The New Silk Road by Camille Brugier

14 2014 www.silkroadproject.org China’s way: the new Silk Road by Camille Brugier

The manner in which Russia deals with its neigh- ambitious. But what lies behind China’s desire bouring states is not a source of concern for the to recreate the ancient Silk Road? Is it simply a European Union only. Further east, China is move to counter Russian influence or does China closely watching Russia’s geopolitical moves, in also have real and tangible interests to defend in particular Moscow’s actions in Ukraine and its Central Asia? attempts to create a Eurasian Union. Where from and where to The fear that Moscow may try to keep Beijing away from what it considers its special ‘zone of influ- A recent feature published by the state-owned ence’ is not new: after rejecting the Chinese initi- news agency Xinhua has offered the clearest look ative to create a free trade zone among the mem- so far at China’s vision of the new Silk Road. Just bers of the Shanghai Cooperation Organization like the ancient one, it is to consist of both a land (namely China, Russia, Kazakhstan, Kyrgyzstan and a maritime route. and Tajikistan), Russia created its own Eurasian Custom Union with Kazakhstan and Belarus – a Accordingly, the former will begin in Xi’an, in move which is perceived in Beijing to have been central China, before stretching to the border undertaken to exclude China. with Kazakhstan. The Silk Road then heads southwest to Iran before passing through Iraq, Coinciding with President Xi Jinping’s Central Syria and Turkey. The new Silk Road then crosses Asian tour in the autumn of 2013, China has in the Bosphorus and heads through Europe, tra- the meantime launched the ‘Silk Road Economic versing Bulgaria, Romania, the Czech Republic, Belt’ project in an attempt to create a vast loop Germany and Rotterdam in the Netherlands – which spans three continents. An allusion to the from which the path runs south to Venice where ancient trade routes linking China to the Middle it converges with the planned maritime route. East and Europe that were established during the Han dynasty (approximately 200 BC to 200 The latter, in turn, begins in Quanzhou (Fujian) AD) and that long allowed merchants, pilgrims, and hits other southern Chinese ports before mercenaries, technologies and even germs to heading to the Malacca Strait. From Kuala circulate between East and West, the project is Lumpur, the maritime Silk Road heads to

European Union Institute for Security Studies May 2014 1 sources for approximately half of its domestic consumption today. In order to meet its energy needs, Beijing imports the energy it lacks from three major sources: the Middle East, Africa and Russia.

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implemented through a string of bilateral agree- ment attribute to the minority, including a brutal 13 Formatted: Font: (Default) +Headings ments with individual countries or between assult on a train station in Kunming last March CS (Times New Roman), Complex Script China and regional bodies such as ASEAN or which left 29 dead and over 130 wounded. the EU. And11 equally unclear is its links with Font: +Headings CS (Times New Roman) other regional9 projects such as Russia’s Eurasian In order to preserve its otherterritorial integrity, the Union or the US’s own ‘New Silk Road’ initiative, Chinese government has made combating what Formatted: Font: (Default) +Headings launched last7 year and centred on the construc- it calls the ‘three evils’ (religious extremism, sep- CS (Times New Roman), Complex Script tion of the nearly $1 billion Central Asia South aratism and terrorism) a priority in the region. Asia electrical5 transmission line (CASA-1000). In order to achieve its aimsImports and reduce of energy local dis- Font: +Headings CS (Times New This project, which aims to bring hydroelec- content, Beijing has replaced its policy of ‘stabil- Roman) 3 products tricity produced in Kyrgyzstan and Tajikistan to ity above all else’ – applied in the province until Formatted: Font: (Default) +Headings electricity-starved Afghanistan and Pakistan, is 2010 – with a strategy of regional economic de- Value US(Billion dollars) 1 CS (Times New Roman), Complex Script currently on hold due to a number of political velopment. -1 Font: +Headings CS (Times New Roman) Formatted: Font: (Default) +Headings European Union Institute for Security Studies May 2014 2 CS (Times New Roman), Complex Script Tajikistan Kyrgystan Uzbekistan

Kazakhstan Font: +Headings CS (Times New

Turkmenistan Roman) sources for approximately half of its domestic consumption today. In order to meet its energy needs, Beijing imports the energy it lacks from three major sources: the Middle East, Africa and Russia.

Formatted: Font: (Default) +Headings CS (Times New Roman), Complex Script Font: +Headings CS (Times New Roman) Formatted: Font: (Default) +Headings 30 CS (Times New Roman), Complex Script Font: +Headings CS (Times New 25 Roman) 20 Chinese 15 energy Value inbillion $ 10 imports from Russia 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Formatted: Default Paragraph Font, Font: (Default) +Headings CS (Times New Roman), 11 pt, Complex Script In the early 2000s, China increased its energy imports from Russia thirty-fold (see table on Font: +Headings CS (Times New page 2) in an attempt to limit its dependency on the Middle East and Africa. This was done for two Roman), 11 pt reasons: first, the transport of energy stemming from these two regions relied on maritime routes Formatted: Font: (Default) +Headings CS (Times New Roman), Complex Script which were sometimes subject to pirate attacks or administrative delays in the delivery of the Font: +Headings CS (Times New supplies; second, the Middle East and Africa suffer from chronic political instability which can cause Roman) shortages in provision or outright cessation of supply. Formatted: Font: (Default) +Headings CS (Times New Roman), Complex Script Font: +Headings CS (Times New Today, however, China is increasingly wary of further increasing its energy dependence on Roman) Russia and has started, just like the EU, to look for alternative sources of supply. Since Central Asian Formatted: Font: (Default) +Headings states are rich in energy resources, China is now increasing its imports from these countries, notably CS (Times New Roman), Complex Script Kazakhstan and Turkmenistan. Font: +Headings CS (Times New Roman) Share of energy products in total Central Asian imports to China in 2012 Formatted: Font: (Default) +Headings CS (Times New Roman), Complex Script Font: +Headings CS (Times New 15 Roman) 13 Formatted: Font: (Default) +Headings CS (Times New Roman), Complex Script

11 Font: +Headings CS (Times New Roman) 9 other Formatted: Font: (Default) +Headings 7 CS (Times New Roman), Complex Script 5 Imports of energy Font: +Headings CS (Times New Roman)

Value inbillion $ 3 products Formatted: Font: (Default) +Headings 1 CS (Times New Roman), Complex Script -1 Font: +Headings CS (Times New Roman) Formatted: Font: (Default) +Headings CS (Times New Roman), Complex Script Tajikistan Kyrgystan Uzbekistan

Kazakhstan Font: +Headings CS (Times New

Turkmenistan Roman)

Source: United Nation Trade Statistical Database

Part of this strategy entails promoting the ex- China’s main and only realistic means to achieve port of goods produced in Xinjiang to China’s these ends without being perceived as a threat by Central Asian neighbours. Considering that the Central Asian governments. 78% of the province’s exports already go to Central Asian states, the creation of a Silk Road Economic Belt would allow the consolidation Strengthening energy security of long-term export hubs in Central Asia for Xinjiang’s goods, thereby guaranteeing further Another driver for the new Silk Road project is economic development in the region. In order energy security. Between 1989 and 2011, China to improve trade flows between Xinjiang and enjoyed an average economic growth rate of Central Asian countries, Beijing has already in- 10%, and its energy needs have grown accord- vested more than $91 billion in trade-related in- ingly. The country has gone from self-sufficiency frastructure in the Western province (including in the 1980s to dependence on external sources in roads, hydropower plants, and primary indus- for approximately half of its domestic consump- try facilities). tion today. The central government is also concerned about In the early 2000s, China increased its energy a possible ‘domino effect’ whereby political inimports from Russia thirty-fold (see table) in an stability in neighbouring states could spill over attempt to limit its dependency on the Middle into its Western-most provinces. China’s nerv- East and sub-Saharan Africa. This was done for ousness was quite apparent in 2005, during two reasons: first, the transport of energy stem- both the Kyrgyz ‘Tulip Revolution’ and the May ming from these two regions relied on maritime uprising in Andijan, Uzbekistan (where Beijing routes which were sometimes subject to attacks backed the repressive actions of the Uzbek gov- by pirates or administrative delays in the deliv- ernment). ery of the supplies. Second, both regions suffer from chronic political instability which can lead The Chinese government’s investments in the to shortages in provision or the outright cessa- infrastructure of Central Asian states, as well as tion of supply. the development of border cities, are designed to stabilise the wider region both economically and Today, however, China is increasingly wary politically. In addition to generating domestic of further increasing its energy dependence benefits for Xinjiang, trade and investment are on Russia and has started, just like the EU, to

European Union Institute for Security Studies May 2014 3 look for alternative sources of supply. Since Just like with energy supplies, China prefers to the Central Asian states are rich in energy re- avoid granting Russia too much leverage over sources, China is now increasing its imports trade policy towards its principal economic from these countries, notably Kazakhstan and partner. And Chinese policymakers are aware Turkmenistan. China’s prudence vis-à-vis Russia that if relations between Russia and the EU stems from two factors: first, China is not per- worsen, or if the sheer trade volume between mitted to make investments or undertake joint- China and the EU forces them to resort to in- ventures in Russia’s energy sector, therefore land routes, Moscow’s clout vis-à-vis Beijing depriving Beijing of both long-term and reli- would increase significantly – a scenario that able access to resources and of influence over China wants to avoid at all costs. the price at which China buys Russian energy. Second, Russia has demonstrated that it is will- Chinese President Xi Jinping declared that the ing to use the energy dependency of other states new Silk Road Economic Belt “is a ‘win-win’ as a lever to exercise political pressure – as is the proposal”, adding “why not encourage a free case with Ukraine. trade zone that encompasses 3 billion people, has tremendous mineral and energy resourc- In other words, the new Silk Road project would es, and access to both Europe and the Middle allow China to lock in supply from its new East?” Central Asian energy partners. It would also allow the country to secure and improve supply The new Silk Road and the rationale(s) behind routes for its energy imports from these states it show the extent of the wariness that exists be- and to mitigate the potential effects of supply tween Russia and China, but it would be wrong cuts from the Middle East, Africa or Russia. to assume that Beijing is pushing the project just to counter-balance or limit Russian influence in Central Asia. While the new Silk Road Creating an inland route to Europe allows China to bypass Russia economically, politically, and geographically, it also has potential By building a new Silk Road through the Central domestic (development in Xinjiang), regional Asian states, China would also create an alter- (cross-border trade and infrastructure) and glo- native inland transport route for its goods to bal (creation of supply lines) benefits. Finally, the European market – a substitute to the one by creating a fast inland route to the European through Russia. Trade between China and the continent, it puts China in direct contact with Union is worth well over €1 billion each day, countries that have long been in Russia’s alleged with thousands of tons of goods being carried ‘zone of influence’. This includes Europe itself, from one end of the Eurasian continent to the where China has already become much more other – mostly by sea, along the vital lanes that active – as shown by the participation of Prime connect Suez and Shanghai. But because of the Minister Li Keqiang in a summit with central sheer volume of trade, Chinese ports are in- European leaders in Bucharest last November. creasingly clogged by an excess of outbound cargo destined for Europe. Camille Brugier is a Junior Analyst at the EUISS. On top of putting pressure on Chinese infrastructure, goods travelling to Europe via the maritime route take a relatively long time to reach their destinations: anywhere between 20 and 40 days. In contrast, an inland trade route spanning from Xinjiang to eastern Europe (Ukraine agreed to build the Silk Road on its territory in June 2013) is expected to allow Chinese products to reach the European market in 11 days.

Bypassing Russia Last but certainly not least, building the new Silk Road would allow Chinese goods to reach Europe without having to pass through Russia.

European Union Institute for Security Studies May 2014 4