New Eurasian Age: China's Silk Road and the EAEU in SCO Space ©
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New Eurasian Age: China’s Silk Road and the EAEU in SCO space © or “Noodles and Meatballs in a Breaking Bowl” © Jeff Schubert Russian economic reform: http://russianeconomicreform.ru/ and Politics and power: http://www.jeffschubert.com/ and Chinese financial issues: http://shanghai-ifc.org/ Email: [email protected] [email protected] Update at 14 August 2017 Table of Contents Introduction .......................................................................................................................... 4 Part A: Russia and China ................................................................................................... 6 1. Political Relationship .............................................................................................. 6 2. Economic Relationship ......................................................................................... 11 3. Influence of Domestic Policies on the Relationship ............................................... 21 Part B: Central Asia ......................................................................................................... 22 1. Introduction ......................................................................................................... 23 2. Domestic and International Economic Data .......................................................... 23 3. Relationship between Central Asian Countries ..................................................... 28 4. Astana International Financial Center .................................................................. 30 Part C: Russia, Central Asia and the EAEU ......................................................................... 31 1. Introduction ......................................................................................................... 31 2. Eurasian Economic Union (EAEU) ......................................................................... 34 3. Russia and Individual Countries of Central Asia .................................................... 39 4. The Way Forward? ............................................................................................... 42 Part D: China and Central Asia ........................................................................................ 44 1. Introduction and Security Issues .......................................................................... 45 2. Economic Issues ................................................................................................... 46 3. Individual Countries ............................................................................................. 48 Part E: Shanghai Cooperation Organization (SCO) ........................................................... 52 1. What is the SCO? ................................................................................................. 52 2. The Way Forward? ............................................................................................... 55 3. The Effect of New Members (India and Pakistan) .................................................. 58 Part F: “Belt and Road” Initiative ...................................................................................... 61 1. What is the Silk Road Economic Belt (SREB)? ........................................................... 61 (a) Reasons for the “Initiative”............................................................................... 61 (b) Official Chinese view of the “Initiative” ............................................................. 69 (c) Role of Russia, EAEU, CA countries and SCO in Official view .............................. 72 2 (d) The special case of the China-Pakistan Economic Corridor (CPEC) ..................... 73 2. Implementation of the SREB .................................................................................... 77 (a) Practical implementation of SREB ..................................................................... 77 (b) Financing the SREB (including by Silk Road Fund) .............................................. 81 3. Belt and Road “Associates” ...................................................................................... 86 (a) Asian Infrastructure Investment Bank (AIIB) ..................................................... 86 (a) BRICS bank ....................................................................................................... 90 Part G: Pulling Together in the Future? ............................................................................. 91 1. Introduction.......................................................................................................... 91 2. The Russian View ................................................................................................. 93 3. The Chinese View ................................................................................................. 98 4. Central Asian View ............................................................................................. 100 5. Some Other Issues ............................................................................................. 102 (a) The Thucydides Trap....................................................................................... 102 (b) EAEU and AIIB: “hard power” and “soft power”! ............................................ 103 Conclusion ........................................................................................................................ 104 3 Introduction At their 3-4 July 2017 meeting in Moscow, Vladimir Putin and Xi Jinping respectively spoke about the formation of a “broad Eurasian partnership” and “coordination of the Belt and Road initiative with the Eurasian Economic Union”.1 Putin also referred to this issue several times at the 14-15 May 2017 Belt and Road Summit in Beijing. After a meeting with Xi, Putin said that “the integration” of the Eurasian Economic Union (EAEU) and the Silk Road (SREB) “actually implies a common economic space on the continent”2, and in his formal speech at the Summit he said that “by adding together the potential of all the integration formats like the EAEU, the ‘One Belt, One Road’ (OBOR), the Shanghai Cooperation Organization (SCO) and the ASEAN3, we can build the foundation for a larger Eurasian partnership”.4 At the same summit, Kazakhstan’s president Nursultan Nazarbayev said “the idea of creating a single economic space of Greater Eurasia acquired a new meaning. The SREB can advantageously link the platforms of the SCO, the EAEU and the European Union5 into a single regional prosperity area”.6 What does all this mean? And, what are the prospects and possible implications? Is there to be a new age of Eurasian economic and power primacy? Or, is it really “Noodles and Meatballs in a Breaking Bowl”? © The Silk Road Economic Belt (SREB) part of the Chinese “One Belt, One Road” (OBOR) or “Belt and Road” initiative announced in 20137 has focused increased attention on central Eurasia. The central Eurasian geographical area is not easy to define, but its importance to the world is immense. Central Eurasia undoubtedly includes the former USSR countries of Central Asia (Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan and Kyrgyzstan) and Afghanistan, but more crucially it also includes parts of – or is of great importance to – their much bigger neighbors Russia, China, India and Pakistan. Central Eurasia is thus a mix of countries and parts of countries, ranging from very small to very large, whose relationships with each other do not always have a happy history. All these countries have both economic and security issue at stake in central Eurasian developments, and it is not always easy or even possible to disentangle these. This book mainly concentrates on the economic issues and does so by way of examining the most important international institutional arrangements and integration ideas impacting on the central Eurasian geographical space. These are presently dominated by Russia and China, but some changes are underway. 1 “Press statements following Russian-Chinese talks”, July 4, 2017 http://en.kremlin.ru/events/president/news/54979 2 “Russia, China agree to integrate Eurasian Union, Silk Road, sign deals”, RT, 8 May 2015 https://www.rt.com/business/256877-russia-china-deals-cooperation/ 3 This text does not attempt to directly address issues connected with ASEAN. 4 Putin speech in Beijing at Belt and Road Summit, 14 May 2017 http://en.kremlin.ru/events/president/news/54491 5 This text does not attempt to directly address issues connected with the European Union. 6 Malika Orazgaliyeva, “Kazakh President attends One Belt, One Road forum, meets with leaders in China”, the Astana Times, 16 May 2017 http://astanatimes.com/2017/05/kazakh-president-attends-one-belt-one-road-forum-meets-with-leaders-in-china/ 7 The “One Belt, One Road” Initiative, “Belt and Road” Initiative, “BRI”, and “B&R” essentially describe the same thing. However, there has been a subtle change in the way China has presented the “initiative” since it was initially raised in 2013 and this may possibly mean that some of the quoted material by various analysts etc would have been different if they had known of later developments. Thus, when quoting I have used the terminology originally included in the quote. Otherwise I use the “Belt and Road” term. In Chinese it is still referred to as “yidai yilu” which literally means “one belt one road”. 4 The main institutional arrangements are the Russian-led Eurasian Economic Union (EAEU) and the Shanghai Cooperation