Putin and Xi celebrate ten years of the BRI with most of the global south

Putin and Xi celebrate ten years of the BRI with most of the global south
/ bne IntelliNews
By Ben Aris in Berlin October 19, 2023

Russian President Vladimir Putin was the guest of honour at China’s celebration of ten years of the Belt and Road Initiative (BRI) held on October 17-18 in Beijing, where everyone who was anyone in the development world attended the party.

For Xi, it was a diplomatic coup that highlights the increasingly close ties amongst the developing countries of the world, where Western powers were noticeably absent. For Putin, it was a welcome opportunity to get out of the house and go somewhere where he was welcome.

Chinese President Xi Jinping hailed his “strong personal friendship” with his Russian counterpart as the two leaders met in Beijing on the margins of China’s global infrastructure forum.

The BRI is at the core of Xi’s foreign policy and is intimately tied up with Putin’s Eurasia Economic Union (EUU), which has become core to Russia’s foreign relations and was explicitly laid out in Russia’s latest foreign policy concept earlier this year.

Despite recent efforts by the West to re-engage with Beijing, which has strong business ties to Germany and several other Western countries, Xi highlighted the “close and effective strategic coordination” with Russia.

“We are moving very confidently bilaterally,” said Putin, who was reportedly in a very good mood, pointing particularly to flourishing bilateral trade as China helps Russia to circumnavigate Western sanctions and buys its surplus oil and gas.

All of the Central Asian presidents were there. They increasingly travel as the “C5” pack and have recently been in the US, China, Russia and Berlin as a group. Most of the senior Asian leaders also attended, as did several African leaders – a total of 130 countries were represented.

However, the delegates were almost exclusively from emerging markets, including all the G20 members and the newly extended BRICS+ group. The only leaders from Europe were Hungarian Prime Minister Viktor Orban and Serbian President Aleksander Vucic.

The confab highlights the growing divided between the West and the global south that is emerging in this fractured world and driven by the ideological disagreement over creating a unipolar world vs a multipolar one.

Xi and Putin

Putin arrived with a large business delegation, including Russia’s top banks and energy companies as well as half his cabinet. Economic ties are flourishing between Russia and China as sanctions have forced the Kremlin to abandon its long-standing commercial relations with Europe and turn to the East for new partners.

Xi and Putin met but notably did not mention in public the conflict that erupted in the Middle East on October 7 when Hamas stormed southern Israel, murdering some 1,400 people on a prolonged rampage of terror attacks and taking some 150 hostage.

The Kremlin called an emergency United Nations meeting to propose a peace plan to bring the fighting to an end, but it failed to pass after G7 members, including the UK, the US, France and Japan, voted against it.

China has been even more reserved with observers saying Beijing has not mentioned the world “Hamas” once since the shooting started a week and a half ago.

But both leaders must be relishing the crisis, which plays directly into Putin’s hands and will improve both their positions in the global south in general and in the Middle East in particular. Both countries are keen to present themselves as the two biggest emerging markets that have the clout to represent the interests of the multipolar world to the existing hegemony dominated by the G7+ countries of the West.

And some in the West remain attracted to Russia by its mineral wealth and copious energy supplies. Vucic has been playing both sides of the fence, cutting lucrative gas supply deals for Serbia and refusing to implement sanctions. The Serbian president was even learning Russian in his spare time and is a regular visitor to Moscow.

Orban has been even closer to Putin as Hungary is equally dependent on Russian energy and commodities. Following Donald Tusk’s epic victory in the Polish elections on October 15, Orban finds himself very isolated in Europe and naturally will look to Russia and China for support. Poland’s new Prime Minister-in-waiting is seen as much closer to the EU as Tusk is the former President of the European Council (from 2014 to 2019), whereas Brussels had to blackmail Orban in the recent votes for more aid to Ukraine by withholding €13bn in post-COVID relief grants.

During a conversation with Putin – his first meeting with an EU leader since Austrian Chancellor Karl Nehammer made a controversial trip to Moscow last April to buy gas – the Hungarian Prime Minister referred to Russia's war against Ukraine using the Kremlin’s preferred moniker of a "military operation." Orban regularly makes anti-Ukrainian statements and has said that Kyiv has missed its opportunity to join Nato as well as calling for the financial aid to Ukraine to be halved.

Orban also met with Xi, who told Orban he was a “friend” to Hungary and that both sides should “elevate” their relations. Beijing has been investing in factories in Central Europe with a particular emphasis on production related to EVs.

"We consider you as a friend," Xi told Orban as cited by Reuters. "You have actively supported jointly building the Belt and Road and made contributions to promoting high-quality development of the Belt and Road cooperation."

Orban was obviously well pleased with Xi’s bonhomie.

"Connectivity instead of decoupling: this is the Hungarian model. Our aim is to strengthen Hungarian-Chinese relations," Orban wrote on X following the meeting. "This is good for Hungary and good for the European economy.”

Down to business

On Putin’s second trip abroad since the International Criminal Court (ICC) issued an arrest warrant against the Russian leader in March for kidnapping Ukrainian children, he was reportedly in an ebullient mood.

Vucic met with Putin in Beijing where they had a “brief” conversation.

"I have met with President Putin and we talked briefly, there was no bilateral meeting," he told local journalists, adding that Putin looked "very confident".

As bne IntelliNews has reported, Putin is attempting with Xi to build a BRICS bloc and the BRI event was attended by his core target market.

Xi was on hand to burnish Putin’s image. Xi was in Moscow in March in an ostentatious show of support for the embattled Russia following the imposition of sanctions and a clear challenge to the US claim to be the leaders of the free world.

At the heart of the Russo-Chinese cooperation is the Treaty on Good Neighbourliness, Friendship, and Cooperation signed in 2001, which is the basis of their trade and economic collaboration and emphasizes a comprehensive, equal, and strategic partnership.

Trade between the two countries has been flourishing, and more recently was catalysed by the sanctions imposed on Russia. Trade turnover was 29.3% in 2022 y/y reaching $190.27bn. This year trade soared 30% in the first half of this year and will breach $200bn for the first time in 2023, according to Russian Economy Minister Maxim Reshetnikov who is also in the delegation.

Russia is now China's second-largest trade partner outside of Asia, second only to the United States, which accounted for half a trillion in trade in the first nine months of this year, followed by Russia with $176bn and Germany with $158bn.

Increasingly this trade is settled in national currencies and since Russia was banned from SWIFT there has been a rapid yuanization of the Russian financial system.

Russia primarily exports energy resources, metals, timber, agricultural products, and seafood to China, while China imports cars, electronics, excavators, microprocessors, clothing, shoes, and consumer goods from Russia.

The Sino-Russian investment fund is supervised by a dedicated intergovernmental commission and currently has 79 large-scale projects with total investments of approximately $170bn, reports Tass.

Russia is a significant supplier of oil and gas to China. The Power of Siberia gas pipeline has been transporting gas since 2019, and a Power of Siberia-2 is expected to appear in the next ten years followed by a Power of Siberia-3.

The heads of Russian energy giants Gazprom and Rosneft, Alexei Miller and Igor Sechin, are both part of Putin's retinue during his visit to China.

Liquefied natural gas (LNG) production projects, including Yamal LNG and Arctic LNG-2, involve Chinese investors, and Russia exported 6.5mn tonnes of LNG to China in 2022, a 44% increase from the previous year.

Russia has a reputation as a technological noob, but some its military technology is world class, as a legacy of the Cold War. Russia remains a major arms exporter to China and Russian aviation, rocket, nuclear, and even submarine technology has been shared with China in the last decade, according to a 2022 assessment by the US Department of Defence.

Belt and Road Initiative (BRI) 

The BRI is not just an Asian project but extends well into Europe and also has major investments into raw material production in Africa as well as increasingly into infrastructure as a way of cementing relations with Beijing.

The BRI connects more than 60 countries in Europe with the global south. The concept was developed by Xi in 2013 and is the backbone of China’s foreign economic and foreign policy and expected to run over the next three decades.

The initiative includes several projects. First of all, these are the Silk Road Economic Belt and the 21st Century Maritime Silk Road. These projects, proposed by Xi Jinping in 2013, named after the ancient caravan route that runs through Central Asia. The maritime route connects the coastal regions of China with Southeast and South Asia, the Middle East, East Africa and Europe, as well as the countries of the South Pacific.

In 2015, the Digital Silk Road project was added, stimulating the development of digital interconnectedness of the countries participating in the initiative: laying fibre optic cables and 5G cellular networks, creating data storage centres, using satellite navigation, and developing e-commerce.

In 2018, China initiated the Polar Silk Road project, which involves coordinating development strategies with Arctic states to facilitate the creation of a maritime economic corridor between China and Europe across the Arctic Ocean.

The projects are financed by the Chinese sovereign wealth fund and state-owned banks, including the China Development Bank and the Export-Import Bank of China as well as the Silk Road Fund created in 2014. The Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB) are also major players.

China builds interaction with its partners on a bilateral basis. To date, under the initiative, the Chinese side has concluded agreements with 150 countries and 30 international organizations. The initiative’s projects are being implemented in countries of Eurasia, Africa, Latin America, and Western Europe, covering two-thirds of all countries and more than 60% of the world's population.

Russia is not directly involved in the initiative, but supports it. In 2015, the Russian Federation and the People's Republic of China signed an agreement to connect the Silk Road Economic Belt and the EEU, which has Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia as members.

For the period from 2013 to 2022, trade turnover between China and BRI participants was $19.1 trillion, with average annual growth of 6.4%. The total volume of investments exceeded $380bn, including China’s direct investments to participating countries to the tune of more than $240bn.

In the first half of 2023 alone, trade turnover between China and BRI countries grew by 9.8% y/y. The share of this indicator in China's foreign trade turnover reached 34.3%. More than 3,000 projects with an investment volume of almost $1 trillion have already been implemented through the initiative.