According to Putin, work on the Russian section of the Europe-Western China road route is planned to be completed in 2019. Thus, a new “Silk Road” - a road one - will appear on the transport map of the world. It should become a joint transport project between Moscow and Beijing, for all participants of which this road is of strategic importance. With the help of new land transport corridors, the Chinese authorities hope to unlock the potential of the western regions of the country, which are too far from the transport hubs of the eastern coast of China. As a result, the population of these regions found themselves on the margins of the country's economic boom. Given that these territories are inhabited by Muslim minorities, economic inequality is transformed into political discontent and separatism. The investment priorities of Chinese investors are aligned in accordance with political interests. They are ready to finance part of the costs of construction of the Moscow – Sagarchin (Kazakhstan) section. The cost of the work is tentatively estimated at 783 billion rubles, half of which the budget is ready to cover. Construction costs must be offset by tariff revenues.
Gazprom is of particular interest in this project. At the end of June, the head of the corporation, Alexey Miller, announced his readiness, together with Chinese partners, to use LNG (liquefied natural gas) as automobile fuel. This project is supposed to be implemented in the process of “gasification” of the automobile corridor.
The route “Europe - Western China” promises to become a real automobile “Silk Road 2.0” - the world’s longest economic corridor, covering countries with a total population of more than 3 billion people. Unlike the railway analogue, which is being created in parallel, the automobile version may turn out to be a more powerful integrator of economic and cultural ties between Europe and Asia due to the active involvement of small and medium-sized businesses in this network. It may also be faster. It is expected that the delivery time for goods from China to the EU by road will be 10 days. This is almost two times faster than by rail and four times faster than by traditional sea route. The total length of the route will be more than 8 thousand km, of which 2.3 thousand km will pass through the territory of the Russian Federation.
The regions of Kazakhstan bordering Russia are also showing keen interest in the project. The country's authorities plan to complete the repair of their section of the Europe - Western China road by the end of this year.
The project is also being completed in China itself. Through the cities of Khorgos, Urumqi and Wuhan, the highway should reach the coast of the Yellow Sea in the city of Lianyungang.
The transport route “Europe – Western China” is a key component of the overall project of the Silk Road Economic Belt, which is promoted by Chinese President Xi Jinping and supported by Russian President Vladimir Putin.
Its implementation will inevitably increase the status of Eurasia as a world economic center and reduce the role of the Atlantic, which could become the most important geopolitical event since the 16th century, when sea routes to America and Asia were opened.
The idea of creating a new Silk Road sounded promising: investing trillions of dollars in infrastructure projects in the barren desert that most of Central Asia, and trade will begin to flourish, the economy will grow, and peace will reign. However, most experts believe that problems in the real world will ensure that this idea remains a pipe dream.
This concept is called “One Belt, One Road” and was put forward by Chinese leader Xi Jinping in March 2015. It has two elements: one is the land route from China to Europe through Asia - the Silk Road Economic Belt, and the other is the sea route going from China to Europe through India and Africa, called the Maritime Silk Road.
While estimates vary, China has called for up to $5 trillion in infrastructure investment over the next five years in 65 countries along these routes. Ports in Sri Lanka, railways in Thailand and roads and power plants in Pakistan are just a few examples of planned investments.
Speaking at a forum in Beijing in May this year, Xi said: “Under the Belt and Road Initiative, we must focus on the fundamental issue of development, develop the growth potential of various countries and achieve economic integration, interconnected development and benefits for all.”
He talks about the desired results, but the details are extremely vague. The project aims to improve intergovernmental communication, coordinate plans, develop soft infrastructure and strengthen tourism and trade, but details are being glossed over.
“There are no concrete actions in the Chinese government's plan, which has become one of Xi's most visible policy initiatives. The document contains a number of general proposals interspersed with platitudes about cooperation and mutual understanding,” the research firm Geopolitical Futures said in a July report.
But despite the lack of specific programs, the huge sums show that the Silk Road has received the support of many countries. The Asian Infrastructure and Investment Bank has pledged $269 billion for the project. Even Japanese Prime Minister Shinzo Abe expressed support at the recent G20 meeting in Hamburg, Germany.
Goals don't match reality
China's goals, explicit and implicit, must be weighed against reality. Based on this, most experts consider the project to be economically infeasible. But it will allow China to gain political influence.
Context
The Great Silk Road and the Great Game
EurasiaNet 07.27.2017India is creating its own Silk Road
Forbes 07/01/2017US attempts to interfere with the Silk Road project
Star gazete 06.06.2017Will the Silk Road be smooth?
Latvijas Avize 05/22/2017Economically, it mainly concerns investment and exports. “China has excess capital and excess manufacturing capacity, which is motivating this set of initiatives. Given China's high savings rate and slowing industrial investment, they are looking for overseas projects to finance and a new outlet for Chinese exports,” says James Nolt, professor international relations at New York University.
The result is this project, which will see China team up with countries along the routes to raise money to build the infrastructure needed to facilitate trade. And everything will be built by Chinese companies.
Holding company China Overseas Ports has expanded the Gwadar port in Pakistan and leased it until 2059. This is just the first small step to connect the Silk Road Economic Belt with the Maritime Silk Road. Roads, pipelines, power plants, optical fiber connections and railways are planned for the China-Pakistan Economic Corridor with a total investment of $62 billion.
Of course, local and international companies are going to bid on these projects, but if China provides most of the funds, then Chinese state-owned enterprises will get most of the contracts.
Unable to finance
Then the question arises of financing these investments. The countries where the investment will take place, such as Pakistan and Cambodia, are not rich enough to spend trillions. This forces China to come up with a way to obtain hard currency financing to achieve its economic goals.
When the project was launched, China had almost $4 trillion in foreign exchange reserves, and it wanted to invest them. Reserves fell to $3 trillion in 2017, a threshold that central planners in Beijing have signaled they will not cross.
“They have to tap international bond markets or deplete their foreign exchange reserves and then borrow. Even by global bond market standards, a $5 trillion bond program over several years is a huge undertaking. They're not going to take on that kind of repayment risk and they're not going to deplete their reserves,” Balding said.
A study by investment bank Natixis found that such borrowing would increase China's external debt from 12% to 50% of GDP. This would expose the country to exchange rate risks and put it in the same vulnerable position as the Four asian tiger» ( South Korea, Singapore, Hong Kong and Taiwan) during the 1998 financial crisis.
Loans from China in RMB are not a good option for two reasons. This “creates risks for Chinese banks' overextended balance sheets. In fact, their bad loans have only increased over the past few years, making it difficult to continue lending,” especially for risky projects, Natixis chief Asia-Pacific economist Alicia Garcia-Herrero wrote in a blog post.
In addition, recipient countries could only repay the loan in yuan by selling goods and services to China, thereby purchasing Chinese currency. This was counterproductive to facilitating Chinese exports and ultimately to trade infrastructure.
“How will Pakistan repay the yuan loan? They are going to create a trade surplus in yuan. Thus, China has to face trade deficits in all the countries to which it lends. Pakistan will have to generate some trade surplus with another country to have enough capital to pay China,” Balding said.
Given that much of the infrastructure will be built to facilitate trade with China, this is unlikely. So, in the end, China will finance the supplier for these projects. The only way For China to achieve its economic goals, it means loans in hard currency that will be fully repaid and will generate a profit, but for this China currently does not have the funds.
Bad risks
All economic indicators of the most famous Silk Road projects point to this repayment scenario.
There are reasons why countries like Cambodia, Laos, Thailand, Pakistan and Mongolia do not have good infrastructure. They have generally poor macroeconomic frameworks, underdeveloped institutions, and high levels of corruption. Building roads and railways will not change this.
Moreover, “Central Asia, a patchwork of states whose borders were drawn to make them easier to rule by Moscow during the Soviet era, is unlikely to be a promising market for Chinese goods,” the Geopolitical Futures report says.
“People say China is giving away money. In almost every case, a Chinese lending company provides a loan to an oppressive dictator, such as in Sri Lanka or Venezuela. None of this ended well,” Balding said.
Economically stable countries such as Malaysia and Vietnam require less investment than troubled states such as the Kyrgyz Republic and Ukraine, which is torn by civil war. These countries have economic stability ratings of 44 and 38.2 respectively, compared with Malaysia's 66.8, according to Oxford Economics.
“Where countries' financial development is relatively weak and governments are highly indebted, financing will be critical,” the Oxford Economics report said. These are the countries that have the lowest chance of repayment.
“While a new airport or railway can be built in just a few years, accumulating the human and institutional capital needed to operate it effectively and contribute to economic and social progress is a slower process,” says the report from research firm TS Lombard. .
Small coverage
Given the limitations in viable economic projects and financing, the scale of the Belt and Road project is likely to be small, while China can still focus on its political goals to exert greater influence over participating countries.
“What remains is a much more modest program of $15 to $30 billion a year,” Bolding said. “This is comparable to the $269 billion already promised by Chinese banks. I don't want to say it doesn't matter, but it doesn't of great importance. The United States spends $300 billion annually on foreign direct investment."
One initiative that makes sense but needs little infrastructure and investment is protecting ships from pirates. “Collaboration with Singapore to secure maritime routes is promising and should be pursued anyway,” Nolt said.
Advances in shipping technology have made it much easier and cheaper to transport goods by ship rather than by land. This is why the majority of Chinese and world trade (80%) is carried out by sea.
After all, defending against pirates and building a few ports in Pakistan and East Africa is a worthwhile task, but it is a far cry from building landlocked infrastructure worth trillions.
“The Silk Road was an ever-evolving market that moved goods across a vast continent where they could be exchanged for other goods. And unlike today, Eurasia was the center of world civilization, home to the most important economies,” says the Geopolitical Futures report.
Today, the most important economy, and for China too, is the United States, and it is best reached by sea through the Pacific Ocean, which is far from the Maritime Silk Road and the Silk Road Economic Belt.
Chinese infrastructure projects in Asia
The Chinese company China Overseas Ports Holding will lease the port of Gwadar in Pakistan until 2059 and has already begun to expand it. China seeks to secure sea trade routes along the so-called Maritime Silk Road, Pakistani port - important element infrastructure.
Thailand will borrow a total of $69.5 billion to finance high-speed rail and other major megatransport projects, with most of the money coming from China and Chinese companies providing construction. Thailand Railways will become part of the Kunming-Singapore railway system. However, Thailand will repay the loans by exporting rice and rubber, thus taking advantage of its trade surplus with China.
The $3.6 billion Myitsone Dam project in Burma, although not officially part of the Belt and Road Initiative, is an example of a Chinese infrastructure project in a very poor country that did not go as planned. Construction was suspended for six years because the two countries could not agree on how to proceed.
InoSMI materials contain assessments exclusively of foreign media and do not reflect the position of the InoSMI editorial staff.
Dina Bogdashova
China has launched a major economic project: the government has decided to create a new Silk Road - an economic corridor that will connect continents with each other through a chain of infrastructure projects. This project could change the economic map of the world and is perceived by many as the first “bell” about the beginning of the battle between East and West for supremacy in Asia, observers say.
In September 2013, Chinese leader Xi Jinping visited the capital of Kazakhstan. In Astana, he agreed on China's purchase of a stake in Kashagan, one of the largest oil fields in the world. It was then that the Chinese leader voiced the idea of the “One Belt, One Road” project - this is a land and sea version of the new Great Silk Road.
The New Silk Road is not just some highway or railway. This is a rather daring idea in its scope. When its construction is completed, it will connect Asia, Europe, Africa and even Latin America. A chain of infrastructure projects will create the world's largest economic corridor. The project will cover 4.4 billion people, and the volumes industrial production within its borders will amount to $21 trillion.
According to the China Development Bank, about $900 billion will be invested in the One Belt, One Road project, and investment plans cover 60 countries. Attractive instruments have been created to promote the project, the main one being the $40 billion Silk Road Development Fund with the possibility of additional capitalization.
China is considering the development of six key corridors: China - Mongolia - Russia; New Eurasian Bridge; China - Central and Western Asia; China - Indochina Peninsula; China - Pakistan; Bangladesh - China - India - Myanmar.
On land, a high-speed rail network is planned, starting in Yunnan province and connecting to Laos, Cambodia, Malaysia, Myanmar, Singapore, Thailand and Vietnam. Another network of roads, railways and energy pipelines will start in Sinai and go west, all the way to Belgium, writes The Quartz.
Sea routes should connect the South China Sea with Indian Ocean and the southern part of the Pacific. China will begin to protect its own sea routes - a corresponding strategy has already been presented. It says that the Chinese Navy is moving from protecting territorial waters to protect China's interests in the world's oceans.
Photo: The Quartz
It should be noted that China does not need to build all these thousands of miles of railways and other facilities - much of the infrastructure already exists. The trick is to tie it all together.
The New Silk Road is an extremely ambitious, long-term project that reflects China's aspirations as a new, rising superpower. Beijing certainly wants to capitalize on this investment. In addition, when implementing this initiative, China hopes to strengthen political contacts, create a transport network from the Pacific Ocean to the Baltic Sea, reduce barriers to trade and investment, and expand payment systems in national currencies. Experts believe that China is now clearly emerging as a global power.
How did this idea even come about? Over the past 20 years, China has grown rapidly due to government investment in infrastructure. This boom has created huge industries that create millions of jobs. But the model has exhausted itself - China has already basically built everything, and there is a need to bring all these companies to foreign markets in order to support economic growth and keep people busy, writes Forbes.
But perhaps not everything planned is destined to happen. At the end of 2014, Mexico abruptly canceled a deal with China to build a railway. The cost of the contract was estimated at $3.75 billion. Japan also began to challenge the Chinese plans. It has begun submitting competing bids to build high-speed rail and other projects in Indonesia, Thailand and several other countries, offering low-interest loans and sometimes better technology.
A strong move by China, in turn, was the creation of the Asian Infrastructure Investment Bank, which included 57 founding members. This international financial organization was created to stimulate financial interaction in the Asia-Pacific region, implement infrastructure projects, and expand integration processes. Representatives of the bank's 57 founding countries will gather in Beijing on June 29 to sign an agreement to launch the organization by the end of the year. Given China's contribution to the bank's total capital ($100 billion is the largest), it can be expected to lobby for its interests in developing projects as part of the grand idea of creating global infrastructure.
What projects are already underway?
China's global trade project to create a new Silk Road has started in Hungary. In early June, the Foreign Ministers of Hungary and China, Peter Szijjártó and Wang Yi, signed a memorandum of understanding on the construction of the “Silk Road Economic Belt” and the “Maritime Silk Road of the 21st Century” as part of the “One Belt, One Road” initiative. At the same time, Wang Yi promised Hungary the role of “the locomotive and development leader” of the project and noted: “History will show that this will be wise and the right choice".
Xi Jinping promised to invest $250 billion in South America over the next 10 years. In Latin America, China mines copper and oil, builds houses and hydroelectric dams, highways and railways. From 2000 to 2013, trade turnover between China and the countries of this region increased more than 20 times. The key to increasing China's role in the region could be the construction of a transoceanic canal in Nicaragua.
In January, China and the African Union agreed on a plan to develop roads, railways and airports to link all 54 countries. African countries. And these plans are already underway, including an 875-mile coastal railway in Nigeria ($13 billion), a 500-mile railway connecting the Kenyan cities of Nairobi and Mombasa ($3.8 billion), and railways in Ethiopia and Chad ($4 billion). and $5.6 billion). China's maritime ambitions are also concentrated here, which include the creation of modern ports in a number of states. All these offshore and onshore projects are on a par with resource investments. Thus, the China National Petroleum Corporation (CNPC) has large oil projects in Chad and Mozambique. Chinese manufacturers are also building factories on the continent, counting on cheap labor.
Pakistan is critical to China's New Silk Road. China has already invested $42 billion in the country's infrastructure projects. Yes, the countries have always been allies. But China has a specific goal here: it wants to contain Uyghur separatists who have been fomenting violence in the western province of Xinjiang. Some of these separatists have refuge in Pakistan and Afghanistan, and Beijing has been pressing both countries to hand over Uyghurs living there to authorities. In addition, transporting goods through Pakistan will help China eliminate the need to use the Strait of Malacca. Beijing fears that if relations with Washington become truly hostile, the US could block the narrow strait and leave the country without an important trade route.
China's influence is also growing in Central Asia, as a result of which Russia's traditional dominance in the region is being called into question. Turkmenistan, for example, supplies more than half of the gas imported by China; China takes oil from Kazakhstan (the country has a $5 billion stake in the Kashagan oil field). The republic also signed $15 billion in gas and uranium contracts with Uzbekistan.
Cooperation with Russia
Russia is considered a “key partner” in Beijing within the framework of the New Silk Road project. However, this idea promises the country not only opportunities, but also risks. Recently, a Russian-Chinese conference on the issue of integration was held at the Institute of Economics of the Russian Academy of Sciences. Chinese representatives claim that the new Silk Road will allow Russian producers to enter the markets of Cambodia, Burma, Thailand and Malaysia. In addition, new logistics centers will appear on the territory of the Russian Federation. Russian experts point out risks. “The Russians have a joke: what is the difference between a man and a male? A man is the one who has money. Not having the same financial resources as China, Russia will be uncompetitive in this belt, although Beijing does not at all want to bring us harm,” believes Deputy Director of the Institute of Economics of the Russian Academy of Sciences Svetlana Glinkina (quote from Nezavisimaya Gazeta). In fact, Russia today is 4.5 times more dependent on China than China is on Russia.
The Russian-Chinese agreements cover eight projects, starting with , which will link Moscow with Kazan and will continue to Beijing, connecting the two countries with Kazakhstan. The contract was won by the Chinese Railway Group. At the same time, another high-speed railway will connect the Chinese province of Girin with Vladivostok, the main Far Eastern port of Russia. Cooperation between the two countries in the field of energy is also actively developing. For example, in May, the Chinese Three Gorges entered into an agreement to build a hydroelectric power station near the Russian-Chinese border.
The first bell
“Great powers love not only to create their own clubs, but to transform their economic power into geopolitical weight. By developing its ties with neighboring and more distant countries, China is setting its own parameters,” writes the Financial Times. According to the publication, China does not intend to turn the established world order upside down. At least for now. Despite competition from the United States in East Asia, China will emerge as the leading power in Eurasia. And the West will have to decide whether it is ready to take part in someone else’s project, the FT summarizes.
“The project (new Silk Road - ed.) is aimed at revolutionary changes in the economic map of the world. Many people perceive it as the first signal about the beginning of the battle between East and West for supremacy in Eurasia,” writes OilPrice. “Will the US join this attempt? If the creation of a new Transatlantic Trade and Investment Partnership, which deliberately does not include Russia and China, can shed light on what is happening, then US participation (in the Chinese project - ed.) is unlikely. Opposition to it is obvious,” - continues the publication. At the same time, in his opinion, most of the world business community will certainly connect to the new Silk Road - otherwise they risk not keeping up with the new “gold rush” flaring up in Asia. It is unlikely that many international companies will miss such a promising idea, which, if successfully implemented, will contribute to the rapid growth of the global economy and help overcome the consequences of the economic crisis, the article says.
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Comments
Andrey Betker 23:56, 06/16/2015
Valery Volozhin 13:44, 06/16/2015
Valery Volozhin del-comment 23:00, 06/16/2015
Del-comment andreev110951yandexru 06:43, 06/17/2015
New Silk Road(Eurasian Land Bridge) is a transport route for moving goods and passengers overland from China to European countries. The route includes the transcontinental railway—the Trans-Siberian Railway—which passes through Russia and second Eurasian continental bridge, passing through Kazakhstan. As of November 2007, about 1% of the $600 billion in goods from Asia to Europe was transported by land each year.
The proposed expansion of the Eurasian Land Bridge includes the construction of railway lines from transcontinental lines to Iran, India, Myanmar, Thailand, Pakistan, Nepal, Afghanistan and Malaysia, among other regions South-East Asia and Transcaucasia (Azerbaijan, Georgia). The route includes the Marmaray tunnel under the Bosphorus, ferry crossings across the Caspian Sea (Azerbaijan-Iran-Turkmenistan-Kazakhstan) and the North-South corridor. The United Nations has proposed further expansion of the Eurasian Land Bridge, including the Trans-Asian Railway project (in fact, it already exists in 2 options).
To develop infrastructure projects in countries along the New Silk Road and the Maritime Silk Road and to promote the sale of Chinese products, the Silk Road Investment Fund was created in December 2014.
Encyclopedic YouTube
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Russia, Belarus and Kazakhstan are building their “Silk Road”
Subtitles
“New Silk Road” through Kazakhstan and Russia (16 days) compared to the route through the Suez Canal (36 days)
New Silk Road (NSR)- the concept of a new pan-Eurasian (and in the future - intercontinental) transport system, promoted by China in cooperation with Kazakhstan, Russia and other countries. The idea of the New Silk Road is based on the historical example of the ancient Great Silk Road, which operated from the 2nd century. BC e. and was one of the most important trade routes in antiquity and the Middle Ages. Modern NSR is a critical part of China's development strategy in modern world- The New Silk Road should not only build the most convenient and fastest transit routes through the center of Eurasia, but also strengthen the economic development of the interior regions of China and neighboring countries, as well as create new markets for Chinese goods.
China is promoting the “New Silk Road” project not just as a revival of the ancient Silk Road, a transport route between East and West, but as a large-scale transformation of the entire trade and economic model of Eurasia, and primarily Central Asia. According to Vladimir Putin, “we are talking about reaching the future new level partnership, implying a common economic space on the entire Eurasian continent.”
The Chinese call this concept “one belt, one road”. It includes many infrastructure projects that should eventually encircle the entire planet. The project of a global system of transport corridors connects Australia and Indonesia, all of Central and East Asia, the Middle East, Europe, Africa and through Latin America to the United States. Among the projects planned under the NSP are railways and highways, sea and air routes, pipelines and power lines, and all related infrastructure. According to the most conservative estimates, the NSR will draw 4.4 billion people into its orbit - more than half of the Earth's population.
On May 8, 2015, a joint statement was signed by Russian President Vladimir Putin and Chinese President Xi Jinping on cooperation between Russia and China within the framework of the Eurasian Economic Union and the trans-Eurasian trade and infrastructure project of the Silk Road economic belt. On June 13, 2015, the world's longest freight railway route Harbin - Hamburg from China to Germany through Russia was launched: trains along this route will take 15 days, which is 2 times faster than the sea route through the Suez Canal.
Project background
The Great Silk Road in ancient times
Regular caravan trade between China and Central Asia began no later than the 2nd century BC. e., when China united into a single empire and the endless internal confrontation between individual Chinese kingdoms gave way to a single foreign policy. In the north, the first Great Wall of China was built to repel the nomadic Huns, maritime trade developed in the southeast, and in the west, Chinese diplomats and merchants set out on long journeys, initially in search of allies against the Huns or for deposits of precious jade in what is now Xinjiang.
The Great Silk Road followed several branch routes:
- The southern branch is from China through the Taklamakan desert, the southern Pamirs, Bactria (Afghanistan), Parthia (Iran), India and the Middle East, from where Chinese goods reached the provinces of the Roman Empire through the Mediterranean Sea, and later to Byzantium, Arab and Western European countries.
- The northern branch is from China through the Turfan oasis, between Altai and Tibet, through the Pamirs to the Fergana Valley, through the Kazakh steppes to Eastern Europe.
China traded not only silk, but also porcelain, tea, rice, jewelry and other items in exchange for gold, silver, leather, wool, carpets, Exotic fruits and other goods from Central Asia. Along the Silk Road, technology was exchanged between East and West - this is how, apparently, gunpowder, paper and other technical achievements of China came to Europe.
The organization of caravan trade required both diplomatic efforts and the creation and support of a complex infrastructure network over thousands of kilometers, where it was necessary to dig wells, create resting and stopping places (caravanserais), arrange river crossings, etc.
Caravan trade along the Great Silk Road had a huge historical meaning. Thus, among the many possible factors and reasons for the fall of the Roman Empire, there is a shortage of silver coins to support the army, which arose, among other things, due to the Romans exchanging silver for luxury goods from the East, including silk from China.
Apparently, the Great Silk Road also played a certain role in the emergence of the Old Russian state in the 8th-10th centuries. During that period, due to political instability in the south (Arab conquests), a significant part of the caravan trade along the northern branch of the route went around the Caspian Sea through Khazaria and Rus' along the river system of the Russian Plain, which contributed to the growth of Russian trading cities, including Kyiv.
In the 13th century, the Mongol Empire united vast areas of Eurasia, and trade along the Silk Road boomed in the subsequent period. It was then that China was visited by the famous Italian traveler Marco Polo, who described his journey in a famous book that inspired many to search for sea routes to the east. And then, in the era of the Great Geographical Discoveries of the 16th-17th centuries, the bulk of trade between East and West began to pass by sea. However, land routes continued to play a major role.
The Great Tea Route - Siberian Highway
Russian-Chinese trade, starting from the era of Peter I, was developed first through Nerchinsk after the conclusion of the Treaty of Nerchinsk in 1689, and then through the border city of Kyakhta, specially founded for customs purposes, after the conclusion of the Treaty of Kyakhta in 1727. Cloth, manufactured goods, furs, and yuft (dressed leather) were exported from Russia to China. Silk, porcelain, gems, and mainly tea, which has since become the national drink of not only the Chinese, but also the Russians.
By the 1740s, the Kyakhta trade ensured the accelerated construction of communication routes between Moscow and Irkutsk - this is how the “Great Tea Route” arose - the Siberian Highway, which became the longest horse-drawn road in the world and anticipated the construction of the Trans-Siberian Railway and the modern network of federal highways in Russia.
New Silk Road: modern projects
Since the 1990s, the current political situation has contributed to increasingly loud statements about plans to recreate the ancient Silk Road, although their implementation continues to be hampered negative factors- basically this is an unstable and tense situation in some countries of Central Asia, especially in Afghanistan.
Since 2008, construction of the transcontinental highway began. Western Europe- Western China" as one of the first examples of the real implementation of the idea of the "New Silk Road". A sequence of high-speed highways and simply high-class roads built into a single system passes through the territory of China, Kazakhstan and Russia. In China and Kazakhstan, construction is nearing completion. In Russia, the route will include the Moscow-St. Petersburg highway currently under construction, the existing Moscow-Kazan highway, as well as sections of recently built and new highways under construction in Tatarstan and Bashkortostan. In Tatarstan, the road also passes along the longest bridge crossing in Russia - the bridge over the Kama River near the village of Sorochi Gory. The first stage of the bridge complex with a total length of 13,967 meters was commissioned in 2002, the construction of the second stage - a parallel bridge crossing - is close to completion as of 2015.
At the beginning of January 2008 in Beijing, representatives of Russia, China, Mongolia, Belarus, Poland and Germany signed an agreement on regular freight transportation on the railways of these countries with coordination of all issues of customs and border services. Less than a month later, according to this agreement, train traffic began through the territory of Russia (7 thousand kilometers and 6 days of travel). In total, the journey from Beijing to Hamburg takes 9,992 thousand kilometers and 15 days, which is at least twice as fast as the sea route through the Suez Canal. In addition, transport risk insurance is much cheaper for overland routes. This became another project that received the name “Silk Road” in the media.
In 2009, a trial branch of the Turkmenistan - China gas pipeline was launched in transit through Uzbekistan and Kazakhstan. In its full form, the project is also called the “Silk Road” with the construction of gas transportation infrastructure in the space between China and Iran, that is, almost along the entire length of the ancient Silk Road.
Project "One Belt - One Road"
In September 2013, Chinese President Xi Jinping put forward the concept of the “New Silk Road” under the slogan “One Belt, One Road.” This global strategy, which includes the “Silk Road Economic Belt” and “Maritime Silk Road of the 21st Century” projects, involves the creation of an extensive infrastructure network along the route from the western borders of China through the countries of Central Asia and Iran to Europe.
The implementation of the project for the construction of transport infrastructure (railways and roads, pipelines, ports) should lead to a significant increase in intra-Eurasian trade and to the intensification of economic development of the vast internal territories of Eurasia, as well as the countries of South and Southeast Asia, the Middle East and Africa, where it will be necessary reach the “New Silk Road” (at least in its maritime component). While political, informational and organizational preparation of the project is underway.
In the spring of 2015, the Silk Road Company investment fund was created to implement the project, and $40 billion was allocated - an extremely small amount by Chinese standards. In the future, it is expected that this amount will increase multiple times and that Islamic and European countries. Earlier, in October 2014, the Chinese created the Asian Infrastructure Investment Bank (AIIB), an international investment bank that the media calls a competitor to the IMF and the World Bank. By May 2015, the AIIB already included almost 60 countries - most Asian countries and all key European countries.
Combining projects from different countries
On April 2, 2015, Chinese Foreign Minister Wang Yi proposed combining the concepts of transport megaprojects existing in the three countries into a joint Chinese-Mongolian-Russian economic corridor. According to Wang Yi, “building an economic corridor means combining the Chinese idea of building the Silk Road economic belt “one belt - one road”, the Mongolian idea of the “steppe road” and the idea of creating a trans-Eurasian corridor promoted by Russia.”
In the land part of the New Silk Road, it is planned to build three railway corridors. The northern corridor will pass through the territory of Russia, and the central and southern ones will pass through the territory of Central and Central Asia, including through Kazakhstan, which is included together with Russia in the Eurasian economic union. Subsequently, the railway corridors will be supplemented by road corridors.
The main direction of the "New Silk Road" through Central Asia it is expected to be about 6,500 kilometers long, of which 4,000 will pass through Chinese territory from the Pacific coast to the Xinjiang Uygur Autonomous Region. Further, the path goes through Kazakhstan, Uzbekistan, Turkmenistan, Iran, Iraq, Syria and Turkey, and from there to Europe - through Bulgaria, Romania and the Czech Republic to Germany. Branches from the main route are also planned towards many other surrounding countries.
The sea route, like the land route, will follow an ancient trade route: from Guangzhou in China along the coasts of Vietnam, Thailand, Malaysia, Singapore and Indonesia, past India to the Red Sea with branches to the Persian Gulf and Africa, and through the Suez Canal to the Mediterranean. As a separate entry point into Europe, before the Ukrainian crisis began, the Chinese were planning to build a deep-sea port in the western part of Crimea.
In addition, Russia and China are also discussing the Arctic route: the possible inclusion of the Northern Sea Route (NSR) development project in the New Silk Road strategy.
China's interests
China’s interests in the large-scale “New Silk Road” strategy it is promoting are extremely diverse:
- New transport corridors should reduce the time it takes to transport goods from China to Europe from the current 45-60 days by sea to 10-13 days by land. This will significantly optimize supplies and reduce the cost of many Chinese goods, strengthen China’s position in European and Asian markets, and also occupy new markets in Africa and the Middle East.
- Conquering new markets is extremely important for the growth of the Chinese economy, which has been slowing in recent years.. Although there are still hundreds of millions of peasants in China who are not involved in the modern economic and technological way of life, China’s human resources are not endless. Continued growth and development requires more and more widespread use of Chinese goods, technologies and investments abroad.
- China is very interested in the entry of Chinese railways and construction companies far beyond its borders to provide jobs for these industries for decades to come. By 2014, about 16 thousand km of high-speed railway lines were built in China (60% of the entire global high-speed railway network), and by the end of the decade, the total length of the high-speed railway network in China should reach 30 thousand km. Enormous resources have been poured into the industry at an astonishing rate of high-speed highway construction, and Chinese leaders understand that China's high-speed network will soon reach saturation and economic profitability, even with its enormous population and territory. Therefore, the Chinese are making significant diplomatic and organizational efforts. Thus, in October 2014, the largest Chinese manufacturers of railway equipment CNR and CSR merged, uniting to jointly enter the world market and compete with foreign companies such as Siemens and Bombardier. The Chinese are willing to build infrastructure even in underdeveloped and unstable African countries - for example, they are planning to build a railway in East Africa through the territory of Kenya, Uganda, Rwanda, Burundi and South Sudan, and at the end of 2014, a $12 billion contract was signed for the construction of a railway along the coast of Nigeria.
- Moreover, China is interested in building railways in its neighboring countries, in building, as far as possible, integrated with the intra-Chinese railway network. As it became known in May 2015, China is ready to invest up to 300 billion rubles in the construction of the Moscow-Kazan high-speed railway. Russia's first full-fledged dedicated high-speed railway with a length of 770 km should reduce travel time between Moscow and Kazan from 11.5 to 3.5 hours. The highway is supposed to be built using Chinese technology and with loans from Chinese banks, and materials and rolling stock will mainly be supplied by Russian companies.
Interests of Russia
Russia has the following interests in relation to the New Silk Road project:
- It is extremely important for Russia to integrate into the trans-Eurasian transport corridors of the New Silk Road, thereby strengthening its position as a major transit country. Russia must become a full-fledged “Eurasian bridge” between the countries of the East and West.
- Russia’s participation in the project and the growth of transit through its territory will dramatically increase the return on investment in transport infrastructure and, as a result, more actively develop many regions of the Asian part of Russia, making them more attractive for locating production and living.
- Against the backdrop of currently difficult relations with the West, Russia is interested in strengthening and expanding cooperation with China. Joint large projects are the most reliable way to build long-term partnerships.
- Russia needs to expand cross-border ties with China - without this, full-fledged economic development of the regions of Siberia and the Far East is hardly possible. Border regions need close markets to sell their products and flows of tourists from China.
- Russia, like China, is very interested in establishing political stability in the countries of Central Asia and the Middle East, as well as in the active economic development of these countries. We are talking about Afghanistan, Pakistan and other problem states. Both Russia and China are threatened by such phenomena as drug production in Afghanistan and related drug trafficking. No less dangerous are Islamic fundamentalist militants and uncontrolled flows of migrants that arise during military conflicts. Ultimately, these threats can be completely eliminated only through accelerated economic development of all countries in the region - only an increase in living standards can become the basis for strengthening political stability. The New Silk Road project can play an extremely important role in this regard, becoming an incentive and tool for establishing peace and economic prosperity in Eurasia. 12
However, the Trans-Caspian route - from China through Kazakhstan, Azerbaijan, Georgia and Turkey to Europe is economically unprofitable - after all, between China and the EU with such a route you have to cross as many as 5 customs borders and as many as 4 times carry out ferry crossings or transshipment in ports (you have to cross not only the Caspian , but the Black Sea, since the railway between Georgia and Turkey is not completed). Meanwhile, the Russian route involves crossing only 3 borders without any sea sections.
The Russian Trans-Siberian Railway is being used to its fullest and is overloaded, but is being successfully reconstructed, which creates a strong prospect for increasing cargo flow through Russian territory.
The Silk Road through Georgia and Ukraine
On January 15, 2016, Ukraine announced the launch of the first experimental flight from the Ilyichevsk seaport through Georgia, Azerbaijan, through the Caspian Sea and Kazakhstan to China. This PR project is associated with the initiatives of Odessa Governor Mikheil Saakashvili, the ex-President of Georgia. According to Ukrainian Prime Minister Arseniy Yatsenyuk, this route “will become a new direction of the Silk Road and an alternative to delivering goods from Ukraine to these markets, bypassing Russian territory.” Ukraine says the journey from China to Europe via the Ukrainian port of Ilyichevsk could take “a maximum of 9 days” instead of “30 days via Russia.”
In reality, however, the route through Russia is designed to take only 14-15 days, while the alternative “Ukrainian” route is unlikely to be as fast as stated. The profitability of this project is very doubtful, because, as in the route through Turkey, here again it is necessary to cross as many as 5 customs offices and 2 seas. However, in connection with the restrictions introduced at the beginning of 2016 on the transit of Ukrainian goods through the FTA Eurasian Union it is possible that Ukraine will be forced to use alternative routes, even at a loss.
As in the case of the route through Turkey, we are actually talking about an attempt to revive the old failed project of the TRACECA transport corridor, giving it the name “Silk Road”, popular in connection with China’s new transport and economic strategy.
China's domestic market in decline general level world trade during a period of economic crisis is not able to consume the amount of goods that it produces. Rising economic indicators such as wages and the cost of doing business increase the price of products, so in order to avoid sharp fluctuations in the Chinese economy and maintain the level of GDP growth, the Chinese government has chosen the path of soft expansion into the rest of the world.
Having put forward in 2013 the idea of restoring the ancient transport route from Asia to Europe as the New Silk Road under the motto “One Belt - One Road”, China simultaneously opens up access for its goods to European markets, strengthens its influence in the world and contributes to the development of other regions, according to the territories of which this logistics route will pass.
Elena Prikhodko, logistics expert, CEO of Petite Logist
Main transport routes between China and Europe
The historical trade route from China to Europe, in its current manifestation as the New Silk Road (NSR) project, represents a serious infrastructural modification, and in some places the creation from scratch of all types of transport routes and the adjacent territory. Countries that will be involved in this project in any way accept it as a transport and economic one. However, China, as the initiator and main customer of the project, put forward a concept under the motto “One Belt – One Road,” namely the creation of a full-fledged space for economic cooperation along the entire length of transport routes with deepening interstate and interregional interaction.
Currently, the New Silk Road project is a door for Chinese manufacturers to the European market for selling their goods with fast delivery times. At the same time, the cost of goods is reduced due to the use straight path and low transit rates, which the Chinese government will start talking about as soon as the first infrastructure facility in another country financed by Chinese investors is built.
The concept of “One Belt – One Road” places the main emphasis on the development of transport routes between China and Europe, which experts combine into three groups.
1. Northern route
The first group includes routes passing through the territory of China, Kazakhstan and Russia. The distance from Urumqi (China) to the western border of Russia is 7,500 km by rail and 6,900 km by road. The cost of delivering goods along this route depends on the type of transport: about $1,300 per TEU (equivalent to a 20-foot container) by rail and at least $3,000 per TEU by road. Design power this path, one of the largest among all those presented, is about 300 thousand TEU per year. So far, the route is used at only 20% of the total capacity.
The most developed route option is the transport corridor “Western China - Western Europe”, passing through the cities of Lianyungang, Zhengzhou, Lanzhou, Urumqi, Khorgos, Almaty, Kyzylorda, Aktobe, Orenburg, Kazan, Nizhny Novgorod, Moscow and St. Petersburg with access to the ports of the Baltic Sea.
This route - the only one of all - is already in operation, and most of the existing transit flow goes through it. An important advantage of the route is passing through only one customs border, which is between China and Kazakhstan. But the main problem of the route remains its limited capacity.
2. Sea route
The second group includes routes passing through the territory of Kazakhstan and using the ports of the Caspian and Black Seas for transit - Aktau, Makhachkala, Novorossiysk, Constanta.
The cost of transportation with reloading onto container ships is currently about $4,000 per TEU when transporting to the EU. There is also another delivery option for this route, which differs slightly from the first: from Makhachkala the cargo goes by road to Tbilisi then to the port of Poti. The cost of delivering cargo from China to Georgia using this method is $3,700 per TEU.
The routes of the second group are less powerful than the first: the theoretical capacity of the route Urumqi - Aktau - Makhachkala - Novorossiysk - Constanta (taking into account the capacity of the ports and the available fleet) is 100 thousand TEU per year, and the route Urumqi - Aktau - Makhachkala - Tbilisi - Poti - Constanta (also taking into account the capacity of the ports and the available fleet) - 50 thousand TEU per year.
One of the problems in the development of this group of routes is that Russian ports in the Caspian Sea are not ready to service these transit cargoes; this requires a serious modernization of port facilities.
3. Southern route
The third group includes routes going south of Russian territory. The route Urumqi – Aktau – Baku – Poti – Constanta is the most expensive and one of the least powerful among all listed (practically untested). The cost of delivering one TEU reaches $5,000 when using rail and up to $4,000 when delivering by road and ferry. The theoretical capacity of the route (taking into account the capacity of ports and the available fleet) is 50 thousand TEU per year. This route will also require large investments for the completion and reconstruction of infrastructure.
The land route currently being launched through Iran and Turkey Urumqi – Dostyk – Almaty – Shymkent – Tashkent – Ashgabat – Tehran – Istanbul is much cheaper and more powerful, and the Iranian market is very promising, especially in light of the realization of Iran’s high potential after the lifting of sanctions. The cost of delivery by rail is $1,700 and for delivery by road – about $2,700 per TEU. The potential capacity of this route is the largest among all of the above and is equal to 300 thousand TEU per year.
Rice. 1. The main promising directions of the economic belt of the New Silk Road (http://valdaiclub.com)
Russia and the New Silk Road
In addition to the currently operating route from China to Europe along the Trans-Siberian Railway, along which 68.5 thousand TEU were transported in transit in the first half of 2016, China is also interested in other options for cooperation with Russia in the transport sector within the framework of the NSR. This is a high-speed railway (HSR) Beijing - Moscow with the launch of regular container trains. The railway distance will be 8,000 km, and the delivery time of goods will be reduced from 5 days to 30 hours.
Among others, the Chinese corporation China Railway Eryuan Engineering Group Co, Ltd was hired to design and carry out engineering work. The first section of the route on the Russian side - the Moscow-Kazan high-speed line - is planned to be completed by 2021. The second planned section, which is also integrated into the Moscow-Beijing high-speed transport corridor, was announced by the government of the Chelyabinsk region - the Yekaterinburg-Chelyabinsk high-speed railway project (standard construction and launch dates have not yet been determined).
Unfortunately, the memorandums and agreements of JSC Russian Railways do not contain specific information about the completion dates of construction, the volume of planned cargo transportation, or the manufacturing companies of light container trains that should run along the route.
Construction of the first stage of the road was postponed to 2017, and the launch of the first trains to 2021. Although, according to the Russian Railways subsidiary OJSC "High-Speed Railways", which is the customer for the design of the Moscow-Kazan high-speed railway, the start of construction was planned for 2014, and completion for 2018. Failure to meet deadlines for the completion of facilities within the framework of the NSR project gives an undeniable advantage to competing countries in the struggle to attract transit cargo flows.
Another option for cooperation under the motto “One Belt, One Road” can be considered the integration of the Northern Sea Route through the Arctic into the program for the development of transit transportation from China. Technically, transit through the Northern Sea Route is possible; it will reduce the delivery time of goods from China to Europe by two weeks compared to transportation through the Suez Canal. Trial shipments of cargo were transported by the Chinese company COSCO in 2013 and 2015. The total volume of freight transportation of transit goods along the Northern Sea Route in 2015 did not exceed 100 thousand tons.
The main problems of this route are the limited shipping period - four months a year, the need to maintain an icebreaker fleet to escort merchant ships and unpredictable ice conditions even in summer. An undeniable advantage is that the entire Northern Sea Route is located in the waters of the Russian Federation, and therefore is not subject to any sanctions or external restrictions on navigation.
However, the lack of modern equipped deep-sea ports on the Northern Sea Route as transport hubs for trans-Arctic shipping, as well as the infrastructure for navigation, ship maintenance and rescue, reduces the prospects for the development of this route more than foreign policy factors.
Competitors and challenges of Russia
China will seek to extract maximum benefits from the project, both economically and politically. According to the strategy for the development of all transport routes of the NSR, investments, technologies, materials and equipment for the construction of railways, logistics terminals, highways and any infrastructure should be predominantly Chinese.
This strategy implements the main goals of the project set by China: expanding the sales market and, as a result, reducing the problem of excess capacity within the country; assistance economic development inland regions of China, especially Xinjiang Uygur and Inner Mongolia, since transit container train routes pass through these areas; expanding the internationalization of the yuan; increasing the export of high-tech products, for example, for the construction of highways.
Russia may face persistent attempts by China to impose favorable terms of cooperation on it in the field of infrastructure renewal, construction of new transport routes and cargo terminals.
If we consider the issue of competition between Russia and other countries participating in the project in terms of the choice of transportation routes, then for rail shipments Kazakhstan may act as a competitor if it quickly develops its roads and provides favorable tariffs for the transit of goods. If cargo from China enters Russia through Orenburg or Chelyabinsk, using Kazakhstani railways for transportation, and not through Far East, Zabaikalsk or Novosibirsk, then the Trans-Siberian Railway will receive less transit cargo and profit for their transportation.
An alternative transit route through Kazakhstan, bypassing the territory of Russia, is also competitive - the Trans-Caspian International Transport Corridor, the participating countries of which are China, Kazakhstan, Azerbaijan, Georgia and Turkey. The Kazakh authorities announce an increase in transportation volumes on this route to 300 thousand TEU by 2020.
Currently, Kazakhstan is pursuing the “Bright Path” economic policy, designed for 2014-2019, which is aimed at creating transport and logistics corridors within the country. One of the priorities of this policy is to attract transit cargo transportation from China to Europe with transshipment at the port of Aktau and further shipment along the Caspian Sea through Azerbaijan, Georgia and Turkey to Europe. Experts believe that those countries where cargo is transshipped from one mode of transport to another receive the greatest benefits from transit, which is why Kazakhstan is actively modernizing the port and access roads to it.
If we do not take into account the difference in the cost of delivery through the territory of Russia and bypassing it, which can be leveled through agreements between other transit countries, then until transit routes in Kazakhstan are fully modified, cargo will enter the territory Customs Union through the Zabaikalsk railway border crossing, which allows loading the Trans-Siberian Railway and delivering cargo to Europe through the port of St. Petersburg. Competitive advantage This border crossing is that for transit container trains from China there is priority in terms of customs clearance. In addition, further delivery to the final recipient of the cargo occurs across the territory of one country without additional transshipments to another mode of transport.
A competitor to Russian ports in the Caspian Sea, in addition to the Kazakh Aktau, accordingly, is the Azerbaijani port of Baku. Was built in 2014 new complex Baku International Sea Trade Port, while a ferry terminal was put into operation as part of the first stage of the project. Work is currently underway to reconstruct the railway infrastructure, international highways, and energy supply systems to bring communication and signaling systems into compliance with international standards. Completion of the project is planned for 2017, then the total throughput of the port will be 21-25 million tons of cargo per year, including 1 million TEU.
When transporting transit cargo from China via the southern route, Russia is not included in the cargo turnover at all. The presence of such competition between potential transit countries makes it possible for China to obtain favorable conditions for itself in all countries included in the project.
Summary
The multivariate development of the project from China’s point of view is an undeniable advantage in negotiations with Russia in the field of defending its interests. China's ability to use alternative transit routes through other countries will allow it to insist on receiving more favorable conditions from the Russian Federation.
It will be necessary to search for levers of influence that will not directly depend on changes in the transport services market in the NSR countries. These may include decisions made in within the EAEU and leveling imbalances in the conditions for the provision of transit transport services by countries that simultaneously participate in the New Silk Road project and are members of the EAEU.
Russia's absolute advantage should be the ability to quickly offer the most diverse transit options with a flexible approach to tariff pricing, simplified customs clearance procedures for goods traveling to Europe, and the use of unified carriage documents.
At the same time, it is necessary to show sufficient rigidity in meeting the deadlines for the implementation of federal programs for the modernization, construction and development of transport infrastructure. The choice of contractors for construction should be in favor of Russian companies, and the involvement of foreign workers should be clearly regulated. It is also important to try to provide projects as much as possible with materials and equipment produced in Russia, accepting mainly investments and technologies from Chinese partners. This approach will stimulate the development of the Russian economy and help increase business activity, the growth of industrial production within the country and the improvement of the socio-economic situation of the regions.
Seaports No. 9 (2016)