Translated on February 10, 2015 by Kristina Rus
Originally published December 15, 2013
The Great Silk Road
Ukrainian press is bewildered about the indecisiveness of President Yanukovych in foreign politics. Many months were spent on the preparations for the signing of the Association Agreement with the EU, and suddenly two weeks before he hit the brakes.
Protesters roam the streets looking to provoke clashes with authorities, and Yanukovych left for a visit with China. In Kiev there are clashes with protesters. Yanukovych, on the way back from China, met in Sochi with Russian President, and then flies to Malta… What does it all mean?
It’s very simple. It turned out that China can offer Ukraine what Europe can’t – investment. And, including in those areas where even Russia would not invest, which is for the most part interested only in the Ukrainian pipeline [not true, actually -tr.].
The fact is that Ukraine unexpectedly found itself a piece of the puzzle of the revived Chinese “Silk Road Belt”. For the sake of this project, it will transfer to China a part of the Crimean territory, where an economic development zone will be created, as part of the “Belt”. It includes Sevastopol and the area near Evpatoria, where a deep-water port will be built, writes “Nezavisimaya Gazeta”. The Chinese also plan to built in Crimea a new airport, shipyards, oil refinery, LNG terminal, education centers, beaches and recreation areas.
But the main flavor of the project is that it does not yet include Russia. Therefore, the Chinese expansion in Ukraine can change the balance of power in the discussion of Russian-Ukrainian economic plans.
Last week, China and Ukraine signed a memorandum on construction in Crimea of a deepwater port (Saksky district), reported “Interfax” with reference to the project developer, the General Director of “Kievgidroinvest” Alexei Mazyuk. The construction of the port will be fully funded by the Chinese side, around it an industrial zone of 300 000 square meters will be established.
And the newspaper “Zhenmin Zhibao” – the official organ of the Communist party of China explained that the construction of a deep-water port in Crimea will allow Beijing to reduce trade route to Europe by as much as 6000 kilometers. Goods from China will go through the Suez canal and the Mediterranean sea, but instead of following through Gibraltar, the ships will turn into the Black sea and will dock for unloading in Crimea. One glance at the map is enough to understand: Yes, it is much closer.
Thus, Crimea discovered new perspectives, which the peninsula did not expect. However, there was talk that China is interested in building wind and solar power plants on the Kerch Peninsula, where previously Scholkinskaya Nuclear Power Plant was almost built (was 90% ready, and closed after Chernobyl accident), but the transit of goods is on a much bigger scale.
But that’s not all. Ukraine and China plan to jointly engage in reconstruction and development of the Sevastopol sea fishing port and the creation of a high-tech industry zone around it. The schedule is already determined: construction will start at the end of next year. China’s investment in port infrastructure will be about 3 billion dollars just in the first stage.
The second stage, writes “Zhenmin Zhibao” of investments will reach $7 billion. Everything will be done quickly: the implementation period will not exceed two years, said the representative of the Chinese side of the project, Wan Jing. And the profit is expected in roughly six years after starting operation of all the facilities.
In China, the President of Ukraine Viktor Yanukovych has confirmed to the Prime Minister of the State Council of China Li Kejing his interest in strengthening strategic ties with China. He hopes that this will be in the aerospace, energy, space industry, infrastructure development and “the creation of the Great Silk Road”, the main transport and economic hub of which in Ukraine will be Crimea.
Note that the project started not so long ago. It was announced in September of this year, when Chinese President Xi Jinping, during his visit to the Central Asian countries, spoke about the implementation of a large-scale integration concept of “Economic zone of the Silk Road”. The Chinese believe that it would be much more promising and more successful than the Eurasian Union, which is being created by Russia on the initiative of President Putin.
Chinese integration plan will cover not only Central Asia but also South Caucasus: Azerbaijan, Armenia, Georgia, Nagorno-Karabakh, Abkhazia, South Ossetia. Ukraine is a piece of the belt, and the end point of the Road will be Europe.
Russia’s participation in the Chinese project remains unclear. Unless she wants to, as proposed by China, to participate in the revival of the transport infrastructure of the Central Asian republics, but it is totally unclear why would she do that. China has a clear goal: after flooding America with consumer goods, it now wants to take them to Europe. For Russia it makes no sense to equip foreign trade routes.
In anticipation of discontent in the US and Europe about its strengthening, China is in a hurry to make all possible moves in advance.
“China has clearly expressed that it is not seeking regional dominance, does not seek to establish a sphere of influence and does not interfere in the internal policies of other large States. In this regard, offered by China, the new concept does not interfere with the interests of Russia, writes, “Zhenmin Zhibao”. – Chinese President XI Jinping held separate talks with leaders of four Central Asian States that have raised the relations between China and them to the level of strategic partnership. For example, Uzbekistan and China signed a cooperation agreement in the amount of $11 billion. With regard to infrastructure, China can help the countries of Central Asia in the restoration and construction of public roads and railways to Europe. Russia also is pleased to take part in this”.
It is possible (and even likely) that it is true, but the thing is that it is rather easy to transform the economic clout into political, if necessary. Now China refrains from this, but it is unknown how it will behave in the future if circumstances change. And for now – yes, China makes investments around the world, for example, in Africa, on the basis only of economic feasibility. But its growing economic power in itself is a strong political factor of deferred action. Stepping to a new level, it will be able to easily change what still seems unreal – for example, to make the yuan the world’s reserve currency, with all the ensuing consequences.
As for Ukraine’s relations with China, according to the Ukrainian resource From-ua the countries have signed more than 20 strategic agreements about the development of trade and investment cooperation. Ukraine discussed strategic cooperation with China through 2018. In the next five years, China plans to import products worth 10 trillion dollars, and part of this quota can be given to Ukraine.
The Ukrainian President’s visit to China became a turning point in the development of bilateral relations, believes the edition. Viktor Yanukovych and the Chairman of the People’s Republic of China XI Jinping signed a joint Declaration on deepening strategic partnership that includes more than two dozen contracts, memorandums in the financial, industrial and energy sectors in excess of $30 billion dollars. Already next year Ukraine will receive $18 billion in loans and investments. How can you compare it with those $600 million, promised by Europe, while twisting Ukraine’s hands with her papers about the Association and Free Trade Zone (FTA)?..
“In addition, Ukraine will have a quota of guaranteed sale of their products in China, which opens unprecedented opportunities for all sectors of the national industry and agriculture”.
In addition, a Memorandum was signed between the state mortgage institution and the Chinese CITIC Construction on the construction of affordable housing in Ukraine. For these purposes, China will provide $15 billion for a period of 15 years with a possibility of extension and expansion of this project.
There is an agreement between the Ministry of Energy and China national engineering Corporation Wuhuan Engineering Co. Ltd., providing for the construction of a plant for production of synthetic gas. In the end, the project will create 2,000 new jobs at the plant and about 100 000 jobs at domestic coal producers.
Now the annual volume of bilateral trade between Ukraine and China is 10 billion dollars. The volume of trade ranks second among 217 countries with which Ukraine trades, and is 8% of the total trade of the country. Therefore, the signed agreements with China will increase these figures three times.
In an election year, Yanukovych will need to demonstrate to the population the improvement of the economic situation, and he hopes that with China and Russia he will succeed sooner than with stingy Europe, which does not want to guarantee anything.
Kristina Rus comment:
Much is talked about the fact that the Ukrainian crisis is not about Ukraine, but about US standoff with Russia. But of course the greatest economic rival of the West today is not Russia, but China. Russia is simply a key to China. A strong Russia with Putin at the helm is China’s friend, and makes China stronger. This is why Russian Western-funded opposition tries to stir trouble between Russia and China, complaining about China’s sights on the Russian Far East among other things. The West’s ultimate dream – is a conflict between Russia and China.
Besides the Eurasian Economic Union with Russia at it’s core, the West is very much concerned about the prospects of another union, initiated by China – “The New Silk Road Economic Zone,” home to 3 billion people, which will be about much more then just transportation logistics (with the new railway worth $150 billion alone and ready by 2030) and makes EU seem like a small peninsula.
The gateway to the silk road, the Xinjiang province with a large Muslim presence, bordering Russia, Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan, Pakistan and India is already a target for terrorist attacks by Muslim extremists.
With September 2014 announcement of the “New Silk Road” project by China, one may wonder about the coincidental timing of the push for Ukraine to sign the EU Association Agreement, followed by protests in Kiev, which resulted in deposing of the government, friendly to Russia AND China.
It is clear that China had much more tangible projects to offer Ukraine, while “EUSA” was interested in pumping resources out of Ukraine, while destroying the competition of their own trans-national corporations in exchange for a promise of a chance of possibility of becoming a member sometime in the next few decades.
China supported Russia’s reunification with Crimea, and after Putin’s visit to China it was announced that Russia resumed talks about Chinese investments in Crimea. At the time when the West is trying to strangle Russia economically, Russia’s own financial crisis, spurred by Western sanctions, and an urgent need for investment in Crimea, it is safe to say that Russia will give China very serious consideration.
At the same time it was announced that Odessa port lost China, which is no longer interested in investing in Ukrainian transport infrastructure due to rampant corruption.
China is already suing Ukraine for $1.5 billion in a London for not delivering the promised grain.
It is safe to say that China has lost it’s interest in investing in Ukraine, and Ukraine has traded a very wealthy and reliable friend for a stingy uncle.
It is unfortunate that Yanukovich administration was not able to get the message across to the Ukrainian public about the lucrative opportunities coming from the East. That message would drown anyway in the sea of Western-sponsored and oligarch-owned media, who had their eyes firmly focused on the prize.
China cut their losses in Crimea, and learned an important lesson about who its friends are.
Despite differences in national interests between Russia and China due to the differences in their geographical and economic positions, one unifying factor is very strong – a challenge from the West. Leadership of both countries realize this very clearly, and will likely focus on working through those differences for the benefit of a common goal – containing the Western threat.
In the meantime Ukraine became the latest victim of the mad rush for new markets, where the East and the West came to a head. This does not add any optimism about the dwindling worldwide demand and the future prospects of the current economic system dependent on infinite growth on a finite planet.