On his visit to Kazakhstan in September 2013 President Xi Jinping of China unveiled his ‘Chinese Dreams’ of reviving the ancient Silk Route through Central Asia. Specifically, he proposed the idea of a Silk Road Economic Belt (SREB). The proposal was aimed at connectivity with Europe via Central Asia to increase trade between the Asia Pacific Region (APR) and Europe. Later, in October of 2013 on a visit to Indonesia, President Jinping put forward the idea of a ‘Maritime Silk Road of the Twenty first Century’ (MSR). Taken together, the ‘Belt’ and the ‘Road’ initiatives reflect China’s core strategy and policy orientation. Incidentally, in Chinese lexicon the two initiatives are referred to as the Belt and the Road or the One Belt One Road (OBOR). When viewed against the backdrop of a rising China and its present assertive foreign policy, these appear as monumental ideas and goals of tremendous significance to both Asia and the rest of the world. It reflects China’s ambition to play a pivotal role in world affairs and it helps define what that role will be.
In recent times there have been major investments by China in transport links, particularly the transcontinental railway lines that have already opened up for freight routes. The Yuxinou International Railway that runs from China to the Duisberg, a distribution hub in Germany, has started transporting laptop computers, shoes, clothes and other non perishable goods in one direction, and electronic goods, medical equipment and car parts in the other.
On the other hand, the Central Asian States (CAS) have extended cautious support to President Jinping’s SREB project, as this coincides with their own focus on connectivity projects. The CAS would like to overcome their landlocked status and connect with the world. Their cautious response is primarily because the contours of the project are not yet clear. As noted by the Chinese scholar Zhong Sheng, “The ‘Belt’ and ‘Road’ initiatives look at ideas and suggestions for cooperation and development” (Zhong Sheng, Spring 2014). However, the SREB is not a multilateral effort, although it should have been given that SREB is expected to traverse through several countries. A consultative mechanism would have had greater acceptance. The CAS in all likelihood will support the SREB, as long as Chinese investments and infrastructure development projects are in tandem with their own plans. Any hint of infringement of their sovereignty or territorial integrity will be unacceptable. The position of the CAS will become clearer once the details are made available. A brief background of the Fifth century Silk Route can provide a historical perspective in understanding the present initiative.
The ‘ancient Silk Route’ came into being during the westward expansion of China’s two great dynasties; the Tang and Han Dynasties (206 BC–220 AD). A Chinese historian Sima Qian living in the first century B C wrote, “The granaries in all towns are brimming with reserves, and the coffers are full with treasures and gold worth trillions” (The Financial Times, 12 October 2015). This provided an impetus to the Silk Route and with that, China’s westward expansion began. In due course trade networks throughout the present day CAs and Afghanistan and the Indian subcontinent sprang up. . These routes eventually extended over four thousand miles from Kian in Central China to Europe and connected East Asia, Central Asia and the Mediterranean region nearly 800 years ago. The extensive network of trade routes not only resulted in the exchange of goods, but as the saying goes, “culture follows trade!” There was exchange of cultural contacts and interaction of historical experience.
Since millennia, trade and the movement of goods has been a regular feature of human activity. The emergence of the Silk Route gave a boost to political unification and led to the development of many cities and regions. These cities were not only centres of trade but centres of learning as well (N Joshi, 2014).
Central Asia was the epicenter of the trade routes, connecting eastern and western markets and spurring immense wealth creation. Valuable Chinese silk, porcelain, jade, Indian Ivory, spices, Kashmiri shawls and other goods from other centres were highly sought after, while China received gold and other precious metals, ivory, and glass products. The route peaked during the first millennium, under the leadership of first the Roman and then Byzantine Empires, and the Tang dynasty (618–907) in China.
The Crusades in the fifteenth century as well as advances by the Mongols in Central Asia seriously disrupted the Silk Route. By the sixteenth century, commerce with Europe had largely shifted to maritime trade routes, which were then considered cheaper and faster. Today, Central Asian countries are unable to interact with other countries. They are keen to integrate with the world economy. They are members of WTO but are still heavily dependent on Russia. For example, remittances, which dropped from earlier figures to a mere 15 percent in 2014, were specifically due to Russia’s economic woes (James McBride, 2015).
In the contemporary globalised world order connectivity and trade have come to occupy the centre stage of international politics. Recently, several connectivity projects have been launched. In this interplay of connectivity projects and North-South/East-West links, Central Asia occupies a key position. Central Asia’s abundant natural resources and geopolitical location in the centre of the Eurasian heartland has attracted major powers who are vying for presence through such projects.
The Silk Road Economic Belt
In 2015, the National Development and Reform Commission of China’s (NDRC, 2015) Central Planning body published a document entitled, “Visions and Actions on Jointly Building Silk Road Economic Belt and the 21st Maritime Silk Road”. The motivation for the current Silk Route project is surplus steel and cement and the growing trade with the CAS. The SREB is 8,400 km long originating in Xian and includes 3,400 km in China, 2,800 km in Kazakhstan and 2,200 km in Russia. Both the Belt and the Road are focused on economic cooperation, and to build cultural and people-to-people exchanges. In the Chinese view, these are purely economic proposition and should not create any interference in the affairs of the countries involved.
In this context, the NDRC has identified five major goals and six OBOR. The goals are Policy coordination; Facilities connectivity; Unimpeded trade; Financial integration and people to people bonds. The OBOR are an integral part of the mega connectivity projects. These are- China-Mongolia-Russia economic corridor; New Eurasia land bridge economic corridor; China-Central Asia West Asia economic corridor; China-Pakistan economic corridor-Bangladesh-China India-Myanmar economic corridor; China-Indochina economic corridor.
In effect, the OBOR can be understood as China’s initiative to increase connectivity and cooperation among countries along China’s old overland and maritime trade routes. Kim Chong Min rightly calls it China’s ‘new international economic diplomacy initiative’ (Kim Chong Min, 2016). It is certainly new and puts the spotlight on a number of countries that are often not in the centre of the world’s attention. It, would also accelerates outward investment, and shift industries into Central South and South-East Asia, which aligns with China’s desire to develop the western part of the country (Van Dijk, 2012).
Georgia is also part of China’s plan to create the SREB and is attractive for several reasons, including the fact that it avoids the necessity of a rail linepassing through Russia. This is a plus because it is considered easier for China to deal with a small country that is more dependent on China than China is on it. (Van Djik, August 2016). Importantly, Georgia also has excellent ports on the Black Sea.
The SREB and MSR have become China’s flagship projects. The question is what motivates this Chinese priority?
Drivers of the SREB
In an era of globalisation, a country’s economic profile and prowess plays a vital role. Perceived as a rising power, China is pursuing a highly pro active policy in the region. The importance of Central Asia had become obvious by 1991 because of their geographical proximity. While launching the SREB this importance has increased phenomenally. Other factors of equal significance are economic cooperation, security concerns and strategic interests. In the economic sphere, as observed by Peter Frankopan, a Senior Research Fellow at Worcester College, Oxford, and Director the Centre for Byzantine Research at Oxford University, “the Chinese government is building networks carefully and deliberately to connect to minerals, energy sources and access to cities, harbours and oceans. Barely a month goes by without the financing (on a massive scale) to either upgrade, or build from scratch, infrastructure that will enable volumes and velocities of exchange to rise sharply. It does so in partnership with countries whose status is raised from “‘iron friends’ to relationships that can survive in ‘all-weather’ conditions” (Frankopan, 2015, p-516). The OBOR related projects would also provide an outlet for China to use its overcapacity in steel, cement and construction materials, as well as its surplus financial reserves. Through this Chinese expression of expansion, China aims at promoting a whole range of Chinese interests. The protection of resources such as oil, gas, uranium, copper and gold is key motive, along with the set up and expansion of new trade routes and sales markets. According to a report by the news agency Reuters, Xi told a delegation of Chinese entrepreneurs that he hopes to achieve a trade volume of over 2.5 trillion dollars with the OBOR countries in around ten years’ time ( Patrick Bessler). And the main focus of the initiative is on the countries within Central Asia, which is where these interests are precisely highly complex.
In the process China hopes to diversify exports, contribute to development in Eurasia, increase access to food and energy, lessen dependence on the US dollar and improve representation of developing nations in global affairs. Helga Zepp-La. Helga Zepp-LaRouche, the founder of the Schiller Institute, feel that OBOR is actually offering a replication of the Chinese economic miracle to every country that wishes to cooperate in this situation (HelgaZepp- Rouche, 2016, p-31). It is from Kazakhstan that the three branches of the trade routes spread out. The northern branch goes via Russia to Europe. The central branch goes through the Kazakh port of Atyrau, the Caspian Sea, Azerbaijan, Georgia and Turkey. This branch bypasses Russia to reach Europe. The southern branch is via Turkmenistan, Iran and Oman. No further details are available as of now.
The Present and Future of the Chinese
Authorities under Xi Jinping
China is being driven both by domestic and foreign considerations. The urge to achieve development in all of China’s 31 provinces is a major factor and all provinces have already affirmed their active participation in a different aspects of the enterprise. The western province of Qinghai has indicated that it will build a rail, highway and aviation network to link the provinces and countries along the OBOR; Guangdong province along the coast will execute some major infrastructure projects, such as a power plant in Vietnam and an oil refinery in Myanmar. Of course see the western province of Xinjiang would be playing a major role; its cities of Urumqi, Kashgar and Khorgos will be at the centre of many of the proposed routes. And the realisation of the OBOR is expected to benefit the entire population in these regions.
Apart from economic compulsions, there are serious security concerns explaining why China wants to build its leverage in the Central Asian States. China’s Western periphery, especially the Xinjiang province, is vulnerable because extremism and separatism has taken root among the typically restive Uyghur minority leading to a long and drawn-out insurgency. China’s worry is that the ethnic affinity on the other side of the border, where a large number of Uyghurs reside in Central Asia, could create a common cause and strengthen the Uyghur cause. The SREB is expected to bring economic prosperity, development and political stability to Xinjiang and also help the developmental process in Central Asia. Interdependence would benefit China in the long run in enhancing its presence and subsequently build leverages in Central Asia. It would also promote good neighbourliness and tranquillity in the Western periphery.
At the broader level, the timing of China’s proposals is probably in response and counter-initiative to the so-called Pivot to Asia or the R balancing strategy of the U S announced in 2011. The pivot includes two main security and economic arms- to redeploy 60 percent US air and sea power to Asia by 2020, surrounding China, and to negotiate the Trans-Pacific Partnership Agreement with allies, excluding China. The de facto containment effects of these policies prevent China from expanding its influence to the East and South.
An equally significant aspect is, as Tingyi Wang,,a Chinese scholar of Tsinghua University, explained, while the OBOR is prompted by China’s interests in energy, security and promotion of economic ties, it is actually driven by the vision of a “greater Eurasian idea” that calls for “strengthening economic and cultural integration” across this whole swathe of territory; and building “a new type of international relations underpinned by win-win cooperation”. Wang summarises that the Chinese strategy is “to guarantee its interests in this region and at the same time cooperate with the other powers”(Talmiz Ahmad, 2016). Furthermore, Saroj Jha, the Regional Director, Central Asia, World Bank, says that, beyond hydrocarbon and key commodities like, cotton, aluminium, etc., the production structure in most countries in the region are quite similar, limiting intra regional trade. At the same time, his argument continues, this creates opportunities for countries within central Asia to benefit more under a friendly environment and through trade-enabled regional value chains, (Saroj K Jha, 2015.) as proposed by China’s OBOR initiative.
Given China’s increasing vital interests in the region, the Belt and the Road strategy has become the core of its Eurasian policy of building an overland route.
Tracking the SREB
The SREB is not a single corridor, but rather, it has multiple branches. The northern route is split between the Trans-Siberian Railway and a route running south of Mongolia via Kazakhstan to Russia and on to the ports of Rotterdam and Duisburg (See image: 1). These connections have been used extensively. For instance, Deutsche Bahn, between 2011 and 2012, employed nearly 200 container trains for BMW to both Chongqing and Shenyang respectively. Apart from this, rail freight service on the route via Kazakhstan has been operative since 1992 (Zhang Xiaotong, Marlen Belgibayev, 2016).
Source: http://eng.globalaffairs.ru, accessed on 20 October, 2016
On the southern route that eschews Russia, various trial connections have recently been tested. These newly emerging connections have several comparative disadvantages, such as numerous custom controls, but they are being energetically expanded and could one day become a true rival to the much longer northern routes. One such trial took place between China and Teheran on 16 February 2016 and is expected to become a regular freight service running once a month. In 2015, DHL(Deutsche Post DHL) also commissioned shipping from Lianyungang in China via Kazakhstan, Azerbaijan, and Georgia, including two sea transit segments, for arrival in Istanbul within 14 days (See Image: 2), (Hans-Joachim Spanger, 2016).
Source: http://eng.globalaffairs.ru, accessed on 20 October, 2016
Although the Ukrainian jump onto the bandwagon might be indicative of the fact that some countries along the Belt would like to use the Russian-Chinese connectivity competition to their advantage, the real challenge for Russian interests is the predominantly bilateral nature of the OBOR initiative. The “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road, a draft and publication by Ministry of Foreign Affairs, China, states: “We should strengthen bilateral cooperation, and promote comprehensive development of bilateral relations through multi-level and multi-channel communication and consultation.” It also calls for the development of “a number of bilateral cooperation pilot projects” and the establishment and improvement of “bilateral joint working mechanisms”. At the same time, it aims to “enhance” the role of multilateral cooperation mechanisms, notably the Shanghai Cooperation Organisation (SCO), Association of Southeast Asian Nations (ASEAN) Plus China (10+1), the Asia-Pacific Economic Cooperation (APEC), the Asia-Europe Meeting (ASEM), and even those aligned with the (Japan-dominated) Asian Development Bank, such as the Greater Mekong Sub-region (GMS) Economic Cooperation and the Central Asia Regional Economic Cooperation (CAREC). (Hans-Joachim Spanger, 2016).
The Central Asian Response
China has long been a key driver of infrastructure investment and occupies a critical position in its overland connectivity projects in Central Asia. It has invested heavily in the region’s natural resources especially in the extraction of gas, oil, uranium, gold and copper, which make up the key exports of the region. The Chinese companies have also built roads, railways, tunnels, power lines and refurbished oil refineries and established special economic zones. It is also actively involved in agri-business and telecommunications investments.
Since the Central Asian States especially Kazakhstan are central to the SREB, it is important to assess their response. At this juncture, the contours of the SREB are not clear nor are any further details. As previously mentioned, the initiative was not consultative in nature. It is wholly a Chinese project. However, it would not be wrong to state that the CASs would welcome any initiative that promotes their own objective of infrastructure development, as it would help them overcome their landlocked status.
. The main issue is whether or not the Chinese investment will lead to an infringement of their sovereignty and violate their territorial integrity? Alternatively, would it cause Chinese economic domination, which could result in a geopolitical fallout? Turkmenistan and Uzbekistan have guarded against this with local content quotas. Turkmenistan technically requires that a project’s workforce consists of 70 per cent local employees, and Uzbekistan mandates that Chinese companies can only send management personnel, not labourers.
Briefly, the CASs have launched their own transport connectivity projects. Kazakhstan is associated with all of the North-South and East-West transport corridors. Turkmenistan has launched a major effort to emerge as a transport hub. Its central location is favourable to its ambitions. Mention must be made of The Kazakhstan-Turkmenistan-Iran rail link that was inaugurated in December 2014; the Tajikistan-Afghanistan-Turkmenistan link is currently in the making. It is awaiting investments but Turkmenistan has already constructed a short 2km rail link from its border with Afghanistan. The Persian Gulf Corridor passes through Turkmenistan and ends at Oman. In September 2015 Turkmenistan organized an international conference in Ashgabat focused on the harmonisation of rules and regulations. The Ashgabat Declaration states this goal. Also, India has now become a member of this Corridor. Afghanistan is probably operational or, at the very least, upgrades of the existing infrastructure are taking place.
Uzbekistan has initiated the Persian Gulf Corridor. The current status of this venture is not known. Its focus, however, is on improving existing domestic infrastructure or planning new projects for internal connectivity. It has also built an international free economic zone at Navoi for air connectivity to the West.
In Kyrgyzstan and Tajikistan there is a more visible Chinese workforce. In Kyrgyzstan, for example, the construction of two roads (Osh-Sarytash-Irkeshtam and Bishkek-Naryn-Torugart) partly-funded by China consisted of 30 per cent local workers versus 70 per cent Chinese workers, with 60 per cent of raw materials being imported. This highlights the often China-centric relationship that is quite typical on such infrastructure projects.
Kyrgyzstan and Tajikistan have played a crucial role in the Northern Distribution Network. However, a China-Kyrgyzstan-Uzbekistan road link is currently held up because of Uzbek Kyrgyz differences about its entry point into Uzbekistan (N Joshi, 2016).
A lack of clarity regarding the terms of official lending to Central Asia may also increase economic vulnerabilities in the region. A representative at the International Monetary Fund (IMF) in Dushanbe noted that the organisation was encouraging Tajikistan to accept the loans, given the very low interest rate. Despite these good terms, in reality the loans are offered with quiet scepticism that they will ever be paid back. This is particularly true of Kyrgyzstan and Tajikistan, given their heavier dependence on Chinese aid. A Wikileaks report from 2009 highlighted this scepticism, saying ‘no one in either the Chinese or Tajik governments is speaking about paying back Chinese loans’. But the Chinese may seek loan repayments in other ways. Sometimes deals are structured so that the access to resources or mineral rights become part of the repayment plan. However, there are suspicions of other, less transparent agreements, such as Tajikistan’s 2011 agreement to settle a land demarcation issue with China, in which the latter gained 1,000 sq km. This has been described as an ‘unofficial debt writing-off agreement’, although there is no documentary evidence to confirm this theory. Mounting debt exposure within already structurally vulnerable economies could exacerbate domestic inequalities and potentially encourage unfair practices. (Sarah Lain, 2016)
In addition, there has been criticism of Chinese companies engaging in non-transparent operations in the region. A case involving Chinese state-owned oil and gas company (CNPC) is a prominent example. Furthermore, China’s historical track record of investment engagement in the region raises concerns that the SREB could instead exacerbate economic inequalities and poor governance. Possibly when the details of the SREB are known, the CAS will weigh their options and decide to what extent they could support the Chinese initiative. Meanwhilem there are other challenges that China will have to address.
The fisrt major challenge is institutional in nature. Russia has established the Eurasian Economic Union (EAEU), a multilateral grouping aimed at economic integration. It is comprised of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. Although Russia and China joined an agreement for greater cooperation between EAEU and SREB in May 2015, the prospects for true partnership between the two institutions emerging appear distant at present. The sticky issue is harmonisation of border control, customs regime and (importantly) the granting of Free Trade Area status to China.
The Russian vision for Eurasia, especially in Central Asia, and the Chinese approach to the region have significant differences. Russia sees it as its own backyard to be defended against Western expansion in favour of keeping the existing order. China, by contrast, sees Central Asia as a strategic corridor in its OBOR initiative, linking Europe, sharing prosperity and conveying inclusiveness in a changing international order (Tao Wang and Rachel Yampolsky, 21 September 2015).
Most significantly it is believed that China will provide half of the total investments for the infrastructure development. The remaining is expected to be provided by the countries involved. However, in the final analysis the decisions of those countries will be crucial. Kazakhstan, Kyrgyzstan, Armenia, Belarus will be caught in the vortex of two competing institutions.
To conclude, in the coming years progress in the SREB project will depend on changes at the global level, as well as on the new elite; the youth who are coming of age in Central Asia and may have their own ‘Dreams’ for the future.
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