CONFERENCE CALL: Time to give up on the New Silk Road?

CONFERENCE CALL: Time to give up on the New Silk Road?
By Clare Nuttall October 23, 2015


For more than 20 years the US and Europe on the one hand and China on the other have been reaching out across Eurasia with various concepts of a “New Silk Road”. Now, with the rift between Russia and the West, and the conflicts raging in Europe’s southeast neighbours, dreams of new connections bringing peace and prosperity across the world’s largest landmass have been shattered.

The old Silk Road was never a single road - it was a complex network of routes criss-crossing the continent between Western Europe and the Far East. It evolved over centuries, only declining with the breakup of the Mongol Empire and the opening of new sea routes.

Similarly, the concept of a New Silk Road that has been bandied about since the collapse of the Soviet Union also encompassed many different routes - from the northerly connections across Russia and post-Soviet Central Asia, to southerly strands via the Balkans, Turkey and the Middle East.

Just like the desert khanates of Samarkand and Bukhara, many modern states including Kazakhstan, Turkey and Romania saw themselves as key points on the new silk roads.

Conceptually, the term “New Silk Road” has also been used to refer not just to new trading routes - particularly in the oil and gas sector - but to broader economic, diplomatic and military cooperation.

The US’s New Silk Road strategy, first broached in 2011, is aimed at integrating Afghanistan into the broader Central Asian regional economy in the hope that supporting the country economically will help it to remain stable after US-led forces pull out. Meanwhile, China’s Silk Road Economic Belt, first announced during Chinese President Xi Jinping’s visit to Kazakhstan in September 2013, grew out of Beijing’s existing bilateral trade links spanning Europe, Asia and Africa.

In the light of the current geopolitical situation, however, these diverse concepts and strategies are looking doubtful, as highlighted at the Aspen Institute’s Bucharest Forum. Titled "Facing a Perfect Storm: Perspectives for Europe’s Neighbourhood Vision”, this year’s forum focussed on Europe’s neighbourhood, an increasingly troubled region.

Looking southeast from Europe, Alina Inayeh, director of US think-tank the German Marshall Fund’s Bucharest office, commented that where there used to be a corridor of economic potential, “there is now a corridor of instability and economic crisis”.

Meanwhile, Charles Ries, vice president, international, of the Rand Corporation think-tank, referred to a new “Donetsk-Damascus axis” running due south from Ukraine into the Middle East.

Turkey, in the middle of this axis, is one of the states struggling to maintain order and protect its international borders. The forum in the Romanian capital took place on October 15-16, days after suicide bombers killed around 100 people at a demonstration in Ankara on October 10. Turkey is also fearful that the Russian bombings of Syria will unleash a new wave of refugees across the border into Turkey.

“Looking out from Ankara we see the breakup of the old post World War II order. It is difficult to talk about the integrity of states in the region when physical borders - for example between Iraq and Syria - have disappeared, and we are dealing with non-state actors like IS,” said Sinan Ülgen, visiting scholar from Carnegie Europe. “We are now in now in uncharted territory and we don’t know how to deal with these new phenomena.”

Even before the rise of IS, revolutions in several states across the Middle East and North Africa demolished tentative efforts at regional integration via tighter economic links, said Ülgen. “There were several initiatives based on economic cooperation before the Arab Spring - that’s a bygone era now.”

Last bit of Europe

In response to these assorted crises - the conflicts in Ukraine, Syria and Iraq and the consequent flood of refugees that has brought the wider region’s instability into the heart of Europe - the EU appears to be retrenching, focussing on solving its own problems rather than reaching out eastwards.

The exception has been the Western Balkans, where, recognising that progress in integrating the final few European nations had slowed, German Chancellor Angela Merkel initiated the Berlin Process to re-engage with the region in 2014.

Unlike other countries on Europe’s borders, “The Western Balkans are unquestionably part of geographic Europe, even though they are not yet integrated into Europe in political terms,” said Ivan Vejvoda, senior vice president of the German Marshall Fund. “If the EU is not capable of integrating this last bit of Europe, how will it deal with issues outside?”

International integration - both within the region and with the EU - is arguably most important for the Western Balkans, which is made up of many tiny states - even the largest, Serbia, is only one third the size of Romania in population terms. “Big investors are not interested in small markets. They therefore need regional cooperation, need to think beyond individual countries and mini-regions to find scale,” said Vejvoda. 

This is particularly important in the energy sector, where according to Vasile Iuga, cluster leader at PwC Southeast Europe, the region is the most vulnerable to shocks in energy supply. Since 2009, when Russia cut gas exports via Ukraine during a cold spell in January, the public as well as institutions fear that supply shocks may occur again. “The region is still isolated from EU energy networks and there is a fear that gas could be used again as a bargaining chip with the region,” he adds.

While there have been efforts to increase energy security, Iuga warns that, “Southeast Europe and the wider Caspian region have a poor record of cooperation as individual ambitions get in the way.”

In his keynote address on October 14, Maroš Šefčovič , the European Commission’s Vice President for the Energy Union, stressed the importance of regional inter-connectors in Southeast Europe, as part of the need to adapt to political challenges.

While Romania was relatively quick to build the Iasi-Ungheni pipeline to its neighbour Moldova, which is almost wholly dependent on Russian gas, other pipeline projects have been slower to materialise. This is despite diplomatic efforts such as the signing of a deal on a “vertical gas corridor” between Bulgaria, Greece and Romania immediately after Russia announced the South Stream pipeline project was being scrapped in December. Construction of inter-connectors between the three countries has dragged on, leading one frustrated delegate to describe progress on the Romania-Bulgaria inter-connector under the Danube as a “national joke”.

“Part of Southeast Europe’s vulnerability in the energy sector is due to its business practices,” Edward Chow, senior fellow at the Center for Strategic & International Studies (CSIS), pointed out bluntly. “The incumbents are not interested in competition. They want to continue with their traditional business practices with their traditional business partners. That’s the reason why we don’t have a Greece-Bulgaria inter-connector or a Romania-Bulgaria inter-connector, and we have got to face it.”

While Brussels has had to rethink its strategy towards its closest neighbours, the burden of change - whether it’s in stamping out corruption, or bringing laws into line with the EU, or political change such as the Belgrade-Pristina normalisation process - will rest mainly with the Western Balkans. If the EU now expends more energy internally and less on reaching south or east, it is still committed to absorbing its closest neigbours. However, as Vejvoda noted, around 95% of the effort will be on the part of the candidate countries.

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