Social and economic aspects of the realization of the Silk Road Economic Belt in Russia

_ G. Mirmanova, G. Jumadilova, A. Chaukerova. L.N. Gumilyov Eurasian National University. Astana, 2018.

In the Russian expert community, the social and economic benefits from the ‘Belt’ are considered from the point of view of the possible diversification of the Chinese project. That is the use of not only infrastructure /transport projects but also other areas that will inevitably accompany the development of the Silk Road. Today, experts call severalthe ‘Belt’tracks: transport, banking, investment, trade, tourism, humanitarian, and others.

At the same time, the process of conjugation from the standpoint of social and economic interaction based on the example of the EAEU, the ‘Belt’and the SCO and other “junction” is still presented schematically in Russian works. Scenarios with the analysisof negative sides of conjugation including the absorption of the weak by strong enterprises, the devastation of local industry and others are while in a small amount.

Simultaneously, authors with the critical view in 2016, in addition to obvious difficulties, also note the explicit successes of Russian politics, which are supported by real practical steps from ministries and responsible departments of the Russian Federation, for instance, the growing number of projects and contacts with Asian partners. Returning to the problem of the perception of conjugation in the Russian expert community, it should be noted that at this stage there is also no complete understanding of the nature and direction of the “internal” mechanisms of such interface and possible external challenges and threats for such a project. These could be considered the challenges of Islamic fundamentalism, and hypothetical options for the economic absorption of part of Eurasia by China, as well as possible conflicts of interests of key actors (Russia, China, India, Pakistan, Afghanistan, Kazakhstan) during the implementation of the proposed conjugation.

Perhaps, it is necessary to structure/classify potential challenges and threats from the interface processes, analyze the core spheres (transport, infrastructure, investments, humanitarian tracks, etc.) and expert justification about the reality of some and the artificiality of other threats.

The position, which does not cause objections and discussions among the majority of Russian experts, is connected with the statement that the concept of the “Belt” testifies to the serious renewal of the regional and global PRC policy. Considerable factor from the point of view of Russia’s national interests in Eurasia is an attempt to bring ETM together three neighbouring projects includingEAEU, SCO and the ‘Belt’, which allowstalking about the possible outlook for the formation of Russia’s long-term Eurasian policy.In a number of works,the course of the creation of the interaction structure is quite rightly viewed, where the SCO played the connecting role between the ‘Belt’and the EAEU. Such an approach significantly reduces the chances of China’s economic domination and maintain Russia’s traditional position in Central Asia with no harm to the Eurasian integration and bilateral relations. More detailedcoordination problems of the conjugation project of the ‘Belt’ and EAEU with the SCO will be discussed below. The specificity of the Russian-Chinese and Central Asian “conjugation” (对接) contains some economic and geographical contours and tasks for individual regions of China and Russia, which can be taken for initial analysis. For example, the provinces of the upper and middle reaches of the Yangtze are encouraged to cooperate with their partners in the Volga region.In general, the central regions of the country focuses on cooperation with the central, southern and western parts of Asia, the role of “window and avant-garde” in the western land (“belt”) is assigned to the Xinjiang Uygur Autonomous Region. Russia benefits from such logistics since the development of huge areas from Vladivostok to Kaliningrad largely depends on the availability of transport corridors and their effectiveness. Apparently, transport projects, according to the intention of Chinese architects of the ‘Belt’, should strengthen the process of “going abroad” direct Chinese investment. Investments are called upon to increase the volume of exports of Chinese innovative products of the transport industry and advanced technologies, to develop the Eurasian market for the construction of transport networks. The transport network created abroad will accelerate the economic development of China’s central and western provinces. In addition, the increase in continental traffic will stimulate the growth of foreign trade in China.

As believed in Beijing, in the future the unified transport network, will create a transport corridor from the APR to the countries of Western Europe. The network will unite 18 Asian and European countries with a total area of 50 million square km with a population of 3 billion people. Over the past ten years, China’s annual trade with countries along the ‘Belt’has grown by about 19% annually, and in 2014, China’s trade with these countries has exceeded 600 billion dollars.

For Russia, which has systemic, strategic interests in Central Asia, the very existence of the ‘Belt’ (the Silk Road Economic Belt) concept is very important. In fact, a mega economic development project from East Asia to Europe is going to unite 21 states. China acts as the main executor and inspirer of this initiative. It’s not about creating a kind of Eurasian free trade zone, but rather about developing economies and transport /infrastructure projects with the help of the PRC in Eurasia. “One belt – One road” projects will strengthen the process of “going abroad” direct Chinese investments, designed to increase exports of Chinese innovative products of the transport industry and advanced technologies, monopolize the Eurasian market for construction of transport networks. It can be assumed that the infrastructure aspect will be the core of the Chinese initiative. The implementation of transport projects within the framework of the ‘Belt’ will allow ensuring the strengthening of China’s economic and therefore political influence in the countries of Central, Western, Southern and Southeast Asia, Transcaucasia, and Eastern Europe.In addition to the infrastructure/transport component, it is impossible to exclude the implementation of a broad investment targeted program aimed to promote the internal social and economic development of partner countries on the Great Silk Road, including the practice of commodity and other loans. Obviously, huge financial resources will be spent on the project. At the same time, not only the immediate neighbours of the PRC but also other countriesoutside the region may act as partner countries. Thus, in November 2014, the government of Fuzhou City (Fujian), ETMtogether with the regional branch of the Bank of China and the China-Africa Development Fund, decided to establish a financing fund for the “China’s 21st Century Maritime Silk Road” in the amount of 10 billion yuan ($1.6 billion), and the Guangdong provincial government expressed a desire to become an investor with the Fund.

International analysts recognize that in the next decade, the construction of Asian infrastructure will be booming, for example,the annual growth rates of the infrastructure construction market will grow to 7-8%. In 2025, investments in the creation of the Asian infrastructure will be estimated at $5.3 trillionthat is 60% of investments in the development of the world market of infrastructure construction. Russia particularly needs to overcome the spatial imbalances of economic development. The beginning of Russian-Chinese cooperation in this area was a joint project for the construction of the Moscow-Kazan high-speed railway and the planned modernization of the Trans-Siberian Railway, including the Kazakh and Chinese sectors.

Russia’s intention to expand the sphere of cooperation in the field of creating transit corridors with China and other Central Asian countries encounters the desire of the CA countries to use their own and Chinese territories to form a new (“own”) Eurasian corridor, which would become a source of foreign exchange for the transit cargo. Obviously, the consequences of the creation of new transit corridors, including further communication with the SCO member states, docking with the PRC railroads, will make real competition for the Trans-Siberian Railway, primarily due to the relatively low transportation tariff. Taking into account the higher profitability of rail transport within China, this can play as afavour of Chinese routes and delivery technologies. As the former head of Russian Railways V.I.Yakuninsays “today the rolling stock in China is two-odd times cheaper than the Russian one and is prepared to operate in the high-speed mode up to 160 km / h”.For the Russian interests, the fate of the highway project “Western Europe – Western China” is also important, part of which must pass through the territory of Russia and go to Finland; the future of this project has not been definitively determined. Meanwhile, this project could facilitate the export of Chinese goods to Europe through Russian territory (accordingly, Russia would receive transit revenues). The Russian part of the project is planned to be implemented by 2020. This is a very sensitive issue for Kazakhstan, and for the general nature of cooperation within the framework of the EAEU and the ‘Belt’. The construction of a high-speed rail system within the framework of the “One belt – One road” project will allow the Central Asian and Mongolian landlocked countries, as well as the sparsely populated and underdeveloped regions of the central and Siberian parts of Russia, to enter the channel of international trade and industry. Thus, an overland corridor of economic development will be created, connecting Europe and Asia.From this point of view, the ‘Belt’ project is by definition based on the idea of linking the existing economic blocks in Eurasia today. Let us consider in more detail three routes of the Eurasian transcontinental highway, which are referred to in Chinese documents. Currently, several routes of the Eurasian transport highwaythe ‘Belt’ are viewed. The northern route of the ETM leads from Urumqi to Kazakhstan through the DzungarGate, crosses Semirechye and through Almaty reaches Shymkent. After that, it diverges into two branches.

1. The first branch bypasses the Caspian Sea from the north through Aktyubinsk and Uralsk, where it connects with transport communications of Russia along the route Urumqi (China) – Alashankou – Dostyk (Kazakhstan) – Kazan – Moscow – Brest – European countries. Further through the railways of the Russian Federation, it goes to Europe. For a long time, the Alashankou-Dostyk checkpoint was the only railway crossing on the Sino-Kazakhstan border. In 2013, the 293-kilometer section of the railway from Kazakhstan Zhetygen-Altynkol-Khorgos was completed, and the Kazakhstani railway connected to the 286-kilometer railway line Jinghe-Inin-Khorgos.

2. The second branch of the northern route of the ETM goes along the route: Khorgos, passing through the territory of the Russian Federation, passes through the Kazakhstan territory to the Caspian Sea to the port of Aktau. Khorgos-Dostyk-Zhezkazgan-Saksaulskaya- Beyneu-Aktau. Here the ferry crossing to Baku begins, and in Kazakhstan, this 3.5-thousandkilometer route is called the Trans-Caspian Transport Corridor. The South Caucasus Railway and the parallel highway connect the port of Baku with the Black Sea ports of Poti and Batumi. With the commissioning of the new Baku-Tbilisi-Kars railway line in 2015, the value of this corridor, which is a possible competitor of the Trans-Siberian Railway, may increase. To date, work is under way to expand the seaport of Aktau, which is the final destination of the northern Kazakhstan route ETM in the west. In addition, the merchant fleet of Kazakhstan is actively developing. At the moment, “the total volume of cargo carried in the Caspian Sea in water transport exceeds 30 million tons, and the share of the port of Aktau is 29% of the total volume of cargo traffic.”

Despite this, experts believe that the possibility of a full-fledged operation of the second branch of the northern route of the ETM is unlikely to be realized since it assumes numerous multi-modal overloads of transit flows. This involves delays in delivery and an increase in the cost of transportation. According to Russian experts, the central route of the ETM is the most important direction of the continental corridor Europe-Asia and at the same time is an integral part of the ‘Belt’. The given route allows to provide delivery of export cargoes from the countries of the APR and the Peoples Republic of China to the countries of Europe and the Persian Gulf. It is noted that the “central route of the ETM in the direction of China – Kazakhstan – Uzbekistan – Turkmenistan – Iran – Turkey – European countries (Lianyungang – Alashankou – Dostyk – Aktogay – Almaty – Tejen – Mashhad – Seraks – Teheran – Tabriz – Ankara – Istanbul – Paris – Rotterdam) will provide direct access to China and the three states of Central Asia to Europe, to the major commercial ports of BanderaAbbas in the Persian Gulf and Chahbehar in the Gulf of Oman, to the countries of South and South-East Asia.

Thus, Russia is not a passive observer in the process of implementation of the ‘Belt’ in the framework of multilateral and bilateral formats of relations with the People’s Republic of China. The Russian Federation is interested in intensifying the processes of coupling between the ‘Belt’, the EAEU and the SCO. Russian interest is clearly seen on the tracks of the interaction of the SCO with the Eurasian Economic Union (EAEU) and the “Silk Road”. At the same time, various variants and scenarios are possible in this process: a) development of integration / rapprochement along the “northern route” of the SCO-EAEU, including the strengthening of the Eurasian Development Bank by integrating Chinese resources; b) the “southern scenario”, in other words the SCO – the Silk Road, which, however, is seen as a later one in terms of possible terms and possibilities for implementation. The variant of parallel development of three projects is not excluded. In recent years, Russian experts have begun to actively develop the problems of the triangle “Russia – Mongolia – China” as a potential part of the East Asian “piece” of the ‘Belt’. The reason for this was, on the one hand, the Mongolian initiative to create the Steppe Way, which is joining with the ‘Belt’ from the east, and, on the other, the activation of both Russian-Mongolian and Chinese-Mongolian trade, economic and energy relations in bilateral formats.China actively develops its presence in the energy sector (for example, Chinese companies develop oil fields and extract oil in the Mongolian Dornod), part of the export flow of copper concentrate and molybdenum from Erdenet is being transferred to the south. The companies of the Russian Federation and the PRC participate in the development of strategic deposits: coal (in TavanTolgoe), copper, gold (Oyutolgoy).

Currently, there are 5,300 business units in the country with investments of $2.4 billion from China. In 2001 and 2005, China introduced soft loans of 200 million yuan for the development of zinc in the Sukhaborator area.The steady expansion and development of political, trade-economic, cultural and humanitarian ties are based on a solid legal framework formed by more than a hundred existing treaties and agreements. As a result of a series of visits by Mongolian leaders to the PRC and Chinese to Mongolia over 20 years, bilateral relations were raised to a qualitatively new level of strategic partnership. In this regard, it is extremely important for Russia to unite politically and economically three bilateral strategic partnership models (Russian-Chinese, Mongolian-Chinese and Russian-Mongolian) in the strategic triangle “Russia-Mongolia-China”, which would create a joint (trilateral) economic zone, transport cooperation.The Chinese mega project of the “Economic belt of the Silk Road” and the Mongolian “Steppe Road” for logistics and the Eurasian direction organically complement each other. There are objective opportunities for using a large political resource of the Russian-Chinese-Mongolian tripartite partnership. Until 2014 and 2015 (prior to the political decision to create a triangle by the heads of the Russian Federation, the PRC and Mongolia), Russian-Chinese and Russian-Mongolian cooperation were carried out in parallel. Currently, there is an intensive expert and practical search for the most optimal and mutually beneficial “links” of the triangle being created, including the resources of the border subjects of the three countries. It is obvious that the creation of a transport and investment “corridor” along the line of Hohhot (Inner Mongolia Autonomous Region of China) – Ulan Bator (Mongolia) – Ulan-Ude (the Republic of Buryatia of the Russian Federation) will go faster and more efficiently with the simultaneous development of adjacent Chinese and Russian territories .

Bibliography:

1) http://www.globalaffairs.ru/pubcol/
2) http://igpi.ru/bibl/other_articl/1406820606.html
3) China’s “One Belt, One Road” Initiatives. http://en.ce.cn/main/latest/201501/17/t20150117
4) com.cn/n/2014/1021/c102839 –8797994.
5) http://ru.valdaiclub.com/files/11300/

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