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Iceland voices disquiet over Chinese tycoon's tourism project

Icelandic authorities on Tuesday expressed concern that a Chinese tycoon’s plans to buy a 300 sq km area of land in the north of the Arctic island and build a resort there may be part of China’s broader agenda of gaining footholds in strategic areas.

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REUTERS - Iceland responded warily on Tuesday to a Chinese tycoon's plan to buy a swathe of isolated land for a green tourism venture, a deal which analysts say raises security questions due to the North Atlantic island's strategic location.

The minister responsible for approving any investment by Huang Nubo said the scheme, part of a trend of Chinese buying of assets in the West, needed close scrutiny.

"This question has to be looked at carefully from many different aspects," Interior Minister Ogmundur Jonasson told Reuters, citing issues of selling such a large piece of land to a foreigner and the ownership of natural resources.

So far there has been little wider expression of concern in Iceland about the plan put forward by Huang, who was 161st on the Forbes list of the richest Chinese in 2010.

But analysts said security aspects of the deal could not be ignored, due to Iceland's strategic location mid-Atlantic between Europe and the United States, and its proximity to the Arctic where a number of nations are competing to make resource claims.

"While this project in Iceland might be a private initiative, it fits in a broader (Chinese) policy agenda to get hold of strategic assets abroad, ranging from land, over raw materials, to knowhow," said Jonathan Holslag, head of research at the Institute of Contemporary China Studies in Brussels.

"Furthermore, in China's 'go-global' policy, we often see that private investors are often just a vanguard for large projects by state-owned firms, and that the government usually follows with a more assertive diplomacy to protect those newly-gained interests."

Ownership of the Arctic seabed has grown in importance as the shrinking of sea ice has opened new prospects for exploration and production of the region's potentially vast oil and gas resources.

Poetry lover

Huang, who also likes to write poetry, has a preliminary agreement with four owners of a 300 sq km farm called Grimsstadir in northeast Iceland for 1 billion crowns ($8.8 million), said Bergur Elias Agustsson, mayor of the Nordurthing local district where the farm lies.

His goal is to build a green tourism resort and he has given up rights to the water resources on the land, Agustsson said.

This would mark the first major Chinese investment in Iceland, which is still slowly recovering from the collapse of its banks in 2008 during the global financial crisis, and Agustsson said he welcomed the investment.

Alan Mendoza at the Henry Jackson Society, a UK-based think tank looking at national security issues, noted Iceland's strategic location outside the Arctic circle.

"China doesn't have any other route into the Arctic, and this might offer them a way in," he said. China has made major investments in Africa to satisfy its need for commodities, on top of its holdings of European government debt.

"There needs to be much more focus on what this means in the longer term," said Mendoza.

However, Steve Tsang, Professor of Contemporary Chinese Studies at Nottingham University, said the strategic issue was not immediate. "It will be a very, very long time -- three to four decades at least -- before the Chinese state as a whole can use any 'territorial base' in Iceland in any strategic way."

Huang is chairman of the Beijing Zhongkun Investment Group Co., Ltd, which describes itself on its website as a large-scale private enterprise in real estate and in the holiday industry.

In the 1980s he was in the Chinese Communist Party's Propaganda Department, working on party propaganda directed at the outside world, according to the biography on his blog.

A Chinese magazine profile published last year described Huang's interest in Iceland, which he dated back to when he shared a university dorm room with an Icelandic student.

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