The New Silk Road in the Shadow of War

The Russian aggression against Ukraine has presented the authorities in Beijing with a number of dilemmas. On the one hand, China sees the war in terms of a clash between Russia and the West. A possible defeat by Moscow would undermine the narrative, dominant among Chinese elites at least since the 2008-09 global economic crisis, that the West and the United States in particular are in a state of irreversible decline. This must be seen as one of the most important reasons for the extensive Chinese support for Russia.

Politically, China has shown unwavering loyalty, refraining from any criticism and copying the narratives produced by Russian propaganda. Beijing unequivocally placed the blame for the outbreak of the conflict on the United States and NATO. Militarily, the two countries continued joint exercises, although none of them took place in close proximity to the theater of hostilities. Joint bombing and naval patrols were conducted in East Asia, targeting Japan, South Korea and the United States.

Economically, Chinese companies seized the emerging opportunities on the Russian market. Both Chinese energy giants and independent refiners increased their oil purchases from Russian producers, taking advantage of significant discounts. As a result, Russia has once again overtaken Saudi Arabia as China’s number one supplier.

Chinese companies have been able to replace their Western counterparts, who have created a vacuum by leaving the Russian market in many sectors. Economic cooperation has also undoubtedly helped to sustain the Russian military effort, as Chinese companies supply a range of so-called dual-use goods. As a result, bilateral trade volumes are likely to surpass the ‘magic’ $200 billion threshold in 2023, something that seemed unlikely just two years ago. A growing proportion of Russian transactions with the outside world, not only with China, are cleared in Chinese yuan. After decades of delays, rail and road bridges across the Amur River have opened in the Russian Far East.

The authorities in Beijing, in contrast, fear that supporting Moscow too openly could cause serious damage, both undermining China’s narrative of neutrality and bringing European countries closer to the United States and thus precipitating the emergence of a common transatlantic policy towards China. The latter factor in particular seems to account for Beijing’s lack of open strategic support.

China has not offered significant financial or economic assistance at the central level. Beijing has not openly chosen to help Moscow bypass Western sanctions. No major investments, mergers or contracts have been announced. Having shut down the Nord Stream pipeline and effectively cut off its European customers from Gazprom’s resources, Russia urgently needs a new gas pipeline (even if it will take time to build). Beijing is clearly in no hurry to sign the contract for the “Power of Siberia-2” pipeline, which would lead to China from the Yamal gas sources so far supplying the European market via Mongolia. A deal cannot be ruled out during President Putin’s scheduled visit to China in October on the sidelines of the “Belt and Road” summit, although this is unlikely.

Global “Silk Roads”…

While the war in Ukraine has brought China and Russia closer together, deepening the asymmetry between these powers to Moscow’s disadvantage, the implications of the conflict for China’s flagship initiative, the “Belt and Road” (a modern version of the Silk Road), are far more complex. To understand them better, we need to start by taking a closer look at the different directions this project has evolved into over the past decade.

The shape of China’s Belt and Road initiative has remained open-ended since its proclamation in 2013. This allowed the Chinese authorities to adapt the project to the needs of specific audiences, assuring each one of them that a suitable formula for cooperation would be found. As a result, the Belt and Road is now seen as a global project, almost synonymous with Chinese foreign policy, by supporters and opponents alike. For such a concept of the “Belt and Road”, Russia’s war against Ukraine has minimal consequences, due to the fact that Russia has never been a central element in this global Chinese narrative.

Russia has occupied an ambiguous place in China’s Belt and Road project from the very start. On the first unofficial map, published by the Xinhua Agency in 2013, China’s overland connection to Europe completely bypassed Russia. The authorities in Beijing quickly backtracked from this undiplomatic gesture and, on subsequent maps promoted by Xinhua, the New Silk Road already led through Russian territory (the original version of the map can now only be found on a few Western blogs). From Moscow’s perspective, the Chinese project generated difficult choices.

The Russian side did not want to be one of the many cogs in China’s megaproject. Most Russian analysts interpreted Xi Jinping’s initiative in terms of a direct challenge to Russian influence in Central Asia. However, given the consistently deepening cooperation, Moscow did not want to position itself as an opponent of the New Silk Road.

A way out of these dilemmas turned out to be the Greater Eurasia concept, promoted by pro-government experts gathered in the Valdai Club and officially proclaimed by Vladimir Putin in 2016. The main role of the concept, which never entered the implementation phase, but is permanently promoted by the Russian government, was to create the impression of equality with China. As the organizer of the Eurasian space, Russia could talk to China on a partner footing. Greater Eurasia was a reflection, but not part, of the Belt and Road initiative. Similarly, Russia promotes the links between the Eurasian Economic Union (EAUG) and the Belt and Road initiative, presenting the two projects as equal, led by two leading Eurasian powers.

The links between Russia’s regional political and economic cooperation initiatives and the Belt and Road initiative have limited relevance, however, outside the community of Russian experts and politicians. For the rest of the world, the Belt and Road initiative is a global project, with the largest funding going to countries in East, South and Central Asia. Variants such as the “Digital Silk Road” and the “Polar Silk Road” only deepen the impression of the initiative’s globality and move it away from the ongoing war in Ukraine.

…and the “Iron Route” Through Russia

The most important practical dimension of Russia’s presence in the New Silk Road project – and one that is rarely recognized outside of the community of experts on logistics – is the rail corridor connecting central and western China with Poland and Germany.

Like a large proportion of the projects under the Belt and Road umbrella, the link had already started operating before the New Silk Road idea was proclaimed. The corridor has developed at an astonishing pace, with cargo volumes increasing year on year. Over the short term, the impact of Russian aggression against Ukraine remained minimal. However, over the long term, Russia’s role in the corridor is highly questionable.

A year and a half of war has had a limited impact on the China-Europe rail link. After a sharp decline in rail shipping in the first weeks, the link has started to recover. Moreover, according to the Chinese side, further growth was registered in the first half of 2023. One factor favoring this growth is the fact that rail transit through Russia is not covered by Western sanctions. Even before the war, Ukraine was not an important part of the transport corridor. Russia’s annexation of Crimea in 2014 thwarted Chinese plans to use the peninsula to build a seaport, and Russia’s embargo prevented rail transit through Ukraine. Even Moscow’s withdrawal from the latter policy a few years ago did not make transit through Ukraine an important part of the China-Europe connection. In effect, the war has conserved the role of transit via Belarus to Poland.

The long-term outlook, however, is much less clear. The route via Russia was the cheapest and shortest, primarily due to the use of the single customs space within the Eurasian Economic Union. Competing options – via Turkey or Iran – were both less cost-effective and geopolitically riskier. They also required the use of inter-modal transport, i.e. both rail and sea, which further increased costs. The Russian aggression against Ukraine began to change these calculations. The war has accelerated efforts to bypass Russia. The most likely alternative is the so-called Central Corridor, running through Central Asia, the Caspian Sea, the South Caucasus and Turkey. Insurance costs, the desire to avoid sanctions or secondary sanctions and the risk of Europe banning transit from Russia make the development of routes bypassing Russia a long-term option. Prolonged conflict and increasing sanctions may reduce the attractiveness of rail transport through Russian territory, especially given the role of the state monopoly, Russian Railways RZD, in controlling the rail route.

China’s Growing Role in Central Asia

Such a potential change in the transport corridor would primarily strengthen the position of the two leaders of Central Asia, namely Kazakhstan and Uzbekistan. Kazakhstan is an essential link in virtually every option for building a rail link between China and Europe. It is also crucial to the development of other infrastructures, such as energy. And Uzbekistan, pursuing a more active policy in the region under Mirziyoyev’s leadership, could become a key link for investment in the Central Corridor.

With regard to the countries of the region, China has primarily sought to demonstrate that the “friendly neutrality” it has shown towards Russia – and its complete disregard for Ukraine’s interests – is a special case, rather than a new rule for Beijing’s behavior in the post-Soviet space.

Xi Jinping used visits to Kazakhstan and Uzbekistan last year to emphasize Chinese support for the sovereignty and territorial integrity of both countries. In 2023, the Chinese side organized a meeting with Central Asian countries in a “1+5” format to send an unambiguous signal that Beijing does not regard the region as a Sino-Russian ‘condominium’. The railway line through Kyrgyzstan and Uzbekistan, promoted by China for more than two decades and often resisted by Russia, was supported by Bishkek. Beijing has also renewed its promotion of a fourth Central Asian gas pipeline that would run through Kyrgyzstan and Tajikistan (undermining the rationale of the “Power of Siberia-2” from Russia).

The intensification of Chinese diplomatic efforts in Central Asia does not mean that Beijing will become a regional hegemon. The countries of the region are much more comfortable with limited Russian-Chinese competition than with taking sides. Nevertheless, Moscow’s decline in favour of Beijing in Eurasia is yet another manifestation of the deepening Sino-Russian asymmetry, a trend accelerated by the aggression against Ukraine.