Monday, June 26, 2017

Russia Settles For Undersized Role In China's Flagship Trade Initiative 

https://www.rferl.org/a/russia-china-one-belt-one-road-project-putin-xi/28579849.html



June 26, 2017 14:15 GMT

Pete Baumgartner

Chinese President Xi Jinping (right) and Russian President Vladimir Putin

Share

It's a "great gift to humanity" in the bumptious parlance of Beijing.

China's grand plan to revamp trade corridors to Europe involves around 60 countries and hundreds of billions of dollars' worth of new networks of roads, ports, railways, power stations, and energy pipelines.

But the so-called One Belt, One Road (OBOR) project doesn't appear to pack many presents for Russia. In fact, analysts say, it largely ignores China's sprawling frenemy to the north and its 11 time zones' worth of aging infrastructure and potential investment.

"If you look at how the [OBOR] is being rolled out, you can tell that Russia almost doesn't feature in it," Sijbren de Jong, a strategic analyst at The Hague Centre on Strategic Studies, told RFE/RL.

While the OBOR "belt" of proposed rail and pipeline networks in former Soviet states crisscrosses Central Asia and spans Belarus and Ukraine, links in Russia appear mostly limited to its southern periphery, along with Moscow and St. Petersburg and new pipelines to Kazan and Irkutsk.

The approach hasn't stopped Moscow from publicly embracing Beijing's effort to recreate overland ("one belt") and sea routes ("one road") between China and Europe reminiscent of the ancient Silk Road.

"I hope that it has paved the way for a new stage of cooperation in Eurasia," President Vladimir Putin told Russians in a nationally televised appearance on June 15, adding, "I have no doubt that we will work together...[to] benefit both the Chinese and Russian peoples."

Sharing the limelight is an acceptable trade-off for Beijing, according to Raffaello Pantucci, director for International Security Studies at the Royal United Services Institute in London.

"I think from a Chinese perspective, it's a no-cost thing to let the Russians do this posturing and show off, because at the end of the day [China] will still do the deals that they want, and ultimately Russia is in a disadvantageous position," Pantucci said.

But OBOR's success could ultimately cost Russia a sizable chunk of Chinese investment, a further loss of markets to Chinese firms, and lucrative construction deals in Central Asia as Beijing gains greater access to natural resources.

Great Expectations

Chinese President Xi Jinping announced the One Belt, One Road initiative in 2013 as a way for the world's second-largest economy to achieve several main aims. He argued that China could provide jobs, direct industrial overcapacity into new markets, bring economic growth to underdeveloped western China, expand Beijing's political and economic influence internationally, and reduce delivery times and costs in trade with Europe. (EU-China turnover is worth more than 1.5 billion euros, or $1.67 billion, per day.)

Xi has dismissed suggestions that OBOR is ultimately aimed at boosting Beijing's political influence and challenging the United States' global standing, saying there is no "political agenda" and the intended result is a "big family of harmonious coexistence."

Drawn up with financing predominantly coming from China and the specially created Asian Infrastructure Investment Bank, OBOR has been touted as the centerpiece of Xi's foreign policy; he has predicted that Chinese trade with OBOR countries could reach $2.5 trillion by 2025.

There has been relatively modest cooperation so far between Moscow and Beijing: Chinese companies invested more than $225 billion internationally in 2016, but only 2 percent of it in Russia.

"Certainly China doesn't have the interest that the Russians hoped that it might have to kind of upgrade existing Soviet transportation links, especially across Russian Siberia," Alexander Cooley, the director of Columbia University's Harriman Institute, told RFE/RL.

The handful of Sino-Russian deals that have emerged are not all proceeding so well for Moscow, OBOR observers said.

"The Chinese know that the Russians need them much more than the other way around," de Jong said.

The Power of Siberia natural-gas pipeline is a case in point, he said. Signed by Beijing and Moscow in mid-2014 with the West ramping up punitive responses to Russia's invasion of Ukraine, it is the largest planned pipeline in Russia's Far East. It was originally slated to carry gas to northeastern China by 2019, but the project is moving "at a snail's pace," de Jong said.

What's more, de Jong added, "the Chinese drive a tough bargain." Beijing secured a "bottom price" for the gas itself, he said, and is charging hefty interest on loans to build the pipeline because of the "political-economic risk" of doing business in Russia.

Pivot Toward Asia?

Putin has "taken OBOR and presented it as a critical [success in] the development of Russian-Chinese relations and framed it as an initiative that is compatible with its emerging Greater Eurasia agenda," according to Cooley.

The Russian president's hopeful pronouncements this month on Russian-Chinese economic relations came exactly one year after he announced his vision of "a great Eurasian partnership" between Moscow and Beijing at the International Economic Forum in St. Petersburg. In that 2016 speech, Putin rolled out his Greater Eurasia idea as part of Russia's proclaimed economic "pivot toward Asia" in response to Western sanctions over Ukraine.

The Russians, on the one hand, are mindful about what is going on because they fear a loss of influence in their backyard, of course. But at the same time, there is not that much that they can really do about it."

-- Sijbren de Jong, The Hague Centre on Strategic Studies


Putin's vision of reinforced economic ties with China is predicated on OBOR working together with the Moscow-led Eurasian Economic Union (EEU), a 2-year-old, Kremlin-conceived economic grouping of five former Soviet countries (Russia, Kazakhstan, Belarus, Armenia, and Kyrgyzstan).

"The main thing we should do is combine our efforts within the [EEU] and the Chinese Silk Road initiative," Putin said earlier this month. "Can this be done? I'm sure it can."

EEU officials involved in negotiating an economic agreement with China and its ambitious venture have cautioned that talks on such a deal could take up to 10 years, according to Alexander Gabuev, a senior associate at the Carnegie Moscow Center.

The Harriman Institute's Cooley said Russia was hoping "OBOR can help jump-start the EEU and all of this will be part of this Greater Eurasia initiative that Moscow has conceived of over the last year or so."

He suggested that Putin's Greater Eurasia idea was "kind of a public admission...that [Russia is] not going to be the dominant economic power in Eurasia...[and] they have to accommodate this new reality that is China."

Cooley said China has already become the main supplier of public goods in Central Asia: "In other words, infrastructure, pipelines, roads, railways. [China] is the country that is really making the large investments" in the region.

The approach lends itself to an expanded political role, too. When Beijing established the China-Central Asia gas pipeline, for instance, it didn't set up a consortium of the three countries involved but rather established three joint ventures -- China-Kazakhstan, China-Uzbekistan, and China-Turkmenistan -- making Beijing the de facto mediator.

Chinese President Xi Jinping (right) and his Kazakh counterpart Nursultan Nazarbaev (left) turn on a symbolic lever during a ceremony in Astana on June 8, 2017, for a new container service.

EEU + OBOR = Slow Going

Although Putin has signed two agreements with Xi pledging that the EEU will work with the OBOR, some see the Russia-led bloc as an effort by Moscow to maintain its influence in Central Asia.

Russia's history in Central Asia -- pioneering in the 18th century and later through a decades-long association as Soviet republics -- has led Moscow to regard the region as firmly within its sphere of influence.

"The Russians, on the one hand, are mindful about what is going on because they fear a loss of influence in their backyard, of course," de Jong said. "But at the same time, there is not that much that they can really do about it."

De Jong suggested that EEU members "actually are much more interested" in being part of the OBOR initiative "because that's actually where the money is coming in."

China has so far ignored the EEU and negotiated individually with bloc members like Kazakhstan to sign infrastructure deals as part of OBOR.

But the Royal United Services Institute's Pantucci told RFE/RL that some Chinese officials think the EEU could serve OBOR well.

"If you are looking at crossing Eurasia with lots of little markets along the way, well, you've got lots of tariff barriers to cross to get your goods across the border -- you've got lots of different markets and different standards," Pantucci said. "[But] if you have one common standard like the Eurasian Economic Union, actually that could work quite well, because it would mean -- from a Chinese perspective -- you basically cross one border to get into the common Eurasian Economic Union space, and then one border at the end to get out and into Europe."

Pete Baumgartner

Pete Baumgartner is a senior correspondent who covers sports and writes about events in Central Europe, Central Asia, and the Caucasus. He can be reached at baumgartnerp@rferl.org

No comments:

Post a Comment