Saadat Hassan

OBOR: Infrastructure, Investment & Connectivity

Date of publication : May 14, 2017 21:43 pm
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Chinese President Xi Jinping prepares to deliver a speech during a welcome banquet for the Belt and Road Forum at the Great Hall of the People in Beijing on May 14, 2017

The Silk Road Economic Belt concept was introduced by Chinese President Xi Jinping during his visit to Kazakhstan in September 2013. In a speech delivered at Nazarbayev University, Xi suggested that China and Central Asia cooperate to build a Silk Road Economic Belt. It was the first time the Chinese leadership mentioned the strategic vision. Actually China is reviving the historic Silk Road trade route that runs between its own borders and Europe. Announced in 2013 by President Xi Jinping, the idea is that two new trade corridors – one overland, the other by sea – will connect the country with its neighbors in the west: Central Asia, the Middle East and Europe.
 
According to the action plan, the Belt will have three routes and the Road will have two routes
 
The Silk Road Economic Belt:
1) China—Central Asia—Russia—Europe (the Baltic)
2) China—Central Asia—West Asia—Persian Gulf—Mediterranean Sea
3) China—Southeast Asia—South Asia—Indian Ocean 
 
The 21st Century Maritime Silk Road:
1) Coastal China—South China Sea—Indian Ocean—Europe
2) Coastal China—South China Sea—South Pacific 

China unveiled the principles, framework, and cooperation priorities and mechanisms in its Belt and Road Initiative in a bid to enhance regional connectivity and embrace a brighter future together. In this regard action plan, mutually released by the National Development and Reform Commission, Ministry of Foreign Affairs and Ministry of Commerce, offered insight in the China-initiated program's vision and endeavors. The Belt and Road routes run through the continents of Asia, Europe and Africa, connecting the vibrant East Asia economic circle at one end and developed European economic circle at the other.
 
The “Five Links” While the traditional Silk Road was primarily a route for trading goods and cultural and technological exchange, the new Silk Road set out the “Five Links” as its goal. The “Five Links” refer to linkages in policies, infrastructure, trade, finance and people. The Asian Infrastructure Investment Bank (AIIB) was formally established in October 2014. As of 29 March 2015, 42 countries had joined or applied to join the AIIB as founding members, including the UK, Germany, France and Italy. In December 2014, Beijing launched its US$40 billion Silk Road Fund along the lines of a long-term private equity venture to improve transport and trade links in countries and regions along the Silk Road. The Fund is expected to be similar to the World Bank’s investment arm International Finance Corp and the African Development Bank’s mutual development fund. Financed by a small group of investors, the Fund targets infrastructure construction, exploration of natural resources, and industrial and financial cooperation.
 
Titled the “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road”, the official document lays out the basic goals of the “One Belt One Road” Initiative: “It is aimed at promoting orderly and free flow of economic factors, highly efficient allocation of resources and deep integration of markets; encouraging the countries along the Belt and Road to achieve economic policy coordination and carry out broader and more in-depth regional cooperation of higher standards; and jointly creating an open, inclusive and balanced regional economic cooperation architecture that benefits all.” The Silk Road Economic Belt focuses on bringing together China, Central Asia, Russia and Europe (the Baltic); linking China with the Persian Gulf and the Mediterranean Sea through Central Asia and the Indian Ocean. The 21st-Century Maritime Silk Road is designed to go from China's coast to Europe through the South China Sea and the Indian Ocean in one route, and from China's coast through the South China Sea to the South Pacific.
 
The first phase of a logistics terminal jointly built by China and Kazakhstan went into operation in the port of Lianyungang in east China's Jiangsu Province. The terminal, with a total investment of 606 million yuan (98 million U.S. dollars), is considered a platform for goods from central Asian countries to reach overseas markets.
 
In November 2014, President Xi announced that China will contribute 40 billion U.S. dollars to set up the Silk Road Fund. During the Beijing APEC meetings, Xi announced that the fund will be used to provide investment and financing support for infrastructure, resources, industrial cooperation, financial cooperation and other projects in countries along the Belt and Road. Chinese Foreign Minister Wang Yi dismissed comparisons of the initiative to the U.S.-sponsored Marshall Plan. The initiative is "the product of inclusive cooperation, not a tool of geopolitics, and must not be viewed with an outdated Cold War mentality," Wang said, adding that China's diplomacy in 2015 will focus on making progress on the Belt and Road initiative.
 
OBOR platform for International Cooperation scheduled for May 14&­15 will provide a platform for the participants to share their views about the future development of the initiative. In other words, although launched by China, the initiative can bring great benefits for all the participating countries. And it can help Washington and Beijing to work together in fields such as infrastructure construction in the US, and take measures to boost free trade in the Asia Pacific region. Besides, the initiative can also help deepen Sino-­US bilateral cooperation, and promote peace, stability and prosperity in the Asia Pacific. The initiative offers the prospect of fulfilling through peace, rising living standards and improved international cooperation and understanding the goal of making the heartland of the “world island” —the combined continents of Asia, Europe and Africa— the communications heartland, or nerve center of the world.
 
Driven by economic interests, China is one of the only major players consistently active in the Iranian oil market during the US sanctions era. Those did have an impact even on China’s diplomatic resourcefulness, seeing Chinese investments, which had totaled US$3 billion in 2011- 2012, sharply decrease to US$400 million in 2012. Meanwhile, bilateral trade between China and Iran was US$45 billion in 2011, rising to US$51.8 billion in 2014, much of this being in the oil and gas arena.
 
However, the recent bringing back of Iran into the international community is likely to have significant impact on Sino-Iranian relations. Free from US sanctions and global restrictions covering everything from banking arrangements to the provision of spare parts, the two countries can be expected to rush forward investment and development plans, most of which are energy driven from the Chinese perspective, and product and parts driven by the Iranians. The China-Iran trade space will be one of the fastest growing globally over the next three years, and this will also have a knock-on effect in other countries, including Pakistan and India. Oil supply pipelines are expected to cross both these nations’ territories, and introduce perhaps more stability to hard pressed Pakistan, which sits on both Chinese and Iranian borders. Iran is also expected to shortly become a full member of the Shanghai Cooperation Organization (SCO), giving it an additional platform to converse with neighboring countries in security, infrastructure development, and trade. As long as the US-led Iran deal holds, the future seems rather brighter for Iran, China, and Pakistan.
 
Iran's geostrategic location has made it the key link in China's New Silk Road to Europe, while the Middle East has become one of Beijing's geopolitical pivots. There are several reasons for China's pivot to the Middle East and most notably Iran. Middle Eastern markets are essential for Beijing's New Silk Road initiative to create a network of manufacturing and logistics centers in Central Asia and Europe. "China's demand for oil imports is expected to grow from 6 million barrels per day to 13 million by 2035, and Iran, ranked fourth in the world in proven oil reserves and second in terms of natural gas reserves, is considered a reliable supplier,". Iran and China have complementary economies which provide many potential grounds for cooperation between two countries. Iran has one of the largest hydrocarbon reserves including crude oil, and natural gas in world which could secure China’s need for energy over next decades. Moreover, Iran has one of the largest domestic market in the region so that in many sectors of its economy Chinese companies can find lucrative opportunities for either investment or trade.
 
Chinese President Xi Jinping paid a visit to Tehran last January one week after the implementation of the Joint Comprehensive Plan of Action (JCPOA) began. During his visit, top Iranian and Chinese officials inked 17 agreements and documents on bilateral cooperation including “Iran-China 25-year strategic relations agreement” and “an MOU to establish the joint Silk Road Scientific Fund”. Meanwhile, two sides agreed to build economic ties worth up to $600 billion within the next 10 years, as Iranian president Rouhani announced in a joint news conference with his Chinese counterpart.



Iran, too, has been playing a very significant role in regional cooperation through the CPEC, and it is significant that Chabahar and Gwadar ports, once portrayed as competitors, have now been declared as sister ports. Given the changing scenarios, the Iranian leadership hinted that China, Pakistan, Iran and Russia should cooperate more for regional stability. And China­-Russia­-Iran­Pakistan cooperation is being discussed in this context. Russia has vital interests in this region as well, as an active partner of both China and Pakistan. The Karachi­-Lahore gas pipeline worth $1.7 billion has been pledged by Russia. And Russia, China and Pakistan have decided to work together to restore peace in Afghanistan.
 
Even now some scholars in the United States reservation the intention of China’s initiative, suggesting it is part of Beijing’s plan to widen its influence in Eurasia and challenge Washington’s global leadership. A few US scholars have even labeled it the Marshall Plan of China, and adopted a wait-and-see approach, while others oppose it simply because it was proposed by China. By doing so, they are only preventing US enterprises from benefiting from the initiative. Regardless of Washington's displeasure, China and its important Middle Eastern ally Iran are pushing ahead with their new infrastructural projects, aimed at unifying the Eurasian trade space. This is the reason forum in Beijing so important. It offers the peoples of the “world island” a constructive alternative to the sinister gathering clouds of religious fanaticism, usually generated by poverty, fear and chaos, or the advance of menacing military alliances to threaten the national sovereignty of great nations.

 
Saadat Hassan, PhD scholar at Quaid-i-Azam University, is the expert on South Asia affairs. Contact him via: qaura1@gmail.com
 
 
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