Table of Contents

iii Preface Johannes F. Linn, Distinguished Resident Fellow, Emerging Markets Forum, Washington, USA Leo Zucker, Project & Research Associate, Emerging Markets Forum, Washington, USA

1 Building the Belt and Road: The Impact on and Hu Biliang, Dean, Emerging Markets Institute; Director, Belt and Road Research Institute, Beijing, China

1 1. Background: China and Central Asian Countries Are All Developing Countries 1 2. The Economic Development of China and Central Asian Countries Faces Constraints 2 3. Building the Belt and Road: Conducive to Easing the Economic Development Constraints facing China and Central Asian Countries 3 4. Cooperation between China and Central Asian Countries is Conducive to Promoting Common Economic Development 4 5. How to Promote and Build the Belt and Road in Central Asia 5 6. International Platforms to Promote Development in Central Asia 6 7. Cooperation with Major Countries to Jointly Promote the Development of the Belt and Road Initiative in Central Asia

9 European Perspectives on the Chinese Belt and Road Initiative Michael Emerson, Associate Senior Research Fellow, Centre for European Policy Studies, Brussels, Bel- gium

9 1. Introduction 9 2. Transport Infrastructure for EU-China Trade 10 3. The EU’s Interests in Central Asia and the South Caucasus 11 4. Regulatory Issues in Central Asia and the South Caucasus 12 5. Trade Policy Aspects for Central Asia and the South Caucasus 13 6. Trade Policy and Legal Aspects in EU-Chinese Relations 14 7. China’s 16+1 Initiative 16 8. China’s Growing Strategic Presence in Europe 18 9. Conclusions 19 Annex: Issues Warranting Further Research 19 References

i  TABLE OF CONTENTS ii 49 References 43 41 References 41 39 38 36 35 35 34 References 33 28 23 21 21 21 Rajat M.Nag the IndianPerspective USA S. FrederickStarr Asia U.S. PerspectivesonChina’s BeltandRoadInitiativeintheSouthCaucasusCentral 5. Conclusion Economic Development,andInvestments 4. TheNeedforNationalandRegionalInstitutionalCapacitytoManageBRI-related PolicyCoordination, 3. ’s Interests 2. OverviewoftheBRICorridorsthrough Russia,CentralAsia,andtheSouthCaucasus 1. Introduction Evgeny Vinokurov The BeltandRoadInitiativefrom aRussianPerspective 5. Conclusions 4. ’s PossibleReactions 3. India’s PerspectivesontheBeltandRoadInitiative 2. India-CentralAsiaRelations 1. Introduction Study ontheBeltandRoadInitiativeinCentralAsiaSouthCaucasus:ANote , DistinguishedFellow, EmergingMarketsForum, , , Chairman,CentralAsia-CaucasusInstituteandSilkRoadStudiesProgram, ChiefEconomist,EurasianFundforStabilizationandDevelopment, Washington, DC Moscow, Russia Washington, Preface

Johannes F. Linn and Leo Zucker

The Belt and Road Initiative (BRI) is a development a success (or a failure, as the case may be). This Working program undertaken by China, beginning in 2013, with Paper compiles the five background notes prepared by a global reach and potentially far-reaching economic and experts from these outside powers. We believe they con- geopolitical implications. Much has been written about tribute very helpful insights for all stakeholders in the CASC various aspects of the BRI since its inception, with a lot region as they try to gain a comprehensive understanding of speculation on China’s motives in launching the initia- of the potential benefits and risks of the BRI. tive, its current and expected future scale, and its possible Based on these ten background notes and on addi- impact on participant countries. Most of the literature on tional research, we have prepared an overview paper which this topic has been contributed by experts and journalists provides an assessment of what we know about the BRI in from industrialized countries and based on the limited infor- the CASC region, including its potential benefits and risks mation available on the BRI at a global level. Little has been (as seen from the perspective of participating countries), written by experts from the participating countries based how outside partner countries are likely to engage with it, on country- and region-specific information; an “inside-out” what policy responses are appropriate, and what issues view of the BRI is needed.1 could be usefully addressed by future research. The Emerging Markets Forum, with financial support from the Swiss National Bank, has undertaken a study of the BRI’s impact on the eight countries of the Central Asia and South Caucasus (CASC) region with the goal of filling this gap. It has commissioned five experts in the region to prepare notes on the BRI in the authors’ respective coun- tries. These notes are compiled in an Emerging Markets Forum Working Paper. The Emerging Markets Forum has also commissioned a set of five background notes on the perspectives of five outside powers (China, Russia, the , India and the United States of America) on the BRI in the CASC region. Most countries in the region have a multi-vector approach to their external relations and hence would expect to rely on multiple partners to help advance their national economic and political agendas. Moreover, it is clear that, for the best possible impact of the BRI, cooper- ation not only among the countries of the region and with China, but also with other partners—bilateral and multi- lateral—will be needed. It is thus important for the CASC countries to understand the motivations and concerns of the outside powers that may have a role in making the BRI

1. See the comprehensive annotated bibliography compiled for this current study: http://www.emergingmarketsforum.org/wp-content/up- loads/2018/10/BRI-Annotated-Bibliography-2018-10-19.pdf

iii

Building the Belt and Road: The Impact on China and Central Asia

Hu Biliang

1. Background: China and Central Asian (82 percent), while the Kyrgyz Republic and Countries Are All Developing Countries have reached only 11.4 and 7.5 percent of world average, Among the 185 countries for which the World Bank respectively. presents per capita GDP in current US dollar prices, China This demonstrates that China and the five Central and the five Central Asian countries rank relatively low.1 Asian countries are all developing countries, among which Take 2017 as an example: Kazakhstan, the group leader, Kazakhstan, China and Turkmenistan are middle-income has a per capita GDP of only US$8,838 and ranks 71st in developing countries, while the other three countries are the world; China lies second among the six countries with low-income developing countries. Therefore, the priority US$8,827 and ranks 72nd globally; Turkmenistan ranks of these six countries is to promote development, espe- 80th with US$7,356. As for the other three countries, there cially economic development, and to improve the income is a huge gap. The per capita GDPs of these countries are levels and living standards of their populations as quickly just over US$1,000, or even less than US$1,000 (Table 1). as possible. In particular, because of their comparatively According to the World Bank, the two highest-ranked lower income levels, , the Kyrgyz Republic and countries in terms of GDP per capita in 2017 were Luxem- Tajikistan rank among the world’s 35 poorest countries. bourg and Switzerland, at US$104,103 and US$80,190, respectively. The world average GDP per capita was 2. The Economic Development of China and US$10,714 in the same year. We find that the per capita Central Asian Countries Faces Constraints GDPs of China and the five Central Asian countries have As the largest economy in the world for a long time, not reached the world average. Kazakhstan and China China once led the world’s economic development. The have reached just over 80 percent of the world average five Central Asian countries have also had a glorious his- tory, especially in the nearly 500 years around 1000 AD,

1. Afghanistan is not included in Central Asia here, although some ob- which is known as the “Golden Age” of Central Asia. At servers count this country as belonging to Central Asia, and indeed a persuasive case can be made for Afghanistan to be included as a part that time, Central Asia led in trade, manufacturing, tech- of the Central Asia region. The same cannot be said for Pakistan, mainly nology, and finance. Later, due to the opening of sea because both China and Pakistan have already made considerable efforts to build the China-Pakistan Economic Corridor, with China having already routes from Europe to the East, coupled with religious spent a great deal of money, and a separate economic corridor is already established. Thus, under the Belt and Road Initiative it would not be not conflicts and other factors, the “Golden Age” of Central suitable to include Pakistan in the definition of the Central Asia region. Asia gradually faded. Table 1: Level and Global Ranking of China Therefore, in terms of economic development, China and Five Central Asian Countries by GDP Per and the five Central Asian countries have a very glorious Capita past, and they have very strong desires to achieve a great Current Global revival of nationhood. However, with historical develop- US$ Ranking ment, the situation has undergone dramatic changes. Kazakhstan 8,837 71 Currently, economic development in both China and the China 8,827 72 Turkmenistan 7,356 80 Uzbekistan 1,504 150 Kyrgyz Republic 1,220 154 Tajikistan 801 164 World Average 10,714 Source: World Bank

1  HU BILIANG 2 Asian Countries five Central Asian countries has been subject to some consumption of110.59milliontons.In2017,China’s net consumed 237.3 billion cubic meters of natural gas, of year inverylargequantities.In2017,Chinaimported420 chemical and pharmaceutical production, as well as some constraint istheregion’s underdeveloped manufacturing conditions thanother three countries.IntermofInternet accounted for an even higher proportion: China imported and Uzbekistan,leadingtohighertradecosts.Theother access, theproportion isvery ofpeopleusingtheInternet so on. However, on the whole, the economic development stan andUzbekistanhaveasmallnumberofventures for so. ForTurkmenistan, thesituationisextremely bad.As serious constraints. with roads, whiletheotherthree countries are muchless which 83.8billioncubicmeterswere imported,accounting that year. tion wasonly190milliontons;importsthusaccounted these commoditiescannotmeetcurrent demand.There to economicdevelopmentcurrently exist.Oneistheregion’s for 35.3percent ofannualconsumption.Soybeanimports for 68.9percent oftotaldemand.Inthesameyear, China fore, Chinamustimportfrom marketevery theinternational for railways,KazakhstanandUzbekistanenjoybetter for 46.5percent ofthetotaldemand of2.3billiontons 2.2. ConstraintstoChina’s EconomicDevelopment 2.1. ConstraintstoEconomicDevelopmentinCentral 95.42 milliontonsofsoybeansfrom theinternational market, accountingfor86.3percent ofthetotaldomestic million tonsofcrudeoilwhiledomesticproduc resources, especiallycrudeoil,naturalgas,iron ore, soy ment constraint is thedomesticsupplyofcertainnatural primary products andimporting manufactured goods. model ofCentralAsiancountriesisstillbasedonexporting production oftextiles,cement, aluminum,wine,dairy, and production of automobiles, trucks and buses, and Kazakh poor transportation and communication infrastructure. Kazakhstan andUzbekistanare relatively betterendowed import ofiron ore reached 1.07billiontons,accounting industry. Uzbekistanhassomesmalljointventures inthe beans, and so forth. In China, domestic production of low in Central Asia, and particularly in the Kyrgyz Republic In China’s case,averycriticaleconomicdevelop For the five Central Asian countries, to main constraints For thefiveCentralAsiancountries,tomainconstraints - - - - - The firstrailwaytunnelbuiltbyChinesecompaniesinCen China andCentralAsiancountrieshavecompletedsome development constraints facing the two sides mentioned China-Kyrgyz Republic-UzbekistanRailway China andwithothercountriesthrough China. Central Asia—andinextremely difficult “highmountain” countries ofCentralAsiawillbe more closelylinkedtothe Once thesetworailwaysare completed,thelandlocked on theSino-Kazakhborder, thuspromoting tradewith opened totraffic onAugust 24,2016afterjust15months. aspects oftheseconstraintscanbecompletelyeliminated. above can be alleviated to a large extent, and some allows it to transport its goods through the Yellow Sea to areas Tajikistan, of central and southern no less. After strengthening cooperation. If the five Central Asian coun starting constructiononMay15,2015,itwassuccessfully 3. BuildingtheBeltandRoad:Conduciveto 3.1. China Helps Central Asia Countries Build and 3.2. TheBelt and Road Connects Central Asia Coun South Korea, through the EastChinaSeatoJapan,and way built by Chinese railway construction enterprises in way, Kazakhstanhas,ineffect, aportinChina,which was alsoopenedinJune2016. the Wahdat-Yovon Railway (Wahdat-Yovon), the first rail tries strengthen cooperationwithChina,theeconomic they havebeguntorealize theimportanceandvalueof through theSouthChinaSeatoSoutheastAsiaandother tral Asia was Uzbekistan’s Angren-Pap railway tunnel. It Improve Transportation Infrastructure In theory, thisshouldbethecase.Whatisreality? Let regions. KazakhstanhasalsocooperatedwithChinato park inLianyungangCity, JiangsuProvince, China.Inthis us lookatsomespecificfacts. na-Kyrgyz Republic-Tajikistan-Afghanistan-Iranian Railway. Kazakhstan andChinahavejointlyestablishedalogistics tries withtheOutsideWorld important transportationinfrastructure projects, suchas increasingly recognized theabove-mentionedconstraints, build theKhorgosEconomicandTrade ZoneinKhorgos Easing theEconomicDevelopmentConstraints facing ChinaandCentralAsianCountries As China andthefiveCentral Asian countries have Under theframeworkofBeltandRoadcooperation, Under the framework of BRI international cooperation, Under theframeworkofBRIinternational In themeantime,Chinaispreparing tobuildthe

and theChi - - - - - BUILDING THE BELT AND ROAD: THE IMPACT ON CHINA AND CENTRAL ASIA  3 - - - - - Due to different natural endowments and states of eco Due to different Evidently, to China, the value and significance of Cen to China, the value Evidently, As for petroleum pipelines, the China-Kazakhstan China-Kazakhstan the pipelines, petroleum for As largest commodity importer for every Central Asian country ing Tajikistan and the Kyrgyz Republic to Wuqia County in County Wuqia to Kyrgyz Republic the and Tajikistan ing per year. is 30 billion cubic meters Belt and Road Initiative provides mutual benefit. It builds on builds It benefit. mutual provides Initiative Road and Belt trade and investment cooperation with By strengthening D line natural gas pipeline, which is still under construction, construction, under still is which pipeline, gas line natural D nomic development, economic cooperation between Chinanomic development, economic cooperation petroleum pipeline starts in Atyrau in western pipeline starts in Atyrau Kazakhstan petroleum oil transmission capacity is 20 miles. Its designed annual well right now. million tons. It operates for about 60 percent of China’s total gas import volume, volume, total gas import of China’s for about 60 percent the complementarity of natural resource endowments and the complementarity of natural resource of China and Central Asia, further the geographic proximity will lower transport improvements transport infrastructure tral Asian countries are mainly reflected in energy exports. exports. energy in reflected mainly are countries Asian tral seeks to develop complementary economic structures, structures, economic complementary to develop seeks their own so that all countries can ultimately overcome starting at the Turkmenistan-Uzbekistan border and cross border the Turkmenistan-Uzbekistan starting at and Central Asian countries under the framework of the of the and Central Asian countries under the framework and natural gas to meet its urgent demands (China is the to due Additionally, need. they development industrial and and extends to Alashankou in China, a distance of 2,800 and extends to Alashankou reached Kazakhstan have from imports oil and China’s China is now the larg about 100 million tons. Therefore, and Uzbekistan. of their populations. constraints and achieve shared economic development. development. economic shared achieve and constraints economic coop by strengthening except Turkmenistan); eration with China, Central Asian countries can obtain the development the economic boost greatly will which costs, the living standards of China and Central Asia and improve est energy export market for Kazakhstan, Turkmenistan Turkmenistan est energy export market for Kazakhstan, Xinjiang. The designed gas transmission capacity of line D capacity of designed gas transmission Xinjiang. The Common Economic Development Central Asian countries, China is able to obtain crude oil crude oil obtain to able is China Asian countries, Central improvements infrastructure investment, goods, Chinese Currently, natural gas imports from Central Asia account Central Asia account natural gas imports from Currently, Asian Countries is Conducive to Promoting Asian Countries is Conducive to Promoting 4. Cooperation between China and Central 4. Cooperation between China and ------By the end of 2016, China’s investment in Central Asia By the end of 2016, China’s In Central Asia, China advances internationalIn Central Asia, China capacity China needs to import a large amount of both petro lines have started gas transmission. In addition, there is a lines have started gas transmission. In addition, there leum and natural gas, so China has built a relatively leum and natural gas, so China has built a relatively Turkmenistan-Uzbekistan the B, which run from A and lines had reached US$9.14 billion, with the largest investment had reached border via Uzbekistan and Kazakhstan to Alashankou in via Uzbekistan and Kazakhstan to Alashankou in border ity is about 30 billion cubic meters. Both pipelines mainly ing natural gas pipelines and oil pipelines. The natural gas ing natural gas pipelines and oil pipelines. in Kazakhstan of US$5.43 billion, accounting for 59.4 per in Kazakhstan of US$5.43 billion, accounting China is also exceeded Russia’s; its investment has greatly industrial development. Kyrgyz Republic to promote the development of modernKyrgyz Republic to promote mainly carries Uzbek gas. These three natural gas pipe mainly carries Uzbek gas. These three pipelines include the China-Central Asia natural gas pipe more than 1,000 new jobs for local people and 20 per 20 and people local for jobs new 1,000 than more Natural Gas for China Industrial Park, which not only promotes the development only promotes which not Park, Industrial Increasing Parks in Central Asian Countries Parks in Central Asian the Khorgos port in Xinjiang, has a designed annual gas the Khorgos port in Xinjiang, has a designed annual gas transmission capacity of 25 billion cubic meters. Line C the Turkmenistan-Uzbekistan border but enters China at but enters China at border the Turkmenistan-Uzbekistan the largest investor in Turkmenistan, the Kyrgyz Republic the largest investor in Turkmenistan, wholly-owned Asian Star Agricultural Industrial Park in the wholly-owned Asian Star Agricultural Industrial 3.5. Central Asian Countries Provide Petroleum and and Petroleum Provide Countries Asian Central 3.5. 3.4. Chinese Investment in Central Asian Countries Is 3.4. Chinese Investment in Central Asian 3.3. China Has Built Industrial Parks and Agricultural Parks and Agricultural Has Built Industrial 3.3. China second-largest source of investment in Kazakhstan, and of investment in Kazakhstan, and second-largest source and Tajikistan. agriculture in Central Asia. agriculture agriculture. China has set up the US$2 billion China-Ka China has set up agriculture. carry Turkmen gas; the C line, which also originates at also originates at gas; the C line, which carry Turkmen complete energy pipeline network in Central Asia, includ Asia, Central in network pipeline energy complete cent of the total investment stock. China has become the cent of the total investment stock. China cent more tax revenues for the state budget. Additionally, for the state budget. Additionally, tax revenues cent more of processing industries in Uzbekistan, but also provides but also provides industries in Uzbekistan, of processing cooperation, builds industrial parks and promotes modern parks and promotes cooperation, builds industrial outside world, which will greatly promote their trade and trade and their promote which will greatly outside world, Xinjiang Autonomous Region. The total length is about Xinjiang Autonomous Region. The total length is about Chinese private-owned companies have established a established a Chinese private-owned companies have developing high-quality production capacity in Kazakhstan. production developing high-quality have jointly established Pengsheng China and Uzbekistan zakhstan Production Capacity Fund for the purpose of Fund for the purpose of Capacity zakhstan Production 10,000 kilometers and the annual gas transmission capac  HU BILIANG 4 “2030 NationalDevelopmentStrategy They also Asian document Chinese enterprisesand discussion o China. Thenonthisbasis,thetwopartieswill of theBeltandRoad, of reaching of relevantcountries. country thatis of and selectedprojects. a formalagreementwithChinaontheco-construction and constructionplanwillbeproposedcarriedoutby and and promotion procedures,thestartingpoint of Belt C Strategy” andKazakhstan’skeydevelopmentstrategies. with their In this way, China and its Central Asian partners have projects ofcommoninterest forwhichconstructionhas reached acollectiveunderstandingandidentified some respective developmentstrategiesandplansto no doubtthat 5.1 Road Initiative has already been linked with 5. HowtoPromote andBuildtheBeltRoad Memorandum of it, it is usually impossible to start a construction project. including it is necessary to ensure the its in-depth discussionsonBeltand investment projectsofcommoninterest.Afterin-depth begun, andissomecaseshasalready beencompleted. based on such in-depth discussions, China’s Belt and in CentralAsia lic ooperation ’s “Stable Development Strategy

Revival oftheAncientSilkRoadstrategy,andlinked an . Once the projects of common interest are determined, So far,withtheexceptionofTurkmenistan, In From theperspectiveofinstitutionalframework Road internationalcooperationliesinthesigning The PrioritiesandProceduresofI countries have signed intergovernmental cooperation countrieshavesignedintergovernmentalcooperation intergovernmental cooperation document, the the case of

in such areas as s engage in national on consensusonhowtolink n on the adequate funding the project building the willingtoparticipateincooperationand Turkmenistan development strateg Understanding substantive discussion Belt the country and Belt andRoad security and funding. There is s , a very detailed investment ir , although it Road isacrucialissue.Without smooth R , ” Uzbekistan’s “Action (MOU),between hasalsoconducted oad constructionand from , ” the KyrgyzRepub ies jointly BRI investments implementation, or governments has not signed . s nternational

For example, with theaim

Tajikistan’s check with China. with China. Central identify their a s -

decisions are basedontheactualneedsofbothparties, Generally, China is the one that invests the most, and other development project inv debt risks. Company Ltd.(CCCC),andwhenthiscompanychooses financial viability one country being in the lead and other countries following. ciple of “Consulting (planning) together, Building together countries usuallyinvestlessthanhalf. owners company in companies. For example, Asian Star, an agricultural grants fromaswell othergovernments, interna donations and on grants,includingChinesegovernment ect constructionandforChina’s constructionenterprises. and Sharingtogether.” Inshort,actionsare discussed, any project isbasedononebasicprinciple,thatis,theprin and Roadprojects, themostcrucialcriterionisthat ability tocontrol debtrisk,bothforthecountryofproj solve thefundingproblem viaaPPPmodel,aswell win-win situation.Therefore, thedesignofanddecisionon that theyare conducivetothecomplementarydevelop through the participation of various partners to mitigate tional financial institutions. In Kazakhstan, many projects to buildaproject, thefirst consideration istoensure appro the completedproject for choosingaconstructionproject for enterprises, Belt perspective ofpoliticsandsocialdevelopment;however, ment of both sides, with mutual benefit so as to create a project are typicallydiversified,withmanyprojects relying priate fundingfortheproject. The fundingsources forthe negotiated and decided jointly by the parties instead of need toconsiderwhethertherewillbeenoughreturn 5. 5. Republic are builtbyChina CommunicationsConstruction For example,80percent ofnewhighwaysintheKyrgyz Kazakhstan, IfoundthatChinesecompanieshaveastrong investment project.Allinvestments 3. Manag 2. Main Through field research on the Kyrgyz Republic and Some investment projects come from private In choosingBeltandRoadpartnercountriesor For the government, there are many considerations and who Road Criteria ing arecurrentlyoperating the KyrgyzRepublic

. D P the priorityconsiderationisaproject’s This ebt roject and meansthattheenterprises R

to repay anydebtandmake aprofit isk s B olving investment asic P rinciples , isaprivateenterprise for it it profitably. , including come from private come fromprivate for S by a Chinese from electing involved from the - - - - - .

BUILDING THE BELT AND ROAD: THE IMPACT ON CHINA AND CENTRAL ASIA  5 , - - - - - of Belt Belt to the to the the Belt and Belt and will play a it SCO member the

From the EEU’s EEU’s the From . and the under the two sides are able the two sides are EEU Therefore, Therefore, the construction of these the construction cannot establish a good a establish cannot . two of the six corridors , China and its Belt and Road China they Hence, one would expect that Hence, one would expect that . with with these corridors these extremely disadvantageous extremely

From this point of view, using the SCO using of view, this point From . If they are to build an integrated is very close. If backbone for backbone will be . limited the current economic strength of the EEU the current economic strength of the EEU , it he main Initiative organization like the European Union, cooperation are t are Initiative (EEU) From China’s perspective China’s From Finally, the SCO has attached great importance to importance to attached great the SCO has Finally, When China initially proposed the Belt and Road Ini When China initially proposed The relationship between the . establish a good cooperative relationship, establish a good cooperative relationship, impossible to promote impossible in trade and investment ism and separatism. It has held regular joint anti-terrorism joint anti-terrorism It has held regular ism and separatism. secu law enforcement security, in the domains of defense a good provide ian cooperation within the SCO therefore Road Economic Belt does not establish good cooperative Road Belt and Road Initiative is not only of great significance, but is not only of great Belt and Road Initiative relationship states, it will be member its and EEU the with relations perspective, member states of the SCO currently have good safeguards have good safeguards SCO currently member states of the turnin This forth. so and laid has security, information rity, the development of Central Asia. promoting Initiative as a factor that would help accelerate the inte Initiative will be essential Initiative will tiative, Russia may have had some concerns, but Russia Federation Russian the and China of Republic People’s the to by China pass the Silk Road Economic Belt advocated of the Silk through EEU countries. If the construction Union Economic Eurasian the of countries member the to focus on the “three evil forces” of terrorism, extrem terrorism, of forces” evil “three the on focus to 6.2 will seek cooperation soon realized the positive significance of the Belt and Road and Belt the of significance positive the realized soon strong states efforts no sparing beginning, the from cooperation security for advancing the Belt and Road agenda and safeguard and Road as the platform to actively promote the construction of the the to actively promote as the platform also highly feasible. and promotion a good foundation for the implementation gration of the EEU. Thus, on May 8, 2015, President Xi Xi President 2015, 8, May on Thus, EEU. the of gration on the Construction of the Silk Road Economic Belt and very positive role for both; if both; for role positive very countries is consists mostly of SCO members consists mostly corridors. economic and humanitar of Belt and Road cooperation. Security development of both. drills such as the “Peace Mission” over many years. Hence,over many such as the “Peace Mission” drills Jinping and President Putin signed the “Joint Statement of Jinping and President

- - - - - out per , the were were their their of the across across current current

popula the SCO as well as as well as framework land-based total Initiative he overall percent participated in not only signed not only signed . T BRI’s BRI’s distributed Eastern Northern Eastern Northern the six serious problems. improve connectivity, connectivity, improve have romote have are and the development P . In other words, actively also Belt and Road

to s herefore, the eight countries eight the herefore, but and promote the developmentthe promote and Belt and Road cooperation is Belt and Road cooperation is rom the current situation, except in the Belt and Road f of the SCO 15.2 trillion, accounting for 65 cooperation BRI would face of regional distribution, the distribution, regional of latform effectively, it will as well as parts of under the

2 P , Central Asia Central country coverage of US$ n actively Judging f is the large overall demographic size of is the large overall demographic size of . cooperation, East, Central and ,

countries in terms in As a key role, t role, key a As . Obviously, if the eight SCO countries , . reason why the SCO is of great significance reason why the SCO is of great significance GDP is In this region, i In this region, . According to statistics from the World Bank, in World Bank, from the statistics to . According first participate member regions of regions nternational nternational In addition, the Secondly The There were at least two important and historically historically and least two important at were There

I the Asian region evelopment i evelopment . look for continued BRI cooperation by SCO members members SCO by cooperation BRI continued for look D basically accounts for two-thirds of the between China and Central Asian countries. is promising. implementation of the North Asia and Northeastern Europe thanks to Russia’s North Asia and Northeastern thanks to Russia’s Europe Belt and Road Europe. President Xi Jinping highlighted the importance of the SCO Xi Jinping highlighted the importance President 2. Except for the China-Indochina Peninsula economic corridor. not to relevant agreements with China on the implementation of relevant construction projects maintain peace and stability and peace maintain and the influence of the SCO member coun prosperity membership role in promoting economic cooperation and development role in promoting economic cooperation platform in the future and will play an increasingly importantplatform in the future for India, the other seven countries tries throughout the tion and GDP the SCO the 67 the SCO was 3.1 billion, accounting for Belt and Road total population of the countries along the to both Belt and Road 6.1. Shanghai Cooperation Organization (SCO) Cooperation Organization 6.1. Shanghai significant developments at the SCO Summit held in at the SCO Summit held in significant developments their since time first for the conference the attended stan able to take the lead economic corridors of eight cent of that of all 64 BRI countries combined of Central Asia countries joined the SCO in June 2017; second, Chinese countries joined the in Belt and Road cooperation.countries’ active participation Qingdao this year: first, heads of state of India and Paki Qingdao this year: first, (referring to 64 countries not including Palestine); (referring to 64 countries not including 2016, the total population of the eight official members of 2016, the total population of the eight official 6 Therefore, the SCO will be a very important international will be a very important international Therefore, the SCO  HU BILIANG 6 Tajikistan, Turkmenistan zone; (5)creation ofagoodenvironment forthedevel development ofCAREC Central AsiaRegionalEconomicCooperationInstitute development intheCentralAsianmembersofEEU, expansion offinancialcooperation. opment ofsmallandmedium-sizedenterprises;(6) on promoting theestablishmentofaChina-EEUfree trade cross-border economiccooperationzones;(3)implemen cooperation projects tojointlybuildindustrialparksand employment; (2)implementationoflarge-scaleinvestment elements for intensified cooperation: (1) expansion of and Road construction advancement oftheBeltandRoad and as wellinincreasing employment opportunities are expectedtoplayavery positiverole inpromoting infra same time structure construction,trade,investmentandindustrial struction oftheSilkRoadEconomicBeltandiswillingto (CAREC) Program work closelywithChinatopromote theimplementationof 6.3 the BeltandRoadInitiative traditional the potentialfor tation ofinfrastructure developmentprojects; (4)research the initiative.ChinaalsosupportsRussiaactivelyinpro the ConstructionofEurasianEconomicUnion.”The Initiative advocatedbyChina. projects may play an play asupportingroleinpromotingtheBeltandRoad moting theintegrationprocess withintheframeworkof undertake moreresearchand training taskslinkedtoBelt Kazakhstan, EEU countries to promote economic growth and expand Eurasian EconomicUnion. Road Initiativewillalsoprovide theimpetusforbetter in Xinjiang its membercountries integration and further development of the EEU will also investment andtradecooperationbetweenChinathe joint statementclearlystatedthatRussiasupportsthecon . This shows This jointstatementcontainedthefollowingkey China has already supported the establishment of the China attachesgreatimportancetoCAREC trade cooperation) Central AsiaRegionalEconomicCooperation increasingly , AutonomousRegion cooperation priorities(transportation,energy with thehighdegree of the Kyrgyz Republic rely that ChinaandtheBeltRoadInitiative mutualbenefitandwin-winsituations,the on CAREC; importantrole. (Afghanistan, , , and m are , and and .Therefore, withthecontinuous highlyconsistent Uzbekistan)and ore and more construction mak

meanwhile, . Inthefuture,it e , Mongolia, Pakistan, interdependency Initiative itmoredynamic withthoseof the , CARECwill , CAREC’s Belt and because , . At the may and as as - - - - -

7. CooperationwithMajorCountriestoJointly Asia China willcontinuetopromote thisimportantcooperation Clearly, Chinasincerely hopestoworkcloselywithEU destinations oftheChina-Europe RailwayExpress are development inCentralAsia. (UNIDO), theUnitedNationsConference onTrade and (ADB), Asian Infrastructure Investment Bank (AIIB), Euro opment Bank (NDB). Other international organizations opment Bank(NDB).Otherinternational organizations inpromoting the construction oftheBeltand countries topromote the BeltandRoadInitiative.Yet so cooperation withChinatopromote economic andsocial cooperation as the United Nations Development Programme (UNDP), and mutualpromotion. and henceamajorreason topromote theBeltandRoad organizationsin actively supportstheworkofinternational and expressingpositivecooperationintentions. standing (MOU) on cooperation Belt and Road cooperation standing (MOU) on cooperation Belt and Road cooperation signed BeltandRoadcooperation agreements withChina. spread across 48citiesin15countries,allEuropean. organizations supports theparticipationofinternational still so forth. with more organizations,including than30international well. Itwillbebasedonm 6.4 the World IntellectualProperty Organization(WIPO),and the UnitedNationsIndustrialDevelopmentOrganization the World Bank Group (WBG), Asian Development Bank far, theeffect isunsatisfactory, andnoEUcountrieshave Initiative andthe pean Bank for Reconstruction and Development (EBRD), port of the Belt and Road Initiative generally, and in Programme (UNEP), the World Health Organization (WHO), Development (UNCTAD), theUnitedNationsEnvironment European InvestmentBank(EIB),andBRICSNewDevel Road Initiative,ChinahassignedMemorandaofUnder include institutionswithintheUnitedNationssystem,such in theBeltandRoadInitiative,more generallyalso impact oftheengagementmultilateralagenciesinsup is Initiative inCentralAsia Promote theDevelopmentofBeltandRoad as yet . Judging fromthecurrentsituation, Attaching great importancetotherole ofinternational Europe isanimportantexportdestinationforChina at theinitialphase specifically International Organizations difficult to projectsarestillbe . However, tradedevelopment assess theextentandpotentialpositive , consisting utually beneficialcooperation it is ing prepared clear that

mostly of itwillfacilitate this signingMOUs cooperation is China actively . Therefore,it S Central pecific . The - - - - BUILDING THE BELT AND ROAD: THE IMPACT ON CHINA AND CENTRAL ASIA  7 - - on the Belt Belt the on cooperation will depend mostly For Russia, there is currently no obstacle to Belt and to Belt and no obstacle is currently For Russia, there As for cooperation with the United States States United the with cooperation for As ident Putin have reached a consensus in this regard and consensus in this regard a ident Putin have reached Road cooperation, because President Xi Jinping and Pres President Road cooperation, because EU, but it also will be conducive to promoting the EU’s goal the EU’s conducive to promoting EU, but it also will be proposed it five years ago. proposed the attitude of the United States, not China. will agree. Therefore, signed a cooperation agreement. More importantly, Russia importantly, More agreement. signed a cooperation strengthen cooperation with China on the Belt and Road with China on cooperation strengthen this bewill only not simple: very is reason The step by step. and Road Initiative, China shows a positive and open open and positive a shows China Initiative, Road and cooperate, China attitude. If the United States is willing to and Central Asian countries have obtained numerous tan numerous have obtained and Central Asian countries gible benefits from the Belt and Road Initiative since China the Belt and gible benefits from conducive to promoting the economic development of the the economic conducive to promoting integration internally and internationally. of greater goal. Considering that China is a large market, one would a large market, one that China is goal. Considering and change its attitude the EU will gradually expect that

European Perspectives on the Chinese Belt and Road Initiative

Michael Emerson

1. Introduction between the EU and China. Both routes are solidly estab- This paper addresses the interests of the EU and its lished thanks to huge investments in ships, aircraft and member states in the Chinese Belt and Road Initiative tailored logistic facilities at each end. The sea routes serve (BRI) as a transport infrastructure project facilitating trade the relatively low-value cargoes that do not perish on the between the EU and China—specifically its role in rela- way. The air routes serve to quickly deliver very high-value tion to Central Asia and the South Caucasus—and as a or perishable commodities. The sea route component of component of China’s increasing overall strategic presence the BRI embraces various port facilities on the way, includ- in Europe. ing the Chinese-owned Piraeus port near Athens. The sea The overall picture is far more complex and qualified routes are served by massive and cost-effective container than the political proclamations coming from the Chinese ships that carry the bulk of trade volumes. The air freight side about a ‘win-win’ proposition for all, with several business has the characteristic of great flexibility, arranging cross-cutting arguments coming into play. all possible point-to-point connections that trade flows may A pertinent survey of mainly Western experts’ opinions justify. EU-China trade is currently worth about US$560- about the BRI has recently been undertaken by the journal 600 billion annually, with a physical weight of about 90-100 International Economy. A few major themes dominated the million tons. Of this, only 1 million tons were sent by rail and responses. China is seen as motivated by a convenient nearly 2 million by air freight in 2016, thus making up only combination of domestic economic concerns (to develop a very marginal 1 percent and 2 percent of the total for rail its Western regions and export construction services and and air freight, respectively. Around 80 percent of this traffic related products such as steel and cement where it has is containerized. Total EU-China trade sees over 12 million excess capacity) and its interests in political and economic containers (forty-foot equivalent units—FEUs) transported, power projection broadly across the Eurasian landmass of which only about 1.5 percent are transported by rail. and beyond. For the recipient countries there are risks of The technical and regulatory limitations on the growth accumulating debt burdens unmatched by adequate proj- of rail transport between China and Europe are several. The ect rates of return. This can link to backlash by recipient most conspicuous is the need to cope with differences in governments and populations wary of increasing Chinese width of rail gauges, namely 1,435 mm in China and most influence, of which there are examples already emerging of Europe versus 1,520 mm in the former Soviet Union. (Ang et al. 2018). This is overcome technically with various techniques, but This paper proceeds with a review of the most import- at a cost of time and money. Other regulatory differences ant chapters of European interests and concerns, starting concern, for example, the length of trains, axle loads, cou- with the relatively technical matter of transport infrastruc- pling systems, electrification standards, tariffs, etc., all of tures and ending with geopolitical matters. which are deemed even more troublesome than the gauge differences (Vinokurov & Tsukarev 2017). 2. Transport Infrastructure for EU-China Trade Road routes do not suffer from the particular prob- By contributing to the build-up of intercontinental lem of rail gauges, but road haulage over intercontinental Eurasian transport infrastructure, the BRI is of interest to distances is otherwise hopelessly uneconomic and cli- European business, but only for a certain niche of trans- mate-polluting compared to sea or rail transport. The port services in comparison with what already functions number of organized rail routes from China to the EU has by sea and air freight. Both sea and air routes are wonder- been increasing and the number of containers carried on fully simple, with no frontier formalities at all to perform in

9  MICHAEL EMERSON 10 Vinokurov &Tsukarev (2017).Thestoryinbriefisthatthe Caucasus andonethrough Iran—hasbeenassembledby China and Europe: Shanghai to Hamburg takes 36 days, of Ukraine,epicentercurrent tensions,there haveactu geopolitical tensionsbetweentheEUandRussia,leading gic diversification awayfrom any reliance ontransitthrough of Piraeus,where itconnects withthe‘Balkan Silk Road’ crossings: China-Kazakhstan-CaspianSea-Caucasus-Tur one islogisticallyrelatively simple:China-Kazakhstan-Rus ally beentransitlimitationsimposed byRussiaonUkraine’s attractive land route economically for geographic-logistic attractions anddrawbacks.TheRussianroute isthemost Western ChinatotheEUviaKazakhstanandRussiacosts a considerableamountoftransittimefortradebetween seven routes—five through Russia, two through the South sia-Belarus-Poland. However, theBelarus-Polandcrossing stok costs US$2,200 per TEU. The route from Urumqi in simplest Shanghai-to-EUroute through RussiaviaVladivo Sea, SouthCaucasusandBlackSeacostsUS$9,000. whereas ShanghaitoPiraeus canbe10daysless. trade volumeswithKazakhstan, inparticularforfood trade withCentralAsia.Ukraine hasimportantandbulky to varioussanctionsimposedbybothsides,thecasefor the searoutes, havetheinterest ofgeopoliticalandstrate these routes hasbeenincreasing fastfrom averysmallor US$4,300, and the multimodal route across the Caspian route diversificationisaseriousone.Intheparticularcase reasons. However, the more southerly route, and of course ment toincrease capacitysubstantially. point haslimitedcapacity, andwouldneedheavyinvest previously practicallynon-existentbase. Russia. Europe followthree basiccorridors.Thefirstandmost-used by road orrailupintocore European markets.Thissaves key/Black Sea. hybrid, whichgoesbyseafrom ChinatotheGreek port land-sea multimodal connections as well as more frontier Number ofTrain Departures perWeek (units) Volume ofContainerTraffic (thousandFEU) Note: Source: PRC-Europe-PRC Routes, 2011-2020 Table 1:ContainerTrains’ Frequency ofDeparture andVolume ofFreight Traffic along The EU views these routes as having contradictory This route hastocompetewithathird route, asea-land The secondoneismuchmore complicated,with The actualrailandmultimodalroutes from Chinato A valuable summary of the capacity and current cost of Since recent yearshavebeencharacterizedbyacute FEU = Forty Foot Equivalent Unit Equivalent Foot =Forty FEU Vinokurov & Tsukarev (2017) &Tsukarev Vinokurov 2011 0.3 7 ------2012 14 1 Transport Routeagreement (TITR),asaresult ofwhichthe There isasetofbilateralhumanrightsdialogueswithallfive Trade Area (DCFTA) with the EU. This was due to be the Asian route, whichGeorgia,Azerbaijan,Kazakhstanand China Railway International GroupChina RailwayInternational isexpressing interest in China are also keen to develop. Transport infrastructure five statesofthe region. Thisinvolvesdialogueovermany gian BlackSeacoast. extending across Georgiaheadingtowards EUmarkets. compromise agreement with theEUin 2018. Azerbaijan for case alsowithArmenia,butatthelastminutebefore the ciation Agreement and DeepandComprehensive Free closest relationship iswith Georgia, byvirtueofits Asso and inGeorgiaontheBlackSea.Georgia,Azerbaijan are portdevelopmentsinAzerbaijanontheCaspianSea and road connectionsacross theSouthCaucasus.Anew as common framework for cooperative relations with all society organizations where they exist (Kazakhstan and sional contactswithbothofficial legalinstitutionsandcivil states, which are noteasy matters, but still allowsprofes signing in2013theArmenianPresident waspressured by 3. TheEU’s Interests inCentralAsiaandthe the KyrgyzRepublic).Itgoes without sayingthatneither title maybeanexaggeration,whichnevertheless provides the EAEUinstead.However, Armeniawasabletomakea the Russianpresident intoswappinghorsesandjoining the statesofSouthCaucasusandCentralAsia.The products andmachinery, whosetransitthrough Russia policy questions,twoof which merit special mention. South Caucasus Kazakhstan havesignedaTrans-Caspian International Baku-Tbilisi-Kars railwaylinehasbeencompleted.There Russia nor China extend their presence in the region to investing in the proposed new Anaklia port on the Geor investments are beingmadeorplannedinportsandrail in thetrans-BlackSea-Caucasus-CaspianSea-Central interest insuchmatters. its partseeksanewagreement withtheEU,andalready has beenblocked.Ukrainetherefore iskeenlyinterested has strategicoilandgaspipelinesrailconnections The EUalsosustainsaCentralAsia‘Strategy,’ whose The EUhasstructured cooperativerelations withall 2013 10 2 2014 22 6 2015 16 40 2016 33 74 2020 (est.) 200-250 100 - - - EUROPEAN PERSPECTIVES ON THE CHINESE BELT AND ROAD INITIATIVE  11 ------. www.traceca-org.org , which addresses institutional-legal institutional-legal addresses which , 1 . 2 The strategy is available at This leads into the broader practical problems posed posed problems practical This leads into the broader ‘Strategy of the Intergovernmental Commission TRACECA for develop heavy lifting in funding of infrastructures. Politically, how Politically, infrastructures. of funding in lifting heavy has a permanent secretariat in Baku. There are four sec are in Baku. There has a permanent secretariat by the two international systems of railway transport law agents between the railways, the customs and forwarding barriers for transport and internationalbarriers for transport trade facing all in principle complementary with the BRI, which does the in principle complementary with the BRI, infrastructures. Its main objective is to improve the level of Its main objective is to improve infrastructures. tively documented in M. Rafsendjani and C.-T. Stempfle (2007). tively documented in M. Rafsendjani and C.-T. Maritime Transport), which are responsible for identification responsible are which Maritime Transport), 2. Comparisons between EU (OTIF) and OSJD systems have been exhaus need to streamline transit procedures and border crossing crossing and border transit procedures need to streamline non-physical border barriers. Overall TRACECA aims for barriers. Overall TRACECA aims for non-physical border required; and long registration procedures with numerous with numerous procedures registration and long required; recognized by customs services, covering the whole route by customs services, covering the whole route recognized frictions Border rules of the ‘OTIF’ and ‘OSJD’ respectively. program brings together transport officials and experts and experts officials brings together transport program thus Networks (TENs). The TRACECA is Transport ropean from the point of departure to the port of destination. This to the port of destination. the point of departure from from Bulgaria, Romania, Moldova, Ukraine, the three Ukraine, the three Romania, Moldova, Bulgaria, from ment of the international transport corridor Europe-Caucasus-Asia 2016- corridor Europe-Caucasus-Asia ment of the international transport 2016.’ the absence of both Russia and China. toral working groups (Trade Facilitation, Road, Rail and and Rail Road, Facilitation, (Trade groups working toral inland water railways, roads, transport modes: maritime, of policies and facilitate the reduction transport regulatory chain ensuring multimodal of an infrastructure the creation into the Trans-Eu transport, with integration of the corridor with the aid of a single uniform railway consignment note ‘SMGS’ and ‘CIM’ divergent the rationalizing mean would ways, and air traffic. TRACECA is a grant-funded technical is a grant-funded TRACECA ways, and air traffic. South Caucasus states and four Central Asian states (all (all states Asian Central four and states Caucasus South state agencies sealed transit containers to be opened); bad coordination coordination opened); bad to be containers transit sealed small-scale investment projects for rehabilitating transport transport for rehabilitating small-scale investment projects and the customs brokers; the number of documents the number of documents brokers; customs the and and cooperation, that of the ‘OTIF,’ in which the EU has has in which the EU and cooperation, that of the ‘OTIF,’ and ‘OSJD,’ whose membership is a relic a leading role, and delays consist of complicated customs procedures points (e.g. random inspections that require at crossing assistance project, supporting only a limited number of supporting only a limited number of assistance project, ever, TRACECA suffers from two important weaknesses: weaknesses: two important from suffers TRACECA ever, Pact Warsaw of the former Communist bloc (USSR, the or Comecon countries, China and even Cuba—see Box except Turkmenistan), and Iran. It has operated operated has It Iran. and Turkey Turkmenistan), except in 1993, and founding conference continuously since its In 2016 it adopted a Strate for EU financing. of projects 2016-2026 Plan gic 1. 1). As an example of the problems that result, there is the there that result, 1). As an example of the problems ------The The However, Uzbekistan’s new post-Karimov leadership leadership post-Karimov new Uzbekistan’s However, As for officially funded investment, both the EBRD funded investment, both the EBRD As for officially The EU’s project of most precise relevance to the BRI relevance of most precise project The EU’s The EU’s most developed relationship in Central Asia is in Central most developed relationship The EU’s The EU has also consistently tried to encourage tried to encourage also consistently The EU has long as projects fit into its screening. Whether this part fit into its screening. long as projects has suffered reputational damage as a result of several of several damage as a result reputational has suffered has changed its policy 180 degrees, now advocating now advocating has changed its policy 180 degrees, in Central Asia and the South Caucasus is a long-standing is Caucasus South Asia and the Central in Caucasus Asia. The Corridor Europe ing for Transport infrastructure of investment projects, including high envi of investment projects, infrastructure its companies in the oil and gas sectors are the biggest for its companies in the oil and gas sectors are ideas about regional leadership. In addition, there was a was a there addition, leadership. In about regional ideas EBRD has the expertise to promote the so-called “soft” the so-called “soft” EBRD has the expertise to promote Rogun. Large-scale funding will be required for Rogun, and Rogun. Large-scale funding will be required Regional cooperation has never really progressed until now progressed has never really Regional cooperation South Caucasus nership will work in practice remains to be seen. The BRI nership will work in practice remains nership and Cooperation Agreement in 2015, and where in 2015, and where nership and Cooperation Agreement policies that had not been at the level applied by the mul major project setbacks (for example in Malaysia, Pakistan, major project ronmental, social and corporate governance standards. social and corporate governance standards. ronmental, regional cooperation and withdrawing its objections to to objections its withdrawing and cooperation regional raw confrontation between Uzbekistan and Tajikistan over and Tajikistan between Uzbekistan raw confrontation regional cooperation between the five states and has con between the five cooperation regional fund projects in Central Asia and the South Caucasus. In fund projects technical assistance program called TRACECA, stand technical assistance program tilateral development organizations. the Kyrgyz Republic is also now under negotiation. the Kyrgyz Republic is also now under negotiation. this might be an attractive project for support from the BRI, for support from this might be an attractive project the construction by the latter of the Rogun hydroelectric the latter of the Rogun hydroelectric the construction by together. Water supply is a natural and desperately import supply is a natural Water together. were completed for environmental and technical aspects and technical aspects for environmental completed were Enhanced Part with Kazakhstan, with which it signed an Sri Lanka, Djibouti, etc.) resulting from project selection selection project from Sri Lanka, Djibouti, etc.) resulting and European Investment Bank (EIB) are mandated to to mandated Investment Bank (EIB) are and European ant agenda item for regional cooperation in Central Asia. Asia. Central in cooperation regional for item agenda ant considers itself to be a natural partner for the BRI. eign direct investors. A further enhanced agreement with investors. A further enhanced agreement eign direct of the project, which gave a green light. which gave a green of the project, especially since due diligence studies by the World Bank the World especially since due diligence studies by generate substantial energy export capacity for Tajikistan. energy export capacity for Tajikistan. generate substantial vened and moderated several meetings of all five states states meetings of all five moderated several vened and Georgia they are the biggest foreign investors. The EBRD the biggest foreign Georgia they are dam. This is due to be the highest in the world and would dam. This is due to be due to tension between Kazakhstan and Uzbekistan over due to tension between 4. Regulatory Asia and the Issues in Central The EBRD is interested in partnering with the BRI, as in partnering with the BRI, as The EBRD is interested  MICHAEL EMERSON 12 cross-border rail traffic. The questionthen becomeswhich adoption. To takeamore precise exampleoftheattempt standards organizations(CEN,CENELEC,ISO)are with technicalassistancefrom theEU,withresult that where thestandards setbyEuropean andinternational to secure regulatory convergence, in2018itwasreported the USSR.TheEAEUdecidedtodothisautonomously, technical regulations and standards for trade in goods, Union (EAEU),replacing GOCTstandards inheritedfrom rience at working out modern railwaylawfor multilateral rience atworkingoutmodern restructure OTIFandOSJD, profiting from theEU’s expe rules couldbeadoptedbyall. principle demandsaharmonizedsystemofregulation of reconsideration by all parties in light of the BRI, which in nowadays identicalstandards are increasingly usedbythe EU andEAEU(Emerson&Kofner2018). increasingly adoptedalsobytheEurasianEconomic railwayorganizationsshouldbeasubjectof international Box 1: The Alphabet Soup of International RailwayRegulation Box 1:TheAlphabetSoupofInternational EU lawwhere itconflictswiththerulesofOTIF. states. EUmemberstatesare allowedtogivelegalpriority closely withtheEU,whichisamemberalongsideits CarriageofGoods.OTIFworks the ContractofInternational Soviet Union; has defined membersareCarriage byRail,Berne; Europe plustheformer This confusing overlap of competences between the A constructiveexamplehasemergedinthefieldof For railways the question might be whether to merge or For railwaysthequestionmight bewhethertomergeor OTIF = Intergovernmental Organisation of International OrganisationofInternational =Intergovernmental CIM = Uniform Rule concerning = Uniform Rule concerning - desirable progress inrailwaycooperationalongthewhole freightdocument supportinginternational consignments. of regulatory convergence. entire Eurasian space, way above the dry technical matters convergence isslow, railwaytechnologyandinfrastruc already formanyyears)allthewayfrom BeijingtoParisno still haveanelementofromantic fantasy, butatleastitcan members ofbothOTIFandOSJD. Agreement GoodsTransport onInternational byRail. former USSRstates)asmembers;hasdefined North Korea andCuba;since1992,alsotheindependent, countries (USSR, Comecon states, Mongolia, China, Vietnam, Warsaw; originallyfoundedin1956,withCommunistbloc way from ChinatoEurope. Whileprogress inregulatory the SouthCaucasusisthat BRIshouldnotjustsee tures forhigh-speedtrainshaveadvancedbyleapsand that OTIFisworkingonextendingtoChinatheuseofits register asalong-runvisionappealingtocitizensofthe model ‘electronic consignmentnote,’which isthekeylegal Express, crossing frontiers athighspeed(asintheEU 5. Trade PolicyAspectsforCentral Asia and the SouthCaucasus bounds. The romantic idea of a New Silk Road Orient longer needstobeconsidered sciencefiction.Thismay Central and Eastern EuropeanCentral and Eastern states,including Russia, are OSJD The BRIraisesthebarintermsofconceivableand A clearobjectiveforthecountries ofCentralAsiaand = Organization for Cooperation between Railways, SMGS = - EUROPEAN PERSPECTIVES ON THE CHINESE BELT AND ROAD INITIATIVE  13 . ------4 . China 5 As soon as there are BRI projects BRI projects are As soon as there Looking ahead to possible negotiations between China Public procurement. The EU’s market is governedis market procure public strict by EU’s The The BRI and other Chinese project funding activities in funding other Chinese project The BRI and located on EU territory or that of neighboring countries countries located on EU territory or that of neighboring EU-Chinese Relations EU-Chinese 5. For a detailed review see Jacques Pelkmans et al. (2018), chapter 12. 5. For a detailed review has made six offers at the WTO to accede to the GPA, but GPA, to the accede to WTO at the offers six made has jing with foreign experts on legal issues raised by the BRI jing with foreign including those participating in the 16+1 initiative (see the including those participating Steven Blockmans, who has participated in these conferences, and to Steven Blockmans, who has participated in these conferences, EU side would want to go further with complementary EU side would want to go further with complementary EU and China have very different systems. The EU is party EU and China have very different next section), as well as Georgia, Moldova and Ukraine, and Ukraine, Georgia, Moldova well as section), as next petition from abroad, and EU companies are frustrated that frustrated are companies EU and abroad, from petition principles of non-discrimination and transparency. competition, of principles the on based directives, ment point that Chinese companies have won an open tender relations with third countries such as China. These issues issues These China. as such countries third with relations for a major project funded by EU grants (the Croatian Pelje funded by EU grants (the Croatian for a major project foreign investment on security grounds. The Chinese The Chinese on security grounds. investment foreign the issue arises over standards, following EU regulatory to reach an agreement over Chinese accession to the the to Chinese accession over an agreement reach to to the WTO’s Government Procurement Agreement (GPA), (GPA), Agreement Government Procurement WTO’s the to 2007 to which China also has applied to join since a has China adequate. as accepted been not have these and non-discrimination. EU law makes no transparency provisions, procurement public contain agreements trade the EU raise issues of respect for EU law, as well as ques as well for EU law, issues of respect the EU raise for legislation needs to be reinforced tions over whether EU The procurement. the lack of a level playing field for public whereas those of China do not. whereas which share DCFTAs with the EU. There are several pre are the EU. There with DCFTAs which share strong tendency to isolate public procurement from com from procurement public isolate to tendency strong free sac bridge—see further below). Also, many of the EU’s access to the Chinese market is much less open that that access to the Chinese market is much less is challenge first the procurement, public on EU and the also arise for the EU’s neighbors that seek EU membership also arise for the EU’s law, of adopting EU market in the process are and already of these issues, to the point at least aware authorities are of the EU, with complaints over weak observance of the of the of the EU, with complaints over weak observance cise areas of relevance here, namely public procurement, namely public procurement, here, relevance of areas cise over and controls policy, control competition and subsidy in Bei of having organized some international conferences GPA of the WTO. However, it may be expected that the it may be expected that the of the WTO. However, GPA distinction between EU and foreign enterprises, even to the distinction between EU and foreign 6. Trade Policy and Legal Aspects in and Legal Aspects Policy 6. Trade Jacques Pelkmans for the work cited next. 4. The author is indebted for information on this point to his colleagues - - - - . But how can this be engineered? There There can this be engineered? . But how 3 other CIS states but remains outside the EAEU the outside remains but states CIS other The EU observes this with interest. It hopes to see It hopes to see The EU observes this with interest. lead because of their participation in the EAEU customs EAEU customs lead because of their participation in the has been taken. A further piece of supporting regulatory regulatory has been taken. A further piece of supporting has complemented its deep free trade agreement (FTA) (FTA) trade agreement its deep free has complemented being Georgia is a unique case, and the countries of the being Georgia is a unique case, and the in supply chains between China and the EU. next infrastructure is also seen as Georgia enters the Pan is also seen as Georgia enters the Pan infrastructure is one model case being tested, that of Georgia, which which Georgia, of that tested, being case model one is impact other than some railway tariff income. It should should It income. tariff railway some than other impact 3. As was the case with the Silk Road of earlier millennia, when the Persian FTAs with FTAs Basically, the EAEU made an economic policy mistake in the EAEU made an economic policy Basically, EAEU in particular are constrained from following Georgia’s following Georgia’s constrained from EAEU in particular are Euro-Mediterranean (PEM) system of rule of origin prefer Euro-Mediterranean partner important an as Turkey with starting states, PEM union. The EAEU has been keen to make an agreement agreement an make to keen been has EAEU The union. undergo sufficient value addition to be eligible for tariff-free to be eligible for tariff-free value addition undergo sufficient many breaches. These issues are now especially worthy now especially worthy These issues are many breaches. means no tariff-free trade. means no tariff-free might have free trade with both China and the EU, cou the and China both with trade have free might of general relevance are pled to rules of origin preferences, for Georgia. The principles at play here, i.e. for states that states for i.e. here, play at principles The Georgia. for there are too big divergences of economic and trade struc too big divergences are there Kazakhstan) and (Russia petrostates the between tures which still the constraint of its common external tariff, to states along the Belt and Road. However, for the time to states along the Belt and Road. However, that both Chinese and European enterprises might see see might enterprises European and Chinese both that trains of containers transiting their lands with no economic lands with no economic transiting their trains of containers with the EU to joining the EAEU under Russian pressure. pressure. Russian under EAEU the joining to EU the with with China, but only a non-preferential agreement, which agreement, with China, but only a non-preferential with the EU with a thinner FTA with China. The idea is with China. The idea is thinner FTA with the EU with a empire and the Central Asia of the golden age of Samarkand were highly were and the Central Asia of the golden age of Samarkand empire developed economic centres. See P. Frankopan (2015). See P. developed economic centres. and the others. It would be better if the EAEU dropped and the others. It would be better if the EAEU dropped advantages in locating value-adding processes in Geor value-adding processes advantages in locating and both the EU and China, between Georgia agreements also see value-adding industries and services developing and services developing industries also see value-adding way along the only exists in theory, since there have already been so so been already have there since theory, in exists only of consideration by post-Karimov Uzbekistan, which has customs union. going for a customs union rather than a deep FTA, since going for a customs union rather than a deep FTA, ences, allowing for cumulation of value-added with other with other ences, allowing for cumulation of value-added gia, where inputs imported tariff-free from one side would side one from tariff-free imported inputs where gia, trade The first step, to extend free export to the other side. Georgia succeed in developing new value-adding activitiesGeorgia succeed in developing new value-adding door would naturally like to do the same, but is unable to its draft deep FTA do so because of its switch in 2014 from  MICHAEL EMERSON 14 There isabasicasymmetryofstructure inthatChina has debt termsandlarge-scalenon-performingloans)rather (Pelkmans et al. 2018, ch. 14). Moreover, given the strict over investmentprotection, theEUitselfhaslimitedcom et al.2018,ch.15).WhiletheEUandChinaare negotiating easy accessforinvestingintheEU,whereas EUfirmsfind greater and more selective control over foreign invest on Investment(CAI).Thenegotiationsbeganin2012,and of SOEs,withhighreliance ondebt(includingpreferential excess capacitiesinsectorsmassivelyinvolvedtheBRI, commitments, includingspecificprovisions regarding agreement, buttheEUprefers toconcludeaCAIfirst. While there havebeenmanybankruptciesandrestructur as existintheEUhaveanycaselostmostofpriv a hugecollectionofSOEs,whereas intheEUtheyare siders that these do not add up to a level playing field, such asconstruction,steel,cementandrelated materials. state policydeclares thattheyoperateinaccordance with state-owned enterprises. SOEs, whereas inGermanythere are only11percent and time being.Atthesametime, Chinese interests complain the lastdecadeorsoChinahaseaseditsrestrictions, but the Chinesemarketextremely difficult tobreak into.Over that aCAIbeintegratedintocomprehensive free trade their scopewidenedin2016.President Xihasproposed the specialconditionsfrom which SOEsmaybenefit. than equitycapital. from astartingpointofextreme restrictiveness (Pelkmans few. InChina,96percent of the biggest enterprises are foreign investments,butthisremains anaspirationforthe pean Commission proposed a framework for screening remains innationalhands. InSeptember2017theEuro petence forthescreening offoreign investments,which ment, inparticularfrom China,gainingground withinthe market principles.However, realities includelarge-scale notably ongrounds oftransparency, legalpredictability and ness of EU competition and anti-subsidy rules, such SOEs EU, asintheUS.SofarChinesefirmshavehadrather ing, withaviewtoconcludingComprehensive Agreement in whichtheEUandChinaare currently actuallynegotiat ing operations,there hasalsobeenmuchsoftfinancing ileges ofstateownership.ReformSOEsinChinahas in France (long home of important SOEs) only 17 percent been highonthepoliticalagendasince1970s,and have beenpolicydevelopmentsinChina.StilltheEUcon State-owned enterprises(SOEs)andcompetitionpolicy. On the related question of competition policy there Regulation offoreigninvestment. Meanwhile, the context changes with the case for This isthemainfield ------16+1 grouping) thatstandoutforhavingwelcomedimport The second group of states are far more ‘investment-hun 7. China’s 16+1Initiative Chinese interests boughtoutaleadingrobot manufacturer, out as a cession of control over strategic economic infra erating andgridenterprise,whichalsohassimilarassets economic orsecurityimplications.InPortugal,Chinese criminating control over investments that have strategic gry,’ bothtodeveloptheirinfrastructural endowments and ests inEurope betweencore Europe Western andseveralof vakia), the two Black Sea states (Bulgaria, Romania) and Western Europe and new member states inCentral and a bilateralbasis.Two recent casesstandout.InGermany, about the lack of acommon policy in this field, but are adequate orexcellenttransportinfrastructures andaccess ant ChineseinvestmentsincludeGreece withtheportof seeking Chinese investments. This fault line has actually intheEUwillnotwantstructure thatmanygovernments soon aspossible.OtherEUmemberstates(outsidethe states, allintheBalkans(Albania,Bosnia,Macedonia, states includetheBalticthree (Estonia,Latvia,Lithuania), states and5non-EUmemberstates.TheEU Southeastern Europe,Southeastern with the latter much more actively which the next section turns. Broadlywhich the next section turns. speaking, the coun which setoff politicalalarmbells,andledtoamore dis to replicate. their ownterritories,butcansee advantagesinhooking to finance for viable projects. They do not need the BRI on the EU’s newmemberstatesofCentral and Southeastern tiating accessiontotheEUorwishstartdoingsoas two Balkanstates(Croatia, Slovenia). Thenon-member four(CzechRepublic,Hungary,the Visegrad Poland,Slo tries mostfavorabletoChineseinvestmentare small-sized, relatively poor, andoftenwithshakydemocracies. nonetheless adeptatnegotiatingwithmemberstateson up withnewtransportinfrastructures thatconnecttoAsia. Europe, aswelltheBalkanstatesaspiringtoEUmem Piraeus andPortugalforitselectricitysector. Montenegro, Serbia),are eitherintheprocess ofnego increasing presence. Themainfaultlineisbetweencore individual memberstatesviewtheBRIandChina’s in Spain.This acquisition has beenaccepted,but stands interests have acquired control of the major electricity gen been developedbyChinaitselfwithits16+1initiative,to bership. Thefirstcore group of‘oldEU’states already have The 16+1initiativeissignalingthedivergencesofinter The 16+1 brings together China with 11 EU member Within the EU thereWithin are manifest differences in how ------EUROPEAN PERSPECTIVES ON THE CHINESE BELT AND ROAD INITIATIVE  15 ------In April 2018 it was reported in the press that 27 of the the press in In April 2018 it was reported Another project in the headlines is the much bigger €3 much the is the headlines in project Another A striking and very concrete interaction between EU EU between interaction and very concrete A striking The EBRD has undertaken or sponsored several several The EBRD has undertaken or sponsored legal correctness for the time being, but of dubious political legal correctness is landlocked Serbia (see the box for details). The project because EU public procurement law does not discriminate because EU public procurement is one of between EU and non-EU bidders. The example shouldwhich (Box 2), in Montenegro project billion highway be seen. ing, these studies show the very extensive investments ing, these studies show the very extensive investments instruments and Chinese interests in the Balkans is the the is Balkans the in interests Chinese and instruments EU’s 28 member states’ embassies in China had signed a states’ embassies in China had signed 28 member EU’s major debt burden as hangover for the host government. major debt burden projects to be built by leading Chinese construction com projects panies under conditions that would not satisfy the IFIs, respective competences of each other and EU standards and EU standards of each other competences respective critical of the BRI on several for Brussels that was report member state was Hungary. points. The only dissenting structural by the EU’s grant-funded largely being is project by EU construction pany won the contract, amid protests funds. Put out to open tender, a Chinese construction com funds. Put out to open tender, take responsibility, while Chinese interests can view it more can view it more while Chinese interests take responsibility, to the Adriatic port of Bar across traverse the country from term strategic significance, alongside warnings IFIs from of China’s This is suggestive that it is not viable financially. tries.” Thus, a diplomatic gesture to the EU was made, and to the EU was made, a diplomatic gesture tries.” Thus, whether But Sofia as an observer. at present the EU was willing to use the BRI as an instrument for debt-funding willing to use the BRI as an instrument for debt-funding terms in economy local the into feedback minimal with studies on Chinese investments in Southeastern Europe, studies on Chinese investments in Southeastern Europe, EU of complementarity potential in the interest its signaling sustainability. The project has been described as a politi The project sustainability. simply as a business opportunity. long- its for president Montenegro’s by supported strongly and IFI investment in the region with those financed by with those financed by and IFI investment in the region able favor to Chinese interests. As remarked above, this is As remarked able favor to Chinese interests. and policies for EU member countries and candidate coun and candidate for EU member countries and policies subsi of favor in balance the “pushes BRI the that argue cal ‘white elephant’ for which Croatia and the EU have to the EU have and which Croatia elephant’ for cal ‘white thus leaving a supplies, of employment and procurement or how this translates into concrete realities remains to to remains realities into concrete or how this translates competition. unfair about complained which companies China (Bastian 2017, Levitin et al. 2016). Broadly speak China (Bastian 2017, Levitin et al. 2016). Broadly dismissed. So here was EU law at work, doing a remark dismissed. So here dized Chinese companies” (Heide et al. 2018). dized Chinese companies” €347 million This major Peljesac bridge project. Croatian Although the report has not been published, it is said to published, it is said to has not been Although the report The complaints were taken to the courts in Croatia and and taken to the courts in Croatia The complaints were ------The Guide ‘The Sofia Guidelines between ‘The Sofia Guidelines 16+1 Summit meeting, hosted by 16+1 Summit meeting, th Expanding People-to-People Exchanges. Deepening Practical Cooperation in Trade, Invest Deepening Practical Cooperation in Trade, mental Protection, Agriculture, Energy, Forestry, Forestry, Energy, Agriculture, Protection, mental ment and Connectivity. Strengthening 16+1 Coordination; Strengthening and Health; Cultivating new drivers for Cooperation in Science, Cultivating new drivers for Cooperation in Technology, Innovation, Finance, Green Environ Finance, Green Innovation, Technology, • • • • More broadly, the EU has expressed concern the EU has expressed over Chi broadly, More In concrete terms, this most sharply raises issues of this most sharply raises issues of terms, In concrete One may observe that this covers a large extent of of extent large a covers this that observe may One July 2018 saw the 8 lines are remarkably extensive, with chapters covering: remarkably lines are increasingly also to the 5 non-member states. increasingly investment in the port of Piraeus, which in turninvestment in the port the became in terms of credit rating. Their leaderships are therefore therefore leaderships are rating. Their credit in terms of which in the mentioned, already in the case of Greece, BRI projects “would also complement EU policies and and policies EU complement also “would projects BRI EU and its policies and created suspicions of ‘divide and of ‘divide suspicions created policies and its EU and of these sensitivities. Bulgaria at least showed awareness Bulgaria in Sofia. Its final declaration contained 18 detailed Bulgaria in Sofia. Its ning to language about “a positive complementarity to the na’s 16+1 strategy, since it separates the 11 ‘new’ from from ‘new’ 11 the separates it since strategy, 16+1 na’s number of cases where the Commission had to intervene number of cases where relationship between China and the EU,” and on how the relationship and with the laws, regulations accordance projects…in rule’ geopolitical tactics. The most recent 16+1 summit in rule’ geopolitical tactics. The most recent railway) from going ahead. railway) from public procurement law, as discussed above, especially especially above, discussed as law, procurement public pages of conclusions in the pages of conclusions more inclined to be attracted by project funding on less less on funding project by attracted be to inclined more has seen Chinese crisis euro-debt midst of its prolonged Its concluding Guidelines devoted one page at the begin the ‘old’ member states, and initially excluded the EU insti tutions, while adding in the 5 Balkan non-member states. to stop a BRI project that did not observe EU public pro to stop a BRI project the competences of the EU, which raises questions over questions over the competences of the EU, which raises by taken being commitments legal and operational the to EU laws and policies, which the 16+1 parties in relation to attract new investment in the manufacturing and service service and manufacturing the in investment new attract to sectors. This second group of countries are often weak weak often are countries of group second This sectors. curement rules (for example the Budapest to Belgrade rules (for example the Budapest to Belgrade curement over infrastructure projects. There have already been a a been already have There projects. infrastructure over of course wholly apply to the 11 EU member states and states and of course wholly apply to the 11 EU member China and Central Eastern European Countries.’ gateway to the Balkan Silk Road. gateway to the Balkan of China, than are offered by the IFIs. An example is seen is example An IFIs. the by offered are than China, of China was thus adopting a format that cut across the the across cut that format a adopting thus was China demanding terms, such as from the Export-Import Bank the Export-Import Bank as from demanding terms, such  MICHAEL EMERSON 16 Chinese ‘16+1’initiativehasbeenessentiallyabilateral 20 or IFIstandards ofproject evaluation. only atanearlystageofpracticalconsideration,sincethe of overlap with EU plans for its extended transport net currently beingmadebyChinaintheregion, withalot aspects of economic andgeopoliticalpowerprojection, of apparent regard—at leastinitially—for existing EU policies affair betweenChinaandthe individual16states,withlittle 8. China’s Growing StrategicPresence in which theBRIand16+1initiativeare onlyexamples. works (TEN-T).However, theobviousissueofcoordination together onaverybroad agendaforcooperation.The inexorable, afactoflifethe21 between European andChinese efforts seemstobesofar Europe language: Box 2:“Chinese‘highwaytonowhere’ hauntsMontenegro” “On theoccasionofthis20 th were unsuccessful. has notbeenpublishedandattemptsbyReuterstoseeit Bank of China, concluded that the project was viable, butthis rate of return. Athird study, commissionedbyExport-Import insufficient projected traffic demandtogiveanadequate concluded that the project was not viable economically, with ment, andanotherfortheEuropean InvestmentBank.Both French consultingcompanyfortheMontenegringovern both customsdutiesandvalueaddedtax. terms thatincludedtheexemptionofimportedmaterialsfrom on site,two-thirds ofwhomare Chinese.TheCRBCnegotiated tunnels, hence its high cost per kilometer. 3,605 workers are means that much of the route has to consistofbridges and the Export-ImportBankofChina.Themountainousterrain km stretch isbeingfundedlargelybya€809millionloanfrom and Bridge Corporation (CRBC). Construction of theinitial 41 atic portofBarandthefrontier withSerbiabytheChinaRoad highway beingconstructedinMontenegro betweentheAdri outcomes achievedinpolitics,economy, trade,culture, enhanced thelevelofEU-China relations,withfruitful sides celebratedthe15 Comprehensive StrategicPartnership.Thishasgreatly principles ofmutual respect,trust,equalityand mutual people-to-people exchangesandother fields.TheLeaders reaffirmed their commitment to deepening their partnership reaffirmed theircommitmenttodeepening theirpartnership for peace,growth,reformand The riseofChina’s interests inEurope is seenasbeing At the summit level, the EU and China work hard EU-China summit in July 2018 opened with splendid Three feasibility studies have been conducted, one by a Such isthetitleofadetailedreport byReutersona165km th anniversaryoftheEU-China th EU-China Summit,the two EU-China civilisation, basedonthe st century. Ithasmany - - - The China-EUCo-InvestmentFund,backedbytheEuro Co-Investment Fund is intended to develop synergies and cooperativeterms: support equity investment across Europe. The China-EU Central Asia. BRI projects, alongside Tajikistan and the Kyrgyz Republic in the mostheavilyexposedtodebtrisksresulting from Chinese billion in2017). sponding to70percent ofMontenegro’s annualGDP(€4.3 completion, whichintotalwillcostaround €3billion,corre makes itverydifficult politicallynottoproceed totheproject’s acceptable toaninvestor. However, thealready-sunk costs requiring largesubsidiestomakeatoll-basedconcession that the PPP model would not be bankable,have warned BoththeEuropeangovernment. InvestmentBankandIMF of contract,forwhichtheCRBChassignedaMoUwith been decidedtogoforapublic-private-partnership(PPP)form pean InvestmentBankandthe(Chinese) Silk RoadFund, is expected to provide €500 million (US$540 million) to between China’s BRI and theEU’s so-called “Juncker launched anewfundtosupportBRIoperationsinEurope. Sources: Barkin&Vasovic (2018),Hurleyetal.(2018) Montenegro hasbeencitedasoneofeightcountriesthatare To proceed withtheremaining stagesoftheproject, ithas “The two sides will continue to forge synergies between obligations, aswellthelawofcountriesbenefitting environmental sustainabilityofEurope-Asiaconnectivity. should improvetheeconomic,social,fiscal,financialand and individualsituations.” able maritime,landandairtransport,energydigital 2020 StrategicAgendaforCooperation.” China’s BeltandRoadInitiativetheEU’s initiatives, playing fieldforallinvestors,andcomplywithestablished market rules,transparency, openprocurementandalevel networks. Thetwosidesstressedthatthiscooperation ropean Transport Networks,andtopromotecooperation Such cooperationshouldabidebythesharedprinciplesof from theprojects,whiletakinginto account their policies international norms and standards, respective international international normsandstandards,respective in hardwareandsoftwareconnectivitythroughinteroper including theEUInvestmentPlanandextendedTrans-Eu benefit, bycomprehensivelyimplementingtheEU-China The textwentonlatertospeakoftheBRIinpositive More concretely, theEU-ChinasummitinJune2017 - - - - EUROPEAN PERSPECTIVES ON THE CHINESE BELT AND ROAD INITIATIVE  17 ------(Finan 1984 At the geopolitical and ideological levels, the EU sees At the geopolitical and ideological levels, The most recent summit meeting between the EU and and EU the between meeting summit recent most The To ensure better connectivity between Europe and Asia they better connectivity between Europe ensure To ligence for the army police, declares, “We must strive to to strive must “We declares, police, the army for ligence have been acceptable for all, yet the principles laid down have been acceptable become a deterrent force to safeguard national security, a national security, to safeguard force become a deterrent its strategic interests overseas. Zhang Xiaopi, head of intel its strategic interests influence without seeking to impose political conditions conditions influence without seeking to impose political Box 3). This text stands out first as a marker to record the record as a marker to text stands out first Box 3). This concerns the two continents between that relations EU’s at a diplomatic level. Both carefully Russia, albeit more for the rule-based multilateral order. It is also setting out the order. for the rule-based multilateral tion and big data bank capabilities, which for the European European bank capabilities, which for the tion and big data two continents’ common rejection of President Trump’s Trump’s President of rejection common continents’ two that the EU considers objectionable in terms to regimes with omnipresent CCTV networks linked to facial recogni facial to linked networks CCTV omnipresent with Facilitation Agreement. … Facilitation Agreement. the importance of developing and strengthening also stressed environmentally, that are transport systems and infrastructure afford viable, financially sustainable, fiscally and socially with relevant in accordance able and accessible and are international standards. implementing and enforcing obligations under the WTO by its implementing and enforcing Trade its implement to work ongoing the including members, stances on trade, climate, Iran, and his general disregard Iran, and his general disregard stances on trade, climate, to general sufficiently be may language The standards. at the beginning of President Xi’s leadership term, the now leadership Xi’s at the beginning of President liberal political values antithesis to traditional European assure a level playing field and respect for international field and a level playing assure than ano side, much more a serious matter for the EU are global their expand to seek that states authoritarian are ous threats to the Chinese state, which amount to a total ous threats of the Chinese security apparatus, expansion extraordinary out of Orwell’s observer could come straight its preparing China is reportedly cial Times 2018b). Further, open and rule-based trade and improved connectivity (see connectivity improved trade and open and rule-based with partner states or taking objection on their relations The practices. and values rights human and political of (in)famous Document 9, which lists the seven most seri (in)famous Document 9, which lists the of doctrine is the (ChinaFile 2013). Adding to this element Chinese Communist Party quite explicitly adopted in 2013, Chinese Communist Party quite explicitly dyne diplomatic language. dyne diplomatic language. same agenda as China as pursuing to some extent the Asia, on 18-19 October 2018, saw an agreed text favoring saw an agreed October 2018, Asia, on 18-19 ‘counter-terrorism’ forces to play a bigger role in protecting in protecting to play a bigger role forces ‘counter-terrorism’ - - - - - ]” (European ]” (European sic The EU’s concerns are not that different concerns not that different are The EU’s Leaders underlined their joint commitment to open, free, and Leaders underlined their joint commitment to open, free, The EU’s reticence over making any whole-hearted over making any whole-hearted reticence The EU’s The above summit language is in accordance with with accordance is in language above summit The anism, and its rulemaking functions. They committed to ensure anism, and its rulemaking functions. They committed to ensure and open trade on a level-playing field and fight all forms of free and measures unilateral including protectionist protectionism, unfair trade practices. Leaders underlined the importance of non-discriminatory trade, as a prerequisite for long term growth for long term growth non-discriminatory trade, as a prerequisite the need to further strengthen, They reiterated and prosperity. the WTO to help it meet new challenges and to and reform monitoring, dispute settlement mech its transparency, improve Box 3: Asia-Europe Meeting in Brussels, 18-19 October 2018: Chair’s Statements (Extracts) Meeting in Brussels, 18-19 October 2018: Chair’s Box 3: Asia-Europe intellectual property rights, and lack of transparency and and and lack of transparency rights, intellectual property European public banks, (EIB, EBRD and member states’ states’ and member banks, (EIB, EBRD public European Europe and Asia’ (European Commission 2018). While the Commission 2018). While the Asia’ (European and Europe European interests, but there is room for skepticism for skepticism is room but there interests, European Plan,” the latter seeking to mobilize €315 billion of new new of billion €315 mobilize to seeking latter the Plan,” national standards and level playing field [ national standards national banks and institutions, and OFIs, in line with inter promote the digital economy, efficient transport connec efficient digital economy, the promote goes on to empha The paper for investment.” playing field paper was addressed to the whole of Asia, it discussed to the whole of Asia, it discussed paper was addressed multilateral trade order of the WTO. multilateral trade order public and private investment across Europe. private investment across public and from those of the Trump administration over such matters administration those of the Trump from through the investment facilities and guarantees, involving through tivity, and smart, sustainable and secure mobility, based based mobility, and smart, sustainable and secure tivity, tries, including the EU-Chinese Connectivity Platform, to to Platform, EU-Chinese Connectivity tries, including the trade policy purposes. However, President Trump’s trade Trump’s President However, trade policy purposes. war policy is equally antithetical to both the EU and China, war policy is equally whether these words will translate into realities on the on the translate into realities will whether these words size the role of the international the of (IFIs) institutions financial role the size such that both are brought together as supporters of the of supporters as together brought are both that such still does not recognize China as a ‘market economy’ for a ‘market economy’ for China as still does not recognize and multilateral development banks (MDBs), with the the with (MDBs), banks development multilateral and connectlvity aims to “facilitate investment for Euro-Asian all modes of air, land and sea transport connecting with land and sea transport connecting with all modes of air, coun third about stepping up cooperation “with relevant accessibility for European investors. As a result, the EU the EU As a result, investors. accessibility for European as subsidization of state-owned enterprises, respect for for enterprises, respect state-owned of subsidization as on extension of the TEN-T network, and promote a level a level promote on extension of the TEN-T network, and endorsement of the BRI seems to emerge from a reading a reading from endorsement of the BRI seems to emerge on ‘Connecting of its quite detailed 13-page policy paper Commission 2018). Chinese side. Asia without referring to the BRI. The paper is explicit to the BRI. The paper is explicit Asia without referring  MICHAEL EMERSON 18 There whileChi are bothpositiveaspectsandconcerns, (or Chineseyuppy)generation—whonowtravelabroad in external presence.external Western democracies sia’s kindofinvidiousdisinformationaimedatundermining Several cross-cutting European perspectivesemerge. 9. Conclusions see Bennersetal.(2018). the worldatlargeare regarded assimplisticpropaganda. today, butoverallthepuzzleisareason whymanyEuro the ongoing transformation of Chinese society, with its themselves is how long or far the doctrines and control force for universal fighting” (Financial Times 2018a). force foruniversalfighting”(Financial peans feelcautioustowards China’s inexorablyincreasing massive numbers.There isnoanswertothesequestions mechanisms oftherulingCommunistpartycansurvive mainly about praising all things Chinese, avoiding Rus pioneering force toprotect overseasinterests andanelite nese diplomaticspeechesabouttheBRIasa‘win-win’for itan younger generation—sometimes called the ‘Chuppy’ increasing numbersofthewell-educatedandcosmopol 6. ForadetailedaccountofChina’s increasing politicalinfluenceinEurope, The puzzleforEuropeans andmaybetheChinese China’s propaganda efforts are quitemassive,but Europe’s viewsonChina’s BRIare, inoneword, mixed. 1. 2. The EUagrees insummitstatementswithChina deeper research. other 99percent thatgoesbyseaandairfreight other sources. Questionsoffunctionallinkages over thepursuitofsynergiesbetweenBRI already growing, and this is appreciated by var are not yet thoroughly addressed, and deserve are generallyofadequateor highquality, andnew and the EU’s own trillion-euro investment plan, since theirowntransportandotherinfrastructures without anytransitborder complications.This which includes its extended European Transport today theChina-EUrailconnectionscarryonly1 rail traffic isexpected toincrease, butstillseems percent oftotalChina-EUtradeflowsalongsidethe practice is notyetclear. The EU itselfand most of networks (TEN-T).However, whatthismeansin Freight train traffic between China and the EU is ious business interests onbothsides.However, investments canfindfundingfrom theEUand its memberstateshavelittleneedforBRIprojects, between BRIprojects andtheEuropean networks 6 . - - - - - 4. 6. 3. 5. The EUcanseetheinterest ofthestatesCentral The EU has an interest in the development of the The ‘16+1’ initiative also raises political concerns The ‘16+1’ initiative also raises political concerns The BRIconnectswithChina’s ‘16+1’initiative, Asia and the South Caucasus in a BRI that would China. Thiswouldaddress problems where ‘level flows. Themostpromising examplehere isGeor commercial reasons. sinceRussiahasactuallyblockedtransit concern, routeern through Russia and Belarus to Poland, casus orthrough IranintoTurkey. Forthetime either across the Caspian Seaand South Cau enterprises, suchasintheconstruction sector. gia, whichnowhasfree tradeagreements with and foreign investmentscreening) needstobe are lesswellplacedtodothis, giventheirmember southern BRIroutes,southern through Kazakhstanand strengthened in relation to third countries such as sphere, there over respectare forEU concerns stantial industrialsectortobuildon. ship of the customs union with Russia. However, states. However, it is too early to see whether this supply chains linkages that add value to trade with boththeEUandChinaforstrategicaswell which likeUkrainehasadeepassociationagree which bringstogether11‘new’EUmemberstates trans-Caucasian route developedincooperation traffic betweenUkraineandKazakhstan.Georgia, transit monopoly. Thisismore thanatheoretical that itmayserveasa‘divideand rule’instrument First,inthestrictlyeconomic types ofconcern. these constraints,andhastheregion’s mostsub the newpost-Karimov Uzbekistan does not have rise aboveamere transitfunctionanddevelop ment withtheEU,alsowishestoseesouthern playing field’conditions are notmetbyChinese procurement, competitionpolicy, tradepolicy projects and,further, whetherEUlaw(onpublic EU-China trade. EU member states inthe Balkans. This raises two in favor of alternative routesin favorofalternative toavoidaRussian in central and eastern Europein centralandeastern withfive‘not-yet’ but fortheEU,strategicconsiderationsmilitate being, themaintrainconnectionstakeanorth both the EU and China, as well as with other Asian hand, thestatesofEurasianEconomicUnion likely toremain onlyamarginalnicheaffair intotal law inthecontractingofBRIpublicinfrastructure leads tosignificantlypositive results. Ontheother ------EUROPEAN PERSPECTIVES ON THE CHINESE BELT AND ROAD INITIATIVE  19 ------level. host governments, specified down to the project governments,project host the to down specified ing with BRI projects. Only general principles are are Only general principles projects. ing with BRI interviews needed. interviews required. More precise examination of the overlap and and overlap the of examination precise More New EU-Central Asia strategy under preparation; New EU-Central Asia strategy under preparation; European networks overlapping with or connect with or networks overlapping European How far the international railway regulators, OTIF OTIF How far the international railway regulators, value-adding pro to leading the BRI of Evidence with the EU and Eurasian Eco agreements DCFTA Developments in the EU over policies to screen EU law. Road Fund; interviews required. Road Fund; interviews selection/evalua of project terms in Differences funded by the Export-Import Bank of BRI projects nomic Union states. required. required. publicly announced. To cover this major issue cover this major issue To publicly announced. by the EIB and Chinese Silk ment Fund, backed Investment Bank, on the one hand, and those those Investment Bank, on the one hand, and foreign (notably Chinese) investments that have (notably Chinese) investments that have foreign tion practice between those financed by the IFIs by the IFIs tion practice between those financed the Chinese-supported ‘Balkan Silk Road.’ security implications; possible developments in security implications; possible developments in and OSJD, might be willing and able to merge merge to able and willing be might OSJD, and industry/port growth; further for prospects and and MDBs, including the Asian Infrastructure and MDBs, including the Asian Infrastructure concretely there would have to be systematic inter would have to be systematic there concretely in as well as mentioned, institutions the in views or converge in their activities; interviews at both both at interviews activities; their in converge or of comparison countries; transit the in cesses of economies with experiences in this respect Operational progress with the China-EU Co-Invest with the China-EU Operational progress and Balkans the in policies EU between coherence Commodity structure of EU-China-Asia trade of EU-China-Asia trade Commodity structure routes, rail flows moving along the newly emerging Coordination between the EU/EIB/EBRD over EU/EIB/EBRD over between the Coordination China on the other. 9. 5. 8. 3. 6. 2. 4. 7. Mansoor Dailami, Andrew DeWit, Mansoor Dailami, Andrew Barry Eichengreen, Bremmer, Gene H. Chang, Bernard Connolly, Rich Connolly, Gene H. Chang, Bernard Bremmer, D. Erb, James K. Galbraith, James E. Glass Richard man, Jonathan E. Hillman, R. Glenn Hubbard, Richard Richard Hubbard, E. Hillman, R. Glenn man, Jonathan ard N. Cooper, Patrick M. Cronin, W. Bowman Cutter, Bowman Cutter, W. Patrick M. Cronin, N. Cooper, ard 1. Jerram, Gary N. Kleiman, Arthur Kroeber, Hongyi Lai, Jerram, Gary N. Kleiman, Arthur Kroeber, References Annex: Issues Warranting Further Research Warranting Annex: Issues Ang, Yuen Yuen, Anders Åslund, Michael J. Boskin, Ian Anders Åslund, Michael J. Boskin, Ian Yuen, Ang, Yuen ------high standards of global governance. In this con high standards borhood; and China, whose global economic borhood; and China, whose global economic ical values, the EU and its member states see the important aspect. The EU has now to look at its at its important aspect. The EU has now to look icymaking that requires unanimity (for example, unanimity (for example, icymaking that requires in Beijing). EU there are problems with all three major part all three with problems are EU there Finally, there is the wider question of the overall is the wider question of the overall there Finally, of which the BRI is an EU-Chinese relationship, Excessive debt burdens from ‘white elephant’ proj from Excessive debt burdens Hungary recently declined to sign onto a note of of note a onto sign to declined recently Hungary need to ‘protect’ against the excessive or insuffi need to ‘protect’ unacceptably aggressive in the European neigh in the European unacceptably aggressive unprecedented uncertainty and tensions. For the uncertainty and tensions. For the unprecedented administration, which undermines ners: the Trump number of major projects that were not screened screened not were that projects major of number remarkable for its agreement between the two between the two for its agreement remarkable relationship with China as part of the big global with China as part of the big global relationship US and Russia. This big quadrilateral is in a state ofUS and Russia. This big quadrilateral is in to which the BRI contributes. Reading between between Reading contributes. BRI the which to side is still proceeding the lines, the European the destructiveness of the Trump administration. administration. the destructiveness of the Trump the existing international order; Russia, which is is Russia, which the existing international order; the BRI route need to avoid. the BRI route text, the BRI is seen as having sponsored quite a text, the BRI is seen as having sponsored tionships with some of the 16+1 states, which which states, 16+1 the of some with tionships pol foreign EU for complications into translate that China is establishing client dependency rela is establishing client that China with caution in its relationship with China. Through with China. Through with caution in its relationship and for investments in intercontinental connectivity, connectivity, and for investments in intercontinental and whose political values are so different. The The so different. and whose political values are as rigorously as they would have been by the IFIs. the by been have would they as rigorously as and therefore stakeholders in the promotion of of stakeholders in the promotion and therefore ciently principled expansion of Chinese interests. ciently principled expansion of Chinese interests. coded language about level playing fields and polit and fields level playing about language coded continents on desirable principles for the world continents on desirable principles for the world while seeking implicitly to counter economic order, expansion lacks ‘level playing field’ conditions expansion lacks ‘level playing field’ conditions October 2018 EU-Asia (ASEM) summit was itself ects are hazards that developing countries along that developing countries along hazards ects are of international of support and aid development ers of the international financial institutions (IFIs), concern the BRI by all other EU embassies about of Chinese power play. More precisely, it seems seems it precisely, More play. power Chinese of This text covered the ground rules both for trade trade for both rules ground the covered text This The EU and its member states are major suppliers states are The EU and its member ‘quadrilateral,’ alongside its relationships with the with the ‘quadrilateral,’ alongside its relationships 8. 7.  MICHAEL EMERSON 20 ChinaFile (2013). Center forIntegrationStudies(2018).“BeltandRoad Hurley, John, Scott Morris, and Gailyn Portelance (2018). Hoppe, Stephan Scheuer,Heide, Dana, Till and Klaus Frankopan, P. (2015). The Silk Roads – A New History of (2018b).Inside China’sFinancial Times SurveillanceState. (2018a). Chinaseeksglobalrole forelite Financial Times European CommissionandHigh Representative ofthe Emerson, M.,andJ.Kofner(2018).“Technical Product Benners, T., J.Gaspers,M.Ohlberg,L.Poggetti,andK. Beifort, A.,Y. Shcherbanin,andE.Vinokurov (2018). Bastian, J.(2017).“Thepotentialforgrowth through Barkin, Noah, and Aleksandar Vasovic (2018). “Chinese Levitin, O.,J.Milatovic,P.Sanfrey (2016).“Chinaand “Examining the Debt Implications of the Belt and “ “Trans-Eurasian Land Transport Corridors: Assess ‘highway tonowhere’ hauntsMontenegro.” Reuters. Transport Corridors:Barriersand Investments.”Eur The World? ASymposiumofViews Chinese infrastructure investmentsinCentraland China’s NewTrade/Debt DiplomacyStrategyReshape Chris Leung,Chong-PinLin,Edward N.Luttwak, Global Development. Comparisons andScopeforConvergence.”IIASA. Growing PoliticalInfluence inEurope.” GPPIandMer counter-terrorism forces. cator InstituteforChineseStudies. O’Neill, JohnPomfret, DanielH.Rosen,Derek Scis Connecting Europe andAsia –Buildingblocksforan against SilkRoad.”HandelsblattGlobal. asian DevelopmentBank. Whalen, LoganWright, andFriedrichWu (2018). “ sors, Daniel Twining, Makoto Utsumi, R. Christopher South-Eastern EuropeSouth-Eastern alongthe“BalkanSilkRoad”.” South-Eastern Europe: South-Eastern Infrastructure, trade and Stratmann (2018).“EUambassadorsbandtogether Social Committee,theCommitteeofRegionsand Standards andRegulationsinthe EUandEAEU– Shi-Kupfer (2018).“Advance-RespondingtoChina’s the World. London:Bloomsbury. the European InvestmentBank. Union forForeign Affairs andSecurityPolicy(2018). ment ofProspects andBarriers.”IIASA. European BankforReconstructionandDevelopment. Economy, 2018:8-33. Winter Robert A.Manning,Greg Mastel,JosephS.Nye,Jim Road Initiativefrom aPolicyPerspective.”Centerfor Parliament, theCouncil,European Economicand EU Strategy .” JointCommunicationtotheEuropean Document 9:A ChinaFile Translation .” The International .” TheInternational . Will Will - - - - Vinokurov, E., and T. Tsukarev (2017). “The Belt and Road Vinokurov, E.,V. Lobyrev, A.Tikhomirov, andT. Tsukarev Rafsendjani, E. M., and C.-T. Stempfle (2007). “Compli Pelkmans, Jacques, Weinian Hu, Federica Mustilli, Mattia Trans-EAEU Freight Traffic Growth Potential. Assessment ofLandTransport Corridors.”Area Devel (2018). SilkRoadTransport Corridors:Assessment of opment andPolicy2(4). ance regarding EU-RailwaylawandOSJD-Railway and Development. Silk Road:AssessinganEU-ChinaFree Trade Agree Initiative andtheTransit Countries: an Economic ment. BrusselsandLondon:CEPSRowman Littlefield International. Littlefield International. Di Salvo,JosephFrancois,EddyBekkers,Miriam Manchin, andPatrickTomberger (2018).Tomorrow’s investment links.”European BankforReconstruction law.” StudyfortheEuropean Commission. - - - Study on the Belt and Road Initiative in Central Asia and the South Caucasus: A Note on the Indian Perspective

Rajat M. Nag

1. Introduction Asia in an increasingly multipolar world. This is discussed India sees the BRI through a multilayered prism. in Section 3.2. Interactions of past history, global geostrategic Many observers, including India, have raised concerns imperatives, regional rivalries, mutual mistrust and interde- about the possible debt burdens which BRI borrowing pendence, and economic and political considerations all countries may incur, which may be unsustainable and come into play, producing an Indian view of the BRI which beyond their capacity to ultimately repay, pushing these is, of necessity, complex and complicated. countries into a vicious ‘debt trap.’ In addition to obviously At one level, it could be argued that while not nec- detrimental economic effects, the ‘debt trap’ could also essarily universally held, the views of the political and have serious geostrategic consequences for India and the bureaucratic elite in the country are largely skeptical. borrowing countries. This is analyzed in Section 3.3. This paper will argue, however, that such a representa- So, in light of the above concerns, what should India tion of India’s views, while not totally inaccurate, would be do? What can India do? How do two large neighbors, India perhaps rather simplistic. and China, both very important in their own right on the India’s views and compulsions are significantly more regional and global stage, continue to pursue their own nuanced and need a careful analysis and understanding understandable interests and aspirations? How do they to help the two major countries of Asia play their right- manage their complex relationship in a spirit of ‘competi- ful and critically important regional and global roles in the tive co-operation’ for their own and the larger good? These 21st century. are the issues of interest in Section 4. It is understandable that India’s perspective on the BRI Section 5 concludes. would be influenced by events in its immediate neighbor- hood in South Asia. However, Central Asia and the South 2. India-Central Asia Relations Caucasus are part of India’s ‘extended neighborhood’ and India and Central Asia have deep and long historical thus of considerable importance and relevance as well for relations going back almost to the first century BC. A group India. And, as the focus of this study is on that region, this of tribal nomads, the Kushans, had settled in Afghanistan, paper first places the India-Central Asia relationship in a and “between 100 BC and 200 AD, they ruled a vast ter- historical, geostrategic context (Section 2). ritory stretching from Khursana to Punjab in India” (Starr Broadly, India’s perspective on the BRI can be consid- 2013, p. 53). Historically, Khursana referred to a large area ered under three broad groupings. (Section 3). east and northeast of the Persian Empire, parts which are India considers the BRI as building on the rich heritage currently in Iran, Afghanistan, Tajikistan, Turkmenistan and of the ancient Silk Road, which is an important part of its Uzbekistan (Bukhara and Samarkand). own historical past as well. For India, its perspective on the The ancient Silk Route (see Section 3.1 below) allowed modern day BRI is thus shaped by that historical heritage, an increasing flow of culture and religion in both directions, and this is presented in Section 3.1 below. resulting in the establishment of a Muslim Sultanate in Delhi For India, the BRI is much more than just enhancing as early as the 12th century followed by several Muslim physical connectivity, important as it might be. In India’s sultans who had their origins in Central Asia. By 1526, a view, the BRI is not just an aggregation of roads, railways young king, Babur from Ferghana, Uzbekistan, had estab- and ports: it has significant geostrategic aspects as well. lished the Mughal dynasty in India, which was to last for India thus needs to also consider how the BRI affects its almost 300 years. position in the regional power architecture in a multipolar

21  RAJAT M. NAG 22 This happenedasIndiatriedtobalanceoutitsstrategic Central Asia’s largesttradingpartner. Inspiteofanincreas (with whichitshares analmost3,000kmlongborder while global exportstothisregion. only about1percent ofthe region’s exports(mostlyoilfrom of players. of economicsupportfrom Moscow. and supportindeveloping extending direct connectiv a route North (a7,200kmlongmultimodalInternational and Asia,soonrevived thekeeninterest ofmajorexternal alignments withtheWest inapost-Sovietworldandas strategically criticallocation at the crossroads of Europe South Corridor, INSTC,discussedfurtherinSec 4.1 below) with CentralAsiawere withintheframeworkofthesecoun to dothesame.Thiswasfurther bolstered byChina’s ofthe21 the turn then be a combination of sea and land routes, and such the region. The most direct land route would be through the Russiansin19 the CentralAsianrepublics copedwiththedramaticeco tries beingpartoftheSovietUnion,withwhichindependent India hasnone),evidencedbyitssignificantinvestments India’s relations with the now-independent Central Asian India hadcloseeconomicandpoliticalrelationships. ments inCentralAsiaandhasnowovertakenRussiaas powers toagainpayseriousattentiontheregion, remi republics continuedbutwere somewhatmutedfora while. niscent of the Great Game machinations of the British and nomic shocksoftheirbreakup andthemassivedrop-offs Russia andNorthEurope wasfirstmootedasfarback Pakistan (andAfghanistan),buttransitthrough Pakistan Kazakhstan) andexportinglessthan1.5percent ofitstotal Europe andlatelyIndia. in 2013),alsoservedasanimportant motivationforIndia ity totheregion (wellbefore theBRIwasformallyproposed ing trend, India’s tradewithCentralAsiaispaltry, importing its mineral andenergy resources, not to mention its geo between thetwocountries.Theonlyotheroptionwould has notbeenpossibleduetomajorpoliticalchallenges linking Indiathrough IrantoCentralAsiaandthereafter to landlocked CentralAsiaislackofdirect connectivitywith The newcastnowprincipallyincludesChina,theUS, A major constraint for India to increased trade with China’s growing interest andinfluenceinCentralAsia China has,inrecent years,madesignificantinvest But the rich natural resources of the region, particularly Following the breakup of the Soviet Union in 1991, During mostofthetwentiethcentury, India’s relations st century. th century, albeit withanaltered cast ------Central Asian region, where it still lags behind China and China inthisforum,there isgeneral consensusamong 2012) isalsoakeyaspectoftheConnectCentralAsia (and Pakistan)formallybeingincluded(sinceJune2017)in cation, tourism (including medical, banking and finance), andenergy. Greater culturalexchanges,edu growing influenceandpresence inIndia’s immediateneigh connectivity butrenewed withvigorintherecent pastand a questforworldorder whichismultipolar”(Ahamed and people-to-peopleconnectionswere foreseen as at thefirstmeetingofIndia-CentralAsiaDialoguein almost halftheglobalpopulation.Notwithstandingsome stan, , Tajikistan, and Uzbekistan) plus China, SCO, Indiahasstrongly indicateditskeeninterest inthe wishes toremain engaged. with great anticipationforthefuture. countries representingwith its billion people, about3.5 this neighborhood,withwhichweare boundbythesilken the Shanghai Cooperation Organization (SCO) after having the ShanghaiCooperationOrganization(SCO)afterhaving INSTC, butalsotobuildonthecenturies-old“civilizational India’s perspective.From India’s pointofview, the BRI, Indian policymakersthatbybecomingafullmemberofthe much needed physical connectivity, butpart of a much particularly inCentralAsia,isnotjustaproject enhancing muted attimesduetoexigenciesofhistoryanddifficult relationship, withdeepculturalandreligious interactions, reservations inIndiaabouttheperceived dominationof not onlyencouragebetterprogress inimplementingthe Policy. Thishas nowbeensignificantlyenhancedbyIndia Bishkek in June 2012. This was a much-needed boost to Russia butwithwhichitwishestosignificantlyenhance Russia, IndiaandPakistan,isanimportantregional forum, important componentsofthispolicy“toreconnect with its engagement. between IndiaandCentralAsia“seeninthecontextof bonds ofcenturiescommonhistory”(Ahamed2012). bonds” withtheregion, goingbeyondjusttheconfinesof borhood inSouthAsia. been anobserverforoveradecade. hood,” Indiaalsounveileda“ConnectCentralAsiaPolicy” long history of association and one with which it very much long historyofassociationand one withwhichitverymuch larger geostrategicinitiativein a region where Indiahasa This thenisabird’s eyeviewofalongandancient The SCO,withfourCentralAsiancountries(Kazakh Strengthening strategicandsecuritycooperation It isinthiscontextthattheBRIneedstobeseenfrom Declaring CentralAsiaaspartofits“extendedneighbor - - - - STUDY ON THE BELT AND ROAD INITIATIVE IN CENTRAL ASIA AND THE SOUTH CAUCASUS: A NOTE ON THE INDIAN PERSPECTIVE  23 ------century century th century AD, century BC, BC, century th th century AD under the Northern Wei dynasty, who who Northern century AD under the dynasty, Wei th Buddhism, originating in India in the 6 the in India originating in Buddhism, India was equally integral to another ancient trade net ancient trade another integral to was equally India Over the centuries, the Silk Road and the Spice Route Greater movement of scholars, preachers and pil preachers movement of scholars, Greater A couple of centuries later, a young Uzbek king, Zahir- A couple of centuries later, Though it came much later, around the 14 around Though it came much later, -5 th but also with two Indian Buddhist monks to preach in in preach to monks Buddhist Indian two with also but travels to India languages, and more be translated to local monks only hastened the process by Chinese priests and influenced by India’s Upanishads and the Bhakti traditions influenced by India’s in India, which ruled the country for the next 300 years. in the Islamic context. Muslim traders and preachers trav preachers in the Islamic context. Muslim traders and Kabul and then onwards to Delhi. There, at the famous at the famous to Delhi. There, Kabul and then onwards Delhi the defeated Babur AD), (1526 Panipat of Battle ud-din Muhammad Babur, having been deposed from his having been deposed from ud-din Muhammad Babur, Indo in Islands) (Spice Islands Molucca the from nutmeg) India to the Middle East and beyond via the nesia through ultimately spread west and east of the country along the the along country the of east and west spread ultimately meated Indian religious thoughts. It was in turnmeated Indian religious significantly down the Khyber Pass on the Silk Road, first to marched religious exchanges. religious to its west and north, particularly Central Asia; to its east the divine. than the Silk Road, the Spice Route carried much more there were already about 2 million Buddhists in China. about 2 million Buddhists in already were there work, the Spice Route, used for maritime transportation work, the Spice Route, used for maritime transportation Sultan (Ibrahim Lodi) and established the Mughal Dynasty Silk Road, reaching the western Silk Road, reaching part of China by around began to texts and scriptures Buddhist religious Sacred spices, and over time expanded to include textiles, pre also served as critical conduits of exchange of people and and northeast, extending to China and beyond; and to actively promoted Buddhism. By the early 6 Buddhism. actively promoted over 15,000 km, encompassing Japan and China as well. reli architecture, and ideas—be it in music, arts, culture gious beliefs and traditions—between India and countries characterized by devotional philosophies emphasizing emphasizing characterized by devotional philosophies Samarkand, in Ferghana, and failing to capture own throne cloves and ginger, of exotic spices (cinnamon, pepper, and stretched saffron incense, and cious stones, timber, grims between India, Central Asia and China followed. followed. China and Asia Central India, between grims cultural (particularly artistic and musical) and of greater traditions,rich their them with carrying route this along elled beliefs. Sufism was one such ideas and religious cultures, deeply per critical Islamic tradition whose spiritual stirrings China” (Behera 2002, p. 5,078). China” (Behera Arabian Sea and the Mediterranean. But, as in the case of AD, the Silk Road’s influence on India was even greater even greater was on India influence Silk Road’s the AD, 4 - But as can be imagined, it was not a single road. It was it was not a single road. But as can be imagined, While the Silk Road obviously enhanced trade and While the Silk Road obviously enhanced trade and One of such spurs veered South, across the Karakoram South, across One of such spurs veered Capturing the above, Starr observes that perhaps perhaps that observes Starr above, the Capturing Contrary to what its name implies (a name of much much of name (a implies name its what to Contrary And, perhaps even more important from the point of of point the from important more even perhaps And, As early as the second century BC, Emperor Wudi had Wudi century BC, Emperor As early as the second There is evidence of Han Emperor Mingti (57-75 AD) Mingti (57-75 AD) is evidence of Han Emperor There latter in turn traded the silk further west. Initiative in many more commodities than silk alone. As a matter commodities than silk alone. As a matter in many more instead a vast network of caravan routes and trading posts, instead a vast network of caravan routes Mediterranean Sea. North and Northwestern India. This then connected to to Northwestern and North connected then This India. Buddhism. Cai Yin returned to China three years later “not to China three returned Buddhism. Cai Yin Road, is Starr’s observation that “he [Richthoven] also also [Richthoven] “he that observation Starr’s is Road, Richthoven had erred in naming the Road as the Silk Road, Silk as the Road the naming in erred had Richthoven Afghanistan to Egypt and India” or a “‘Gold Road’ from East” Middle the of capitals the to Road’ ‘Copper a or Road Parthian Empire to the Roman Empire. Parthian Empire Road gradually came to traverse a distance of over 7,000 Road gradually came mainly to China and not, equally, to India as well” (Starr India as well” (Starr to mainly to China and not, equally, passes to the towns of Leh and Srinagar, finally reaching reaching finally passes to the towns of Leh and Srinagar, von Richtho Ferdinand origin, given by Baron recent more miles connecting the Yellow River Valley in China to the in China to the River Valley the Yellow miles connecting Road and Spice Route vs. the BRI Road and Spice Route for precious stones and metals such as gold and silver; thesilver; and gold as such metals stones and precious for from China through Central Asia, northern through China India and the from traders exchanged their silk with their Indian counterparts Indian their with silk their exchanged traders which could just as easily have been called a “‘Lapus Lazuli with several branches and spurs spread over a vast area over a vast area with several branches and spurs spread 3.1. A Sense of Pique: the More Inclusive Ancient Silk Inclusive Ancient of Pique: the More 3.1. A Sense 3. India’s Perspectives on the Belt and Road on the Belt and Perspectives 3. India’s sending his emissary Cai Yin to India to learn more about to India to learnsending his emissary Cai Yin more sent his emissary General Zhang Qian, the man generally sent his emissary General and her near and far-flung neighbors. and her near and far-flung only with images of the Buddha and Buddhist scriptures scriptures Buddhist and Buddha the of images with only commerce, it played an even more important role in in role important more even an played it commerce, and cultural exchanges between India enabling religious view of emphasizing India’s close interaction with the Silk view of emphasizing India’s corridors of transport ran in assuming that the great erred of fact, even in the very early years of this route, Chinese route, of fact, even in the very early years of this other trails and roads throughout the Indian subcontinent. throughout other trails and roads Silk Road tradedven, a German cartographer in 1877), the connectivity westwards. Over the next 1600 years, the Silk Over the connectivity westwards. credited as being the founder of the Silk Road, to seek of the Silk Road, to seek as being the founder credited (Starr 2013, p. 43). 2013, p. 43).  RAJAT M. NAG 24 ence tohistoryandtheBRIisnoexception. gional/intercontinental connectivity, manyinIndiasawitas as awhole. ancient SilkRoadandSpiceRouteintheIndianpsycheas a Chinesestrategy, negatingafundamentalaspectofthe space intheIndianimagination,psycheandcommerce, 3.2. ExacerbatedbyaSense ofMutual Mistrust: the were muchmore thanmere traderoutes butanintegral Panda Hug India’s viewsontheBRImuchmore deeplythanmightbe readily apparent. part oftheIndianheritage. nothing between China and India happens without refer BRI inNovember2013asabold,globalstrategyofinterre Road and the Spice Route (Figure 1) perhaps influences Rather, itwasmore asabelief,instinctivelyfelt,thatthese Road andtheSpiceRoutehaveoccupiedanimportant in between. its Southeast,allthewaytoIndonesiaandregions belonging tonoonecountryinparticularbuttheregion belonging toIndiaexclusivelybuttheregion asawhole. but notsomuchinaproprietary senseoftheseroutes Figure 1:TheAncientSilkRoadandtheSpiceRoute Source: This historicalandgeographicalcontextoftheSilk As wouldbeexpectedfrom twoproud, oldcivilizations, While manymighttakePresident Xi’s enunciationofthe No wonderthenthatthrough themillennia,Silk UNESCO (2018) - - And indeed,there canbe no globalmultipolarorder with 2014, p.30). catching uptogetherwithanumberoflargeeconomiesin eastwards totheAsiaPacific region. SeveralAsianecono center of gravity of the global economy gradually shifts economic architecture willincreasingly includeAsiaasthe out amultipolarAsia. are importantregional andglobalplayersintheirownright. and political leaders. India believes that a globalmultipolar and fast-growing economythatremains onlyafifth the size of the Chinese economy, India’s strategic advantage is world historywasthatit“…represented thefirstattemptto world’s mostpopulouscountrywithinthenextfiveyears) 370 yearsago:thesigningofPeaceWestphalia to two debilitating wars of religion in Europe which had the BRIhasitsroots insomethingthathappenedalmost mies, currently ledbyChinaandJapan,withIndiarapidly rather thanthedominanceofasinglecountry”(Kissinger rules andlimitstobaseitonamultiplicityofpowers raged fordecades,afarmore fundamentalinfluenceon East andSoutheastAsia(Korea, Indonesiaamongthem) institutionalize an international orderinstitutionalize aninternational onthebasisofagreed in 1648.Whileitsimmediateeffect wastobringanend lar order anditresonates strongly withIndianpolicymakers This wasthegenesisofconceptaglobalmultipo A criticalconceptrelevant toIndia’s perception of As apopulous (projected toovertake China as the - - - STUDY ON THE BELT AND ROAD INITIATIVE IN CENTRAL ASIA AND THE SOUTH CAUCASUS: A NOTE ON THE INDIAN PERSPECTIVE  25 ------Many countries around the world suffer from very sig from the world suffer Many countries around However, bilateral and multilateral organizations such such bilateral and multilateral organizations However, India’s third major concern, one shared by several several by concern,major shared one third India’s It is in this context of a relationship marked by suspicion a relationship It is in this context of Of particular concern to India is what the BRI would The recent event of Hambantota Port in Sri Lanka pass The recent borrowing countries are taking on to finance BRI projects. countries are borrowing borrower from this institution). from borrower justed infrastructure investments of some US$26 trillion investments of some US$26 trillion justed infrastructure ing to Chinese hands on a 99-year lease, as well as airport ing to Chinese hands on a 99-year lease, ADB (2017) completed study, ingly very high. In a recently ingly collaborating on the regional and international and stage on the regional ingly collaborating 2). in Asia and (Figure in Xianjiang to the Gwadar Port of Pakistan via a network Pacific (including China and India) would need climate-ad Economic Corridor (CPEC), a 2,700 km spur from Kashgar from Economic Corridor (CPEC), a 2,700 km spur national Governments and international organizations, is deficits, particularly in transportation nificant infrastructure provided an average of about US$50 billion annually over provided presence in its immediate neighborhood through what what in its immediate neighborhood through presence mean in its immediate neighborhood. The China Pakistan mean in its immediate what India calls “Pakistan-occupied Kash passes through Kashmir). mir” and Pakistan calls “Azad Kashmir” (Free India’s sovereignty and territorial integrity, as the CPEC as the CPEC integrity, and territorial sovereignty India’s fraction (less than even 5 percent) of this demand, having demand, this of 5 percent) even than (less fraction the last five years. the 2016 level of US$700 million) and the two are increas and the two are of US$700 million) the 2016 level without climate change mitigation and adaptation mea adaptation and mitigation change climate without 3.3. The Debt Trap some in Delhi have called a “Panda hug.” some in Delhi have called a “Panda hug.” in any (an unwise and unsustainable proposition, sures as ADB, AIIB, and the World Bank are able to meet only a Bank are as ADB, AIIB, and the World and sea port developments in the Maldives, all cause India and sea port developments in the Maldives, owed mostly to China, which the about the debt burdens, correspond are requirements Their financing and energy. and mistrust, and yet a mutual dependency of economics and mistrust, and yet that India warily views the BRI as partand being neighbors, case), the costs would still be about US$1.5 trillion annually. great concern about the growing Chinese influence and Chinese influence and concern about the growing great estimated that the developing countries of Asia and the Even annually). trillion US$1.7 (or 2016-30 period the over opment Bank, or in India being a founding member of the a founding member or in India being opment Bank, of a ‘panda hug’ of countries of a Chinese grand strategy of particular con of highways, railways and pipelines, is violates routing cern. argued that this India has strenuously (such as on climate issues, or in setting up the New Devel setting up the New climate issues, or in (such as on Asian Infrastructure Investment Bank and also the largest Investment Asian Infrastructure ------However, more than a decade later, while China still still China while later, a decade than more However, During an official visit to India in April 2005, the 2005, the to India in April visit official During an In a remarkable acknowledgment of China’s and and acknowledgment of China’s In a remarkable In a clear nod to the Westphalian philosophy, the joint the philosophy, Westphalian to the nod clear a In And yet the two countries know they need each other. other. know they need each two countries And yet the The Indian psyche is still deeply affected by the trau The Indian psyche is still deeply affected the shaping of a new international political and economic the shaping of a new international political and acknowledged the importance of their respective roles in of their respective roles in acknowledged the importance order” (Saran 2017, p. 146). “As two major developing countries, India and China China and India countries, developing major two “As billion for several years). Chinese investments in India are billion for several years). Chinese investments in India are benchmarking itself with the US as part of a G2 global G2 global the US as part of a benchmarking itself with increasing rapidly (at US$2 billion in 2017, up sharply from rapidly (at US$2 billion in 2017, up sharply from increasing in the hierarchy of nations rather than simply being a pole a being simply than rather nations of hierarchy the in ing military strength, assertive moves in the South China assertive moves in the South China ing military strength, Prime Minister Manmohan Singh, the two leaders “spelt “spelt leaders two the Singh, Manmohan Minister Prime percent over 2016, after having stagnated at about US$70 percent power architecture rather than in a multipolar Asia in a rather than in a multipolar Asia in a power architecture multipolar world. war with 1962 border in the defeat humiliating matic and professes a similar wish for a multipolar Asia, many in a similar wish for a multipolar Asia, many in professes ment of India-China relations in the new millennium” (Saran ment of India-China relations India have grown skeptical about China’s intentions and intentions and skeptical about China’s India have grown India and China. Both welcomed the rise of the other and India and China. Both welcomed the rise India’s roles in a multipolar Asia, the two leaders agreed in a multipolar Asia, the two leaders agreed roles India’s tan border only reinforce such apprehensions. such apprehensions. only reinforce tan border that “there was enough room in both Asia and the world world the and Asia both in room enough was “there that rapid rise of both to accommodate the simultaneous and then-Chinese Premier Wen Jiabao asserted a similar view Jiabao asserted a similar Wen Premier then-Chinese will, border issues still lurk beneath the surface. Standoffs issues still lurk beneath the surface. Standoffs will, border Sea, and increasing presence and influence in Pakistan Pakistan and influence in presence Sea, and increasing statement issued at the end of Wen Jiabao’s visit said: Jiabao’s the end of Wen statement issued at and other immediate neighbors of India are all seen as evi and other immediate neighbors of India are aspirations. China’s overwhelming economic clout, grow overwhelming economic aspirations. China’s of over US$80 billion in 2017, an increase of about 18 of about 18 of over US$80 billion in 2017, an increase of a multipolar Asia. According to many Indian observers, of a multipolar Asia. According on China’s part as well. At his meeting with the then-Indian as well. At his meeting with the then-Indian part on China’s consensus underlying the develop out the elements of clearly in promoting a multipolar Asia in a multipolar world. a multipolar Asia in clearly in promoting (as recent as last year) at Doklam at the India-China-Bhu (as recent 2017, p. 146). 2017, p. 145). China is India’s largest trading partner (with a total trade largest trading partner (with a total trade China is India’s China, and in spite of periods of accommodation and good dence of a country intent on establishing its superior place power relations,’ China now seeks a new type of ‘great declared that neither posed a threat to the other” (Saran other” (Saran to the that neither posed a threat declared That is what India strongly desires. India strongly That is what  RAJAT M. NAG 26 on atleastfourcounts: eral sources (manyofthecountriesparticipatinginBRI accepts thispoint)buthowsuchprojects canbefinanced, as President XihashailedtheBRI, Chinaisresponding around theworld.Inpursuing the“project ofthecentury,” so incurred. would notbeabletotapprivatesectorfunding,andthose whether the host countries can afford them, and whether that couldwouldfaceunattractivecostsandterms),Chi they are therightpriorityand financiallyviablesothatthe ture projects are needed (they mostly are, and India fully to agenuinedevelopmentconstraintformanycountries: to the huge unmetdemand for infrastructure development focused onfinancinginfrastructure projects, responding nese financingisgenerallyperceived tobemore attractive, inadequate (andoftenpoorquality)infrastructure. borrowing countrieswouldbeabletorepay thedebts Figure 2:ASchematicof theBeltandRoadInitiative Source: The criticalissueisthusnotwhethersuchinfrastruc China’s BRIstrategyislargely, thoughnotexclusively, In contrasttoobtainingfinancingfrom official, multilat i. Mercator for Institute Chinese Studies China actively seeks outprojects forfinanc often verydemandingandchallenging formany studies, assessingthesocial and environmental to propose projects. Theprocess ofpreparing projects for international financing—includingprojects forinternational undertaking detailedfeasibility andengineering impacts, designingmitigationmeasures, etc.—are ing, rather than waiting for borrowing countries - - - - they oftensimultaneouslyentail thepossibilityofsignificant for borrowers, particularlyforthesmallerandpoorer ones, long-term risks. While eachofthesefourfactorsare oftenattractive iv. iii. ii. China isalsomore flexibleinnegotiatingpayment efficientlyGovernment bringstogethervariousmin decision-making mechanismwithintheChinese China isalsoseenasbeingmore nimblein developing countries.GettingChinesefinancing (accommodating) tohostcountryneedsandcon cumbersome approval processes oftheMDBs,at approving projects, contrastedwiththelongand straints, particularly budget constraints, and willing straints, particularlybudgetconstraints,andwilling seen bymanyborrowers as beingmore sensitive significantly reduces suchburdens. terms, being willing to defer the start of repay ticularly forbiginfrastructure projects. to provide largeamounts offundingupfront, par In contrastwithmultilaterallenders,Chinais ments, offer longer terms of maturity, and accept mentation oftheprojects. more readily apparent andappreciated inimple up the approval process, afeature which is even istries and agencies of the Government, speeding istries andagenciesoftheGovernment, barter repayments anddebtforequityswaps. least as perceived by the borrowers. A centralized - - - - - STUDY ON THE BELT AND ROAD INITIATIVE IN CENTRAL ASIA AND THE SOUTH CAUCASUS: A NOTE ON THE INDIAN PERSPECTIVE  27 - - - - - In the Maldives, China is heavily involved in the coun It found that 23 of these countries are already at risk at risk already It found that 23 of these countries are In Pakistan, for example, CPEC (China Pakistan Eco It is significant that only very recently (August 2018), recently (August 2018), only very It is significant that Apprehensions about BRI participation leading many leading many BRI participation about Apprehensions in reassuring were conclusions Study’s the level, one At These eight countries are Djibouti, Kyrgyz Republic, Djibouti, Kyrgyz Republic, These eight countries are To systematically assess the risk of debt stress in the assess the risk of debt stress systematically To istan. While Afghanistan and Sri Lanka are not in the most istan. While Afghanistan and Sri Lanka are in the 68 countries identified as potential BRI borrowers BRI borrowers in the 68 countries identified as potential et al. 2018, (Hurley focus” the initiative’s of regions the in Laos, Maldives, Mongolia, Montenegro, Pakistan and Tajik Laos, Maldives, Mongolia, Montenegro, Prime Minister Mahathir of Malaysia decided to cancel two Prime Minister Mahathir Sabah Gas Pipeline billion Trans Rail Link and the US$2+ of Global Develop countries, the Center BRI borrowing upgrade (US$830 million), the development of a new upgrade (US$830 million), the development of a new neighbors in South Asia are vulnerable to fall into the debt neighbors in South Asia are Leaving Project. BRI a flagship as serves Corridor) nomic rather sobering. poor countries of particular mostly small and relatively projects, on grounds of non-affordability and the future and the future of non-affordability on grounds projects, tank, think non-profit ment (CGD), a Washington-based undertook a study of potential debt problems recently also were conclusions Study’s time, the the same p. 5). At try’s three most prominent investment projects: an airport projects: investment most prominent three try’s tressed countries. In other words, four of India’s immediate immediate India’s of four words, other In countries. tressed trap as a consequence of the BRI. that the BRI is “unlikely to cause a systemic debt problem debt problem that the BRI is “unlikely to cause a systemic well above 70 percent, requiring perhaps another round perhaps another round requiring well above 70 percent, worrisome. The total value of CPEC projects is currently is currently worrisome. The total value of CPEC projects Several western countries, including some borrowing Several western some borrowing countries, including already warned Pakistan’s public debt ratios could rise rise could ratios debt public warned Pakistan’s already also considered. issue raised by India, as discussed aside the sovereignty of IMF assistance. of debt distress today. Of these, 10-15 could suffer from from Of these, 10-15 could suffer today. of debt distress concern, as they would face a significant risk of sovereign debt-dis 10-15 of list the in are they “eight,” vulnerable on Pakistan due to CPEC is the debt burden earlier, estimated at US$62 billion, with China expected to countries into a debt trap is not an Indian concern a debt trap is not countries into alone. and internationalcountries themselves have organizations, voiced similar concerns. (Hurley et al. 2018). finance about 80 percent of that amount. The IMF has of that amount. The IMF has finance about 80 percent debt distress due to future BRI-related financing, with eight BRI-related due to future debt distress is financing BRI-related potential when future default debt China-funded mega projects, the US$20 billion East Coast the US$20 billion East projects, China-funded mega on the country. would impose these projects debt burdens - - - - Hambantota Port in Sri Lanka is a case in point to illus to point in a case is Lanka Sri in Port Hambantota But perhaps the most important consideration of all is But perhaps the most important consideration India considers the Hambantota Port, situated on Sri India considers the Hambantota Port, situated on Sri Similarly, an important counterbalance of faster counterbalance of faster an important Similarly, While flexibility of Chinese funding, particularly on the the particularly on of Chinese funding, While flexibility China provided a loan of about US$1.3 billion to to billion US$1.3 about of loan a provided China The situation is further exacerbated by the fact that the fact that The situation is further exacerbated by This is reflected in the fact that almost three-quarters in the fact that almost three-quarters This is reflected True, preparation of projects for international for funding projects of preparation True, has long insisted that the BRI is a commercial venture, not not venture, has long insisted that the BRI is a commercial borrowers also face considerable exchange rate risks as as risks rate exchange considerable face also borrowers importance. Thus, notwithstanding Sri Lankan assurances ibility on the period and nature of repayments, but “China of repayments, ibility on the period and nature MDBs (Hillman 2018). Lanka’s southern coast and providing access to critical critical access to southern coast and providing Lanka’s undertaking unviable or undesirable projects. unviable or undesirable undertaking port and 15,000 acres of adjacent land to a Chinese SOE port and 15,000 acres most CDB and CHEXIM loans are usually denominated in most CDB and CHEXIM loans are projects are significantly less open to local and internalocal and to open less significantly are projects might have been reluctant to support. might have been reluctant Indian Ocean sea lanes, to be of significant geostrategic Indian Ocean sea lanes, to be of significant geostrategic US dollars or Chinese renminbi. foreign power, India is deeply concerned about Chinese power, foreign forthcoming from multilateral sources. But as the country as the But sources. multilateral from forthcoming payments and after several exten failed to meet its interest that the port will not be used for any military activity by any trate these concerns. the issue of flexibility on payment terms. True, there is flex is True, there the issue of flexibility on payment terms. tional participation. A recent report by CSIS indicated by CSIS indicated report A recent tional participation. Chinese companies could projects, that in China-funded were at commercial terms, provided principally by CDB and CDB by principally provided terms, commercial at were sions and renegotiations, Sri Lanka finally handed over the sions and renegotiations, successful at locking in higher rates because it agrees to it agrees successful at locking in higher rates because assume risks that other lenders will not” (Hillman 2018). assume risks that other lenders will not” an aid program” (Deloitte 2018). an aid program” account for as much as 90 percent of the contractors used, account for as much as 90 percent approval and implementation is that such Chinese funded and implementation approval amounts provided, is welcomed by resource-constrained by resource-constrained is welcomed provided, amounts ownership of that port. on a 99-year lease in December 2017. of Chinese lending for infrastructure development during development during of Chinese lending for infrastructure compared to less than 30 percent on those funded by the to less than 30 percent compared countries, this may also be interpreted as China being less as may also be interpreted countries, this can often be demanding, but it reduces the possibility of possibility of the it reduces be demanding, but can often 2000-2014 (amounting to slightly over US$350 billion) US$350 billion) 2000-2014 (amounting to slightly over develop this deep-sea port after such funding was not develop this deep-sea port after such funding was not CHEXIM. Principally, many observers argue that “China is CHEXIM. Principally, demanding and willing to fund projects which the MDBs which the MDBs to fund projects demanding and willing  RAJAT M. NAG 28 4. India’s PossibleReactions financing severalmajorprojects initsimmediateneighbor Central, SouthandSoutheastAsia)ispoor. India’s own connecting Kolkata and Kunming; and various rail,road enhancing regional connectivityandisactivelysupporting/ connectivity with its neighbors and beyondis a majorcon ence, presence, and, evenmore worrisome, ownership of countries, theauthorbelievesthatIndia’s are concerns ownership willbefinancedbyloansfrom China(atterms conglomerate will take a 70 percent equity stake inthe of view)isfarfrom clear, andyetaChinesestate-owned as part of its ‘extended neighborhood,’ it is deeply involved as partofits‘extendedneighborhood,’ itisdeeplyinvolved and energytradeprojects withBangladesh. all developingcountriesoftheworld.Intra-countryand of greateralso due to geostrategic concerns Chinese influ alaPandahug.Thus, also basedonsecurityconcerns, about thedebttrapare universallytrueforallborrowing World BankandtheIMFconsiderMaldivestobeat straint toexpandingitsaccessandtradewiththem. structure deficitsin Asiaand the Pacific,and indeed in which are stillunclear)withsignificantheavydebtburdens the Bangladesh-China-India-Myanmar (BCIM)Corridor, three (historicallegacy, concerns [“the securityconcerns to theBRI.Nomatterhowstrongly itmightfeelaboutthe the country’s vulnerabilityalaHambantota. the relocation ofamajorport(costsunknown).Boththe township andbridgeneartheairport(US$400million) India’s foritsimmediateneighborsis debttrapconcerns Its economicandfinancial viability(from Myanmar’s point regional connectivityinvariouspartsofAsia(especially merely foraandprotesting raisingthematinternational is physical infrastructure assets. port andrunitfor50years.Theremaining 30percent ultimately connecting India to the ASEAN highway network; ultimately connecting India to the ASEAN highway network; not veryhelpfuleitherforitselforanybodyelse. not necessarilyonly due toaltruisticneighborlyfeelingsbut nomic zone) at Kyaukpyu inMyanmar on the Bay ofBengal. Panda Hug”],debttrap)abouttheBRIasnotedabove, in thefuture. billion deepwaterport(andanassociatedspecialeco hood: theIndiaMyanmarThailand(IMT)Trilateral Highway, high riskofdebtdistress, henceIndia’s about concerns There is widespread consensus about huge infra As amatterof fact, Indiaisherselfa major proponent of While India might officially argue that its reservations Similar concerns areSimilar concerns voicedaboutaproposed US$7.3 Similarly, givenIndia’s strategicinterests inCentralAsia India facesmajorstrategicchallengesinresponding - - - - - 4.1. TheInternationalNorthSouthTransport Corridor Azerbaijan hasrecently (early2018)extended aUS$500 (discussed below). essentially followsanancientroute thathadconnected ers inCentralAsiaandEurope, whileatthesametime clothing, chemicalsandagriculturalproducts toconsum overemphasized. Undercurrent geopoliticalsituationsand and thenbeyond(Figure 3). almost US$500 million in the Chabahar Port on Iran’s and landconnectivitywithCentralAsiabeyond. a majorachievement. alignment ofcustomsprocesses andprocedures, and and software challengesto besortedout:issuessuchas South Asia with Northern Europe South AsiawithNorthern forcenturies,widelyused (INSTC) through theSuezCanal(Sharma&Sano2018,p.4). tional) could almost halve the transportation time between the physicalcompletionofINSTCitselfwillindeedbe for movement of cargo from Bandar Abbas to Tehran). Yet, India enunciatedits“ConnectCentralAsia”policy, atwhich point the sponsoring countries started seriously address procuring oil,naturalgasandmetalsfrom CentralAsia’s relations withPakistan, the INSTCisonlypossible sea misaligned tariffs (highertariffs byrailratherthanroad pleted by 2020, marking the completion of the INSTC itself. million loan to Iran. Iran expects this segment to be com Persian Gulfcoast.Inreturn, Iranhasagreed toletan Mumbai and Moscow, compared tothe current route ingly slow, withverylimitedprogress almosttill2012,when ing Afghanistan and Central Asia totheCaucasus, Russia in severalconnectivityprojects there aswell.Theseare ing thefinancingandotherinstitutionalissues. by European, Russian,CentralAsianandIndiantraders. briefly discussedbelow. border crossing rulesanddocumentationrequirements, between theIraniancitiesofRashtandAstara,forwhich linking thePersianGulf to theCaspian Sea via Iran andlink least tillaproposed gaspipelinefrom Turkmenistan isbuilt landlocked countries”(SharmaandSano2018,p.6),at The implementationofthisproject hasbeenpainstak INSTCisamultimodaltransportationroute The modern According tosomeestimates,thisroute (whenopera A key link still missing in the corridor is the railway line Without adoubt,there willstillbemajorinstitutionalWithout India has thus courted Iran assiduously and invested Iran isthegatewaythrough whichIndiacanexport“its For India,theimportanceofINSTCcannotbe Mooted byRussia,IndiaandIranin2000,theINSTC ------STUDY ON THE BELT AND ROAD INITIATIVE IN CENTRAL ASIA AND THE SOUTH CAUCASUS: A NOTE ON THE INDIAN PERSPECTIVE  29 - - - Dubbed the “Peace Pipeline,” it will test the resolve of the resolve Dubbed the “Peace Pipeline,” it will test It is not the length of the pipeline (though not an insig It is not the length of the pipeline (though Undoubtedly, TAPI is important for Turkmenistan to to is important for Turkmenistan TAPI Undoubtedly, Conceptualized in the 1990s, it took quite a long time The pipeline is designed for an economic life of 30 years imaginative, but the fact that it will traverse some high some high imaginative, but the fact that it will traverse in Punjab. nificant 1,800 km) that is particularly extraordinary and and extraordinary nificant 1,800 km) that is particularly meters). Construction began in 2015 and is expected to be 16 percent. remaining mate destination at Fazilka at the India-Pakistan border border mate destination at Fazilka at the India-Pakistan Interstate Gas Services of Pakistan and the Gas Authority the transit countries to assure safe passage of gas and and gas of passage safe assure to countries transit the to get the fundamental institutional framework in place. with an annual carrying capacity of 33 bcm (billion cubic cubic (billion bcm 33 of capacity carrying annual an with security risk areas in Afghanistan (Herat and Kandahar) and Kandahar) Afghanistan (Herat in areas security risk serve as an example of cooperation between countries standing between them. about 42 percent of the output, with Afghanistan taking the taking Afghanistan with output, the of percent 42 about and Pakistan (Quetta and Multan) before reaching its ulti its reaching and Pakistan (Quetta and Multan) before commissioned in 2020. India and Pakistan will each take wound down Gazprom on China, particularly after Russia’s even when there are many contentious issues still out many are even when there build, (GAIL), was incorporated in late 2014 to of India Ltd own and operate the estimated US$7.5 billion pipeline. diversify its destination market (currently dependent heavily diversify its destination market (currently A special-purpose consortium, led by Turkmenistan’s A special-purpose consortium, led by Turkmenistan’s Turkmengaz, and including the Afghan Gas Enterprise, Gas Enterprise, and including the Afghan Turkmengaz, - - - - Sharma & Sano (2018) In another example of dreaming big, TAPI proposes to proposes big, TAPI In another example of dreaming India will also fund a railway link from Chabahar to Chabahar to India will also fund a railway link from While Iran has historically been close to India, and and India, to close been historically has Iran While The important takeaway is that while India and China China and India while that is takeaway important The Source: Figure 3: The International South Corridor North Figure lizational links as important in defining current strong and strong lizational links as important in defining current instead aim to strike a balance between the two countries two the between balance a strike to aim instead infrastructural plans. As recently as March 2018, for exam as March infrastructural plans. As recently Port, but only for a period of 18 months (not 99 years a la Port, but only for a period of 18 months Hambantota Port). ple, China inked a deal (through a SOE) to build a US$700 ple, China inked a deal (through million train link between the cities of Shiraz and Bushehr. coun as possible the INSTC and the BRI might consider India and Pakistan. Indian Company manage the first phase of the Chabahar Indian Company manage the first phase Pipeline (TAPI) the world’s fourth largest gas reserves, to energy-hungry to energy-hungry fourth largest gas reserves, the world’s terfoils to each other, countries in the region do not see do not see region countries in the terfoils to each other, will and proposition” either/or “an as routes two these tance in its geostrategic calculations. Iran is China’s largest tance in its geostrategic calculations. Iran is China’s and maximize the benefits from both. and maximize the benefits from a side spur to Uzbekistan and other Central Asian countries. a side spur to Uzbekistan and other Central carry natural gas from energy-rich Turkmenistan, boasting energy-rich Turkmenistan, carry natural gas from good relations with India, it also recognizes China’s impor China’s with India, it also recognizes good relations critical for Iran’s oil supplier and Chinese investments are genuinely considers the past historical, cultural and civi genuinely considers the past historical, Zahedan, on the border with Afghanistan, making possible making Afghanistan, with border the on Zahedan, 4.2. Turkmenistan-Afghanistan-Pakistan-India Gas Gas Turkmenistan-Afghanistan-Pakistan-India 4.2.  RAJAT M. NAG 30 Third, India’s objectives,scopeandinterests insupporting/ Central andSouthAsia. domestically produced gas),securityofsupplyandsignif diversify itssources ofmuch-neededcleanenergytofuel equally applytoprojects elsewhere aswell. even expressed interested insupportingaspurlineoff TAPI complementarity and overlap of the INTSC and the BRI cussion ontheINSTCandTAPI. whichforthelattercouldbeashighUS$400mil earn, climate accord commitments.PakistanandAfghanistan of reducing greenhouse gas emissions as per the Paris assistance thanitisabletoor mobilizefundsfrom other accruing tothem. sponsoring, say, theINTSCorTAPI neednotnecessarily second, thatIndiawishessuchprojects involvemulti support largeinfrastructure projects inCentralAsia.But, sources (say, bystronger lobbyingand supportfrom the smaller andpoorer ones,are willingparticipantsintheBRI, will alsobenefitsignificantly from thetransitfeestheywill were noted and there are some reports that China has this, Indiawilleitherhaveto offer muchlargerfinancial the debt trap, for example), but because of the access to to reach China (Drazen2018).Andfourth,theparticipat that the pipeline will indeed become operational by 2020, the gas(ascurrently negotiated,thedelivered pricetothe the pipeline. These mainly pertain to the final pricing of funds that China provides and which others, including the India-supported projects inCentralAsia,they would multilateral institutions). multilaterals, are unwilling orunabletooffer. To counter participate inalltheseprojects tomaximize the benefits projects asbeingmutually exclusive. Theyare keento ple partnersin their financing, design andimplementation. not necessarilybecausetheyare unaware oftherisks(of ushering inanothereraofsignificantcooperationbetween ultimate consumer in Indiaisseriouslyuncompetitive with ing countriesthemselvesdonotseesuch infrastructure icant fundinggaps. its briskeconomicgrowth andalsomeetthechallenges its importsfrom Turkmenistan in2016)andforIndiato be inconflictwithChina’s sponsorshipoftheBRI.The hopeful thattheseissueswillbesatisfactorilyresolved and lion ayear. While theaboveobservationshavebeendrawnfrom It followstherefore thatmanycountries,particularlythe First, thatIndiaisnotaverse(andinfactkeen)to Four relevant observations emergefrom theabovedis However, severalmajorunsolvedissuesstillplague Nevertheless, all thefour partner countries are stillvery - - - - - AIIB andNDBcanmeetonlyasmallfraction(lessthan declining political and diplomatic capital and goodwill in (particularly for thelatter)are ratherdifficult toobtain,itis ects, isanothermajorchallengeforIndia.Evenwhile eign nations, includingthose in India’s own neighborhood, offer sources alternative offundingsupport,othersover cases. Forexample,inspiteof asignificantincrease (of ects which itis supporting elsewhere in the region; and of influence. contracts andlocalinvolvement,there isnodenying the accounting fordiffering administrative systems,whichoften and mostvulnerable,multilateralizationoftheChinesesup a poortrackrecord ofimplementationseveralproj and, infact,activelyseeksthemouttoexpanditscircle advantages in responding generously to such overtures almost fiveyearsbehindschedule. speedy execution and completion of China-funded Proj supports and advocates such multilateralization efforts, but will find seeking and accepting (readily available) support turn down. turn tenth) ofsuchdemand. that eventhecombinedfinancingof World Bank,ADB, the demand for infrastructure is so huge (as noted earlier) the BRI,particularlythosewhoare already debt-stressed to their neighbors in South Asia by both India and China these countriestoreach out toChinaasacounterbalance. their own priorities, compulsions and aspirations. Except ther exacerbatedbywhatthesmallerstatesperceive to from the BRI a very difficult and tempting proposition to fer toothercountries,particularlyinitsownneighborhood; factors: limitedfinancial resources ofitsowntocounterof for BangladeshandBhutan,India’s bilateralrelations with fact that the IMT Trilateral Highway Project, for example, India-supported projects, particularlycompared tothe require time-consuming processes, including for awards of port wouldobviouslybeadesirableprocess. Indiastrongly mutual suspicions to varying degrees, which often leads no surprise that China leads India by a wide margin in all No doubt,Chinaforitspartseesconsiderablestrategic its neighborhood. be India’s oftenhigh-handedandinsensitiveapproach to her immediateSouthAsianneighborsremain fraughtwith has suffered severalseriousdelaysandiscurrently running The veryslowpaceofimplementationmany The bottom line therefore remains that unless India can To reduce the dependenceofthecurrent participantsin The situationinIndia’s immediateneighborhoodisfur While dataoninvestmentsinand financialassistance India is thus faced with simultaneous interplay of three ------STUDY ON THE BELT AND ROAD INITIATIVE IN CENTRAL ASIA AND THE SOUTH CAUCASUS: A NOTE ON THE INDIAN PERSPECTIVE  31 ------India thus needs to think of the BRI in broad geostra India thus needs to think of the BRI in broad India also needs to take an even more proactive role role proactive more even an take to needs also India but understandable, concerns BRI are about the India’s While China pushes ahead with the BRI, it will need While China pushes ahead with the BRI, it will need At the same time, the dramatic sweep of the BRI’s cov BRI’s the of sweep dramatic the time, same the At leadership and in fact is now enshrined in the country’s country’s the in enshrined now is fact in and leadership licly airing such concerns. be willing to put into “the project of the century” cannot of the century” cannot be willing to put into “the project of priorities some mistaken for Even allowing ignored. be leaders might be tempted to countries where borrowing needstheir to sensitive countries by being more borrowing is a very serious commitment on the part of the Chinese is a very serious commitment on the part of the Chinese it should think strategically how this may be best achieved. is a transformational possibility for many countries, with countries, with is a transformational possibility for many in regional and sub-regional groupings in Asia. There are are There Asia. in groupings sub-regional and regional in Policy. India is now actively pursuing projects and pro projects India is now actively pursuing Policy. the of details are nor available, readily is not projects BRI noted the apparent lack of transparency in BRI discussions lack of transparency noted the apparent resources being made available by China which these these which China by available made being resources mental impacts of some of the projects being considered being considered mental impacts of some of the projects India. India, on her part, will have to accept that the BRI India. India, on her part, will have to accept that the BRI for support under the BRI. Information on the pipeline of the pipeline of for support under the BRI. Information on term national interests (financial, social, environmental, (financial, social, environmental, term national interests should make it tegic terms. At one level, as noted earlier, to ones, in their efforts ticularly the smaller and the poorer to be sensitive to the genuine concerns of countries like the BRI cannot be countered by simply resisting it with it with by simply resisting the BRI cannot be countered with its Southeast Asian neighbors through its Act East East its Act through Asian neighbors with its Southeast sovereignty and security), the fact remains that the BRI that the BRI and security), the fact remains sovereignty sub-regional initiative involving South and Southeast Asian initiative involving sub-regional agree to some BRI projects not necessarily in their long- not necessarily in to some BRI projects agree to bilaterally enhance its own influence with the all efforts come should India importantly, Equally aspirations. and countries, par as the champion of the borrowing across a ‘dog in the manger’ attitude; this would be counterpro a ‘dog in the manger’ in pub role and negotiations. India performs a very useful constitution. And, while India should make all genuine constitution. And, while India should make all genuine to influence the course of the BRI for the greater efforts its own national perspective, good of the world and, from erage, ambitions, and possible resources China seems to seems China resources and possible ambitions, erage, else. countries cannot get anywhere financing, including from get access to global infrastructure encouraging signs of more robust engagement by India engagement by India robust signs of more encouraging with ASEAN in general, as well as a grams of cooperation Program. the BIMSTEC countries through viability and social and environ economic and financial China, for viable and sustainable projects. ductive. There are indeed genuine concernsgenuine indeed the about are There ductive. Many international observers have financing being offered. ------Even more important would be for India not to appear Even more India should also consciously reflect on why several several why on reflect consciously also should India India should certainly try hard to speed up the various India should certainly try hard While alerting BRI countries of the dangers of the debt Given India’s limited financial resources and its econ its and resources financial limited India’s Given A power interchange project with Bangladesh (at (at Bangladesh with project interchange power A been made easier with the recent opening of international been made easier with the recent between the two crossings) border khawdar-Zowkhawtar bureaucracy and indeed has drawn the attention of the and indeed has drawn the attention of the bureaucracy billion compared to US$150 million). billion compared including the IMF and MDBs), India should make strenu immediate neighbors seem to be turning to China with it will be unrealistic (and perhaps even undesirable) to even even to undesirable) even perhaps (and unrealistic be will it Land border crossings between India and Myanmar have crossings Land border Behrampur) and rail connections between the two coun two the between connections rail and Behrampur) natives to the participating countries in general and to its neighbors in particular. resent India’s attitude towards them. While each sover each While them. towards attitude India’s resent political leadership itself. projects under implementation. Encouragingly, this seems this seems implementation. Encouragingly, under projects to be opposing the BRI without offering meaningful alter to be opposing the BRI without offering others, many by (a concernexample for issue, trap shared the regional and global major powers, several of India’s India’s of several powers, major global and regional the tives on the ground must be high on India’s to-do lists. to-do must be high on India’s tives on the ground tries (Akahura- Agartala) have recently been completed been completed tries (Akahura- Agartala) have recently three points above. points three by the highest levels of the Indian to have been recognized than a third of China’s during the same period. Similarly, period. Similarly, during the same of China’s than a third than more invest to expected is and years several past the The differ the next largest investor. twice as much as India, structure financing as possible. structure strategic partnerships with the larger countries, particularly sense of urgency in completing the IMT Trilateral Highway. Highway. Trilateral IMT the completing in urgency of sense and are now operational. There seems to be a renewed seems to be a renewed now operational. There and are aid program is almost six times the size of India’s (US$1 (US$1 of India’s is almost six times the size aid program ous efforts at all international countries fora to help poorer ous efforts the MDBs for infra obtain as much financial support from greater enthusiasm in the recent past. This should be of past. This should be of enthusiasm in the recent greater concern to India. great of its neighbors seem to increasingly mistrust and even mistrust and even of its neighbors seem to increasingly out its big or small, would naturally balance eign country, entry-exit checkpoints (at the Tamu-Moreh and the Rih and the entry-exit checkpoints (at the Tamu-Moreh of India-supported initia countries. Showing the results omy being only a fifth of the size of the Chinese economy, size of the Chinese economy, of the omy being only a fifth on the first of the to do much more expect India to be able entials are even more striking in Bangladesh, where China’s China’s striking in Bangladesh, where even more entials are over 70 percent), India’s aid to Nepal (at US$150 million) million) to Nepal (at US$150 aid India’s over 70 percent), China has been the largest foreign investor in Nepal for for investor in Nepal been the largest foreign China has during the current fiscal year is still expected to be less to be less year is still expected fiscal current during the  RAJAT M. NAG 32 Japanese participationintheBRIselectivelyandonaproj As amatteroffact,Indiamightbeabletobetterinfluence development agendabasedonarules-basedapproach domestic stakeholders (such as the state Governments The BCIM Corridor could also giveGovernment. a boost opment BankAnnualMeeting heldinMay2017India, egy toenhanceconnectivitybetween thetwocontinents. efits toitselffrom theprojects soundertaken(theBCIM, out thekeyprinciplesitholdsdear, andselectivelysup ect-by-project basisbuthasemphasizedthatChinaneeds either way, Japanhasindicatedthatitwasopentopartic expressed itsstrong desire tohaveJapanparticipateinthe of theBRI,whichshehassofarrefused todo. acknowledged thesynergybetweeneconomicgrowth and and principles of sustainability and equity, and has also a more inclusive initiative while also accruing direct ben able tobringIndiaonboard wouldbeinmakingtheBRI a corridor). and theprivatesectorwhowouldcouldbenefitfrom such standards community”(Shim2018). oftheinternational which emphasizesbuildingqualityinfrastructure following which are highpriorityareas ofdevelopmentfortheModi the “ExpandedPartnershipforQualityInfrastructure” (EPQI), to thecountry’s ActEastPolicy. Indiamighteveninclude the basisof“transparency, opennessandaccountability.” to ensure thattheprojects itfinancesare carriedouton the dialogueonandcourseofBRIbybeingapart for example). formulated an“AsiaAfricaGrowth Corridor(AAGC)”strat It hasoffered anapproach forinfrastructure development, principles oftransparency, accountabilityandsustainability. principles. Anexampleofsuchanapproach couldbethe port onlythoseprojects whichare consistentwiththose ment Bank. But, without making any explicit commitments national security. Kolkata withKunming.Thisproject couldhavesignificant Bangladesh-China-India-Myanmar (BCIM)Corridorlinking BRI, includingbyitjoiningtheAsianInfrastructure Invest BRI maybeinstructiveforIndia.Chinahasconsistently ipating inthosepartsoftheBRI“whichwere insyncwith benefits toIndia, particularly inEast and Northeast India, Another lessonfrom Japan’s approach isnoteworthy. Unveiled by Prime Minister Modi at the African Devel Using theaboveframeworks, JapanandIndiahave India, foritspart,hasalsoemphasizedaglobal India couldconsiderfollowingsuchanapproach: Set In this context, Japan’s nuanced approach to the For China, the benefits of beingflexible enough to be Prime MinisterAbehasalsoalludedtothepossibilityof ------“develop aninstinctfor‘variablegeometry’—beingcomfort Their combinedimportanceontheglobalscenewillthus AAGC willfocusonfourareas: (i)undertakingdevelop defer to the primacy of the Central Government onmat defer totheprimacyofCentralGovernment China andIndiawillhavetocontinue cooperating,fortheir cal andbureaucratic). Whiletheirviewsholdtheprincipal encouraging people-to-peoplepartnership. own andindeedfortheglobal welfare. only continue to grow asthecenter of theglobaleconomy economies oftheworldinnexttentofifteen years,are access toneighboringmarketsthatsuchconnectivity and easierconnectivitywiththeirneighborstheready and institutionalconnectivity;(iii)enhancingskills;(iv) able withparticipatinginshiftingcoalitionsdependingon at timesbeindirect competitionasthetwolargeemerging already the major drivers of the global economy. China, a brakeontheirpotentialinvolvement. sway, particularlyof theviewsofstateGovernments, superpowers jostleforregional andglobalinfluence.But shifts eastward. sidered undertheBRIand seeIndia’s reticence tojoinas would provide. TheIndianprivate sectorisverykeento ters relating to theBRI,theyseebenefitsofgreater towards theBRIare more accommodating.Whiletheyall the border states, and those of the Indian private sector leadership(politi to theDelhi-basedCentralGovernment to saythatallreferences madesofartoIndiareally refer table ratherthannot. the pursuit of these objectives more feasible. India could the policyissueunderdiscussion”(Bery2017). this is where both the countries will be well advised to the world’s mostpopulouscountry, willtradeplaceswith to be number one) and India, as the world’s fastest grow India onthepopulationladderwithinnextfiveyears. ment corridor projects; (ii) enhancing quality infrastructure remain economicandpoliticalrivalson theglobalstage, political prioritieswillnotalwayscoincide,andinfactwould participate inthelargeinfrastructure projects beingcon influence the BRIagendamore effectively bybeingatthe in theBRIaswell.India’s presence intheBRIcouldmake ing economyanddestinedtobeinthetopthree orfour here aboutIndia’s perspectivesontheBRI.Itwouldbefair China, as the world’s second-largest economy (soon Under suchapragmaticapproach, evenasthey It maybeappropriate tobringinanothernuancedpoint Interestingly, allfouroftheseobjectivesare embedded India andChinarecognize thattheireconomicand ------STUDY ON THE BELT AND ROAD INITIATIVE IN CENTRAL ASIA AND THE SOUTH CAUCASUS: A NOTE ON THE INDIAN PERSPECTIVE  33 - - - - - However, the demand for infrastructure by the BRI’s by the BRI’s the demand for infrastructure However, But even this has to be placed in the larger context of India thus considers the BRI as part of a much larger much of a part as BRI the considers thus India concerns Asia are about the BRI in Central India’s And, unless India and others can offer alternate sources And, unless India and others can offer skepti All the points discussed above confirm India’s As in South Asia, India has similar concerns Asia, India has similar As in South about the To minimize, if not stave off the effects of the debt of the debt the effects minimize, if not stave off To have the desired effect of ensuring that international stan effect have the desired to formally endorse and join the BRI, at least having agreed is the second-largest (soon to be the largest) economy is the second-largest (soon to be the largest) economy in economy growing fastest the is India and world the in and in fact important in a multipolar global architecture, immediate and extended neighborhood, will find seeking immediate and extended neighborhood, will find seeking is in spite of the risks (of falling into the debt trap, for exam BRI in Central Asia. India has had deep and long historical deep and long historical Asia. India has had BRI in Central participating countries is so huge that even the combined countries is so huge that even the participating would entail, though the borrowing ple) such borrowing relations with Central Asia going back almost to the first the first going back almost to with Central Asia relations engaged. much wishes to remain namely in that region, own of its major connectivity projects India-China relations. Given their economic and population India-China relations. far short, meeting only a tenth of their needs. further exacerbated by the fact that India supports some further exacerbated the world, and one of the top ten. They are both critically the world, and one of the top ten. They are transparency and accountability, are followed. are and accountability, transparency the INSTC and TAPI. The former links India through Iran to The former links India through the INSTC and TAPI. Afghanistan to India via Turkmenistan transport gas from security impli trap and its consequent geostrategic and other donors the BRI as far as possible by encouraging sizes, China and India are formidable players on the Asian sizes, China and India are siders its “extended neighborhood” and with which it very siders its “extended and global scenes which neither country can ignore. China and global scenes which neither country can ignore. and accepting (readily available) support from the BRI a the BRI a available) support from and accepting (readily as yet. and Pakistan. This would also and multilateral institutions to participate. environmental and social safeguards and standards of of and standards and social safeguards environmental countries, including in India’s of funding support, borrowing to turn and tempting proposition down. This very difficult of these risks. well aware countries are about the BRI, leading to India not cism and reservations century BC. which India con by China in a region geostrategic initiative to multilateralize supports efforts cations, India strongly dards of project preparation, including adhering to required required including adhering to preparation, of project dards financial support of international funding agencies will fall Central Asia and thereafter to Russia and Northern Europe. and Northern to Russia Europe. Central Asia and thereafter The latter (TAPI) is a major pipeline project designed to to designed is a major pipeline project The latter (TAPI) - - - - - It is fair to say then that while India appreciates the the It is fair to say then that while India appreciates India is also concerned about the potential ‘debt traps’ In one sense, given the huge infrastructure deficits in in deficits infrastructure huge the given sense, one In India’s perspectives on the BRI are multilayered and and multilayered are BRI the on perspectives India’s Given its long history of association with the ancient of association with the ancient Given its long history Turning to Central Asia, it is important to note that given note that to it is important Asia, to Central Turning Though the BRI is a network of roads, railways and railways and Though the BRI is a network of roads, hug.’ This concern is particularly exacerbated by the pro branded as a Chinese initiative. Notwithstanding China’s China’s Notwithstanding initiative. Chinese a as branded influence and presence in India’s immediate neighborhood immediate in India’s influence and presence ‘panda benevolent than less a as seen be could what in initiative, which India would prefer. initiative, which India 5. Conclusions Hambantota Port in Sri Lanka through a 99-year lease to Hambantota Port in Sri Lanka through powers, including China and India. region. These could all potentially dilute India’s global and These could all potentially dilute India’s region. geopolitical standing. regional press of the ‘panda hug.’ press possibility of significant benefits to participating countries pertains mainly to China possibly gaining equity control of pertains mainly to China possibly gaining equity control for equity swaps to settle unservice debt through projects passes through disputed territory. passes through posed China Pakistan Economic Corridor (a key element posed China Pakistan Economic Corridor professed willingness (and even keen desire) to invite other desire) willingness (and even keen professed India considers the proposed projects, particularly in South particularly projects, India considers the proposed the risks of greater Chinese influence and presence in the in presence and influence Chinese greater of risks the particularly its mineral rich natural resources, the region’s the debt trap in geostrategic terms as potentially another terms as the debt trap in geostrategic terms, India fears that China will thus increasingly exert its increasingly fears that China will thus terms, India the BRI but also has some concernsthe BRI but also has and reservations. which the poorer and weaker countries might find them which the poorer Silk Route, India feels a sense of pique at the BRI being being at the BRI of pique a sense Silk Route, India feels settle such a debt burden is a case in point. India thus sees settle such a debt burden siderations for the economic welfare of its neighbors. It of its neighbors. It siderations for the economic welfare selves in as a result of participating in BRI. However, this of participating in BRI. However, selves in as a result siders a violation of its national sovereignty as the corridor siders a violation of its national sovereignty sea links, with spurs spreading out in several directions, out in several directions, sea links, with spurs spreading sees it as a China-centric initiative, rather than a multilateral rather than initiative, sees it as a China-centric and energy resources, not to mention its geostrategically mention its not to energy resources, and able debt burdens. A Chinese SOE gaining control of the A Chinese SOE gaining control able debt burdens. critical location at the crossroads of Europe and Asia, and Asia, of Europe critical location at the crossroads concern is not simply the result of India’s altruistic con concern of India’s is not simply the result of the BRI), a 3,500 km transport corridor which India con of the BRI), a 3,500 km transport corridor countries, including India, to participate in the BRI, India India, to participate in the BRI, India countries, including Central Asia continues to attract all major and emerging emerging Central Asia continues to attract all major and due to enhanced and improved connectivity, it also fears fears also it connectivity, improved and enhanced to due driven by complex considerations. driven by complex Asia, as a possible attempt at encirclement. In geostrategic Asia, as a possible attempt at encirclement. Asia, including in Central Asia, and Africa, India welcomes Asia, including in Central  RAJAT M. NAG 34 Asian DevelopmentBank(2017).MeetingAsia’s Ahamed, E.(2012).Keynoteaddress byMOSShriE. gradually butinexorablyshiftseastward. and reservations abouttheBRIanditwillcontinuetoraise and militarystandoffs (mostrecently atDoklam,thetri Shanghai Cooperation Organization) and equally important Shanghai CooperationOrganization)andequallyimportant with animportantrole toplayinamultipolar Asiaanda wise inpracticingtheartofrealpolitik asbefittingacountry them atvariousoccasionsandfora.ButIndia,theauthor through formal(Indianowbecomingamemberofthe multipolar world. relations. Thus,eveninspiteofunresolved border issues mons (climatechange,forexample)asthecenterofgravity prowess andpotential.Theyare bothincreasingly called upon toplayanimportantrole inmattersofglobalcom need eachotherbothfortheirmarketsizesandeconomic Hurley, John, Scott Morris, and Gailyn Portelance (2018). Hillman, Jonathan (2018). “China’s Belt and Road Ini Hasimova, Umida(2018).“WhyCentralAsiaisbettingon Drazen, Jorgic(2018).“ChinaInterested in joiningTAPI Deloitte Insights(2018).EmbracingtheBRIEcosystem Bery, Suman(2017).“HowIndiashouldrespond toChina’s Behera, Subhakanta(2002).“India’s Encounterwiththe Baruah, Darshana M. (2017). “Nepal joined the BRI: What Modi andPresident Xihavereached outtoeachother in this larger context. Indeed, India has several concerns informal means(theWuhan Summit,forexample). believes, willalsocontinuetobepragmaticandhopefully both countriestotakealargergeostrategicviewoftheir References lateral junctionofBhutan,IndiaandChina),PrimeMinister Thus, India’s perspectiveontheBRIneedstobeseen These considerations have motivated, indeed pushed, “Examining the Debt Implications of the Belt and Ahamed atFirstIndia-CentralAsiaDialogue. Global Development. does thatmeanforIndia?”TheDiplomat. Silk Road.”EconomicandPoliticalWeekly 37(51): tiative: 5yearslater.” CenterforStrategicand 5,077-80. International Studies. International Infrastructure Needs. Road Initiativefrom aPolicyPerspective.”Centerfor BRI.” TheDiplomat. Pipeline Project.” MoneyNews. Belt andRoad.”TheDiplomat. in 2018. - - - Tambi, Radhey (2018). “The Folly of Great Expectations Zhu, Zhiqun(2018).“Can the QuadCounterBRI.” Starr, Frederick S.(2013).LostEnlightenment:Central Shim, Elizabeth(2018).“Japansignalsinterest inChina’s Sharma, Kiran, and Akihiro Sano (2018). “India and China Saran, Shyam(2017).HowIndiaSeestheWorld: Kautilya UNESCO (2018).“AbouttheSilkRoad.”Roads:Dia Ramachandran, Sudha(2018)“TheChinaMaldivesCon Kissinger, Henry(2014).World Order. London: Nag, Rajat, Johannes F. Linn, and Harinder S. Kohli,eds. Modi, Narendra (2018).PrimeMinister’s KeynoteAddress The Diplomat. Asia’s GoldenAgeFrom theArabConquesttoTamer Asian Review. (2016). CentralAsia2050:Unleashing the Region’s One Belt,RoadInitiative.”UPI. at theShangriLaDialogue. to the21 from IndiaChinaRelations.” TheDiplomat. nection.” TheDiplomat. Potential. NewDelhi:SagePublications. Penguin Books. jostle forinfluenceinIranandCentralAsia.”Nikkei lane. Princeton,NJ:PrincetonUniversityPress. logue, Diversity&Development. st century. Books. NewDelhi:Juggernaut - - - The Belt and Road Initiative from a Russian Perspective

Evgeny Vinokurov

1. Introduction envisaged to play a prominent role in the implementation In the early 2010s, the growing economic and political of the BRI. On 8 May 2016, during the visit of Xi Jinping to weight of China and its foreign policy ambitions led to the Moscow, Russian President Vladimir Putin and the Chinese development of a qualitatively new foreign economic policy leader signed a decree on cooperation to tie the develop- strategy. In 2013, China’s President Xi Jinping proposed a ment of the EAEU with the BRI. Later that year, at the modern equivalent of the ancient Silk Roads—the Belt and Shanghai Cooperation Organization (SCO) Summit in Ufa Road Initiative (BRI). In practical terms, China aims to pro- (Russia), this idea was consolidated in the SCO announce- mote economic growth in potential markets and improve ment of negotiations on a non-preferential agreement on connectivity with them. Among other things, the initiative trade and economic cooperation between the EAEU and called for the building of a network of railways, roads, the PRC. pipelines and other infrastructure that would link China to Russia appreciated the potential positive implications Central Asia, West Asia, South Asia, Europe and Africa. of the BRI early on. One of the key advantages of Eurasian In 2015, the State Council of the People’s Republic of continental cooperation is the opportunity it presents to China (PRC) authorized the BRI action plan with two main increase transport capacity. By realizing the potential of components: the Silk Road Economic Belt and the 21st trans-Eurasian links, work in this area will generate sev- Century Maritime Silk Road. According to the plan, the BRI eral positive spillover effects, such as more efficient use is a systemic project that must be built jointly through con- of transport capacity in transit countries. Most importantly, sultation to meet the interests of all concerned states, with such cooperation should eventually lead to much better efforts being made to integrate the development strategies internal connectivity between inner-Eurasian regions (Cen- of the countries along the Belt and Road (State Council tral Asia, Siberia, the Urals and the Caucasus) (Nag et al. of the PRC 2015). The BRI serves as an underlying idea 2016). For Russia and Central Asia countries, involvement about how China’s foreign economic expansion and trans- in the BRI is also significant since it may open new regional port policies might look in the coming years (Wang 2016). development opportunities, boost individual regions’ The PRC primarily seeks access to new markets, optimal investment appeal, energize interregional cooperation and export terms and increased economic development of its speed up economic growth. remote regions (Xinjiang Uyghur Autonomous Region, Tibet The structure of the paper is as follows. First, I provide Autonomous Region, Qinghai, Gansu and Inner Mongolia). an overview of the BRI corridors traversing Russia, Central To remedy the current situation, China intends to exploit Asia, and the South Caucasus. Then, I provide estimates the resources and geographical advantages of its central of the container freight flows (since trans-Eurasian transit and western provinces, unlocking the potential associated is primarily a ‘container story’). There will be three time with their cooperation with neighboring countries and the dimensions to these estimates—the current situation, the EU (Valdai 2015; Syroezhkin 2016; Toops 2016). The BRI short-term growth until 2020, and the long-term projec- is one of the cornerstones of China’s contemporary vision tions. Here I rely on the extensive work made by the EDB with dimensions that are not just economic, political and Center for Integration Studies under my supervision. A strategic (Yu 2016) but also cultural, religious and scientific, discussion on Russia’s view and Russian national inter- drawing on the symbolic meaning of the Silk Road (Liu & ests regarding the BRI follows. Further, along the way, I Dunford 2016, p. 326). argue that the Belt and Road is virtually an ideal compo- From the very beginning, Eurasian Economic Union nent of the nascent Greater and suggest a set of (EAEU) member states and Russia in particular were

35  EVGENY VINOKUROV 36 Accordingly, four corridorsand their constituentroutes/ flows were examined(Figure 1): of deliverycostsandperiods,determinationthe amount ofinvestmentsrequired forfurtherdevelopment. 2. Overview oftheBRICorridorsthrough2. Overview transport routes alongtheChina-EAEU-EUaxisinterms pects ofRussiaandCentralAsiancountries’involvement in implementingtheBRIare theidentificationofoptimal institutional arrangementsoffunctionalnature atvarious belts thatcouldpotentiallysupporttranscontinentalcargo Russia, CentralAsia,andtheSouthCaucasus levels andinvolvingvariousactors. Figure 1:MajorTrans-Eurasian Corridors Source: Important componentsofanyanalysisthepros • • • Eurasian Development Bank Development Eurasian Trans-Asian Corridors Central EurasianCorridor stan-Azerbaijan-Georgia-Turkey-EU; (2)Western structure oftheRussianFederation). stan-Russia-Europe, through theterritoryof sia-Europe viatheRussianFarEastandEastern Siberia) whichincludes(1)theFirstTransport Irkutsk-Chita-Khabarovsk-Vladivostok. Russia) including: (1) Western China-Kazakh Russia) including:(1)Western Kazakhstan andthenontothetransportinfra Belt: Tyumen-Omsk-Novosibirsk-Krasnoyarsk-Ir Northern Eurasian Corridor Northern kutsk; and(2)theSecondTransport Belt: (routes tothesouthof (China-Kazakh (China-Rus ------of development transport and logistical infrastructure. on toBrest orSaintPetersburg andtheportsofBaltic Orenburg, Kazan,NizhnyNovgorod, Moscow, andthen available inVinokurov &Tsukarev 2018). EurasianCorridorthroughand (2)aNorthern theTrans-Si routea southern through Khorgos,AlmatyandKyzylorda); Sea; or, alternatively, through thecitiesofUrumqi,Dostyk, traversing theterritoryofChina,KazakhstanandRussia. two landtransportcorridorsappeartooffer thehighest It passes through the cities of Lianyungang, Zhengzhou, routes: route anorthern through DostykandAstana rics andcurrent andanticipatedcargoflows,thefollowing number oftransitstates,throughput capacity, andlevel Based onacomparativeanalysisofroute efficiency met Karaganda, Petropavlovsk, Yekaterinburg, Kazanand Lanzhou, Urumqi,Khorgos,Almaty, Kyzylorda, Aktobe, improvement potential:(1)aCentralEurasianCorridor(two berian Railway(adetailedcomparisonandestimatesare The Central Eurasian Corridor brings together routes Each corridor and its constituent routes differ in length, • Trans-Caspian Route. China-Kazakhstan-Turkmenistan-Iran; and(3) (Port ofConstanta,Burgas). Urumqi-Aktau-Baku-Poti, andthenontotheEU Route; (2)aWestern Route;and(3)aCentral North-South International TransportNorth-South International Cor ridor (ITC) , whichincludes:(1)anEastern - - - THE BELT AND ROAD INITIATIVE FROM A RUSSIAN PERSPECTIVE  37 ------in 1 and Tsukarev 2018). and Tsukarev Increases in container traffic along the PRC-EAEU-EU in container traffic Increases Growth of transit container traffic through the EAEU EAEU the through container traffic of transit Growth There has been a considerable increase in railway con in railway increase been a considerable has There Trans-Eurasian transit is primarily a ‘container story.’ story.’ ‘container a primarily is transit Trans-Eurasian Vinokurov kets and ensuring smooth logistics in the Russian Far East. in the Russian Far smooth logistics kets and ensuring imately 80 percent of EU-China cargoes are carried in carried in of EU-China cargoes are imately 80 percent TEU to almost 100,000 TEU. At the 5,600 from increased ing adequate revenues. The real competitor for all these these competitor for all The real adequate revenues. ing Most opportunities associated with transit traffic along along traffic transit with associated opportunities Most PRC and the EU. Currently about 98 percent of mutual of mutual about 98 percent PRC and the EU. Currently made by maritime transport, with EU-China deliveries are BRI routes are related to the use of containers. Container to the use of containers. related are BRI routes guaran Eurasian transit cargoes. The use of containers provided by China. Our analysis shows that the annual by China. Our analysis shows that the annual provided routes is maritime transportation, which is still responsible which is still responsible is maritime transportation, routes unified ship packaging costs, accelerated cargo handling, If the bulk of ping documents and facilitated forwarding. from the EU to China. the from for 98.5-99 percent of China-Western Europe traffic. Europe of China-Western for 98.5-99 percent switch does axis China-EAEU-EU the along traffic freight ties. With the Chinese transit container freight rate reduced ties. With rate reduced the Chinese transit container freight to the EU from China and 70-75 percent of cargoes carried and 70-75 percent China to the EU from TEU 1,300 from China, EU to the from traffic tainer reached the EAEU crossing transit container traffic to-China transport remains virtually the only method of delivery of the only method of delivery of virtually transport remains dimensions, reduced of cargo, standard tees preservation it will be using 20- and 40-foot containers to land routes, will be contingent on development of trade between the the between trade of development on be contingent will several thousand kilometers of Russian soil, thus bring several thousand kilometers aviation transport and railway transport accounting for accounting for aviation transport and railway transport China to the EU from and 2016, transit container traffic subsidies transport railway by supported largely was axis of container cargoes along PRC-EAEU-EU routes in in routes PRC-EAEU-EU along cargoes container of by Chinese authori traffic export-oriented railway freight containers, including about 90 percent of cargoes brought of cargoes brought containers, including about 90 percent Europe- and China-to-Europe of volume the 2017, of end other purposes, namely exporting raw materials (coal, oil, raw materials (coal, namely exporting other purposes, mar Asia-Pacific to metals) pulp, and wood products, oil ( 2013-2016 was largely attributable to subsidization of 2013-2016 was largely attributable to subsidization of 2010 to more than 50,000 TEU in 2016. Between 2010 than 50,000 TEU in 2016. Between 2010 2010 to more 262,000 TEU, exceeding the 2016 value by a factor of 1.8. doubling of the number of container trains and volume doubling of the number of container trains and volume cargo capacity of container carriers and container terminals. zakhstan route which—let us not forget—also traverses traverses forget—also not us which—let route zakhstan 1. Twenty Foot Equivalent Unit, a conventional unit used to describe the 1. Twenty Therefore, Russia is interested in promoting the trans-Ka in promoting interested Russia is Therefore, 1.5-2 percent and 0.5-1 percent, respectively. Approx respectively. percent, 0.5-1 and percent 1.5-2 ------As for Kazakhstan, Turkmenistan and other Cen As for Kazakhstan, Turkmenistan There is no conflict of interest between Russia and between Russia and is no conflict of interest There The Northern Eurasian Corridor’s central link is the central link is the The Northern Eurasian Corridor’s birsk, Omsk, Tyumen, Yekaterinburg, Kazan and Moscow. Kazan and Moscow. Yekaterinburg, birsk, Omsk, Tyumen, by land between Europe and China. The overall length of and China. The Europe by land between inland transportation lies at 1.3-2 million TEU, which is inland transportation lies at 1.3-2 million TEU, which is economy political the from Second, growth. for room is it is already used to carry cargo in both directions; and and directions; both in cargo carry to used already is it Moscow. This route supports the bulk of cargo carried carried the bulk of cargo supports This route Moscow. Russia’s long-term interest to use Transsib primarily for primarily for to use Transsib long-term interest Russia’s Kazakhstan in developing these two corridors simul corridors two these developing in Kazakhstan Europe and Asia reduces delivery times by 10-15 days. delivery times by 10-15 days. reduces and Asia Europe Besides its exceptional role in the development of Rus Besides its exceptional role Europe-China routes traversing EAEU countries. routes Europe-China participate in boosting investment and ensuring conver ensuring and investment boosting in participate point of view, this growth can only be achieved if all playersall if achieved be only can growth this view, of point potential. Using this corridor to carry transit cargo betweenpotential. Using this corridor to carry transit reaching 100 percent. The largest transport hubs along along hubs transport largest The percent. 100 reaching route running over the Trans-Siberian Railway (Transsib) (Transsib) Railway Trans-Siberian the over running route path. It has a number of advantages over other routes: (1) over other routes: a number of advantages path. It has Unfortunately, weak infrastructure seriously limits expan weak infrastructure Unfortunately, tariff and attract additional cargo volumes. Third, it is in in is it Third, volumes. cargo additional attract and tariff taneously. There are several reasons for that. First, our our for that. First, several reasons are There taneously. the southernthe passing Corridor Eurasian Central the of leg The total potential capacity Almaty and Kyzylorda. through tral Asian states, they may also benefit from one of the one of the from tral Asian states, they may also benefit the foreseeable future remains doubtful. Transit capacity capacity Transit doubtful. remains future the foreseeable the route are Vladivostok, Irkutsk, Krasnoyarsk, Novosi are the route the route is 7,000-7,500 km, depending on the specific on the specific km, depending is 7,000-7,500 the route way transport); (2) a minimal number of border crossings crossings minimal number of border way transport); (2) a stan-Turkmenistan-Iran. If overland trade between Iran Iran between trade overland If stan-Turkmenistan-Iran. sia’s eastern has considerable transit territories, the railway sia’s in and any significant improvement sion of transit capacity, at least five times higher than the current volume. There volume. There at least five times higher than the current and Turkmenistan, and about 9 million tons of cargo are are of cargo tons million 9 and about Turkmenistan, and and China is revitalized, this route will make ample use of this route and China is revitalized, and Baikal-Amur Railway (BAM), with Transsib utilization utilization and Baikal-Amur Railway (BAM), with Transsib an ability to use a single transport modality (e.g., only rail an ability to use a single gence of technical regulations in order to lower the transit in order gence of technical regulations calculations show that the upper bound of demand for calculations show that the upper bound of demand for cargo are carried by land from China through Kazakhstan China through carried by land from cargo are Shanghai to the Port of Bandar Abbas. carried by sea from of the Iranian market is staggering: about 600,000 tons of tons 600,000 about is staggering: market Iranian the of can only be boosted following completion of the BAM and can only be boosted following completion (4) competitive shipping prices compared with the other other the with compared prices shipping competitive (4) (only two: China-Kazakhstan and Russia/Belarus-EU); (3) and (only two: China-Kazakhstan Transsib Development Program. Transsib Western China-Kazakh Corridor routes: Trans-Asian ‘traditional’ use and relative importance of the corridor, as of the corridor, importance relative ‘traditional’ use and  EVGENY VINOKUROV 38 This estimateassumesanaveragesubsidyofUS$2,500 cargo capacityofcontainercarriersandterminals. dramatically decrease (Figure 2b). 2020 to 500,000 FEU by 2030 is possible subject to further 2020 to500,000FEUby2030ispossiblesubjectfurther (from US$5,500perFEUto US$4,000perFEU). (Lobyrev etal.2018a). growth ofcontainertraffic to200-250,000FEUin2020(a container traffic. Thecurrent through freight rate(including originating from centralPRCprovinces standingat35,000 ers rapidlyswitchedfrom searoutes torailwaytransport. almost tozero, cargoflowsgeneratedbyChineseexport such apronounced effect andcontainergrowth rateswill subsidies) ofUS$5,500 per FEU may encourage further Subsidy-driven reduction ofChina-Europe railwayfreight 6,000 perFEU(subsidizedbyabout40percent) (Figure 2a). twofold increase overthree years).Afterthat,keepingthe to 131,000FEU(orfrom 14,000TEUto262,000TEU)has tainer traffic growth. Thegrowth ofrailwaycontainertraffic freight rateatUS$5,500 perFEUwillnolongerproduce reduction of the through freight rate by US$1,500 per FEU rates by30-50percent hasresulted ina19-foldincrease of percent ofthetotalvaluecontainer-shipped cargoes per FEU nese authoritiesamountedtoaboutUS$88millionin2016. 2. Forty Foot Equivalent Unit, a conventional unit used to describe the FEU. TheaveragesubsidyperFEUwasmerely 0.3-0.4 ing bothwaysfullyloadedwithoptimalcargoes;no been achievedatathrough railwayfreight rateofUS$4,800- between China and the EU in 2011-2017 from 7,000 FEU by Chineseprovinces isakeydriverofcontinuedcon Volume ofFreight alongPRC-Europe Routes(estimatedfreight elasticityofdemand) Figure 2:DynamicsofRailwayContainerFreight RatesandLong-Term Estimatesofthe Source: 1: (a) Scenario Container traffic growth from 200-250,000FEUin With balancedcontainerloads(containerstravel With Preservation and expansion of transport subsidies Estimates showthattotalsubsidiesprovided byChi Lobyrev et al. (2018a) al. et Lobyrev 2 , withthetotalnumberofsubsidizedcontainers

freight rate reduction to $4,000 per FEU per $4,000 to reduction rate freight - - - - (b) Scenario 2: unchanged freight rate at $5,500 per FEU per $5,500 at rate freight unchanged 2: (b) Scenario China through RussiatotheEUandbackappealsmedia Container transitisgrowing extremely rapidlybutfrom the (including existingtraffic) maybeashigh650,000FEU. outlets, butdoesnotaloneprovide anadequaterationale year (Lobyrev atal.2018a). could, overthelongerterm, reach up to 1million FEU per empty containers), additional container traffic that may competitive production centers, create opportunities for and incorporateinnovativeindustrialagrarianclusters access tomarkets.From Russia’s perspective,theBRI small andmedium-sizedbusinesses,provide aboost 3. Russia’s Interests Siberia andtheFarEastcriticallydependsonimproved Silk Roadis,primarily, aboutboostinginter-regional con will help capitalizeon growing inland industrial centers transit. Thepicture ofendlessfreight trainsrunningfrom take onanycargoesthatcanbecontainerized,aggregate future ofregions suchasCentralAsia,theRussianUrals, for heavycountryinvolvement.Fortransitcountries,the for regional development. 500-550,000 FEU,whiletotalfreight traffic alongthe axis railway containertraffic alongtheChina-EAEU-EUaxis ritorial andindustrialdevelopment.We canneitherprove nectivity withintheEurasianlandmassinlongrun.The nor disprove thishypothesisat particularpointintime. imbalance (2:1)persistsandWest-East trainsadditionally into the larger international economy.into thelargerinternational TheBRIwillbemost be attractedbyEAEUrailwaynetworksisestimatedat beneficial forRussia if it will help develop innovative and hypothesis thatBRItransitwouldhelppropel inlandter As concerns thelatter,As concerns there isaforward-looking If the existing East-West/West-East container traffic For Russia,theBRIisnotonlyabouttranscontinental - - THE BELT AND ROAD INITIATIVE FROM A RUSSIAN PERSPECTIVE  39 ------First, there is the applied nature of the BRI transport of the BRI transport is the applied nature First, there Furthermore, it is in the Russian interest to promote to promote interest it is in the Russian Furthermore, Several structural features of the Belt and Road Ini Several structural features A caveat on the Arctic Sea route. While there is a lot a lot is While there Sea route. Arctic the caveat on A Policy Coordination, Economic Development, Policy Coordination, Institutional Capacity to Manage BRI-related Institutional Capacity to Manage BRI-related hard infrastructure (railways, logistic hubs, border cross (railways, logistic hubs, border infrastructure hard highway from the border with China to the border with with with China to the border the border highway from baijan, Kazakhstan, Turkmenistan); and, third, provide provide and, third, Turkmenistan); baijan, Kazakhstan, coordina and efficient and routes, key transport corridors ings) and soft infrastructure. into a lengthy discussion of this route’s lacking transit lacking transit into a lengthy discussion of this route’s questionable transit economics, and lim infrastructure, for passage, let us agree ited availability of seasonal free PRC-EAEU-EU axis make it a practically ideal component Europe-Western China Highway Project, Kazakhstan has China Highway Project, Europe-Western Russia. Russia, in turn, intends to finish its part of the EAEU countries need to assure the joint prioritization of joint prioritization of the to assure EAEU countries need now that the Arctic Sea route is a very long shot while is a very long shot while Sea route now that the Arctic unlock the potential of transit countries (Armenia, Azer countries transit of potential unlock the port corridors. For example, within the framework of the of the port corridors. For example, within the framework tiative (BRI) in terms of transport corridors along the tiative (BRI) in terms of transport corridors along the tially powerful gateway for Asia-Europe traffic, the reality reality the traffic, tially powerful gateway for Asia-Europe a percent 100 by growing is transit railway overland the the Korean Peninsula and northeast China); second, help and northeast China); Peninsula the Korean corridors and make the East-West tangible synergies for within the BRI framework. efficient them more EAEU the reality, In programs. investment related of tion the prospects transcontinental shipments and undermines between large monopolies (for to develop infrastructure projects, infrastructure certain launch independently tries and Investments works only in 2020. would, first, allow for efficient logistics with Middle Eastern logistics allow for efficient would, first, internationalof the same parts de facto form which trans already completed construction of a modern completed automobile already asynchronously. This situation diminishes the efficiency of This situation diminishes the efficiency asynchronously. of the emerging Greater Eurasia. of the emerging Greater development of the implies both corridors. The initiative of talk on the prospects of the Northern route as a poten a as Northernthe of route prospects the on talk of going subdued. While not is much more on the ground year already. countries (as well as between the Russian Far East and and East Far Russian the as between (as well countries within the EAEU framework. of positions coordination their infrastructural projects countries often implement lack of coordination is a cargo flows. There of increasing Coun example, Russian and Kazakhstan Railways). 4. The Need for National and Regional ------BRI can be generally perceived within the priority task BRI can be generally perceived Russia appreciated the potential positive implications potential positive implications the Russia appreciated Increasingly more attention is being paid to the attention is being paid to the more Increasingly In fact, no ‘mega-projects’ are required to expand expand to required are ‘mega-projects’ no fact, In limited financial outlay: construction of additional railways, berian Railway” but selective elimination of transport berian Railway” but selective elimination of transport infrastructure bottlenecks, which can be managed with with managed be can which bottlenecks, infrastructure etc. infrastructure, crossing of border improvement involved in container transport either only accept con involved in container transport either only capital allocated for investments in con include insufficient its own; (2) a means to advance ties with China and attract its own; (2) a means Middle East, from Russia through Central Asia to Iran and Russia through Middle East, from EAEU-EU axis and boost their competitiveness vis-à-vis EAEU-EU axis and boost their competitiveness vis-à-vis nomic means to counteract Western policies. It also views It also Western policies. counteract to nomic means nese-Kazakhstani border (Dostyk and Khorgos). border nese-Kazakhstani relevant in the context of the BRI. It is a positive phenom relevant more detail. more United States and China. In most Russian regions, export regions, United States and China. In most Russian framework. Last but not least, there are several spheres spheres several are there least, not but Last framework. then on to India, from the Russian Far East through China through East Far Russian the from India, to on then peninsula, etc. The North-South corridors to the Korean trans-Eurasian transport corridors which traverse the trans-Eurasian transport corridors which traverse the the transport capacity of land corridors along the PRC- tainers or only dispatch them. Other enduring limitations limitations enduring Other them. or only dispatch tainers shortage of light tainer stations (logistics centers), and a traffic, containers accounts for only 2 percent of traffic and of traffic accounts for only 2 percent containers traffic, times lower than in the than three tion in Russia is more through raising the level of containerization. The Russian Russian The containerization. of level the raising through transport complex is developed but undercontainerized the BRI as an inherent part of the nascent ‘Greater Eurasia’ the nascent ‘Greater part of the BRI as an inherent in points these into delve us Let 2016). BRI (Libman the territorial development in only two places on the Chi two places on the development in only territorial wherein EAEU policies should be developed to adjust to should be developed to adjust to EAEU policies wherein 6 percent of revenue. The current level of containeriza The current of revenue. 6 percent sea routes. What one needs is not a “second Trans-Si sea routes. should be viewed as (1) a good business opportunity on (1) a good business opportunity on should be viewed as and medium cargo-handling tools and equipment. and import container flows are unbalanced: many stations and import container flows are corridors running from Russia through Caucasus to the the to Caucasus through Russia from running corridors continent from the East to the West. This is especially This is especially the East to the West. continent from transport North-South meridional time, same the At enon. to the corridors should also be developed. I am referring electrification of new railway sections, upgraded and mod and upgraded sections, railway new of electrification stock, ernized rolling locomotives, acquisition of special of raising the economic efficiency of the national economy national the of efficiency economic the raising of of the BRI very early on. To sum up, for Russia, the BRI the BRI Russia, for up, sum BRI very early on. To of the very low base. Hence, we currently witness significant witness significant Hence, we currently very low base. (that also applies to CASC). Within the Russian Railways Chinese investments, and (3) generally, a political and eco and (3) generally, Chinese investments,  EVGENY VINOKUROV 40 Thus, nosinglerailwayoperatorcandramaticallyaffect the There is no uniform through freight rate along their entire They gain a lot from effective cooperation international Germany, whichhasavitaleconomicinterest inthemod (for comparison,attheendof2017,volumetransit ests, concerns withthedevelopmentofothercorridors,or ests, concerns only useless, but also potentially harmful (conflicting inter get involved in the initiative. Their involvement would be not ofPolishrailways(seeanextensivediscussion ernization cooperation across the whole continent. The list of coun container traffic reached 260thousandTEU,andbythe estimates, at2millionTEU,couldonlybereached when of railwaycontainertraffic whichstands,according to our of theroute), orPoland,locatedsquarely onthewayto country to provide a boost—beit China with its significant costs incurred bycarriers.Itisnotenoughforonlyone global valuechains. aggregate amount of the freight rate by changing its freight and coordinate their efforts. Otherwise,500-700,000TEU subsidies, Russia modernizing infrastructuresubsidies, Russiamodernizing (eventhough success oftheBRItransportcorridorsdoesnotdemand ways, border crossings points, marshalling capacities, while changesinthesefreight ratesare notsynchronised. with theEUcountriespassthrough theEAEUcountries. will probably besetasaceiling fortransitcontainertraffic the placePolandtakesinBRILobyrev etal.[2018b]). the EUcountries—Polandinfirstplace,butalso ties andintegrationorganizationsisfinite.ItincludesChina, thousand TEU). time this article is published, it is likely to stand at over 300 the freight rateisabout‘deep sea+US$1,000.’Thelatter rates withoutgoingbeyonditsprofitability range. main industrialregions ofEurope. Themaximumpotential rolling stock, etc.) and standardisation of technical reg regions aswellontheparticipationoftheseregions in need for the other 79 countries of the Eurasian continent to need fortheother79countries oftheEurasiancontinentto ulations, whichwillenabletoreduce deliverytimesand economiccooperation. nition theobjectsofinternational Participation ofthesecountries isjustenough.There isno EAEU memberstates(Belarus,Kazakhstan,Russia),and Russia accounts for 50 or more percent of the total length is possibleonlyifallthecounterpartiesinvestinthisproject industrial andagriculturaldevelopmentofinlandEurasian both in terms of physical infrastructure development (rail length. Eachrailwaycompanychargesitsownfreight rates Third, trans-Eurasiantransportcorridorsare bydefi Currently alltherailwayroutes usedtoconnectChina Second, there are positive effects of the BRI on the Fourth, from thefunctionalpointofview, theultimate ------There are severaltasksandtheyare interrelated. First,to The long-termsuccessoflandtransportcruciallydepends Asia and the western provincesAsia andthewestern ofChina.Third, tocreate Greater Eurasia. Greater Eurasia. volume is300thousandTEU).Secondly, toremove bot cooperation butratherisaproduct ofglobalization. cooperationwithinEurasia on whetherornotinternational various levels and between various actors. Let us list a few: of trans-continentaleconomiccooperation.Cooperation global cooperation.Rather, itis situated on themeso-level centrifugal forces inGreater Eurasiawillpartially give way at leastwishestogetridoftheonesthatare already in use). a needforsetofarrangementsfunctionalnature at at the interregional level will yield results that far exceed will besuccessful.Moreover, landtransportcompeteswith thereby give impetus to the development of land-locked tlenecks intheirtransportandlogisticalinfrastructure and Eurasia. Central andEastern Northern, tries inWestern, tutional structure tomanagethisprocess. Rather, there is the China-EAEU-EUaxisare an“ideal”project ofthe those thatcanbegainedattheglobalor(sub-)regional to centripetalones. fullest potentialrequires theconcertedefforts ofthecoun It is easier to reach mutual understanding with a limited maritime transport,whichisnotdependentoncontinental participation in the global economy. Thus, the historical na-EAEU-EU axisanidealcomponentoftheemerging number ofcountriesinvolved. national cooperation.Itisamatterofneitherregional nor new exportopportunitiesfortheseregions andensure their Eurasian regions—the Russian UralsandSiberia,Central increase containertraffic upto2million TEU(thecurrent relations and international political economy textbooks. in theprevious sectionare takeninthecontextofinter level. Therefore, the land transport corridors along The realisation ofthetrans-Eurasiantransportcorridors’ These tasksare solvableifcertainstepsdiscussed All thismakesthetransportcorridorsalongChi One doesnotneed,however, anencompassing insti We are alsodealinghere withaperfectcasestudyfor • etc.), international workinggroupsetc.), international representing the eters, environmental standards, etc.).T types ofcargoes,rolling stock operating param regulatory convergence(CIM/SMGSconsignment mative documentsandtechnicalregulations used notes, flawlessfunctioning of border crossings, More workneedstobedonestandardise nor in Eurasiancountries(rulesforshippingvarious o ensure ------THE BELT AND ROAD INITIATIVE FROM A RUSSIAN PERSPECTIVE  41 ------.” EDB Toward the Great Great the Toward Action Plan on the Belt Sopryazhenie EAES i EPShP. Ros Sopryazhenie EAES i EPShP. . .” Rossiya i Novye Gosudarstva Evra Reflections on China’s Belt and Road Ini Reflections on China’s .” EDB Center for Integration Studies. Silk Road Transport Corridors: Barriers and Silk Road Transport Silk Road Transport Corridors: Assessment Silk Road Transport .” Area Development and Policy 1 (3): 352-360. .” Area Road Initiative ble?” Caucasus International 6 (1): 41-53. Development and Policy 1 (3): 323-340. Delhi: SAGE Publications. Role Within China’s Belt and Road Initiative.” Area Belt and Road Initiative.” Area Role Within China’s Development and Policy 1 (3): 341-351. Investments Relations.” The Interna Implications for China-Europe Unpacking China’s belt and road initiative.” Area initiative.” Area belt and road Unpacking China’s tiative tional Spectator 51 (4): 109-118. siya i Novye Gosudarstva [EAEU and SREB. Russia siya i Novye Gosudarstva [EAEU and SREB. Russia and New States] and the Eurasian Economic Union: Mission Impossi Mission Economic Union: the Eurasian and and Ocean-3 Creating Central Eurasia. The Silk Road Central Eurasia. The Silk Road Ocean-3 Creating of Trans-EAEU Freight Traffic Growth Potential Growth Traffic Freight of Trans-EAEU (2018b). “ (2018a). “ Center for Integration Studies. zii [Russia and New States in Eurasia] 2: 37-55. Asia 2050: Unleashing the Region’s Potential. New New Potential. Region’s the Unleashing 2050: Asia References in Russia and Kazakhstan surging twofold in 2016. As surging twofold in 2016. As in Russia and Kazakhstan and countries. inner Eurasian regions Minghao, Z. (2016). “The Belt and Road Initiative and its Minghao, Z. (2016). “The Belt and Road Initiative and its Nag, R. M., J. F. Linn, and H.S. Kohli (eds.) (2016). Central (2016). (eds.) Kohli and H.S. Linn, F. J. R. M., Nag, Lobyrev, V., A. Tikhomirov, T. Tsukarev, and E. Vinokurov E. Vinokurov and Tsukarev, T. A. Tikhomirov, V., Lobyrev, Economic Belt Libman, A. (2016). “Linking the Silk Road (2016). “Inclusive globalization: and M. Dunford Liu, W., Eurasian Corridors (through Kazakhstan) were identified identified were Kazakhstan) (through Eurasian Corridors North: Russia’s Bennett, M. (2016). “The Silk Road Goes E. Vinokurov and Tsukarev, T. A. Tikhomirov, V., Lobyrev, nomic Union, another Russian priority. Finally, it is in the it is in the Finally, Russian priority. nomic Union, another fact for economic cooperation within the Eurasian Eco fact for economic cooperation we have shown, there is no conflict of interest in devel is no conflict of interest we have shown, there totalraising ones, East-West complement the would which State Council of the PRC (2015). K. (2016). “ Syroezhkin, South Caucasus states to develop North-South corridors, South Caucasus states as the most promising (Vinokurov & Tsukarev 2018). Not 2018). Not & Tsukarev (Vinokurov promising as the most coincidentally, these two routes are exactly where rapid rapid exactly where are these two routes coincidentally, turnover cargo transit with occurring, already is growth a positive is This simultaneously. routes these two oping Asian states, and of Russia, Central interest vital shared unlocking and effectively of national economies efficiency Valdai Discussion Club (2015). Valdai Toops, S. (2016). “ Toops, ------long-term financing for the capital-intensive parts parts long-term financing for the capital-intensive mitigate local legislation changes, which helps to lations, coordination of transport development of transport development lations, coordination in Central Asia. importance of the availability of subsidized lending importance of the availability of subsidized ified international treaties that do not depend on ified internationaldo not depend on that treaties involvement into economy-related matters has so involvement into economy-related NDB, EFSD and EDB but also, very importantly, importantly, very also, but and EDB EFSD NDB, Road Fund are key players. They may provide provide may They players. key are Fund Road EAEU institutions. EAEU is a more important player as many trans important EAEU is a more provide project financing based on signed and rat project provide regard. Such IFIs as the World Bank, ADB, AIIB, Bank, ADB, AIIB, Such IFIs as the World regard. portation-related issues fall under its competence issues fall under portation-related by the be dealt with therefore policies) and should ministries of transport, the national railways, and railways, and of transport, the national ministries In the IFI-related context, I should also stress context, I should also stress In the IFI-related far proved to be modest. At the same time, the the time, same the At modest. be to proved far the leading industry players should suffice. industry players should the leading such national institutions as the Chinese Silk Chinese Silk the such national institutions as as well as grants for technical feasibility studies. studies. as well as grants for technical feasibility and inter-governmental commissions. SCO SCO commissions. inter-governmental and certain risks. of the BRI story. International institutions financial story. BRI the of (technical regulations, common market regu market common regulations, (technical Coordination among national and multilateral among national and multilateral Coordination in this development banks is vitally important dealt with by means of similar working groups working groups by means of similar dealt with They are necessary in many occasions, in particularin occasions, many in necessary are They The coordination of transport policies can be policies can be of transport The coordination • • • Based on the analysis of existing and potential land- Based on the analysis of existing and potential land- In terms of policy, the key area of common interest for of common interest the key area In terms of policy, is to achieve a substantially higher degree of internal con is to achieve a substantially higher degree inland regions: Xinjiang, Qinghai, Gansu, and Inner Mon and Gansu, Qinghai, Xinjiang, inland regions: 5. Conclusion Eurasia. That means, in particular, modern railway and (to Eurasia. That means, in particular, Russia, Central Asia countries and the BRI is the devel nectivity between the inner-Eurasian regions (primarily, but (primarily, regions nectivity between the inner-Eurasian Urals Russian the Kyrgyzstan, Kazakhstan, exclusively, not were greatly enhanced, it would unlock the potential of enhanced, it would unlock the potential of greatly were and Siberia. Northernand multi-modal transport corridors, the Eurasian a lesser degree) road transport corridors. If the physical corridors. If the physical transport road a lesser degree) golia for China; the Urals and Siberia for Russia; and all golia for China; the Urals and Siberia for Russia; and all opment of efficient cross-border infrastructure in Greater in Greater infrastructure cross-border opment of efficient connectivity of Russia, Central Asian countries and China Corridor (essentially along the Transsib) and the Central Central the and Transsib) the along (essentially Corridor five Central Asian countries. The optimal policy objective five Central Asian countries. The optimal policy objective  EVGENY VINOKUROV 42 Vinokurov, E., and T. Tsukarev (2018). “The Belt and Road Wang, Y. (2016).“Offensive forDefensive:TheBeltand States’ Initiative andtheInterests ofTransit Countries:an Pacific Review29(3):455-463. Road InitiativeandChina’s NewGrandStrategy.” The Development andPolicy3(1):93-113. Economic AssessmentofTransport Corridors.”Area Economic BeltandthePrioritiesofEurasian Joint Development . U.S. Perspectives on China’s Belt and Road Initiative in the South Caucasus and Central Asia

S. Frederick Starr

China’s Belt and Road Initiative is one of the most ambi- the Pacific, completed in 1869. And it later built the 51-mile tious development projects ever undertaken, comparable (82 km.) Panama Canal, opened in 1914. Surely these proj- only to the post-World War II Marshall Plan and China’s ects, and others that could be cited, anticipate China’s own Three Gorges Dam project. Significantly, China deftly BRI. Both the United States and China have long histo- presented it to the world as a civic economic project ries of digging canals on their own territory to strengthen designed to benefit all participating countries and many economic links between disparate regions and for using other countries where its effect was expected to be indirect transport as an engine for economic development. Ameri- but positive. Many countries have expressed enthusiasm ca’s Federal Highway Program, launched in the 1950s, and for the project, while others have reacted more warily, China’s high-speed “bullet” trains of half a century later had expressing concerns over the amount of indebtedness it the same objective of knitting disparate regions together. may entail or giving voice to various geopolitical anxieties. As a result, each of these countries has solid historical The position of the United States, as the world’s largest reasons for being predisposed to favor large infrastructure economy, with respect to the Belt and Road (originally projects to foster transport and trade and for understand- “One Belt One Road,” hereafter “BRI”) is of significance not ing when the other side did the same thing. only to China but to all the other countries affected by it. The success of China’s effort to open land transport About the time China announced its BRI, there was corridors across Central Asia and through the South much speculation in the West, as well as in Turkey, that the Caucasus to Turkey will ultimately depend not on the infra- United States might oppose it. Inevitably, the Washington structure, which is a prerequisite, but on the market. Thus, think tanks produced numerous papers reviewing the posi- any judgment on the long-term viability of the BRI, and tion of regional governments and advising the American hence any projection of the U.S.’s response to it, must government on what it should and shouldn’t do. Some of wait until the governmentally driven infrastructure phase these were useful,1 others less so. The Chinese-sponsored has been completed and the market begins to offer Institute for China-America Studies in Washington issued its judgment. a paper on “American Perspectives on the Belt and Road The existence of the BRI immediately raises questions Initiative” that included, inter alia, dyspeptic comments by regarding its relationship to the Asia Development Bank’s unnamed “experts” who predicted trouble ahead (Chance “Central Asia Regional Cooperation” Program, or CAREC.2 2017). Others took a less anxious view, and still others CAREC, which held its seventeenth annual ministerial con- concluded that the U.S. was likely to take the new project ference in Ashgabat in November 2018, complements the in its stride. BRI rather than competes with it. On the one hand, CAREC From the outset there were solid historical reasons for is broader than the BRI, in that it includes activities to pro- thinking the American response might be positive, or at mote trade by small and medium-size businesses, energy least neutral. After all, the U.S. government constructed sector cooperation and development, and compliance the Transcontinental Railroad, a 1,912-mile (3,077 km.) rail with WTO standards. On the other hand, CAREC focuses link between the eastern and midwestern rail network and on transport and trade between its eleven members and South Asia rather than east-west trade. It is regrettable 1. See Dr. Thomas Fingar (2016), “A Silk Road for the Twenty-First Cen- that CAREC has not promoted the so-called “Southern tury? A Good Idea, Blown out of Proportion”; Johannes F. Linn (2016), “Whither Eurasian Integration?”; and a series of reports drafted in 2015- Corridor” between the Indian sub-continent and the West 2016 by Andrew Kuchins and Jeffrey Mankoff on how regional govern- ments in both Central Asia and the South Caucasus were treating the new integrative projects. All of these papers were published by the Center for 2. For more on CAREC, see the program’s excellent website, https://www. Strategic and International Studies. carecprogram.org/?page_id=24

43  S. FREDERICK STARR 44 Anaklia willgreatly speedtransportviatheSouthCaucasus Caucasus to Europe is still under development. But the China canstillbedivertednorthward through Russiato China refused Moscow’s pleas,bluntlyinformingtheRus only for northern Europe.only fornorthern conducted through Russia.Inthelongrunitislikelythat construction by Georgia of its major deep-water port at casus. To besure, aftercrossing Kazakhstan,trainsfrom on Russia’s powerinbothCentralAsiaandtheSouthCau ences inSt.PetersburgandUrumqiatthestartofBRI’s cut off transportalongthisroute, aconditionthatwould via theSouthCaucasus,aroute thatisolder, more heavily and willlikelyreduce theproportion ofEurope-China trade and toproceed thence toEurope. Atthetime,Russia and GeorgiatoTurkey was toavoidgivingRussiaveto across KazakhstantotheCaspian andthrough Azerbaijan same timeworkingrelentlessly toprevent Kazakhstan stan anddoesnotextendtoIndia. sians thatitwouldproceed withitsplannedroute across Silk RoadtoChina(Starr 2018). Butthisproject, which would provide complementtotheBRI,hasnot asouthern was proclaiming itsfriendship withKazakhstan,yetatthe the Russianroute willbeusedmainlyforgoodsdestined that the Soviet system had imposed on it. But it failed. the railroad linefrom direction Urumqiinanorthwestern the BRI. to meetstrictlymilitaryneeds.Russia,alongwithLatvia, travelled andlessfrequently interruptedthantheso-called from overcoming theisolationfrom bothEastandWest U.S. response to it. planning stage,Moscowofficials foughtbitterlyto divert power overitstransportlinkswiththeWest. Atconfer may provide insights on the viability of the BRI and the port supplies from the Baltic to the fighting in Afghanistan, northern Europe.northern Thisisactuallyhappeningtoday, largely Kazakhstan. Bydoingthisitinstitutedanimportantcheck Kazakhstan, andUzbekistan,allconsentedtoitprof Distribution Network” (NDN), which NATO opened to trans 3. Kuchins(2009)advancedthisnotion asearly2009. impending completionoftheAzeriportatAlatand in order to connect with Russia’s Trans-Siberian Railroad ited from it.ButRussiaretained therightatanytimeto because theroute from Kazakhstanacross theSouth been possiblebecauseCAREC’s mandatestopsatPaki have beenclearlyunacceptabletotheChinesedesigning Some have suggested that the so-called “Northern Some have suggested that the so-called “Northern Indeed, a major motivation for China to open the BRI 3 This is not the case. NDN was set up ------1997 bookbyKazakhstaniforeign ministerKassimjoomart Tokayev, oftheforeign isnowthecornerstone policiesof Asia, asopposedtoitsmore skepticalview ofitsplans Armenia, whichisopentojoining theBRIbuthasnotyet Asia from economic to strategic, it would of course be 4. Foranexcellentoverviewofthefate ofthisstrategyinKazakhstan,see dominating CentralAsia.IncontrasttoRussianthinking done so,supporttheBRI,for it engagesbothChinaand Central Asiansdo:itenablestheregion’s statestomore (2014-present). Whileitlongrefused toprovide theseand can thinkingabout the BRI and accounts for its generally covert meansoftakingcontrol oftheregion itself,buta on the subject, such a strategy by Washington is not a outside power, or combination of outside powers, from other threatened countrieswithevendefensiveweapons, exerted by external powers. exerted byexternal effectively pursuetheirstrategy ofbalancingthepressures conspicuous example.ButforthetimebeingU.S.can actions likehisinvasions of Georgia (2008) and Ukraine all regional states,aswellofAzerbaijan. sure, Chinaposesserious challengestotheU.S.,among way ofstrengthening theregion’s sovereignty andcapacity welcome theBRIinCentralAsiaforsamereason the which itsBRIprogram inSouthandSoutheast Asiaisa ton inevitablyperceived aspositivethegradualshiftof the riseofPutinhasbeentoprevent himfrom takingfurther time carefully balancingthemagainsteachother. Were the this strategyisthateachcountrymustmaintaincordial throughout thetsaristandSovieteras,toeast-west, as transport corridorsfrom north-south,ashad prevailed for SoutheastAsiaandtheAsia-Pacific region. Washing andatthesametimepreventingfor self-government other positive stancewithrespect totheprogram inCentral powers from controlling theterritory. Clarke (2018). relative strength of these pressures to change,for instance, relations powerswhileatthesame withalltheexternal now. Thisexplainswhyallthestatesofregion except necessary torethink thisstrategy. Butitworksverywellfor Because ofthis,theU.S.hasworkedtoprevent anysingle in traditional notions of balance among contending powers. in traditionalnotionsofbalanceamongcontendingpowers. it hadunboundedfaithineconomicinstrumentsandalso ing external pressures,ing external firstproposed inCentralAsiaa is takingplaceundertheBRIandrelated initiatives.To be by China significantly expanding its influence in Central This, asmuchanythingelse,hasshapedAmeri An important element of United States diplomacy since Indeed, theideaofpreserving sovereignty bybalanc 4 Thekeyto - - - U.S. PERSPECTIVES ON CHINA’S BELT AND ROAD INITIATIVE IN THE SOUTH CAUCASUS AND CENTRAL ASIA  45 - - - But one might ask if the Chinese project was not an an not was project Chinese the if ask might one But In reviewing the list of active players in the construction In reviewing A further and equally serious shortcoming of Hillary Hillary shortcoming of serious equally A further and The existence of TRACECA and NDN, along with the with the The existence of TRACECA and NDN, along The history of TRACECA helps explain Europe’s mixed Europe’s explain helps TRACECA of history The had diminished to the status of reservations and cautions, and cautions, reservations to the status of had diminished key role in the development of the first pipeline from the the from pipeline first the of development the in role key institutions, such as the Asia Development Bank and the European Bank for Reconstruction and Development, and European Europe’s own initiative. However, by 2018 these objections by 2018 these own initiative. However, Europe’s in Ankara supported strongly U.S. The Istanbul. and Baku neither staffed nor funded the project adequately, and it and it adequately, nor funded the project neither staffed neighboring Turkey, change the common conception of common conception of change the neighboring Turkey, it. understand the calm spirit in which they have received many projects undertaken by regional countries and by by and countries regional by undertaken projects many and involvement with the region mate the scale of China’s phase of the new continental trade initiative is completed. new continental trade phase of the has (2017) Corre le BRI. As Phillippe the to response Union and member countries ini pointed out, the European had seemingly preempted the fact that China reflecting it play a Not only did mention should be made of Turkey. this effort, thus providing a further reason for Washington for Washington a further reason thus providing this effort, contribution to east-west transport. to support China’s and constructing the BRI as single-handedly conceiving maps their on included have mapmakers Chinese trade. of the international both the role financial to underestimate tially voiced various objections to the project, many of them to the project, tially voiced various objections issues and market-driven concerns. commercial towards which may reappear if China plays a stronger hand in east- plays a stronger if China which may reappear as discussion likely to vanish more west transport, but are Secretary of State Clinton announced in Chennai, India in Secretary states of Central Asia (Clinton 2011). Unfortunately, Clinton Unfortunately, 2011). (Clinton Asia of Central states structed by others. This has caused consternation in the all the infrastructure needed for east-west continental needed for east-west continental all the infrastructure in Americans’ evaluation of the BRI, and helps us to a role advent of the BRI. But TRACECA remains an active player remains BRI. But TRACECA advent of the the infrastructure as so more become and will doubtless easy links by rail between India, Afghanistan, and the other India, Afghanistan, easy links by rail between gradually died. of the BRI many routes that were in fact financed and con that were of the BRI many routes overesti to analysts many led has and slighted countries in turn countries themselves. This reality plays of regional that expanded version of the “New Silk Road Project” of the new routes shifts away from geopolitical concerns shifts away from of the new routes special trade, continental east-west for infrastructure of 2011. The prospect she offered was grandiose, featuring she offered 2011. The prospect Clinton’s “New Silk Road” is that it connected the Indian “New Silk Road” is that it connected the Indian Clinton’s Caspian to the Mediterranean, but it has spent billions of Caspian to the Mediterranean, but it has between connections and road dollars to forge railroad - - - - As these many locally funded initiatives have gone have gone As these many locally funded initiatives A further reason for which Washington has to date has to date which Washington for reason A further The heart of TRACECA has been its reconstruction The heart of TRACECA has been its reconstruction had expanded their transport infrastructure using their own infrastructure had expanded their transport just as it generously subsidized road, rail and energy trans subsidized road, just as it generously in attracting adequate funding to execute the most import included, but has turned a secondary focus. The out to be its infrastructure to China. Iran subsequently joined the the China. Iran subsequently joined to its infrastructure invested in east-west transport routes through the South through invested in east-west transport routes Mediterranean and Caspian Sea. Air transport was also Mediterranean and Caspian Sea. Air transport was also Meanwhile, neighboring Georgia rebuilt its port of Batumi, Meanwhile, neighboring Georgia rebuilt Europe-Caucasus-Asia, or TRACECA. Fourteen regional regional Fourteen TRACECA. or Europe-Caucasus-Asia, Black Sea with the countries of the South Caucasus and Europe in their balancing act. U.S. support for it hinges on act. U.S. support in their balancing Europe program, but sanctions have prevented it from becoming it from but sanctions have prevented program, manence to the organization. move in 1993, only two years after to collapse of the the of collapse to after years two only 1993, in move port projects during its first two decades of independence. port projects road and railroad from the Afghan border to the Caspian, border the Afghan from railroad and road its energy sales to China, from paying for them with profits using its Azerbaijan meanwhile is Turkmenbashi. port at resources. Kazakhstan too invested heavily in infrastruc Kazakhstan too invested resources. responded calmly and even positively to the BRI is that it even positively to calmly and responded USSR, the European Union set up the Transport Corridor Corridor Union set up the Transport USSR, the European forces with the twenty-eight states of the European Union with the twenty-eight states of the European forces forward, both the European Union and Turkey have also have also Union and Turkey European both the forward, to fill the breach, and in others nothing happened until the until happened nothing others in and breach, the fill to to mount a many-sided program to boost trade via the the via trade boost to program a many-sided mount to the Kyrgyz Republic to Uzbekistan in 2018, the Uzbeks to Uzbekistan in 2018, the Uzbeks the Kyrgyz Republic the Caspian, using mainly its including new ports on ture, transport infrastructure, independent of BRI. Until China China Until of BRI. independent transport infrastructure, this same reality (Zhao 2017). (Zhao reality this same while a private Georgian firm is planning the major new the major new while a private Georgian firm is planning secretariat were established in Baku in 2000, giving per established in were secretariat states in the South Caucasus and Central Asia joined states in the South Caucasus and Central Asia joined ant projects. In some cases, local governments stepped in ant projects. actively involved. A Director Generalship and permanent Generalship and permanent actively involved. A Director and then proceeded on its own to build the ambitious new and then proceeded appreciates the extent to which the countries of the South the extent to which appreciates or construction of road and railroad links between the links between the and railroad or construction of road anticipated the BRI, and the concept of TRACECA directly own resources to construct its impressive new port at Alat, to construct its impressive own resources own resources. Turkmenistan completely rebuilt both the completely rebuilt Turkmenistan own resources. committed to subsidizing the rail line from Kashgar through through Kashgar from line rail the to subsidizing committed Chinese doubtless studied it carefully. Where it failed was Where Chinese doubtless studied it carefully. Central Asia. TRACECA also envisioned the extension of of extension the envisioned also TRACECA Asia. Central Caucasus to Central Asia via the Caspian. In a visionary visionary a In Caspian. the via Asia Central to Caucasus deep-water port at Anaklia. Caucasus and Central Asia have themselves invested in in invested themselves have Asia Central and Caucasus  S. FREDERICK STARR 46 As hasbeennotedabove,backintheperiod1998-2003, Chinese officials, ifchallengedbytheU.S.,toboastthat ect. Ithasmaintainedthisposition fairlyconsistentlyin calmly andinaguardedly positivemannertoChina’s proj environmental when undertaking megaprojects. concerns Obama neversomuchasmentioneditpublicly. Given against the proposal in Moscow. This would have enabled a pristineecologicalzoneandcampaignedsuccessfully and her State Department were eager toforget their own so brazenlyappropriate theterm.ButbythistimeClinton shore oftheCaspianandthencetoEurope. Thisstun subcontinent with Afghanistan and therest of Central Asia sought cordial relations with Beijing. On the other, it saw so theissuenevergainedtraction. State Departmentknewitwasinnopositiontocriticize Silk Roadproject. ThiswasalltheeasiersincePresident State’s Bureau ofSouthandCentralAsiaAffairs, whereas South Caucasus.Forthesereasons ittherefore responded was aflopthemomentitbegan. the BRIaspotentiallystrengthening China’s abilitytocheck their ownproject hadavertedanecologicaldisaster. And the issue. the Chineseforattemptingtodosamething,albeitin the failure ofits own “New Silk Road” project, the U.S. the Chinese“SilkRoadEconomicBelt”inaspeechat to their own initiative might have caused opposition to the took thenameoffailedAmericanproject andappliedit the Secretary capitulatedbefore it.Her Silk Roadproject the SouthCaucasusfellunderjurisdictionofEuro fore noonein Washington raised somuch as a peep about Urumqi northwesttoSiberia,where itwastoconnectwith ronmentalists complainedbitterlythatthiswouldcorrupt rail linefrom crossing Kazakhstantorunninginsteadfrom pean Bureau. Ratherthansolvethisbureaucratic problem, ning failure maybetracedtothefactthatallcountries Russia’s Trans-Siberian Railroad. However, Russianenvi Russia hadpushedveryhard todivertthemaineast-west But thisissuescarcely surfaced, andforasimplereason. BRI arose from over China’s concerns decision to ignore BRI in Washington. It is true that President Xi announced Russia’s neo-imperial aspirations in Central Asia and the Nazarbayev UniversityinSeptember2013,andthatat improved form, or for pilfering the title it had used. There involved withClinton’s project fellundertheDepartmentof but failedtoextenditsroads andrailroads tothewestern least a few in Washington were surprised that he would And withgoodreason. Ontheonehand,Washington A secondpossiblesource ofAmericanopposition tothe It hasbeensuggestedthatthefactChinese - - - - - This deftmoveavertedwhatmightotherwisehavebeena Afghanistan duringthefightingthere, butnoneisinaposi Azerbaijan, Georgia,andTurkey, aswellthrough Iran. of CentralAsianandEurasianTrans-Continental LandTransport Corridors,” did not see these as trivial concerns. Washingtondid notseetheseastrivialconcerns. remem flict in the South Caucasus,as he invaded both Georgia on RussiaandthuslimitsomewhatRussia’s abilitytoshape giants asMaersk,letalonetheirChinesecounterparts. of the former Soviet republics and of Afghanistan than can. TheUnitedStates’economicinterest intheproject course androuted traffic from theCaspianportsthrough ened theeconomiesoftheseandotherregional countries, open newmilitarybasesthere. AslongastheBRIstrength aroused intheWest, concern andparticularlyintheUnited Washington wasgoingtooffer noseriousoppositiontoit. and Ukraine, and as he pushed the Kyrgyz Republic to spite of rising tensions between the U.S. and China over States. Various reprisals havebeenundertaken,including with itsowneconomicprospects. To besure, American was linkedmore closelywithitshopesfortheeconomies with horror asPutincontinuedtostirtheKarabakhcon their internal andforeigntheir internal affairs. TheAmerican government the U.S.willhelpthosecountriesreduce theirdependence tion tocompeteatsuchadistancewithEuropean the SouthChinaSeaandIndianOcean,overtariffs. the West through IranratherthantheSouthCaucasus.A the twentiethcentury”(Sanders2014).Ithadwatched the USSRhadbeen“thegreatest geopoliticaldisasterof Uzbekistan, andAfghanistanbothChinaEurope, Silk Road ny Vinokurov ofRussia’s EurasianDevelopmentBank,whofocus onsteps moment ofconflict. maps, whichwere likeared flagto Washington. new corridorwouldbeEuropean orChinese,notAmeri number of western studentsoftheBRIreproducednumber ofwestern these Kazakhstan, theKyrgyzRepublic,Tajikistan, Turkmenistan, By reinforcing thenewlinksbetweenAzerbaijan,Georgia, to engageRussiamore directly ineast-westtransport.See“Optimisation it assumedthatthemajorproducts transportedalongthe increased tariffs oncertainChinesegoods.However, as its trade policies and business practices have increasingly routed alltrafficissued bytheChinesegovernment to 6. See, for example, Chris Devonshire Ellis (2015): bered Putin’s words from April2005thatthecollapseof before Washington hadachancetoobject,Chinareversed 5. Thisapproach istobecontrastedthatofMichaelEmersonand Evge EUCAM Working Paper, No.7,(2009and2017),p.1-18. logistics firms dominated transport between Europe and A furtherreason forWashington’s moderationwasthat Since 2013China’s economyhascontinuedtosoar, but But whatabouttherole of IranintheBRI?Earlymaps , publishedbyAsia Briefing. China’s New Economic 6 However, 5 ------U.S. PERSPECTIVES ON CHINA’S BELT AND ROAD INITIATIVE IN THE SOUTH CAUCASUS AND CENTRAL ASIA  47 - - - - http://www.un.org/en/ga/

7 However, we noted at the outset that as the BRI we noted at the outset that as the BRI However, Because of this, one can expect in the coming years coming years Because of this, one can expect in the It should be stressed that the entire discussion of of discussion entire that the be stressed should It Thus, something akin to ASEAN or the Nordic Council to ASEAN or the Nordic Thus, something akin hard infrastructure was being planned and constructed. being planned and constructed. was infrastructure hard infrastructure to soft infrastructure, and from governmen from and soft infrastructure, to infrastructure industry and trade, as well as to the businessmen whose interference of outsiders. It passed the General Assembly, Assembly, It passed the General of outsiders. interference Central Asia. While of Greater is being bornin the region Because it centered on the delineation of specific routes routes on the delineation of specific Because it centered utilize the new routes, what companies will offer insurance what companies will offer utilize the new routes, new regionalism will spread to encompass most of the BRIof the encompass most to spread will new regionalism roadbed will be defined and constructed, discussion will will be defined and constructed, discussion will roadbed posals to redraw certain routes or to supplement them with certain routes posals to redraw regional entities in order to glean from them “best prac “best them from glean to order in entities regional of the as a whole and to champion the interests region focus on which logistics firms and freight forwarders will will forwarders focus on which logistics firms and freight for the same reason that they may take a deeper interest in that they may take a deeper interest for the same reason for the West to take a deeper interest in the Belt and Road in the Belt and Road to take a deeper interest for the West to shippers, and who will construct and manage storage the EU has recently grown more active in the South Cauca more grown the EU has recently seek to resolve will surely the U.S. and Europe the region, become public. to the BRI and not allow them to fester or the period when during now has occurred to BRI up the large populations, this inevitably called forth that affected tal concerns concerns and negotiators to the of private this remained a distant dream as recently as two years as two years as recently a distant dream this remained themselves, but also with existing the Central Asian states east-west interaction by expanded tices.” Reinforced China. Indeed,transit countries in the event of tensions with with China, Russia, and the U.S. all supporting it (UNRCCAit supporting all U.S. the Russia, and with China, search/view_doc.asp?symbol=A/RES/72/283 sus and is working on a new strategy for Central Asia. And sus and is working on a new strategy for spirit is also increasingly associated with more open forms open forms associated with more spirit is also increasingly are most intimately concerned.are Rather than asking how the advances towards realization, the focus will shift from hard hard the focus will shift from realization, advances towards as a region capable of taking charge of its own economic of taking charge of capable as a region the its security without development and even and social actively discussed not only among ago, it is today being that the influence of this the Caspian, it is clear across others. Such concerns were inevitably the responsibility of others. Such concerns inevitably the responsibility were the normal governments, them through which addressed channels of diplomacy. countries between Turkey and China. This new regional and China. This new regional countries between Turkey of government, as seems to be happening in Uzbekistan. 2018). quickly and quietly any issues that may arise with respect with respect quickly and quietly any issues that may arise and led to pro discussions of the geopolitics of the project 7. The full text of this resolution is available at 7. The full text of this resolution - - - - - Even before he was elected President in 2016, Shavkat he was elected President Even before Uzbekistan’s outreach to its neighbors, including to its neighbors, including outreach Uzbekistan’s Of course, there is a distance between the cup and is a distance between the cup and Of course, there larly, and have organized conferences on such sensitive on such sensitive and have organized conferences larly, lifted bans on intraregional transport and trade, resolved transport and trade, resolved lifted bans on intraregional habeas corpus, reformed and expanded the defense bar, and expanded the defense bar, habeas corpus, reformed jan and Georgia. The presidents of the five Central Asian jan and Georgia. The presidents including Russia, China, Europe and the United States par including Russia, China, Europe interest of the U.S. and other democratic countries in trade in countries democratic other and U.S. the of interest ident Islam Karimov, had launched what has turned out ident Islam Karimov, Mirziyoyev, then Uzbekistan’s Prime Minister under Pres Prime Minister Uzbekistan’s then Mirziyoyev, reforms, they could deepen America’s engagement and engagement and they could deepen America’s reforms, practice. But they immediately elicited positive responses responses elicited positive they immediately practice. But reform. He made the currency fully convertible, instituted fully convertible, He made the currency reform. right the public the gave and extremists, religious pected related emergence of Central Asia as a geopolitical reality Asia as a geopolitical reality emergence of Central related reasons for this are, first, that no trade problems have yet have yet no trade problems first, that for this are, reasons important more all the generally and China make the BRI in Uzbekistan and the of reforms potentially epochal set If other regional countries imitate some of Uzbekistan’s countries imitate some of Uzbekistan’s If other regional from the U.S. and Europe, as well as Japan, India, etc. India, etc. as well as Japan, the U.S. and Europe, from ticipate only as observers. Beyond this, in June of 2018 2018 of June in Beyond this, as observers. ticipate only governments for the UN’s drafted a resolution the region’s topics as water and hydroelectric energy. Outside powers, energy. topics as water and hydroelectric that of the other countries noted above with most or all of the BRI countries, and hence with the BRI. Times (Tashkent racked the region tensions that previous the lip: some of these reforms may never be instituted in the lip: some of these reforms to invest abroad, removed thousands from lists of sus of lists from thousands removed abroad, invest to (Starr levels all at bureaucrats against complaints lodge to to be a remarkable series of reforms. Internationally, he he Internationally, of reforms. series to be a remarkable with Uzbekistan, which will deepen their interest in the BRI. with Uzbekistan, which will deepen their interest Security Council supporting the emergence of Central Asia around the region building goodwill with the other leaders. building goodwill with the other leaders. region the around arisen with respect to the BRI and, second, that recent second, that recent to the BRI and, respect arisen with These developments include a as a balance to Russia. expanded, as has trade across the Caspian to Azerbai expanded, as has trade across countries and Afghanistan have begun meeting regu gave entrepreneurs the right to seek investors abroad and the right to seek investors abroad gave entrepreneurs On the domestic front he launched a program of massive of massive he launched a program On the domestic front on the world stage. of the time of writing the U.S. government of writing the U.S. of the time not raised had practices concerning to Chinese objections the BRI. The 2017). Trade within Greater Central Asia has greatly Central Asia has greatly within Greater 2017). Trade decades-old disputes over territorial claims, and rushed and rushed decades-old disputes over territorial claims, developments within Central Asia and the South Caucasusdevelopments within & Cornell 2018a,b). Afghanistan, has already removed many of the interstate many of the interstate removed Afghanistan, has already To the extent they are implemented, they will increase the increase implemented, they will the extent they are To  S. FREDERICK STARR 48 China announcedtheformationofAsianInfrastructure only US$30billioncamefrom China).U.S.officials feared on thefalseassumptionthatitwilleventuallybeforgiven. countries to becautious abouttaking ontoomuchdebt of itsownfirmstoplaya role inonearea oranother. It certain routes andcautionedagainstothers. Astheshift construction ofhard infrastructure. Itquietlyencouraged overtheBRIwasatplanningstageandin concern of theBRIwhentheydeemitnecessary. Moreover, they managers voice togethertheirdemandstogovernmental of supportingplayerstothebusinessfolks. already growing more skepticalonaccountofitsproposals as willbethecaseinfuture. Thisisquiteseparate qz.com/africa/1273424/kenya-joins-china-led-asian-infrastructure-invest will dosoonthebasisofexhaustivehour-by-hour dataand whether ChineseorAmerican,whoselevelofactivitywill will bethe chiefactorsinthis newgame,notdiplomats, which isdefinedmore bygeopoliticsthaneconomics, to soft infrastructure begins, it may well champion some the earlyphasewhenfocuswasonfinancingand the IndianOcean.European andChineselogisticsfirms that the American role will diminish from the current level, those whomanagetheBRIwillpertaintospeedof for SoutheastandSouthAsia,theChinaSea from theU.S.stancetowards theBRIasawhole,whichis beingcastincreasinglyfail, withgovernments intotherole facilities and hotels. Henceforth, it will be the realities of the Investment Bank(AIIB),withfifty-seven countriesasmem ment-bank-aiib/ membership ofaChina-leddevelopment bankchallengestheIMF-World market disciplinetoallthosewhomaywishreturn the routes, i.e.shippingbysea.Thiswillprovide anaustere private sectorthatwillcausetheBRIeithertoflourishor nance ofroadbeds. For Washington in 2015 when was genuinely concerned BRI toitsearliergeopoliticalidentity. is alsolikelythatitwillcautiontheweakerparticipating in fullcognizanceofthecomparativecostalternative infrastructure willbeintouchwithoneanotherand bers andaninitialcapitalizationofUS$100billion(ofwhich border crossing, costspermile,taxation,andthemainte hard infrastructure. have declinedfrom thetime whenthemainfocuswason 8. Thesewillbecomparabletothedetailed dataalready being collected 9. ThisdangerisdiscussedbyAbdi LatifDahir(2018):“Thegrowing Bank orthodoxy,” publishedbytheCenterforGlobalDevelopment,https:// iru.org/ by the International Road Transportby the International Union in Geneva. See https://www. The chief demands the private sector will make to As the shift to such concerns movesforward,As theshifttosuchconcerns itislikely Stated differently, theperiodofAmerica’s greatest 8 ShippersonallsectionsoftheBRI’s 9 - - -

Central Asia and the South Caucasus than did the Obama Central Asia.Thenegativesare real, andpertainmainlyto diplomatic effort involving Japan, Australia,India,andthe Caucasus andCentralAsiaorinoppositiontothem.After officials ofcountriestransitedbytheBRIratherthanwith opened (Economy2015). years wouldbeneededbefore theinstitutioncouldposea administration. For example, it is actively supporting the administration hasalready devotedfarmore attentionto and theSouthCaucasusmaybetoChina,Europe, orthe all, ithasresponded emphatically totheBRI’s program stated obliquelyratherthandirectly, andwhyitmayprefer serious threat totheexistingdevelopmentbanks,andby sole exceptionofAfghanistan. ItistruethattheTrump sons. First,aswehaveseeninthisoverview, incontrast South CaucasusandCentral Asiaasawhole,withthe work of the World Bank and Asian Development Bank, to dealwiththeBRIandthrough thestates ofthe the U.S.positiononBRIinheartofAsiamightbe the Chinesethemselves.Itwillstopfarshortofplayinga that timesomechannelsforcooperationmighthavebeen this negativeresponseoutthatmany fadedwhenitturned that Chinesemoneyandstandards wouldunderminethe the United States. Indeed, the same can be said of the of transited countries,itisatbestasecondaryconcern the BRI,knowingthatachangewillonlypunishitsregional the unknownfuture. Second,becauseofthesebenefitsto to thesituationinSouthPacificandIndianOcean, U.S. willinalllikelihoodmaintainitscurrent stancetowards U.S. and its regional partners in the South Caucasus and United States that called for a “free and open Indo-Pacific Indian Ocean. This is quite normal, and it explains why matters pertainingtotheBRI,itislikelyworkmainlywith partners andbenefitRussia. region.” Neitherwillhappen,andforthree verygoodrea region ratherthanovertheir headswithChinadirectly. unequivocal stanceinfavoroftheBRI’s actionsintheSouth BRI in the South Caucasus and Central Asia may differ from BRI inthisregion offers severalpositivefeatures toboththe intentions in Southeast Asia, the South China Sea and the its more skeptical response to the program’s announced its partnersintheSouthCaucasusandCentralAsia, in theSouthPacific region byconveningaquadrilateral both of which Washington strongly supported. But even leading role intheenterpriseasawhole. And third, howeverimportanttheBRIinCentralAsia We havealready noted thattheU.S.response to the Some havewishedfortheUnitedStatestotakean Even whentheU.S.offers adviceondebtandother - U.S. PERSPECTIVES ON CHINA’S BELT AND ROAD INITIATIVE IN THE SOUTH CAUCASUS AND CENTRAL ASIA  49 Armenia open to the Belt and Road Road to the Belt and Armenia open .” CGTN. Initiative Zhao Hong (2017). “ Zhao Hong ------. General Assembly General Assembly Century st 21 .” Forbes. Remarks on India and the . The AIIB Debacle: What The AIIB Debacle: What Central Asia – Afghanistan dia Did Vladimir Putin call the breakup Did Vladimir Putin call the breakup be created ” Punditfact. . century?’ th logue format to Eurasia’s Emerging Southern Corridor.” Horizon. Emerging Southern Corridor.” Eurasia’s Brookings Institution. Brookings Policy: Diminishing Returns in an Era of Great Power Power ReturnsDiminishing Policy: Great of Era an in na-America Studies. United States: A Vision for the for Central Asia (UNRCCA 2018). the Belt and Road Initiative.” Institute for Chi for Institute Initiative.” Road and Belt the work and the Modern Silk Road.” Center for Strategic stan’s New Face. Washington: Rowman & Littlefield. New Face. Washington: stan’s stan: A New Model for Reform in the Muslim World?” stan: A New Model for Reform in the Muslim World?” Washington Should Do Now Washington and International Studies. on China’s One Belt, One Road Initiative.” The The Initiative.” One Road Belt, One on China’s geopolitical tragedy of the of the USSR ‘the greatest 20 Central Asia Adopts Resolution on Strengthening Cooperation in Cooperation in Adopts Resolution on Strengthening The Central Asia-Caucasus ANALYST. “Pivots”?” The Asan Forum 6 (5). This reality will place constraints on the extent to which will place constraints This reality References Le Corre, Philippe (2017). “Europe’s Mixed Views Mixed Views Philippe (2017). “Europe’s Le Corre, Economy, Elizabeth (2015). “ Economy, Northern “The (2009). Net Distribution Andrew Kuchins, nation of the regional states. nation of the regional now going forward. But there are limits to this interest and to this interest limits are But there forward. now going political crisis in the region. At that point, however, it is it is At that point, however, region. political crisis in the yet carefully will respond than likely that Washington more reforms in Uzbekistan and the efforts at at regional and the efforts in Uzbekistan reforms United Nations Regional Centre for Preventive Diplomacy Preventive for Centre Regional Nations United these have to do with world politics as a whole, and not not and whole, a as politics world with do to have these list of secondary of Washington’s to advance to the top with the South Caucasus and Central Asia. Caucasus and with the South Starr, S. Frederick, and Svante E. Cornell Uzbeki S. Frederick, (2018b). Starr, Starr, S. Frederick (2018). “From Thailand to Hamburg: Thailand to Hamburg: (2018). “From S. Frederick Starr, and Svante E. Cornell “Uzbeki (2018a). S. Frederick, Starr, Sanders, Katie (2014). “ Washington will engage with the BRI and with the vari the and with BRI the with will engage Washington concerns, it is unlikely that they will rise further among but and self-determi the sovereignty in support of vigorously ous participating countries of the region. Both can hope Both can hope countries of the region. participating ous Clarke, Michael (2015). “Kazakhstan’s Multi-vector Foreign Multi-vector Foreign Clarke, Michael (2015). “Kazakhstan’s Clinton, Hillary Rodham (2011). Chance, Alek (2017). “American Perspectives on on Chance, Alek (2017). “American Perspectives America’s priorities without the stimulus of some new geo without the stimulus of some new priorities America’s The Tashkent Times (2017). The Tashkent