Coordination of the Eurasian economic Union and the Silk road economic Belt: Opportunities for Russia

Abstract

This article examines the opportunities created for Russia by the launch of China's Silk Road Economic Belt (SREB). On one level, the SREB is a transport and logistics initiative to deliver Chinese goods to Europe. However, more than this, the SREB is a comprehensive project to develop Central Asian countries and to respond to economic and political processes within China and the larger Asia-Pacific region. Specifically, the SREB is intended to meet challenges - increasing income gaps, the growing presence of the United States in Asia and changing labour patterns - that are transforming the region's social and economic landscape. In this context, the SREB is an expression of China's desire to create strong regional value chains, to outsource labour-intensive and environmentally harmful production, to foster the development of northwestern China, to create conditions for political stability in the Xinjiang Uyghur Autonomous Region, and to guarantee that Chinese construction firms are operating at full capacity. To the extent that the SREB is about the transport of goods, this is driven by the need to diversify export risks in the face of deteriorating military and political conditions in the sea rather than by perceived commercial benefits. The Joint Statement on Cooperation on the Construction of Joint Eurasian Economic Union and the Silk Road Projects signed on 8 May 2015 represents a milestone in China-Russia relations and potentially lays to rest concerns about competition between these two projects. Indeed, the Eurasian Economic Union (EEU) and the SREB are complementary projects with the former providing an institutional basis for cooperation and the latter providing the necessary investment resources for joint projects. If successful, the coordination of the EEU and the SREB will make it possible to overcome potential contradictions in Central Asia - the source of the most serious tensions between Russia and China. Participation in the SREB may come with certain benefits for Russia. First, the integration of Russia's transportation system into the logistics network of the Eurasian region will give Russia's transit and associated logistical services access to growing regional markets. Second, the SREB creates opportunities to strengthen industrial cooperation between neighbouring countries and to develop new economic clusters. Third, the integration of the EEU and the SREB may support the more ambitious project of cooperation in the greater Eurasia area and transform the region into a new centre of economic development on the global level.