Ukraine carving out a role in China’s Silk Road strategy
Ukraine and Georgia inked an agreement on September 13 on the setting up of direct ferry and railway services through their respective seaports in the Black Sea.
Kiev and Tbilisi aim to establish a direct and permanent link with Azerbaijan, Kazakhstan and China in the framework of Beijing’s One Belt, One Road infrastructure initiative which is intended to connect the Chinese eastern coast with Western Europe through land- and sea-based passageways; a sign that China’s Silk Road strategy has begun to gather steam despite economic uncertainties and security challenges.
The new Ukraine-China route is seen as an alternative to the one linking Europe and China along the northern passage, which runs through Russia altogether. As of July 1, Moscow toughened up restrictions on transporting Ukrainian goods via its territory, in a further deterioration of the relations between Kiev and the Russian government.
Ukraine and Russia have been at odds since the spring of 2014, when the Kremlin annexed the Crimean Peninsula – until then part of the Ukrainian republic – and started backing a pro-Russian rebellion in eastern Ukraine, after a Western-leaning leadership had seized power in Kiev.
All countries involved in the transportation venture knitting Ukrainian Black Sea ports and the Trans-Caspian International Transport Route together point to improve logistics, make transit cheaper and cut the time of delivery of the freight travelling from Europe to China and back.
In particular, Ukrainian Minister of Infrastructure Volodymyr Omelyan stressed recently that the government’s objective is to increase the speed at which containers transit from the Sino-Kazakh border to the frontier between Ukraine and Poland, slashing time of shipment to 9-10 days from the current 16 days.
A test container train moved from Illichivsk port, in Ukraine, on January 15, and arrived at the border between Kazakhstan and Xinjiang, western China, on January 31, passing through Georgia and Azerbaijan – the trip included ferry crossings through the Black Sea and the Caspian Sea. While a preferential tariff on the Trans-Caspian route has been in force since June 1, it is expected that participant nations conclude a deal to introduce a single rate, along with simplified customs procedures, by the end of the year.
Furthermore, in late August, Ukraine and China sealed a protocol that committed Kiev to lower the tariffs for the transport of freight via the China-Ukraine-Western Europe leg of the new Silk Road. Ukraine needs a single tariff and efficient logistics to reduce time of transit and relative price; this is the only way Kiev can beat the Russian competition, given that currently it takes 14 days for goods from eastern China to reach Europe’s western rim through Russia.
To date, the cost of cargo shipping through Russia is estimated at some $3,900 for one container, i.e. half the amount paid for Kiev’s test freight travel in January, according to the London-based European Council on Foreign Relations. Russian analysts confirm this figure, noting that the route sponsored by Kiev is unprofitable because of the high costs of shipping cargo freights by ferry from Ukraine to Georgia and from Azerbaijan to Kazakhstan.
Despite current logistical constrains, China appears to be willing to invest in Ukraine’s “Silk Road potential”; at the last August meeting, Beijing and Kiev defined the creation of a mechanisms of public-private partnerships to promote infrastructure projects in the former Soviet republic. The Chinese government also proposed that Kiev applied for a loan from its US$40 billion Silk Road Fund for financing the infrastructure plans falling within China-Ukraine-European Union (EU) rail and ferry scheme.
It is worth remembering that China is Ukraine’s third-largest trading partner, behind the EU and Russia; the Sino-Ukrainian commercial turnover was worth US$6.3 billion in 2015, the EU Directorate-General for Trade reports, and the Chinese leadership recently signed with the Ukrainian government a memorandum of understanding on trade safeguards.
At a meeting with China’s Ambassador to Ukraine Du Wei in early August, Omelyan maintained that the Ukrainian government viewed Yuzhny and Illichivsk port facilities as the “sea gates” of Beijing’s trade with Europe through the new Silk Road. The problem is that the Ukrainian port and rail network necessitates structural improvements to meet government’s expectations. Faced with a pathological economic disorder, Ukraine lacks resources to bridge the infrastructure gap; loans from the EU and United States do not cover all Kiev’s needs, so Ukrainian leaders have to turn to Beijing.
China versus Russia?
Whether the Ukraine-China Silk Road is feasible or not largely depends on economic factors and not on political ones. Although China has arranged a strict cooperation with Russia over the past few years, it will not hesitate to protect its business relations with another country, even though this runs against Moscow’s national interest; in the Sino-Russian dynamic, in fact, the former Middle Kingdom is the major shareholder, virtually immune to Moscow’s possible direct pressure.
Economic feasibility, then, overlaps with security problems affecting all countries along the Black Sea-Caucasus-Central Asia-Xinjiang axis, as geopolitical instability is the great liability of the Belt and Road initiative.
Should Ukraine get out of the current state of frozen belligerence with Russia and plunge into all-out chaos, Kiev’s ambition to become a key hub for China’s new Silk Road would inevitably be strangled, probably in favor of EU members like Romania or Bulgaria; destabilization is the only card at Putin’s disposal to effectively condition Beijing’s strategies in Ukraine (and in the remaining post-Soviet space); unless it is a reckless action by the Ukrainians to unleash hell at the EU’s eastern doorstep and prompt China to change its plans for the Black Sea region.
Emanuele Scimia is a journalist and foreign policy analyst. He is a contributing writer to the South China Morning Post and the Jamestown Foundation’s Eurasia Daily Monitor. In the past, his articles have also appeared in The National Interest, Deutsche Welle, World Politics Review, The Jerusalem Post and the EUobserver, among others.He has written for Asia Times since 2011.