Author: Emanuel Pietrobon – 02/09/2019
The ongoing so-called new Cold war between the US-led West and Russia has pushed the latter to re-orient its focus on the East. The Eurasian school of thought is flourishing and the China’s presence in Russian society and economy is strongest than ever, while Vladimir Putin and Xi Jinping are tied by a very good friendship relation and Beijing apparently is willing to help the rival-turned-partner face the economic containment.
What the Kremlin could not know is that China would use Russia’s moment of weakness to start a hardly-stoppable and barely-expectable process of “economic colonization” by means of large loans to public entities, investments in the strategic infrastructure system, rising claims over the Arctic, Siberia and the Far East, and underground collaboration with local administrations and organized crime groups (according to reports from the Environmental Investigation Agency) in the country’s most remote regions to exploit natural resources.
In this context must be read the $10 billion loan from the China’s Development Bank to Vnesheconombank, the $13 billion invested in Yamal LNG gas plant in Jamal peninsula – which now is 9,9% owned by Chinese, the agreements signed between Beijing and the Eurasian Economic Union, Siberia’s wildfires, and the proposal of building the so-called Polar Silk Road to reduce the shipping times over the Shanghai-Rotterdam route.
Moscow is likely to survive, as it did many times throughout its centuries-long glorious history, but at a very high price. And the time to act is now.
After this premise is time to stress what is happening in Belarus, which is Russia’s last reliable neighboring country in Europe after the loss of Ukraine. China is using the already successfully-tested diplomacy based on investments, loans and gifts to enter Belarus and complete Russia’s encirclement.
In early August, Belarus’ President Alexander Lukashenko confirmed the long-discussed project according to which China is set to build a giant football stadium that will meet the international standards set up by FIFA and UEFA. The project is worth $180 million, the construction is at the expense of Beijing, and the work completion date is 2023.
But the fact that China wants to build a huge stadium as a present for Lukashenko isn’t the real issue. The stadium is the last of many actions that seem to indicate that Xi Jinping is willing to extend Beijing’s influence over another Russian-backed territory. And Mr Putin is allowing that.
Chinese construction companies are playing an increasingly primary role in the modernization of the nation’s infrastructure system as they are building and or restoring roads, hospitals, dormitories, social houses, parks, districts, railways. As they do in the rest of the world, they employ Chinese workers and set budget, construction standards, and economic return criteria.
Xi is betting a lot of capital on Belarus because it is seen as the ideal linking point between the Russian-backed Eurasian Economic Union and the Chinese-sponsored Belt and Road Initiative. Furthermore, the country provides an easy access to the Eastern periphery of the European Union.
The most important project whose construction is underway is the so-called China-Belarus Great Stone Industrial Park. It is planned to be the country’s first special economic zone and the powerhouse for an enduring economic growth fostered by the attraction of foreign investments and brain drain from all over the world.
Chinese media are warmly promoting the hub, which is Beijing’s most expensive single project ever funded overseas, since they are popularizing it as “the gateway to Europe”.
The high-tech hub is being built just outside Minsk and is set to have a size of up to 112 square kilometres. The project includes not only offices, but also residential buildings, stores, factories, entertainment services.
The Belarusian government guaranteed $500 million in technical and economic assistance, while the Bank of China and other Chinese investors are expected to provide up to $5 billion.
The final agreement is a win-lose situation which is unlikely to benefit the national economy as a whole: Chinese firms get a decades-long tax-free regime, foreign firms are tax-exempt on profits for 10 years and then 50% discounted from the existing rate for up to 2060s, all the park-based companies are free from land- and estate-related taxes and can rent land plots from the Park for up to 99 years or buy them and make them a private ownership.
The big business-friendly laws seem to work: to date more than 35 companies have chosen to build a R&D plant and make business in the park. Many of them are Chinese, like Huawei and ZTE, but some Western are present, like Austrian Kronospan and American IPG Photonics.
Lukashenko replied to the critics that the economic return won’t be based on the taxation but on the attraction of investors, multinational corporations, and international expertise. Indeed, the goal is to turn the park into Europe’s Silicon Valley. Wealth and benefits aren’t expected to grow in the short-term but to flourish over the years.
Last year the two countries signed new agreements covering a wide range of issues: economy, technology, science, culture, defence, security. It was the most intense year of this rising partnership: a bilateral visa-free agreement came into force, educational and language exchange programs for students were implemented, and Beijing became Minsk’s third most important trade partner just after Russia and Ukraine.
Furthermore, for the first time, Chinese troops took part in Belarus’ Independence Day along with Belarusian and Russian military; and during the state-of-the-nation address, Lukashenko said that China is now considered a strategic partner on the same level of Russia.
The Kremlin’s China-watchers should consider properly what is going on in the increasingly Putin-intolerant neighbouring country in light of the fact that Lukashenko never was, nor is, a reliable ally. He always tried to carry on a Erdogan-like two-step dance for the purpose to emancipate the country from Russia’s sphere of influence. Now he is replacing Russian loans, subsidies and investments with Chinese ones – no matter for the uneconomic conditions requested by Beijing.
The last news is that Belarus is getting money from China to pay off Russian debts. The risk is that the country could soon be the next to fall into Beijing’s debt trap, that is to fall into Beijing’s sphere of influence.
Russia can’t challenge China as it does not have the capital to do so, but it can take advantage of the deep-rooted cultural ties that link both countries to foster a Russian-friendly ethnic nationalism whose aim is to prepare the ground for the post-Lukashenko.
Furthermore, Russia shall exploit the fear coming from NATO expansionism to strengthen the military partnership with the Belarusian establishment. China is helping Belarus to modernize its missile and satellites capabilities, the enlargement of such cooperation can’t be allowed.
But a strategy based on cultural influence and military diplomacy can’t work without a 360-degree change of attitude towards the country. Putin is often quoted for the say “they [the West] need vassals, not allies”, but as regard to Belarus and some other post-Soviet countries he is treating them as vassals.
A vassal is afraid of the king’s sword and will try to escape when the king is sick. This is exactly what is happening to Lukashenko’s Belarus and what happened to the Soviet Union when the collapse was clear to all.
It is precisely this treatment, which is negatively perceived both by the people and the political elite, that made it possible for the West to lead a pro-Western revolution in Ukraine. The solution isn’t easy but shall be tested: to use the common cultural background to highlight the similarities and make the peoples closer and united for the defence of common goals and enemies, to replace economic dependence with true economic partnership, to work for the improvement of Belarus’ living standards, to find a common enemy to fight together.
Emanuel Pietrobon, Higher School of Economics, Saint Petersburg, Russia