawater changes, and the marine fauna is looking for a more comfortable habitat or simply dies.

Energy factors of environmental danger are manifested as emissions into the environment from fuel (coal or heavy oil fuel): slugs, nuclear waste, etc. Nearly 75% of the fuel used in Arctic shipping is marine fuel oil with high emissions of sulfur and soot dioxides. Soot emissions are considered one of the reasons for the melting of the Arctic ice (the use of marine fuel oil in Antarctica has already been banned). Reduced sea ice and open water increase the risk of accidents due to under-explored regions. Hydrocarbon tankering due to risks of discharges greatly increases the risk of Arctic shelf pollution. The development of oil and gas fields is accompanied by the combustion of associated gas and excess amounts of hydrocarbons and their emissions into the atmosphere. Nearly 30% of the burned substances are released into the atmosphere and fall to the surface of the sea, forming a film.

Ecosystem exploitation factor. Arctic ecosystems are characterized by a low ability to self-restoration which worsens oil pollution risks [32]. For instance, the industrial use of natural resources in the Nenets Autonomous Okrug is accompanied by “the loss of the basic elements of the naturally occurring of the territory … namely: to mechanical disruption and land pollution, oil spills, withdrawal of territories for pipeline installation, construction of permanent and seasonal roads and other infrastructure facilities” [33]. Currently, it could result in the impossibility of sustainable ecosystem exploitation due to the fragmentation of reindeer runs and pastures and environmental pollution, and consequently, disrupt the existing lifestyle indigenous population. The researchers also note violations of the Russian Federation legislation on specially protected natural areas when issuance of licenses areas for the search, exploration, and development of hydrocarbon [34].

As for political risks, as a rule, they always result in direct cost damage associated with the financial and reputational components for both the energy companies and the government. Currently, political risks have been increasing, since there are geopolitical concerns and a growing shortage of energy resources [35]. The uncertainty of borders, the Arctic and near-Arctic countries’ claims, as well as existing and potential sanctions also add political strain. The continental shelf of the Arctic Ocean and adjacent seas are claimed by Canada, Denmark (Greenland Island), Iceland, Norway, Russia, and the United States (Alaska). In addition, at least twenty countries, most of which do not have direct access to the Arctic Ocean, want to share the natural resources of the Arctic region.

Recently, China has been actively defending its interests in the Arctic. Taking into account the current geopolitical situation, the relationship between China and the Russian Federation in the context of economic activity in the Arctic territories is becoming rather relevant.

Thereafter the main parameter (a parameter is like any other characteristic that helps to identify and classify a system) of the identified environmental hazards which we use to describe is any economic activity for the extraction of energy resources to meet energy demand (

Table 3. Types of economic activities affecting the environment in the Arctic region *.

Environmental Hazard Parameter	Type of Economic Activity Affecting the Environment of the Arctic Region (i = 1,2,3)
Values of the environmental hazard parameter through which it affects the Arctic environment	The type of economic activity is production and exploration i = 1	The type of economic activity is the processing of energy resources (LNG) i = 2	The type of economic activity is the transportation of energy resources i = 3

Source: Compiled by the authors. * The types of economic activity in the Arctic are defined on the priority interests in the Arctic for China and the Russian Federation (see part of the interests of China and the Russian Federation in the Arctic region). Under the transportation of energy resources, we mean maritime shipping (LNG tankers transporting) and pipeline transport under the ice period.

).

In the situation of the environmental impact from the economic activity, we are interested in its impact through the types of economic activities i = 1,2,3 (see Table 3) used in the extraction of energy resources in the Arctic to meet the energy demand of China. In general, such an impact can be dual– with positive consequences, accompanied by obtaining energy resources for the development of China’s economy without environmental damage, and with negative consequences, which can lead to environmental degradation of the Arctic territory.

If we are talking about the negative consequences of economic activity in the Arctic, then it may or may not occur. Thus, the economic impact may be different. The duality of the negative consequences (the presence or absence of damage) can be described by the risk (R_i) of negative impact from the type of economic activity affecting the environment of the Arctic region (i = 1,2,3). The risk of negative impact from the processes of economic activity in the Arctic R_i could be described as a function of two variables Q_i as the probability of occurrence of the i-th negative consequence and DA_i—the damage amount resulting from the implementation of the i-th negative impact.

Thus, we can present the risk of negative impact as follows:

Ri = f (Qi; DAi), (i = 1,2…. n)

(1)

where:

R_i—risk of negative impact from economic activities in the Arctic.

Q_i—is the probability of occurrence of the i-th negative consequence.

DA_i—the Damage Amount resulting from the implementation of the i-th negative impact.

Such a presentation of the risks of the economic activity’s negative impact in the Arctic zone can be used for a probabilistic assessment of possible damage (based on our particular definition of environmental risk and the identified main parameter of the environmental hazards—any economic activity in the Arctic region for the extraction of energy resources to meet the demand for energy in China/Russia).

Probabilistic assessment of possible damage in the conduct of economic activities in the Arctic could be as follows:

P_DAi = qi x _DAi, (i = 1, 2….n),

(2)

where:

P_DAi—is the Probability of damage resulting from the implementation of the i-th negative impact.

qi—probability of occurrence for the i-th negative consequence.

DA_i—the damage amount resulting from the implementation of the i-th negative impact.

The solution for reducing the negative impact of economic activity in the Arctic by reducing the risks of negative impact on the Arctic environment on the parameters of man-made (anthropogenic) impact requires clarifying those parameters of the considered economic activity on which the choice of economic activity can have an impact.

The presented theoretical formula can be used in empirical studies after the construction of a prioritized list of environmental risks and obtaining primary quantitative information about their impact (in the following part of the research).

Thus, we have come to the need to build an algorithm for identifying the risks of a negative impact and compiling their prioritized list from the main parameter of environmental hazard—“type of economic activity”.

Step 2. Identification of the premises and factors for the occurrence of environmental hazards from the main parameter—the type of economic activity—in the Arctic regions in the context of the two largest players in the Arctic region—the Russian Federation and the People’s Republic of China.

In this part, we present schematically the logic of identifying the risks of negative impact on the Arctic environment from the main parameter of environmental hazard “type of economic activity” (the construction of a prioritized list of risks is planned for the next stage of the research). In this paper, we consider the scheme limited to the stage of risk identification (dark blue color). The process of prioritizing the identification of identified risks will be considered in the authors’ next study (Figure 1). At this stage, we identify the main premises and the factors (causes) of the environmental hazards in the Arctic region in the context of the two largest players—the Russian Federation and the People’s Republic of China.

The increased interest in the Arctic region and the emergence of environmental hazards is due to:

(1)

The presence of the largest resource base in the Arctic region (reserves of oil, gas, and condensate);

(2)

The ever-increasing needs of society and the economy (primarily China) for energy resources;

(3)

Current trends in the development of society and the economy, which make it possible to simplify access to energy resources in high latitudes;

Science and Technology progress and digitalization, the emergence of more technologically advanced/unmanned technology/safety ways of exploration and production of energy resources, which makes it possible to reduce the cost of production of energy resources in high latitudes;

(4)

Targeting the economic and political agenda of Russia and China within the framework of strategic plans for the development of the Arctic territory.

Premise (1). The largest reserves. Availability of oil, gas, and condensate.

Currently, not only the Arctic but also the so-called Arctic states, including China, are interested in the development of the Arctic. In general, the area of the Arctic Ocean is more than 12 million square kilometers, of which about 8 million square kilometers belong to the sovereign territory of Norway, Russia, Canada, Denmark, Finland, Iceland, Sweden, and the United States. The jurisdiction of the Arctic states includes internal waters, territorial seas, adjacent and exclusive economic zones, as well as the continental shelves of the Arctic Ocean. At the same time, there are areas in the Arctic Ocean that belong to the open sea and the Special Zone. In these zones, in accordance with special provisions, such as the UN Convention on the Law of the Sea and general international law, the Arctic states that do not have territorial sovereignty carry out scientific research, lay navigational sea and air routes, underwater cables and pipelines, fishing vessels are mining, and mining companies [36]. The signing of the Svalbard Treaty provides similar advantages to the Arctic countries.

The resource base of the Arctic region (in the jurisdiction of the Russian Federation) is really large. According to the Federal Agency for Subsoil Use and the Energy Center of the Moscow School of Management “Skolkovo”, oil, gas, and condensate reserves located in the Arctic zone of the Russian Federation, including the offshore region, domestic companies that have licenses and develop hydrocarbon fields, as well as existing and promising projects in the region account for more than 20% of all oil and gas reserves of the Russian Federation (

Table 4. (a) Data on hydrocarbon reserves (oil, gas, and condensate) in the AZRF current. (b) Prospective projects for development in the Arctic region.

(a)
Hydrocarbon Reserves in the Arctic Zone	Arctic Shelf
282 fields with an oil component with technological recoverable oil reserves cat. A + B1 + C1 —3879.5 mln tons (20.8% of reserves in RF), cat. B2 + C2 — 4 201.4 mln tons. 157 fields with drilled technological recoverable condensate reserves cat. A + B1 + C1 —1352.2 mln tons. —58.0% of reserves in RF. Undurbed recoverable reserves (estimated) cat. B2 + C2 — 1303.0 mln tons the leading place in terms of reserves and production of condensate, both in the AZRF and in the whole of RF, is occupied by the Yamalo-Nenets Autonomous District (124 fields). 204 fields with technological recoverable reserves of free gas cat. A + B1 + C1 —37 417.5 bln m3 — 76.3% of reserves in RF, cat. B2 + C2 – 16 898.3 bln m3. Recoverable reserves of dissolved gas are recorded at 264 fields of the AZRF, total cat. A + B1 + C1 —390.7 bln m3 — 25.2% of reserves in RF, cat. B2 + C2 — 645.7 bln m3; production amounted to — 9.2 bln m3 — 1.3% of production in RF (data include adjacent water areas).	On the shelf of the Barents Sea, the Kara Sea and the Laptev Sea, the State Balance of Reserves takes into account 8 oil fields, the reserves of A + B1 + C1 amount to 118.3 mln tons (3.0% of the reserves as a whole in the AZRF). 13 fields with drilled technological recoverable condensate reserves cat. A + B1 + C1—74.4 mln tons. — 5.5% of the reserves in the AZRF. Undressed recoverable reserves (estimated) cat. B2 + C2 – 1303.0 mln tons. 21 fields with technological recoverable reserves of free gas cat. A + B1 + C1 — 8337.895 billionm3 (22.3% of the reserves of the AZRF and 17.0% of the reserves of RF), cat. B2 + C2 — 3815.862 bln m3, including 7 deposits on the shelf of the Barents Sea, all explored, with reserves of cat. A + B1 + C1 — 4 231.2, cat. B2 + C2 — 608.9 bln m3, on the shelf of the Kara Sea — 14 fields, 3 developed and 11 explored, with reserves of 4106.7 and 3206.9 bln m3, respectively.
(b)
Energy Companies with Licenses	Current and Prospective Projects
Shelf of the Barents and Pechora Seas: Gazprom Neft Shelf LLC, Arctichelfneftegaz CJSC, Rosneft Oil Company PJSC.	Prirazlomnoye project (Gazprom Neft Shelf LLC, Rosneft, Arktikshelfneftegaz CJSC); Varandey-Sea project (Rosneft, Arcticshelfneftegaz); Varandey terminal (LLC LUKOIL-Komi).
Shelf of the Kara Sea: Rosneft, LUKOIL-Western Siberia LLC, Arctic LNG 2 LLC.	Yamal mega project (Gazprom PJSC); Kruzenshternsky Project (Gazprom Dobycha Nadym LLC); Yamal LNG project (PJSC NOVATEK); Arctic LNG-2 Project (PJSC NOVATEK); Ob MCC project (PJSC NOVATEK); Arctic cluster (Rosneft).
Shelf of the Laptev Sea, the East Siberian Sea and the Chukchi Sea: Rosneft.	Vostok Oil Project (Rosneft). Yakut LNG project (YATEC and GlobalTEK as part of A-Property).

Compiled by the authors on basis of: [37,38] information on the state and prospects for the use of the mineral resource base of the Arctic zone of the Russian Federation on 15.03.2021. No. 049-00016-21-00. Access mode: https://www.rosnedra.gov.ru/data/Fast/Files/202104/45bb8bcc7b844220954744c0149a86f4.pdf; Markov B., Buranbaeva L., Rodichkin I., Tkachenko M., Sabiryanova L., Ishmuratova M., Suldin A., Sun D. Activities of large oil and gas companies in the Arctic zone of Russia. Volume 2. M.: Energy Center of the Moscow School of Management “Skolkovo”, 2020. 56.

a,b).

The Arctic part of the Timan–Pechora oil and gas province (the coast of the Pechora Sea) and the northeast of the East Siberian mega province (the coast of the Laptev Sea) are mainly oil-bearing. “The initial potential gas resources of the Russian Arctic, according to official estimates, exceed 150 trillion m³ (initial explored reserves—20.1 trillion m³), oil—20.4 (1.6) billion tons (extracted). At the same time, corporate and author’s estimates of gas resources and, especially, oil, as a rule, are lower” [39]. Experts note that “the subsoil of most CEA basins, especially offshore or land/sea type, is more prone to gas accumulation than to oil accumulation».” Therefore, there is a pattern characteristic of all countries, which is that the fields located closer to the sea are gas, not oil.

Premise (2). The ever-increasing needs of China’s society and economy for energy resources, even taking into account the scenarios of reducing the consumption of fossil energy and the global energy transition.

The need for energy resources and the structure of energy consumption depends hugely on the long-term demographic trends, respectively, the volumes of production and consumption.

According to the latest UN forecasts [40], by 2050 the world’s population will grow up to 9.7 billion people. The world’s population will peak by 2080 and by 2100 the population will remain at that level. China (with 1.4 billion inhabitants) and India (1.3 billion inhabitants) remain the two most populous countries, accounting for 19 and 18% of the world’s total population. The overall growth in Final Energy Consumption in China in 2020 and the forecast for 2025, 2030, 2035 and 2050. In 2050, China’s total final energy consumption is projected to be approximately 3091 million tons.

China is still in the mode of lack for energy resources, while declaring in the international arena a commitment to achieving the goals of carbon neutrality by 2060. As some researchers showed on the basis of mathematical modeling, the possibility of achieving the goals of the Paris Agreement exists. However, along with the accelerated spread of renewable energy sources, in order to create a stable and sustainable energy system of the future, it is necessary to simultaneously develop nuclear energy as a low-carbon source of generation of basic electricity. Only a symbiosis of renewable energy sources and nuclear power plants with the latest generation of low- and medium-sized nuclear reactors with a high degree of safety will make it possible to replace fossil fuels and solve the problem of climate issues without compromising economic development [41].

More than 70% of China’s energy mix today is coal and oil. The need for a more environmentally friendly energy source to achieve ambitious goals is obvious. Currently, the most acceptable option is gas (in the form of LNG) from the Arctic.

As it is shown on the basis of AI simulations by Cui, X. [42] in the long-term future total energy consumption in China will grow smoothly until 2060. The same conclusion was reached in the short term by Chinese researchers [43] using the support vector regression model (SVR) methods and Markov Chain (MC). At the current rate of energy consumption, China’s total energy consumption will exceed six billion in the next 4 years. As the world’s largest energy consumer, China’s major supply–demand imbalance will have a significant impact on global energy markets. The increase in China’s energy consumption in the short- and medium-term will seriously affect its political and economic position in the Arctic, as the largest source of the most environmentally friendly energy resource among fossil fuels—gas. This will largely determine the future trade and investment plans of the government and the Communist Party to ensure China’s energy security.

Premise (3). Current trends in the development of society and the economy, allow for simplified access to energy resources in high latitudes.

Science and technology progress and digitalization, the emergence of more technologically advanced/unmanned technology/safety ways of exploration and production of energy resources, makes it possible to reduce the cost of production of energy resources in high latitudes. Therefore, more and more countries are getting ready to invest in R&D to search for new technologies for the extraction of Arctic energy resources. Science and technology progress has led to the emergence of the Internet, and widespread digitalization has become a major breakthrough technology that can radically change the attitude towards Arctic reserves of natural resources. The first is the development of unmanned mining technologies and the development of digital twins. Secondly, digitalization and optimization of energy transportation along the Northern Sea Route. Not surprisingly, the main developers and beneficiaries here are Russian energy giants. Russian energy companies operating in the Arctic zone are now paying increased attention to the development of information technology and digitalization [44]. However, a more detailed analysis shows that nearly all the projects of digitalization are mainly at the initial stage of implementation and are generally only planned. In this respect, Chinese companies are ahead [45].

Sanctions on the Russian Federation and China. It remains questionable how much China is willing to risk its economic ties with Europe and the United States, especially at a time when China is struggling with a slowing economy at home and facing an internationally more united West that has demonstrated its determination to impose significant spending. «China may see the need to proceed with extreme caution. Indeed, the decision by China’s state-owned company Sinopec of the project’s suspension in Russia suggests that Beijing is listening to Washington’s warning, despite the fact that the Foreign Ministry insists that China has the “right to carry out normal economic and trade exchanges” with other countries. As China’s National Petroleum Corporation and China National Offshore Oil Corporation also reportedly assess the potential impact of sanctions, Beijing may be watching other international investors who have not yet decided to exit or postpone their projects in Russia, including India’s state-owned energy company Oil and Natural Gas Corp and Japanese investors in liquefied natural gas projects on Sakhalin and Arctic LNG 2».

Notwithstanding, prospective energy projects [46], including carbon-free energy, as well as projects for the joint development of the Northern Sea Route and related coastal infrastructure remain promising. According to the Chairman of the Committee of Senior Arctic Officials (PRC), scientific cooperation between the two countries in the Arctic also has great potential. For Chinese investments under the Belt and Road Initiative, it is crucial to protect the vulnerable environment and ensure the sustainability of Arctic projects [47,48].

Premise (4). Targeting the economic and political agenda of Russia and China within the framework of strategic plans for the development of the Arctic territory.

China’s political goals in the Arctic region are: “to understand, protect, develop and participate in the Arctic governance system in order to safeguard the common interests of all countries and the international community in the Arctic and to promote the sustainable development of the Arctic.” [49].

Russia’s major goals in its Arctic policy are: “the use of the natural resources of the Arctic, the protection of its ecosystems, the use of the seas as a transport system in the interests of Russia and ensuring its preservation in the zone of peace and cooperation”.

The most acute risk for national security and the environment in the document is considered the risk of intensive climate warming in the Arctic, which is occurring 2–2.5 times faster than on the planet as a whole [50]. (

Table 5. (a) The national interests of China in the Arctic region. (b) The national interests of the Russian Federation in the Arctic region.

(a)
Political Goal	Implementation
Understanding	China will improve its capacity and capabilities of scientific research in the Arctic, strive for a deeper understanding and knowledge of Arctic science, and explore the natural laws behind its modification and development in order to create an enabling environment for humanity to better protect, develop, and manage the Arctic.
Protection	China will actively respond to climate change in the Arctic, protect its unique natural environment and ecological system, promote its own climate, ecological and ecological sustainability, and respect its diverse social culture and historical traditions of indigenous peoples.
Development population and strive for common development.	To build capacity and capacity in the use of applied Arctic technologies, strengthen technological innovation, environmental protection, resource use, and development of shipping lanes in the Arctic, as well as contribute to the economic and social development of the Arctic, and improve the living conditions of the locals.
Participation	China will participate in the regulation and management of affairs and activities related to the Arctic, based on rules and mechanisms.
(b)
Political Goal	Implementation
Preservation in the zone of peace and cooperation	Ensuring the sovereignty and territorial integrity of the Russian Federation.
	Ensuring a high quality of life and well-being of the population of the Arctic zone of the Russian Federation.
The protection of its ecosystems	Preservation of the Arctic as a territory of peace, stable and mutually beneficial partnership.
	Environmental protection of the Arctic region, preservation of the native habitat and traditional way of life of indigenous peoples, the Arctic zone.
The use of the natural resources of the Arctic	Rational development of reserves and resources of deposits in the Arctic zone of the Russian Federation in order to increase the pace of economic growth of the country.
The use of the seas as a transport system in the interests of Russia	Development of the Northern Sea Route as a «transport highway» for domestic and international traffic.

Compiled by: Fundamentals of the state policy of the Russian Federation in the Arctic for the period up to 2035 http://www.scrf.gov.ru/security/economic/Arctic2035 (accessed on 12 December 2022); Arctic policy of China Information Bureau of the State Council of the People’s Republic of China January 2018. First edition 2018 https://www.northernforum.org/ru/news-ru/358-china-s-arctic-policy-2 https://english.www.gov.cn/archive/white_paper/2018/01/26/content_281476026660336.html (accessed on 12 December 2022).

a,b).

As for the zones of functional jurisdiction [51] the continental shelf, and the exclusive economic zone, specific issues arise regarding the international legal status of the Arctic maritime spaces. The high latitude, exceptionally harsh climatic conditions, and a continuous ice mass that covers most of the Arctic Ocean for almost the entire year raise the issues of environmental safety for the Arctic states, as well as ensuring military security [52].

Common points of contact between China and Russia are the transportation routes development. «Climate change in the Arctic has a direct impact on the environment and climate of China, therefore, affects its economic interests in vital industrial sectors—agriculture, forestry, fishing, marine industry». The sea routes, exploration, and development of resources in the Arctic can have a huge impact on the energy strategy and economic development of China, which is the world’s leading producer and energy consumer. China offers cooperation within the framework of “The One Belt—One Road” initiative, “The Arctic Silk Road” for the economic and social development of the region. China is investing in infrastructure projects in Iceland and Greenland. Yet the closest of China’s Arctic partners remains Russia. Most notably, as an important source of energy and other mineral resources, and as the shortest trade route to the EU regional market.

Wang Juntao notes that “Russia has certain concerns about the actual lack of environmental standards in China in the field of resource extraction, which is absolutely unacceptable in relation to the fragile and unique Arctic ecosystem” [53]. Thus, a possible source of environmental hazards in the analysis of the interests of China and the Russian Federation in the Arctic is the diversity of their national interests.

The studied premises form exactly those factors that affect the interest in conducting economic activities in the Arctic, due to which the exposure of the object (environment) to danger arises.

STEP 3. Factors of environmental hazards in the Arctic region in the context of the two largest players in the Arctic region—the Russian Federation and the People’s Republic of China.

Based on the premises identified above, we can detect the main factors of environmental hazards in the Arctic region:

Factor (1). Competition for resources. China has asserted itself as a near-Arctic state and as an Arctic stakeholder;

Factor (2). The recent and planned expansion of the world’s largest energy companies in the Arctic, despite the green agenda;

Factor (3). Creating a portfolio of joint investment projects and agreements, in view of huge transformational possibilities.

Let us consider the above factors in more detail.

Factor (1). Competition for resources. China has asserted itself as a near-Arctic state and as an Arctic stakeholder.

In addition to the six Arctic countries, at least twenty countries, which include China, Japan, Great Britain, and Finland, pursuing their direct or indirect strategic interests, claim control in the Arctic [34].

Currently, China’s activities in the Arctic cover various areas of Arctic problems, considering the possibilities of both global and regional governance within the framework of bilateral and multilateral relations. China raises issues in the field of environmental research, climate change, as well as economic development, and cultural exchanges. In general, China has played a constructive role in the development of international rules concerning the Arctic and the development of its management system. The cooperation initiatives put forward by China—the Silk Road Economic Belt and the 21st Century Maritime Silk Road (The Belt and Road Initiative)—are aimed at creating a route of the Polar Silk Road, largely contributing to the sustainable economic and social development of the Arctic.

While climate change research contributes to China’s legitimacy in the Arctic, there are aspects of its strategy that run counter to expressed environmental concerns. The 2018 strategy details China’s interest in developing Arctic tourism, but the increase in transportation, marine fuel, and pollution in the Arctic region does not bode well for environmental interests. In addition, the increased likelihood of marine accidents, including fuel spills, calls into question the sincerity of Beijing’s environmental policy.

It remains indisputable that China would prefer to independently extract the resources of the Arctic basin and use the opportunity of transportation along the NSR without icebreaker escort from the Russian Federation. Back in 2010, the Stockholm International Peace Research Institute (SIPRI) drew attention to that fact in its report “China is preparing for an ice-free Arctic”. This is despite the fact that they do not have not only experience in marine Arctic work but also experience in ordinary life in the Arctic zone. However, China is positioning itself as an experienced Arctic state with a long history and connection to the Arctic (

Table 6. The history of China’s presence in the Arctic begins in the first quarter of the XX century.

Period	Characteristics of China’s Participation in Arctic Exploration
1925	Accession to the Svalbard Treaty now Svalbard
1996	Participation in the International Arctic Science Committee
1999	The organization of research expeditions to the Arctic region of the platform is the research vessel Xue Long (Snow Dragon)
2004	The Arctic station “Yellow River” in Novy Ålesund on the Svalbard archipelago begins to function
2013	In 2013, China became an accredited observer in the Arctic Council
2013-present	Implementation of the Belt and Road Initiative

Source: Compiled by the authors.

).

In light of new geopolitical challenges, China is trying to find a compromise to shorten its trade routes and avoid disputed sea lane passages such as the Strait of Malacca, while maintaining energy sufficiency. On the other hand, economic sanctions encourage Russia to strengthen its ties with the PRC. The establishment of the Northern Sea Route from the Bering Strait to the Barents Sea could be a win-win strategy for both countries, as it would generate revenues for Russia and save resources for China. In addition, it can also serve strategic purposes against the backdrop of Sino-American and Russian–American rivalries.

As we can see, the goals of the Arctic policy of the two states are different. If China needs to note and establish that it is precisely the Arctic state, which can use the Arctic resource potential on an equal footing with other countries, the Russian Federation is focused on using the resources of its northern territories.

Factor (2). The recent and planned expansion of the world’s largest energy companies in the Arctic, despite the green agenda.

Factor 2 is of much importance, since the attention to the largest Arctic oil and gas reserves will not weaken in the coming decades, despite the new energy transition agenda and the desire to achieve almost zero or zero CO₂ emissions and the active introduction of technologies for obtaining electricity from renewable energy sources. Still, the main and reliable energy source remains fossil fuels. Most of the largest energy companies in the world are working out the green agenda, their reports show energy transition strategies, but they do not abandon the traditional business lines. Recently, Chinese energy companies have begun exploring commercial opportunities related to Arctic shipping routes.

We have conducted the empirical study of 23 of the world’s leading energy companies’ activities, and analyzed more than 400 sources on the Internet (press releases of companies, information from official websites of companies, developed and implemented strategic initiatives, as well as annual reports, reports in the field of sustainable development, integrated reports) including the three largest Chinese companies—CNPC, CNOOC, Sinopec in the first half of 2022. Results have shown that due to the realization of geopolitical risks and volatile energy resource prices, energy companies around the world have intensified their efforts to develop traditional business lines related to oil and gas production. This is a consequence of both the extremely high energy prices and the political will: the main goal is to find a replacement for suppliers of energy resources, as well as the development of its own raw material and product base. The activity of energy companies is most notable in the following areas:

• Acquisition of oil and gas assets;
• Start of production and development of oil and gas fields;
• Obtaining licenses to start the development of fossil fuel deposits;
• Revaluation of reserves and discovery of new deposits.

Since 2014, the development of hydrocarbon deposits on the shelf of the Russian Arctic has been hampered due to Western sanctions regarding the ban on the provision of services, export, and re-export of equipment and technologies necessary for deep-sea oil and gas production on the Arctic shelf. Since 2016, the issuance of new licenses for offshore fields has been suspended due to the introduction of a moratorium by the Russian government. At the moment, only Gazprom and Rosneft can develop Arctic offshore fields. In order to preserve the ecological environment, a mandatory state environmental impact assessment was introduced in 2020 in projects for drilling wells in this region. Due to the difficult geopolitical situation, consultations within the Arctic Council on the part of the Russian Federation have been suspended since March 2022 [54,55].

Factor (3). Creating a portfolio of joint investment projects and agreements, in view of huge transformational possibilities.

Joint LNG projects are a cornerstone of Sino-Russian cooperation in the Arctic. In 2021, a Chinese communications construction company won a contract to build one more LNG terminal on the Kamchatka Peninsula in Russia. All this contributes to an increase in energy transport from Russia to Asia. The original idea of the Polar Silk Road is focused on the Northern Sea Passage, which can reduce the cost and time of energy delivery. Currently, Russia pays great attention to the infrastructural development of the Arctic region, and this is a promising opportunity for China. The Russian Federation encourages businesses and individuals to move to the Arctic region to accelerate economic growth in the region. This will greatly benefit China’s Polar Silk Road.

The top three investment projects of China in the Russian Federation in 2019 were the projects related to the development of the energy potential of the Arctic Region of RF:

1. Yamal LNG is the largest investment project in Russia over the past 5 years, actively implemented with the participation of Chinese companies. CNPC owns 20% of the shares, and the Silk Road Fund—9.9% in the project. The condition for entering the project was to raise financing, which was provided by a syndicate of Chinese banks, headed by the State Development Bank of China. The total investment amounted to about USD 20 billion. The deal was closed in 2014–2015.

2. SIBUR-Sinopec. SIBUR is Russia’s largest petrochemical company implementing a number of major investment projects in the downstream industry. In 2015 Sinopec bought 10% of the holding for USD 1.338 billion. In 2016, the Silk Road Fund also bought 10% of SIBUR for about USD 1.5 billion. Sinopec and the Silk Road Fund raised most of the financing from Chinese banks for the USD 9.5 billion project. Sinopec also participated in other SIBUR projects, for example, in 2013 they bought a 25% + 1 share of the Krasnoyarsk Synthetic Rubber Plant, most of whose products are sold on the Chinese market.

3. Arctic LNG-2 is a project of Novatek for the production of liquefied natural gas (LNG) on the Gydan Peninsula. A total of 10% stakes in the project were acquired by Chinese CNOOC and CNODC (CNPC subsidiaries). The cost of transactions was not specified, but according to expert estimates, it was about USD 25 billion. The entry of two Chinese companies into the project increased the chances of its timely implementation. In November, 2022, the chairman of the board of directors of China National Petroleum Corporation Construction said that the new gas pipeline in Russia’s Far East, as well as the implementation of the Arctic LNG 2 project need to be accelerated to guarantee the security of supplies.

The Arctic is a base for cooperation. In addition to cooperating on projects on the Yamal Peninsula, China is also the largest investor in the Power of Siberian Pipeline, a USD 55 billion project that is the largest gas project in the history of post-Soviet Russia. Therefore, it is quite clear that the largest Chinese energy company PetroChina, which is actually owned by the state-owned company CNPC, along with the development of renewable energy sources, the promotion of CCUS, so actively promotes gas as a transitional element of energy transition (

Table 7. PetroChina’s low-carbon development plans.

2030s	2050s
By 2030, continue to increase the supply of natural gas and other clean energy. Ensure that the share of the company’s domestic natural gas production, as well as the share of renewable energy production in total domestic primary energy production, grows.	By 2050, the share of gas production in the domestic market, as well as the share of energy produced from renewable sources in domestic primary energy production, will continue to grow.

Compiled by the authors: [56]. PetroChina Environmental, Social and Governance Report, http://www.petrochina.com.cn/ptr/xhtml/images/2020kcxfzbgen.pdf (accessed on 20 December 2022).

).

Undoubtedly, PetroChina’s strategic plans are consistent with China’s state policy. According to the international agency Reuters, despite the current geopolitical situation, Russia became the main supplier of oil to China in August and September 2022, China preferred to import more Russian oil at reduced prices, reducing more expensive supplies from Saudi Arabia. For the first half of 2022, Chinese oil imports from Russia increased by 55% (May) and 10% (June), respectively, compared to 2021, according to data from the General Administration of Customs of China. According to Wood Mackenzie, gas will have to play a crucial role in the decarbonization of PetroChina. In PetroChina’s production structure, oil production is declining at the highest rate, from 57% in 2020 to about 25% by 2035. Until 2035 gas production as a whole will not change, which will help limit GHG emissions. If the company can increase gas production at the expense of oil, then the goal of achieving zero GHG indicators looks quite justified. In 2020. PetroChina produced 4221 billion feet3 of commercial natural gas, up 8% from 2019. Of these, 3993.8 billion feet3 of natural gas was produced in the domestic market, which is 9.9% more than in 2019, such an increase indicates the company’s significant progress towards a green and low-carbon transformation of the company. We can see that Chinese companies are focused on Russian high-latitude gas, considering it as an excellent alternative to the transition period during the energy transition pathway.

Thus, in order to identify the sources of environmental hazard, we considered the premises and factors (the creation of sustainable interest in the Arctic territories) on the part of China and the Russian Federation. At the next stage, we will consider the criteria for identifying risks based on the identified prerequisites.

Step 4. Criteria for risk identification based on the prerequisites.

Premises and factors form prerequisites, on the basis of which criteria are selected and risks are identified (

Table 8. Premises and factors.

Premises		Factors
(1) The largest reserves. Availability of oil, gas, and condensate		Factor (1). Competition for resources. China has asserted itself as a near-Arctic state and as an Arctic stakeholder
(2) The ever-increasing needs of China’s society and economy for energy resources		Factor (2). The recent and planned expansion of the world’s largest energy companies in the Arctic, despite the green agenda
(3) Current trends in the development of society and the economy, allowing us to simplify access to energy resources in high latitudes		Factor (3). Creating a portfolio of joint investment projects and agreements, in view of huge transformational possibilities
(4) Targeting the economic and political agenda by Russia and China within the framework of strategic plans for the development of the Arctic territory

Source: Compiled by the authors.

).

Based on the results obtained, we form a set of sequential steps, a scheme of actions leading to the desired result, that is, an identification algorithm of environmental risks.

Criteria –problem statement for risk selection based on the prerequisites (

Table 9. An algorithm for identification of environmental risks in the system of Sino-Russian relations in the development of the Arctic shelf.

Stage	Problem Statement	Description	Risks Identification	Possible Impact of Risks
Factor (1)	Lack of channels for obtaining primary data on Arctic ecosystems.	Large reserves and projected growth in energy consumption attract the attention of China’s energy giants. Yet weak scientific argumentation and lack of necessary statistical data on changes in biological species, the state of the environment, damage caused by accidents of natural and anthropogenic impact is a major threat. Financing of research on the Arctic ecosystem by China and the Russian Federation.	Risk of incorrect decision-making based on insufficient information.	-Economic loss. -Environmental damage. -Health and safety violations with consequences for personnel.
	Lack of scientific knowledge and experience in the Arctic territories.	Haphazard and incorrect use of sea lanes, as well as the exploration and development of natural resources in the Arctic. Infrastructure development Funding R&D (environmental studies, constructions suitable for the extreme temperatures).	Risks of accidents and malfunction. Risks of the natural balance disruption (water, air, and land) in Arctic ecosystems.	-Defects in critical infrastructure due to technical errors, use of inappropriate materials or work in severe weather conditions. -Environmental pollution (oil spills, fires). -Ice melting and altering the aquatic ecosystem deterioration. -Increasing shipping traffic. -Increase in production volumes and project participants due to reduced ice load.
Factor (2)	New level of access to significant resources at high-latitude areas with advances in computing technology, nanotechnologies, etc. [57]	Technological solutions make it possible to develop economic activities in the region, which can lead to a number of consequences.	Risks of dependence on imported technological solutions for RF. Risks of undertested technologies. Refining the technological solutions already at the asset exploitation stage in the Arctic.	-Loss of competitiveness (as a Chinese energy market supplier). -High probability of potential accidents and malfunction due to untested solutions affecting the Arctic ecosystem.
Factor (3)	Accumulated environmental damage during the soviet period of Arctic Development. China’s Active Actions as a near Arctic state for empowerment in the Arctic.	Lack of clear boundaries, criteria for stability, adaptability of Arctic nature as a single ecosystem. RF actions are in need to form a legislative framework and clearly delineate the responsibility of subsoil users, as well as measures to minimize accumulated damage.	Risks of an acute deterioration in the environmental situation due to accumulated damage. The risk of uncontrolled use of sea routes. Risks of insufficient liability for damage to nature.	-Environmental deterioration. -Local tensions with indigenous people. -The emergence of tension between countries. -Further damage accumulation.
	Different understanding of the region role by the Arctic and near Arctic countries.	China—The Arctic is in the public domain. Russia—The Arctic as a Source of National Energy Security.	Political risks. Risks of conflict of interest.	-Direct cost damage associated with the financial and reputational damage of both subsoil user companies and states.

Source: Compiled by the authors.

).

The risks identified in the baseline study predict the possible impact of the risk that we described in the table. To further study the impact of risks, it is not necessary to focus on the quantification of risk information. It should be noted that the methodologies currently in use to assess damage from adverse effects on the components of the environment having the legal status necessary for practical application cover only part of the environmental components. For the Arctic region, the risk structure must be reviewed, expanded, and carefully calibrated, as the Arctic plays an important role in shaping and changing the planet’s climate.

4. Discussion

From the perspective, along with the LNG marine transportation, a major volume of gas produced in the Arctic is planned to be supplied within the project «Power of Siberia-2» through the territory of Mongolia in the PRC. The agreement between China and Russia was signed back in May 2015 [58]. The projected capacity of the Power of Siberia-2 is about 50 billion m³ per year. Since December 2021 it has become known that the RF and Mongolia are moving to the designing phase of a gas pipeline to China. Definitely, the project implementation requires significant investment, the technological capacities and there are new challenges from 2022, but in the medium term, some chances exist to deliver the project.

Until recently, LNG processing capacities in the Russian Arctic were limited to supplies from the Sakhalin-2 plant, and therefore, the share of the RF in the LNG market in 2016–2018 was no more the 4.0–5.8%, mainly towards the countries of the Asia-Pacific region. At the moment, there are certainly competitive advantages in the implementation of LNG projects in the Yamalo-Nenets Autonomous Okrug in the RF. Firstly, these are shorter transportation routes to the main Asian market. Secondly, in winter, when energy demand reaches its maximum, the costs for natural gas liquefaction in the Yamalo-Nenets Autonomous District are 10–15% lower than, for example, in Qatar (due to low temperatures in the RF). It is also very encouraging the RF has established a zero-export duty for LNG supplies, to stimulate the implementation of projects for the construction of LNG plants. In recent years, Russia has sought to significantly increase its LNG production capacity and expand the geography of its supplies on the world market, and therefore, the share of the Russian Federation in the liquefied natural gas (LNG) market in 2020 was already 8.3%.

Today, two large LNG plants are operating in Russia—Sakhalin-2 (production volume—11.6 million tons of LNG in 2020), owned by Gazprom PJSC, and NOVATEK’s Yamal LNG (project capacity—17.5 million tons). Actually, when the external environment in the Arctic gas supply is changing rapidly, there is anxiety about environmental issues as main competitors (and ex-partners) with high environmental safety standards are winding down their businesses because of miscellaneous reasons.

An integrated approach to the development of the Arctic business involves the formation of a mechanism for the safe supply of Russian gas to the new regional markets, for which the construction of trunk pipelines is economically unprofitable or simply impossible due to their geographical location. In fact, the development of the Arctic territories should be comprehensive and environmentally friendly in order to effectively develop Russia’s hydrocarbon reserves, correctly locate the necessary infrastructure facilities in a fragile Arctic territory, and develop nearby territories, as well as a well thought out logistics chain.

5. Conclusions

The purpose of our study is to build an algorithm for identifying environmental hazards and related risks in the context of two major players’ interests: the Russian Federation as an Arctic state with the longest territory in the Arctic, which has huge reserves of fossil resources, and China, positioning itself as a near-Arctic state with the ensuing goals and objectives.

This paper provides important contributions to the existing literature. First, we conducted environmental hazards classification in the development of the Arctic shelf then we defined the main parameter of the identified environmental hazards—any economic activity for the extraction of energy resources to meet energy demand.

Next, we identified the premises and the factors for the occurrence of anthropogenic environmental hazards from the main parameter—the type of economic activity.

The premises of environmental hazards are:

(1)

The presence of the largest resource base in the Arctic region (reserves of oil, gas, and condensate);

(2)

The ever-increasing needs of China’s society and economy for energy resources;

(3)

Current trends in the development of society and the economy, allowing simplified access to energy resources in high latitudes;

(4)

Targeting the economic and political agenda of Russia and China within the framework of strategic plans for the development of the Arctic territory.

The studied premises form the factors that affect the interest in conducting economic activities in the Arctic, due to which the exposure of the object (environment) to danger arises.

Identified factors:

Factor (1). Competition for resources. China has asserted itself as a near-Arctic state and as an Arctic stakeholder;

Factor (2). The recent and planned expansion of the world’s largest energy companies in the Arctic, despite the green agenda;

Factor (3). Creating a portfolio of joint investment projects and agreements, in view of huge transformational possibilities.

Based on the results obtained, we have formed a set of sequential steps, a scheme of actions leading to the desired result, that is, an identification algorithm of environmental risks. Those allowed us to create a list of environmental hazards and risks within the scope of China and Russia’s interests in the Arctic region:

• Risk of incorrect decision-making based on insufficient information;
• Risks of accidents and malfunction;
• Risks of the natural balance disruption (water, air, and land) in Arctic ecosystems;
• Risks of dependence on imported technological solutions for RF;
• Risks of undertested technologies. Refining the technological solutions already at the asset exploitation stage in the Arctic;
• Risks of acute deterioration in the environmental situation due to accumulated damage;
• The risk of uncontrolled usage of sea routes;
• Risks of insufficient liability for damage to nature;
• Political risks;
• Risks of conflict of interest.

In this study, we have focused on the scheme limited to the stage of risk identification and possible impact of the risks. The quantitative approach within the probabilistic approach could be utilize on the next step of the research (see Figure 1 light blue area).

The practical application of the research is in the fact that enterprises and countries that intend to work in this region can analyze the list of risks proposed by the article, highlighting the most priority ones for themselves, based on their production specifics. The existing criteria assessing the environmental activity of the company could be supplemented, for example, by the following:

• The annual amount of expenses for the restoration of biological species of the Arctic zone is millions of dollars;
• The population dynamics of biological species over 10 years (the ratio of the average population of biological species in the reporting year to the population 10 years ago), %;
• The extinction of biological species in 10 years, % of the total number of existing biological species;
• Contaminated water discharge (fuels and lubricants) from sea/river transport, tons per year;
• The innovative technologies localization in the Arctic region, % of the total number;
• The innovative technologies, “unmanned” technologies, share in the structure of production technologies.