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MOSCOW STATE INSTITUTE OF INTERNATIONAL RELATIONS

(MGIMO-UNIVERSITY),
THE MINISTRY OF FOREIGN AFFAIRS OF RUSSIA

Master Program: M.A. in Political Science Program,


Politics and Economics in Eurasia

Masters Dissertation

The Eurasian Economic Union and the Silk Road


Economic Belt : what place for Kazakhstan ?

Done by: Cyrille Vignon


Supervisor: Alexei Voskressenski
Opponent: Nikolay Kaveshnikov

Moscow 2017

1
"How do I see the future of that space that used
to be one country? Nowadays, in the conditions
of sovereignty, recognising equal rights of all,
respecting the sovereignty and independence of
each state, we could create a completely new
unity. I would call it the Eurasian Union.

Nursultan Nazarbayev, speech at the


Lomonosov Moscow State University,
29 March 1994.

In that context, how America 'manages' Eurasia is critical. Eurasia is the globe's largest
continent and is geopolitically axial. A power that dominates Eurasia would control two
of the world's three most advanced and economically productive regions. a mere glance
at the map also suggests that control over Eurasia would almost automatically entail
Africa's subordination, rendering the Western hemisphere and oceania geopolitically
peripheral to the world's central continent. About 75% of the world's people live in
Eurasia, and most of the world's physical wealth is there as well, both in its enterprises
and underneath its soil.

Zbigniew Brzezinski, The Grand Chessboard (1997)

2
Introduction

The present work seeks to make sense of two different developments taking place in
Eurasia, this mega-continent stretching from Lisbon to Vladivostok and evaluate their
impact on the biggest country in Central Asia: Kazakhstan. From the early Post-
Soviet era, several attempts at integrating Eurasia have, through trial and error led, to
the creation of the Eurasian Economic Union. The Eurasian space underwent a great
number of transition, from one state to many, from a single identity to a host new
national ideas and visions, from five years planning to a market economy. New
borders were redrawn and as national interests were defined, security relations were
partly re-constructed. What had been a single unit in International Relation became a
constellation of states, all dependant to varying degrees to the centre: Russia. As the
only great power Russia remained at the nexus of all security patterns in the post
soviet space. This state of affairs is challenged nowadays by a project called the Belt
and Road Initiative. Proposed in 2013 by China as arguably one of the most
ambitious investment program for Eurasia, it seeks to connect the Eastern and
Western economic poles of the continent. It is now taking shape as regional and
extra-regional countries register to take part, physically or through investments. In
such a context, and given the purpose of the present dissertation (a comparative
assessment of two projects for a single space), a regionalist framework was the most
sensible choice. In a first chapter on theoretical foundations the preference for the
Regional Security Complexes Theory (RSCT) is put in perspective as an analytical
3
tool, against the historical record and vis a vis other IR schools of thought. Then the
empirical work is split in two parts (chapter 3 and 4). They outline the rationales of
both projects, their strengths and their potential weaknesses. The first chapter of the
observational component contains an operationalisation of the RSCT theory and uses
the three levels of securitisation (domestic, regional and global) to explain the
behaviour of the actors in the Russian-Centred RSC. A definition of the EEU is
attempted as an unprecedented endeavour, building on the already existing Customs
Union and Single Economic Space, equipped with institutional structures capable of
creating and enforcing legislation at a supranational level. The next chapter deals
with the Belt and Road Initiative (BRI), popularly referred to as New Silk Road:
composed of a sea element (the Road) and a land element (the Belt). The Silk Road
Economic Belt (SREB), on which the present work is focused proposes to re-energise
the Chinese economy and increase connectivity across the whole of Eurasia. Physical
projects include trade corridors, railways, logistic terminals, airport and pipelines. I
argue that the process of securitisation- central to Regional Security Theory- is at the
heart of rationales that pushed China to start an initiative of this scale, while
undergoing a re-adaptation of its economic model. The next section, devoted to
analysis will use the knowledge gathered to demonstrate the following hypothesis.
Although the EEU and the SREB can be detrimental to one another on certain
aspects, the strain to devise a modus vivendi is far lighter than that of open hostility.
Synergies can be unlocked to the benefit of both parties. Special attention will be cast
on Kazakhstan in the light of these two projects. As an early proponent and member
of the Union and having synchronised its economic development policy to the Belt
and Road Initiative the country can be considered as a relatively neutral and willing
testing ground for the meeting of the two projects.

4
Summary
Introduction
Summary
I. Theoretical foundations
A. Historical background of Regionalism 7
B. Place in the literature 9
C. The Regional Security Complex Theory (RSCT) 10
II. The Eurasian Economic Union
A. The Eurasian Integration: an heavy legacy and a complex context 12
a) Operationalisation of the RSCT in Eurasia 12
b) Eurasianism is a vision of the Eurasian heartland 15
c) Economic integration in the Post-Soviet era 18
d) Competing views in the Eurasian continent 22

B. The EEU as a construct of unprecedented ambition 24


a) The Institutional design 24
b) The Tariffs and the WTO commitments 25
c) Non tariff barriers 28
d) Energy Component 29
e) Remittances 31

C. Critical analysis: achievements and perspectives 31


a) Structural Pluses and Minuses 31
b) Economic results 34
c) Members perspective on the EEU 35
d) Widening membership 40
e) Relations with the West 42

III. The Silk Road Economic Belt (SREB)


A. The Silk Road then and now 44
a) History : what was the Silk Road ? 44
b) The Silk road discourse Nowadays: the power of an idea 46
c) Land based trade nowadays: why bother ? 47

A. Against all odds: looking for the rationales 48


a) The threats: a securitisation logic 48
b) Opportunity: what if ? 52
5
B. Addressing Threats, Embracing opportunities: the SREB proposal 55
a) The Belt and Road Initiative in Chinas Foreign Policy: rupture or continuity ? 55
b) To be further defined, the birth of an idea 57
c) Five official goals for the Belt and Road Initiative (BRI) 57

C. The SREB is made of corridors 59


a) The corridors of the Silk Road Economic Belt 59
b) Financing the Initiative: a multilateral effort 63

D. Perspectives: potential roadblocks and the conditions for success 65


IV. Findings and analysis
A. Contextualising the Russian and Chinese agendas towards Central Asia 68
B. Structural divergence and great power politics 71
a) The EEU as a threat to OBOR 71
b) SREB questioning Russias interests 72

C. The rationales for convergence: a division of labor formula 73


a) It is Russias Interest to engage with China 73
b) Chinas position 74
c) The Link-Up strategy 76

D. Kazakhstans multi-vector strategy and the Link Up 79


a) The multi-vector strategy 80
b) Defining the strategic goals of Kazakhstan 81
c) Synchronising: Becoming Land-linked instead of land-locked 82
d) Roadblocks to the synchronisation 83
e) Evolution from a RSC point of view 85

V. Conclusion
Appendix
A. Table of Corridors 90
B. Abbreviations 91
C. Bibliography 93

6
I. Theoretical foundations
The two projects tackled in the present dissertation are of very different nature.
Nevertheless, their proposed areas of implementation are partly overlapping and
their interaction is our subject. In order to adequately make sense of them both
individually and in relation to one another, the choice of the theoretical framework is
crucial. Wherefore, I argue that the regional level of analysis came into increased
relevance in the Post Cold War era. Regionalism is defined as a distinct approach to
neorealism and globalism although borrowing elements from both.

A. Historical background of Regionalism

Before 1500, regional systems were independent worlds because the weak degree of
connection at the global level. Starting at the end of the 15th century, the world was
gradually better known and the first world-wide political system emerged whereby
European powers built empires replicating the political systems of their metropoles
on colonised territories.1 The security landscape amounted to a series of great
games among European colonial powers conceiving security at the global level with
a mostly Realist understanding.2 After WWII, two trends emerged with contradictory
effects. Decolonisation meant the loss of European overseas dominions and the
resurrection of the regional security patterns in the newly independent areas, while
Europe itself became a battlefield for the bipolar rivalry between the United States
and the Soviet Union.3 The subsequent process of territorialization was paradoxical in
that the new states rejected European imperialism but reproduced its political system.
Meanwhile though, the fear of mutually assured destruction made peace impossible,

1 It took a truly systematised and global character only starting in the 19th century. Voskressenski,
A. D. (2016). The Role of the West in Evolving World Order, and Russian Politics. Russian Politics
& Law, 54(56), 421460.
2 In the RSC theory Europe would constitute a Regional Security Complex but it was essentially

composed of empires meaning that the world was their region.


3 Both the United States and the Soviet Union where favourable to decolonisation. For the US the

colonies represented European mercantilism and USSR saw them as manifestations of capitalism
and exploitation.
7
war improbable in the words of Raymond Aron.4 But the bipolar rivalry took the
form of proxies battles to secure influence and capabilities. This constituted an
overarching pattern that limited the degree of autonomy of the regional dynamics.5 At
the end of the cold war, the bipolar approach to International Relation was no longer
valid and regional security re-emerged, no longer suppressed by the superpower
rivalry. Conflicting theories on the structure of international relations emerged to
explain this new reality. The Neo-Realist perspective, state-centered and focused on
the global level of analysis asks how power is distributed within the system in terms
of polarity. As bipolarity was no more after the Cold War: they argue the world is
now either multi-polar or unipolar. Globalisation in turn tries to make sense of the
new world disorder6 and questions the centrality of the state insomuch as
development of capacities of transportation and communication have empowered
non-state actors. Structurally, the idea is that the world is divided between a centre
and a periphery. The rich and core countries in the system control most resources and
define the terms of participation in this system.7 The territoriality of politics is
challenged as well but the globalist idea is more a critic of the Neo-Realist
perspective than a genuine proposal. The regionalist theory is made of both of
neorealism and globalism. It shares territoriality with the neorealist perspective but
differ in so much as the regional -not the global- level is the prime focus. The
distribution of power is included in the analysis but is compounded by a
constructivist understanding of regional security relations. Conversely, regionalism
allows for globalist concepts to be taken into account too, such as the openness to
non-state actors. Further, the idea of levels (regional and global) offers flexibility to

4 Aron, R. (1948). Le grand schisme (GALLIMARD.). Gallimard.


5 In a RSCT perspective, the general structure of international security was bipolar. But the third

world was being structured as a series of regional security complexes albeit penetrated by the great
power rivalry.
6 Carpenter, T. G. (1991). The New World Disorder. Foreign Policy, (84), 192.

7 There are two visions of globalism; the Marxian and Liberal. The Marxian see the centre-

periphery structure as exploitative. The liberals acknowledge its instability but they claim that
further alignment on the core is the fastest and most efficient way to overcome the centre-periphery
dilemma. This understanding has taken a wide hold in the West and is very close to the unipolar
thinking in neorealism because the process is conducive to US hegemony. It is on this basis that
competitive powers such as Russia and China argue for multi-polar power structure.
8
the conceptual apparatus. The regional level may not always be prominent in
considering a particular actor or event.8

B. Place in the literature

The original idea of singling out the relations between local actors at a regional level
appeared in the literature under many different names. In 1973 Thomson wrote The
Regional Subsystems: A Conceptual Explication and a Propositional Inventory.9 He
reviewed the field and the conceptual toolbox of Regional Subsystems. The author
points at Binder10 as pioneer in formulating the idea as a component of a larger
system with system properties of its own with four key criteria :
proximity 11
close and regular interaction between the elite 12
internal and external recognition of the system
existence of at least two actors, one of which has to be a state
Hence, Subsystem theory was a way to present world politics as a network of levels
from which the analyst can choose the one that best explain the matter at hand but
this reading was discarded because of the political realities of the time. The US-
USSR rivalry produced a bipolar world that overshadowed the regional dynamics.
The neoliberal and neorealist interpretations were better equipped13 to make sense of

8 From a regionalist perspective, globalisation itself can be securitised as a threat. Prominent


security threats are enhanced by globalisation: cultural standardisation, climate change, financial
instability as well as terrorism and traffics are facilitated by globalisation. Consistent with the
glocalisation idea whereby globalising and localising tendencies take place at the same time,
consequences and cures of these global phenomena are constructed at the local or regional level.
Voskressenski, A. D. (2017). Non-Western Theories of International Relations. Cham: Springer
International Publishing.
9 Thompson, W. R. (1973). The Regional Subsystem: A Conceptual Explication and a Propositional

Inventory. International Studies Quarterly, 17(1), 89.


10 Binder, L. (1958). The Middle-East as a Subordinate International System. World Politics, 10(3),

408429.
11 The regional substance of such sub-systems is not primarily geographical although some degree

of proximity is required.
12 (corporate, political and military) of the countries as a key factor.

13 Kaplan, M. A. (1957). Balance of Power, Bipolarity and other Models of International Systems.

American Political Science Review, 51(3), 684695.


9
the reality than the subsystem. They produced very complex models that seemed not
to reflect a more straightforward reality. Hence the idea gradually faded until the late
days of the cold war.

C. The Regional Security Complex Theory (RSCT)

Barry Buzan wrote People, States and Fear in 1983. He addresses security through
the regional level of analysis but mentions it should not be understood as an attempt
to illustrate IR exhaustively. Rather, two strata account for political developments in
the world. At the global level (often referred to as system level in his writings),
great powers conceive and project their interests beyond their immediate security
environment.They dictate the conditions of political developments for entire regions.
In turn, according to the theory, the main conceptual apparatus of the regional
approach is the Regional Security Complex (RSC) and is defined as follows: "a group
of states whose primary security concerns are linked together sufficiently closely that
their national securities cannot be considered apart from one another.14 Relations
between states within a RSC can be of amity or enmity because of their
interconnected security issues. The understanding of security is that of the
Copenhagen School; beyond the political-military aspect, security challenges can
arise in other sectors, economic, cultural and environmental. In a post cold-war
context, the regional level of relations regained its importance and therefore, the
theory held better explaining potential than its predecessor.15 Regional Security
Complex are rooted in the idea that most security related threat travel better on a
short distance.16 It prompts to the fore the mutual perceptions of regional actors as
determinants of the regions security. Hence the authors contend that the fabric of

14 Buzan, B. (1983). People, States, and Fear: The National Security Problem in International
Relations. Wheatsheaf Books.
15 Thompson, W. R. (1973). The Regional Subsystem: A Conceptual Explication and a Propositional

Inventory. International Studies Quarterly, 17(1), 89.


16 Buzan, B., & Waever, O. (2010). Regions and powers: the structure of international security (7.

printing). Cambridge: Cambridge Univ. Press.


10
security is constructed over time and is not merely not a plain reflection of the
distribution of power although it is taken into account. This parenthood with the
constructivist field is assumed but not exclusively embraced as critical geopolitics
are too absolutists in studying only the social construction of space.17 The RSC is
defined by three levels of security concerns interconnected across the region it
delimitates. The domestic level refers to the internal challenges stemming from the
relation between the leadership and its population. The next level includes issues that
spread beyond national boundaries: border disputes, minorities, religions ethnicities,
water management. Otherwise said, every social, political or environmental
phenomena of regional scope. The International level focuses on the role played by
external powers in the region in shaping the security environment of the RSC.
Challenges at these three levels are evidently constructed over time. At the regional
or local actors seek their interest and compose with their neighbour's. It is at this level
that Regional Security Complexes are bound to appear through the process of
Securitisation. In the words of Buzan and Waever, it is the process by which a
security issue is posited (by a securitising actor) as a threat to the survival of some
referent object (nation state, the liberal international economic order, the rain forests),
which is claimed to have a right to survive.18 Consequently, securitisation is the
result of perceptions of threats translated in a discourse which in turn triggers a
responsive securitisation so that the initial object is no longer the main focus but the
constructed security relationship is. This creates patterns of amity or enmity that are
path dependent and therefore self explanatory. Hence, what defines the RSC is more
the regionalist discourse rather than the actual practice of what members securitise. It
is therefore functional and subject to change even if the amity/enmity gives it inertia.
Hence the characteristics of an RSC are specified by 4 factors: territoriality (the
boundaries of the RSC), anarchic structure (2 or more actors), distribution of power
or polarity and the constructed patterns of amity/enmity.

17 Tuathail, G. (1996). Critical Geopolitics: the Politics of Writing Global Space. Hoboken:
Routledge.
18 Buzan, B., & Waever, O. (2010). Regions and powers: the structure of international security (7.

printing). Cambridge: Cambridge Univ. Press.


11
II. The Eurasian Economic
Union
A. The Eurasian Integration: an heavy legacy and a complex context

a) Operationalisation of the RSCT in Eurasia

The relations between Russia and the rest of the CIS is inherently asymmetrical
because the distribution of power in population, GDP and resources make Russia the
unquestionable centre of gravity of the region. In RSC terminology, that is a centred
RSC.19 The ebbs and flows of the Russian empire and the Soviet Union have
constructed and maintained the relations of between the Russian core and the four
different subregions of the RSC; the Baltic states, the Western states, the Caucasus
and Central Asia.20 In the 9th century the Russian state was founded but fell to the
Tatar in 1238, was administered by that empire until 1480 when it freed itself. It was
not before the Romanov dynasty that the Russians started to partake in European
politics. In the 18th century, primarily under the impulse of Peter the Great -whom
had lived in Western Europe- Russia adopted Western military and administrative
techniques in order to modernise the country and join Europe. Russias implication in
European allowed it to project influence and expand Westward, mostly at the expense
of Poland. At the same time, the conquest of Central Asia - a 300 years endeavour -
and the 1828 war with the Ottoman empire allowed Russia to set foot in the Caucasus
and sketch the boundaries of the empire, not unlike the ones of the later USSR. The
conquest of Siberia was conducted along the rivers as corridors of communication,
settlements and commerce. Both the physical and mental Eastern frontier was in part

19 Buzan, B., & Waever, O. (2010). Regions and powers: the structure of international security (7.
printing). Cambridge: Cambridge Univ. Press.
20 Trenin, D, (2001). The end of Eurasia: Russia on the border between geopolitics and

globalization. Moskva: Carnegie Moscow Center.


12
defined when Alaska was sold to the US in 1867 and in the 1905 defeat to Japan. This
war left a lasting impression in the Russian mindset and strengthened focus to the
West. But the relation to the West has also been much defined by two antagonistic
conceptions: Westernisers and Slavophiles. In the early years of the post cold war
Russian Federation, the Westernisers had the upper hand but were soon discredited.
In part because Russia was not welcomed by the West as an equal partner and also
because the strain of liberalisation reforms was blamed on the Westernisers. In turn,
the idea of Near Abroad became policy in 1993 and presented the Post-Soviet space
as a zone of quasi-domestic policy for Russia. The economic interdependence and
large Russian minorities outside the borders of Russia commanded special attention.21
This shift mirrored Russias disillusioned involvement in a liberal dominated world in
which it was considered a junior partner. In other words, the Russian bear retreated to
its familiar Taiga. The advent of the Putin confirmed the turn away from a Western
orientation and enshrined the contestation of American unipolarity while accelerating
the process of integration in the Eurasian space. Western commentators contested the
Near Abroad as an imperial policy and the advent of the Eurasian Economic Union
in this regard reinforced the perception. This view was epitomised by Hillary Clinton,
then Secretary of State, qualifying it as an effort to resovietize.22
RSC theory adequately outlines and connects the main challenges that Russia, Baltic
states, the Western states, the Caucasus and Central Asia face. The three levels of
security concerns are interlinked among the countries of the Russian-centred RSC.
The domestic level looks at the relation between the leadership and the population
and indeed, Russian minorities in the ex-soviet states is a shared concern. From a
Russian perspective this diaspora is the object to securitised either the distinctive
identities and rights (in Ukraine and the Baltics) or their physical security with

21 Russian President Vladimir Putin referred to greatest geopolitical catastrophe of the 20th
century when talking about these 25 million Russian citizens left outside Russia. That statement -
often misunderstood- has been decried as the evidence of an intent to revive the USSR.
Notwithstandingly, there is a certain tension in both defending the interests of Russian minorities
abroad and maintaining the inclusiveness and multinational character of the Russian state itself.
22 Riro, J. (2012, December 6). Clinton Warns Of Russian Efforts To Re-Sovietise Eastern

Europe.
13
regards to terrorism (mainly in CA). From the other states, the Russian minorities are
increasingly viewed as pretexts for Russian interference, especially after the Crimean
precedent. Furthermore, CIS citizens working in Russia are crucial to the economic
well-being of several Post-Soviet countries and integral to economic structure in
Russia. With the exception of Kazakhstan, all Central Asian (CA) states are among
the 60 most unstable countries in the world with 30% to 60% of their population
living under the poverty line. With remittances from workers abroad accounting for
up to 30% of GDP.23 A common feature of the CIS political systems is the weak
degree of institutional development and poor economic redistribution.24 Political elite
are more concerned with personal enrichment and regime stability than economic
governance and fighting corruption. In CA especially where the economies are poorly
diversified, this sets pre-conditions for domestic unrest and increases dependency on
remittances. At the regional level, the fight against religious extremism and terrorism
is a key element in the securitisation discourse. Russia lived through the Chechen
episode in the 90s. In Central Asia the most blatant manifestation was the 1999 and
2000 attempts by the Islamic Movement of Uzbekistan to (IMU) to install an Islamic
state centred on the rich Fergana valley. Interestingly, this securitisation concern is
shared by China and the SCO is a vehicle for cooperation between CA, Russia and
China to address these concerns. Another issue is the drug trade: no less than a
quarter of Afghan opium (which accounts for 93% of global production) crosses CA
and Russia on its way to world markets. Some issues are securitised at a sub-level
within the RSC. Water management in CA for example, opposes upstream countries
(Kyrgyzstan and Tajikistan) interested in harnessing the rivers for hydro-power
generation and downstream (Kazakhstan, Turkmenistan and Uzbekistan) concerned
with irrigation. The next analytical level proposed by the RSC theory is international.
As such it involves the security implications of the aims and strategies pursued by
external players as well as the international posturing of the members. In the Western

23 Klimenko, E. (2011). Central Asia as a regional security complex. Central Asia and the Caucasus,
12(4).
24 Simai, M. (2006). Poverty and Inequality in Eastern Europe and the CIS Transition Economies

(Working Paper No. 17). United Nations, Department of Economics and Social Affairs.
14
States and the Baltic, Institutions like NATO and the EU have made inroads into the
Russia-centered RSC. They are securitised in Russia as a threat to its influence in the
region as well as its military position. The influence of great powers in the Eurasian
space is further evidenced in the following chapters of the thesis. In turn, Russias
activity on a global level is crucial to its regional primacy as well as the perceived
legitimacy of its ruling elite domestically.

b) Eurasianism is a vision of the Eurasian heartland

Eurasia covers 36% of the earths terrestrial surface. On these vast stretches of land,
civilisations have rose and felt, mingled and fought. Eurasia never achieved unity but
has known long periods of interconnectedness and centrality in world affairs. The rise
of maritime trade and the discovery of the americas has shifted power West: in
Europe. The surge of wealth coming from the colonies to Europe allowed
unprecedented modernisation and discoveries. This sparked a great power rivalry for
the control of the known world which eventually ended in two world wars and left the
old continent in shambles. At this point it became clear that the economic centre of
power had crossed the Atlantic. The former english and french colonies in Northern
america had formed the most formidable power history had ever known: the USA.
70 years ago, the US concentrated 50% of the worlds GDP.25 It was on the old
continent though, during in the last decades of British and European power that
Halford Mackinder, a British geographer came up with the theory that Central Asia,
Afghanistan, and Southern Siberia constituted a heartland. This core of the earth
was subject to the following axiom Who rules the heartland commands the World
Island; who rules the World Island commands the World."26 What he called the World
Island is what we call now Eurasia. This understanding had a profound impact on the
american political thinking and shaped the approach of the US towards the continent;

25Kratz, A.
(2015). Chinas AIIB: A triumph in public diplomacy (China Analysis No. 5). Berlin:
European Council on Foreign Relations.
26 Mackinder, H. J. (1904). The Geographical Pivot of History. The Geographical Journal, 23(4),

421437.
15
never to allow too large a degree of integration because the power it would yield
would be too large for the US to control.27 Eurasianism in turn, is more than a
balance of power vision of the Euro-Asian landmass. The ideology places Russia at
the centre of a landmass populated by Slavic and Turkic nations that make up a
civilisation that is nor fully European nor fully Asian. It first appears in the 1920s
after the fall of the Russian empire. The early Classical Eurasianists were not
politically against the dismissal of the Russian empire but wanted to retain the
geopolitical construct. They resisted fragmentation as detrimental to the unity of the
civilisation constituted of this cohesive multinational community of fraternal
people. The ideology rejected colonialism and took pride in including and respecting
ethnic and cultural differences, but quite inconsequently, some Eurasianism
considered ethnic Russians as first among equals. On the contrary, some like
Trubetskoi argued that it was necessary to go beyond Russian nationalism and
embrace a pan-Eurasian nationalism. The classical Eurasianist project was in essence
continental and even isolationist. It considered the attempt of Peter the first to
establish Russia as a naval power as undue Westernisation. In this vision the enemy
was Western Europe.28 Neo-Eurasianism appeared in the early 1990s and was as well
a reaction to the fall of the Soviet Union. It held the same argument to withhold unity
in spite of the new independencies. Similarly, although it also rejected colonialism, it
argued for the primacy of the Russian identity and claimed it should be the backbone
and organising force behind the Eurasian idea. The main proponent of this updated
version is the contemporary ideologue Alexander Dugin.29 He re-published the
founding Eurasian manifestos and hence seeks to stress the continuity of his
approach. Rather than being hostile to Europe in a territorial understanding, Neo-
Eurasianism is a response to the West and more precisely to Atlanticism or the
strategic alignment of Europe as a junior partner to the United-States. This vision has
resonances in the current Russian political leadership and partly determines its

27 Brzezinski, Z. (1997). The grand chessboard: American primacy and its geostrategic imperatives
(1. ed). New York: BasicBooks.
28 Bassin, M. (2003). Classical Eurasianism and the Geopolitics of Russian Identity. Ab Imperio,

2003(2), 257266.
29 Dugin, A. (2014). Eurasian Mission: An Introduction to Neo-Eurasianism. Arktos.

16
ideological commitment to the EEU. The Russian President Vladimir Putin has
argued that Eurasian integration would allow the entire post-Soviet space to become
an independent Centre for global development.30 In this regard Russia would shield
the member states from external influences that it considers as destabilising. This is
essentially the rationale behind the Russian push for a greater political integration. In
June 2016 Putin announced he wanted to extend partnerships with the EEU to
countries with which Russia already enjoy fruitful relations such as China, India,
Pakistan and Iran.31 Another -technocratic- view of the Eurasian project focuses on a
pragmatic idea to fit in the globalised economic system as a region. Nazarbayev of
Kazakhstan subscribes to this understanding of Eurasianism.32 Plus, as an ideological
vehicle to make sense of the multi-vector and multi ethnic-policies within Kazakhstan
Eurasianism serves a purpose. The Kazakhstani leadership also entertain the vision of
a supranational entity addressing the imbalance of power between Russia and other
EEU member states.33 The Belarusians and the Kazakhs are wary of political
commitments and would like the union to remain only about economics. Albeit being
of the generation of Post-Soviet leaders with close ties to Russia, the leaders place a
lot of emphasis on their political independence and sovereignty.34 Russia wishes it to
be otherwise; the question of a joint Parliament and a common currency are primary
issues of contention. This gap in perception may be the biggest question for the future
of the Eurasian Economic Union. Further, some argue about the existence of two
Eurasia one that is real and the other imagined. One is geopolitical in nature and the
other is economic. Vladimir Putin aims at the geopolitical construct by re-enforcing
and leveraging the economics dependencies of Post-Soviet states with no choice than

30 Putin, V. (2014). Munich, Valdai, Crimea: 3 landmark speeches by the president of Russia. Kuala
Lumpur: ITBM.
31 Kazinform. (2015, October 6). EEU may establish free trade zones with Israel, India and Iran.

32 Mostafa, G. (2013). The concept of Eurasia: Kazakhstans Eurasian policy and its implications.

Journal of Eurasian Studies, 4(2), 160170.


33 Crisis Group. (2016). The Eurasian Economic Union : Power, Politics and Trade (Europe and

Central Asia Report No. 240). Crisis Group.


34 Chiarello, A. (2015). Paper Tiger or Game Changer? Challenges and opportunities of EU

engagement with the Eurasian Economic Union . College of Europe, EU International Relations
and Diplomacy Studies.
17
Post-Soviet integration. He hopes the EEU to be one of the building blocks of global
development along with the (EU,NAFTA and APEC) in the multipolar world order
envisaged by the Kremlin. But the Ukrainian have alienated Russia from its Western
partners and made its Post-Soviet neighbours unsure of Russias intentions.35 The
real/economic Eurasia is a carefully calculated compromise between members that
will prove its worth in deepened integration and hence time is on its side. On the
other hand, the geopolitical/imagined Eurasia is calling for a fast enlargement
because the ability to project power depends on the momentum and political capital
gained. Competitive integration schemes reduces the likelihood of new memberships
as time passes. Geopolitical Eurasia as a power centre died with the impossibility to
get Ukraine on board.

c) Economic integration in the Post-Soviet era

The Soviet Union in its demise lost 20% of its territory and nearly 50% of its
population. This strategic loss brought the country down from the global relevance to
regional focus.36 Consequently, many attempts were made to re-integrate but their
results were mixed. Most regional integration projects in the Post-Soviet space have a
record of increasing economic and political tensions rather than solving them. In the
past decade, a new wave of integration proposed narrowed membership but deeper
integration: the Eurasian Economic Union is the outcome of this trend. Immediately
after the fall of the Soviet Union the CIS was founded and though many agreements
were signed, few were really implemented. One of the overarching goals of the CIS
was the creation of a common economic space but the organisation never yielded
enough supranational authority to achieve it because the newly independent states
were reluctant to give away sovereignty.37 It became soon very clear that the interests

35 Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and
the likely. Paris: ISS.
36 Chiarello, A. (2015). Paper Tiger or Game Changer? Challenges and opportunities of EU

engagement with the Eurasian Economic Union . College of Europe, EU International Relations
and Diplomacy Studies.
37 Weitz, R. (2014). The Customs Union and Eurasian Union: A Primer. In Putins grand strategy:

the Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk
Road Studies Program (SAIS).
18
of the members where not aligned with the interests of its bigger member. Russias
policy of trying and maintain the economic ties beyond the demise of the Soviet
Union was perceived as diktats and intervention. Although post-Soviet states were
still very dependent on Russia, they did not want further integration, quite the
contrary. Moreover, during the 90s, Eurasia wasn't the main focus for Russia and the
CIS represented only 14% of the Russian foreign-trade turnover.38 Domestic reforms
and modernisation was deemed more important to heal the wounds of such abrupt
changes. In that period, Russia tried to integrate the West and nurtured relations with
the US and Europe.39 In this context, the CIS had famously been qualified as an
instrument for a civilised divorce between former republics of the Soviet Union.40
Plus, in 1993 the disunion within the CIS prompted the US to assert that the area
should not be considered one of privileged interests of Russia. As a consequence,
Georgia, Ukraine, Azerbaijan and Moldova felt emboldened to unite themselves in
opposition to the hegemonic Russian influence in the CIS. They then constituted the
GUAM Group with the support of the US. As a consequence, in 1996 Russia shifted
its strategy to a will-based multi-speed integration. Little by little emerged the idea
that a smaller community of states actually willing to integrate would be more
effective.41 Among the CA countries, Kyrgyzstan, Tajikistan and Kazakhstan have
participated in most of the integration efforts while Turkmenistan and Uzbekistan

38 Selivanova, I. (2014). CIS: From the Civilized Divorce to the Eurasian Union the Evolution of
the Russian Integration Policy in the Post-Soviet Space. Romanian Review of Political Sciences and
International Relations, Tom. XI(No. 2).
39 Melville, A., & Shakleina, T. (Eds.). (2005). Russian foreign policy in transition: concepts and

realities. New York: CEU Press.


40 Weitz, R. (2014). The Customs Union and Eurasian Union: A Primer. In Putins grand strategy:

the Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk
Road Studies Program (SAIS).
41 In line with the 1996 strategy of ad hoc integration, Russia launched the CSTO in 2002. It is a

military alliance on the basis of the Collective Security Treaty signed in 1992. Although the
membership diminished significantly in this new operational form (Azerbaijan Georgia and
Uzbekistan eventually chose to discontinue their participation).
Tarr, D. G. (2016). The Eurasian Economic Union of Russia, Belarus, Kazakhstan, Armenia, and
the Kyrgyz Republic: Can It Succeed Where Its Predecessor Failed? Eastern European Economics,
54(1), 122.
19
have shown reluctance42 In the early 2000, the Russian leadership elevated regional
integration with the CIS partners as a key strategic priority.43 But the relevance of the
CIS itself was increasingly challenged by the birth of new multilateral formats
initiated by Moscow. The attempt to reform the CIS in 2005 was to no avail.44 Prime
among these frameworks was the EurAsEc or Eurasian Economic Community
launched in October 2000 as an attempt to coordinate economic policies by reducing
custom tariffs, taxes and duties. The membership of the organisation; Belarus,
Kazakhstan, Kyrgyzstan, Russia and Tajikistan was already more focused than that of
the CIS but the integration effort stalled. The accessibility of the markets (inherited
from the CIS) meant that the balance between trade creation and trade diversion
would not be beneficial to the small states.45 As a consequence, only about 50% to
60% of the common external tariff lines were applied. With no effective regulatory
body equipped with supranational authority, the interest in the scheme dropped.46
This coincided with greater European Union involvement in the region through the
European neighbourhood policy ENP, devised in 2003.47 Further, the motives of the
Coloured revolutions in Georgia in 2003 and Ukraine in 2004 and the favourable
attention they received from Western capitals was in direct contradiction with
Russia's regional interests.48 Moreover, the end of the first decade of our century

42 Indeo, F. (2016). The Eurasian Economic Union and the Silk Road Economic Belt : the impact of
the Sino-Russian geopolitical strategies in the Eurasia region (Working Paper No. 2016/5).
Maastricht School of Management.
43 The Foreign Policy Concept of the Russian Federation, Approved by the President of the Russian

Federation V. Putin, 28 June 2000.


44 Weitz, R. (2014). The Customs Union and Eurasian Union: A Primer. In Putins grand strategy:

the Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk
Road Studies Program (SAIS).
45 An explanation of the mechanisms of trade diversion and trade creation is given in the second

chapter on the point b) of the part B) The Tariffs and the WTO commitments
46 Tarr, D. G. (2016). The Eurasian Economic Union of Russia, Belarus, Kazakhstan, Armenia, and

the Kyrgyz Republic: Can It Succeed Where Its Predecessor Failed? Eastern European Economics,
54(1), 122.
47European Neighbourhood Policy (ENP) - European Union External Action Service - European

Commission. Bruxelles (2016).


48 Chiarello, A. (2015). Paper Tiger or Game Changer? Challenges and opportunities of EU

engagement with the Eurasian Economic Union . College of Europe, EU International Relations
and Diplomacy Studies.
20
brought mounting pressure at the global level that increased rationale for regional
answers. For Russia especially, the 2008 crisis, the subsequent fall of energy prices,
the inroads of the EU's Eastern Partnership as well as the Chinese investments in
Central Asia were threats to Russian influence which commended hastened
response.49 In 2006 the Customs Union was announced between Russia and
Kazakhstan and Belarus. Some argue that Kyrgyzstan, Tajikistan and Uzbekistan
were not considered sufficiently advanced economies to join. Save Uzbekistan the
two others were willing to take part.50 It took three years for the members to agree on
a common code (2009) and one year later the CU was effectively launched. By July
2010 regulatory bodies were created.51 In 2011 customs barriers were brought down.
Enshrined in the CU was the possibility for member states citizens to travel with
their internal passport as well as a commitment to enforce WTO regulation even
overriding the members own. Building on those developments and on the tangible
success of the Customs Union, the idea of deepening integration and granting
freedom of movement for capital and labour was endorsed by Vladimir Putin in his
campaign for presidency in November 2011.52 In 2012 a Single Economic Space SES
was launched. Beyond the freedoms of circulation it aimed at further synchronising
policies in macroeconomics and later on transport and energy.53 It was a major step in
the sense that Eurasian Economic Commission (EEC), born of the SES was given
supranational Authority. It replaced the CU Commission and was tasked with the
development of the CU and the SES as well as the correct implementation of the

49 Winiewska, I. (2013). Eurasian integration. Russias attempt at the economic unification of the
Post-Soviet area. (No. 44). OSW Center for Eastern Studies.
50 Indeo, F. (2016). The Eurasian Economic Union and the Silk Road Economic Belt : the impact of

the Sino-Russian geopolitical strategies in the Eurasia region (Working Paper No. 2016/5).
Maastricht School of Management.
51 Chiarello, A. (2015). Paper Tiger or Game Changer? Challenges and opportunities of EU

engagement with the Eurasian Economic Union . College of Europe, EU International Relations
and Diplomacy Studies.
52 Crisis Group. (2016). The Eurasian Economic Union : Power, Politics and Trade (Europe and

Central Asia Report No. 240). Crisis Group.


53 Chiarello, A. (2015). Paper Tiger or Game Changer? Challenges and opportunities of EU

engagement with the Eurasian Economic Union . College of Europe, EU International Relations
and Diplomacy Studies.
21
treaties. On the basis of the CU and the SES, the Eurasian Economic Union treaty
was signed by Russia Belarus and Kazakhstan on the 29th of May 2014. Armenia
joined in October 2014 and Kyrgyzstan in December 2014. Finally, the EEU was
launched on the 1st of January 2015.54 One essential difference between the CU and
the EEU is that the former was an intergovernmental agreement while the latter is
governed by a supranational institution. A crucial question therefore is the degree of
independence of this institution and the mechanism of its decision making.55 The
movement towards a Moscow-Centric Eurasian integration can be understood in
various manners: re-sovietisation,19th century sphere of influence, buffer zone or
balance of power in face of Chinese growing implication.56 The following section
will evidence the challenging international context in which the EEU was launched.

d) Competing views in the Eurasian continent

Russia is viewed in the West as a revisionist power that seeks to undermine the
established post Cold War order. The events in Georgia in 2008, in Kyrgyzstan in
2010 and in Ukraine from 2013 are seen as instances of re-asserting a policy that is
hostile to Western interests.57 One could see these frictions as the signs of the
structural competition between the EU's Eastern partnership and this project of
Eurasian integration.58 Both initiatives pursue the goals of integration over partly
overlapping spaces but with antagonistic centres, norms and values. The Eastern

54 Kyrgyzstan joined formerly in August.


55 Weitz, R. (2014). The Customs Union and Eurasian Union: A Primer. In Putins grand strategy:
the Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk
Road Studies Program (SAIS).
56 Riro, J. (2012, December 6). Clinton Warns Of Russian Efforts To Re-Sovietise Eastern

Europe.
57 Starr, S. F., & Cornell, S. E. (Eds.). (2014). Introduction. In Putins grand strategy: the Eurasian

Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk Road Studies
Program (SAIS).
58 The Eurasian integration process was poised as a proposal to construct a sort of dual-headed

Europe that would allow a quicker integration of the Eurasian members into Europe. This held some
attracting power to CA countries but not to those closer to Europe. Additionally, the neighbourhood
policy of Europe consisting of concentric circles of norms-based integration conflicted with the
Eurasian project.
22
Partnership is the European Unions proposal for neighbours East of the union.
Through its Association Agreements/Deep and Comprehensive Free Trade Areas
(AA/DCFTAs ) the EU seeks to increase political association and economic
coordination. Without being necessarily conducive to membership in the Union, the
partnership implies aligning standards and legislation with those of the EU as well as
political commitments to better governance. These efforts are financed in large part
by the EU.59 On the other hand EEU also implies regulatory requirements based on
the Soviet era standards (GOST) but do not entail the chapter on governance issues
therefore less harmful to the elites in place.60 Since the DCFTA and AA are
mechanisms that allows preferential access to the EUs market, they are incompatible
with EEU. Conversely, the EEU external tariff became a supranational prerogative so
members cannot sign free trade agreement at the bilateral level.61 Russia sees this EU
policy as an attempt to expend its sphere of influence at the expense of Russia.
Western commentators argue in turn that the reluctance of Russia to participate in
unions is due to the imperial impulse to be at the centre of them. Many see the
Russian policy under the leadership of Vladimir Putin as having returned to a tsarist
view. In this view, sovereignty is dependent on power, culture and historical instead
of being an unconditional principle of statehood.62A hard realist perspective may
picture the EEU as an attempt to render another Ukrainian scenario impossible.
Indeed, Eurasian states with strong leaders and weak institutions have intensive ties
to Russia to the extent that their leaders are loyal to Russia. But this commitment
rests on the personalised leadership of ageing leaders, especially in Kazakhstan.
These bonds may be questioned in the wake of their replacement. The EEU
institutionalises these bonds in an attempt to make sure they survive leadership

59 Participants to the partnership have received 3.2 billion of EU funds so far. EU External Action.
(2016, October 19). Eastern Partnership - eeas - European Commission.
60 Crisis Group. (2016). The Eurasian Economic Union : Power, Politics and Trade (Europe and

Central Asia Report No. 240). Crisis Group.


61 Emerson, M. (2015). Kazakhstan and Europe: Towards a New Partnership. Institute for Security

and Policy Development, (Policy Brief no. 190).


62Blank, S. (2014). Vladimir Putin and the Intellectual Origins of the Project. In Putins grand

strategy: the Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute
& Silk Road Studies Program (SAIS).
23
changes.63 Another understanding -closer to the official aim of the union- is that the
institutionalisation is the best way to effectively integrate the region. In that regard,
the transfer of economic sovereignty and decision making power not only
demonstrates the strong dedication of the member to the new framework, it is the
only way to produce biding legislation.64 In the current context, both hypothesis are
receivable and only time will tell which of the geopolitical or economic rationales is
confirmed in reality. However, in this chapter I will give my analysis of the
institutional framework, the theoretical impacts of the unions commitments as well
as the perspectives of the members so far. While it may not give us sufficient grounds
to assert authoritatively what the true nature of the Union is -especially given it
youth- it will outline the key developments to follow to continue the assessment in
the future.

B. The EEU as a construct of unprecedented ambition

a) The Institutional design

The main governing body is the Eurasian Economic Commission, (ECC)


headquartered in Moscow and staffed with over 1000 citizens from the member
states. It's main mission is to implement the integration process and represent the bloc
in trade negotiations. Each country is represented in the commission by two Members
of the collegium. With five members states, there are 10 members to the Collegium
(they are also called ministers). Each of these ministers heads a number of the 25
departments over which the Eurasian Economic Commission has jurisdiction.
Decisions at the ECC are adopted and biding if they receive two thirds of the votes.65
But each state can veto a decision at the Council of the Eurasian Economic

63 Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and
the likely. Paris: ISS.
64 Chiarello, A. (2015). Paper Tiger or Game Changer? Challenges and opportunities of EU

engagement with the Eurasian Economic Union . College of Europe, EU International Relations
and Diplomacy Studies.
65 Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and

the likely. Paris: ISS.


24
Commission. It is composed of the Deputy Prime Ministers of each countries. To
avoid the deadlock of a failed vote, consensus is sought through consultations before
a decision is brought to a vote. Unfortunately, the technocratic mechanisms for
dispute resolutions are often sidelined and critical or controversial issues tend to be
resolved at an higher echelon. The next up is the Eurasian Intergovernmental Council
(composed of Prime Ministers) which convenes twice a year. Finally the highest body
is composed of head of states, they meet at least once a year and form the supreme
Eurasian Economic Council. Non-withstanding the institutional design, critics claim
that the EEU in fact amounts to another tool of Russian domination.66 A court,
headquartered in Minsk was established to ensure the agreements are respected. It
also can judge economic disputes and it can interpret the treaties in case of disaccord
but it has yet to be used to remind a member of its duty.67

b) The Tariffs and the WTO commitments

Economic theory sets a hierarchy between different degrees of integration, depending


on the commitment of the participants. The most basic effort is the setting up of a
Free Trade Agreement (FTA). In this arrangement, participants reduce or abolish the
taxes on goods reciprocally traded but keep authority over the tariffs with other
countries. The next step in integration is a Custom Union whereby the external tariff
of the Union is negotiated at in common and must be applied in exchange for free
trade within the union. Then a common market can be set up, providing freedom of
movement for capital and service across the union. Further, an economic union is the
combination of the two preceding formats with the introduction of a common labor
market. A common currency can be introduced as well. Greater integration holds the
promise of economic benefits but the increased economic complexity and loss of

66 Crisis Group. (2016). The Eurasian Economic Union : Power, Politics and Trade (Europe and
Central Asia Report No. 240). Crisis Group.
67 The union is young and can be expected to gloss over disagreement to show unity in order not to

damage its credibility.


Chiarello, A. (2015). Paper Tiger or Game Changer? Challenges and opportunities of EU
engagement with the Eurasian Economic Union . College of Europe, EU International Relations
and Diplomacy Studies.
25
sovereignty on segments of policy may prove a great impediment. Moreover, the
average tariff of a Customs Union is likely to be higher than the average tariff of each
member since the lines are negotiated jointly and each country lobbies to protect its
own industries.68 Hence a Customs Union, albeit being a step further than a Free
Trade Area in terms of integration, is a step back in the openness of trade. Indeed,
while internal barriers are brought down, a common external tariff is set.
Consequently, the key variable for success of a Customs Union is the degree to which
trade is facilitated inside the union versus the trade that is diverted by the instalment
of the new common external trade barriers, often higher than preceding national
tariffs.

The trade creation effect:


The mechanism of trade creation is straightforward. The abolition of trade tariffs
within the union lowers the prices of goods and increases competitiveness of
producers inside the union: demand can grow and money is better allocated
globally.69 At first glance, the effect of the establishment of the Eurasian Economic
Union (ECU) was positive as a two third increase in the intra-CU trade occurred in
2010-2011, the year following its establishment. But the European Bank for
Reconstruction and Development (EBRD) considers that it was mainly a
consequence of the growing trends of the world economy in a post-crisis situation
that sustained this growth. Indeed, the trade then decrease by 5.5% in 2013 and nearly
12% in 2014.70

Trade diversion

68 Tarr, D. G. (2016). The Eurasian Economic Union of Russia, Belarus, Kazakhstan, Armenia, and
the Kyrgyz Republic: Can It Succeed Where Its Predecessor Failed? Eastern European Economics,
54(1), 122.
69 Pomfret, R. (2014). The Economics of the Customs Union . In Putins grand strategy: the

Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk Road
Studies Program (SAIS).
70 Berglof, E. (2012). Transition Report 2012: Integration Across Borders. European Bank for

Reconstruction and Development.


26
This happens when the goods inside the union become cheaper in the absence of
tariffs but are nominally less competitive. The existence of a much bigger economy
among smaller ones is more conducive to trade diversion. This is perverse because
production becomes less efficient. The combined loss for the displaced exporter as
well as the loss for the customer outweighs the gain of creating a new tie inside to the
union.71 In the case of the ECU, 80% of the Common External Tariff lines were based
on the Russian tariffs.72 They were higher than the Kyrgyz and Kazakh ones. As a
result of alignment, the average tariff level of Kazakhstan raised from 6,2% to
10,6%.73 This raised the price of imported Chinese goods and in comparison Russian
ones became cheaper (Russian cars for instance). This structural dimension was
compounded with conjectural factor: a weaker ruble, further favouring Russian
exports in the CU. Moreover, there is a conflict between the Customs Union's
commitment to be WTO compliant mechanism and the current tariffs now in force.
So far Russia (2012), Kazakhstan (2015), Armenia (2003) and Kyrgyzstan (1998) are
members. Belarus is observer since 1983 and there are doubts about its future
membership.74 They all negotiated external tariffs with the WTO as part of the
accession process but the EEU external tariff remains substantially higher than the
one required by the WTO in most EEU members. This could lead to demands of
compensation by other WTO members and for that reason, the newly members are
asking that Russia compensates.75 Plus, the WTO ruled that a country cannot set a
Free Trade Union with a non-WTO country or another custom union unless it is
willing to extend the agreements to the whole of the WTO, which is problematic in

71 Pomfret, R. (2014). The Economics of the Customs Union . In Putins grand strategy: the
Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk Road
Studies Program (SAIS).
72 Chiarello, A. (2015). Paper Tiger or Game Changer? Challenges and opportunities of EU

engagement with the Eurasian Economic Union . College of Europe, EU International Relations
and Diplomacy Studies.
73 Winiewska, I. (2013). Eurasian integration. Russias attempt at the economic unification of the

Post-Soviet area. (No. 44). OSW Centre for Eastern Studies.


74 Emerson, M. (2015). Kazakhstan and Europe: Towards a New Partnership. Institute for Security

and Policy Development, (Policy Brief no. 190).


75 Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and

the likely. Paris: ISS.


27
terms of Belaruss membership. That being said, Russia negotiated a transition when
it joined the WTO in 2012. The lower tariffs to which Russia committed will allow
the EEU external tariff to decrease accordingly. By 2020 it is projected to decrease to
7,9% as the WTO commitment is enforced.76 This should decrease the trade diversion
towards Russia and open the EEU to competition.

c) Non tariff barriers

With the general tendency towards liberalisation; external tariffs have tended to
decrease. Nowadays, the costs of trade are increasingly of non tariff nature. Non tariff
barriers include quotas, licenses, Sanitary and Phytosanitary (SPS) as well as
technical barriers to trade (TBT). While licenses and quotas were more widely used
to regulate trade; Sanitary and Phytosanitary regulations now have gained
prominence because they can appear less arbitrary and politically motivated.77 Over
the past decade the Russian Federal Service for Veterinary and Phytosanitary
Surveillance (Rosselkhoznadzor) has implemented numerous bans on Belarusian and
Kazakhstani products on the basis of SPS standards. These bans have elicited virulent
protests and countermeasures in the case of Belarus, often spiralling in trade wars. Its
is obvious that these bans serve a political purpose and are used as bargaining chips is
strategic negotiations or as retaliating moves include the tools of pressure.78 As
mentioned earlier, the start of the EEU has had a trade diversion effect in favour of
Russia reinforced by the 2015 depreciation of the ruble. In a move to protect its
national meat industry, Kazakhstan banned Russian products on SPS grounds,
triggering Russian counter-moves along the same lines. In the context of the Ukraine
crisis the counter-sanctions installed by Russia on European agricultural imports have

76 Tarr, D. G. (2016). The Eurasian Economic Union of Russia, Belarus, Kazakhstan, Armenia, and
the Kyrgyz Republic: Can It Succeed Where Its Predecessor Failed? Eastern European Economics,
54(1), 122.
77 Cadot, O., & Gourdon, J. (2014). Assessing the Price-Raising Effect of Non-Tariff Measures in

Africa. Journal of African Economies, 23(4), 425463.


78 Starr, S. F., & Cornell, S. E. (Eds.). (2014). Tactics and Instruments in Putins Grand Strategy. In

Putins grand strategy: the Eurasian Union and its discontents. Washington, D.C: Central Asia-
Caucasus Institute & Silk Road Studies Program (SAIS).
28
in fact led to the re-introduction of custom controls since Belarus and Kazakhstan
have not implemented the sanction. As Russia suspects Belarus to re-package EU
foodstuffs in order to sell them on the Russian market thanks to the Customs Union ,
it has declared the imports of the suspected goods from Belarus improper in regard to
SPS rules. Wether the repackaging is taking place or not, the ban is perceived as a
way Russia has to punish its partners for their non-alignment. The focus on non-tariff
trade barriers and deep integration is deemed paramount for the potential success of
the union. The EEU is in the process of harmonising non-tariff barriers but little
progress has been made in this regard and they are still used as lever to regulate and
restrict trade according to political aims.

d) Energy Component

In 1969, the Central Asia Central system of pipelines (for natural gas) was
commissioned and eventually channeled virtually all of the CAs exports to Russia
through Kazakhstan. Moscow would buy, transport and sell (still does) the CAs gas
production through its own pipelines in direction of Europe. This arrangement offered
Russia a steady supply of gas as well as political leverage on its neighbours. In the
mid 2000, Russia set itself the goal to become the world leader in energy market. It
sought to leverage it's central position in the infrastructure of the Soviet Union by
performing a Europeanisation of oil prices towards its CIS partners. In order to
streamline the implementation of this strategic goal, the government gave Gazprom

Compared Reserves, Production and Consumption of Natural Gas


Reserves in TCM Production in BCM / Y Domestic consumption in
(Trillion Cubic Meter) (Billion Cubic Meter) BCM /Y
(Billion Cubic Meter)

Russian Federation 32,6 578,7 409,2

Azerbaijan 1,2 16,9 9,2

Turkmenistan 17,5 69,3 29,2

Kazakhstan 1,5 19,3 5,6

Uzbekistan 1,1 57,3 48,8

EU 1,5 132,3 386,9

China 3,5 134,5 185,5

29
Source: BP Statistical Review of World Energy June 2015
the exclusive rights for gas exports and became its main shareholder in 2005. Retain
and expending control over production and transportation assets was considered a
primordial goal in itself but also limit other great powers influence in the region.79
Further, it turned out cheaper to buy from central Asian countries and resell to Europe
rather than developing new field at home.80 Given the landlocked position of central
Asian countries Russia maintained its position as the only available transit state and
dealt from a position of strength. Gas originating from Uzbekistan and Turkmenistan
is also ferried via Kazakhstan on its way to Russia through the Central Asia Centre
Pipeline (CAC) which is controlled by Gazprom. But the CAC is not flowing enough
and needs capital and technology that Russia does not have. Russia has a dominating
position in the Armenian energy market.81 The Kyrgyz oil and gas resources are
under Russian exclusive concession until 2028 and the national energy company has
been bought by Gazprom in exchange for a $600 in the countrys energy
infrastructure. In Kazakhstan Gazprom operates a joint venture KazRosGas and
Lukoil owns 10% of Kazakhstans total crude oil production capacity.82 In this
context, the Baku-Tibilissi-Ceyhan (BTC) pipeline was one of the first projects that
allowed hydrocarbons to be marketed bypassing Russia but its quantities are
negligible.83 Facing with this dominating position, the two energy-rich countries of
Central Asia -Kazakhstan and Turkmenistan- have therefore looked at alternative
roads bypassing Russia in 2007, an agreement was signed with China for a Central
Asia China Gas Pipeline (CAGP).84 As early as 2009 the gas started flowing and

79 downstream assets (pipelines directed to consuming markets going its territory) as well as
upstream investment (production capacity)
80 Smith Stegen, K., & Kusznir, J. (2015). Outcomes and strategies in the New Great Game:

China and the Caspian states emerge as winners. Journal of Eurasian Studies, 6(2), 91106.
81 Starr, S. F., & Cornell, S. E. (Eds.). (2014). Tactics and Instruments in Putins Grand Strategy. In

Putins grand strategy: the Eurasian Union and its discontents. Washington, D.C: Central Asia-
Caucasus Institute & Silk Road Studies Program (SAIS).
82 Pastukhova, M., & Westphal, K. (2016). A Common Energy Market in the Eurasian Economic

Union (SWP Comments). 9: SWP - German Institute for International and Security Affairs.
83 Jaffalian, A. (2004). Loloduc Bakou-Ceyhan: paradoxes et cohrence de la stratgie amricaine

des pipelines. Politique trangre, 69(1), 151163.


84 more detail on Chinas involvement in CA in the next chapter.

30
since 2012 China imports more than half of the Turkmen gas production.85 In this
context, the EEU projects a common market for energy. Three main forms of energy
will be included in the market at different times: electricity in 2019, oil in 2024, gas
in 2025. The exact nature of this market is yet unclear and still subject to intense
negotiations as energy represents respectively 70 and 80 percent of exports in Russia
and Kazakhstan and therefore a crucial element for their economic strategy.86
Consequently, the common market will only regulate the trade of energy resources
between EEU member states and not with third parties.

e) Remittances

Access to the Russian labor market is to certain CA states a matter of crucial


importance. The remittances -money sent back by workers to their families- is a key
source of wealth in most CA states both in and out of the EEU. They amount to 28%
of Kyrgyzstans GDP, 42% in Tajikistan, and an estimated 15-25% in Uzbekistan.
They are less significant in Kazakhstan and in Turkmenistan.87 In theory migrants
from central Asia enjoy Visa-free travel to Russia but residency requirements and
administrative paperwork means a significant portion of these workers immigrate
illegally. This is why the simplified procedures for the citizen of EEU member state
Kyrgyzstan and potentially Tajikistan matter a lot. Now the difference is made
between the members and nonmembers in terms of migrant policy.

C. Critical analysis: achievements and perspectives

a) Structural Pluses and Minuses

Strengths

85Smith Stegen, K., & Kusznir, J. (2015). Outcomes and strategies in the New Great Game: China
and the Caspian states emerge as winners. Journal of Eurasian Studies, 6(2), 91106.
86 Winiewska, I. (2013). Eurasian integration. Russias attempt at the economic unification of the

Post-Soviet area. (No. 44). OSW Center for Eastern Studies.


87 The Economist. (2016). From Russia with love. The Economist.

31
The Eurasian Economic Union has a population of 183 million and a GDP is of $4,1
trillion. One of its main aims is to overcome trade barriers and facilitate labour
migration and and drive towards greater economic integration. If correctly and fully
implemented, the improvement of the legal framework and harmonisation of customs
and trade regulations will yield positive impact in the long run. Theoretically
speaking conflicts between the EEU members becomes less likely because of the
greater interconnectedness and because mechanisms of conflict resolution are
institutionalised and an international court was given authority.88 The new wave of
Eurasian integration -started with the Customs Union - distinguished itself from the
previous in the sense that it was more focused in its membership, specific in its
formulation, broader in the issues tackled, as well as aimed at compliance with
international standards.89 More political capital was invested into it, especially by
Vladimir Putin and Nursultan Nazerbaiev. In consequence, the EEU yields a high
degree of public approval, across a large spectrum of political sensibilities. Some see
it as a vehicle to become a pole in a multipolar world order and a link between
Europe and the Asia Pacific region. Liberal voices in Russia see the Eurasian union as
a possibility to modernise through a competition of jurisdictions whereby states
rival in best practices and better business environment to try and attract businesses.
Additionally, there is hope that the commission could balance out the tendency of
some sectors of the Russian executive towards politically motivated regulation. 90

Weaknesses

88 Crisis Group. (2016). The Eurasian Economic Union : Power, Politics and Trade (Europe and
Central Asia Report No. 240). Crisis Group.
89 Weitz, R. (2014). The Customs Union and Eurasian Union: A Primer. In Putins grand strategy:

the Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk
Road Studies Program (SAIS).
90 Daly, J. (2014). Kazakhstan and Belarus: Buyers Remorse? In Putins grand strategy: the

Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk Road
Studies Program (SAIS).
32
Due to previous integration frameworks, in which markets were already open, the
boost in trade that could be expected in theory didn't occur.91 The war in the Eastern
provinces of Ukraine struck a great blow to the image of Russia among its EEU
partners. Concern rose about sovereignty in countries that have a substantial Russian
minority in their population.92 In Central Asia, although the proportion of Russian has
steadily decreased, the group still weighs 7 million out of the 66 millions.93 Because
of this climate of defiance and because members are not certain that the integration
effort will be economically beneficial, they have to be incentivised into cooperation
which is a further burden on Moscow. Russia has been critically hit by the economic
crisis and the sanctions regime related to the standoff in Ukraine has further
weakened the Russian economy and meant that the Union will not reach the critical
mass envisaged when the union was conceptualised. Russian counter sanctions were
unilaterally carried out after Russia failed to gain support of Belarus and
Kazakhstan.94 This move undermined the credibility of the commitment to take trade-
related decisions in common. Further, energy, accounting almost half of the intra-
regional trade is for now left out of the Unions reach.95 The rest of the regional trade
consists of machinery, vehicles, chemicals, metallurgical and agricultural products.96
While the EEU commission is in the process of harmonising non-tariff barriers,
governments are still using food quality standards as a lever to regulate and restrict
free commerce in case of trade conflict. Finally, for most participants, the common
91 Tarr, D. G. (2016). The Eurasian Economic Union of Russia, Belarus, Kazakhstan, Armenia, and
the Kyrgyz Republic: Can It Succeed Where Its Predecessor Failed? Eastern European Economics,
54(1), 122.
92 Indeo, F. (2016). The Eurasian Economic Union and the Silk Road Economic Belt : the impact

of the Sino-Russian geopolitical strategies in the Eurasia region (Working Paper No. 2016/5).
Maastricht School of Management.
93 Out of these 7 million, 4 live in Kazakhstan where they make 21% of the population in

Kyrgyzstan,12%, in Uzbekistan, 6%, in Turkmenistan 4%, and in Tajikistan 1%.


Mitchell, G. (2014). China in Central Asia: The Beginning of the End for Russia? Slovo, 26(1)
94 Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and

the likely. Paris: ISS.


95 Winiewska, I. (2013). Eurasian integration. Russias attempt at the economic unification of the

Post-Soviet area. (No. 44). OSW Center for Eastern Studies.


96 Daly, J. (2014). Kazakhstan and Belarus: Buyers Remorse? In Putins grand strategy: the

Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk Road
Studies Program (SAIS).
33
EEU external tariff has raised their average tariffs and displaced trade with non-EEU
countries while intra-EEU trade has not compensated the loss.

b) Economic results

In the aftermath of the creation of the Customs Union, intra-regional trade reached
$62 billion in 2011. Then, it decreased by 26% in 2015 to $45 billion and the
tendency is still downwards. Trade fell by 34% with non-member countries.97 The
low energy prices as well as currency destabilisation have added stress on the nascent
economic union. Indeed Russia, produces 85 % of the EEUs GDP and has been hit
very hard by the declining oil prices which contribute about 30% to its budget
revenue. Kazakhstan and Belarus are also energy dependant economies. Overall
mineral resources account for two thirds of all products exported by the member
states and represent a third of the intra-region trade as of 2015. Therefore it is
difficult to know to what extent the bad performances of the EEU are conjectural (oil-
prices and sanctions) or structural (trade diversion vs trade creation). The general
increase in external tariffs has not been met with a surge in intra-EEU exchanges,
quite the contrary. Nevertheless, as the external tariffs are gradually reduced
reflecting Russia's WTO commitments, the situation could change for the better
provided that non-tariff barriers governance and business climate improve. The
economic theory of economic unions holds that open-ended unions with closely
integrated internal market fare better than unions with higher external barriers to
trade. So the way forward would be to pursue deeper market integration. Decreasing
transaction costs (both tariffs and non-tariffs) and render external tariffs non-
discriminatory for third countries would be a step in the right direction. Indeed, a
Customs Union is inferior to a non discriminatory trade liberalisation. This open
regionalism should enhance the EEU in terms of economic relevance but it may
undermine the Russian economic relevance in Central Asia.98 Arguably, the impact of

97 Crisis Group. (2016). The Eurasian Economic Union : Power, Politics and Trade (Europe and
Central Asia Report No. 240). Crisis Group.
98 Pomfret, R. (2014). The Economics of the Customs Union . In Putins grand strategy: the

Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk Road
Studies Program (SAIS).
34
the devaluation as well as the trade diversion could be mitigated to a certain extent by
a common currency but Kazakhstan is clear about it: no further giving away of
sovereignty.99 Ultimately, economic progress for the EEU hinges on a score of key
factors among which:
Openness to other regional bodies and trade regimes
A shift from geopolitical to economic incentives
A reform of governance and a real fight on corruption
Streamlining of labour migrants law
Strengthening of institutions with means and authority to implement

c) Members perspective on the EEU

Belarus
It has a consistent record of participating in integration project led by Russia because
the latter represents about 50% of its external trade. The autocratic nature of
Lukashenko's regime limits the options available to the country. Arguably, one of the
main attractions for Belarus in the Eurasian Economic Union is the perspective of a
common energy market. As it is not scheduled to be established before 2025, Belarus
stands to receive a negotiated $1.5 billion in compensation.100 Therefore, it seems like
joining the EEU was a logical step in the effort to keep the rents of loyalty flowing.101
Belaruss main negotiating card is the oil pipeline (friendship in english)
which ferries 70 million tons of oil or practically half of Russias export to the EU. In
addition, 44 Billion Cubic Meters of gas per year finds its way to Europe. The transit
rents include subsidised oil and gas supplies amounting to about 15% of the GDP of
the country. Hence, neither Russia nor Belarus have an interest in seeing the energy

99 Indeo, F. (2016). The Eurasian Economic Union and the Silk Road Economic Belt : the impact
of the Sino-Russian geopolitical strategies in the Eurasia region (Working Paper No. 2016/5).
Maastricht School of Management.
100 Astapenia, R. (2015). Belarus and the Eurasian Economic Union : The view from Minsk.

European Council on Foreign Relations.


101 Atiglan, C. (2014). The Eurasian Union, International Reports, Articles, International Reports,

Konrad-Adenauer-Stiftung (International Reports of the Konrad-Adenauer-Stiftung No. 2). Konrad-


Adenauer-Stiftung (KAS).
35
flows grind to a halt. Nonetheless when political tensions arise they are often
accompanied with restricting trade moves in an attempt to yield political concessions.

Russia
The economic rationale for EEU integration from Russias perspective is the
historical interdependence of the Post-Soviet economies and transport networks. At
the strategic level, the union constitutes a base for global power projection by
leveraging its comparative advantages in the region (common history, language,
culture).102 A majority of Russians view this project favourably, as an opportunity for
Russia to return as a great power. The calls for higher levels of political (Eurasian
Parliament) and monetary integration (common currency) mainly come from Russia
and are viewed critically in other capitals.103 Critics argue that EEU will further
increase the dominant position of Russia towards its regional partners and be used as
a platform for confrontation with the West, challenging the other members
commitment to the union.104 Indeed, while the Eurasian Economic Union is strong of
183 million inhabitants and its GDP is of $4,1 trillion, the share of Russia is
overwhelming. With a GDP of $3,9 trillion and a population of 144 million it weighs
about 85% of the GDP and 84% of the population.105 The aggregate GDP of Armenia,
Belarus and Kyrgyzstan make 5,4% of the Russian GDP, 19,4% if Kazakhstan is
added. Given this imbalance, Russias view of the EEU as a new pole of power in
world politics under its leadership will be complex to challenge.

Kazakhstan

102 Weitz, R. (2014). The Customs Union and Eurasian Union: A Primer. In Putins grand strategy:
the Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk
Road Studies Program (SAIS).
103 Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and

the likely. Paris: ISS.


104 Crisis Group. (2016). The Eurasian Economic Union : Power, Politics and Trade (Europe and

Central Asia Report No. 240). Crisis Group.


105 Daly, J. (2014). Kazakhstan and Belarus: Buyers Remorse? In Putins grand strategy: the

Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk Road
Studies Program (SAIS).
36
In the Union, Kazakhstan represents 8% of the GDP and 10% of the population: the
second economy and population of the union.106 Kazakhstan remains Russias main
strategic partner and always joined the Russian integration attempts and now enjoys
membership in both in the EEU and CSTO. Kazakhstan leadership was clear in
proposing the Eurasian Economic Union as early as 1994. But nowadays, the
countrys vision of the union do not fully coincide in all respects with Russia's.
Nazerbaiev is adamant that border controls, migration, security, defence, healthcare,
education and culture can not be discussed as they are strictly sovereign matters. The
union should remain in the realm of economics. The urge of Moscow to integrate new
members to the Union as well as Russian members of the EEC also taking part in
sessions of the Russian government is resented by Astana. As a result of the
application of the common external tariff, increased increased 45% of its tariff
lines.107 Consequently the average external tariff upped from 6.7% to 11.1%. This is
contrary to the 6,1% average tariff negotiated during WTO accession.108 In the short
term, the higher tariffs mean an bonanza of 1,3B dollars in budget revenues. On the
long term however Kazakhstan may stand to loose Foreign Direct Investments, and
sever its commercial links to non-EEU members.109 Kazakhstan is pursuing a multi
vector strategy to engage with multiple actors. Consequently, refuses to take sides in
the conflict that opposes Russia to the West and did not enforce the counter-sanctions

106 Daly, J. (2014). Kazakhstan and Belarus: Buyers Remorse? In Putins grand strategy: the
Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk Road
Studies Program (SAIS).
107 Libman, A. M., & Vinokurov, E. J. (2012). Holding-together regionalism: twenty years of post-

Soviet integration. Basingstoke, Hampshire: Palgrave Macmillan.


108 Tarr, D. G. (2016). The Eurasian Economic Union of Russia, Belarus, Kazakhstan, Armenia,

and the Kyrgyz Republic: Can It Succeed Where Its Predecessor Failed? Eastern European
Economics, 54(1), 122.
109 Pomfret, R. (2014). The Economics of the Customs Union. In Putins grand strategy: the

Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk Road
Studies Program (SAIS).
37
proposed by Russia.110 Actually, far from implementing them, Kazakhstan increased
its cooperation with Ukraine and both heads of state visited each others capitals.111
Kazakhstan is also in the process of changing the alphabet from cyrillic to latin. It is
so far unclear wether that is intended as a message of defiance towards Russia or as a
move to better integrate with the other turkic-based languages.

Kyrgyzstan
The country has one of the smallest population of the Post-Soviet-space with nearly 6
million inhabitants, its GDP is of $7,2 billion and state budget about $2 billion.112 The
country has endemic social problems related to poverty, unemployment as well as
poor education and health systems. According to an advisor to the minister of
Economy of Kyrgyzstan, the elite expects foreign aid as a due rent and this mentality
has a deep negative effect on governance.113 The Kyrgyz economy depends
extensively on the re-export of Chinese goods, the Kumtor gold mine and the
remittances (28% of the GDP). The latter was a great bargaining chip for Russia to
pull Kyrgyzstan in with the promise of streamlined administrative processes and
social rights for the workers expatriated in the union. Other measures to convince
Kyrgyzstan to board the EEU included a promise to finance the countrys accession
($200 million) and create a Russian-Kyrgyz Development Fund of $1 billion.114

110 Moreover, in the height of the tension on the Ukraine crisis, comments from the Russian
politician Jirinovski and writer Limonov about integrating part or all of Kazakhstan into Russia has
sparked outcry in the country. In response, the Kazakh government has legislated that threats or
advocacy of threats to national integrity would be punished by 10 years in prison. Both Jirinovski
and Limonov were declared persona non grata in Kazakhstan.
Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and the
likely. Paris: ISS. Retrieved from
111 Bugajski, J., & Assenova, M. (2016). Eurasian disunion: Russias vulnerable flanks. Washington,

DC: The Jamestown Foundation.


112 Thorez, J. (2016). La nouvelle Route de la soie": une notion porteuse dillusion. Questions

internationales, 82, 3341.


113 Rakhimov, K. (2017, 03). Advisor to the minister of Economy in Kyrgyzstan. Interview on the

EEU and OBOR in Bishkek.


114Mashrab, F. (2016). Eurasian Unions Expansion Falters Amid Russias Economic Woes (Eurasia

Daily Monitor No. 13). 42: Jameston Foundation.


38
Kazakhstan also provides $41 million in technical assistance.115 The prospects of the
common energy market was also of great importance to the country which struggles
with energy stress. The energy imports mainly come from Uzbekistan which
Kyrgyzstan failed to pay on several occasions resulting in energy cuts. Consequently,
the EEU accession bargain included that Russia would guarantee the energy security
of the country and took over its energy infrastructure in exchange for the promise to
invest $600 million in it. Unfortunately, given the current troubles in the Russian
economy, only $350 million were allocated to the fund and the promised Hydro-
electric plant is on a halt. The economic slowdown in Russia had terrific
consequences given the Kyrgyz dependence on remittances as mentioned above.116
Further, the integration of Kyrgyzstan is not unanimously saluted since there is doubt
about capacity and integrity of the Kyrgyz customs to enforce the external custom
frontier of the EEU with China.117 Accession has raised tariffs significantly and put
stress on cheap foodstuff imported from China which is resented in a country that
experienced difficulties with food security and associated social turmoil.
Kyrgyzstans commitments to the WTO118 will be hard to conciliate with the
membership in the EEU. The union has effectively raised the countrys average
external tariff and displaced trade with non-EEU countries. This combined with the
customs rights no longer perceived because of the EEU may endanger the capacity of
the state to deliver on its social obligations and lead to unrest. Nonetheless 82% of
the population is in favour of the accession with support among the business
community, the farmers as well as migrants and their benefactors. Resistance is
strong among bankers and the political elite: afraid of seeing their power diluted in
the Union structures. Nationalists are hostile as well, jealous of the countrys
sovereignty.

115 Kudryavtseva, T. (2017, March 18). Kazakhstan to allocate $ 41 million of technical assistance
to Kyrgyzstan.
116 Kubayeva, G. Economic Impact of the Eurasian Economic Union on Central Asia , (OSCE

Academy, Central Asia Security Policy Brief, Biskhek, February 2015), p.10
117 Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and

the likely. Paris: ISS.


118 member of the WTO since 1998.

39
Armenia
Previously, Armenia followed a foreign policy of complementarity much akin to the
one Multi-Vector policy of Ukraine or Kazakhstan. It nearly signed an Association
Agreement with the EU before its leadership did a U-turn and applied to join the
EEU. Most probably, Russia used its position as Armenias ally and only security
provider in its conflict with Azerbaijan over Nagorno-Karabakh.119 Interestingly,
Armenia's accession to the EEU does not concern Nagorno-Karabakh since it is
legally part of Azerbaijan. The EEU being posited as compliant to international
regulation, any other stance would have hurt its credibility.120 Regardless of the
disputed status of Crimea it is included in the EEU as part of the Russian territory,
raising questions of consistency and double standards. As far as economy is
concerned, Armenia is the second to last (Kyrgyzstan) with a GDP of $10 billion. The
population is of three millions, the smallest in the union. The average tariff negotiated
by Armenia to enter the WTO is not in conflict with the EEUs 2020 target.

d) Widening membership

Tajikistan seems the most likely of candidates, but it looks to be more of a burden
than an added strength to the union. This small, yet open economy is still the poorest
post-Soviet space. GDP per capita is $2982. The national economy revolves around
industries (machinery, aluminium, fertilisers) and agriculture (both crops and
livestock). The country has nonetheless enjoyed solid 8-10% economic growth over
the last decade sustained by dynamic exports of cotton and aluminium. But the
domestic consumption, construction and services sectors is very much dependant on
the remittances of Tajiks working in Russia. In 2013 they amounted to $4 billion or
about 25% of the countrys GDP and expatriated workers represented half of the
countrys workforce. The country also heavily relied on international help programs

119 With the Azerbaijani and Turkish frontiers closed, Armenia is even more dependent on Russia
and therefore open to pressures.Grigorian, A. (2014). Armenia: Joining under the Gun. In Putins
grand strategy: the Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus
Institute & Silk Road Studies Program (SAIS).
120 Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and

the likely. Paris: ISS.


40
to the extent that it makes up 10% of its budget revenue. Moreover, its territory is
landlocked and poorly connected. About 90% of the exports to the EEU depends on
one railway connection through Uzbekistan. The latter raises transit costs frequently
in the absence of an alternative. EEU membership would mean unrestricted legal
access to the common labor market and the associated social rights. With a rapidly
growing population and 150 thousands youth on the labor market each year, the
question of finding jobs is a matter of national security. It is estimated that entering
the union would provoke a surge of migrants from Tajikistan of 15-20%. While trade
with neighbouring China, Afghanistan and Pakistan may decrease due to higher EEU
tariffs, the local industriess exports to other member states could be boosted. In the
long term, a common energy market and investments would be positive developments
associated with membership. In any case, 90% of Tajikistans petroleum products are
imported from Russia with an obvious dependency implied.121 Although there seems
to be support in the Tajik leadership for a EEU bid, the prospect of bigger Chinese
investments may shift their focus.122 Additionaly the Chinese do not see the EEU as a
challenge to their Belt and Road Initiative. Hence it is in the Tajik interests to join the
union as a counterweight to the Chinese influence. But any case, given the regional
economic crisis, it is probable that the union is in no hurry to bear the burden of
integrating another weak economy.123 It can be expected that Tajikistan will
eventually join but the country will try to time accession when the benefits clearly
outweigh the drawbacks. In this regards, the progressive alignment of the EEUs
external trade tariff reflecting Russias 2020 WTO commitment may soften the blow
to non-EEU trade. Other post-soviet countries look less likely to join. Ukraine is torn
by war and its short term prospects are unclear though it has chosen a European path.
The Baltic are in the EU therefore out of question.124 Moldova and Georgia have

121 Zhang, H. (2015). Building the Silk Road Economic Belt : Challenges in Central Asia.
Cambridge Journal of China Studies, 10(3).
122 When the EurAsEc was discontinued, the Customs Union launched and the EEU announced, the

Tajik president asked 6 expert groups to assess the economic consequences of joining the union.
123 Crisis Group. (2016). The Eurasian Economic Union : Power, Politics and Trade (Europe and

Central Asia Report No. 240). Crisis Group.


124 Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and

the likely. Paris: ISS. Retrieved from


41
signed Association Agreements with the EU, Azerbaijan is politically isolationist and
keeps away from integration attempts.125 So is Uzbekistan, although the late president
Karimov was open to negotiations on a FTA with the Union.126 The countrys GDP
also depends 15-25% on remittances coming from Russia. But in 2013, a joint
declaration was signed On Further Development and Deepening Bilateral Relations
of Strategic Partnership which included a commitment not to become part of
alliances detrimental to the sovereignty and security of the counterpart. An
understanding of security including economic interest (which is the stance of China)
would point to the investments of China in Uzbekistan as incompatible with the EEU
in this regard. But beyond membership, the EEU is active in its external links. In
2015 a free trade agreement with Vietnam was signed and negotiations are reportedly
underway with Israel, India, and Egypt.127

e) Relations with the West

The EEUs relation with the West has been hampered by the Russo-Ukrainian crisis
and the ensuing series of sanctions and counter sanctions. The US and EU measures
targeting Russia have had a further impact on the already contracting Russian
economy. And Russia's counter sanctions against EU agricultural products was as
well quite effective. But contrary to what Moscow would have wanted none of the
fellow EEU members have joined in on implementing the sanction against the EU.128
Rather they have benefited from the situation as foodstuff entered the Russian market
through Belarus often marked as bound to Kazakhstan. This happened even before

125 Russian Azerbaijani security relationship is complicated. Azerbaijan is part of NATO partnership
for peace and refuse to enter the CSTO it has a working relation with the European Union Turkey
and Iran.
126Indeo, F. (2016). The Eurasian Economic Union and the Silk Road Economic Belt : the impact

of the Sino-Russian geopolitical strategies in the Eurasia region (Working Paper No. 2016/5).
Maastricht School of Management.
127 Vasilyeva, N. A., & Lagutina, M. L. (2016). The Russian Project of Eurasian Integration:

Geopolitical Prospects. Rowman & Littlefield.


128 Actually the pattern repeated itself in the stand-off between Russia and Turkey in December

2015 following the downing out of the Russian aeroplane in the Northern part of Syria. None of the
EEU member states joined Moscow in putting sanctions on Turkey.
42
the EEU entered into force. In response to Ukraines AA/DCFTA going online Russia
discontinued its recognition of the CIS free trade agreements and blocked Ukrainian
goods at the frontier while the rest of the ECU continue business as usual with
Ukraine. Theses issues were addressed by the EEC but no agreement was reached.129
With regards to the official relation between the EU and the EEU, the latter openly
call for engagement.130 Opinions in the EU, in turn are far from unanimous.
Supporters of engagement think that the EEU could be a new interlocutor not entirely
controlled by Moscow. Senior EEC technocrats such as Tatyana Valovaya and
Veronica Nikishina, respectively responsible for macroeconomics and trade are
considered competent in Brussels. In 2015 a letter from Jean-Claude Junker -the
president of the European Commission (EC) hinted possible corporation with the
EEU, given certain criteria were met. Among them, fairer decision-making process
more inclusive of smaller state - and guaranteeing their independent voice - within
the EEU would be prerequisites. On the other hand, critics argue talks would
legitimise both the EEU itself and Russia's actions in Ukraine and undermine bilateral
relations with other EEU member state. The EEU is often thought of as a Russian led
response to the Eastern Partnership with little capacity to propose something really
beneficial. Conducting talks would mean accepting the Russian vision of a bipolar
Europe.131

129 Crisis Group. (2016). The Eurasian Economic Union : Power, Politics and Trade (Europe and
Central Asia Report No. 240). Crisis Group.
130 In 2010, then Russian prime Minister Vladimir Putin proposed is to establish trade relations

between the Customs Union and European Union. But Moscow still perceives the EU's AAs and
DCFTAs as tools to challenge Russia's position into what it considers its sphere of influence.
Further, the EU and the US tend to have a moralistic approach to other forms of political
organisation and their advocacy for their brand of democracy and human rights is met with
suspicions in Belarus, Kazakhstan and Russia.
131 Chiarello, A. (2015). Paper Tiger or Game Changer? Challenges and opportunities of EU

engagement with the Eurasian Economic Union . College of Europe, EU International Relations
and Diplomacy Studies.
43
III. The Silk Road Economic Belt
(SREB)
This young Eurasian Economic Union, unprecedented in the Post-Soviet Integration
record as well as facing structural and conjectural challenges of its own will have to
face a much greater project intersecting its territory: The Belt and Road Initiative
(BRI). Its a vision proposed by China constituted of The Belt (Silk Road Economic
Belt or SREB) and the Road (The New Maritime Silk Road) as the two parts of the
Chinese grand design for Eurasia. The two are designed in coordination and proceed
from the same effort to increase Chinas connectivity with the World. In practical
terms, New Maritime Silk Road consists of investments in ports and shipments
facilities.132 The present work is dedicated to the land based component: the Silk
Road Economic Belt.133 At first, an account of the conditions in and out of China -
the menaces and opportunities- that shaped the apparition of the Belt and Road
Initiative will be given. The second part will explain the SREBs aim and nature as
well as the resources being allocated to it. The present chapter will close the
empirical part and call for a discussion on the relation between the EEU and the BRI
as well as the role that Kazakhstan will play in the two frameworks.

A. The Silk Road then and now

a) History : what was the Silk Road ?

132 It originates in Quanzhou in the province of Fujian and crosses the Malacca Strait, rounds the
tip of the Indian Subcontinent before splitting into two flows. One crosses the Suez Canal towards
Venice and the rest of Europe while the other connects with Eastern Africa through the port of
Nairobi
The New Maritime Silk Road was announced in October 2013 in Indonesia. The general project
was unveiled as One Belt One Road at the 2014 APEC summit in Beijing
133 The details of the New Maritime Silk Road and its implication will not be discussed in this

thesis, the focus of which is making sense of the Kazakh role in the SREB and the EEU. The
Eurasian landmass on which these projects operate is quite insulated from maritime exposure by the
Himalaya. Further the New Maritime Silk Road, does not involve any countries of the EEU and its
impact should be indirect although it may be an interesting direction for future research.
44
Rather than a single well-established road, the Silk Roads were many. They formed a
network along which goods and ideas where exchanged quite intensively for about 12
centuries. The Empires born in modern-day Iran had already created efficient East-
West connections and joined the Caspian and Mediterranean Seas to the Persian Gulf
five century before the Christian era. When Alexander the Great died after having
defeated the Achaemenid Empire in Persia (323 BC), some of his veterans settled in
the new city of Alexandria (now in Tajikistan). The greek warriors founded the
Seleucid Empire in these lands and extended their control as far as the seres as
ancient greek historian Strabo reports in the last century BC.134 The Greek referred to
the Chinese as Seres and silk was Serica hence the civilisation was named after its
most famed good. Meanwhile, the Han dynasty was threatened by nomadic tribes to
its North and West. Upon meeting with the Greek descendants, they were very
impressed by the size and speed of the horses they used. They could represent an
edge in the fight against their enemies from the steppes. Used as an item of trade for
its value, its lightness and its softness, silk grew popular among the ruling elite of the
young and growing Roman Empire as a symbol of wealth and power. But the fabric
was also used as a salaries in remote regions were barter was still the fact of life, or as
a fine for disobeying citizens in China.135 Beyond these two items of trade many
others circulated along these roads: inventions like paper and gunpowder,
commodities like spices and slaves, metals and precious stones. Religions as welled
struggled for influence and empires for control of the routes. Through the road and
the intensive human contacts diseases spread as well. The land-based transportation
routes were the main veins through which commerce between West and East Asia
took place through a web of cities now mostly forgotten: Boukhara, Khiva
Samarkand, Kashgar.136 The existence of dynamic connections between East and
West was critical for the emergence and prosperity of the civilisations of China,

134 Grainger, J. D. (2009). Alexander the Great failure: the collapse of the Macedonian Empire.
London; New York: Hambledon Continuum.
135 Frankopan, P. (2016). The Silk Roads: a new history of the world (First US edition). New York:

Alfred A. Knopf.
136 Sahbaz, U. (2014). The Modern Silk Road: One way or Another? (Policy Brief). German

Marshall Fund of the United States.


45
Persia, Arabia, the Indian Subcontinent, Northern Africa, and Europe. In the fifth
century AD, Rome fell and the demand for Silk in the West decreased. The Eastern
head of the empire remained as the Byzantine empire and towards the middle of the
6th century the secret of silk was pierced and production started in Anatolia. Later,
the discovery of trade routes to the Americas and Asia round the Southern tip of
Africa as well as the fantastic inflows of American gold to Europe placed it at the
centre of exchanges, greatly decreasing the importance of land-based trade along the
spine of Asia.137 The name Silk Road, however, was coined in 1877 by Ferdinand
von Richthofen, a German geographer and has been intimately linked to the historical
record of Central Asia ever since. The notion of Silk Road has attracted lots of
scholarly attention and inflame popular imagination as a romantic and fantasied
visions of ancient times. But some scholars argue the notion of a Road as the main
defining factor of such a vast space over such a long period is not only inaccurate but
dangerous. It conjures the vision of a bipolar trade axis between China and Rome and
glosses over the existence of empires and civilisations in between especially the
Persian.138 The current centrality of the West in contemporary affairs has made us
believe that this centrality was inherited from Rome just as Rome had inherited from
Greece, discarding the East as inferior.139 We tend to equate the supremacy of Rome
over the mediterranean world as dominion of the world. But we fail to realise that
geographical Europe was actually at the fringes of the world economy until 1500.

b) The Silk road discourse Nowadays: the power of an idea

Notwithstanding, the Silk Road is commonly viewed as a development mechanism


that accommodated interests by way of commerce and cultural exchanges, placing the
geopolitical interests in the background. 140 As such it has been increasingly endorsed

137 Frankopan, P. (2016). The Silk Roads: a new history of the world (First US edition). New York:
Alfred A. Knopf.
138 Rezakhani, K. (2010). The Road That Never Was: The Silk Road and Trans-Eurasian Exchange.

Comparative Studies of South Asia, Africa and the Middle-East, 30(3).


139 Said, E. W., & Laade, W. (1978). Orientalism. London: Routledge & Kegan.

140 Larouche, L. (2016). Building a World Land-Bridge: Realizing Mankinds True Humanity:

Executive Intelligence Review; Volume 43. CreateSpace Independent Publishing Platform. and
earlier writings.
46
by a variety of actors (both intra and extra-regional) to propose their vision of
connectivity for Eurasia. The first such instance was the opening of the Karakorum
Highway between China and Pakistan in the 80s.141 Then, in 1997, the Kazakh leader
made references to the Silk Road in his strategy towards 2030. More recently the
EUs program TRACECA (Transport Corridor Europe Caucasus Asia) was also
advertised as an effort to shape the 21st century Silk Road. Under the Asian
Development Bank, the CAREC framework (Central Asia Regional Economic
Cooperation) was given the mission to fund the reconstruction of the Silk Road along
five economic corridor in Central Asia and enhance trade facilitation. Regional
payers such as Turkey, India, Iran refer to it in their discourses. Finally, in 2011 the
US also launched its version of New Silk Roads as a way to strengthen Central Asian
- South Asian connectivity and disentangle them from a dominant Russian
influence.142 Interestingly, Russia does not refer to the silk road as much as other
Eurasian actors although the ancient Rus' -the ancestors of modern day Russia- were
much involved in the commerce along the Silk Roads. Instead, Russia prefers a
territorially constructed vision of a common Eurasian identity. This Eurasianism
projects the inclusion of Central Asia in the Russian empire and the Soviet Union as
well as the multi-ethnic nature of Russia itself as rationales for integration of the
continent.

c) Land based trade nowadays: why bother ?

Whatever the real importance that the Silk Road had in the past and its popularity
among scholars and strategy planners in our days, the relevance of land-based trade
in Eurasia is at best questionable. That is because, maritime shipping now constitute
the backbone of globalised trade. In 2014, the volume of trade of Central Asia with
the rest of the world represented 0,5% of the total and $200 Billion in value. Every
year, an estimated 15 million container TEU (Twenty-foot Equivalent Unit) travel
between Asia and Europe. The terrestrial route accounts for a few thousand

141Boulnois, L. (2010). La route de la soie: dieux, guerriers et marchands. Genve: d. Olizane.


142Laruelle, M. (2015). The US Silk Road: geopolitical imaginary or the repackaging of strategic
interests? Eurasian Geography and Economics, 56(4), 360375.
47
containers every year and yet the ambitiously target to ferry 10% of the Asia-Europe
freight was set for the region.143 The economic realism of such a goal seems far
fetched. Both in volume and value there is a massive gap between the terrestrial and
maritime trade options. Maritime trade is more than six times cheaper than rail
transport. Indeed, how can a train towing 100 to 120 units compete with the gigantic
capacities of the latest vessels reaching 19 000 containers?144 Further the
infrastructure in the Eurasian landmass is not up to standards and chokepoints are
many. Building and maintaining infrastructure is too costly for CA states to pursue
large scale projects alone. Plus, standards, legislations and infrastructures are
different from one country to another, slowing down the transit and creating
vulnerabilities.145 Therefore, the question is why would one want to develop such
costly infrastructure when a cheaper option already works ?

A. Against all odds: looking for the rationales

China is both pushed by challenges to its economy and security environment as well
as pulled by the opportunity that lie with the fulfilment of the Silk Road. I use a
threat-opportunity model to assess the context in which the Silk Road is projected.

a) The threats: a securitisation logic

The economic model


The global economy was painfully hit by the financial crisis started in 2008 and
China was no exception. But the Middle-Kingdom recovered spectacularly right after
the crisis; back to the double digits it had experienced in the previous decades.
However, the growth decreased sharply over the past five years and has now settled

143 Thorez, J. (2016). La nouvelle Route de la soie": une notion porteuse dillusion. Questions
internationales, 82, 3341.
144 The latest Triple E Class container ships essentially have the capacity of 170 container trains.

Vinokourov, E. (2016). Transport Corridors of the Silk Road Economic Belt Across the Eurasian
Economic Union : Preliminary Estimates for Transportation Capacity and Investment Needs.
145 The reality of China-Euro trade seems to reflect these constraints. On the one hand the two

countries essential to Eurasian land trade; Kazakhstan and Russia have handled respectively 40,000
TEU and 3,5 million TEU per year in 2015. On the other canal of Suez, through which passes most
of the Sino-EU traded goods shipped 14,6 million TEU that same year.
48
around 7% per year since 2014. In the past, the massive amounts of foreign currency
earned from the positive trade balance were re-invested in the national economy in
the form of infrastructure investments. But lately the internal demand for
infrastructure decreased as the rate of equipment rose. The construction sector and
infrastructures over-capacities further slow the countrys growth. Additionally, the
Eastern coastal harbours are saturated as the demand for transportation twice exceeds
the capacities of the facilities.146 The leadership is quite aware that lower economic
growth may fuel discontent with the government or even social unrest.147 This new
normal demands substantial adaptation.148 Meanwhile, other pressing issues are to
be addressed.

The internal security

The Xianjang Uighur Autonomous Region is the largest and Westernmost


administrative district and of China but only 4,3% of its territory is hospitable to life
because of the harsh desert conditions.149 It ranks 25th out of 29 regions in terms of
gross domestic product. Muslim Uighur are a majority and their claims to
independence have been harshly repressed by Beijing, fuelling unrest and even a
strong terrorist menace.150 Moreover, Central Asia hosts a Uyghur diaspora (mostly in
Tajikistan and Kyrgyzstan) of 300 000 peoples and a vast border of 3700km making
it a cross-border issue.151 Beijing is concerned about Afghanistans instability and
CAs weakness providing a safe haven for terrorists and separatists preparing

146Kazutomo, A., & Wilson, J. (2009). Weathering the Storm Investing in Port Infrastructure to
Lower Trade Costs in East Asia (Policy Research Working Paper No. 4911). The World Bank.
147 Aoyama, R. (2016). One Belt, One Road: Chinas New Global Strategy. Journal of

Contemporary East Asia Studies, 5(2), 322.


148 Kratz, A. (2015). One Belt, One Road: Whats in it for Chinas economic players? (China

Analysis No. 3). European Council on Foreign Relations.


149 Xinjiang Sees Annual Population Growth of 340,000. (2000, June 9). Peoples Daily.

150 In 2014 an attack resulted in 9 dead and over 130 wounded in the railway station of Kunming.

151 Moreover, 78% of the Xianjang production is already bound to Central Asia.

49
operations in the Xianjang or against Chinese asset abroad.152 Pekins fear of popular
unrest was further evidenced during the 2005 Kyrgyz Tulip Revolution and the
uprising in neighbouring Uzbekistan whereby Beijing politically supported the harsh
response of the Uzbek authorities amid condemnation of the West.

The Energy security

Chinas growth has meant a consequential increase of its demand in energy and self
sufficiency gave way to dependence on imports in 1993.153 Increased attention has
been devoted to diversifying its supply sources and routes.154 First, China is wary of
its reliance on Gulf Countries because of the regions political instability. Second,
maritime shipment make 80% of its oil supplies. These may be threatened by piracy
and the strait of Malacca is a major chokepoint for Chinese supplies. As of 2012, 57%
of its imported oil sailed through the strait, thereby vulnerable to an eventual
maritime blockade.155 For these reasons China seeks to increase its land-based
supplies. The value of imports from Russia rose to $30 billion in the period from
2000 to 2012.156 Central Asia as well represents a great opportunity for securing new

152 In 2016 a suicide bomb on the Chinese embassy in Kyrgyzstan has further alarmed the
leadership about the need to address the burning question of security. Indeo, F. (2015). China as
security provider in Central Asia Post 2014: a realistic perspective? (Central Asia Security Policy
Briefs No. 17). OSCE academy.
153 In 1990, Chinas demand for primary energy was of 872 Mtoe (Million Tons of Oil Equivalent)

while the 2008 estimate was 2131 Mtoe. Chinas natural gas demand is bound to grow from 85
billion cubic meters in 2008, to 216 billion cubic meters in 2020, and to 395 billion cubic meters in
2035 ". Chinas mid-term strategy is to augment its reliance on LNG to reach 30% in 2020 of
natural gas imports and 50% in 2035. Four LNG terminals have been built along the Chinese coasts.
Andrews-Speed Philip, Xuanli Liao and Roland Dannereuther. The Strategic Implications of
Chinas Energy Needs. Adelphi Paper 346, Oxford and N.Y.: Oxford University Press
154 Nota: Chinas claims for diversification are legitimate and well founded. However, both security

of procurement and security of transportation routes are often used as excuses to justify (at the
domestic and global level) its territorial expansion (South China Sea claims) and the extension of its
influence in neighboring regions (CA).
155 Heinrich, A., & Pleines, H. (2015). Introduction: The political economy of the Caspian oil and

gas states. Journal of Eurasian Studies, 6(2), 8990.


156 But until recently, Russia barred China from investing and setting up joint ventures in its energy

sector. But the Ukraine crisis barred Russias access to Western credits and technology and pushed
it to change its mind and selectively open to Chinese investments. Brugier, C. (2014). Chinas way:
the new Silk Road (Brief Issue No. 14). European Union Institute for Security Studies.
50
sources and routes of supply. The Turkmen natural gas flowing through the China
Asia Gas Pipeline (CAGP) accounts for 50% of the Chinese gas intake which makes
the trade relation crucial to both countries.157 Especially since China plans to increase
the share of gas into its energy mix. Therefore, a $8 billion loan was granted to
Turkmenistan to kickstart the exploitation of the Galkynysh giant gas field. Further,
the construction of the line C and D of the CAGP will increase the importance of
securing this energy corridor as the current 21,3 BCM/year will be tripled to 65
BCM/Y in 2020. The centrality of Central Asia in Chinas oil supply was also
demonstrated in the 8% share in the Caspian offshore oil project of Kashagan in
Kazakhstan. The production of Chinese companies in the oil and gas soon are soon to
reach 40% of the total output of Kazakhstan.158 The pace and scale of this
involvement does not please certain elements within the Kazakh elite and China has
already been pressured into selling shares in an energy company at a loss. The
security of the oversees investments is therefore a new concern. Consequently, China
proposed in the 2015 white paper on the BRI to guarantee the security of investments
by law.159 Its realistic to expect that further investments will be conditioned on the
inclusion of such provisions.

Great power rivalry: pressure comes from the sea

The Sino-American relation has grown tense in the past decade as China grew more
assertive and the US fearful of the rising Chinese commercial and political power.
Although the Obama administration claimed to welcomed the Chinese rise, the 2009
policy of Rebalancing to Asia suggested the contrary. The US military and
economic capabilities are strongly mobilised to contain China. The deployment of 60

157 Indeo, F. (2016). The Eurasian Economic Union and the Silk Road Economic Belt : the impact
of the Sino-Russian geopolitical strategies in the Eurasia region (Working Paper No. 2016/5).
Maastricht School of Management.
158 Open Dialgue. (2013). Kazakhstan: A change of key players in the oil sector. Open Dialogue

Foundation.
159 National Development and Reform Commission. (2015). Vision and Actions on Jointly Building

Silk Road Economic Belt and 21st Century Maritime Silk Road. Ministry of Foreign Affairs, and
Ministry of Commerce of the Peoples Republic of China.
51
percent of the US navy under the Pacific Command is securitised as a threat from a
Chinese point of view. The US are using the territorial disputes and some neighbours
disputes with China as levers for pressure. For instance, since 2010, the US have sold
weapons to Taiwan. Newly appointed president Trump has had official contacts with
the Taiwanese leadership in spite of the One-China policy of dealing only with
mainland China.160 Clashes with Japan on water territoriality and the overlapping
claims of practically all South-Eastern Asian nations in the South China sea have
been occasions to further pressure China.161 All these instances evidence in the
Chinese understanding a coordinated US containment policy.162 Further, Trans-
Pacific Partnership is an american initiative to make sure that China does not get the
chance to write the rules of trade in the region. It excludes therefore China as well
as Russia.Hence, faced with the US pressure exerted through proxies in the East and
South, China is unwilling to have a confrontational policy because its economy is still
quite dependent on the USs consumption: 20% of the Chinese exports.163 Also,
conflict would contradict the overarching commitment to a peaceful rise. Therefore
China is seeking opportunities to address its economic, energetic and geopolitical
threats. The Belt and Road Initiative is in this view an effort to extend the strategic
security space Westwards.164 Before going into details about the nature of the
proposal, we will review some of the opportunities that can be seized if the threats are
viewed differently.

b) Opportunity: what if ?

160 Wang, Y. (2016). Offensive for defensive: the belt and road initiative and Chinas new grand
strategy. The Pacific Review, 29(3), 455463.
161 The US official meeting with the Dalai-Lama was interpreted as an hostile signal in China.

162 Although the momentum for leadership is increasingly in Chinas favour, it is careful not to

antagonise the US because of the power it has in international organisation, its privileged position
with many of Chinas neighbours, and its weight (20%) in the Chinese exports.
Aoyama, R. (2016). One Belt, One Road: Chinas New Global Strategy. Journal of Contemporary
East Asia Studies, 5(2), 322.
163 Observatory of Economic Complexity. (2017). OEC - China (CHN) Exports, Imports, and Trade

Partners.
164 Habova, A. (2015). Silk Road Economic Belt : Chinas Marshall plan, pivot to Eurasia or

Chinas way of Foreign Policy. KSI Transactions on Knowledge Society, 8(1), 6470.
52
Facing security threats, economic interests, and strategic imperatives, the Chinese
government has shifted tactics and hopes to achieve security through economic
development. As far as the Xianjang is concerned, rather than enforcing security at
all costs government has invested $91B in roads, railways, hydropower facilities and
other trade related projects within Xinjiang to improve its connectivity.165 For
example, in 2006, the 1,904-kilometer double-tracked Xinjiang-Lanzhou Railway has
connected Xinjiang to the rest of China.166 Overall, as of 2013, Beijings investments
in the infrastructure of the Western regions of China have amounted to $1,4
Trillion.167 The region's geographic position is an asset in the endeavour to project the
Silk Road into the neighbouring South, Central and West Asia. Consequently, the
regions long-term stability is vital to the countrys national security. But beyond the
Xianjang, the Asian Development Bank has identified a tremendous demand for
infrastructure in Asian developing countries. By 2020, the region will be in need of
$8 trillion in investments and the current investment mechanisms (mainly Western-
led) cannot meet this demand.168 Poor connectivity has impeded development. In
highly integrated and developed regions like the European Union, the intra-regional
trade accounts for 45 to 55 percent of the GDP. Even if the CA states are landlocked -
as such less prone to engage extra-regional trade partners - the intra-CA trade
represent only 4 to 8 % of the region's GDP. Consequently, the local industrial base is
not developed the opportunities to diversify the economies because of the resources
curse. Quite tellingly, although only Kazakhstan, and Turkmenistan, are resource-
rich, the non energy-related exports of CA countries only account for 20% of CAs

165 Brugier, C. (2014). Chinas way: the new Silk Road (Brief Issue No. 14). European Union
Institute for Security Studies.
166 Sahbaz, U. (2014). The Modern Silk Road: One way or Another? (Policy Brief). German

Marshall Fund of the United States.


167 But arguments have been made that these investments have not resulted in a substantial

amelioration of the populations conditions of life and prosperity but almost only expanded the
capacities to exploit natural resources in the region. Global Times. (2013). More public
infrastructure projects to Go West. Global Times.
168 Bhattacharyay, B. N., Kawai, M. and Nag, R. (2012) Infrastructure for Asian Connectivity.

Northampton, MA: Edward Elgar.


53
GDP.169 Europe being the largest consumer market and China one of the most
dynamic centres of production, CA is the weak economic and infrastructure link
between both. Consequently, the revitalisation of the railway links between East and
West offer the possibility for Central Asian countries to be a platform for industrial
production and transit. The construction of dry-ports can meet that opportunity, if
coupled with logistics centres with storage capacity, custom service and inter-modal
connectivity. In these conditions, the Chinese extra-capacities in infrastructure
building and the massive reserves of currency are no longer a liability but can be
converted into assets as part of an ambitious financing program. While the economic
model that gave 30 years of double digit growth no longer work in China proper,
conditions may have appeared to export the infrastructure building model to its West,
in Central Asia. Moreover, inside China a transition to higher Value-Added
production is underway.170 As the living standards are raising in China, companies
can find cheaper labor elsewhere. Consequently, the share of trade of finished
products (consumption goods) reached 54 % of the total trade in 2014, when it was
still 43 percent in 2005.171 The gradual refocus on production (export) and
consumption (import) of higher value goods decreases the relative cost of shipping.
For such goods, the capacity to respond quickly to market demands becomes more
important. And as we said earlier, Rail delivery is two times faster than the sea option
from China to Europe. Plus, goods from the developing Western regions of China
have to travel 3000 km to the Eastern coast harbours, adding cost and time, especially

169 Sahbaz, U. (2014). The Modern Silk Road: One way or Another? (Policy Brief). German
Marshall Fund of the United States.
170 To put this trend in perspective, it is crucial to understand that until the 1980s the first wave of

modern-era globalisation saw countries fighting in sectoral competition (German cars


manufacturers against their Japanese rivals). Global exchanges were fuelled by the search for low-
cost labor and easy access to sea transportation to reach consuming markets. This phase propelled
East Asia -and China primarily- as a major centre for global production and a hub for trade. But
now, the production processes for a single finished product are scattered around the planet due to
comparative economic advantage, legislative conditions as well as the decreased cost of
transportation. Moati, P., & Mouhoud, E. M. (n.d.). Les nouvelles logiques de dcomposition
internationale des processus productifs. Revue dconomie politique, 115(5), 573589.
171 Kratz, A. (2015). One Belt, One Road: Whats in it for Chinas economic players? (China

Analysis No. 3). European Council on Foreign Relations.


54
since the harbours are saturated.172 Besides, railway transport has a 20% smaller
carbon impact than maritime transportation. That can be converted into a bonus sold
on the newly established Chines carbon emission market.173 Still, the current cost of
transportation of a 20 foot-Equivalent Unit container (TEU) is between 700 and 1300
euros by sea and estimated between 3500-5000 euros by rail.174 As the Belt and Road
investments will reduce the cost of rail transport and greatly increase its capacity, the
question is wether the projected upgrade will offset the gap in price with the maritime
option and make it a viable option.175

B. Addressing Threats, Embracing opportunities: the SREB proposal

a) The Belt and Road Initiative in Chinas Foreign Policy: rupture or


continuity ?

The bedrock of Chinas development has been the search for political stability and
good neighbourhood relations to guarantee economic growth, in other words, focus
on China. This policy is best summed up in late statesman Deng Xiaopings
principles observe developments soberly, maintain our position, meet challenges
calmly, hide our capacities and bide our time, remain free of ambition, never claim
leadership.176 In the Chinese view, a low profile attitude coupled with a will to
engage neighbours in mutual beneficial cooperation is essential to build trust with
smaller states. But the 2008 crisis shook the balance of economic power and China
surpassed Japan in 2010 and now has become the largest economy according to the
IMF. The reality of globalised Chinese interests has commanded greater engagement
and China is growing more assertive in foreign policy, leaving in its wake the low-
profile policy. The biding time is over, and now the main theme of foreign policy is to

172 Vinokurov, E. (2016). Transport Corridors of the Silk Road Economic Belt Across the Eurasian
Economic Union : Preliminary Estimates for Transportation Capacity and Investment Needs.
173 Fialka, J. (2016, May 16). China Will Start the Worlds Largest Carbon Trading Market.

Scientific American.
174 Sahbaz, U. (2014). The Modern Silk Road: One way or Another? (Policy Brief). German

Marshall Fund of the United States.


175 Djankov, S., & Miner, S. (2016). Chinas Belt and Road Initiative: Motives, Scope, and

Challenges. Peterson Institute for International Economics.


176 Huang, Y. (2011, June 15). Context, not history, matters for Dengs famous phrase.Global Times.

55
strive for achievements.177 In the beginning of his tenure, Xi Jinping restructured
the foreign affairs and policy making community landscape that had been fragmented
by different interests groups at the expense of overall coherence. To that effect he
launched the National Security Committee to centralise the planning and decision
making. The new administration also recognised the necessity to ensure security on
the peripheries of China as a way to secure internal economic development. The 2013
forum on Peripheral Diplomacy introduced the concept of a community of common
destiny justifying engagement on a win-win basis. Different opinions were
emitted as for the direction that this peripheral diplomacy should take. But overall,
those advocating the necessity to advance Westwards appear to have had the upper
hand in the debate.178 This direction is not new. In the 50s, Mao had refocused
development effort from the East Coast to concentrate on inner China. In a
continuation of this effort, the past decade has seen a focus on the development of the
Western regions, Xianjang in particular. Hence One Belt One Road is consistent with
the Chinese foreign policy record and looks further West. Much attention is given to
the way the Initiative is perceived abroad, as the Chinese do not want to be seen as
revising the world order but supplement it in an effort to avoid a zero-sum thinking.
Arguably, China wants to avoid the geopolitical confrontation traditionally associated
with the rise of a great power.179 In this line of thought, the BRI is presented as
Chinas gift to the world and an offer to harness development of its neighbours on
Chinas economic might. The investment component has often conjured parallels
with the post WWII Marshall plan. But China rejects that qualification and assures it
is not seeking political alignment, influence or conformance to a set of values.
Partnership would be a fair description as China is also wary of the commitment that
alliances or treaties entail.

177 Yan, X. (2014). From Keeping a Low Profile to Striving for Achievement. The Chinese Journal
of International Politics, 7(2), 153184.
178 Chang-Liao, N. (2016). Chinas New Foreign Policy under Xi Jinping. Asian Security, 12(2),

8291.
179 Bondaz, A. (2015). Rebalancing Chinas geopolitics (China Analysis No. 2). European Council

on Foreign Relations.
56
b) To be further defined, the birth of an idea

The Belt and Road project in itself is an attempt to improve connectedness between
China and the other economic centres located on the Eurasian supercontinent. The
MFA of China claimed the BRI as its key focus in 2015 and proposed it as an attempt
to catalyse the revitalisation of the Eurasian continent.180 The material dimension of
the SREB contemplates the construction of a network of high-speed railways and
highways, pipelines, energy infrastructures, industrial zones, fibre-optic cables.181
The immaterial side is an attempt to lower all barriers to trade, investments and
cultural exchanges. It has not been defined as a clear project but rather as a general
aim to improve Chinas trade relations with its Eurasian neighbours.182 The Initiative
is still hotly debated in the politics and academics community regarding the future
direction of the scheme. The next couple of years will be dedicated to fine tuning the
plan before moving into implementation. Completion is expected in 2049, in time for
the 100th anniversary of PRC.183 The symbolic character of this objective is an
indication of the centrality of the Initiative as a vehicle to achieve the Chinese
Dream.184 More generally the initiative is based on the economic liberal idea that
political and security tensions can be eased through trade and economic connectivity.

c) Five official goals for the Belt and Road Initiative (BRI)

In September 2013, while visiting Kazakhstan, Xi Jinping the president of the


Peoples Republic of China (PRC), proposed the Silk Road Economic Belt (SREB).
An ambitious strategy to build an economic belt along the silk Road. The initiative
was made policy in November 2013 during the Third Plenary Session of the 18th
Central Committee of the Communist Party of China. Nonetheless, it was only in

180 Ministry of Foreign Affairs of the Peoples Republic of China (2015) Foreign Minister Wang Yi
Meets the Press
181 Habova, A. (2015). Silk Road Economic Belt : Chinas Marshall plan, pivot to Eurasia or

Chinas way of Foreign Policy. KSI Transactions on Knowledge Society, 8(1), 6470.
182 Knowler, G. (2015). One Belt One Road and a new terminal. Journal of Commerce.

183 Cohen, D. (2015). Chinas second opening: Grand ambitions but a long road ahead (China

Analysis No. 1). European Council on Foreign Relations.


184 Luzyanin, S. (2015). The Great Silk Road: From Sea to Sea (Discussion Club). Valdai Club.

57
2015 that more details were given in a white paper titled Vision and Actions on
Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road.
From this paper, the initiative is defined as follows: The BRI is a proposal to unlock
the economic development of the hinterland of the Eurasian continent and connect it
with other centres of globalisation. Posed as an argument for free trade and especially
the implementation of WTO regulations, integration and market allocation of
resources according to international norms and regulations: aligned on the UNs Five
Principles of Peaceful Coexistence.185 It includes all countries along the ancient silk
Road but is open to other countries, institutions and organisations wether
governmental or not to join the discussion. Five major areas for cooperation are
envisioned:
Policy coordination: at the intergovernmental level the creation of an exchange
and communication mechanism to coordinate the BRIs participants national
developments strategies and solve the issues related to their implementation.
Facilities Connectivity: amelioration of infrastructure and the connectivity between
countries for transport, energy and information. Removing of bottlenecks; both
physical and administrative (custom clearance, certificates)
Unimpeded trade: mutual recognition of regulation, and mutual assistance in law
enforcement as well as increased cooperation on certification of goods, standards,
inspection and quarantine regulations. Generally the directions given by the WTO
Trade Facilitation Agreement should be implemented along with the concept of
single window. All documents related to cross-border trade are submitted to a
single agency responsible for their dispatch to the relevant authorities (quarantine,
bank, insurance, custom, chambers of commerce) therefore saving much time. The
creation of industrial parks and cross-border economic cooperation zones.
Financial integration: the development of a bond market in Asia, currency swaps
and an early warning system to hedge against instability. The setting up of the
Asian Infrastructure Investment Bank, the BRICS New Development Bank and the

185UNs Five Principles of Peaceful Coexistence: respect for sovereignty and territorial integrity,
noninterference in internal affairs, equality and mutual benefit, nonaggression and peaceful
coexistence.
58
Silk Road Fund as multilateral financing bodies as well as an open policy towards
sovereign wealth funds and private capital to finance the projects under the Belt
and Road Initiative.
People to People Bonds; strengthening academic, cultural communications through
exchanges forums and events as well as inter-parliamentary visits, joint research
symposiums to build support from the populations and evidence the local benefits
and opportunities to be gained from the Initiative
In order to fulfil these goals, China intends to negotiate both at the bilateral level and
through the many multilateral frameworks already in place. Mainly the Shanghai
Cooperation Organisation ( SCO), ASEAN + China, AsiaPacific Economic
Cooperation (APEC) and the Central Asia Regional Economic Cooperation
(CAREC). So far both Xi Jinping and the Chinese premier Li Keying have toured the

Eurasian region and visited no less than 20 countries in an effort to promote the
Initiative and conduct these equal footed consultations about how the territories
crossed by the initiative can benefit. Indeed, China insists on the deal being a
collaborative and flexible effort to develop and connect Eurasia.186

C. The SREB is made of corridors

a) The corridors of the Silk Road Economic Belt

The Silk Road Economic Belt is about transport and trade corridors. In the most
optimistic scenario, the SREB may be able to channel about 4% of the trade between
China and Europe.187 The general direction the SREB is clearly Western both within
China and beyond but three corridors assume a Southern direction as the border
regions of the South of China reportedly lobbied to be included in the project.188 The

186 National Development and Reform Commission. (2015). Vision and Actions on Jointly Building
Silk Road Economic Belt and 21st Century Maritime Silk Road. Ministry of Foreign Affairs, and
Ministry of Commerce of the Peoples Republic of China.
187 Vinokurov, E. (2016). Transport Corridors of the Silk Road Economic Belt Across the Eurasian

Economic Union : Preliminary Estimates for Transportation Capacity and Investment Needs.
188 Kratz, A. (2015). One Belt, One Road: Whats in it for Chinas economic players? (China

Analysis No. 3). European Council on Foreign Relations.


59
Fig.1 Routes and Projected modernisation

Kunming Initiative or Bangladesh-China-India-Myanmar (BCIM)189 and the China


IndoChina Peninsula Economic Corridor (CIPEC).190 The China-Pakistan economic
Corridor (CPEC) in turn, assumes a South-West direction. The initial deal signed in
April 2015 was worth $46B, later upgraded to $62 billion.191 In this thesis, attention
will be cast on the SREB corridors that traverse EEU territory: mainly the New
Eurasian Land Bridge and China-Central-West Asia corridors. Behind the labels, a
greater number of itineraries actually are being studied in an effort to finance the
project based on sound economic rationale. Instead of a written description of the
routes, I created a compiled table of the transport current capacity, transport costs,
need for investments and the projected capacity and cost once the investments are

189 Bangladesh-China-India-Myanmar (BCIM) is the brain child of the Bengladeshi economist


Rehman Sobhan who argued for the development of the corridor in the 90s. It was adopted and
included in the Silk Road framework and as such was given new impetus.
190 It should be a step to further the trust building effort between the ASEAN and China after the

establishment of the Free Trade Agreement in 2003. Taillard, C. (2009). Un exemple russi de
rgionalisation transnationale en Asie orientale: les corridors de la Rgion du Grand Mkong.
Espace gographique, 38(1), 1.
191 It concerns roads, railways and pipelines and energy transformation producing capacity to be

built by Chinese companies. The corridor will connect the Xianjang to the Pakistan deep water port
of Gwadar already under Chinese Management. The deal also included a $2B loan to build the
Pakistani side of a gas pipeline from Iran. Although, Pakistan is experiencing energy stress, that
pipeline had been delayed because of threats of sanctions from the US for trading with Iran.
Siddiqui, S. (2017, April 12). CPEC investment pushed from $55b to $62b. The Express Tribune.
60
implemented. Figures were retrieved from a compilation of sources: Kazakhstan

Temir Zholy (KTZ -Kazakhstan Railways), InfraNews Research Centre data, PJSC
TransContainer; TRACECA Inter-Governmental Commission.

The Northern Corridor or New Eurasian Land Bridge is the routes by which goods
are sent to Europe through Kazakhstan and Russia or Russia alone (using the Trans-
Siberian). Goods enter the territory of Kazakhstan through Khorgos, join the Trans-
Siberian at Omsk and cross the rest of Russia and Belarus to join joining Europe.
There are serious advantages to this route. First, it traverses a single custom space
from China to Europe: the EEUs. Second it already has the biggest capacity. The
route crossing Kazakhstan to Omsk is only used at 20% of its transit potential: 350
000 TEUs /Year. The estimated costs to upgrade the combined capacity of the
Northern Corridor to 1 million TEU is of $10 billion. The current cost of rail
transportation to the Western border of Russia is $1300/TEU and expected to drop to
$1000/TEU. However, the Trans-Siberian is already working at full capacity with a
bottleneck between the Russian cities of Omsk and Novosibirsk which limits the
growth of the volumes shipped.192 A great strain will be placed on the extension of
the capacity of the Urumqi-Khorgos-Omsk to reach the 1million TEU/year on the
Northern Corridor. In turn, the routes traversing the Caspian cross Kazakhstan from
the Eastern border at Khorgos to the Caspian port of Aktau in the East of the country.
They cross the Caspian Sea to reach either sides of the Caucasus mountain range:

192The price of transit on the Trans-Siberian from Vladivostok to Moscow is $1200/TEU or


$1400/2TEU. In case the goods come by rail from Shanghai, it would raise the costs to $2200/TEU
and $3000/2TEU
61
Russia (Makhachkala) or Azerbaijan (Alat). The South Caucasus branch would then
use the BakuTibilissiKars (BTK) railway to join Turkey. This line is expected to be
completed in 2017 after having experienced repeated delays. Alternatively, the
containers can reach the Black Sea port of Poti and enter in Europe through
Constanta, on the Eastern coast of Romania. The Southern Trans-Caspian corridor
would require most intensive investments in container facilities and logistical centres
as well as a motorway and the development of the port of Poti. The Northern
Caucasus option is less complicated as the infrastructure is mainly existent. Overall
Trans-Caspian routes could accommodate 1 million TEU/year. Hence the potential of
the Trans-Caspian trade is promising but it face strong challenges. First the
infrastructure is not up to the task as the Caspian ports so far hardly handle
containerised goods but rather bulk cargo. Up to 8 container terminals along the
coasts of Kazakhstan and Russia as well as flat-bottomed ships with the capacity of
800 TEU will have to be procured. Overall, the estimated cost of upgrading the
Caspian transit potential is of $12 billion and yet, the expected transport cost is
projected to be sensibly higher than on other routes: $1500-$1600/TEU. Much of it
is owed to the multimodal nature of the corridor (land, Caspian Sea, Caucasus, Black
Sea, land) as well as the Nagorno-Karabakh conflict looming over the region. On the
other hand it benefits from Western and Chinese backing, whom welcome the
possibility of bypassing Russia. Just as the Northern corridor circumvents the
Caspian through the Russian territory so does the Southern Corridor through Iran.
The inauguration of the Kazakhstan-Turkmenistan-Iran railway is a step in this
direction.193 The route can be furthered to Turkey but much hinges on the security
and political environment of the Middle-East. Corridors should not be seen as
competitors from a cost-effectiveness point of view. As a set of transit options, they
weaken transport monopolies which pulls prices down and mitigates the risks of
disruption for the supply chains.194 Nevertheless, concerns arose bout the imbalance

193 Kuchins, A. C., Mankoff, J., & Backes, O. (2015). Central Asia in a Reconnecting Eurasia:
Turkmenistans Evolving Foreign Economic and Security Interests. Rowman & Littlefield.
194 Sahbaz, U. (2014). The Modern Silk Road: One way or Another? (Policy Brief). German

Marshall Fund of the United States.


62
in volumes traded: only 30% of the containers return to China full.195 In principle,
transport corridors tend to create wealth by connecting local traders and attracting
FDI. The common market of the Eurasian Economic Union stands to be much
affected by these developments and this should deeply impact its political posture.196

b) Financing the Initiative: a multilateral effort

Chinese sources have claimed 900 billion dollars will be invested in projects related
to the BRI.197 Funds will be channeled through a series of financing mechanisms,
both private and public, Chinese and multilateral. The most hyped initiative has been
the creation of the Asian Infrastructure Investment Bank (hereafter AIIB). The idea
was launched in October 2013 to help address the demand for infrastructure in
Asia.198 The Chinese have committed $50 billion to the bank 199
and placed its focus
on transportation, energy, water supply projects. The rise AIIB has been vocally
criticised by the United States. The US Treasury Department rebuke it as hostile to
american interests and the post WWII financial institutions it dominates like the Word
Bank and the Asian Development Bank.200 The AIIB has about the same lending
capacity as the ADB but it is solely focused on infrastructure and can thereof
outspend its rival in SREB projects.201 Notwithstanding american rejection and

195 The CIS mainly sell energy goods to China and they are mostly sent through pipelines.
196 Srivastava, P. (2014). Operationalising economic corridors in Central Asia: a case study of the

Almaty-Bishkek Corridor.
197 He, Y. (2015, May 28). China to invest $900b in Belt and Road Initiative. China Daily.

198 estimated by the Asian Development Bank (ADB) to be of $8,2 trillion in the 2010-2020 period.

199 Cohen, D. (2015). Chinas second opening: Grand ambitions but a long road ahead (China

Analysis No. 1). European Council on Foreign Relations.


200 Perlez, J. (2014, October 9). U.S. Opposing Chinas Answer to World Bank. The New York

Times.
201 Han, M. (2017, March 23). China-Led Development Bank Gets 13 New Members in Status

Boost. Bloomberg.com.
63
undermining campaign,202 the funding quickly gained traction and now 57 countries
have chipped in among which UK, Germany, France and Italy. Although it is a
multinational funding effort, China enjoys 30% of the weighted voting shares and
great influence on the banks policy with the next biggest share being Indias at 8,5%.
In addition to this imbalance, doubts about the standards in implementation
(corruption, stability of recipient government, redundancy, social costs and oversight)
are fuelled by the past the records of the Chinese Development Bank and its Export-
Import Bank in South America and Africa.203 The participation of the EU leading
economies will probably help steering its funding towards projects that take into
account the social and environmental as well as good governance parameters.
Additionally, the Silk Road Fund was announced in November 2014 endowed with
$40 billion of sovereign Chinese funds to finance the projects of the BRI. In period
leading up to the banks effective operations, initial sums were gathered by the China
Export-Import Bank, the Chinese Development Bank and the China Investment
corporation. A $20 billion Energy Development Fund focused on energy
infrastructure was initiated, reflecting the crucial stake of energy in the BRI.204 The
BRICS New Development Bank - with a projected capital of $100 billion - will be
called upon to contribute to the projects in Eurasia. At the bilateral level, under the
banner of the SREB, Xi Jinping struck investment deals of tremendous proportions.
$15 billion with Uzbekistan $30 billion with Kazakhstan, $3 Billion with Kyrgyzstan

202 The US is reluctant to restructure the financial order to the new relative weight of the economies.
The argument goes, that the share of the votes in the institutions of the Bretton-Woods system were
instituted 70 years ago in a context when the US held 70% of the gold reserves and 50% of the
global GDP. Now the USs GDP is second to Chinas but the new equilibrium has not been reflected
in voting shares. Some Chinese analysts understand the commitment of the European to the AIIB as
an expression of the wariness about the US hegemony and a consequence of a damaged trust US-
EU. After the 2008 crisis that initiated in America, the US did not buy the EU bonds and
downgraded the ratings of the EU economies (through their rating agencies) while implementing
quantitative easing (QE) measures detrimental to the EUs interests.
203 Leland, L. (2016, March 2). Why the U.S. Should Embrace the AIIB. The Diplomat.

204 Weijia, H. (2015, January 25). New fund initiated for Silk Roads.

64
and undisclosed amounts with Turkmenistan.205 Tajikistan was granted a $900 million
loan to help the government finance the construction of roads leading to the capital
Dushanbe. These roads are constructed by Chinese companies.206 The initiative is
indeed backed by substantial economic commitments and the AIIB -which is going to
be at the forefront of the financing effort- is designed as multilateral and open
mechanism. Although China retains a dominant position in the organisation, its
weight does not allow it to unilaterally dictate an economic policy and consensus is
projected to be the sought when possible.

D. Perspectives: potential roadblocks and the conditions for success

First and foremost, the success of Silk Road Economic Belt will be assessed on the
basis of the economic rationality of the projects implemented. It is crucial to
understand in this regards that the effectiveness of a transport corridor is only equal to
the capacity of its weakest link. Relations between many of the countries bound to be
included in the initiative are complex and sometimes conflictual. Having these
countries cooperate and connect will require much diplomatic effort and economic
incentives. Much will depend on the ability of China to convince them of the positive
impact the BRI will have on their common destiny.207 But governments should no
be the only actors. Previous experience has evidenced that the logic of government-
built infrastructure build and they will come does not work. The private sector must
be implicated in the design and building phases.208 Further, scholars agree that China
should seek to delegate investment decisions as much as possible to the actors on the

205 Rejepova, T. (2013). Turkmenistan, China Reach New Energy Deals (Field Report). Central Asia
Caucasus Institute.
Yakobashvili, T. (2013). A Chinese Marshall Plan for Central Asia? (CACI Analysis). Central Asia
Caucasus Institute.
206Indeo, F. (2016). The Eurasian Economic Union and the Silk Road Economic Belt : the impact

of the Sino-Russian geopolitical strategies in the Eurasia region (Working Paper No. 2016/5).
Maastricht School of Management.
207 Cohen, D. (2015). Chinas second opening: Grand ambitions but a long road ahead (China

Analysis No. 1). European Council on Foreign Relations.


208 Sahbaz, U. (2014). The Modern Silk Road: One way or Another? (Policy Brief). German

Marshall Fund of the United States.


65
ground, both local governments and private entities, consistent with the principle of
subsidiarity. China should focus negotiating an attractive legislative, trade and
financial environment for the successful implementation of projects in order to avoid
blind investments.209 In this regard, the BRI is innovative and open to non-
governments actors to contribute. The proposal does not stand to subsume the
national development strategies of participating countries but proposes to harness
them to the initiative.210 This should give the nations more leverage on the choice of
projects to be implemented on their territory and their economic outcome. This is
called the Link policy (dui jie in Chinese). Such links are pursued on a multilateral
basis with the EEU but also on a bilateral level. Kazakhstan, Mongolia and Turkey
have proposed linked strategies.211 Although its essential to create trust, delegating
implementation raises the question of the quality of implementation of the Initiative.
Recipient countries of the SREB have endemic issues of governance and deep seated
patterns of corruption at every level of society. The local elites are used to taking the
lions share of the rent-producing segments of the economy and the Initiative is likely
to produce new such opportunities (infrastructure, natural resources). The
effectiveness and inclusiveness of the distribution mechanism will determine in the
long run wether or not the SREB really advances the conditions for the
populations.212 In definitive, the success or failure of the Initiative is question of
perceptions and trust. Recipient countries -especially by the public opinions- may
perceive the BRI as a colonial strategy to increase their dependency on Chinese
capital and contract massive debts. China in turn will have to trust its partners
because the creation of infrastructure on foreign soil is a liability. Given Chinas
policy of non-intervention and the existing security arrangement in Central Asia
(CSTO) the physical security of the investments will have to be negotiated with and

209 Cohen, D. (2015). Chinas second opening: Grand ambitions but a long road ahead (China
Analysis No. 1). European Council on Foreign Relations.
210 We shall see how Kazakhstan seized this opportunity with the New Economic Policy Nurly

Zhol
211Wang, Y. (2016). Offensive for defensive: the belt and road initiative and Chinas new grand

strategy. The Pacific Review, 29(3), 455463.


212 Ghiasy, R., & Jiayi, Z. (2017). The Silk Road Economic Belt : Considering security implications

and EUChina cooperation prospects. Stockholm International Peace Research Institute.


66
enforced by the recipient states. But the BRI is a cornerstone and possibly a turning
point in Chinas external policy. The consensus reached on engaging more with the
world has triggered a debate about the security posture. Prominent pundits Wang
Weixing and Zhu Chenghu of the China National Defence University are arguing for
the projection of military force along the Belt. Others like Zhao Kejin and Li Shaojie
from Tsinghua University have proposed the use of Private Military Corporations.213
All agree on the necessity to enhance bilateral cooperation between the security
forces of the concerned countries and China in the fight against terrorism. This
cooperation has already taken ground in Pakistan where the Pakistani army has
allocated a 13000 strong division to protecting the CPEC.214 The outcome of this
debate must be closely followed in Moscow and Washington. Russias military
dominance in CA is a key asset and it will be fiercely defended if challenged. The
current mood between China and Russia in this regard seems to be cooperation and
accommodation of each other's interests but this agreement may be questioned as the
Chinese interests grow in value and exposure. The increased terrorist threat in
Afghanistan, and in the Middle-East may physically endanger the project and tame
the eagerness of investors. Nonetheless, it is notable that in terms of security, the
agendas of all major powers theoretically align. Peace is desirable and the BRI seems
to be promoting a logic of economic cooperation conducive to peace; but on whose
terms ?

IV. Findings and analysis


The sheer scale of the SREB is bound to radically strengthen the influence of China
in the CA region. Seen from Moscow, this development is menacing to its historic
position and sphere of privileged interests. Central Asian countries are worried as
well about the scale of the initiative. In a zero-sum view, the EEU and the SREB are

213 Links to the works of Weixing and Chenghu are found are in the following article Mokry, S.
(2017, March 6). Is the Belt and Road Initiative Globalizing Chinas National Security Policy? The
Diplomat.
214 Tata, S. (2017, January 14). Deconstructing Chinas Energy Security Strategy. The Diplomat.

67
competing economic endeavours proposed to the same region commanding an either-
or choice. But the pledge taken by Russia and China to link-up the two initiatives
forces us to search for the rationales that prompted this commitment. To put things in
perspective, I will first give a brief historical record of the relation between Russia
and China regarding Central Asia. Then, building on the understanding we have
gained of the two projects in the previous chapters I will outline the elements of
compatibility and competition. The link-up effort will be assessed and roadblocks
that have and may further impede this process will be singled out. Finally we will
look at Kazakhstan as a central element to both strategies. Through its Nurly Zhol
strategy, the kazakh leadership is energetically striving to strike a balance between
the two projects. I therefore argue that the outcome of this effort could be
successfully extended to the whole EEU-SREB integration.

A. Contextualising the Russian and Chinese agendas towards Central


Asia

About Central Asia, Russia and China have shared concerns about security. The
collateral effects of the war in Afghanistan, the threats of religious extremism, the
associated terrorist transnational threats as well as the resilience of the CA political
regimes are sources of concern in Moscow and Beijing. The Sino-Russian policies in
relation to the CA can be broken down into three main stages in the Post-Cold war
era. During the first ten years after 1991 the Russian and Chinese policies towards
CA were undertaken relatively independently from one another. In the immediate
aftermath of the Soviet Union, the newly independent countries sought to establish
their sovereignty, establishing distances with Moscow. In any case, until the end of
the 90s Russia looked to the West, trying to integrate it. Central Asia was then a
secondary concern. But the security threats listed above as well as the Western energy
companies making inroads into the region pushed Moscow to give it more attention.
In the early 2000s, under the leadership of Vladimir Putin, the integration effort in
Eurasia was given new impetus. While addressing the security issues mentioned
above, the integration strategy also aimed at regaining and securing Russias
68
economic influence in Central Asia through bilateral relations and multilateral
organisations. Meanwhile the relation with China also was in recomposition as the
two countries were repairing the wounds of a conflictual relation since 1960. China in
turn was concerned that the independence of the Central Asian countries would
strengthen the separatists claims of its Uighur minority in Xinjiang. They are in many
ways more similar to the peoples of Central Asia than to Han Chinese in terns of
religion, ethnicity and culture. As a result, political and economic capital was
invested in the relation with the new CA states, border disputes were settled and
security cooperation was increased.215 The complementarity of the CA and Chinese
economies helped: an energy hungry China represented an alternative market for
Kazakhstan and Turkmenistan mainly while cheap consumer goods from China are
welcomed in Central Asia. The same kind of complementarity was leveraged in the
Sino-Russian relation but beyond energy versus consumer goods trade, military
equipment and mutual diplomatic support was thrown in the mix.216
The creation of the SCO in 2001 ushered in the second phase. It was the first joint
Sino-Russian attempt to engage Central Asia (except Turkmenistan) based on a joint
security agenda of fighting the three evils of religious extremism, terrorism and
ethnic separatism.217 That same year, the signature of the Treaty of Good
Neighbourliness, Cooperation and Friendship between Russia and China confirmed
the will to maintain a constructive relation.218 Moreover the increased presence of the
USs military in CA - the Northern Distribution Network, a stepping stone to Afghan
theatre - was perceived in Russia as a challenge to its strategic influence and in China
as a potential threat very close to the Western borders. The two powers pressured
their CA partners and positioned the SCO as natural partner for regional security. But
the CA leaders were reluctant to abandon a bargaining chip in their Multi-Vector

215 Gabuev, A. (2016). Crouching Bear, Hidden Dragon: One Belt One Road and Chinese-Russian
Jostling for Power in Central Asia. Journal of Contemporary East Asia Studies, 5(2), 6178.
216 Voskressenski, A. (2012). The Three Structural Stages of Russo-Chinese Cooperation after the

Collapse of the USSR and Prospects for the Emergence of a Fourth Stage. Eurasian Review, 5.
217 Zhuangzhi, S. The relationship between China and Central Asia, in Akihiro, I. (ed), Eager Eyes

Fixed on Eurasia (Slavic Research Center, Hokkaido University, Sapporo, 2007) pp. 47-52
218 Zemin, J., & Putin, V. Treaty of Good-Neighborliness and Friendly Cooperation Between the

Peoples Republic of China and the Russian Federation (2001).


69
policy of navigating the interests of stronger neighbours. Nonetheless, US backed
coloured revolutions and the Western pressures on human rights issue, increased
the CA ruling elites suspicion of the Americans purpose in the region. Hence the
gradual pull out of the US was initiated.219 This political victory helped build trust
between the two powers at a time when Russia started to look more to the East than
to the West for constructive and non-conflictual partnership. The relation took the to
the level of strategic partnership. In the field of energy, the Altai and Power of
Siberia projects have been signed to provide China with natural gas in volumes
reaching 38 BCM/year.220 The third phase of the relation opened with NATOs final
withdrawal from Afghanistan in 2014 leaving the security landscape to regional
actors only. This both deprived CA countries of leverage in their relations with Russia
and China and freed the competing interests of China and Russia in the absence of the
common US strategic challenge. Although Russias military prominence in CA
remained unchallenged, China took the lead in trade with the region. The higher
degree of complementarity (energy hungry China vs energy-rich CA) as well as the
capacities to invest in the infrastructure of transport has offset the Russian position
inherited from the Soviet Union.221 Both partners pushed their respective advantages
in their sphere: military and economic. In 2007, through a memorandum of
understanding between the CSTO and the SCO Russia tried to interest China into a
formal military alliance but to no avail. China was careful not to engage in political
commitments that could limit its freedom of movement. In turn, Chinese leaders
proposed on several occasions to build a SCO-wide FTA.222 The Chinese economy
would far outweigh the economies of CA and Russia combined so the offer has been
repeatedly declined although it was agreed that it would be a desirable goal in the
distant future.

219 Cooley, A. (2008). U.S. Bases and Democratization in Central Asia. Orbis, 52(1), 6590.
220 Habova, A. (2015). Silk Road Economic Belt : Chinas Marshall plan, pivot to Eurasia or

Chinas way of Foreign Policy. KSI Transactions on Knowledge Society, 8(1), 6470.
221 The Chinese import of gas from Turkmenistan broke a pattern of quasi-monopoly on CA energy

export through Russia. This transit and influence rent inherited from the soviet days was a great
strategic and commercial loss in Russias position vis a vis China.
222 Liuxin. (2016, October 20). Chinese official proposes free trade area for SCO members. Xinhua.

70
B. Structural divergence and great power politics

Hence, the Sino-Russian relation has now entered a phase in which great-power
rivalry is not constrained by the US presence at the regional level. But the pair is still
at odds with the US-dominated world order at the global (system) level. This
translates into mounting pressure from the West in Russia and a wide containment
effort towards China that drives the two closer to one another. For both powers, the
initiatives they propose are a way to respond to this geopolitical landscape and
address the complex economic dilemmas they face. They turn to the Eurasian
landmass in an attempt to shape their economic and security environment. The two
proposals are bound to meet in some respect, the question is which dynamic (global
or regional) will set the tone for this interaction.

a) The EEU as a threat to OBOR

Some argue that the EEU is a geopolitical tool under the Russian control to retain the
position and influence Russia inherited in CA from the Soviet Union. They point to
the economic design of the union as protectionist and therefore aimed at keeping the
Chinese at bay from impacting CAs economic relations to Russia. This opinion is
substantiated by the alignment of the external tariff on the Russian average levels.223
For most countries taking part in the union, it has consequently raised the barriers to
enter their market and has displaced non-EEU exporters towards EEU internal
players with Russia as main benefactor. It is clear then that the Eurasian Economic
Union has complicated the Chinese commerce with Kazakhstan and Kyrgyzstan due
to the higher tariffs.224 Beyond the debate about the economic soundness of the
integration process under the EEU, memberships can be seen as as shield against
Chinese economic penetration.

223 Blank, S. (2014). Vladimir Putin and the Intellectual Origins of the Project. In Putins grand
strategy: the Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute
& Silk Road Studies Program (SAIS).
224 Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and

the likely. Paris


71
b) SREB questioning Russias interests

Though the exact projects of the Silk Road Economic Belt are still unclear; the sheer
size of the investments can be a source of concern for Moscow who is likely to see its
influence and interest diluted in this ocean of FDI. The projected penetration of
Chinese economic power can be strongly disrupt the stability of the union itself, if a
modus vivendi is not found.225 The announcement of the SREB in September 2013 in
Astana was therefore initially understood in Russia as a threat rather than an
opportunity. Quite symptomatic of this sphere of influence vision, a senior Russian
official qualified SREB as Just another attempt to steal Central Asia from us.226
Undoubtedly, several key interests and endeavours of Russia will be challenged by
the Belt and Road. The idea of common EEU currency already faced hostility in the
CA states and Belarus but the emergence of active Chinese backed financial
institutions bent on internationalising the Renminbi through greater international
exposure and foreign investments might finally terminate these hopes. Russia also
fears that the proposed routes would diminish the centrality of the Trans-Siberian
railway as the main land corridor to Europe at a time when the government had
committed to invest $20 billion in renovating it.227 Additionally, the proven reserves
in CA are crucial and the Russian energy interest are threatened by Chinese capital
now controlling about 20% of the oil and gas industry in Kazakhstan.228 Transit as

225 As Russias economic weight in CA started to decrease; even before the announcement of the
Belt and Road Initiative, in 2010,China had already become the main trading partner for all CA
states. Loans to the region through the SCO in 2009 and 2012 helped mitigate the economic
hardships and positioned China in the driver's seat in of economic impetus to the region.
Rickleton, C. (2014, November 12). Central Asia: Can Chinas Silk Road Vision Coexist with a
Eurasian Union? EurasiaNet.
226 Gabuev, A. (2016). Crouching Bear, Hidden Dragon: One Belt One Road and Chinese-Russian

Jostling for Power in Central Asia. Journal of Contemporary East Asia Studies, 5(2), 6178.
227 Gabuev, A. (2016). Crouching Bear, Hidden Dragon: One Belt One Road and Chinese-Russian

Jostling for Power in Central Asia. Journal of Contemporary East Asia Studies, 5(2), 6178.
228 An estimated 5 billion tons of oil representing 2.25% of global oil reserves are in the regions

deposits both on and offshore in the Caspian Sea area. Further, 10.7% of the worlds proven gas
reserves are in Central Asia and Turkmenistan alone owns 17.5 trillion cubic metres. Smith Stegen,
K., & Kusznir, J. (2015). Outcomes and strategies in the New Great Game: China and the Caspian
states emerge as winners. Journal of Eurasian Studies, 6(2), 91106. Parkhomchik, L. (2016, 06).
China-Kazakhstan Relations in the Oil and Gas Sector. Eurasian Resaerch Institute.
72
well used to depend on the Russian territory229 and now pipelines go East from
Turkmenistan and Kazakhstan, effectively canceling the monopolistic position of
Russia. Since 2009, exports of CA gas towards Russia have decreased by a staggering
60%.230 Turkmenistans gas (over 80% of the countrys exports) is now mostly China
bound: 78% of the gas exported in value.231 Thus, the Middle-Kingdoms business
interests, energy demand and great resources has pushed out the Russians inherited
rents in CA. Some fear that the SREB is a trojan horse (in the guise of mutually
beneficial development) that later will transform into undue leverage both economic
and political on the recipient countries. Hence, both Russia and CA fear the increased
Chinese financial clout in Eurasia but hopes to benefit from these investments to
develop their economies.

C. The rationales for convergence: a division of labor formula

a) It is Russias Interest to engage with China

Against this backdrop, the initial Russia response to the BRI was all but welcoming.
However, the Ukrainian crisis meant hostile isolation from the West and prompted the
Kremlin to turn East and revise its relations with Beijing, Russias largest neighbour.
Maintaining good relations with China is now crucial to the Russian ability to engage
with the rest of the world. Conflictual relations would open a new and much harder to

229 This monopolistic situation gave Moscow authority over the price and volume shipped.
Likewise, the control of downstream (transit infrastructure) and upstream (production facilities)
assets gave Moscow consequent leverage on these countries policies in general. In Turkmenistan or
Kazakhstan the energy is the key export commodity and hence a crucial source of budget revenue.
In poorly diversified economies, the demand and price of energy determines the health of the
country.
230 Michel, C. (2014, November 11). China Edging Russia out of Central Asia. The Diplomat.

231 But Russia is still relevant in oil transit from Kazakhstan at 1,42 million Barrels Per Day (BPD)

while Chinas imports are much less significant: 400000 BPD.


Observatory of Economic Complexity. (2017). OEC - Turkmenistan (TKM) Exports, Imports, and
Trade Partners.
Zhang, H. (2015). Building the Silk Road Economic Belt : Challenges in Central Asia. Cambridge
Journal of China Studies, 10(3).
73
sustain political front in the already subsidised and underpopulated Far East.232 The
Far Eastern and Eastern Siberia constitutes 60% of the Russian territory but counts
only 14,8 million Russian citizens while the Chinese North-East province is home to
132,9 million people, or nearly as much as the whole Russian population. Energy
interests also are at play. Consumer demand in Europe is stagnating, and low prices
are apparently here to stay. On the other hand, Chinas consumption keeps on rising.
Moreover, most of the fields of Western Siberia -easier to operate- have peaked: they
accounted in 2008 for 68% of the Russian production and are projected to decline to
60% in 2020. Consequently Russia is also rebalancing towards Eastern Siberia and
the Far Eastern. Developing energy ties and pipelines can be used as an Asia Card
in negotiating with the EU when the latter consumes 85% of the oil and 70% of the
gas exported by Russia. Reflecting this new reality, the volume of Russias trade with
China grew from $6.2 billion in 2000 to about $60 billion in 2010 mainly due to the
growth of Russian exports of oil: from 1.3 million tons to 12.8 million tons over the
same ten years period. From the point of view of Russia, another positive
consequence of the BRI is that CA energy resources will be further pushed towards
China and away from Europe. This reinforces Russias position in the EU energy
market, where prices are much higher than on the Chinese market.233

b) Chinas position

Conversely, the Chinese academic debate on the SREB clearly evidenced that given
the leverage Russia has on Central Asia, the implementation of the Initiative would
be severely compromised if Russia was to actively oppose it.234 It seems therefore
that China benefitted from the reduction of strategic options for Russia as a result of

232 Voskressenski, A. (2012). The Three Structural Stages of Russo-Chinese Cooperation after the
Collapse of the USSR and Prospects for the Emergence of a Fourth Stage. Eurasian Review, 5.
233Ghiasy, R., & Jiayi, Z. (2017). The Silk Road Economic Belt : Considering security implications

and EUChina cooperation prospects. Stockholm International Peace Research Institute.


234 Gabuev, A. (2016). Crouching Bear, Hidden Dragon: One Belt One Road and Chinese-Russian

Jostling for Power in Central Asia. Journal of Contemporary East Asia Studies, 5(2), 6178.
74
the Ukraine crisis.235 Moreover, as evidenced in the second chapter, the Belt and
Road initiative is partly conceived as a response to existing security threats (energy,
terrorism, unequal development, saturation). But the proposed solution includes
building infrastructure on foreign territory which can become liabilities in an unstable
region. What is more, China is constrained in its capacity to address this
inconsistence by its own foreign policy principle of non-intervention, the deep
mistrust in CA public opinions about its intentions 236 as well as the regulation of the
dominant security arrangement in the region: the CSTO.237 If these obstacles are
overcome, establishing a military presence would make most sense Turkmenistan
given the Chinese energy interests in the country. But Turkmenistans constitutions
explicitly rules it out in pursuing a neutral policy and the non-use of force; non-
alignment with any military blocs.238 Thereof, China can but observe Russias
efforts as a regional security provider and refrains from intervening both because it
would contradict its policies and antagonise Russia.239 Consequently, the main tenet
of the security agenda of China expressed through the SCO is the common resolve to
fighting terrorism. China does not seek leadership and keeps away from framing such
a cooperation as a geopolitical projection.240 Moreover, the prospects of the US-led
TPP and TTIP engaging respectively Europe and the Asia-Pacific in high standard

235 Satke, R., & Galdini, F. (2017). Between East and West: Kazakhstans development along
Chinas new Silk Road. OSCE academy.
236 Indeo, F. (2015). China as security provider in Central Asia Post 2014: a realistic perspective?

(Central Asia Security Policy Briefs No. 17). OSCE academy.


237 The CA states it shares a border with (Kyrgyzstan, Tajikistan and Kazakhstan) are members of

the CSTO. Under the provisions of the organisation, hosting a foreign military base requires the
consent of all CSTO members and Moscow would most likely veto it.
238 Johnson, C. (2016, September 20). Turkmenistan: Amended Constitution Lengthens Terms of

Presidents. Global Legal Monitor


239 China offers very calculated support to Russia but is concerned with Russias instrumentalisation

of the CSTO as a vehicle for its interests in CA under the guise of conflict resolution. Indeed, the
record the organisation has been greatly tarnished by the 2010 coup in Bishkek in which the CSTO
did not intervene. Russia claimed the lack of legal provision in the CST treaty to intervene in
internal affairs. This unwillingness to intervene and provide security when needed has been resented
by members. There is an increasing understanding that the CSTO is just a pose of multilateralism
while Russia cultivates both its bilateral military relations and its own intervention capacity way
more than inter-allied dialogue, and conflict resolution.
240 Gabuev, A. (2016). Crouching Bear, Hidden Dragon: One Belt One Road and Chinese-Russian

Jostling for Power in Central Asia. Journal of Contemporary East Asia Studies, 5(2), 6178.
75
trade coordination were securitised by both Russia and China as they were
deliberately not included in the proposals.241 The infrastructure projects financed by
China not being subjected to the tariff regulations, it is possible that China is willing
to look beyond the loss in trade due to the higher EEU tariffs for the sake of the
relation with Russia, which China considers strategic.242

c) The Link-Up strategy

As it dawned on both leaderships how both stood to gain more from cooperation than
from competition, a political process of rapprochement of the two initiatives was
initiated. Some key roadblocks in the bilateral relation were smoothed as Russia
sought to empower its relationship with China; sales of advanced Russian weapons
were allowed and Chinese investors no longer barred from participating in
infrastructure and resource-related investments in Russia. In the same movement, the
stance on SREB was revised, the government and the academic community started
looking at possible cooperation throughout the year 2014. The Valdai club was
instrumental in this process. In February 2015 - 3 months after the formal creation of
the EEU- the idea to link up the OBOR and the EEU was announced by Igor
Shuvalov, an economic advisor to president Putin. Later that year, a Sino-Russian
declaration confirming the idea was signed at the highest level during Xi Jinping visit
to Moscow in may when Vladimir Putin commented on the possibility of
harmonious alignment. In turn, Xi Jinping also declared by strengthening the
cooperation between the Shanghai Cooperation Organisation and the Eurasian
Economic Community, we can gain a greater space for development.243 During the
Sankt-Petersburg economic forum of June 2015, a Valdai report was presented that
first outlined the basis upon which the EEU and SREB could be seen as

241 Ghiasy, R., & Jiayi, Z. (2017). The Silk Road Economic Belt : Considering security implications
and EUChina cooperation prospects. Stockholm International Peace Research Institute.
242 Popescu, N., & Institute for Security Studies. (2014). Eurasian Union the real, the imaginary and

the likely. Paris: ISS.


243 MFA Peoples Republic of China. (2013). President Xi Jinping Delivers Important Speech and

Proposes to Build a Silk Road Economic Belt with Central Asian Countries.
76
complementary.244 On the one hand the EEU is an attempt to re-integrate the
economies of the post-soviet part in the Eurasian landmass.245 On the other hand, the
pursued objective of the SREB is the enhancement of connectivity both physical and
immaterial across the Eurasian mega-continent.246 The development of transports and
logistics and the unification of market regulation and standards are mutually
beneficial development. As a matter of facts, the Customs Union means that Chinese
goods only need to cross one border before reaching the EU if they transit through
EEU territory. The common market also implies a unified regulatory framework for
investments and trade within the union. In parallel, the SREB promises to enhance
connectivity with other regions more business opportunities, economic
diversification, integration into international supply chains and ultimately a richer
Eurasian Economic Union . For the landlocked countries of Central Asia especially,
the prospects of strengthened canals of trade is very attractive. Nevertheless, the
linking up process has been slowed by several factors. The fluid nature of the
OBOR idea hardly allows for a clear plan on which to base cooperation. Both in
Russia and in China the Ministries of Foreign Affairs, which had been the initiators of
the movement to link up the OBOR and EEU kept the leadership in outlining the
projects and the synergies between the two frameworks. But their lack of economic
expertise and administrative authority over other relevant agencies slowed the
process. The business community was left out of the loop and the traditional top-
down approach, familiar to the China and Russian was preferred to a forum for Sino-
Russian businesses to evaluate the prospects of the initiative. At that point, Russia
had bypassed the Eurasian Economic Commission to propose this movement of

244 Valdai Club. (2015). Toward the Great Ocean 3: Creating Central Eurasia (Analytical Report
No. 3).
245 Institutionally, it is modelled on the EU with a supranational body vested with power to make

policy and implement it. It aims at creating a common market, free movement of goods,labor,
service and capital as well as reach a degree of coordination of economic policy.
Crisis Group. (2016). The Eurasian Economic Union : Power, Politics and Trade (Europe and
Central Asia Report No. 240). Crisis Group.
246 The initiative proposes bilateral investment, infrastructure building, financial connectivity and

people to people contacts.


Gabuev, A. (2016). Crouching Bear, Hidden Dragon: One Belt One Road and Chinese-Russian
Jostling for Power in Central Asia. Journal of Contemporary East Asia Studies, 5(2), 6178.
77
synchronisation much to the discontent of other members, Kazakhstan primarily.
Nonetheless the Russian government understood the linking up as the guarantee that
the SREB projects would be negotiated at the EEU level and implemented on the
territory of the union in compliance with EEU standards. That way, Moscow would
have some degree of decision-making power on projects beyond its national territory.
Beijing on the other hand continued the bilateral negotiations where they knew they
could negotiate more favourable terms. Russia eventually managed to convince the
other leaders of the EEU to make the linking up initiative a EEU policy. The EEC
was therefore given a clear mandate to negotiate the policy. The talks were officially
started in late June 2016 and Veronika Nikishkina the EEC Trade Minister outlined
the agenda for negotiation would mainly include non-tariff barriers: customs,
technical regulation, and intellectual property. In the future, more unknowns will
define the future of the linking policy. Both the EEU 247 and the BRI 248 are concepts
anchored in a multipolar world view and as links between Europe and the Asia
Pacific region. But it is unclear whether both leaderships have the same
understanding of where the poles should be and how connectivity is to be
achieved.249 The engagement of China with the Eurasian region has been
overwhelmingly bilateral. Wether China will start to consider the EEU as a partner is
not certain. It would legitimate the young union, under much criticism from the West
and maybe push the EU to do the same. It would increase the members bargaining
power to obtain better terms since the territory of the union can hardly be bypassed
by the SREB. But there is doubt that China stands to gain in yielding in
multilateralism when it has a higher ground in bilateral relations. Further, the SCO
has been repeatedly proposed as a conduit for cooperation between the Chinese and

247 Lo, B. (2016). The Eurasian Union: Drivers, Aspirations, Realities. Presented at The evolution of
the Eurasian Union: Economics Politics, Geopolitics, Georgetown University, School of Foreign
Service.
248 National Development and Reform Commission. (2015). Vision and Actions on Jointly Building

Silk Road Economic Belt and 21st Century Maritime Silk Road. Ministry of Foreign Affairs, and
Ministry of Commerce of the Peoples Republic of China.
249 Daly, J. (2014). Kazakhstan and Belarus: Buyers Remorse? In Putins grand strategy: the

Eurasian Union and its discontents. Washington, D.C: Central Asia-Caucasus Institute & Silk Road
Studies Program (SAIS).
78
Russian policies in CA but the two countries have different approaches towards the
framework. Russia pursues an agenda of military and security cooperation. China in
250
turn wishes to increase trade through the framework. How these discrepancy will
be addressed will be crucial.

D. Kazakhstans multi-vector strategy and the Link Up

As they became independent Central Asian countries underwent the process of state
and nation building, establishing sovereignty over territory after 70 years of
communist overlay. In January 1994, the two leaders of the region Kazakhstan
(economically) and Uzbekistan (demographically and militarily) started a Central
Asian Union, soon joined by Kyrgyzstan. It did not thrive because of the competition
for regional primacy between the two leaders, disputes in water management and
unresolved territorial disputes (most notably in the Fergana Valley).251 Arguably, CA
countries have a high degree of similarities as far as cultures, religion, legacies and
political systems are concerned. In most Central Asian states, threats to the regime in
power is a prime security concerns because power is generally concentrated in a
closed circle. Regardless of constitutional mechanisms to ensure plurality and
legitimate power transfers; prepared successions covered by controlled media and
non-existent opposition and civil society are the norm. The tension between elites
power struggles and the need for stability open the way to external influences and
further weaken the democratic nature of the regimes. The existence of Russian
minorities further complicates matters. But diverging political orientation, weak intra-
regional interdependency and crucial bilateral relationship with greater powers
namely Russia, China and the US have rendered a regional approach irrelevant. This
centrifugal dynamic was complemented with the emergence of a national historical
narratives. The new states had to establish the state legitimacy, express continuity
with a distant independent past and restore connectivity with the rest of the world.

250 Indeo, F. (2015). China as security provider in Central Asia Post 2014: a realistic perspective?
(Central Asia Security Policy Briefs No. 17). OSCE academy.
251 Zhang, H. (2015). Building the Silk Road Economic Belt : Challenges in Central Asia.

Cambridge Journal of China Studies, 10(3).


79
The idea of Silk Road provided the right mix of imaginary pull, economic rationale
and narrative for economical relevance as a platform and link between East and West.
It therefore answered the questions about the national identity and heritage as well as
anchored their development policies into a future.252 Nazerbaiev was the first among
the CA leaders to refer to this distant past to outline the prospect for his nation. In
1997, while outlining his countrys 2030 strategy, he said [] along the legendary
Silk Route [our forefathers] set up a broad channel of trade between European and
Asian countries. Today we initiate its restoration. but in the same speech he insists
that Kazakhstan cannot single-handedly realise its transit potential.253 In the present
decade, as Kazakhstan maps its development plan for 2050, the Chinese SREB may
give it the necessary impetus. Generally, the CAs leadership welcome the Chinese
initiative as a way to diversify their economies benefit from the transit rents and
disentangle from the overarching relation to Moscow. Kyrgyzstan has expressed it
readiness to cooperate in implementing the New Silk Road.254 Turkmenistan is
officially pursuing a strategy of neutrality but given its export dependance on China,
that policy can be questioned.

a) The multi-vector strategy

The kazakh leadership is cautious of the Russians and Chinese as great powers, the
Multi-Vector approach balances out relations with either partners in order not to
antagonise nor be dominated by none. Kazakhstan uses the mechanism to maximise
its bargaining powers in negotiations and open up options. In practice, it adapts to the
relative power of Russia, China, the US and the EU in the region at a given time.
Since the NATO withdrawal from Afghanistan in 2014, the US is out of the picture in
conventional military terms but still has influence within certain mechanisms like the
ADB; playing a significant role in Kazakhstan. In December 2015 Kazakhstan signed

252 Thorez, J. (2016). La nouvelle Route de la soie": une notion porteuse dillusion. Questions
internationales, 82, 3341.
253 Satke, R., & Galdini, F. (2017). Between East and West: Kazakhstans development along

Chinas new Silk Road. OSCE academy.


254 MFA Peoples Republic of China. (2014). President Almazbek Atambayev of Kyrgyzstan Meets

with Yang Jiechi.


80
a new Enhanced Corporation and Partnership Agreement (ECPA) with the EU but
cannot discuss tariffs because this now depends on the Eurasian Economic Unions
jurisdiction.255 Some argue that the balance leaned too strongly towards Russia so
that Kazakhstan has lost opportunities to engage with the rest of the world, especially
in the context of hostility between Russia and the West.256 While that may be true in
strategic and military terms (where the Kazakh alignment has been constant), in
economic terms the country now depends much more on China than on Russia. The
Sino-Kazakh bilateral trade overtook the Russo-Kazakh in 2013 and the amount of
Chinas involvement nearly doubled in 2015. This growth is mainly driven by the
energy exports.

b) Defining the strategic goals of Kazakhstan

The Kazakh strategy at the horizon 2050 is to turn the country into a logistical hub
connecting East and West, leveraging its strategic geographic location. However,
Kazakhstan has inherited the Soviet transportation system that was tailored to fulfil
the needs the USSR rather than allowing for the development of Kazakhstan
independently. In order to distribute the Kazakh SSR resources to the rest of the
union, the rail transport infrastructure was developed. Kazakhstan got closely
connected to Siberia (11 railway border connections) and less so the other central
asian countries (one connection to Kyrgyzstan, two with Uzbekistan).257 Under these
circumstances, the Kazakh New Economic Strategy (NES) was outlined in a speech
given by Nursultan Nazerbaiev in November 2014.258 The strategy is to place the
country as the Eurasian Conduit between Asia and Europe as a Nurly Zhol or

255 The signing of the agreement was conditioned by Kazakhstan's accession to the WTO. The aim
of the agreements is the progressive liberalisation of trade and other WTO commitments such as
services, intellectual property rights, Energy, and labour affairs. It is an open agenda calling for
further implication of the European Union in central Asia.
World Bank. (2013). Beyond Oil: Kazakhstans Path to Greater Prosperity through Diversifying,
Volume 2. Main Report.
257 In essence trade was organised following a North-South pattern whereby CA resources such as

coal oil and cotton where ferried through Kazakhstan on their way to Russia where they were
transformed and distributed Union-Wide.
258 Nazerbaiev, N. (2015). State of the Nation Address: Kazakhstan in a new global reality: growth

reforms development.
81
Bright Path As Nazerbaiev states in his address: Roads are lifeline for
Kazakhstan. Hence, transport infrastructure will constitute the backbone of the
investment program. Key logistical hubs in the East (Khorgos-Eastern Gate) and the
West on the Caspian sea (Aktau - Kuryk) are completed -or in progress- to strengthen
the main axis of communication. It is expected that the momentum produced by these
investments will sustain the demand for construction material, housing, and local
industrial production.259 Beyond the key sectors of transport, energy, industrial
production, public and social infrastructure, the fabric itself of the economy is put to
contribution. Small and Medium Businesses (SMB) are expected to produce to 50%
of the GDP at the conclusion of the strategy in 2050. The objective is to encourage a
portfolio of investments of $19 Billion over the 2014-2018 period with the
government spending 15% of the total, making use of the National Fund that was
created in 2000 and now holds North of $76 billion dollars although $10 billion were
used in 2008 to help mitigate the crisis.260 The rest of the funding will originate from
private equity and major development agencies such as the European Bank of
Reconstruction and Development (EBRD), the Asian Development Bank and the
Islamic Development Bank. The objective is to take Kazakhstan to the worlds 30th
most developed countries when its GDP is now ranking 43rd in Parity of Purchasing
Power (PPP).

c) Synchronising: Becoming Land-linked instead of land-locked

On the 3 of September 2015 Nazerbaiev and Xi Jinping agreed to link up the strategy
of Nurly Zhol to OBOR.261 As evidenced earlier in the thesis, OBOR is explicitly
posited as a multi-lateral project that integrates the development strategies of the

259 Interestingly, the president wished a special commission responsible for a centralised verification
and control of the implementation of the investments to be created and answer directly to him.
Nazerbaiev, N. (2014, November 11). Nurly zhol - The Path to the Future.
260 Voloshin, G. (2014, November 21). Kazakhstan Announces New Economic Policy to Avoid

Another Crisis. Eurasia Daily Monitor, 11(209).


261 MFA Peoples Republic of China. (2015). Joint Declaration on New Stage of Comprehensive

Strategic Partnership Between the Peoples Republic of China and the Republic of Kazakhstan.
82
countries along the Belt and Road instead of replacing them.262 The two strategies
are promoting connectivity as a way to economic development and security.
Consequently, the Sino-Kazakh interests align in the sense that the infrastructural
development of Kazakhstan (good for the overall development of the economy and
its diversification) allows China to pursue its Western Strategy. The Kazakh
government has been supportive of creating infrastructure and facilitating trade. It has
proposed the creation of 10 special economic zones with the necessary support for
industrial activity; electricity grids, substations, natural gas connections and grids,
internal and external roads, and railway connections as well a tax and custom duties
exemptions and liberalisation of the regulation on foreign labor.263 Astana is
favourable to all SREB routes because all of them run through its territory. This
indicates that the Kazakh leadership is engaging with the framework independently
from the EEU.264 As famously put by Olivier Roy; Nazerbaiev wants to hitch the
Kazakh wagon to the Russian train but throw the Russians out of the first class
compartment. 265 Russia claim this is a unilateral move undermining the unity of the
unions position, although the decision to link up was forced into EEU policy in a
very similar manner.

d) Roadblocks to the synchronisation

Crucially, one of the major pushes for the Belt and Road is the overcapacity of
Chinese companies in the field of infrastructure. It is likely that Chinese investments
in Central Asian infrastructure will be carried out by Chinese companies therefore
limiting the demand effect for infrastructure related sectors of the Kazakh economy.
Plus, the scope of trade and investment has not widened beyond the trade of natural
resources for finished goods and the regional industrial base is still shrinking,

262 National Development and Reform Commission. (2015). Vision and Actions on Jointly Building
Silk Road Economic Belt and 21st Century Maritime Silk Road. Ministry of Foreign Affairs, and
Ministry of Commerce of the Peoples Republic of China.
263 Sahbaz, U. (2014). The Modern Silk Road: One way or Another? (Policy Brief). German

Marshall Fund of the United States.


264 Diplomat, A. G., The. (2015, March 23). China, Russia and the Tussle for Influence in

Kazakhstan.
265 Roy, O. (2000). The New Central Asia: The Creation of Nations. I.B.Tauris.

83
undermining economic diversification. Contrary to the Eurasian Economic Union, the
partnership with the Silk Road Economic Belt is not institutionalised. Therefore it
depends on the goodwill of the leadership on both sides and the popular sentiments.
While one can assume stability from China, the looming prospect of succession in
Kazakhstan may challenge this policy choice. The CA populations wariness of
Chinese intentions was epitomised in Kazakhs protests last year against renting
agricultural land to China. Further, Beijings harsh approach towards Uighur question
has further deteriorated the image of China in Central Asia. Hence, the linking-up of
the two strategies will be under strain and the upcoming leader will have to strike a
very fine balance between maintaining political stability at home and attracting
Chinese capital. Especially since the latter has a record of preferably engaging with
sectors of the economy where they can strike big deals with the elite, bypassing the
mechanisms of state procurement, and from which the population does not profit.
Indeed, the vast majority of the wealth produced by the country stays within a small
circle next to the President. Big infrastructure and energy projects offer great
possibilities for well connected apparatchiks seeking to maintain or expand their
rents. The objective to diversify the economy to 50% of the GDP from SMEs
undermines the centrality and power of the bureaucratic structure. Indeed, the
practice of administratively protecting the businesses from competition is a source
substantial of revenue for bureaucrats. It would be too optimistic to expect a fast
transition from a rent system to a diversified and local economy, the only way to long
term equal development. To a large extent, the success might depend on the greed of
the political elite. Although many attempts have been undertaken to tackle the issue,
the results have been poor and corruption is widespread at all levels of government
and society. It was estimated that the shadow economy accounts for about 30% of the
GDP.266 The pyramidal redistribution mechanism among the elite and in the
administration will hardly be eradicated by an investment strategy that allows
avenues to strengthen these mechanisms.267 It is therefore essential that China

266 AkiPress. (2014, 08). Shadow economy makes up 28.6% of GDP of Kazakhstan.
267Galdini, F., & Satke, R. (2015). Entre Oriente y Occidente: Kazajstn y la nueva Ruta de la Seda
de China. Barcelona Center for International Affairs.
84
engages CA with projects that have positive implications for the populations. As an
example, the field of agriculture can be one where cooperation can be beneficial.
Indeed, China has now made great progresses in advanced irrigation systems in the
Xianjang province. Exporting this know-how might be a vast relief for the
populations in agricultural regions since an estimated 50% to 80% of the water is
wasted. Further, at government level, it would help mitigate interstate tensions in a
tight water security environment since 70% of water resources are used by the
agricultural sector. The revival of sustainable agricultural production provided
through micro-credits directly to small farmers would be perceived as a great
development for the population. China would be perceived by the population as
benign and seeking mutual benefits, which is pivotal in the security of the other
investments.268

e) Evolution from a RSC point of view

The Russian centred RSC is fragmenting. Some members have chose to further
integrate (the countries of the EEU and CSTO) while others have edged closer to
other poles of power (the Baltic and GUAM countries) or tried to stay as independent
as they can (Azerbaijan, Uzbekistan, Turkmenistan). In theory, a RSC can either
remain the same (status quo), contract/expand (membership in the RSC) or undergo
an internal transformation. I argue that the growing influence of China through its
Belt and Road Initiative is a case of an external great power triggering internal
transformation for the Post-Soviet-RSC. The anarchic structure of the RSC has
started to transform in the region as the balance of power is tipping towards China, at
East in economic terms. The way this newfound economic influence translates in
political clout will be crucial in determining the future patterns of amity-enmity. The
BRI is not uniformly perceived among the elite in CA and by the populations. The
elites understand the Initiative and the potential rents they can extract from such great

268
Zhang, H. (2015). Building the Silk Road Economic Belt : Challenges in Central Asia.
Cambridge Journal of China Studies, 10(3).
85
projects while the greater population cant yet grasp if and how these development
will be beneficial.

V. Conclusion
The regionalist framework allowed to approach our subject at the right level of focus
since the EEU and the SREB are essentially regional projects. Indeed, Regional
Security Complex Theory (RSCT) does not aim at exhaustively explaining all
international relations at a regional level. It accepts the notion of a system level in
which Great Powers and tightly-knit RSC are impacting entire regions. The model
proved efficient in assessing the complex relations between the members of the RSC
along the four determining notions of territory, patterns of amity/enmity, distribution
of power and polarity. Further, the wide understanding of security (Copenhagen
School) adopted by the RSCT made the study of the Silk Road Economic Belt flow
into the theoretical framework effortlessly. As a policy response to several types of
perceived security threats, the SREB will extensively affect the security environment
of the Russia-centred Regional Security Complex and vice versa. Within the Russian
RSC, it has been demonstrated that relations are asymmetrical between the centre and
the peripheries, given the great imbalances in territory, resources and population. The
security concerns of the members of the RSC are interlinked inside the countries and
RSC-wide: terrorism, migrants, minorities, water, elite conservation. The central
construct in the contemporary political landscape of the RSC is the Eurasian
Economic Union. It came after many attempts at Post-Soviet integration failed
because they increased political tensions, were too wide in membership, not
institutionalised enough and void of political will to achieve relevance. A new
blueprint of integration framework: focused, deep and ambitious started with the
Customs Unions in 2010 and upgraded gradually into an economic union with
institutions and a bureaucracy. But on its Western fringes, the EEU is facing
competition from the EUs Eastern partnership. Both proposals are structurally
incompatible and therefore command an either-or choice: the Ukrainian conflict is a
86
dreadful evidence of it, torn between the contradicting wishes of its neighbours and
within its population. Economically, the implementation of the common external
tariff (mostly aligned with the Russian tariffs) has had a big trade diversion effect,
compounded by the weak rouble at the time and mainly beneficial to Russia. It
undermined trade with non-EEU members and although the Eurasian Economic
Commission (ECC) is trying to implement higher quality of trade conditions, non
tariff barriers are still in use as political weapons. Further, the common external tariff
is often conflicting with the WTO commitments of several countries although things
should normalise when the Russian tariffs reach their WTO level at the end of the
adaptation period; in 2020. Remittances from foreign workers in Russia is still a
sensible question in all capital cities of the union because of its intimate relation to
unemployment and as fuel for unrest in CA. With regards to energy, Russia inherited
a quasi-hegemonic position but it is eroding. Central Asian and Caucasian states are
working out alternatives to Russia as a customer or transit state. Complementarities
are more obvious with China, energy hungry and ready to invest in infrastructure.
The EEUs success will in part hinge on the openness off its trade and non trade
regime and practices. The nature of its geopolitical posturing and the response of the
West will determine the relationship: somewhere between conflict, accommodation
and cooperation. Apart from Tajikistan, biding its time to enter the union when
parameters are most favourable, new memberships are unlikely.
Beyond the internal parameters for success in the union, the EEUs relation with the
Silk Road Economic Belt will be the determining factor for the regions future. The
latter responds to the current structural realities of the Chinese economy. Growth has
slowed down and the days of double digit growth are over. Overcapacity in
infrastructure building, saturation on the coastal regions and gigantic foreign
exchange reserves have prompted the need to invent a new growth model. China is
pressured from the East, challenged at sea, where its territorial claims are hotly
disputed and where the US military deploys 60% of its military fleet. There is
concerns as well about the security of supplies passing through straits (Ormuz,
Malacca), especially regarding energy supplies. Out of all these challenges China
came up with an ambitious plan that seeks to export the infrastructure building model
87
(that yielded positive results for China) in weakly developed regions where they are
much needed. This should accompany the economic transition of China to producing
higher-quality export goods and help revitalise the region. With that in mind, the
security of the Xianjang is a crucial. As the proposed platform to connect to the
neighbouring regions and richer markets; it needs to be pacified. In this endeavour,
the recent change of tactics by Beijing (lavishly financing infrastructure
development) is more likely to succeed than the previous heavy handed approach that
alienated public opinions in Central Asia. Further, the initiative counters the Chinese
stance not to get involved in internal affairs beyond its borders. It has raised many
questions as to how to adapt this position in the future while guaranteeing the
integrity of the investments made abroad. The size of the investments leave little
doubt about the centrality of BRI in Chinese policy and its transformation potential
for the region. This raises the essential question of my work. With the BRI facing
high defiance from the local population in CA, security uncertainties in Afghanistan
and in the Caucasus, the EEU lacking economic stimulus and facing governance
impediments: How will these two framework cope: are they compatible with or
detrimental to one another ? Some argue about an inevitable clash, corollary to the
rising of a new power and brewing potential for conflict. And indeed, the SREB is
threatening Russias interest as it dilutes Russias economic might in the region,
undermines the creation of a monetary union, and threatens the hegemony of the
Northern corridor in land trade. On the other hand, the advent of the EUU raised the
external tariff which has been detrimental to Chinese business interests. Further,
China does not yield the same advantage when negotiating in a multilateral format
than it does with smaller states in a bilateral setting. But, I argue that both understand
they cannot possibly afford to have a conflictual relationship and another political
front. Especially since the benefits for cooperation could be immense. The economies
of China and EEU countries are potentially complementary and the current economic
structure in China offers the opportunity to invest massively. At present, China cannot
guarantee the security of its investments itself. Notably because of the existence of
the CSTO, fulfilling that role in much of the region. In economic terms, a single
customs tariff, a unified administrative framework for operations in all the union and
88
one border crossing to EU territory are substantial advantages. If played right, the CA
country could mange to revive their local industries, having access to better
transportation. I argue that CA states are increasingly emerging beyond a position of
object of international games since they adopted a multi-vector strategy to balance off
the interests of greater powers and retain room for manoeuvre. Kazakhstan in
particular, is central to both strategies and stands to benefit enormously. Its national
economic policy has been harnessed to the Chinese one. But much as the population
welcomes investments in infrastructure and take pride in the newly built roads, they
are wary of the Chinese intentions. The next government of Kazakhstan will walk a
fine line between attracting Chinese investors and keeping the population peaceful.
Arguably, the biggest danger for CA is the greed of local elites and the lack of
capacity -or will- to overcome the rent distribution system. This entrenches elite and
administration in a self serving scheme while impeding real growth and
diversification. Change in this regard will necessary be slow and painful due to the
vested interests. Furthermore, the nature of the investments (large contracts,
construction works, government procurements etc.) is likely to open avenues of
creating new ones. In conclusion, as the powerful currents of globalisation tend to
make modes of governance, ideas and processes more standard, the fruits of
integration are not evenly felt. Some countries, districts or social groups fall behind
and this process of fragmentation can be addressed at the regional level.269 From this
perspective, the EEU can be a vehicle for Eurasian states to navigate the tumultuous
global (system) level and engage with other regional groupings (EU, SCO, ASEAN,
BRICS). Further, by embracing the proposed flows of investment, infrastructure and
economic activity emanating from China under the Belt and Road Initiative; Eurasia
could successfully implement trans-regionalism, as a promising way of development.

269Voskressenski, A. D. (2017). Non-Western Theories of International Relations. Cham: Springer


International Publishing.
89
90
Fig.1 Routes and Projected modernisation
A. Table of Corridors
Appendix
B. Abbreviations

EEU/EAEU: Eurasian Economic Union


EEC: Eurasian Economic Commission
NSR/ SRI / OBOR : New Silk Road / Silk Road Initiative / One Belt One Road
BRI: Belt and Road Initiative
WTO: World Trade Organisation
RSC: Regional Security Complex
RSCT: Regional Security Complex Theory
FTA: Free Trade Agreement
EU: European Union
NAFTA: North American Free Trade Agreement
SPS: Sanitary and Phytosanitary
TBT: Technical Barriers to Trade
CIS: Commonwealth of Independent States
CA: Central Asia
US: United States
USSR: United Soviet Socialist Republics
IR: International Relations
GDP: Gross Domestic Product
IMU: Islamic Movement of Uzbekistan
SCO: Shanghai Cooperation Organisation
NATO: North Atlantic Treaty Organisation
EU: European Union
APEC: Asia Pacific Economic Cooperation
NAFTA: North American Free Trade Agreement
GUAM: Georgia Ukraine Armenia Moldova
ENP: European Neighbourhood Policy
CU: Customs Union
SES: Single Economic Space
AA: Association Agreement
91
DCFTA: Deep and Comprehensive Free Trade Agreement
ECC: Eurasian Economic Commission
WTO: World Trade Organisation
ECU: Eurasian Customs Union
EBRD: European Bank for Reconstruction and Development
BTC: Baku Tbilisi Ceyhan
CAC: Central Asia Centre
CAGP: Central Asian Gas Pipeline
BCM: Billion Cubic Meters
CSTO: Collective Security Treaty Organisation
FTA: Free Trade Agreement
EC: European Commission
CAREC: Central Asian Regional Economic Cooperation
TEU: Twenty tones Equivalent Unit
OBOR: One Belt One Road
MFA: Ministry of Foreign Affairs
PRC: Peoples Republic of China
BRICS: Brazil Russia India China South Africa
BCIM: Bangladesh-China-India-Myanmar
CIPEC: china indochina peninsular economic corridor
CPEC: China Pakistan Economic Corridor
KTZ: Kazakhstan Temir-Zholi
BTK: Baku Tbilisi Kars
AIIB: Asian Infrastructure and Investment Bank
QE: Quantitative Easing
BPD: Barrels Per Day
OSCE: Organisation for Security Cooperation in Europe
TTP: Trans Pacific Partnership
TTIP: Transatlantic Trade and Investment Partnership
ADB: Asian Development Bank
ECPA: Enhanced Cooperation and Partnership Agreement
92
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