The Bottom Line.
In this insight, Thales Country Director for Russia Remi Paul explores the interaction between Russia and the China-led Belt and Road Initiative (BRI). Whilst the BRI is usually discussed taking a South-East Asian or European perspective, Remi Paul points to the North and develops on a de facto marriage between Moscow and Beijing. Marrying the Bear and the Panda is an ambitious plan, he writes, but the stakes are crucial and the big picture speaks for itself.
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The BRI seen from Russia: marrying the bear and the panda?
[By Rémi Paul]
Like the Sino-Russian relationship, Russia’s perception of the Belt & Road Initiative (BRI) is ambivalent: both promising, particularly in economic terms, but also threatening Russian sovereignty and its regional influence.
The Silk Roads, as defined by Beijing’s objectives, can promote a number of beneficial developments in Russia. While the southern axes of the Chinese initiative – towards South East Asia – are the priority of Beijing’s regional influence strategy in Asia, the roads to the north on Russian territory are far from minor.
In essence, the Northern roads represent a major rail axis linking Europe to the Far East and the “Northern Sea Route” in the waters of the Arctic Ocean.
Hence, although not an integral part of the BRI project, the region is clearly a match in China’s strategy to diversify its trade routes.
Drawing the China – Russia big picture.
The Russian portion of the Belt and Road Initiative will be highly dependent on the – slow – modernization of Russian railways, of course. But it will also be very much aligned with one of the Russian government’s strategies to anticipate the consequences of global warming and to invest in a number of port and logistics infrastructures that will ultimately make this new maritime route viable.
Hence, while the Russian government is giving priority to asserting its strategic presence and control over these Arctic regions and their resources, it also sees in them a future evolution of maritime flows that could bring it significant revenues and help it in the development of these territories.
Russian perception of the Belt and Road Initiative.
Russia’s perception of the Belt and Road Initiative in Central Asia is contrasted, however.
For Moscow, the BRI’s purpose is to enable China to take on the role of dominant economic – and political – power in this region, through the investments and development of the Chinese presence that are supposed to accompany it.
Russia still retains an important cultural, linguistic, economic (through, i.e. the existence of the Eurasian Economic and Customs Union), military (with the Collective Security Treaty Organisation signed in 2002) influence on the majority of the former Soviet republics in Central Asia. Nevertheless, after the independence wave which followed the fall of the USSR, the region has (re)become a terrain of economic conflict of interest and political rivalry not only between China and Russia, but also with Europe and the United States (not to mention Korea and Japan).
Depending on the wealth of their economy, on the strength of their subsoils, and on their own political turbulence, the new republics have been more or less able to free themselves from Russian control. As a result, creating a new balance and establishing an “optimal equidistance” with the major powers competing for influence in the region is still and more than ever a challenge.
Hence, China’s Russian BRI is a strategic move and in Russia the new silk routes are seen as a decisive offensive of Chinese soft economic power aimed at ensuring its long-term pre-eminence in the region.
Russia, natural resources and diplomacy.
Natural resources play a key factor in this rising competition between China and Russia. In fact, in an area where it obtains abundant supplies of oil, gas and coal and where it is already spreading its manufactured products on a massive scale at low cost, China has a lot to earn.
For instance, China’s increased control over the extraction areas and supply systems for hydrocarbons and natural resources in Central Asia is already giving Beijing some significant negotiating power with the Russians, who are also suppliers of these raw materials.
At the same time, the crisis in Moscow’s diplomatic relations with the Western powers since 2014 has forced it to move steadily, probably with regret, towards Beijing. Said differently, marrying the Bear and the Panda was never an easy story.
Nonetheless, a strong partnership is emerging. Somehow, the alliance has resulted in an ostentatious strengthening of military ties (take the VOSTOK 2018 exercise for instance), or a sharp increase in joint industrial projects (such as the C929 long-haul aircraft).
Think in terms of new trade figures, too. Bilateral trade has increased by 30% in 2018 to reach USD 107.6 billion according to Chinese customs, while in 2017 the stock of Chinese foreign investments in Russia increased by 72%.
Tourism has also increased significantly, as 1.5 million Chinese tourists visited Russia in 2017 and spent USD 2.5 billion. A 16% increase.
But something is missing…
In view of these major strategic and economic maneuvers in Central Asia, of which financial investments are the main weapon, there is however a critical absent here.
Whether we like or not, the strength of the emerging partnership highlights the inability of Europe to build ties with Eurasia, and there is an overall increasing room to legitimately question the modesty of European resources and visions in this “Great Game”, which result will inevitably have a considerable impact on the future of our countries.
>> Related reading: Building Connectivity between Europe and Asia, the European way?
This insight was originally published in French in « La Lettre de la Chine Hors Les Murs » N°27, January 2019, by the French External Trade Advisors (Comite National des Conseillers du Commerce Exterieur).
Rémi Paul | Vice-Président, Thales Group Russia.
Rémi Paul has been managing the operations of the Thales Group in Russia, Kazakhstan, Bielorussia, Kirghizistan, Tajikistan and Armenia since 2014. Whilst now based in Moscow, he was previously based in Shanghai where he was the Deputy Director for the Shanghai Pudong Veolia Water Corp Joint Venture.
Rémi Paul otherwise holds an MBA from the prestigious HEC Business School. He is the Vice President of the France-Russia Chamber of Commerce, an administrator of theAspen France Institute, and a French Foreign Trade Advisor (Conseiller du Commerce Extérieur de la France).
Disclaimer: The views expressed are those of their author(s) only and do not reflect those of The Asia-Pacific Circle or of its editors unless otherwise stated.
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