Improving the political and economic ties between European and Central Asian countries in the context of Belt and Road

How can European countries increase and improve their political and economic ties with Central Asian countries (Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan and Turkmenistan) in the context of the BRI?

 

1. Executive Summary

The European Union does not play a key role in Central Asian affairs. There are three main sources of influence on the region today: Russia, China, the collective West (the United States and the EU). The first two actors play a key role. The role of China is growing and the influence of Russia is still high. Both Russia and China are suspicious to the West: they push Central Asian states to reduce contact with the West. But the relations with the EU remain important for the Central Asian states for a number of reasons. The first is the need to balance relations with Russia and China, preventing the region from very strong influence of these parties. Secondly, economic goals: access to Western technologies and financing, including lending, and the sale of own goods in the EU- mainly hydrocarbons and other raw materials. The European Union is also an attractive socio-political and economic model for Central Asian nations (albeit to a lesser extent for Transcaucasian countries).

Central Asia is a strategic military-political backlog for China, a resource base for hydrocarbons and metals, a market for own goods and a transit site, whose role is growing. Beijing is interested in the political and economic stability of the Central Asian states, as well as their loyalty to the course of Beijing. By implementing the BRI, China intends to format the surrounding economic and political space around itself. Influence in the Central Asian states for China is an instrument for obtaining, on the most favorable terms, resources for the development of the Chinese economy and creating the most favorable conditions for the sale of its own goods and the activities of its own companies. The important role of Central Asia is assigned as territories bordering on the western provinces of China: Beijing strongly intends to accelerate the development of unstable Xinjiang Uyghur Autonomous Region.

The authorities and commerce of Central Asian states consider the BRI as an opportunity to accelerate economic development and benefit from transit. Interaction within the BRI is seen primarily as a bilateral interaction with China, rather than international cooperation in a broad format with the participation of the EU and other players. The political and economic elites of the Central Asian states do not plan a special deepening of ties with the EU and European business in the framework of the BRI’s implemented projects. At the same time, they expect to use the transport infrastructure and are ready to benefit from the growing transit of goods from China to the EU and back.

The Central Asian states, by virtue of their territorial proximity and the previously established base of interaction with China, have advanced deeper into the implementation of the BRI than countries in other regions. The most important sectors are transport and pipeline projects, projects in the oil,gas, petrochemical and mining industries. Mechanical engineering and manufacturing industries developed within the framework of BRI is weak. The most important Central Asian country for China in the implementation of the BRI is Kazakhstan. This is due to the transit potential of Kazakhstan – several transport routes of the BRI are passing through Kazakhstan at once.

The implementation of BRI in Central Asia objectively contributes to economic growth and infrastructure development, but the negative side is the formation of economic dependence on China and the preservation of the Central Asian economies in a role that is beneficial to Beijing, but not always beneficial to the states of Central Asia and other international partners. The inflow of financial sources from China to Central Asia, on the one hand, contributes to the development of infrastructure, maintenance of socio-economic stability, but on the other hand, puts the countries of the region in front of a number of challenges, such as the conservation of the resource structure of the economy and the reduction of incentives for economic modernization.

There is a violation of balance in foreign trade towards the PRC. It is especially relevant for Kyrgyzstan and Tajikistan, where Chinese investments exceed the country’s’ GDP several times. The Chinese investment treaties with Central Asian states often prescribe mandatory participation of Chinese companies, the use of Chinese technology and labor. A large-scale connection to China’s transport and energy system, with the disproportionate development of other vectors, is fraught with an increase in the orientation of Central Asia to the Chinese economy to the detriment of economic ties with other countries.

Today there is a tendency towards decreasing in the scale of China’s claims to the implementation of projects within the framework of BRI in Central Asia. The decline in funding is due to the problems of China’s financial and economic development in recent years, which is linked to the problem of bad debts, the cleansing of the financial sector from negative elements. The implementation of the Chinese initiative faces a number of significant difficulties. There are serious cultural differences between Chinese society and Central Asian societies. Other Eurasian states also have their own views on the development of cooperation, different from the Chinese. Countries – potential recipients of China’s investment in the BRI are also not always ready to accept financing from the PRC: due to a lack of staff, political disagreements, economic conditions and other terms put forward by Beijing.

The political and economic consequences of the implementation of the BRI in Central Asia for the European Union are mixed. They can promote the growth of transit trade with the countries of the region, contribute to the revitalization of European business’ presence in the region, which, thanks to the projects of the BRI, will develop more rapidly. But the main negative impact not only for the EU, but also for other partners, is the gradual ousting from Central Asia: first economically, and then politically. One can not speak of Chinese companies displacing non-Chinese businesses. There is a policy of Chinese soft power, which, nevertheless, may ultimately prove to be unprofitable for non-Chinese business. Since the authorities and companies of the Central Asian states, under the influence of this force, tend to cooperate with the Chinese where they could previously cooperate with European or Russian business. China even prefers to provide its technology. The technological level of the vast majority of projects allows Chinese companies to provide their technological solutions without resorting to Western partners.

The participation of European business in the implementation of projects within the framework of the BRI in Central Asia is possible, but the large scale of such participation appears to be questionable. China is building relations on a bilateral basis: China-Kazakhstan, China-Uzbekistan and so on. A multilateral format is used, as a rule, only in cases when several countries are objectively involved in the project (road, passes through several states, airspace and so on). Secondly, such participation in most cases is contrary to the goals and objectives that China is solving by implementing the projects in the framework of the BRI. The task is to provide its own funding, maximize the use of its production facilities, raw materials, equipment, machinery and even labor.

The BRI implementation in the Central Asian states can be considered one of the most advanced and effective. It is a case for other states, including the states of Eastern and South-Eastern Europe what they can expect from the consequences, if they intensify relations with China within the BRI and act in a way that the Central Asian states have acted.

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