Russia has been trying to align its Eurasian integration project with China’s One Belt, One Road initiative. But has the Kremlin really assessed the political and economic consequences of such an alignment?

A fragment of the cover of Russia Direct's report "Crossing The Bridge to The Far East". Photo: Russia Direct

The concept of a “Greater Europe” was not the only lively topic of debate at the Jan. 12-14 Gaidar Economic Forum in Moscow. The possibility of a free trade agreement between the Russia-led Eurasian Economic Union (EAEU) and China’s One Belt, One Road initiative (OBOR) also energized pundits, who described this as an “alignment.”

While those who took the floor at the forum are optimistic about the prospects of this bold and much touted project linking Russia and China, independent experts from the West remain very skeptical.

First and foremost, there is the risk that Russia may be spreading itself too thin by trying to establish closer ties with both the EU and China at the same time. By rushing too quickly into new EAEU integration initiatives without adequately assessing the current state of relations with Brussels, Beijing, and the Central Asian countries themselves, Moscow could be setting itself up for failure.

Secondly, experts are concerned that any type of alignment between the EAEU and the OBOR might be seen purely as a new form of bilateral cooperation between China and Russia. However, it would ignore the key role of the Central Asia countries, which should have a say and offer more initiatives, with Moscow and Beijing shying away from dominance. Any “alignment” should be both bilateral and multilateral in its nature, experts agree. And the same principle should be applied to any type of EAEU cooperation with the European Union.

Yet, given the current geopolitical reality, in which Russia is attempting to reclaim its great power status and China is asserting its right to become another global superpower, attempts to align several huge integration projects might be good just on paper, not in reality.    

Inherent obstacles and risks

One of the problems facing the EAEU is that it cannot offer new stakeholders anything of value other than hydrocarbons and security. Unfortunately, the agenda of Russia’s collaboration with the EU and China is very limited; at times, in fact, it appears that each of these geopolitical players is pursuing its own asymmetric interests.

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As Evgeny Vinokurov, the director of the European Development Bank’s Center for Integration Studies, points out, the economic interests of the EU and the EAEU (and thus Russia) don’t necessarily coincide, regardless of their energy and trade interdependence. While Europe seeks to get access to the 180 million people in the Eurasian market, its natural resources and, to a certain extent, security, the EAEU badly needs EU innovation, technologies and a visa-free regime, said Vinokurov at the Gaidar Forum on Jan. 13.

Such asymmetry stems from the economic peculiarities of the stakeholders, with the Russian economic model based primarily on oil and gas exports and the European model on innovation and new technologies.

Likewise, there is a great deal of asymmetry in the goals Beijing and Moscow are pursuing. As experts and economists argued during last year’s international conference organized by the Russian International Affairs Council (RIAC), the model of China-Russia cooperation is outdated, with Russia exporting raw materials like gas and oil and China providing manufactured goods.

Moreover, Western pundits believe that Beijing basically pursues economic goals in its relationship with Russia. Specifically, it is seeking more energy resources to support its economy, while Moscow is looking at its strategic partnership with China rather in a political and security-driven context, which, oddly enough, could hamper any alignment of the EAEU and the One Belt, One Road project.

“The two parts of the ‘great game between Russia and China’ are asymmetric,” according to an article by Jeffery Schubert, director of the International Center for Eurasian Research at RANEPA  (Russian Presidential Academy of National Economy and Public Administration) and his colleague Dmitry Savkin, also a researcher at RANEPA.

As they point out, “Russian thinking about the EAEU has less to do with economics than with security and political prevalence in the heartland of Eurasia, while Chinese thinking about the OBOR is rather in terms of economics and long-term influence over broader regions.”

"Where Is the Silk Road leading?'

However, despite the challenges created by such asymmetry, the discussion resulting from the “Where Is the Silk Road Leading?” panel at the Gaidar Forum was rather optimistic about any EAEU-OBOR alignment.

Stanislav Voskresensky, deputy minister of Russia’s Economic Development, is more optimistic. He views the alignment of the two integration projects as an attempt to harmonize the relations and cooperation between Moscow and Beijing. Not only is it expected to foster the implementation of their common infrastructure and investment projects, but also it could lead to the creation of joint value added chains and competitive, collaboratively manufactured products. 

Likewise, the idea of the Silk Road endeavor is music to the ears of Justin Yifu Lin, a professor at Peking University, former chief economist and senior vice president at the World Bank (2008-2012). He describes the bold integration as “a win-win project” for both nations. It could spur what he calls regional infrastructural “connectivity.” At the same time, Lin is clear about Beijing’s real interest: opening up to the world In order to explore resources that are vital to its future economic growth.

However, Naoki Tanaka, the president at the Center for International Public Policy Studies (CIPPS), another speaker at the discussion, questions China’s efforts to diversify its markets and sees it as a form of economic expansion to achieve regional dominance. Thus, China’s efforts to re-balance the distribution of goods and resolve the perennial problem of overcapacity, even if they are well-intentioned, might have important implications for nations in the region.

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Djoomart Otorbaev, the former prime minister of Kyrgyzstan (2014-2015), echoes this view. While expressing cautious optimism about the project, he argues that the One Belt, One Road project is going to be a serious challenge for China not only economically and financially, but also politically. Beijing should understand how properly to implement its economic expansion without irritating its neighbors in Central Asia and creating unnecessary conflicts.

Robin Lewis, the director of RANEPA’s Master of Global Public Policy Program, also raises eyebrows at China’s attempts to frame its integration project as a win-win solution. In today’s world, when Russia and the West are driven by a Cold War-like mentality, the win-lose approach might prevail, he implied.

Nevertheless, Lin (as well as his other Chinese counterpart Ho-Fung Hung, a professor at Johns Hopkins University) claims that the One Belt, One Road project is purely economic in its nature and does not seek political dominance. Lin dismisses such skepticism from Tanaka and others as “misperception.”

Lack of trust

Another problem is the lack of sincerity and trust. According to numerous experts, despite the fact that Russian President Vladimir Putin and his Chinese counterpart Xi Jinping do have personal chemistry, it doesn’t translate into trust between Chinese and Russian business leaders. This fact was recognized by Chinese and Russian experts at the 2016 RIAC conference in May. The lack of trust is still a problem, not to mention the high potential for strategic rivalry in Central Asia.

Li Fenglin, ambassador extraordinary and plenipotentiary of China to Russia (1995-1998), is among the skeptics. During his speech at the RIAC conference, he said that Russia and China are lacking cooperation in the field of small and medium-sized business, which is overshadowed by the robust collaboration between the state gas monopolies of the two countries.

Moreover, all these bold projects within the EAEU-OBOR alignment might not be commercially viable and demand-driven. So far, they seem to be politically imposed. Given a lot of speculation about the weakening Chinese economy as well as extremely high costs of the One Belt, One Road initiative, it remains to be seen if China and the Eurasian Economic Union will be able to keep up with their grandiose ambitions.

“All infrastructure projects should be commercially viable — nobody will deal with a charity,” said Kairat Kelimbetov, the president of Astana International Financial Center and the former chairman of the National Bank of Kazakhstan (2013-2015). He called for realizing the potential of already existing foundations and banks, including the Silk Road Foundation and the Asia Infrastructure Investment Bank.

All these challenges and hidden risks should be taken into account by the Kremlin, which persistently promotes the idea of Eurasian integration and Russia’s further economic expansion to Asia. Moscow should constantly keep in mind that trying to launch two integration initiatives is going to be hard to implement without an adequate assessment of the current geopolitical and regional landscape in Central Asia.