China sees itself as one of the Arctic-neighboring states and has massively expanded for years its involvement in the region to make its new polar Silk Road a reality. Until now, however, it has been primarily through investments and contracts with Russia along the Northeast Passage. But the COVID-19 pandemic has severely weakened the economy in many countries, including Svalbard. A analyst on Norwegian state broadcaster NRK now fears that China could buy into Svalbard through a possible purchase of Hurtigruten.
In an editorial published yesterday on the NRK company’s website, the author Per Arne Totland writes that buying or selling the entire group of companies is a realistic scenario. On the one hand, the Hurtigruten Group, the parent company, has major financial difficulties due to the effects of the pandemic and an image problem caused by the COVID outbreak on board the “Roald Amundsen” in August; On the other hand, since 2014 the Hurtigruten Group has been owned by TDR Capital, a British company for private equity operating throughout Western Europe. “The average investment horizon for such a fund is five to seven years. The time for an exit should therefore be approaching,” Totland writes in his article. And China could well be a potential buyer.
Totland cites China’s great interest in the Arctic as reasons why the cokuntry, of all places, might have an interest in the company if it were put up for sale. For years, the Chinese government has been pursuing a charm offensive against Arctic states in order to realize its plan for a “new, polar Silk Road”. Huge investments are being made in infrastructure and support projects. In addition, Chinese leasing companies have already leased three of the Hurtigruten ships, as reported on NRK. In addition, Hurtigruten had made great investments and effort in recent years in order to present itself on the Chinese market. This, of course, led to a high level of awareness and therefore to a high attractiveness for potential polar travel customers from China. A purchase could not only open up a lucrative market, but also open up access to the Norwegian mainland for China thanks to the Hurtigruten transports along the coast.
Another argument why China could buy the Hurtigruten Group is directly on Svalbard in the shape of Hurtigruten Svalbard AS. This is one of the largest tourism companies in the archipelago and, according to Totland, also one of the largest property owners in Longyearbyen. But the tourism company, like virtually all companies in Longyearbyen, is in a precarious position due to COVID-19. This could pave the way for an acquisition by investors, who could also come to property ownership. Five years ago, Chinese buyers had tried to buy property on Spitsbergen, which could only be prevented by the intervention of the Norwegian state. With the new situation, China could build a mainstay at the western end of its Silk Road.
Totland points out that this is all speculation at the moment and neither Hurtigruten nor TDR Capital have yet announced anything about a sale. But he sees the signs of such a possible development and demands that the Norwegian state should now deal with the issue so as not to be swayed by control. In his opinion (and that of many directly affected on Svalbard), the Norwegian Government should intervene financially and in one way or another prevent the takeover of Norwegian companies by foreign companies and states, as the EU had already decided in April last year, before COVID-19. It is true that the Norwegian state has allocated an additional €2 million for the tourism industry on Svalbard to support the companies there. But it is not yet clear whether this will be enough. As long as the virus rages on, tourism and travels will have to remain low, which will simply worsen the situation. But time will play into the hands of any possible investor.
Dr Michael Wenger, PolarJorunal
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