After travelling 21,400 kilometers overland, I finally reached the New Silk Road’s birthplace in Kazakhstan. Nur-Sultan is a strange city—a young and isolated metropolis trying its best with its glass skyscrapers and yurt-shaped megamalls to impose a shiny sci-fi futurity on the primordial Kazakh steppe. It was founded 21 years ago as “Astana”—literally “capital city,” a new capital for a newly independent nation, but in 2019 it was renamed in honor of Nursultan Nazarbayev after he resigned as president. Kassym-Jomart Tokayev is Kazakhstan’s new head of state, but Nazarbayev is “Leader of the Nation” and chairman of the Security Council. Having held the office of president since the country’s creation in 1990 amid the break-up of the Soviet Union, the 79-year-old still dominates Kazakhstan’s political scene.

It’s late November, and the temperature is 30 degrees below freezing. Locals tell me that winter hasn’t truly arrived yet, and that it will reach minus 40 or 50 before January. Walking the vast boulevards between citizen-humbling monuments, my eyelashes start freezing together and ice crystals form in my nostrils.

Nur-Sultan is a hard place. The former capital, Almaty, with its beautiful mountains, cafe culture, and temperate Southern climate is a nicer city, but Nur-Sultan is a more poignant symbol of 21st-century Kazakhstan.

The city blends Kazakhstan’s mythologized nomadic past with the cold gleam of oil money. Alone on the harsh steppe, it embodies the country’s future-facing hopes and mad ambition. Kazakhstan is troubled, and like the rest of Central Asia, it lives with the seemingly incurable plagues of corruption and debilitating bureaucracy. At the same time, it has potential and vision, boasting oil-and-gas-funded urban development, strong human capital, and striking visions like the Kazakhstan 2050 Strategy—an ambitious plan to jump into the world’s top 30 economies within the next 30 years.

The Birthplace of China’s Vision

Nur-Sultan is thus a fitting birthplace for an equally ambitious Chinese vision. In September 2013, behind a lectern at Nazarbayev University, China’s newly enthroned President Xi Jinping proposed building a “Silk Road Economic Belt” across Eurasia—one half of what would become known in English as China’s Belt and Road Initiative (BRI).

Since March 2019, I’ve been travelling this Silk Road Economic Belt (SREB), or “New Silk Road.” From Brussels to Beijing, I’ve passed through 23 countries, visiting infrastructure projects, talking to experts, and trying to get a feel for how locals see Beijing-sponsored development.

As I proposed in my inaugural article for the Berlin Policy Journal, the BRI is something of a blank canvas onto which commentators and decision makers can project their desires and assumptions. The policy documents behind the initiative do absolutely nothing to narrow the scope of the BRI, imbuing it with the potential to describe pretty much any aspect of human endeavor anywhere. The Chinese literature associated with the BRI paints it as a highly idealistic foreign policy concept, while knowledge of Chinese political processes casts it in the role of a campaign slogan, designed to mobilize support in a certain direction while leaving details to be filled in further down the chain of command.

An Undefined, All-Encompassing Idea

Most people I speak to about the SREB conceptualize the initiative as a physical route running from East to West. Beijing is keen to promote the physical dimension of the SREB, but it is not alone in doing so—almost every single country I’ve visited has marketed itself to me as a “transit” or “logistics hub” for East-West trade. In countries like Azerbaijan and Kazakhstan, where oil and gas still provide a worryingly large percentage of GDP, embracing a more logistics-based economy is an important step toward economic diversification. In many “BRI countries,” governments and observers take it upon themselves to brand projects as part of the “Belt and Road.” Even those with no Chinese involvement, such as the Baku-Tbilisi-Kars railway, are associated with China by simple virtue of providing East-West connective infrastructure.

Building a route across the Eurasian landmass is a powerful, yet simple idea. In planning my exploration of the SREB as an overland journey East, I myself have been engaging with this narrative, drawn by its easy appeal. Undefined and all-encompassing, the BRI is pretty much what you make of it. If it means East-West overland trade infrastructure to you, then that’s what it means. But if you are looking at the larger picture of what Beijing has been funding in Eurasia, or what has been tagged “BRI,” then East-West trade is not nearly the full story.

My journey from Brussels to Beijing has revealed a rag tag combination of Chinese direct investment and credit that is highly specific to country and regional context. In financial terms, coal plants are more important than roads, and just as the “Silk Road” itself was in fact a collection of multiple merchant-led routes, Beijing-financed transport infrastructure is often locally conceived and has little to do with overarching East-West corridors.

A Tendency Toward Experimentation

It’s certainly not a straight line from Beijing to Brussels. The “China-Railway Express” is a much-celebrated element of the BRI brand, producing endless “new” connections between European and Chinese cities. Its pre-2013 growth, led by private needs for a cheaper Central China-Central Europe route, is an interesting story, but the truth is that Europe-China rail freight will only ever be a drop in the ocean of global trade. The promise of transit revenue on Europe-China traffic is appealing to countries stuck in the middle of the continent, but a more overlooked story is the role new infrastructure might play in stronger inter-regional connections.

The elements of the BRI that appeal most to commentators are grand geo-economic ideas, like connecting the COSCO-owned Piraeus port in Greece with markets via the Beijing-sponsored Budapest-Belgrade railway. But these plans are trumpeted more by academics than practitioners, and the conversations I’ve had throughout my journey have left me with the impression that these ideas, which may be appealing on a macroeconomic level, are rarely followed through in practice.

This is not so much a failure on China’s part—it is more likely a reflection of tendencies toward experimentation and a demonstration of Chinese enthusiasm for signing lots of non-binding memoranda of understanding (MoUs). Chinese officials seem to throw lots at the wall and see what sticks—sometimes locals and the international press misinterpret apparent enthusiasm for serious commitment. At most, supposedly global-trade-reshaping routes like the Middle Corridor through the Caucasus are about building a little extra redundancy into China’s trade networks.

Associations with the Past

Along with the appealing cross-continental dimension, the BRI’s romantic connection with the ancient Silk Road also offers a temptingly cyclical reading of history. At Nazarbayev University, on September 6, 2013, Xi Jinping said wistfully: “Today, as I stand here and look back at that episode of history, I can almost hear the camel bells echoing in the mountains and see the wisp of smoke rising from the desert.”

This association with the past promises revitalization to left-behind continental economies, but also has a wider appeal. People like stories about renewal, and as the emergent 21st century superpower, anything China does taps into a universal thirst for novelty. Of course, the BRI itself is a new concept for a collection of policies that are far less new. China started building and funding infrastructure long ago, especially in Africa, and many of the most recognizable BRI projects have pre-2013 origins. Every element of the BRI taken on its own predates 2013. It is their collective articulation as a foreign policy concept and brand that is new—it is in a sense the practice of putting a name to Chinese economic power.

The BRI dovetails with wider interest in the “China rise” narrative, and because a powerful China is a novel concept in modern geopolitical terms, the BRI automatically becomes an alternative for those dissatisfied with the status quo. In the Western Balkans for example, Beijing is a fairly recent geopolitical player. It arrives with little historical baggage and ready to serve as a foil to EU partners with whom countries in the region are increasingly disillusioned. In worldwide terms, the BRI represents a Chinese development model that contrasts with paternalistic Western approaches to aid that are perceived as having failed developing countries.

Popular Unease

But not everyone is happy with the BRI and with increasing Chinese economic presence. In Kyrgyzstan and Kazakhstan, the fact that Beijing is a neighbor and familiar face in the history books works to Beijing’s disadvantage. China’s levels of popularity are incredibly varied worldwide. Beijing is able to muster large support for diplomatic maneuvers, but the respect it is shown by other governments does not always reflect public opinion in those countries. Among China’s Central Asian neighbors, friendly government-to-government relations mask widespread Sinophobic feelings.

The same is true of another neighbor to China—Vietnam, where colonial domination from the North occupies a thousand year stretch in the history books. As in Central Asia, the past provides motive (or pretext) for widespread Sinophobia.

Vietnam is where my overland travels end and the “Maritime Silk Road” begins that connects China to Southeast Asian ports and by sea to East Africa and Europe beyond. From Nur-Sultan, I have travelled another 8,300 kilometers and crossed China. The last 2,300 kilometers from Beijing to Nanning in Southern China are covered by high speed train in 11 hours. From Nanning, I followed the well-worn tourist trail into Vietnam, queuing at the border with dozens of Chinese tourists heading south for a cheap holiday.

My journey, however, continues, and along the Maritime Silk Road my next stop beckons: Singapore.

The post A Romantic Name for China’s Economic Might appeared first on Berlin Policy Journal - Blog.

Pictures © Jacob Mardell; composition by Thorsten Kirchhoff

“What do I get in return for this sacrifice?”, Wu says, echoing my question.

He’s chewing over those words, thinking about the last four years he’s spent apart from his family. Wu married his wife in 2015, and he left that same year, moving to work for China Road and Bridge Corporation (CRBC) in Kyrgyzstan. He spends three months over winter back in Hubei province, but those remaining nine months a year aren’t easy—his daughter, now two, was born to him while he was working over 5000 kilometers from home.

“That’s a very good question—I also ask myself this often,” Wu says, suddenly serious. I’m being shown around the construction site of an important project that will soon provide an alternate route between North and South Kyrgyzstan. At the moment, there’s only one road connecting the capital, Bishkek, to the south of the country, and in winter it can be closed for days.

Snowcapped mountains are painted against the sky on all sides, like a movie scene backdrop. The work camp is basic, pared back, but also a trove of sophisticated road building wizardry. In simple container box laboratories, asphalt cores are tested for maximum density and concrete blocks are cured in baths of water.

All but one of the Kyrgyz employees I speak to highlight the impressive work ethic of the Chinese, as well as the cultural gulf that lies between Kyrgyz and Chinese workers. “They came here to work hard and make money,” one tells me, “you’ve seen the huge projects—they need to work hard, only with their methods can they finish, can they do something so impossible.”

The Chinese workers sing a different tune. They may work non-stop in challenging conditions, but they have an easier time of it than they would at home. “The pressure in China is really great, I like the pace of life here, it’s much slower and easier,” one tells me. Central Asia is an underdeveloped space that can help absorb Chinese overcapacity, but it also provides an opportunity for escape on an individual level.

Working abroad also provides opportunities for ambitious young engineers. Wu repeats my question a second time: “What do I get…” Then he says more decisively, “There are three aspects to it: one, this project is big, and so I can increase my professional knowledge; two, I widen my personal field of vision living in a foreign country; three, just life needs—the benefits are good here.”

And with those words, his sadness sinks back below the surface, and the moment of vulnerability has passed.

The post Postcard from the New Silk Road: Routes of Escape appeared first on Berlin Policy Journal - Blog.

© REUTERS/Brendan Smialowski/Pool

Some Tajikistani businessmen estimate that only 5 percent of the Chinese money ends up in the hands of the Tajikistani people. But that hasn’t reduced their appetite to work together.

I could be anywhere on the planet. The marble, glass, and expensive looking vertical lines of the Hyatt Regency give nothing away. In fact, I’m in Tajikistan—a poor, mountainous Central Asian republic that is remembered in the West for its bloody civil war and long, opium-stained border with Afghanistan. These negative associations tend to deter European and American investors, but as I’m finding out, they do little to stem the flow of capital from China.

I’m in the Hyatt to meet a Tajikistani lawyer who works as a fixer for Chinese companies, but there’s been some confusion. The fixer thought he’d be meeting a representative from China Road and Bridge Corporation, not some nosy British researcher. After I finish my introduction, the fixer asks, “and why should I risk talking to you? Are you going to pay for my information?” There’s a smile on his face, but I don’t get the impression that he’s joking. Tajikistan, coming in 179th on Freedom House’s “Freedom in the World” rankings, is not the sort of country where questions are encouraged, and China—Tajikistan’s largest creditor and economic partner—is an especially sensitive topic.

Perhaps suspecting that I’m actually an undercover investor, the fixer eventually launches into his sales pitch: “There’s a lot of money to be made here you know – cotton, gold, silver mining, all you need is a good lawyer – someone with know-how.” He’s not wrong. Tajikistan is so much more than its border with Afghanistan—it’s a beautiful country with kind, indomitable people and a deeply rich culture. Despite the poverty of its citizens, it’s also materially rich—mostly in mineral resources, but also in unlocked economic potential. China realizes this, and where other creditors and investors fear to tread, the Chinese are present in full force.

“We Have the Money”

After the fixer leaves, I start a conversation with two Chinese women at a nearby table. They’re in the construction business, and their understanding of Tajikistani-Chinese dynamics is simple: “They need development, they need help, but they have no money. We have the money.” Introducing herself using her English name, Alice tells me that she’s from Shanghai. She speaks fluent English, but she’s smilingly tolerant of my sloppy Chinese. “Why Tajikistan?” I ask. “Because there are so many opportunities here. It’s just so crowded in China. In London too – not everyone can invest. Here there are plenty of investment opportunities. The people are friendly, and there is no war anymore.”

The Belt and Road is a state-led campaign that provides relief to the massively overheated infrastructure market in China, but the “going out” of Chinese companies and individuals is also an organic process driven by cut-throat competition at home. Tajikistan ranks 129th out of 191 countries on the World Bank’s “Doing Business” index. It’s a cliché that the Chinese are less risk averse than European actors, but it’s an observation that holds true in Tajikistan.

Fahrad works at a big Chinese-Tajikistani joint venture that produces cement. We meet at his offices in a dusty suburb of Dushanbe, where he elaborates on the differences between Chinese and European companies. “The Chinese don’t care about risks,” Fahrad tells me, “they don’t listen to World Bank ratings, they just do and then see the results. The Europeans analyze and wait, but by then maybe it’s too late. If Europe cares only about risks, they’ll lose the market here.” He pauses, and adds – “the reality is, they already have.”

Fahrad and his colleague Arash, who’s in accounting, have worked for both European and Chinese bosses. Returning from his lunch break to find me in his office, Arash is initially frosty, but eventually warms up to his role as informant: “Another big difference is the way Chinese and Europeans work. I used to work for a French company. When it came to paying overdue taxes, I said I could make the problem go away by paying a ‘fine’ to the right person, but my boss preferred to just pay the correct taxes. The Chinese – they don’t care about reputation.” I ask whether his new Chinese boss pays the “fine,” and Arash just laughs.

As well as being risk-friendly, it’s also a justified cliché that Chinese companies are more corrupt, more willing to play by “local rules” than Europeans. Of course, European business people are no more virtuous than their Chinese counterparts – they are simply better bound by anti-corruption laws at home, and by a cleaner corporate culture. When Western critics lambast China’s Belt and Road Initiative, the word “corruption” is always part of their vocabulary. It is undeniable that BRI money fuels corruption in countries like Tajikistan, but such moralizing arguments sound better in Washington or Brussels than they do on the ground in countries that desperately need capital.

Corruption is as pervasive as oxygen in Tajikistan. Everyone—from elites paying for construction contracts to high school students paying for good exam results—is accustomed to bribery. Life and business are also all about who you know. Everything here is owned by Emomali Rahmon, Tajikistan’s president-for-life, and his nearest and dearest. As in other Central Asian countries, wealth that should be in the hands of the people is concentrated at the very top. A Tajikistani friend who was part of the old guard—a Soviet nostalgist—describes this system as “neo-feudalism.”

Every Foreigner Needs a Local

Another Tajikistani “fixer” explains, “As a foreigner you need a ‘roof’ to work here—a local who can protect you.” As well as bribery, Chinese companies seem au fait with managing informal networks.  Fahrad tells me, “They work with local people, they know how to work – they make the product and we deal with the government, like working with two hands.” Fahrad and Arash cite this as another difference between European and Chinese companies: “The Europeans don’t use the knowledge of locals, they say, ‘we know Central Asia,’ but they don’t and then they go bankrupt. The Chinese always work with partners—there’s always a Tajik manager next to the Chinese.”

Tajikistan’s neo-feudalist system means that most Chinese money coming into the country ends up in the pockets of Rahmon and his extended circle. The Chinese-built and -funded highway managed by the enigmatic, British Virgin Islands registered company “Innovative Road Solutions,” is one infamous example of short-sighted rent-seeking, but the list of suspect deals is long. In Dushanbe, I stay with the Tajikistani director of an important Chinese-owned company. They are deeply resentful of the government, and are desperate to leave Tajikistan. “I don’t know what has happened to my country,” is a frequent refrain during our time together. One day I ask them, “of the money China is pouring into Tajikistan, how much do you think ends up in the hands of the people?” They answer—“probably only 5 percent.”

But according to Fahrad and Arash, you’ve just got to accept the conditions of doing business here if you want to operate. Both men say they’d prefer to work with European companies, but, Fahrad expands, “we waited a long time for Europe and Russia… they just didn’t see our potential.” Fahrad echoes the simple equation laid out by the Chinese businesswomen in the Hyatt: “We needed money and knowledge – the Chinese have both, they just needed a market.” He continues, “business is very good right now. They invested, made a successful business, and created jobs. Within five years we’ve paid back the loan we took out.”

Dushanbe Hospitality

Like almost everyone I meet in Tajikistan, Fahrad is absurdly friendly. After our interview, he insists on showing me his home—a courtyard house magically secluded from the bustle of Dushanbe. I meet his parents and leave carrying heaps of home-grown grapes and oriental pears. As he drives me back to the centre of town, Fahrad explains, “We’ve seen the horrors of war here. As long as there’s economic development, I just don’t care, I don’t mind the corruption.” The specter of war and chaos is often wheeled out by the President to bolster support, but it’s a motif that finds a receptive audience in an emotionally scarred population with habitually low expectations. After giving me the 5 percent quote, the director laments, “it would be better if our country had clever people to control investments, but we don’t… here there are just stupid people.” In Tajikistan, there is a sense that, corrupt or not, China is the only country trying to meet the country’s huge need for infrastructure and investment. “Overall,” the director says, “Chinese money is good for Tajikistan.”

One sunny afternoon in late September, I drive down to the South of Tajikistan with the director to visit the construction site of a Chinese textiles factory. The sky is still summer-blue and the Chinese-built road is strewn with the white-fluff of early-harvest cotton. I spot a colossal flagpole flying the red, white, and green flag of Tajikistan, and remark banally on the size of the flag. “Yes,” the director says with a bitter laugh, “we have a lot of flags here in Tajikistan. No education or healthcare, but lots of big flags.” At the construction site itself, the director tells me to pretend I’m a cousin from Russia. I say that I’ve felt no animosity as a Brit in China, but they warn me, “if you speak English, they won’t trust you, they love Russians a lot better.”

We wait outside the factory with a motley collection of senior Chinese and Tajik employees. Once the work day finishes, we’ll head into town to sort out a “tax problem” on behalf of the Chinese company. As the sun slips below the mountains, workers lay down their tools and stream out of the gates. The Chinese get on buses heading back to their nearby work camp—an austere industrial village made from shipping containers and concrete— while the local workers head into town. Most workers it seems, are local, but not as many as the official quota mandates. Over the gates, a red and yellow banner reads in Chinese “Let the Chinese and Tajik people share together in the Belt and Road, let them share together in its achievements.”

Dispatch from Dushanbe, Tajikistan

The post China in Tajikistan: Corrupt, Risky, but Desperately Needed appeared first on Berlin Policy Journal - Blog.

© Jacob Mardell/composition by Thorsten Kirchhoff

The carriage is plunged into darkness. According to Chinese state media, it takes 900 seconds for a train to pass through the Kamchiq tunnel, but I’ve forgotten to start the timer on my phone. I’m having breakfast beers in the dining car with an Uzbekistani engineer, and in my early-morning lager haze, timing tunnels has slipped my mind.

At 19.2 kilometers, the Kamchiq tunnel is the longest tunnel in Central Asia. It is the crux of the 123 kilometer Angren-Pap railway, a $1.6 billion project that Uzbekistan launched in order to connect its capital, Tashkent, with the Fergana Valley,  a fertile chunk of land that is home to a third of the country’s 32 million inhabitants.

Although it was announced before the advent of China’s Belt and Road Initiative (BRI), the Kamchiq tunnel, which was built by China Railway Tunnel Group and part-funded by the Exim Bank of China, has become a BRI model project in Central Asia. A difficult feat of engineering completed ahead of time, the project oozes connective charisma. The Fergana valley is encircled by treacherous mountains, and travelers in the pre-tunnel era had to choose between passing through Tajikistan or taking a long, winding car journey through sometimes impassable mountains.

I ask my engineer companion, Muhammadjon, whether the railroad has made the journey East easier. “Of course,” he says, “before it was six hours through the mountains. In winter? Impossible.”

Winning Tenders, Making Money

Uzbekistan is a Muslim country, and I’m surprised to be invited for an early morning drink in such a public place. But Muhammadjon, who’s in his late 20s and has a lot of confident energy, tells me, “We only live once.” He freelances as a turbine engineer and runs a business with friends selling vegetables from Fergana to Russian markets. Like many people I meet in Central Asia, Muhammadjon is clear-eyed about China’s purpose in the region. “There are two sides to everything,” he says, “they win all the tenders here, and they make a lot of money out of us.” He points to a power station whizzing past outside the window—another project built and financed by China.

The scenery is blue and gold, occasionally there’s the white of a snow-capped mountain or field of cotton. When he was a student, Muhammadjon says, he was forced to pick cotton along with his classmates. You could only get out of picking if you were rich enough to pay a “fine.” Things are different now. Uzbekistan’s paranoid dictator, Islam Karimov, died in 2016, providing space for reform and opening up. Referencing the economic promise since reforms began, Muhammadjon tells me, “For twenty-five years, it’s like we were asleep.”

The Kamchiq tunnel was opened jointly by Karimov and Chinese president Xi Jinping. Karimov’s gone, but Xi and the BRI remain. As Central Asia’s largest market reforms and seeks more development capital, Beijing’s prominence in Uzbekistan is only likely to grow.

Dispatch from Tashkent, Uzbekistan

The post Postcard from the New Silk Road: A Morning Drink with the Turbine Engineer appeared first on Berlin Policy Journal - Blog.

© Jacob Mardell

Linking China and Europe via the Caspian Sea, the “Middle Corridor” is one of the BRI’s six “official” corridor. But in the South Caucasus region, China is almost nowhere to be seen.

The Mercury II sank in 2002, leaving only eight survivors. So when I notice that I’m crossing the Caspian Sea on the Mercury I, I’m not exactly filled with confidence. The slot machine in the games room, which only takes Deutschmark, does nothing to alleviate my sense that this Soviet-era ferry has seen better days.

But the crossing is smooth. We leave the port of Baku in the early hours of Saturday morning, and after twenty two hours of glorious stars and mess-room meals with Ukrainian truck drivers, we arrive in Kazakhstan at the port of Kuryk.

This Caspian Sea crossing is an essential feature of the shortest route from China to the EU, otherwise known as the “Middle Corridor”—so called because it charts a middle passage between Russia in the North and Iran in the South. Some transport initiatives are more concrete than others. The EU’s trans-European transport network (TEN-T) program, for example, describes a specific list of studies and works funded by the EU. Like China’s Belt and Road Initiative (BRI), the Middle Corridor tends more toward the conceptual end of the spectrum. Although China’s BRI is far more complex, both the BRI and the Middle Corridor operate like slogans and are leveraged by various actors to tap into the zeitgeist of resurgent East-West overland connectivity.

Noticeable for Its Absence

The Middle Corridor is sometimes described as being a Chinese initiative, but Beijing’s role in recent Trans-Caspian and Caucasian infrastructure has been minimal. While “China-Central Asia-West Asia Corridor” is one of six official corridors of the BRI, its remit is vague, and it encompasses Iran rather than the Southern Caucasus. China is a party to the trans-Caspian agreement signed in 2013 between Kazakhstan, Azerbaijan, and Georgia, though despite frequent talk of synergy between “Turkey’s Middle Corridor” and the BRI, cooperation is limited to the signing of MoUs.

The long-planned Baku-Tbilisi-Kars (BKT) railway connection from Azerbaijan to Northeastern Turkey is the most important infrastructure project to have been completed along the Middle Corridor. It was inaugurated in October 2017 and, as I found out when I took a shiny new Stadler car heading West from Baku, the service recently opened to passenger traffic. The BKT is often associated with the BRI in official statements, but neither Chinese finance nor Chinese companies were involved. Beijing has also been largely absent from port developments around the Caspian Sea. The new ports of Baku and Kuryk are keen to stress their relevance to the New Silk Road, but China played no role in their development.

Georgia has good access to funds from international financial institutions (IFIs), and oil-rich Azerbaijan has enough money to pay for its own infrastructure—in fact, it also provided funds for the Georgian portion of the BTK. This self-sufficiency explains why Chinese funding might be absent from the Middle Corridor, but it doesn’t fully account for the shallow depth of China’s footprint. One plausible explanation is that Beijing isn’t convinced the Middle Corridor is viable.

Five Borders, Two Seas

I talk to an expert at an IFI in Baku who dismisses the Middle Corridor as “cumbersome.” As well as referring to the Caspian as a “lake with bad weather that they call a sea,” he also says that a lack of infrastructure and multiple border crossings mean the Middle Corridor can’t compete with the “main overland route through Russia.” As the crow flies, it may be the shortest route between Europe and China, but the middle corridor involves crossing five borders and transiting one or two seas, depending on where the cargo’s heading.

Multilateral institutions such as the Trans-Caspian International Transport Route (TITR) have been set up to coordinate trade, but linguistic, cultural, and legal differences make aligning customs procedures an uphill battle. As ever in the world of trade, “soft” institutional infrastructure is just as important as the “hard infrastructure” of railroads and port facilities. One Middle Corridor insider tells me he spends around 50 percent of his time waiting for signatures.

Thanks to the help of a good friend at the port, I arrive an hour before boarding, but most of the foreign travelers I meet at the Port of Baku have been camping there for at least a day. The boat leaves only when it’s full, sometimes once or twice a week, sometimes less frequently. If there’s bad weather at sea, as there often is, the boat goes nowhere. There is a lot of paperwork and hours of unexplained waiting involved in crossing the Caspian Sea. For Silk Road travelers with time on their hands, it’s a fun, if bemusing experience, but it’s not the easiest way to get from A to B.

Beijing’s Diversification Game

In fairness, the port wasn’t built to service European thrill-seekers. The new cargo terminal is much more modern and efficient, and the ferry terminal is also scheduled for expansion. Yet the multi-day Caspian crossing does illustrate the problems faced by goods heading to and from China through the Middle Corridor. The overwhelming majority of trade between the EU and China is by sea, and for the small percentage of goods suited to the more expensive, but slightly quicker land routes, the Northern Corridor remains an easier option.

The Middle Corridor’s main appeal is that it bypasses Russia. Despite currently healthy Sino-Russian relations, Beijing likes to build redundancies into global trade networks. Diversification is the name of the game, and the Middle Corridor provides a good alternative route to Europe should problems arise along the Northern Corridor. While the route through Russia remains the cheaper option, the Middle Corridor is an insurance policy that’s probably low on Beijing’s list of priorities.

But the Middle Corridor isn’t all about end-to-end trade between China and the EU. When I visit ports, I tend to search for containers adorned with Chinese characters, which always provide easy photo opportunities. But at the Port of Baku, the starring role is played by a long train of fertilizer from Turkmenistan. Via Poti port in Georgia, the fertilizer will end up on the fields of Scotland. Onboard Merkury I, I talk to a Turkish truck driver who is hauling a cargo of heavy textile machinery, destined not for China but Kazakhstan. Because of a persistent global obsession with the BRI, stories about East-West connectivity often choose China as their main protagonist, but there are other markets and producers out there.

The Race for the Best Logistics Hub

The countries sandwiched between the European and Chinese markets are also capable of laying out their own plans for development. The Middle Corridor is partly led by a strong sense of competition between participating states. Every official I meet in every country I visit between the EU and China touts their country’s credentials as a regional logistics hub, and the race is on to establish the best facilities and the most preferential conditions for business.

As Eugene Seah, Chief Operating Officer at the Port of Baku reminds me: “We’re not just talking about transit, we’re talking about hubs—about building viable supply chains and being able to manufacture and export from Azerbaijan.” Alongside a tidy, hi-tech port facility that was inaugurated in 2018, the Port of Baku is also developing a colossal Free Trade Zone (FTZ) that officials hope will attract businesses to base operations in Azerbaijan. Shah says he has seen “strong interest” from Chinese parties but suspects that Beijing is playing something of a waiting game.

In the meantime, the Middle Corridor remains a firmly regional initiative. It faces serious obstacles to becoming an alternative China-EU route, but Trans-Caspian traffic can still flow without support from Beijing. In other words: China is big, and the BRI is important, but there’s a lot going on in the Southern Caucasus and Central Asia besides Beijing-sponsored initiatives.

Dispatch from Aktau, Kasachstan

The post On the “Middle Corridor,” China Is Largely Absent appeared first on Berlin Policy Journal - Blog.

© REUTERS/Andrea Verdelli/Pool

Near the end of her speech at the Munich Security Conference in February, Chancellor Angela Merkel struck a resigned, almost plaintive note about Germany’s place in a world dominated by a more hostile United States and China.

Germans could work day and night to be the best, she told her audience, but they would still come up short against the Americans, with their massive economy and all-powerful dollar, and the rising Chinese, with a population more than 16 times the size of Germany’s.

“The odds look pretty bad for us,” Merkel concluded in a remarkable admission of frailty.

That moment in Munich is instructive when trying to understand Merkel’s trip to China last week, her twelfth in 14 years as chancellor and perhaps the most challenging of all her visits, amid violent protests in Hong Kong, an escalating trade war between Washington and Beijing, and nascent European attempts to push back against the master plans of Chinese President Xi Jinping.

Constant Criticism from Trump

Germany is feeling especially vulnerable these days. Its economy, held up for the past decade as the growth locomotive of Europe, is heading into recession, buffeted by the decline in international trade and investment, Brexit, and a struggle by its industrial champions to adapt to a digital future.

The United States, guarantor of Germany’s security since World War II, has turned into its biggest critic. Hardly a day goes by when US President Donald Trump or one of his allies doesn’t lob a verbal grenade at Germany, for its lack of defense spending, its outsized trade surplus, or its addiction to Russian gas.

Against this gloomy backdrop, China looms with open arms. It believes in climate change. It pays lip service to the idea of a free, multilateral trading system. Despite recent signs of weakness, it remains a vast, growing market for German firms. And it doesn’t engage in Germany-bashing. On the contrary: at a time when the Trump administration is gearing up for a new Cold War, Beijing is doing all in its power to lure Europe’s largest economy into its camp.

But there is a price for doing business with China, and Merkel paid it during her two-day visit to Beijing and Wuhan. Not once did she utter the word “Xinjiang,” the western Chinese province where more than a million members of the Muslim minority have been detained in reeducation camps. And not once did she criticize Beijing for its handling of the protests in Hong Kong, limiting herself to calls for dialogue and de-escalation.

Open for Business

At her news conference with Chinese Premier Li Keqiang, Merkel sounded almost apologetic about her government’s moves to shield German companies from the opportunistic embrace of state-backed Chinese rivals, reassuring her hosts that the German market remained open for acquisitive Chinese firms. And she praised Beijing for granting German companies like Allianz, BASF, and BMW opportunities in China that have been denied to other Western firms—moves that skeptics dismiss as symbolic gifts designed to soften up the Germans.

Merkel’s trip came after a year in which Europe, in the words of French President Emmanuel Macron, overcame its “naivety” vis-à-vis China, erecting its own barriers to Chinese investments in its critical infrastructure and declaring the rising Asian superpower to be a “strategic rival.”

In January, the Federation of German Industries, an influential business lobby, issued a toughly worded paper that questioned whether China would ever fully open up its market to foreign investment and urged European countries to work closely together, and with like-minded partners including the United States, to coordinate their response.

European Shift

Spooked by China’s economic ambitions, a new European Commission is expected to explore changes to the bloc’s industrial, competition and procurement policies when it takes over later this year.

Yet there was little evidence of this European shift during Merkel’s visit. And her partners, in Paris, Brussels, and other capitals, may be alarmed by its “back to business” tone.

Merkel travelled with a large delegation of German CEOs, the most prominent of whom was Siemens boss Joe Kaeser, who once referred to China’s controversial Belt and Road Initiative as “the new WTO.” Also along for the ride was Volkswagen’s chairman, Herbert Diess, who only a few months ago caused outrage when he denied knowing anything about the mass detentions in Xinjiang, where VW has a plant, despite months of front-page stories about the plight of the Uighurs.

The Trump administration, which has been piling pressure on Germany and other European countries to follow its lead and decouple from China, will also be alarmed. A transatlantic split over the inclusion of Chinese telecommunications supplier Huawei in next-generation 5G networksis looming. And that may provide just a taste of the tensions to come.

At a time when Washington is eyeing new export controls against China, Germany is doubling down on research collaboration with the Chinese and pressing Beijing to clinch an elusive investment agreement with Europe in time for an EU-China summit that Merkel will host in the eastern city of Leipzig in September 2020. If the deal comes together, two months before the US presidential election, it would mark the death knell of Trump’s clumsy attempt to pry the Europeans away from China.

Antithesis to German Values

The Americans must see this. On the same day that Merkel was meeting with Li in Beijing, US Defense Secretary Mark Esper was in London warning Europe to be wary of China.

“The more dependent a country becomes on Chinese investment and trade, the more susceptible they are to coercion and retribution when they act outside of Beijing’s wishes,” Esper told the Royal United Services Institute, a think tank.

Merkel is not naive. As Hong Kong pro-democracy activist Joshua Wong pointed out in an open letter to the German leader before her trip, she grew up under authoritarian rule in communist East Germany. She sees what is happening in China, from the rollout of a Social Credit System grounded in big-data surveillance, to Beijing’s attempts to chip away at democratic freedoms in Hong Kong and its crackdown in Xinjiang.

All this is antithetical to German values. And yet, unable to count on the support of the United States, Merkel seems to feel she has no choice but to cozy up to Beijing.

The post A Vulnerable Germany Finds it Hard to Say No to China appeared first on Berlin Policy Journal - Blog.

There’s not much to see in Anaklia, but I insist on visiting—I want to find out what 5 million cubic meters of sand looks like.

For almost three months last year, one of the world’s largest dredging ships—a Dutch vessel named the Athena—sat just off the Georgian coast, pumping up sand from the bottom of the Black Sea. The result is, quite honestly, underwhelming: a vast expanse of black-grey sand punctuated by plastic drainage tubes that litter the landscape like a carpet of dead sea worms.

These are the inglorious beginnings of Anaklia port—a project that the CEO of Anaklia Development Consortium, Levan Akhveldiani, tells me will be a turning point in the history of Georgia. Akhveldiani hopes that this mass of sand will soon become the first deep-sea port on the Eastern coast of the Black Sea, positioning Anaklia as a major international logistics hub along the New Silk Road.

But the future of the development is far from certain. It is plagued by rivalry with Poti port to the South, by financing problems, and by a domestic scandal that some say indicates Russian obstruction. Just this month, the consortium lost its founding member: the US construction giant Conti Group pulled out, diminishing the project’s hitherto firmly Euro-Atlantic flavor.

Aside from partial funding from the China-led Asian Infrastructure Investment Bank (AIIB), Chinese interest in the port has largely been frustrated. According to insiders, Beijing sought too much control, wanting to build, operate, own, and finance the port with loans guaranteed by the Georgian state.

The preference for US investors might also be geopolitically motivated. Walk north from the Anaklia construction site, along the seaside promenade and past the tacky resort bars, and you’ll find yourself on the border with Abkhazia, a separatist “republic” recognized by Russia after its invasion of Georgia in 2008. Chinese capital is always appealing, but Beijing can’t offer the kind of security guarantees implied by US involvement.

Despite Georgia’s rhetorical enthusiasm for the Belt and Road Initiative (BRI), China’s footprint in the country is still small. Tbilisi’s Western orientation may play a part in this story, but Georgia also has good access to international finance and a strong sense of fiscal responsibility. This makes the BRI model, which often involves hefty Chinese loans or controlling shares, less appealing in practice.

Beyond the sometimes-contradictory mists of domestic politics, powerful forces in Georgia do seem determined to turn this mass of sand into a bustling Black Sea hub, and the recent departure of Conti Group reopens the prospect of Chinese involvement. Georgia has good reasons to continue overlooking Beijing for the job, but easy Chinese capital is an ever-present temptation.

Dispatch from Anaklia, Georgia

The post Postcard from the New Silk Road: Another Belt and Road Port? appeared first on Berlin Policy Journal - Blog.

Chinese New Year banners are not common in rural Macedonia, but there, fluttering against the doorframe of a dilapidated breezeblock house, are the Chinese characters for “New Year, New―.” The last character is cut off.

Like the construction site I’ve just come from, the building looks abandoned. Chickens scratch the ground in lonely silence and aluminium dumpsters overflow with plastic detritus and discarded clothes. But this building isn’t empty―hanging on a washing line I spot a pair of still-damp overalls, and from somewhere deep in the concrete interior, I hear a cough.

Mr. Li is from Chengdu. He’s been living in this building, along with 40 other Sinohydro workers, for over two years. They’re working on the Kicevo-Ohrid highway project, one of two big highways being built and financed by China in North Macedonia. The other highway, Miladinovci to Stip, has recently opened to traffic, but the Kicevo-Ohrid project feels thoroughly forgotten. As he stirs a simmering pot of chicken legs and Sichuan peppers, Li tells me that he and his colleagues have been “off-work” for months.

The project is a hodgepodge of near-completed and under-construction works. Some sections are only missing a top layer of tarmac, while others are mostly gravel and half-poured concrete. The highway’s original price tag was €374 million but prices have since increased―though it’s difficult to say by exactly how much.

No one really knows what’s going on with the Kicevo-Ohrid highway. In 2015, a series of salacious audio recordings released by then opposition leader Zoran Zaev precipitated years of political crisis. In one of these wiretapped conversations, the former transport minister and prime minister can be heard discussing how best to extort €25 million from Sinohydro. Both highways have also been plagued by ambiguous “technical difficulties,” resulting in delays, price increases, and reopened negotiations.

Zaev is now in power (the former prime minister, Nikola Gruevski, is in hiding in Hungary) and his government has signed a third annex on the highway. On paper, the highway is under construction. In reality, it is in limbo, and, somewhere in the mountains of Macedonia, a lost tribe of Sinohydro workers is waiting patiently.

The post Postcard from the New Silk Road: A Highway to Nowhere appeared first on Berlin Policy Journal - Blog.

© Jacob Mardell

Dispatch from Belgrade, Serbia

The post Filling a Vacuum appeared first on Berlin Policy Journal - Blog.

Mihaljo Pupin (1854-1935) was a Serbian-American physicist and good friend of US President Woodrow Wilson who campaigned for closer relations with the United States. That’s why it’s somewhat ironic that the Serbian-Chinese friendship bridge was named, by public vote, in Pupin’s honour. Jutting out, arrow-straight, and six lanes wide across the mighty Danube, Pupin bridge connects New Belgrade to the neighboring municipality of Borča. On a sunny Tuesday afternoon the grassy banks and sanguine flow of the Danube provide a sharp contrast to the constant thunder of commuter traffic across the bridge.

Pupin bridge was opened in late 2014 by the Premier of China, Li Keqiang. As with many projects along China’s Belt and Road, the bridge was built with a Chinese loan, by a Chinese company, and using mostly Chinese workers and equipment. Although Western commentators rankle at the idea of this kind of self-serving development being branded an investment, or worse, aid, many in Serbia seem satisfied with the Chinese development model.

Of course, it would be better had the bridge provided more local jobs, but, as the phrase goes, beggars can’t be choosers. The Serbian government lacked funds for such a project, and the Chinese provided. Now there is a convenient route for commuters that would otherwise not exist. Ordinary people appreciate this kind of convenience, and prominent banners either side of the bridge highlight Beijing’s role in the project.

Similar stories are told elsewhere in Serbia and in the Western Balkans. Montenegro went cap in hand several times to Brussels for a road that would improve connections to Serbia in the north. Their request went unanswered for many years, until they turned to a lender of last resort—the Exim bank of China. Now the Montenegrins have an incredibly expensive highway under development. It may not be the best deal, it may not even be a good idea, but it’s the highway Brussels denied them.

The economic impact of China in the Balkans is minimal, even in Serbia, where Switzerland and the United Arab Emirates outpace China in terms of investment. The political impact however, is palpable, although this has more to do with the relationship between the EU and accession countries than it does with Beijing’s efforts to infiltrate the Balkans.

Dispatch from Belgrade, Serbia

The post Postcard from the New Silk Road: Happy Commuters appeared first on Berlin Policy Journal - Blog.