Economy

China’s Trade With Europe Bypasses Russia In Both The North and & The South

Analysis 4 December 2019
China’s Trade With Europe Bypasses Russia In Both The North and & The South

Russia has long counted on its geographic location between the Asia-Pacific region and Europe to cement its relationship with China. However, Beijing increasingly views Russia as merely a supplier of raw materials (Svobodnaya Pressa, April 27)—a view reinforced anew on Monday (December 2), by the official start of flows of natural gas from eastern Russian fields to China via the Power of Siberia pipeline (Meduza.io, December 2).

And perhaps even more importantly, the Chinese now also generally dismiss Russia’s utility as a transportation link given systemic problems with Russian infrastructure that make using Russian railways or highways extremely inefficient (Profile.ru, November 3, 2015; Nezavisimaya Gazeta, April 25, 2016). The latter difficulties were highlighted late last month, when the first ever cross-border bridge between Russia and China was finally opened (Znak.com, November 29).

As a result, Chinese officials and businessmen have more and more focused on finding ways to transit Europe-bound goods around Russia, circumventing the world’s largest country along its north and, now, to the south. The former strategy has already attracted a great deal of international attention, with China’s drive to pursue dominance on the Northern Sea Route.

These Chinese activities in the High North are disturbing for Moscow given that the Kremlin had long viewed that Arctic maritime corridor—more than any other—as uniquely under its own control (Regnum, December 1, 2019; see EDM, July 12, 2018, June 12, 2019, September 3, 2019).

But today, Moscow has yet another worry: China is also looking to the south. Officials in Austria, Azerbaijan and the Netherlands say that while Beijing has talked about using Russian routes to move goods (especially containerized cargo) between China and Europe, it now has demonstrated the capacity to do so via a corridor bypassing the Russian Federation to the south by using a route transiting Kazakhstan, Azerbaijan, Georgia and Turkey, crossing the Caspian (and in some cases the Black Sea) by intermodal transfers to ships (see EDM, December 2).

The time needed for freight to pass between China and Europe along this corridor is only 16 days, operators say, less than for the Northern Sea Route or for passage via the Suez Canal (Chinalogist.ru, November 27).

Not surprisingly, this project—which is actively promoted by Central Asian countries as well as Azerbaijan, Turkey and the West—worries Moscow because it will inevitably reduce Russia’s importance to China and limit Russia’s ability to influence the countries of Central Asia and the South Caucasus.

In a recent article published by Svobodnaya Pressa, Valery Tsygankov, a Moscow analyst who tracks economic and political developments in what Russians still refer to as their “near abroad,” notes that quietly and without fanfare, Beijing “has launched a project that is an alternative to the New Silk Road—the overland transport corridor” Moscow expected would traverse the Russian Federation and Belarus (Svobodnaya Pressa, November 30).

This Trans-Caspian International Transportation Route (TITR), “or the so-called Middle Corridor,” allows for Chinese and European goods to be exchanged by rail and ship via Kazakhstan, the Caspian Sea, Azerbaijan, Georgia and Turkey, the Moscow commentator writes. Plans for the TITR were agreed to a year ago and focus more on container traffic than on bulk cargo.

Last month, the Baku port, the Austrian rail operator ÖBB Rail Cargo, and the Venlo Logistics Center of the Netherlands formalized this agreement and arranged to have it linked into the European Union rail network. “We expect that, in the near future, this route will be very effective from the point of view of travel time and amount of goods carried,” Andreas Reichhardt, Austria’s transportation minister, told Tsygankov (Svobodnaya Pressa, November 30).

In general, the Svobodnaya Pressa commentator observes, the new Chinese route follows Western plans for routes bypassing Russia, between Central Asia and Turkey. But because China is involved, he continues, this raises the question as to whether “Russia is losing its attractiveness as a transit country and, more generally, whether [Moscow] has missed a chance for cooperation with China” in this critical sector.

Aleksey Maslov, an economist at Moscow’s Higher School of Economics, told Tsygankov that he was not as pessimistic about the implications of this development for Russian-Chinese relations given agreements between the two countries on gas and oil sales. These had been at risk, but now the two sides have agreed on prices, he added. At the same time, however, Maslov pointed out, “China has its own policy. It is a country that never puts all its eggs in one basket and will never give any one other country the chance to hold a monopoly over the Chinese market.”

One aspect of China’s approach, Maslov said, is that it wants to control the routes that it uses rather than having to rely on the good graces of others. That is what it has been doing with success in Central Asia, but “Russia is not prepared to agree to such conditions.” As a result, China, unsurprisingly, has looked elsewhere. “This means,” he continued, that “we, of course, are losing [money] but not only we.”

However, what is important to remember is that “for China, control is more important than money” (Svobodnaya Pressa, November 30). That is not the international norm, but it is how China operates. And unless Moscow is willing to cede more control, it must expect that Beijing will continue to try to bypass Russian territory, whatever the leaders of the two countries say about cooperation or even an “alliance” (see EDM, July 30, October 22).

Republished from www.jamestown.org.

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