Russia’s OBOR – Moscow’s In It For The Money (and so is everybody else)

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CDE Op-Ed Commentary

russia-obor-moscow-the-moneyFollowing Russian President Putin’s appearance at Beijing’s One Belt One Road Forum, analysts in Moscow have been having a field day in examining what all this means for Russia. The country is a vital component part of China’s plans – Beijing needs Moscow onside to help it create political goodwill and develop infrastructure in the many nations that were previously under Moscow’s influence during the Soviet era.

While many have concluded the OBOR plans thus far are about Chinese politics and creating domestic symbolism to demonstrate to the Chinese people that China is a world leader and Xi Jinping one of the global statesmen, able to summon diplomats and prime ministers to Beijing to pay tribute, others suspect that from Russia’s perspective, money and infrastructure investment is the sole aim.

Petr Topychkanov of the Carnegie Moscow Center  has stated that  “First, Russia’s economy desires foreign investments and it hopes to get some funds through OBOR, second, Russia wants to bring new drive to the Eurasian Economic Union by connecting it with OBOR. Third, Russia wants to compensate the vanished economic agenda of the SCO (Shanghai Cooperation Organization) with the Chinese-led OBOR. Fourth, Russia wants to make European countries more nervous about the prospects of Russian-Chinese economic cooperation.”

We have examined each of these scenarios in previous articles on our Russia, Silk Road and China Briefing portals:

 

China & Russia Propose Vast Eurasian Free Trade Zone


The Eurasian Economic Union – About To Bring China To The EU’s Borders


Russia-China Bilateral Trade Up 38% In Q1 2017

 

Russian academics and businessmen will certainly be aware of Beijing’s pledge to source USD2 trillion in purchases from OBOR routes  within the next five years. It will be interesting to see how many Russian consultants and investment funds will actually be prepared to set up operations in Beijing to look for that money – it certainly won’t be arriving by the truck load and will need to be earned by forging relationships in Beijing and Shanghai. That is best organised by establishing a Representative Office in China to build those links. Russian entrepreneurs will need to put in some effort to facilitate Chinese outbound investment away from Beijing and into Russia.

Vasily Kashin, a senior research fellow at the Center for Comprehensive European and International Studies at Moscow’s Higher School of Economics takes a structural view and sees value in marrying Russian institutions with Chinese ones. “Russia is also trying to achieve a high level of coordination between the Chinese OBOR policy and the Russian policy concerning the Eurasian Economic Union.” he has stated. This is already manifesting itself as Beijing has already opened negotiations with Moscow over a Free Trade Agreement between China and the EAEU.

However, it does appear as if Russia is bent on one aspects of China’s OBOR plans – it sees it more as a bilateral relationship as opposed to China’s more global ambitions. These have already taken fruit with the following Chinese investments shaping up to pour billions into the Russian infrastructure that China needs built to get its products to markets in the West, and to bring much needed supplies, and energy and agriculture in particular, back home. These include:

 

The Moscow-Beijing Hi-Speed Rail Link


Developing Russia’s Arctic Ports


Building a Transport Corridor To Allow Heilongjiang Access To The Pacific

 

China’s “One Belt One Road Forum” may have just ended with the pop slogans “mutual benefit, joint prosperity, shared destiny” ringing in delegates ears, however China may not find it so easy to get its side of the bargain. If China wants it built, and needs it built, countries such as Russia will be holding their hands out and be delivering a simple statement: “You want it; you pay”. Beijing’s bill for Xi Jinping’s grand OBOR plans are likely to be rather more expensive than first budgeted for. Moscow, and Russian entrepreneurs, could be among the first to benefit when going in search of the Chinese investment dollar.

 

Russia Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, India, Indonesia, the Silk Road & Vietnam. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.

Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Eurasian region. We maintain offices in Moscow and St.Petersburg through our Russian partner firm, as well as our own offices in China, South-East Asia and India. For assistance with Russian issues or investments into Russia and Asia, please contact us at russia@dezshira.com or visit us at www.dezshira.com

 

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