Russian President Vladimir Putin meets with Chinese President Xi Jinping at a signing ceremony of bilateral documents during the APEC summit in Beijing on Nov. 9. The two big powers are looking separately toward Central Asia to expand trade, economic, and political relations. Credit: Russian Presidential Press Service

By Chris Rickleton
BISHKEK, Nov 20 2014 (EurasiaNet)

There is a good chance that economic jockeying between China and Russia in Central Asia will intensify in the coming months. For Russia, Chinese economic expansion could put a crimp in President Vladimir Putin’s grand plan for the Eurasian Economic Union.

Putin has turned to China in recent months, counting on Beijing to pick up a good portion of the trade slack created by the rapid deterioration of economic and political relations between Russia and the West. Beijing for the most part has obliged Putin, especially when it comes to energy imports. But the simmering economic rivalry in Central Asia could create a quandary for bilateral relations.At the APEC gathering, Xi and Putin were all smiles as they greeted each other, dressed in summit attire that was likened by journalists and observers to Star Trek-style uniforms. Yet, the public bonhomie concealed a “complicated relationship."

Chinese President Xi Jinping elaborated on Beijing’s expansion plans, dubbed the Silk Road Economic Belt initiative, prior to this year’s Asia Pacific Economic Cooperation (APEC) forum, which concluded Nov. 12.

The plan calls for China to flood Central Asia with tens of billions of dollars in investment with the aim of opening up regional trade. Specifically, Xi announced the creation of a 40-billion-dollar fund to develop infrastructure in neighbouring countries, including the Central Asian states beyond China’s westernmost Xinjiang Province.

An interactive map published on Chinese state media outlet Xinhua shows Central Asia at the core of the proposed Silk Road belt, which beats a path from the Khorgos economic zone on the Chinese-Kazakhstani border, through Kyrgyzstan and Tajikistan, before snaking into Uzbekistan and Iran. Turkmenistan, already linked to China by a web of pipelines, would not have a hub on the main route.

The fund’s aim is to “break the bottleneck in Asian connectivity by building a financing platform,” Xi told journalists in Beijing on Nov. 8. Such development is badly needed in Central Asia, where decaying Soviet-era infrastructure has hampered trade among Central Asian states, and beyond.

No matter the need, Russia, which is busy promoting a more protectionist economic solution for the region in the form of the Eurasian Economic Union (EEU), may not share Beijing’s enthusiasm for the Silk Road initiative.

At the APEC gathering, Xi and Putin were all smiles as they greeted each other, dressed in summit attire that was likened by journalists and observers to Star Trek-style uniforms. Yet, the public bonhomie concealed a “complicated relationship,” according to Bobo Lo, an associate fellow at the Russia and Eurasia Program at Chatham House.

The Silk Road Economic Belt is a case in point, explained Lo. The “mega project”, much like the original Silk Road, could eventually encompass several routes and benefit Russia’s own infrastructurally challenged east, he noted. But it might well dilute Russian influence in its traditional backyard of Central Asia.

“If you are sitting in Moscow, you are hoping that Russia will be the main trunk line [of the belt], but it seems likely it will be more of an offshoot,” said Lo. “[The belt’s] main thrust will be through Central and South Asia.”

Chinese leaders are intent on linking their Silk Road initiative to a broader project, the Free Trade Area of the Asia Pacific (FTAAP), which they touted during the APEC gathering.

FTAAP and the Silk Road Economic Belt, along with a similar strategic plan called the 21st Century Maritime Silk Road, are pro-trade in the broadest sense, seeking to break “all sorts of shackles in the wider Asia-Pacific region to usher in a new round of higher level, deeper level of opening up,” according to Li Lifan, an associate research professor at the Shanghai Academy of Social Sciences.

Under the Chinese vision, its “grand idea” would seek to “absorb the Eurasian economic integration [project] led by Russia,” Li told EurasiaNet.org via email.

In contrast to the expansive Chinese vision for Eurasia, early evidence suggests a Russia-led union, with its tight border controls and levied tariffs, could end up stifling cross-border trade among members and non-members. Under such conditions, Central Asian states could experience a decline in their current level of trade with China. The existing Kremlin-dominated Customs Union is set to evolve into the Eurasian Economic Union on Jan. 1.

At least since the build-up to the 2013 summit of the Shanghai Cooperation Organization (SCO), a Central Asia-focused security organisation of which China and Russia are both members, Beijing has been very public about wielding its economic might in the region. Back then, Xi jetted across the region speaking of the belt for the first time as he signed deals worth tens of billions of dollars, most notably energy contracts with Turkmenistan and Kazakhstan.

Ever since, discussions of how to turn the belt into a reality have been uncomfortable. Moscow is reportedly steadfastly opposed to the idea of turning the SCO – which also comprises all four Central Asian countries positioned along the proposed belt’s route – into an economic organisation.

Uzbekistan has refused to join the Customs Union, which also excludes China. But the Kremlin expects Kyrgyzstan to join at the beginning of next year and Tajikistan to follow. Currently, the bloc’s only members other than Russia are Kazakhstan and Belarus.

For countries that have already been on the receiving end of Chinese largesse, the prospect of deeper economic integration with Russia may begin to seem like a limitation.

During a Nov. 7 meeting in Beijing ahead of the APEC summit, Xi and Tajik President Emomali Rahmon signed agreements securing Chinese credit for a railway to connect Tajikistan’s north and south, a new power plant and local agricultural projects. They also agreed on investments for the state-owned aluminium smelter Talco, an entity that once enjoyed close ties with the Russian conglomerate RusAl. Bilateral trade for the first eight months of this year increased by 40 percent compared with the same period last year, reaching 1.5 billion dollars.

“If we compare something like the Customs Union to the Silk Road Economic Belt, then of course the belt is preferable for Tajikistan,” Muzaffar Olimov, director of the Sharq analytical centre in Dushanbe, told EurasiaNet.org in a telephone interview. Tajikistan “has not decided” if it wants to join the economic bloc [the EEU], he added.

Editor’s note:  Chris Rickleton is a Bishkek-based journalist. This story originally appeared on EurasiaNet.org.

Edited by Kitty Stapp

Armenia has finalised its accession to the Russia-led Eurasian Economic Union, an intended regional counterweight to the European Union. But while Armenian and Russian officials focus on future prosperity, some Armenian observers believe membership in the bloc could exacerbate Armenia’s security challenges.

During an Oct. 10 meeting of the Supreme Eurasian Economic Council, held in Minsk, Belarus, Armenian President Serzh Sargsyan confirmed that Armenia would be formally admitted to the Eurasian Economic Union (EEU) when it launches on Jan. 1, 2015.“Currently, we have no expectations with regard to security. We see only threats.” -- Aghasi Yenokian, director of a Yerevan-based think-tank

The Armenian government approved the draft text of the accession agreement in early October, Armenian media reported. The EEU will be an outgrowth of the existing customs union among Russia, Belarus and Kazakhstan.

Armenian political analysts greeted the accession announcement with mixed feelings, in part because the final text of the pact has not been subjected to public scrutiny. There is particular concern about the pact’s ramifications for Armenia’s relationship with the Nagorno Karabakh territory, an enclave inhabited by ethnic Armenians who aspire to gain international recognition of their de-facto independence from Azerbaijan.

A draft released earlier this year implied that a customs post would be established between Armenia and Karabakh. Local economists say that such an economic barrier would paralyse Karabakh’s economy since the territory depends on Armenia as its primary market for its limited selection of exports.

Beyond the potential economic ramifications, many Armenians would see the establishment of a customs regime as tantamount to the cutting of cultural ties with Karabakh, an act that could leave the territory – and, consequently, Armenia itself – vulnerable to possible Azerbaijani aggression.

“Currently, we have no expectations with regard to security. We see only threats,” commented Aghasi Yenokian, director of the Armenian Center for Political and International Studies, a Yerevan-based think-tank.

Over the past year, Armenian officials have said repeatedly that Armenia’s membership in the Eurasian Economic Union takes into account security guarantees for both Armenia and Karabakh, but no proof of this has been offered.

As a result, uncertainty continues to swirl around the future of the Armenia-Karabakh trade relationship. Two of the EEU’s three members, Belarus and Kazakhstan, are on record as categorically opposed to allowing Armenia to share the bloc’s trade advantages with Karabakh, which none of the members recognise as a country independent from Azerbaijan.

In Minsk, however, Kazakhstani President Nursultan Nazarbayev stated that a “compromise” had been reached “on a delicate question within the borders by which Armenia will be joined to our union,” the ITAR-TASS news agency reported.

Details were not immediately available.

Members of the ruling Republican Party of Armenia contacted by EurasiaNet.org declined to comment on the challenges that EEU membership could pose for Armenia’s ties with Karabakh.

“There is a very complicated period awaiting us, taking into account the somewhat unfriendly attitude of the EEU to Armenia, particularly on the part of Nazarbayev and [Belarusian President Alexander ] Lukashenko,” commented Styopa Safarian, director of the Armenian Institute of International and Security Affairs.

President Sargsyan, a native of Karabakh, does not, however, appear to share such worries. Congratulating Russian President Vladimir Putin on his Oct. 7 birthday, Sargsyan stated that Putin’s “consistent efforts” for a peaceful resolution of the 26-year Karabakh conflict with Azerbaijan, and his support for Armenia’s EEU membership “deserve the deepest appreciation.”

Opposition parties have also adopted conciliatory stances toward Russia, observers note. This fact leaves some analysts glum; to them, it means the political class is unlikely to push hard to promote Armenia’s interests within the EEU.

“The opposition and the authorities do their best not to make the Kremlin angry,” said Styopa Safarian, the analyst and former member of the opposition Heritage Party. “This situation is not encouraging at all.”

Editor’s note:  Marianna Grigoryan is a freelance reporter based in Yerevan and editor of MediaLab.am. This story originally appeared on EurasiaNet.org.

Edited by Kitty Stapp

Victory Day on May 9 was an occasion for Russians to indulge in patriotic flag waving in Moscow. Russian President Vladimir Putin used the previous day to muster a show of diplomatic support for his efforts to bring formerly Soviet states closer together.

On May 8, Putin met with the presidents of Armenia, Belarus, Kyrgyzstan, and Tajikistan in the Kremlin. Following the success of the Euromaidan movement in Kyiv, Putin has made it a priority to shore up support among other formerly Soviet states for Russia’s geopolitical agenda, in particular the establishment of a regional economic union as a precursor to a wider political union of Eurasian states.“It’s hard to predict anything these days, but it seems to me that the treaty will be signed -- but in a reduced form, with most difficult issues to be resolved after signing,. -- Nargis Kassenova

A treaty on the formation of a Eurasian Economic Union (EEU) is due to be signed in Astana in late May, paving the way for its launch in January 2015. The body would be an outgrowth of the existing Customs Union, a free trade zone comprising Russia, Belarus, and Kazakhstan. Armenia and Kyrgyzstan are slated to join the Customs Union before the end of the year.

As Putin warmly welcomed existing and potential union members in Moscow on May 8, ostensibly for security talks unrelated to the economic integration project, the question on the lips of Kremlin watchers was: will they or won’t they put pen to paper on the EEU founding document in less than three weeks’ time?

The Moscow meeting came on the heels of a disastrous Customs Union summit in Minsk on Apr. 29, where expectations of finalising the treaty fizzled as Putin and his counterparts, Alexander Lukashenko of Belarus and Nursultan Nazarbayev of Kazakhstan, admitted that, at this late stage, they have differences over the pact’s wording.

Nazarbayev’s conspicuous absence from the May 8 talks in Moscow, convened under the auspices of the Collective Security Treaty Organisation, set tongues wagging about differences of opinion. Contacted by telephone by EurasiaNet.org, Nazarbayev’s office said it had no comment — but some observers interpreted his no-show as a snub to Putin from one of his closest allies.

As other regional leaders were cozying up to the Kremlin, Nazarbayev was having a tete-a-tete in Astana with a senior official from the United States, Moscow’s arch-rival in the geopolitical struggle over Ukraine. Deputy Secretary of State William Burns used the meeting to assure Nazarbayev of America’s “enduring” commitment to Kazakhstan and Central Asia, the State Department said, as the Ukraine crisis helps “underscore what’s at stake.”

Regional analysts tend to believe that the recent signs are not indicators of insurmountable problems surrounding the EEU’s formation.

“It’s hard to predict anything these days, but it seems to me that the treaty will be signed — but in a reduced form, with most difficult issues to be resolved after signing,” Nargis Kassenova, director of the Central Asian Studies Center at Almaty’s KIMEP University, told EurasiaNet.org.

“If it’s not signed it will be a blow to the reputation of Vladimir Putin, but also to some extent that of Nursultan Nazarbayev,” she added. “Both invested a lot of personal image capital into it.”

Alex Nice, a regional analyst at the London-based Economist Intelligence Unit, also feels that integration plans are more or less on track.

“It’s possible there might be a further delay to the final signing of the document, but I’m confident that the treaty will come into force as planned next January,” he told EurasiaNet.org, pointing out that “negotiations on the EEU treaty are very far advanced.”

“Of course, some of the more controversial provisions will be subject to lengthy transition periods,” Nice added.

The chances of the agreement being signed on time are “quite high,” concurred regional security expert Aida Abzhaparova of the University of the West of England. Nazarbayev is a cheerleader for integration, she pointed out, and signing the treaty in Astana would have huge “symbolism” for him: Nazarbayev first proposed the notion of a Eurasian union long before Putin took it up, and sees himself as “the father of the idea.”

Speculation that the union might be heading off the rails was fueled by reports on May 7 that Kyrgyzstan’s prime minister, Joomart Otorbayev, wished to postpone membership for a year — but his spokeswoman denied the claim. Otorbayev had, on the contrary, said Kyrgyzstan would complete the legislative groundwork to join by the end of the year, Gulnura Toraliyeva told EurasiaNet.org by telephone.

Armenia is expected to join sooner – but is currently bogged down trying to negotiate some 900 exemptions to the union’s single customs tariff.

Analysts believe that incorporating the weaker economies of Armenia and Kyrgyzstan into the union is a sticking point in the treaty negotiations; Kazakhstan and Belarus are believed to be wary of the economic implications amid Russian efforts to expand its geopolitical clout.

Perhaps the biggest threat to the EEU’s success is Russia’s actions in Ukraine, suggests Kassenova.

“The Ukraine crisis undermined Russian policy in the post-Soviet space,” Kassenova said. “Now it’s seen as a bully without any respect for the sovereignty of its neighbors. Plus, the crisis undermined the economy of Russia and made it less capable of serving as the locomotive of integration.”

“On the one hand, the crisis should give more bargaining power to Belarus, Kazakhstan, and Kyrgyzstan,” she continued. “On the other, the overall destiny of the project is in doubt: will Russia have the will and resources to support and sponsor it further?”

Editor’s note:  Joanna Lillis is a freelance writer who specialises in Central Asia. This story originally appeared on EurasiaNet.org.