The New Silk Road Initiative and China’s Investments in Russia – Interview with Stansilav Pritchin

By Nina Fois, QUORUS GmbH

The New Silk Road Initiative (BRI), launched in 2013 by the Chinese President Xi Jinping, is considered by China to be a network of six trade and economic corridors[1], which will benefit all parties involved. Connection, openness, innovation and sustainable development are mentioned, among others, as motivators for the initiative. [2] However, many nations doubt China’s motivation and fear China’s geopolitical and economic control and transformation of balance among the global powers.

What specific interests does Russia have in the New Silk Road?

The Chinese BRI initiative is a very important project from a geo-economic point of view. On the one hand, it is aimed at creating transport and energy infrastructure, which creates a fundamental economic basis for cooperation and political partnership between Russia and China. On the other hand, Russia’s transit potential allows us to count on receiving dividends from the transit of trade flows between China and Europe.

China`s Initiative may change the world economic center

The cooperation between Russia and China will be consolidated in the context of the New Silk Road and especially with the so-called Ice Silk Road. [3] Is Russia not at risk of developing asymmetric relations with China that will force the country into a weak position?

In fact, the scale and diversification of the economies of Russia and China are largely incompatible, but with regard to transport infrastructure it is difficult to talk about any imbalance in relations. You mentioned the Arctic part of the New Silk Road, this part of the global project, as well as the transport infrastructure in Eurasia be built on the basis of deep mutual dependence. China needs stable transport routes, Russia needs investment and a stable flow of transit goods.

Joint major projects between Russia and China have been mentioned several times. Which projects are these exactly?

For the implementation of joint projects within the BRI, an intergovernmental Russian-Chinese Commission has been officially operating since 2014 on investment cooperation, the task of which is to promote implementation of investment projects in the non-energy sector and reduction administrative and trade barriers between Russia and China. In 2015, an agreement was signed between Russia and China on pairing The Belt and Road Initiative and the Eurasian Economic Union (EEU). This decision means that the Russian Eurasian space (from the Urals to the Western and Central Asian borders of the Russian Federation) becomes the main zone not only transit and economic cooperation, but also investment activities. That is, there are both legal and administrative structures for the implementation of joint projects.

Created in 2014, the silk road Fund (FSP) with a capital of 40 billion US-Dollar invested in Russian companies Yamal LNG and SIBUR. In March 2016, FSP acquired a 10 % stake in SIBUR, Russia’s largest gas processing and petrochemical company, which in monetary terms was about $ 1.338 billion US-Dollar. Also in 2016, NOVATEK sold FSP 9.9 % in the Yamal LNG project, which involves the construction of a plant for the production of liquefied natural gas (LNG) with a capacity of 16.5 million tons of LNG per year on the resource base of the Yuzhno-Tambeyskoye field. In addition, FSHP provided NOVATEK with a loan of $ 792.8 million US-Dollar for 15 years. Given that the number of investment projects FSP as new financial institutions are sufficiently small, investment in two Russian companies demonstrates the investment attractiveness of the Russian business for Chinese investors and a possible increase in investment activity FSP in Russia, aided by various arrangements of China and Russia on the facilitation of investment activities. Chinese companies also intend to actively invest in international native transport corridor (MTK) Europe-Western China passing on the territories of Russia, Iran and Kazakhstan.

What role does the Eurasian Economic Union play and how will the New Silk Road affect it?

At first glance, these two global initiatives, the Eurasian Economic Union and the Chinese BRI, are competing geopolitical projects. On closer examination, it becomes clear that although both projects have serious political goals, in reality they are primarily focused on economic goals. If China through its investments seriously increases the transport accessibility and connectivity of the region, Russia through the promotion of a common market with the countries of the region increases their investment attractiveness. As a result both projects contribute significantly to the development of Central Asia.

Do you think the situation of the former Soviet republics will change due to the BRI? With regard to Central Asia Republics like Kyrgyzstan or Kazakhstan, is there no risk that they will find themselves in-between two competing countries?

As already noted, these projects seriously contribute to the development of states in the region. At the same time, geopolitical competition between China and Russia certainly exists, but an interesting detail is that Moscow and Beijing strive to ensure that they all fully and respect the interests of their friends in the region.

Many countries have agreed to the initiative or clarified their own interest in this regard. Recently, however, there have also been certain countries, which, especially in the first quarter of 2019, have expressed far-reaching reluctance towards the Silk Road Initiative. Could this be related to China’s budget problems? What other factors do you think have affected some countries reluctance to join the BRI?

The main problem of revising the approach to BRI is the financial factor. Everywhere, including Central Asia, the debt of the countries participating in the project to China. So, Tajikistan was forced to transfer a gold deposit to the PRC as a return of a loan issued earlier for the modernization of the power plant. Over the past 10 years, Kyrgyzstan’s debt to China has increased to half its GDP. Kazakhstan and Turkmenistan also have a serious debt burden in front of Beijing. All these examples make the implementation of any new Chinese projects in the region less attractive for both governments and the public.

Uzbekistan and its neighbor are in the eye of global investors

How do you see the future of this initiative?

Despite the existing negative aspects, China remains an important political and economic partner, whose position cannot be ignored. Therefore, cooperation in any case will be continued, maybe with less intensity.

To what extent are the United States interested in this project?

Obviously, the strengthening of China through geopolitical projects and large-scale investments from the point of view of US global interests is a very negative trend, but Washington does not have many tools in Central Asia to oppose something to the expansion of China.

The New Silk Road could be an important opportunity for Swiss investors and companies to seek international exposure. According to Felix Sutter, President of the Swiss-Chinese Chamber of Commerce and Industry SCCC, Switzerland is encouraged to “participate in consortiums that apply for technically demanding projects and to act as a specialist implementing Swiss technology and know-how.” [4]. How is Switzerland generally perceived by the other participants?

Switzerland as a whole and Swiss companies have a very positive image in the region in terms of political neutrality and high quality of projects. In such circumstances, the arrival of Swiss business is seen as a very positive trend and is welcomed by the countries of the region. Switzerland has every chance through the implementation of high-tech, environmentally friendly projects and the introduction of its competencies and technologies on the one hand to seriously improve the efficiency and environmental friendliness of projects within the BRI, on the other hand will allow countries through the use of best practices and technologies to improve the image and investment attractiveness of Central Asia.

Stanislav Pritchin currently works as an expert for the British Think Tank “Chatham House“, that was found 1920 by Woodrow Wilson and Lionel George Curtis. He received his PhD on The International Legal Status of the Caspian Sea and Strategic Interests of the Russian Federation in the Region in 1991-2011 and researched at the Center for Caucasian and Central Asian Studies at the Institute of Oriental Studies of Russian Academy of Science.


[1]New Eurasia Land Bridge; China, Mongolia, Russia Economic Corridor; China, Central Asia, West Asia Economic Corridor; China Indochina Peninsula Economic Corridor; China, Pakistan Economic Corridor; China, Bangladesh, India, Myanmar Economic Corridor. OECD (2018), «The Belt and Road Initiative in the global trade, investment and finance landscape», in OECD Business and Finance Outlook 2018, OECD Publishing, Paris, S. 11. URL: https://www.oecd.org/finance/Chinas-Belt-and-Road-Initiative-in-the-global-trade-investment-and-finance-landscape.pdf

[2]OECD Business and Finance Outlook 2018, OECD Publishing, Paris, S. 13. URL: https://www.oecd.org/finance/Chinas-Belt-and-Road-Initiative-in-the-global-trade-investment-and-finance-landscape.pdf

[3] A silk road through ice. China wants to be a polar power, 14.04.2019. in: The Economist. URL: https://www.economist.com/china/2018/04/14/china-wants-to-be-a-polar-power.

[4] Sutter, Felix: Die neue Seidenstrasse, in: China-Extra 2018. URL: https://www.sccc.ch/resources/WEW_39_Chin_038_OBOR.pdf

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