Silk Road Fever Grips The Russian Far East And Boosts Economy

Authored by Pepe Escobar via The Asia Times,

China's Belt and Road Initiative heralds a new era with mega infrastructure projects dotting the landscape...

If  you are looking for the latest breakthroughs in trans-Eurasian geoeconomics, you should keep an eye on the East – the Russian Far East. One interesting project is the new state-of-the-art $1.5 billion Bystrinsky plant. Located about 400 kilometers from the Chinese border by rail and tucked inside the Trans-Baikal region of Siberian, it is now finally open for business.

This mining and processing complex, which contains up to 343 million tonnes of ore reserves, is a joint venture between Russian and Chinese companies. Norilsk Nickel, Russia’s leading mining group and one of the world’s largest producers of nickel and palladium, has teamed up with CIS Natural Resources Fund, established by President Vladimir Putin, and China’s Highland Fund.

But then, this is just the latest example of Russian and Chinese cooperation geared around the New Silk Roads or the Belt and Road Initiative (BRI). Beijing is the world’s largest importer of copper and iron ore, and virtually the entire output from Bystrinsky will go to the world’s second largest economy.

Naturally, to cope with production, a massive new road and rail network has been rolled out, as well as substantial infrastructure, in the heart of this wilderness. Yet there is another major BRI initiative about 1,000km east of Bystrinsky. Work started on the Amur River Bridge, or Heilongjiang as the Chinese call it, in 2016 and the road and rail links should be finished in 2019.

The project is being developed by Heilongjiang Bridge Company, a Russia-China joint venture, along a crucial stretch of the Russian-Chinese border. It will also be part of a huge trade corridor, which will transport iron ore to China from the Kimkan mine, owned by Hong Kong’s IRC Ltd,  in Russia.

The Amur River Bridge, linking Heihe, in Heilongjiang province, with Blagoveshchesnk in the Russian Far East, is a natural part of the New Silk Roads program. It is well connected to one of BRI six major corridors – the China-Mongolia-Russia Economic Corridor, or CMREC, via the Trans-Siberian Railway all the way to Vladivostok.

CMREC’s additional importance is that it will connect BRI with the Russia-led Eurasia Economic Union, or EAEU, as well as the Mongolian Steppe Road program. CMREC has two key links. One involves China’s Beijing-Tianjin-Hebei to Hohhot before winding on to Mongolia and Russia. The other is from China’s Dalian, Shenyang, Changchun, Harbin and Manzhouli to Chita in Russia, where the Bystrinsky plant is located.

Numerous aspects of the Russian-Chinese intranet were extensively discussed at the Third Eastern Economic Forum in Vladivostok in September. CMREC involves closer cooperation, especially in energy, mineral resources, high-tech manufacturing, agriculture and forestry. Chinese Vice-Premier Wang Yang had already announced even closer economic cooperation with Russia, including a $10 billion China-Russia Investment Cooperation Fund in yuan for BRI and EAAU projects.

Monetary integration

Part of this will include Russian-Chinese investment funds, known as Dakaitaowa, or “to open a matryoshka doll”. Monetary integration and energy cooperation are all part of an ambitious Russian-Chinese package. This will allow trade to be settled in yuan, instead of US dollars, in Moscow via the Industrial and Commercial Bank of China. Products promoted under the “Made in Russia” brand are bound to get a boost.

According to the China General Administration of Customs, Russia continues to be the country’s leading crude oil supplier, exporting more than one million barrels per day, ahead of Saudi Arabia and Angola. Exports of Russian oil to China have more than doubled during the past six years.

Last month, the Russian parliament approved the draft of a conservative 2018-2020 Russian federal budget at $279 billion. This included increased spending in the social sector, a higher minimum wage, and increased salaries for teachers and healthcare workers.

Manufacturing in Russia has actually grown in absolute terms during the past decade along with a slight rise in GDP. Contrary to Western perceptions, energy revenue in Russia amounts to only around 30 percent of the federal budget. In absolute terms, it actually fell from 2014 to 2016, while non-oil and gas income has increased steadily since 2009.

Those were the days when Saudi Arabia and the Gulf petro-monarchies were dumping excess capacity on the oil market in a price war that was bound to ruin Russia’s finances. The draft budget assumes the price of oil will stay around at least $40.80 a barrel during the next few years. In fact, it may actually rise from its current $61.03 for the OPEC basket. Of course, that would boost Russia’s reserves.

Natural resources

As for exports, oil accounts for around 26 percent of Russia’s GDP. Oil and gas as a percentage of total exports fell during the past two years from 70 percent to 47 percent, but they are still the country’s top export money earners. When you add other commodities, such as iron, steel, aluminum and copper, revenue from natural resources come to more than 75 percent of Russia’s total exports.

But the key problem ahead for the country is the debt of provincial governments, and not defense, which is much lower than during Gorbachev’s reign in the late 1980s. Still, the integration of BRI and EAEU now offers excellent opportunities for Russia.

To put this into context, we have to go back to the 1689 Treaty of Nerchisk at a time when Manchus, an ethnic minority in China and the people from whom Manchuria derives its name, were deeply concerned about Cossack incursions into their lands.

Nerchisk was the first Chinese treaty with a European power, and it safeguarded borders and regulated relations between the two neighbors for nearly two centuries. For the first time, Russians could trade directly with the Middle Kingdom and negotiate as equals. No Russian or Manchu was spoken, but Latin, via two Jesuit interpreters. They were well positioned in the Qing court by supplying the Kangxi emperor with weapons, as well as advanced courses in geometry and astronomy.

Century of humiliation

Now, compare this with the “unequal treaties” of the 19th century with England, France, the United States and Germany, known as the “century of humiliation” in China. It is true that Russia gobbled up Chinese lands back then, as well as securing the Amur basin and the eastern side of the Sikhote-Alin mountains, which denied the country access to the Sea of Japan.

At the time, the Qing dynasty was helpless. Everything was later formalized by, well, treaties. China lost what was known as Outer Manchuria and Eastern Tartary. Today this whole region is known as Primorsky Krai, Russia’s Maritime Province. Then in 2006, President Putin solemnly announced the resolution of all border disputes with China along the Amur. Beijing de facto agreed.

Now, with the integration of BRI and the EAEU, Russia has a great chance of fulfilling part of its Pacific Destiny, first envisaged when the Trans-Siberian rail link was finished in 1905. Today, that vision is alive with gold and timber in the mountains north of the Amur, fish in the Sea of Okhotsk and the Bering Sea, and gas reserves from Sakhalin island all part of a modern export chain.


new game BennyBoy Fri, 12/15/2017 - 05:28 Permalink

it is called the GREAT CRUMBLE. uncle sam has shoot his foot and is walking with a limp.uncle sam is ready to keal over.uncle sam is overcome by medical billswhich he can't afford.uncle sam is not your friend.he delivers free shitbut steals moralityhe reside in dccrony sam needs to dieand be replaced bysound money

In reply to by BennyBoy

AurorusBorealus williambanzai7 Fri, 12/15/2017 - 08:34 Permalink

Indeed.  I was in the U.S. in the 1990s.  In June of 1989, when I was a very young man, I asked Jean Kirkpatrick, who was the U.S. ambassador to the UN at the time, what would the U.S. response be if the Soviet Union withdrew from Eastern Europe?  Would the U.S. dismantle NATO and withdraw its forces from Europe?  I also suggested that d'etente could lead to a U.S.-Russian alliance that would ensure global stability, peace, and prosperity for a century: much like the Anglo-Russian alliance of the 19th century.Do you know what Jean Kirkpatrick told me?  She stated, in June of 1989, that the "Soviet Union would never withdraw from Eastern Europe."  I will never forget her words because 5 months later, the gates to the Berlin Wall were opened, and in June of 1990, the Berlin Wall came down.  That is how ignorant, short-sighted, and ill-informed U.S. leadership was and still is.  The people in Washington are as ignorant as children and as arrogant as the Sun King.Instead of a Amero-Russian alliance, the world must now contend with a Sino-Russian alliance, in which China will use Russian resources and Russian transportation infrastructure to expand its mercantilist empire across the whole of the Eurasian continent.  I pray only that our leadership in South America is wise enough to prevent us losing all of our manufacturing and industry to Chinese imperialist mercantilism.  How ironic that the former colonial powers of Europe are about to be subjugated by the same mercantilist trade policies that they used to exploit colonial provinces for centuries.

In reply to by williambanzai7

LightBeamCowboy Idaho potato head Fri, 12/15/2017 - 13:20 Permalink

If the US were to push a similar project in this part of the world, it would have to be a high speed rail linking the full north-south expanse of North America to South America, say, Anchorage, AK to Buenos Aires and Santiago. What would it cost? That doesn't matter, because the capital we could have spent on this project has already been squandered several times over on 16 years of war in the Middle East. I hope Americans like what they bought. Idiots.

In reply to by Idaho potato head

dubaibubble Fri, 12/15/2017 - 02:53 Permalink

visit any border crossing between Russia and Chinathe Chinese side will have all new buildings, shops, roads, restaurants.............on the Russian side there will be some sh*tty little shashlik stand and a liquor store disguised as a crappy mini-mart  

VK Fri, 12/15/2017 - 03:09 Permalink

It's part of the Chinese century that lies ahead. Chinese GDP PPP is already much higher than America. They have the latest infrastructure and a homogenous population and thousands of years of history. The West is going to be steamrolled even if China undergoes a monetary crash as they have the military, infrastructure, hard working population in place to recover and proceed apace.

dubaibubble Fri, 12/15/2017 - 03:42 Permalink

a dangerously corrupt place, the Russian leaders are "cut from the same cloth" as the Chinese politicians = perfect marriagethe typical Russian is a "doormat" used by the local silovikino need to walk the Russian side of the border with China, just think of wasteland, nothing to see  

Diatom dubaibubble Fri, 12/15/2017 - 14:04 Permalink

Russians ,Chinese and Americans could have corruption lessons from the Portuguese...We were the first global empire 500 years ago...Now we are DEFINITELY in the top 5 of OECD most corrupt nations.Poor country, no resources, drowned in fiat debt...We pay the most expensive gasoline, natural gas, electricity (more than 50% of it renewable...) and telecoms in Europe!We are paying until 2090 public/private partnerships in highways and hospitals costing every year more than 2 billion dollars ( well euros...)The government some years ago decided to make fire fighting a business...This year more than 100 people were burned alive by forest fires. More than half of the total burned area in Europe is Portuguese.Old people living in the middle of nowhere, started seeing drones and planes throwing incendiary shit to the forest..."Corruption: Portugal's Oil."TM

In reply to by dubaibubble

dubaibubble Fri, 12/15/2017 - 03:57 Permalink

people who actually know anything about the Russian Far East and have actually been there understand:there is a basic "yellowication" happening now on the Russia side, with Chinese marrying the local Russian ladies, buying land opening businessestrains going south are loaded with unprocessed timber, oil and minerals, trains headed North are loaded with value-added goods like appliances, machinery, clothes................seems some of Slavic ZHers here are "butt hurt" about the real truth abour Mother Rossiya (a hollow vessel)lots of natural resources and a few oligarchs everyone kisses up to 

shitshitshit dubaibubble Fri, 12/15/2017 - 04:42 Permalink

This is hardly a secret, this is why there is this project of giving land to russians willing to relocate and work in far east (2 free hectares per person with possibilities to extend even more, I almost applied there because choice is completely free and there are incredibly nice places, but given my work etc. it would have been very hard to relocate). 

In reply to by dubaibubble

WTFUD Fri, 12/15/2017 - 06:51 Permalink

Ok so what, the Russians & Chinese have their state of the art $1.5 Billion Bystrinsky Plant which will produce Minerals for 25-35 years, well we've got the $1 Billion US London state of the art Embassy with MOAT, lol.

fiddy pence ha… Mon, 12/18/2017 - 00:48 Permalink

Lots of us have joined in on the Silk RoadCentral Asia growth.Go East, Middle-aged man.  Or west,if you're on the Pacific.Anyway, we are required to follow growthbecause the West is decaying, and hasalready given our pensions to the banks,and just about everything else too.In the West, wealth is being extracted, notfrom manufacturing or green energy, but fromthe skin, stomachs and wallets of the people.And when they're done, they find you somemeth or fentanyl to kill you off.