Ruta de la Seda: motivaciones & consecuencias

Mientras esperamos para ver cómo continúa la saga “anticorrupción” del FBI y del departamento de Justicia de los EEUU contra los malos de la FIFA, reproducimos un extenso artículo escrito recientemente por el analista financiero en temas energéticos Robert Berke. El artículo apareció en el sitio web OilPrice.com y consta de dos partes: en la primera parte se examinan las motivaciones y planes de China para la construcción de la denominada “Ruta de la Seda” (la cual, conviene aclarar, no es una ruta o vía férrea específica sino un conjunto de megaproyectos transnacionales de infraestructura en una escala sencillamente colosal). En la segunda parte se examinan las consecuencias y tensiones geopolíticas que un proyecto como este podría desencadenar.

Parte 1: New Silk Road Could Change Global Economics Forever

Texto: Beginning with the marvelous tales of Marco Polo’s travels across Eurasia to China, the Silk Road has never ceased to entrance the world. Now, the ancient cities of Samarkand, Baku, Tashkent, and Bukhara are once again firing the world’s imagination.

China is building the world’s greatest economic development and construction project ever undertaken: The New Silk Road. The project aims at no less than a revolutionary change in the economic map of the world. It is also seen by many as the first shot in a battle between east and west for dominance in Eurasia.

The ambitious vision is to resurrect the ancient Silk Road as a modern transit, trade, and economic corridor that runs from Shanghai to Berlin. The ‘Road’ will traverse China, Mongolia, Russia, Belarus, Poland, and Germany, extending more than 8,000 miles, creating an economic zone that extends over one third the circumference of the earth.

The plan envisions building high-speed railroads, roads and highways, energy transmission and distributions networks, and fiber optic networks. Cities and ports along the route will be targeted for economic development.

An equally essential part of the plan is a sea-based “Maritime Silk Road” (MSR) component, as ambitious as its land-based project, linking China with the Persian Gulf and the Mediterranean Sea through Central Asia and the Indian Ocean.

When completed, like the ancient Silk Road, it will connect three continents: Asia, Europe, and Africa. The chain of infrastructure projects will create the world’s largest economic corridor, covering a population of 4.4 billion and an economic output of $21 trillion.

Politics and Finance

The idea for reviving the New Silk Road was first announced in 2013 by the Chinese President, Xi Jinping. As part of the financing of the plan, in 2014, the Chinese leader also announced the launch of an Asian International Infrastructure Bank (AIIB), providing seed funding for the project, with an initial Chinese contribution of $47 billion.

China has invited the international community of nations to take a major role as bank charter members and partners in the project. Members will be expected to contribute, with additional funding by international funds, including the World Bank, investments from private and public companies, and local governments.

Some 58 nations have signed on to become charter bank members, including most of Western Europe, along with many Silk Road and Asian countries. There are 12 NATO countries among AIIB´s founding member states (UK, France, Netherlands, Germany, Italy, Luxembourg, Denmark, Iceland, Spain, Portugal, Poland and Norway), along with three of the main US military allies in Asia (Australia, S. Korea and New Zealand).

After failed attempts by the US to persuade allies against joining the bank, the US reversed course, and now says that it has always supported the project, a disingenuous position considering the fact that US opposition was hardly a secret. The Wall Street Journal reported in November 2014 that “the U.S. has also lobbied hard against Chinese plans for a new infrastructure development bank…including during teleconferences of the Group of Seven major industrial powers.

The Huffington Post’s Alastair Crooke had this to say on the matter: “For very different motives, the key pillars of the region (Iran, Turkey, Egypt and Pakistan) are re-orienting eastwards. It is not fully appreciated in the West how important China’s “Belt and Road” initiative is to this move (and Russia, of course is fully integrated into the project). Regional states can see that China is very serious indeed about creating huge infrastructure projects from Asia to Europe. They can also see what occurred with the Asia Infrastructure Investment Bank (AIIB), as the world piled in (to America’s very evident dismay). These states intend to be a part of it.”

Buttressing this effort, China plans on injecting at least $62 billion into three banks to support the New Silk Road. The China Development Bank (CDB) will receive $32 billion, the Export Import Bank of China (EXIM) will take on $30 billion, and the Chinese government will also pump additional capital into the Agricultural Development Bank of China (ADBC).

The US: Unlikely Partner on the Silk Road

Will the US join the effort? If the new Trans-Pacific Partnership (that pointedly leaves out both Russia and China, two Pacific powers) is any indication, US participation seems unlikely and opposition all but certain.

But there’s no good reason that America should sacrifice its own leadership role in the region to China. A project as vast and complicated as the Silk Road will need US technology, experience, and resources to lower risk, removing political barriers for other allied countries like Japan to join in, while maintaining US influence in Eurasia. The Silk Road could enhance US objectives, and US support could improve the outcome of the project.

An editorial in the Wall St. Journal argues that the US proposed trade agreement and China’s sponsored Silk Road project are complimentary, with the trade agreement aimed at writing rules for international trade, while the Chinese aim at developing infrastructure is necessary for increased trade.

Initial Project

A look at the first project, currently under development, provides a good example of how China plans to proceed.

The first major economic development project will take place in Pakistan, where the Chinese have been working for years, building and financing a strategic deepwater port at Gwadar, on the Arabian Sea, that will be managed by China as the long-term leaseholder.

Gwadar will become the launching point for the much delayed Iran-Pakistan natural gas pipeline, which will ultimately be extended to China, with the Persian section already built and the Pakistan-Chinese section largely financed and constructed by the Chinese.

The pipeline is also set to traverse the country, following the Karakoram Mountain Highway towards Tibet, and cross the Chinese western border to Xinjang. The highway will also be widened and modernized, and a railroad built, connecting the highway to Gwadar.

Originally, the plan was to extend the pipeline to India, with Qatar joining Iran as natural gas suppliers, forging what some considered a “peace pipeline” between India and Pakistan, but India withdrew, under pressure from the US along with its own concerns over having its energy supplies dependent upon its adversary, Pakistan.

India’s Counter

Not surprisingly, India, a US ally, countered China’s initiative with one of its own, announcing a new agreement to build a port in Iran on the Arabian Sea, only a few hundred miles from Gwadar, bringing Iranian energy to India via Afghanistan, bypassing Pakistan.

Although it would offer an alternative to the Chinese-backed Gwadar initiative, the US warned India not to move ahead with the port project before a final nuclear agreement between Iran and the West is actually signed.

Both the Chinese and Indian projects are clearly in defiance of international sanctions on Iran, but both countries appear unconcerned. The Chinese could also be accused of a ‘double dip’ sanctions violation, given the immense and continuing trade deals it negotiated with Russia.

The rest of the business world is sure to follow, or risk losing out in what is certain to be a new “gold rush” towards Asia in a world still struggling with the lingering effects of the great recession. And New Delhi pointed out the harsh truth: American energy companies are also trying to negotiate deals with Iran. Following on the heels of the US visit, the German mission is due in Tehran soon, with the French beating everyone to the punch in an earlier visit.

What then of sanctions? Sanctions only work in a world united behind them. If a large part of the world chooses to ignore sanctions, they become unenforceable.

Conclusions

China and much of the world is intent on developing the largest economic development project in history, one that could have dramatic ripple effects throughout the world economy.

The project is expected to take decades, with costs running into the hundreds of billions of dollars, if not trillions. What that will mean for the world economy and trade is almost inconceivable. Is it any wonder then, that the world’s largest hedge funds, like Goldman Sachs and Blackstone, are rushing to market new multi-billion dollar international infrastructure investment funds?

No doubt a project as large and complex as this is likely to have failures, and is certain to face many western geopolitical obstructions. Assuredly, the “great game” will continue. Look no further than US President Barack Obama, who also senses the urgency. “If we don’t write the rules, China will write the rules out in that region,” he said in defense of the Trans-Pacific Partnership.

In a world where economic growth is tepid, with Europe still struggling with the aftermath of the global recession, along with China’s growth slowdown, where else could a project that promises so much opportunity be found?

It’s a good bet that giant iron mining companies like Vale, that have seen their business fall to a thirteen-year low, are currently busy figuring how much steel goes into construction of a new, high speed 8,000 mile railroad. If the project is successful, it could very well spark a boom across the entire depressed international mining, commodities, and construction sectors.

Consider how many jobs could be created in a decades-long construction project that spans a huge region of the world. In practically every sector, the prospects are enormous for a revival of trade and commerce.

The ancient Silk Road increased trade across the known world, but the Road also offered far more than trade. One of its least anticipated benefits was the widespread exchange of knowledge, learning, discovery, and culture.

Beyond the riches of silks, spices, and jewelry, it could be argued that the most important thing that Marco Polo brought back from China was a famous nautical and world map that was the basis for one of the most famous maps published in Europe, one that helped spark the Age of Discovery. Christopher Columbus was guided by that map and was known to have a well-annotated copy of Marco Polo’s travel tales with him on his voyage of discovery of a new route to India.

For the world at large, its decisions about the Road are nothing less than momentous. The massive project holds the potential for a new renaissance in commerce, industry, discovery, thought, invention, and culture that could well rival the original Silk Road. It is also becoming clearer by the day that geopolitical conflicts over the project could lead to a new cold war between East and West for dominance in Eurasia.

The outcome is far from certain.

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Parte 2: The End of Old Geopolitical Tensions? Cold War or Competition on the New Silk Road

Texto: Silk Road Projects: It is important to understand that the new “Road’ is not a formal plan in any sense but merely a broad outline of goals, a work in progress, being filled in, opportunistically, with projects as they are developed, and as negotiations with target countries allow. The Road is also not a ‘start-up’ from scratch, but builds upon and extends a number of projects that have been ongoing with China’s partners.

The Iran-Pakistan-China project (described in Part 1) is one of the few that provides more details, but it is still very much in the planning stage. The second proposed project, only recently made public, focuses on Russia. China is also proposing a partnership with India for its third project.

The Pakistan program is an important economic development project that ties in with the Road as one of the connecting dots along the way, while the proposed program for Russian could become the nexus for the entire Road project, and the proposed India project could become the crucial piece in tying it all together.

Russia and China, the Emerging Partnership

What makes Russia important enough to include in the plan? A better question might be: how is it possible to leave out Russia, the largest country in Eurasia, from a plan to build across the entire region?

In a recent meeting in Moscow, celebrating the 70th anniversary of the allied victory in World War II – which saw Indian, Chinese, and Russia troops parading in Red Square – China and Russia signed multiple agreements to tie development of the Chinese sponsored Silk Road to the Russian sponsored Eurasian Economic Union (EAEU).

The EAEU plan is a Kremlin-sponsored trade union between Russian, Kazakhstan, Kyrgyzstan, Belarus and Armenia, that has been pilloried in the western press as part of Russia’s supposed underlying agenda to re-establish the Soviet Union. With Russia’s inclusion, the plan for the Silk Road will extend from Beijing to the border of Poland. The blossoming cooperation between Russia and China is not something to be ignored, according to former Indian diplomat M.K. Bhadrakumar:

“Clearly, the cold blast of western propaganda against the EAEU failed to impress China…China’s integration with the EAEU means in effect that a real engine of growth is being hooked to the Russian project. In reality, China is the key to the future of the EAEU. Significantly, Xi has combined his visit to Moscow with a tour of Belarus and Kazakhstan, the two other founder members of the EAEU….This is vital for the implementation of the Silk Routes via Russia and Central Asia.”

The Chinese/Russian agreements cover eight specific projects, starting with the development of a high speed railway that will connect Moscow and Kazan (Tatarstan Republic), and will be extended to China, connecting the two countries via Kazakhstan. China’s Railway Group has won a contract for $390 million to build the road, with China contributing an initial $5.8 billion toward total estimated costs of $21.4 billion. Eventually, the planners hope to link this project to Russia’s planned high speed railway to Europe.

Also, China’s Jilii province has offered to build a cross-border high speed railway link between the two countries connecting with Russia’s major Pacific port city, Vladivostok. In addition, the two nations are expanding their energy partnership through a variety of projects. As Oilprice reported in a May 12 article, “the Russian hydropower company RusHydro and China Three Gorges Corp. have signed a deal to cooperate on a 320-megawatt hydroelectric power project in Russia’s Far East…near the border between China and Russia.” As described, this is the largest dam project in China or Russia, already under construction, and is expected to generate 1.6 trillion watts of electrical energy per year, with an estimated cost of around $400 billion.

China has also proposed developing an economic corridor between Russia, Mongolia, and China, a plan likely to include the EAEU member states, the initial step in development of one of the major components of the Silk Road, the Eurasia Economic Corridor, a preferential trade zone stretching across the region.

Several smaller joint project deals were also signed, including establishing a $2 billion agriculture financing fund.

Geopolitics on the Silk Road

Until very recently, it was widely assumed that the US would lead its western allies in a campaign against the Russian/Chinese deal to develop the Silk Road, but events have been reversing with remarkable speed.

With Obama desperately trying to keep the wars in Yemen, Syria, and Iraq from metastasizing across the region, Obama’s Middle East policy is at a crossroads, with none of the big issues likely to be resolved before his term ends. Clearly, the US President wants to concentrate on Asia and reduce the US presence in the Mid-East, a region that has bedeviled every President for more than a generation.

The Deal to Get Out

In the midst of all this, and after more than a two year absence from Russia, Kerry and his entourage requested an immediate urgent meeting with Putin and Lavrov that was granted by the Kremlin.

There is widespread speculation over what might have taken place in the Kremlin meeting on May 8th. Yet, the fact that the meeting took place at all may be more important than any agreements reached, because it clearly shows some form of thaw in a relationship that’s in process.

The rumor out of Russia is that Kerry requested Putin’s help in resolving the ME conflicts and closing the nuclear deal with Iran, with the Russian President agreeing. The quid pro quo for Russia was the US lowering tensions in Ukraine. The issue of Crimea was apparently not even raised, while the visit ended with Kerry’s unprecedented warning to Kiev to abide by the Minsk 2 agreement for a truce in Ukraine’s eastern provinces.

Much of the news media is speculating that the US is starting to remove the ‘crime scene tape’ around the Kremlin. Whether this is really a US offer of an olive branch to Russia is still pretty much guesswork, and even if it were, how far the US is willing to go in accommodating the Kremlin is largely unknown. Stratfor, the popular internet intelligence newsletter, speculates that the US is willing to start easing sanctions on Russia.

Israel and the Gulf Kingdoms

For the Israelis, any easing of tensions with Iran and Russia is very bad news. In the Middle East, Israel is the canary in the coal mine, and is always among the first to discern the faintest signs of political unrest in its region.

There’s no denying the significance of Israel’s reaction to the US/Iran nuclear deal and US coordination with Iran and Russia in Syria and Iraq. Israel placed all of its chips on its ability to stop the deals, and lost badly, while perhaps severely damaging its relationship with it largest ally, the US.

Now, the howls of protest and betrayal pour out of every media source in the country, and Israel is not the only one. Saudi Arabia also feels left out in the cold with the Iran deal.

Proposed Partnership with China and India

If it were possible to put politics aside, there’s no question that China’s single best partner for the Road would be its giant neighbor, bringing together the two most important markets for traders on the original ancient Silk Road. As the Associated Press reported on May 14, 2015:

“Both countries are members of the BRICS grouping of emerging economies, which is now establishing a formal lending arm, the New Development Bank, to be based in China’s financial hub of Shanghai and headed by a senior Indian banker. India was also a founding member of the embryonic China-backed Asian Infrastructure Investment Bank.

The cooperation between China and India is only growing, and their needs appear to be compatible, as the AP goes on to note:

China is looking to India as a market for its increasingly high-tech goods, from high-speed trains to nuclear power plants, while India is keen to attract Chinese investment in manufacturing and infrastructure. With a slowing economy, excess production capacity and nearly $4 trillion in foreign currency reserves, China is ready to satisfy India’s estimated $1 trillion in demand for infrastructure projects such as airports, roads, ports and railways.”

If India chooses to partner with China in the Silk Road, it could keep China building for the rest of the century, in a project that would combine the world’s most populous nations, with more than 2.6 billion people. With Russia already a partner, and Iran waiting in the wings to join, the project could add almost another quarter of a billion people, with a combined total of over one third the global population. A better fit would be hard to find.

But there is no shortage of historical baggage between China and India, ranging from a half century of unresolved border disputes; China’s growing relationship with Pakistan, India’s longtime adversary; and India’s close relationship with the US and Japan, both opposed to China’s claims in the South China Sea.

In a recent meeting in Beijing, China and India signed agreements for $22 billion in development projects, disappointing to many observers when compared to the $47 billion committed to the China/Pakistan deal. A former Indian diplomat, Bhadrakumar, argues, “that strategic distrust cannot be wished away,” and “…that India is not ready to replace the west as its development partner.”

It seems like the US influence with India has at least slowed prospects of recruiting India as a major Silk Road partner. Yet, the results are not so simple to predict since so many countries involved are dependent upon trade with China to the tune of hundreds of billions of dollars annually, and are also active trading partners with both Russia and Iran.

Even in the cold war, India became adept in its studied policy of co-existence with the Soviet Union and the US, which allowed India to play both sides. For pragmatic India, the choice of development partners may depend on the simple formula of ‘following the money’, given the fact that China is one of the few countries in the world with sufficient resources to finance the rebuilding of India’s infrastructure.

The rush of western allies, including India, to join China’s sponsored Asian Infrastructure Bank speaks clearly to the fact that western business is eager to take part in the Road projects. There are probably few banks in the world that would hesitate to finance major components of the project. However, whether the recent sea change in the US/Russian dynamic is a prelude for US support of the Silk Road project remains an open question.