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Building the Infrastructure for Eurasia’s Future

May 29, 2017, 19:35 UTC+3
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The development of technology and globalisation of economic relations are turning the huge Eurasian expanses into an attractive site for international infrastructure projects. The largest one of them is the New Silk Road, which has been initiated by China and will connect it to Europe and later to Central Asia and Africa. Over 40 countries have so far signed cooperation agreements with China. Russia, however, proposes a broader approach, advocating a big Eurasian partnership.

Russia and China agreed to cooperate on aligning the Silk Road Economic Belt and the Eurasian Economic Union (EAEU) in 2015. For Russia, it is not only about the advantages of Chinese goods transit via Russia and the EAEU, but also about a broader approach to the integration process in Eurasia.

“I believe that by adding together the potential of all the integration formats like the EAEU, the One Belt, One Road, the Shanghai Cooperation Organisation and the Association of Southeast Asian Nations, we can build the foundation for a larger Eurasian partnership,” President Vladimir Putin said at the May summit in China. “This is the approach that, we believe, should be applied to the agenda proposed today by the People’s Republic of China.”

“We would welcome the involvement of our European colleagues from the EU states in this partnership. This would make it truly concordant, balanced and all-encompassing, and will allow us to realise a unique opportunity to create a common cooperation framework from the Atlantic to the Pacific –for the first time in history.”

Chinese President Xi Jinping mentioned the following achievements of the New Silk Road over the four years:

  • Several infrastructure projects were developed: a high-speed railway in Indonesia, railways between China and Laos, Addis Ababa and Djibouti, Budapest and Berg. Economic corridors China–Pakistan, China–Mongolia–Russia, the New Eurasian Land Bridge and a network of roads, ports and pipelines are being created.
  • In 2014–2016, China’s trade with the countries alongside the route exceeded USD 3 trillion. Its investment in these countries exceeded USD 50 billion.
  • The Asian Infrastructure Investment Bank has already granted a USD 1.7 billion loan for nine projects. Investments of the Silk Road Fund have reached USD 4 billion. Another USD 14.5 billion will be contributed to the Fund, and in the next three years China will allocate USD 8.7 billion to support countries participating in the New Silk Road project.

China is Russia’s leading economic partner, accounting for 14% of its foreign trade turnover.

  • In 2016, the trade volume between the countries reached USD 66 billion. In the first quarter of 2017, the bilateral trade turnover grew by 29.3% year-on-year.
  • In 2016, Russia became No. 1 oil exporter to China.
  • The countries are building the Power of Siberia, a natural gas pipeline with an annual capacity of 38 billion cubic metres of gas. The Yamal LNG project is also progressing.
  • Construction of the two units in the second block of the Tianwan Nuclear Power Plant is also underway.
  • The parties have reached agreements to build a long-distance wide-bodied aircraft and a heavy civilian helicopter. They have also signed an agreement to draft project documentation for construction of a high-speed railway line between Moscow and Kazan.

At present, experts from Lomonosov Moscow State University and the Chinese Academy of Social Sciences are working on a concept of a bigger Eurasian partnership.

However, implementation of the ambitious plans of both Russia and China is stalled by a number of factors:

  • The One Belt, One Road Initiative (OBOR) is so far just a global political vision rather than a practical investment plan.
  • OBOR countries have poor infrastructure. Its upgrade will require huge investment, and Chinese investors consider about half of these countries to have high risks.
  • The Chinese economy is closed for European imports.
  • Trade barriers between Russia and the EU, US and a number of other countries limit European companies’ possibilities to use the Silk Road land routes going via Russia. The European Union considers the South Railway Corridor – across the Caspian Sea to Azerbaijan, Georgia and Turkey – to be more appealing.
  • The sea route for delivery of goods from China to Europe remains on average about 50% cheaper than the land route.
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