On May 14-15, China hosted the very first Belt Road Forum (BRF) in Beijing. 29 heads of state, including special guest Russian President Vladimir Putin, attended the forum.

The BRF is a major milestone of the four-year long development of Beijing’s key foreign policy idea - the Belt Road Initiative (BRI). Russia is considered to be a major partner and a key driver of the BRI. However, there is not so much to talk about when it comes to the practical results of Sino-Russian cooperation within the initiative. 

Political and economic gains for Russia

President Putin’s visit to China was widely promoted in the Russian media as yet another important step of Sino-Russian strategic friendship. According to Alexander Gabuev, head of Russia in Asia Pacific Program at the Carnegie Moscow Center, the gains of the BRF are mostly political for Russia.

 “Vladimir Putin gave speech on the opening ceremony right after Xi Jinping, which emphasized Moscow’s importance for Beijing, Gabuev told RBTH.

“Also, this gave the Russian media a chance to say that President Putin opened the event on par with President Xi. However, that is not completely true if for no other reason that the Chinese media published the full text of Xi’s opening address and only separate statements of the foreign guests.”

Gabuev adds that an opportunity for President Putin to speak on an international event about the Greater Eurasia project and to promote Russia as an equal partner of the BRI was, from Kremlin’s point of view, the biggest political outcome for Moscow.  

Greater Eurasia is a grand international cooperation idea that was announced by President Putin last year during the St. Petersburg International Economic Forum.

The only more or less concrete economic result of the BRF for Moscow is the establishment of China-Russia Regional Cooperation Development Investment Fund “to promote cooperation between China's Northeast and Russia's Far East.”

But when it comes to the Chinese penetration of the Far East, the mistrust that investors from the Middle Kingdom get from Russian regional authorities often hampers real cooperation.

However, right after the forum, President Putin himself tried to encourage optimism, saying there was no ground for fears about Chinese businesses “taking over the Russian economy.”.

Apparently, a detailed discussion about the economic content of Sino-Russian cooperation was postponed until President Xi’s upcoming visit to Moscow in July.

At the bilateral meeting during the BRF, Putin and Xi limited themselves to a dialogue on the trade turnover between China in Russia, which slightly increased for the first time in the recent years.

This might give Moscow a little time to prepare itself for a constructive discussion in almost two months.

Although, there is a vast number of opportunities for Russia to cooperate with China within the BRI, without a proper “homework” it is impossible to attract Chinese investment, says Oleg Remyga, head of the China Studies Lab at the Skolkovo Moscow School of Management.

Following the results of his two-day visit to China, President Putin said that “it is a sin not to use the opportunities” of Sino-Russian cooperation. He emphasized China’s openness to the world.

What the Russian President didn’t mention is the number of other bidders for Chinese investments all over the world. Judging by the scale of a single Belt Road Forum, Moscow faces quite lot of competitors for the Chinese money while trying to develop a partnership with its eastern neighbor.

One belt, One leader? 

The scope of the event was impressive. Although the agenda of the BRF was quite vague, the representatives of more than 100 countries gathered in Beijing to hear about the development of the Belt Road Initiative.

 “It is China’s first experience of creating such an authoritative international platform for discussion of its main initiative,” Igor Denisov, senior research fellow at the Center for East Asian and Shanghai Cooperation Organization Studies, MGIMO University, told RBTH. “The most important objective for China was to succeed in the organization of the BRF and to present itself as a protector of globalization.”

President Xi emphasized the universal role of the initiative in the development of the world in the new era, calling it  “the project of the century”.

Xi Jinping added some promising specifics. An injection of $14.5 billion to the Silk Road Fund, a $55 billion scheme in support for the state-owned China Development Bank and Exim Bank of China, and an extra $113 billion in funding for infrastructure projects within the initiative. 

China assigned an epoch-making status to the BRF long before the event itself took place. State media touted the world level status for the BRI as well as President Xi Jinping’s core role in its realization. The forum and the Belt Road Initiative are considered to be the triumph of Xi right before the major political event in China – the 19th Party Congress. Beijing made sure to secure this success no matter what.

Alexander Gabuev in his recent article notes, that the BRI has no stated performance indicators, so China has enough room to announce any results of its development as great accomplishments.

“From China's state PR point of view, the forum went quite well. Almost every global media outlet mentioned the One Belt, One Road Initiative,” Igor Denisov says.

“Moreover, the journalists actually did the job of the forum’s hosts: in most articles the initiative was billed as some long-term game-changing strategy, giving China the role of the rescuer of the global economy. Even if China doesn’t have such plans in reality, it is good that it is perceived this way.”

A very picky investor

Experts agree that four years after the announcement of China’s initiative, Moscow still has to do a lot of work to go beyond what has already been achieved. 

In 2015 Russia and China signed the agreement on the cooperation between the Eurasian Economic Union (EAEU) and the BRI. The biggest outcome of the agreement was the start of the talks on the free trade zone between the EAEU and China, which according to different estimates, might last from 10 to 20 years.

As for the bilateral track, although Moscow is perceived as one of the most active partners of the BRI, there are not so many concrete projects in progress. The most noticeable are a gas contract between Gazprom and CNPC (2014), Silk Road Fund investments in Sibur and the Yamal LNG project (2015), and the Western Europe–Western China highway.  

“First and foremost, China follows its own interests while developing OBOR. Beijing has no intention of giving out cheap cash to the neighboring countries,” says Oleg Remyga.

The Chinese investors are turning out to be more and more picky about the projects they finance. In 2016 Chinese total investment to the BRI countries dropped for the first time in 3 years.

In 2015 the BRI countries accounted for 12.6 percent of China’s investment, in 2016 the share shrank down to 8.5 percent. And so far in 2017, this number has already shown an 18 percent decrease. 

OBOR as a political vision

Moreover, China-watchers in Russia are becoming more skeptical on the real economic content of the BRI. Land transport tracks of the One Belt One Road (OBOR) in Eurasia help save time on the delivery, but sea logistic support is still at least 50 percent cheaper.

The European experts also note that OBOR is “less of a practical plan than a broad political vision”. At the moment the trade flow from China to Europe over the land routes goes practically one way, which is not economically efficient.

Despite the criticism of the content of the initiative and Beijing’s intentions in its development, China is still one of the biggest investors in the world.

However, “Chinese investors are becoming more experienced and pragmatic. There is no way to get Chinese financing, if a project is not well prepared and properly presented. In this sense, Russia is no exception to the rule,” Oleg Remyga adds.

This op-ed was originally published on the Russia Beyond the Headlines