Joint Statement Between the Kingdom of Norway and the People’s Republic of China, available at https://www.regjeringen.no/
- Støre’s delegation group visit to China is potentially renewing Norway’s security economic landscape, but not only helping to address Oslo’s energy economic transition hurdles, highlighting their Joint Statement has profound implications beyond what many conceive.
Background
On 9 September 2024, Norwegian Prime Minister Jonas Gahr Støre led a delegation on his three-day official visit to China. After their arrival, Støre emphasized the importance of maintaining bilateral dialogue and cooperation despite contentions on geopolitical events in an interview. During his visit to Shanghai Fudan University, Støre gave a speech, diplomatically presenting Norway’s future potential cooperation with China, including the Polar explorations, Northern Sea Route (NSR) cooperation, and energy transition partnership. Concluding the trip on a productive note, Støre signed the Joint Statement on the Establishment of Dialogue on the Green Transition (hereafter Statement), underscoring the synergy in promoting the Norwegian energy transition progress. However, the Statement is ostensibly focused on energy cooperation, but the latent meanings have far greater implications than mere energy matters, which is their latent strategic security economic dialogue. Therefore, how could the Statement potentially renew Norway’s changing security economic environment?
Norwegian Economic Challenges and Solutions Amid Decarbonization
What motivated Støre’s administration to reach the Statement is the global energy transformation pressures on the Norwegian national economy. These pressures created a lurking problem for its fiscal reserve. For instance, the current structural non-oil fiscal deficit trend has been steadily increasing in recent years (See Figure 1), despite the number remaining slightly positive with fiscal impulse (See Figure 2). However, its oil and natural gas production is forecasted to decline drastically in the next 25 years, with 83% and 44% respectively (See Figure 3), entailing the ending hydrocarbon era. Meanwhile, as an export-oriented economy with over 47.2% of its GDP, its export structure primarily relies on the hydrocarbon sector, which adds more future economic challenges.
Source: Norwegian Ministry of Finance Meld. St. 1 (2023–2024) – regjeringen.no
Source: Det Norske Veritas. Energy Transition Outlook Norway 2024
To ease these burdens, the Norwegian state promulgated its green competitiveness strategy to usher in its energy economic transition. It outlines that Norway would diversify its economic and export structures by advancing renewables to buffer the aforementioned challenges.
Challenges of Implementing The Strategy for Green Competitiveness:
Yet, the path toward energy transition remains onerous. Firstly, while the government could alter its export structure, the progress must be speedy to compensate for the gradual loss of hydrocarbon exports to ensure its smooth landing. To do this, Oslo has to construct a substantial amount of renewable sectors swiftly, but it requires significant domestic energy investments. Nevertheless, Norway currently faces several financial, technological, and regulatory hurdles before establishing a well-developed renewable ecosystem, especially when domestic energy enterprises are unwilling to invest domestically. Secondly, Norway has to bolster its carbon capture and storage (CCS) facilities and power grid network building nationwide before the smooth transition can materialize.
Opportunities of Støre’s trip to China in Accelerating the Energy Transition:
Facing such governance challenges, these headache problems contributed to Støre’s trip to China. The reason for choosing China is that the country excels at renewable production of many kinds, catering to Norway’s short-term developmental goals in developing solar and hydrogen energies, and establishing more offshore wind turbines. Benefiting from the well-planned green industrial strategy, enormous industrial base, and advanced technological hub, China became a global new energy center. Meanwhile, the country has grasped a complete supply chain in renewables, including the upstream, middle, and downstream, making China an unavoidable partner.
For instance, China holds over 90% of the global manufacturing capacity in solar panels, including the reservation, extraction, and processing of transition-critical materials like polysilicon, wafers, and lithium. For hydrogen energy, electrolyzers are a critical technology for producing low-carbon hydrogen for energy usage, and China now occupies 40% of the global capacity. While the traditional hydrogen production method is based on fossil fuel production, China successfully conducted direct seawater electrolysis of hydrogen while integrating this technology with offshore wind turbines. Several months later, a Chinese firm, CNOOC, speedily applied this new technology to a megawatt hydrogen production for industrial usage, largely meeting Norway’s developmental needs.
Meanwhile, China built nearly half (46.1%) of the global offshore wind turbine installation capacity in 2023. Currently, the country accounts for 65% of turbine nacelle and critical components production globally, like blades and generators, making the country the central manufacturing hub. The economic scale of this industrial powerhouse also allows its manufacturers to produce products that are 20% cheaper than their Western counterparts. Consequently, this robust industrial presence makes Oslo hardly ignore China despite European manufacturers’ leads in technological expertise.
Another economic standpoint is that Norway lacked domestic renewable investments, while China is looking for overseas markets. Since Norway’s limited market size is perceived as non-lucrative for energy investment returns, domestic energy enterprises are unwilling to contribute their efforts. In contrast, Chinese markets are hyper-competitive, and their practitioners are actively spotting overseas opportunities. As such, bilateral cooperation became a primary option for both sides to address energy transition needs by stimulating Chinese investments in Norwegian domestic offshore wind energy projects.
Apart from the renewables development, Oslo is also keen on China’s power grid technology and construction capability to enable nationwide power transmission that could penetrate across regions. On the one hand, the USA and China are spearheading advanced AI smart grid development, and this technology is especially vital for breaking down energy access barriers for economic activities. On the other hand, China’s globally renowned ultra-high-voltage technology is essential for efficient energy transmission across vast regions, helping Norway to overcome its energy interconnectedness bottleneck issue.
Last but not least, the Statement notes the bilateral willingness to propel their green vessel development. Specifically, Norway and China have different bright spots in green vessel construction. For instance, Norway is highly reputable in green maritime technology, and China is a gigantic vessel manufacturing hub. Accordingly, cooperating with China could expeditiously lower the low-carbon emissions of Norway’s vessel industry by reducing the reliance on traditional-powered vessels for global shipments, achieving Norway’s climate commitments.
A Dedicated Balance between National Economic and Security Considerations:
Notwithstanding, these bright aspects of their bilateral cooperation, implementing the Statement demands thoughtful balancing and navigation between national economic and security considerations. Firstly, although Chinese wind turbine manufacturers hold efficient and low-cost supply chains, bestowing Chinese firms with better comparable profitability versus Western counterparts, this worried the EU authorities and local wind industry stakeholders. Consequently, the EU is attempting to shield its wind industry by strengthening the supply chain resilience while diversifying supply sources via a policy package. From this prism, Oslo had to deftly navigate between the bureaucratic opposition forces and industry incumbents in Europe before harmoniously cooperating with China.
Secondly, Støre’s administration spoke about their security considerations before the delegation group went to China, unveiling the ambivalent side of their bilateral cooperation. Taking the Port of Kirkenes of Svalbard as an example, it’s a valuable asset for NATO to closely monitor Russia and an outstanding geographical location to establish a logistics post for a future viable NSR. Yet, the port needs substantial infrastructural investments to materialize its strategic values, but China is the one that could realize it. Unavoidably, Oslo weighted national security considerations above local economic interests and disapproved of the China Ocean Shipping Company (COSCO)’s investments.
An official statement from the Norwegian Minister of Justice and Public Security confirmed a slightly inclined prioritization of national security concerns over local economic values. The statement notes that Støre’s administration would balance the local economic stakes and overall security concerns when addressing COSCO’s investments. But, it also stresses that Svalbard is located in the High North, and it’s an ideal place to conduct intelligence-gathering activities, like monitoring Russian submarine activities and collecting radar data for missile trajectory. Oslo worries that the current friendship between Russia and China could pose additional risks to the Norwegian security environment in the long term.
Nevertheless, despite Oslo’s security concerns, seeking closer economic ties with China also brought new security opportunities, paradoxically. This is evident in his speech when he expressed his security economic vision with China. Apart from envisaging the future NSR to better connect Europeasia, foreshadowing Oslo left room for maneuver on the Svalbard issue, Støre also notes the importance of managing Norway’s disputes with Russia, like the Barents Sea. While both sides settled their limitation line in 2010 for the Barents, the Kremlin is keen on Norwegian offshore hydrocarbon extraction installations. Subsequently, Støre presented the importance of the Green Shift for Norwegians and shared it with his Chinese counterparts. In this vein, one could argue that his administration attempts to cooperate more closely with China in renewable fields to lower the possibility of future energy disputes in the Barents due to hydrocarbon extraction.
What Next: When Trump Returns to the White House?
Nevertheless, Trump’s second administration might even bring Norway and China into the security economic field. To illustrate that, firstly, Trump’s second administration will likely draw China and the world closer together in the new energy cooperation due to its passive status in developing renewables, and its foreign policy preferences could pull allies closer to Beijing. With the advancing technological expertise of China in the near term, it’s reasonable to believe that Oslo would be more willing to cooperate with Beijing than Washington in unfolding renewable projects.
Still, one might also notice that Trump, as a pragmatic businessman, could continue allowing domestic CCS firms to maintain robust connections with Norwegian enterprises if the overall national economic interests are jeopardized. Given the U.S. global leadership in CCS technology, a crucial cooperation field in the Sino-Norwegian Joint Statement, maintaining close business ties with Norwegian firms could preserve American technological leadership and overseas merchandise interests. An example includes not banning China from purchasing American General Electric jet engines for China’s newly developed homegrown commercial jets amid their steep geoeconomic competition, shedding light on Trump’s deft economic diplomacy.
Secondly, Støre’s administration might extend an Olive Branch to China for their latent consensus on potential cooperation in the security aspect due to the absence of Trump America’s military promise. In the aforementioned Støre’s speech, he mentions his willingness to participate in the polar exploration with China, given Norway’s global geographical reach in the field, including Antarctica. Considering China’s relatively latecomer status in polar regions, one could reasonably understand that Støre’s administration might be soliciting China’s security promise in navigating Norway’s confrontation with the Russians against the backdrop of the raging war in Ukraine. In return, Norway could more actively invite China to partake in polar activities, such as climate research and humanitarian rescue missions, even including their further future security economic dialogue to harness the geopolitical confrontation with Russia. In America’s falling security promise in the NATO leadership during the second Trump administration, scaling up the cooperation level with Beijing is a second-to-none option to prevent further conflicts spilling over with the Russians between NATO.
Simultaneously, Norway could become a vital dialogue partner between NATO and China. Although Trump’s stance on whether to keep the U.S.’s security promises to Taiwan is ambiguous, some American security experts noted that the importance of continuing support for Taiwan is vital for American strategic assets globally (Another see: NATO and Asia). Given that Trump is attempting to broker a broad economic deal with Beijing and might leverage Taiwan for discussion, NATO resources will be paramount to strengthen the position of U.S. representatives. Accordingly, Norway could play a vital role in buffering the tensions between both sides, especially when Oslo attempts to solve its national security needs with Russia through China.
Conclusion: Reality Constraints
From this view, the Statement has profound implications beyond what is ostensibly believed and is noteworthy of the implementation of the Statement as well as the evolving Norwegian-Sino relationships. Their bilateral cooperation is not going as smoothly as they might think. On the micro level, Oslo has to address the difficulties in financing Chinese offshore wind turbine manufacturers in Europe before they can undertake large-scale construction projects. For example, nowadays, increasing wind turbine generator (WTG) prices have reduced the bidding opportunities for WTG original equipment manufacturers, and European banks are unwilling to finance Chinese WTGs, straining the scale of Chinese projects. On the macro level, a call for a European self-defense strategy makes it difficult to convince European partners to accept a similar security-economic arrangement with China.
Nevertheless, while Europe could achieve self-defense without the U.S., the European states will have to spend nearly 250 billion euros annually on extra manpower and industrial support, implying a sudden surge of huge economic output and societal burdens. The current economic fundamentals of European states are lukewarm, like experiencing sputtering growth with uncertain economic policy direction and turmoil in geopolitical environments. It will test the fiscal and economic fundamentals of European fiscal authorities when they try to adopt and implement their self-defense budget. Accordingly, maintaining a latent consensus with China within a manageable scope from Oslo’s view would benefit Europe’s self-defense purpose in the short run, despite the opposition voices from the Arctic and NATO circles.
From this view, the Statement represents a masterpiece of Norway’s smart diplomacy to China. On the one hand, maintaining a latent security economic diplomatic relationship with Beijing could aptly balance the stakes between Svalbard’s local economic and overall national security concerns. On the other hand, the Statement’s full articles written only on renewables cooperation could serve as a pre-emptive measure. For instance, Oslo could shrug off the diplomatic pressures from NATO for its deepening relationship with China, but also cease the level of cooperation when its security environment does not permit it to happen.
In conclusion, all of these suggest that the Norwegian-Sino cooperation and their Statement have profound implications that are far beyond what many conceived of the changing security economic environment of Norway, and even of the Arctic Circle.
Suggested Readings:
Norwegian Prime Minister Jonas Gahr, S., 2024, “Støre’s Speech On top of the globe – Norway, the Arctic, and geopolitics at Shanghai Fudan University”, 11 September 2024.
Regjeringen.no., 2024, “Joint Statement Between the Kingdom of Norway and the People’s Republic of China on the Establishment of Dialogue on the Green Transition”, 10 September 2024.
DVN., 2024, “Energy Transition Outlook Norway 2024: A national forecast to 2050”, 28 November 2024.
The Confederation of Norwegian Enterprise, 2024, “Outlook for Norway: Building sustainable industrial advantage through the green transition”, 9 January 2024.
