The Eurasian Economic Union and the Silk Road Economic Belt – prospects for cooperation

The integration of them will help to create conditions to balance economic development of various countries and regions

In 2013 China’s Head of State Xi Jinping proposed a plan to stimulate development in Eurasia by constructing what he called the Silk Road Economic Belt. It is worth mentioning and symbolic that he made his speech in Kazakhstan, and the leader of that country proposed the idea of Eurasian integration of post-soviet countries almost quarter a century ago in Moscow. Nowadays the idea of eurasionism (commonality in national culture and historical heritage of the Eurasian countries) is realised among a number of the post-soviet countries and transformed into the organisation of the Eurasian Economic Union. Meanwhile the Silk Road Economic Belt together with the 21st Century Maritime Silk Road are the revivals of the traditional trade routes that once operated and connected China and Europe in medieval time. There is a great interest for Russia in realisation of the Silk Road Economic Belt initiative as this initiative is a factor for expanding Russia’s own economy and a factor to develop the Eurasian Economic Union. This project does not anticipate the creation of its own organisational institution like the EU (the European Union). Luckily due to the largely infrastructure band of the initiative, the Silk Road Economic Belt has gained attractiveness to the participating countries and this will help the project be a success story. Moreover from the Russian perspective the initiative will assist in fulfilling the task to build the Eurasian bridge between Europe and China.  Nowadays at the first glance we can say that the Silk Road Economic Belt is not a direct competitor to the Eurasian Economic Union and vice versa. Thereupon it is quite understandable that the common aspiration for the initiative has led the leaders of the two great countries (Russia and China) to take advantages of the two projects to the mutual benefit. In May 2015 in Moscow there was the signing of very important agreements between the countries regarding the future conjunction of the two projects – the Eurasian Economic Union and the Silk Road Economic Belt. This has been a major step to further develop and maintain the strategic and long-time cooperation between the Russian Federation and the People’s Republic of China.

The Eurasian Economic Union is significant for the Silk Road Economic Belt as it represents a common market of over 170 million people, and the economy. China expects to see the Silk Road Economic Belt to contribute to the economic growth of the Eurasian Economic Union by providing a bridge between the regional economies of Eurasia and the Asia-Pacific and this can be done by offering an economic stimulus to both regions. It is worth mentioning that China and the Eurasian Economic Union will work towards the establishment of a free trade zone and the absence of customs duties to pay from Russian-Chinese to Belarussian-Polish borders makes this huge 7,000 km area very attractive not only to neighbouring countries but also to economies located in the Far East like the Republic of Korea (South Korea).

It is interesting to mention that the convergence between Russia and China has happened not only in the current circumstances of intensifying contradictions in the relationship between Western European states and Russia but also in the circumstances of absence of deeply rooted and antagonistic contradictions among the Central Eurasian states. It is obvious the leaders of the Central European states express if not a direct support but a direct interest to the idea of the convergence between the Eurasian Economic Union and the Silk Road Economic Belt. In other words we might say that the ultimate goal behind the Belt and Road Initiative is to diversify transit lines (that will ultimately help to the economy of the region), thereby mitigating China’s vulnerability to external economic shocks and strengthening the economic situation in western and central parts of China. Nonetheless the Initiative is still loosely defined. In open resources there is a claim that there are about 60 countries of the Belt and Road Initiative but we could not find the public listing of these countries. The main goal of the Initiative is the implementation of a number of infrastructure projects but the straightforward list of these projects is not available yet. Clearly the initiative is still under development and open for proposals and discussions from all participants.

The Silk Road Economic Belt initiative is aimed to the development relatively economically distant but perspective western and central regions of China (Gansu province, Xinjiang-Uyghur and Tibet autonomous regions). In these regions of China transport infrastructure and new economic corridors to central Eurasia will be constructed in the coming decades. Thereupon it is interesting to note that Russia plans to invest around 19 billion USD of the investment resources in the expansion of its own transport infrastructure of the Trans-Siberian Railway  (Transsib) and the Baikal-Amur Mainline (BAM), both situated in Asian part of Russia. The Silk Road Economic Belt initiative only partly includes the Transsib and the BAM. But on the other hand the Transsib and the BAM projects are of importance not only to the development of border regions of Russian Far East but also to the development of Inner Mongolia autonomous region of China.

The other infrastructure project that could be included in the expansion of the Silk Road Economic Belt initiative is the Northern Sea Route. It is not one of the traditional Silk Road routes coming from middle ages but very perspective modern route. The Northern Sea Route is the shortest shipping and cargo transportation lane from sea ports on the eastern shore of China to sea ports of Europe. Due to the fast development in the Asian Pacific Region, the Northern Sea Route can be of importance to rapidly expanding Chinese business. The Northern Sea Route saves time (it will be spent less than 30 percent time compared to the overloaded transportation corridor through the Suez Canal (Suez channel)). It has a shorter distance (2440 nautical miles less compared to the traditional routes) and it also saves money (an average vessel spends around 800 tonnes of fuel less compared to the traditional routes). On the other hand in the transportation of cargo through the Northern Sea Route there is no need to buy expensive insurance policy against pirates who are at work in the Red Sea and the Strait of Malacca. The global warming causes the ice shelf to leave the main routes and the growing fleet of Russian ice-breakers allows to operate the Northern Sea Route throughout the year.

For successful realization of the Silk Road Economic Belt initiative it is important to avoid the model of domination of one party over another. I hope every country-participant of the initiative understands that we are all in the same boat here and the Silk Road Economic Belt initiative is created for the mutual benefit of all parties involved. There is much scope for partnership and cooperation here and there is little or no room at all for rivalry. The Russian Valdai club says in its report “Towards the Great Ocean-3: Creating Central Eurasia” (June 2015) that “the central Eurasia connected with the infrastructure projects of the Silk Road Economic Belt initiative should become a positive example for all countries involved in the project, sample of cooperation but not rivalry and hatred”.

The Central Asia countries have a lot of natural resources like oil, natural gas, rare-earth and non-ferrous metals. The realization of the Silk Road Economic Belt initiative will help not only to transform this region into the transit corridor for transportation of export cargo from China to Europe but also to convert the Central Asia region to the common ground for mutual development of all participants of this initiative.

Russia is pushing to modernise and diversify its energy-focused economy. Russian leaders see that the mix of the Silk Road Economic Belt and the Eurasian Economic Union will translate into a number of transportation and construction projects for which Russian constructial and engineering companies and know-how will be crucial.

During his visit to Moscow in April 2015 Chinese Foreign Minister Wang Yi said that Russian Look East policy and China’s Go West through the massive New Silk Road project “created historic opportunities for docking the two countries’ development strategies.” These recent developments are not only about the infrastructure projects to interconnect and to develop Western and Central regions of China and Eastern Siberia and the Russian Far East. It’s also about investment, banking, finance and high technology. This partnership’s reach is exceptionally wide, from Russia-China cooperation within the Shanghai Cooperation Organisation (SCO) to the Russia-China stake in the new BRICS bank, and to the support that Russia provides to the Chinese-led Asian Infrastructure Investment Bank (AIIB) and the Silk Road Foundation. The last two institutions will provide overwhelming financial support to the Silk Road initiative. Moreover the AIIB will give alternative to countries in need of help. Until now the IMF was the only choice for countries in need of financial assistance and in its current form the AIIB is designed to provide development funds much like the World Bank. Given that the World Bank and the IMF were created as a pair of international institutions under the postwar Bretton-Woods regime there is certain chance that in a number of years a sister institution to the AIIB with a role similar to that of the IMF will be created. It is also one of the positive consequences of the Silk Road initiative.

On the other hand, Russia is proposing to review the existing Eurasian Development Bank (EDB) with the headquarters in Almaty, Kazakhstan by creating a new bank with China participation. EDB is a financial structure created in 2006 and the bank was aimed to be the development financial arm of the Eurasian Economic Union.

Several years ago Vladimir Putin, Russia’s President, proposed to create “harmonic community of national economies from Lisbon to Vladivostok”. It is one of the major economic policy lines of Russia (the outlook to Europe). The other one is the outlook to Asia – how to successfully develop the Asian economic ties. Look at the Russian coat of arms where one of the heads of the eagle looks west but the other looks east. The integration of the Eurasian Economic Union and the Silk Road Economic Belt will help to create conditions to balance economic development of various countries and regions of the Central Asia, to maintain harmony among all countries and to support mutual benefits in trade and commerce. This will help not only to grow regional trading and economic ties within the region but also to diminish the risk of global war beginning.

Silk Road Economic Belt Eurasian Economic Union economic