THE BELT AND ROAD INITIATIVE: GEOPOLITICAL IMPACT FOR SPAIN AND THE EU
Although presented to the world as a strictly economic development plan, China's Belt and Road Initiative is set to have major geopolitical consequences and to change the regional and global balance of power in the medium and long term. Europe and Spain will be able to take advantage of its positive repercussions to the extent that the opportunities it offers converge with those sought by the Asian giant.
What is the Belt and Road Initiative?
Concept. Renamed the Belt and Road Initiative -initially One Belt One Road-, it is an economic development project launched by the current President of China Xi Jinping in 2013 and it aims to radically transform the economic situation of the People's Republic over the next thirty years.
Structure. Inspired by the historic Silk Road, the Initiative aims to promote two international trade routes: a land route, called the Silk Road Economic Belt, which is in turn divided into six sub-routes or "corridors", and a maritime route, called the 21st Century Maritime Silk Road. In addition to these, there is the Digital Silk Road, which consists of the key participation of China and its companies in the development of the main global communication standards (5G networks).
Recognised objectives. The stated purpose of the BRI is eminently economic, and is embodied in three main objectives: (i) improving trade routes to solve China's industrial overcapacity problems, (ii) securing supplies of mineral and energy resources, and (iii) providing an outlet for the massive currency accumulated after two decades of economic growth.
Massive investment. Far from being a single or specific plan, the BRI aims to encompass a wide range of initiatives under the same umbrella, mainly through the financing of macro infrastructure projects in the countries crossed by the Belt and Road, with planned investments of $890 billion channelled mainly through the Silk Road Fund and Chinese companies themselves.
External involvement. Although there is no official map, currently more than 70 countries can be considered to be included in the Initiative, either by hosting projects labelled as BRI, or by having expressly signed bilateral cooperation agreements in this context.
Owennson, CC BY-SA 4.0, via Wikimedia Commons
Spain. Although Spain has not yet formally joined the BRI through a bilateral agreement, the Spanish authorities view its potential economic repercussions very favourably and there is a positive inclination towards certain projects such as the Yiwu-Madrid train (characterised so far by coming full of goods and instead returning underused). However, Spain is strongly opposed to other aspects derived from the BRI, such as the creation of sub-regional forums within the European Union (EU), and is cautiously observing the acquisition by Chinese companies of strategic assets within its borders.
Analysis of the political, economic and strategic-military impact of the BRI
Political sphere
Global influence. Although not explicitly acknowledged, the BRI has an eminently political motivation: to place China in a position of global leadership by progressively increasing its influence over the recipient states of the massive funding.
Debt trap. The high interest rate of the loans, the frequent disproportion of the infrastructure financed to the nature and capabilities of the country, and the endemic corruption of its leaders may result in some of the recipient countries not being able to repay the loan. In such a case, China would obtain three types of perks: an economic one, as the ownership of the infrastructure is usually transferred to it as repayment of the loan; a strategic one, as in certain cases key transport infrastructure is involved; and finally a political one, since as a creditor it obtains the backing of the debtor state in international fora. This has already happened in Sri Lanka, for example, where the construction of the port of Hambantota (with a loan at an interest rate of 8.8%) generated a debt of 8 billion dollars that led to the ceding to China of control of a key port for navigation in the Indian Ocean.
Division in Europe. In the European context, the most pressing threat in this sphere is the instability that can arise from a lack of cohesion as individual EU states seek to maintain their own agenda and objectives in relation to the BRI. In this regard, China has encouraged talks with sub-regional groupings such as the "16+1", a forum comprising eleven central and eastern EU countries and five candidate countries.
Beijing is thus capitalising on the unease of Europe's less developed countries and their economic situation after the 2008 crisis, and has already reaped political benefits from such collaboration: Hungary has blocked complaints about China's human rights situation, and in 2016 Greece and Hungary blocked an EU declaration condemning Beijing's non-compliance with an International Court of Justice ruling on the South China Sea. In recent times, however, these countries seem to be losing interest in Chinese money as the volume of investments is not what was promised and, once the international financial crisis is over, the conditions are much more unfavourable compared to those offered by Brussels.
However, the signing in early 2019 of a Memorandum of Understanding between China and Italy - for the latter to join the BRI - has once again fuelled misgivings in Brussels, Paris and Berlin, due to the enormous significance of being the first G-7 country to do so. Thus, the European Commission has just described China as simultaneously a 'cooperation partner', an 'economic competitor' and a 'systemic rival promoting alternative models of governance', in a blunt and stark statement that is unprecedented in recent relations. In the face of such misgivings, Beijing claims to uphold European unity, while asserting that the EU is a collection of sovereign states that has no sovereignty of its own, and defends its legitimacy to negotiate bilateral agreements with its members.
Economic sphere
As mentioned above, the BRI is an eminently economic initiative, and therefore a large part of the threats and opportunities it entails belong to this sphere.
Asset acquisition. China has voraciously embarked on the acquisition of strategic companies and assets in the West that will allow it to (i) release its enormous financial reserves, (ii) rapidly acquire intangible assets, and (iii) establish itself in strategic sectors for the functioning of the target countries, thereby increasing its political influence over them.
This appetite falls mainly on technology-based companies (such as Aritex, supplier of aeronautical and automotive components to the main manufacturers), as well as strategic assets for Spain (for example, Hutchison Ports invested 500 million in the modern container terminal in the port of Barcelona -BEST-, COSCO acquired 51% of Noatum Ports, whose main assets are the terminals in the ports of Bilbao and Valencia as well as the dry ports in Madrid and Zaragoza). It remains to be seen however how much prominence is given to the Spanish ports in the face of the strong investment under the BRI umbrella in other competing ports such as Genoa in Italy or those of El Hamdania (Algeria) or Tanger Med (Morocco).
European response. The EU is preparing a centralised control mechanism for investments in strategic sectors, which, while allowing member states to use their sovereignty to give the green light to an acquisition, would allow the Commission to veto certain operations when they have cross-border implications, as well as facilitating the exchange of information between the different states to set off alarm bells before an investment takes place that could have effects in other states (such as the purchase of the energy company EDP, with unavoidable consequences for the Spanish subsidiary).
Participation of European companies in BRI projects. European and Spanish companies are in an advantageous position in this respect, given their extensive experience in macro infrastructure projects around the world (such as the Mecca-Medina high-speed train or the Panama Canal). However, Europe has criticised the lack of information on the conditions under which the tenders will be carried out, casting doubt on the real possibility of bidding for such tenders given the fact that competition is not equal but is marked by Beijing's centralism and the predilection for Chinese or local companies, as has already happened in relation to the entry of European companies into China itself, under an absolute lack of reciprocity.
Digital Silk Road. Through the so-called Digital Silk Road, China and its companies - Alibaba, Baidu (China's Google) and Huawei - aim to be at the forefront of technological standards over the next twenty-five years. Huawei has been the subject of enormous controversy in all Western countries given its clear leadership in the implementation of the 5G communications standard and the reticence it generates in terms of cybersecurity, so much so that several countries have already banned it from participating in the deployment of their networks.
Strategic-military sphere
Although since its launch President Xi has repeatedly insisted that the objective of the BRI is eminently economic, the reality is that many of the planned investments may entail essential changes in the world order, and this in turn may affect the security sphere of Spain and the EU.
Peripheral regions. China seeks to promote the development of some of its less favoured regions, thus avoiding massive migrations from the interior to the coast and, especially, trying to solve the problem of radicalism and separatist movements such as that of the Uighurs in Xinjiang.
Central Asia and the Persian Gulf. The BRI project to which China perhaps attaches most importance is the China-Pakistan Corridor, which will allow it to bring oil from the Persian Gulf via the Pakistani port of Gwadar to the Chinese city of Kashgar without the need to cross the Strait of Malacca. This supply route not only raises suspicions in India (because it crosses Kashmir) but also in the US, because of the possibility that the port of Gwadar itself could become a Chinese military base on the doorstep of the Persian Gulf and just a few kilometres from the Iranian border, adding it to the existing military base in Djibouti.
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| Government of Pakistan |
In addition, China also intends to increase its energy supply from Central Asia through major acquisitions in Kazakhstan, Turkmenistan and Uzbekistan. This may arouse the animosity of Russia, which considers this its traditional region given the strong cultural and linguistic ties it has with these former Soviet republics. So far, president Putin has been open to collaborating on certain aspects of the BRI, although this Chinese incursion could be a source of tension in the medium term.
Securing investment. Given the massive disembarkation of Chinese companies and workers in BRI projects abroad, it is not out of the question that at some point and in the face of a serious crisis, China could appeal to its financing and the security of its nationals to justify the use of its own forces (police or military) on foreign soil. Moreover, the acquisition of strategic assets and the aforementioned debt trap may result in certain infrastructures passing into Chinese hands, which may even ultimately decide who does or does not make use of them. In our neighbouring countries, however, such a circumstance seems unlikely, as states reserve such decisions for themselves because they are under their sovereignty.
Military-to-military relations. In the context of the US's retreat from the international scene and the inclination of several European countries to promote a common European army to the detriment of NATO, some countries may be tempted to collaborate with China in this area. Not surprisingly, Greece has offered the Chinese navy the provision of maintenance services for its ships on the island of Crete, as well as the possibility of joint naval patrols in the Mediterranean.
Conclusions: cohesion vs. conflict factors
We can conclude that where opportunities for China and the EU converge - cohesion factors - the impact will be positive, while where BRI poses threats to both sides - conflict factors - the consequences will be negative. There are also other areas where threats to one side are opportunities for the other - instability factors - which may become conflict factors in the event of a crisis.
Conflict factors
There are several areas in which the BRI may cause tensions between the EU and China:
A. Europe between two fronts: US vs. China: the EU may find itself in an uncomfortable position of having to deal with its traditional ally, which currently pursues an intransigent policy towards Beijing and strongly opposes China's economic and political rise stemming from the BRI.
B. Strategic asset acquisitions and debt trap: Of particular concern for the EU, insofar as it may affect countries in its periphery and/or generate internal division among individual member states.
C. Mobilisation of Chinese troops on foreign soil: Although it seems unlikely in member states, Europe fears that investments in infrastructure could spearhead the presence of Chinese security forces in countries on Europe's periphery (Balkans, North Africa).
D. No cooperation from European companies in BRI projects: BRI is bound to fail if European countries do not decide to participate through their companies, and this may happen if China does not guarantee a level playing field or provide transparent information on projects.
E. Russian retaliation to isolation: Even in an economically favourable scenario for China and the EU, a threat to both would be Moscow's reaction to its progressive displacement, insofar as Europe will no longer need Russia as a source of energy and Russia may lose its influence in its traditional fiefdoms in Central Asia.
Cohesion factors
Despite the obvious difficulties, China and Europe can agree on some key issues arising from the BRI:
A. Energy market diversification: Both Europe and China have an interest in reducing energy supplies from Russia, a key geostrategic issue for the EU's stability and independence.
B. Development assistance to Europe's periphery: The funding promised by the BRI can promote economic growth and higher living standards both in the EU's less advantaged countries and in its periphery in Eastern Europe and North Africa.
C. Participation of European companies: Given the necessary conditions of transparency and equality, EU companies can make a massive push to participate in macro-infrastructure projects, taking advantage of their leadership and experience and collaborating with Chinese and local companies.
D. Alternative source of financing for the EU: China will be able to use its huge reserves to offer an alternative source of credit, which will benefit the EU provided that such financing is done according to international standards and is not politically motivated.
E. Mediation between China and its adversaries (US, India, Japan): Europe can increase its role as a mediator for the normalisation of relations between China and its opponents, with the ultimate goal of avoiding warlike conflicts that could drag it down.
