“The Silk Road Economic Belt: A Stocktaking and Implications for Europe”. Lecture by the OeNB in Moscow.

On 5 June 2018, Stephan Barisitz,  Dr. Sciences (Economics), Senior Economist, Foreign Research Division, Austrian National Bank (OeNB) held a lecture and book presentation at the National Research University “Higher School of Economics” in Moscow titled “The Silk Road Economic Belt: A Stocktaking and Implications for Europe”. The event was co-organized by the Eurasian sector of the HSE Centre for Comprehensive European and International Studies (CCEIS) and the HSE-OECD Centre.

The lecture was attened by master and PhD students of several Russian universities (HSE, MGIMO, Russian Customs Academy, MSU) from several countries (Russia, Armenia, Kazakhastan, Italy, Germany), as well as by representatives from the Eurasian Economic Commission (EEC).

The Austrian economist was introduced by Yuri Kofner, head, Eurasian sector, HSE Centre for Comprehensive European and International Studies (CCEIS).

Central Asia and the Silk Road – Economic Rise and Decline over Several Millennia

In the first part of the event Dr. Stephan Barisitz, who is also a university lecturer on economic history, gave a presentation of his new book – “Central Asia and the Silk Road – Economic Rise and Decline over Several Millennia” (Springer International Publishing, 2017).

The main bullet points of his lecture and book presentation were:

Central Asia (CA)

  • The Central Asian steppe belt: The cradle of horseback nomadism, far-reaching mobility, and military prowess
  • Eurasian steppe civilization: seamlessly linking CA and Eastern Europe
  • CA as a unique terrain of sedentary-nomadic interaction and of related economic and political dualism
  • Technologically based nomadic military superiority over settled civilizations lasted almost 2½ millennia: up to the 18th century with incisive consequences
  • No other global region can call as many major civilizations its neighbors
  • No other global region can boast of as complex a political history as CA

The Silk Road (SR)

  • Nomadic powers tended to be materially interested in the good functioning of international trade networks
  • The (traditional) Silk Road (SR) was a network of overland trade routes running through CA that provided commercial and cultural exchange between Europe, CA, India and China (Ferdinand v. Richthofen, 1877)
  • The SR is estimated to have existed for almost two millennia – up the 19th century
  • The SR enjoyed at least three heydays:
    – Han Dynasty – Roman Empire (ca. 100 BCE – 200 CE)
    – Tang Dynasty – Caliphate (ca. 675-875 CE)
    – Mongol Empire (ca. 1245-1345)
  • As its name indicates, silk was very popular as SR merchandise; it often even served as a de-facto means of payment
  • From the late 16th century, silver also attained importance as a medium of exchange

Important products traded on the SR

  • Exorbitant transport costs meant that only goods with very high value-to-weight ratios would be carried over long distances for profit
  • Over the centuries, regional markets for lower-cost bulkier goods also expanded
  • Example: 16th to 18th centuries
    Relatively highly developed sedentary economies:
    – China: tea, silk and silk textiles, porcelain (china), lacquerware
    – India: cotton and textiles, silk, indigo, precious stones
    – Western Europe: silver, fine cloth, apparel, manufactured products
    “Emerging markets”
    – Persia: silk and silk textiles, carpets/rugs, cotton, horses
    – Rus’: furs, leather, wool products, metal utensils, wood
    Central Asian sedentary economies:
    – Uzbek Khanates: cotton, Bukharan lambskins, slaves
    – Chagatay Khanate: jade, musk, wool, textiles, dried grapes
    Central Asian nomadic economies:
    – Dzungar Empire (without Tarim Basin): horses, sheep, camels
    – Kazakh Khanate: sheep, horses, camels, leather, slaves
    – Turkmens: horses (notably Akhal-Teke breed), sheep, carpets, slaves

Factors that contributed to ups and downs (heydays and declines) of the SR

  • Heydays
    – Simultaneous political stabilization
    – Successful economic reforms
    – SR infrastructure investments
    – Political = economic integration (of large parts) of SR
    – Tendencies toward religious unification
    – Spillovers of Western silver flows from America to Eurasia (late 16th century)
    – Networks of enterprising merchants
  • Downturns
    – Political instability/de-stabilization, turmoil, warfare
    – Unraveling or lack of economic reforms
    – Vicious circle between political instability and loss of SR revenues
    – Diseases/pandemics spread by the SR, notably the “Black Death”
    – Slow loss of importance of SR through increasing Western maritime competition circumventing CA (from 16th century)
    – Emergence of Siberian Route (Russia), equally bypassing the SR

Some further aspects

  • CA’s political and partly economic centrality in Eurasia up to the 15th century, followed by lengthy decline
  • Some of the renowned C Asian traders and their networks: from the Sogdians, via the Uighurs, to the Bukharans
  • Nomadic imperial “Law and Order” was not generally accompanied by “Rule of Law”, which rendered long-term investment difficult
  • Central Asian versus European medieval experiences: differential exposure to invasions, no urban bourgeoisie on the SR
  • Stylized cycles of C Asian monetary reforms, inflation and currency crises
  • The Middle Kingdom remained the economically predominant and most resourceful power along the Silk Road

After the first lecture and book presentation there was a lively debate. The participants asked the lector about the state history and role of the Kazakh nomads in the Silk Road and about the historical foundations of modern Eurasian integration.

The Silk Road Economic Belt: A Stocktaking and Implications for Europe

In the second part of the event Dr. Stephan Barisitz gave a lecture and presentation on “The Silk Road Economic Belt: A Stocktaking and Implications for Europe”.

In he lecture the expert gave a selective project-oriented overview of China‘s „Belt and Road Initiative“ (BRI). He gave a definition of the SREB and named its supporting institutions, financial means, motivations, goals, risks, challenges, rivaling initiatives. He listed the main economic corridors and its link-ups with the Paneuropean corridors (EU), as well as some Belt & Road key projects.

„Belt and Road Initiative“ (BRI)

consists of:

  1. a) „Silk Road Economic Belt“ (overland)
  2. b) „21st Century Maritime Silk Road“ (seaborne)
  • Both focus on connectivity along infrastructural trajectories
  • Compare: Marshall Plan

Selected institutions supporting the BRI

  • Silk Road Fund (USD 55 bn)
    – Asian Infrastructure Investment Bank (AIIB, USD 100 bn)
    – New Development Bank (BRICS, ca. USD 50 bn)
    – China‘s policy banks:
       China-EXIM Bank (USD 100 bn already disbursed)
       China Development Bank (USD 120 bn already disbursed)
       Agricultural Development Bank of China (USD 20 bn)
  • Special regional sub-initiatives
    – „16+1 format“ (USD 11 bn)
    – China-Russia Renminbi Investment Fund (USD 10 bn)
  • China‘s international reserves potentially up to USD 500 bn to be used

Goals of BRI: largely economic and geopolitical

  • Improvement of transportation links, reduction of trade costs
  • Redirection of surplus savings, re-utilization of unused domestic productive capacities
  • Diversification of investments, markets and suppliers
  • Creation of „strategic propellers of hinterland development“
  • Contribution to internationalization of Yuan-Renminbi
  • Creation of alternative cooperation network (given China‘s exclusion from TPP)
  • Venue for addressing strategic resource supply & security issues (e.g. chokepoint Strait of Malacca)
  • Pragmatic infrastructural project cooperation can be easier than traditional „deepening“ of trade integration areas
  • Steady enhancement of Chinese soft power

Main conclusions

In the conclusion Dr. Barisiz analysed the possible implications for Europe, Russia and Austria of the Silk Road Economic Belt.

  • BRI: enormous investment program to reduce transportation costs
  • B&R corridors are also venues for addressing strategic resource supply and security issues for China
  • Trans-Eurasian railroad container traffic is somewhat catching up
  • B&R projects partly help Russia circumvent Western sanctions
  • According to expert estimates (Herrero and Xu, 2016), the B&R could increase global trade of EU by 6% and of Austria by 9%
  • According to China Global Investment Tracker following countries profit most from Belt & Road investments:
  • Large neighbors of Middle Kingdom incl. Pakistan, Russia, Malaysia, Bangladesh, Indonesia
  • Strategically-situated smaller countries, incl. Djibouti, Laos, Kyrgyz Rep., Kenya, Montenegro
  • However, potential „debt trap“, particularly for smaller countries (Hurley, Morris, Portlance 2018)
  • Frequent Chinese dominance in projects (financially and logistically)
  • In some cases, popular resistance to B&R projects
  • In Europe: most important B&R project countries (measured by B&R expenditures/GDP) are in CESEE
  • Chinese financial offers and unbureaucratic project managment may provide complements or additions to EU programs
  • Yet EU and national standards/regulations are not always respected
  • Attractiveness of EU/Brussels in SEE and Western Balkans may somewhat come under pressure by Chinese „investment competition“
  • In long term, SEE‘s participation in the B&R may contribute to overcoming this region‘s traditionally peripheral position in Europe
  • Austria, being a connecting link of core Europe to SEE, may be one of the first to profit from such an upswing
  • Convergence of „Breitspur“ with prolongation of LSER to Vienna could turn Vienna-Bratislava region into new „key logistics hub“ of EU
  • Overall, if key projects are carried out, the B&R will support infrastructural and economic relations between Russia and Europe

Following the second lecture, there was again a lively discussion. The participants asked the Austrian economist to compare the “strings attached” to the Chinese investments, as compared with EU investments, as well as about his view on the EU’s policy towards the Eurasian Economic Union (EAEU) in the context of the Belt and Road Initiative.

After the event Dr. Stephan Barisitz presented a copy of his book “Central Asia and the Silk Road – Economic Rise and Decline over Several Millennia” to the Higher School of Economics.

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