Belt Road Project and the Response of EU and EUEA in 2020

Updated: Aug 5

Akash Manwani,

Research Intern,

Internationalism


The Eurasian Economic Union


The Eurasian Economic Union (EAEU) was established in the year 2015, with the objective of promoting the free flow of goods, capital, services and labour among its member States, which currently comprise of Russia, Armenia, Belarus Kazakhstan and Kyrgyz. The EAEU seemed like a highly refurbished form of its predecessor Eurasian Customs Union (ECU) however for the West, it was seen as an apprehensive brainchild of Russia aiming to foster influence on a bloc of countries in order to monopolise trade competition with the European Union (EU)[1]. Though the EAEU had significant achievements to its credits, the recent operations don’t demonstrate a promising future in the sense that its deep-rooted aspiration of a common language and currency, similar to its counterpart the EU, is far from materialization. This disintegration is a direct result of prioritization of divergent prospects of all the individual member states. Russia’s aspirations for EAEU is to further its own political and strategic interests, whereas Kazakhstan, which is an active post-Soviet state is looking for pure investment and economic proliferation without security or political pressure and other smaller states, like Belarus, Kyrgyzstan and Armenia are expecting economic benefits from Russia[2]. Among all these hostilities, it is speculated that the EAEU, rather than taking a route of total dissolution, will subsidise into a Union with minimum and limited activities. It is important for Eurasian states to sustain and act as a unified front due to their strategic geographical advantage which shall play a substantial role in panning out a smooth Belt Road Initiative (BRI) of China.


The Belt and Road Initiative


It is important to evaluate the Belt Road Initiative (BRI) in order to understand China’s potential influence over the EU and the EAEU member states. The object of China’s ambitious initiative of Silk Road Economic Belt is to improvise its transport corridors, gain access to new markets and develop its western territory by establishing rail/road carriage routes throughout the continent of Asia and Europe. It is showcased, not as a major road-building project but, as a prosperity belt which shall flourish development throughout the territories it passes. China is highly dependent on marine transport for its export which is more economical than rail/road transport unless production capacity is developed in western China as it is closer to central Asia and Europe. The BRI proposes 6 potential transit routes through the EAEU member states located between China and Europe[3].


The BRI is the main source of concern and the EAEU, on the other hand, is a common neighbourhood shared by Russia, China and the EU. The EAEU and BRI will serve as catalysts which will be applied to variables in order to gather empirical evidence of fiscal and security threats which China poses to the today’s world and more importantly to EU and the EAEU.


EU-China relations on EUEA and BRI


China is the second-largest economic partner of the EU, after the United States of America (USA) while China’s largest economic partner is the EU. Although the trade involves high stakes and benefits at both ends, the EU expects China to function within the four corners of international standards. For instance in 2016, due to China’s dumping activities, it lost the market economy status (MES) in the EU Parliament which bashed a strong statement, “a fair partnership is only possible if China plays by the rules of free and fair international trade and honours the WTO obligations”. Although the EU relations with China involves major transactions, it is a conscious one and the EU is far from calling China its eminent companion. The EU seems to express worries about the BRI and is critical about the imposition of Chinese standards and dominance in Eurasia.

The answer to China’s BRI is the EU’s strategy to develop European-Asian relations by inculcating European ways of “sustainable, comprehensive and rules-based connectivity”[4]. This is an effort of the EU to establish international standards countering plausible imposition of Chinese standards in Eurasia and Central Asia. The need for the EU to counterbalance China arises on account of the nature of Chinese economic structure itself. China is a non-market economy whose trade is essentially monopolized by the government. It is this object of the EU to promote market based economies at home and otherwise, which encounters a need for counterbalance[5].

China is rigorously pursuing trade with the EU through its own measures like the ‘17+1’ initiative wherein 12 represents a number of European states, 5 represents the Balkan countries and 1 being the integration of China itself. The EU is not immune to internal political jargon. The individual member states, having strong dealings with China, are reluctant to give up individual remunerations for group resolutions. China has been signing major Bilateral Investment Treatise (BIT) with individual member states of EU, thereby attempting to exert influence on votes in the European Parliament. One such instance is the Chinese acquisition of a 51% stake in the Piraeus Port Authority, which is the largest harbour in Greece. Soon after the acquisition, there was an unprecedented growth on account of the introduction of Chinese technologies in the administration of the Port and it has seen an increase of 300% in marine traffic[6]. The Eastern European countries have closely watched such acquisitions and asserted huge value to Chinese investments. China has made substantial investments in Greece, Hungary and the Czech Republic, wherein now it is known as “the unsinkable aircraft carrier for expansion” in Europe[7]. Lucrative monetary incentives cloud the risks associated with such BITs in which the dispute resolution clauses are majorly Chinese favoured, by setting a predetermined venue for Arbitration in China[8].

Post-Brexit, Germany’s stance has been closely watched, considering it is the next driving force of the EU. Recently, Federation of German Industries (BDI) had released a policy paper critically referring to China as a ‘systematic competitor’[9] in response to the Chinese takeovers of some of the major German companies. Although a wave of a joint European effort to counter China was on the move ultimately, the furtherance of trade and economic activity has taken precedence over concerns of undemocratic persecution of Muslims in China, forceful technological transfer and intellectual property theft by the Chinese, thereby succumbing to its economic might.

Germany has accepted huge Chinese investments in efforts to develop western German city of Duisburg and to make it a smart city with Chinese powered 5G technology wherein some are terming the city as “China’s gateway to Europe”. With Germany’s softened stand on China, it will be very difficult for the European Union to introduce international standards in countries under the direct influence of China. Even on account of China’s reluctant response during the COVID-19 pandemic, Germany has feathered away from the United States on account of Trump’s policies and is seeking to relook its relations with China[10].


With respect to EU-Russia relations, the bone of contention is Ukraine considering the recent accounts wherein Ukraine sided with integration into EU against Russia’s wishes. With respect to EUEA and EU, there is no formal communication between both the Unions however, the EU has been actively pursuing economic treatise with the EAEU member states at the bilateral level. Owing to the influence of Moscow over the EAEU, and in reciprocal, even the member states don’t prefer to be locked down by the perimeters of a ‘Russianized’ EAEU. Major developmental projects like Enhanced Partnership and Cooperation Agreement with Kazakhstan (2015) and the Comprehensive and Enhanced Partnership Agreement with Armenia (2017) are examples of the EU’s determination to be associated with Eurasia[11].


Sino-Russian relations on EUEA and BRI


Russia’s role in the acceptance of BRI is a major consideration for China due to the EAEU corridor. Irrespective of the earlier negative-neutral attitude of Russia towards BRI, it came to realize the potential economic benefits and was rather vocal in its support for BRI[12]. Russia has even looked at China for investment and strategic cooperation, mainly due to the sanctions imposed on it by the West[13]. Its aspiration to act as a joint partner, and not as a beneficiary, was not articulated in the earlier stages of the announcement. To comprehend the rationale behind Russia’s preliminary stance of non-interference, it is important to understand Russia’s goals for itself at the global scale. Surprisingly, Russia was not running in the race of becoming the superpower, rather its goal aligned more towards achieving its political objectives, which was exerting influence and autonomy over post-Soviet states.

Although it has shown support for the BRI, it has maintained a safe distance from Chinese standards[14]. Very recently in 2019, Putin announced that “Russia with its unique geographic location is willing to engage in this joint activity[15].” Russia now wants to play a bigger role in the BRI. Its differentiated stance has come on account of the realization of its importance in the success of the project and its own economic deterioration. It is understood that Russia will not engage in an all-out dispute thereby threatening the project itself, but will propel China for a more inclusive initiation for itself and the EUEA. Although in circumstances where Russia takes a staunch stance on its involvement, there will be a major power disparity and it will be very difficult to find a common equilibrium for both the countries to agree upon[16]. The individual member states have been rigorously trying to have a trialogue, between Russia, the EU and itself, for better developmental prospects. China, on the other hand, is vying for better integration of the EUEA for a smooth BRI project.


Conclusions


China’s loan/investment diplomacy has made several nations indebted to it. Chinese are also known to be notorious in demanding controversial compensatory actions in exchange for writing off such loans. Trade with China also means loss of valuable intellectual property and data theft. Furtherance of democracy and maintenance of basic equitable standards in trade is one of the objects of the EU and other democracies around the world. But with the EU grappling with economic paucity, lack of internal cooperation, the United States reducing its footprint in global politics, Eurasian and African countries constantly falling into the trap of systematic Chinese debts, failure of international organizations to act with force, Russia seeking to partner with China and its unlimited supply of monies financed by the State itself, makes the world vulnerable to Chinese ambitions. The international community needs to prioritize ethical business over profits and make an informed decision between short term gains and perpetual/long term security.


References

[1] David G Tarr, International Trade Analysis, 31st August 2015, http://ssrn.com/abstract=2185517

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