ARVAK Center comment, 30.07.2024(1)
03.07.2024 on the margins of the SCO summit in Astana a “Declaration on strategic cooperation” between AzR and PRC was signed. As can be seen from the text of the declaration published by the Azerbaijani Azertaj news agency, the overwhelming part of the articles of the document refers to the perspective of trade development – the two countries are cooperating economically within the framework of the Chinese “One Belt, One Road” mega-project. The separate paragraph emphasizes the obligation of the parties to “accelerate the signing of the agreement on the development of multimodal transportation” within the “Middle way” route connecting the PRC and AzR through Middle Asia.
Identical document was adopted on 31.07.2023 between Georgia and China in Beijing, after which Tbilisi gave the start of the process of Chinese investment boom in the republic, associated with the modernization and construction of new trade and logistics infrastructure. To date, the main result of the Georgian–Chinese strategic cooperation was the transfer of the project by the Georgian side for the construction of a new deep-water port of Anaklia and related extensive coastal infrastructure to the China–Singapore Consortium of China Communications Construction Company (CCCC).
Similarly, the Azerbaijan–China “Declaration on Strategic Cooperation” seems to indicate that China will seek agreements and contracts to attract investment into the modernization of the AzR port and railway infrastructure. According to Azerbaijani statistics, there are currently 4 active Azerbaijani ports on the Caspian Sea (Baku, Astara, Sumgait and Lenkoran). The volume of trade in this sector is slightly more than 10 mln tons per year, with more than 80% of the cargo destined for further transit. The new Azerbaijani port at Alyat (a branch of the Baku International Port), whose construction began in 2010, currently has a capacity of 10 million tons, but when it’s finished, this number will increase to 25 mln, which makes 1 mln shipping containers. Considering the scale of the planned trans-Caspian transport, designed as a part of the “Middle Corridor” (TITR – Trans-Caspian International Transport Route, according to some data – at least 50 mln tons per year), Azerbaijan’s port industry needs extensive modernization and rapid completion of unfinished projects. The modern port at Alyat with its capacity and the free economic zone being created around it, are not sufficient for the planned Beijing cargo traffic. Moreover, since the “old” Azerbaijani ports soon will not be able to receive deep draft cargo vessels due to the rapid lowering of the water level in the Caspian Sea, their use will have to be abandoned. Therefore, it is very likely that Beijing will diversify the directions of cargo flows from Kazakh Aktau and Turkmen Turkmenbashi (previously–Krasnovodsk) by modernizing old Azerbaijani ports and overland logistics connecting them with Georgia. Such works in the medium and long term can provide for the project “One Belt, One Road” to reach the declared maximum volume of trade flows.
Measured through agreements reached with Georgia and Azerbaijan, which are reflected in the two statements, Beijing has finally decided on the “Middle Way” route and is ready to defend its project in the financial, economic and political dimensions. This obviously explains the current government’s steady shift away from the Western vector, as well as Baku’s attempts to neutralize the influence of the United States and its European allies. Without a multifaceted dependence on the PRC, this trend would hardly have occurred in the political realities of the South Caucasus. At the same time, it is doubtful that Beijing itself would have been able to operate freely in the region without regard to Moscow’s interests. There are reasons to believe that the Russian Federation, unable to maintain its former influence in the region, where the role of the West and Turkey is rapidly growing, is inviting the PRC to cooperate, expecting serious economic benefits from this global deal, in addition to the geopolitical effect.
For Moscow, the issue is the overland trade route of the Russian Federation through Georgia to Turkey, with a subsequent exit to the Mediterranean region. In this context, the prospect of two routes with problematic capacity for the Russian Federation is very interesting: the first – due to the geo-climatic environment, and the second – because of the political conditions. These are the Lars–Kazbegi Trans-Caucasus Railway and the Poti–Sukhumi–Sochi Railway. As for the first route, the elimination of its technical “weak points” is being practically implemented through a several-kilometer-long tunnel under the Cross Pass. The project was initiated by Georgia and China; the construction has been carried out since 2021 by the Chinese China Railway Tunnel Croup company, and the financing is provided by the Asian Development Bank (ADB) and the European Bank for Reconstruction and Development (EBRD). By the end of 2024 the tunnel under the Caucasus ridge will be ready for continuous operation. And it seems that this most complex project was implemented because of China’s political lobbying, the Asian Development Bank‘s founding team is a leader in science and technology. As for the Georgian–Russian railroad through Abkhazia, there is reason to believe that Beijing will make the necessary efforts to induce Tbilisi to unblock this route by “sidelining” the political dimension of the problem. At the same time, the Russian Federation may reconsider its position on the Abkhaz problem and cooperate with Tbilisi, either within or outside the PRC’s negotiations. Such a scenario should not be ruled out, as it is known that Moscow does not stop at “reputational losses” when it comes to major projects to exit from trade and economic isolation.
It was after the actual handover of Nagorno-Karabakh to Moscow in September 2023 that I. Aliyev visited Moscow to discuss the “North–South” project, which is necessary for trade and energy relations with South Asia and the Indian Ocean. It is possible that a similar decision could be taken on Sukhumi, where the political dividend has exhausted its former significance for Moscow, and the financial and material maintenance of Abkhazia itself costs the Russian Federation significant sums. According to Stratfor American analytical center, Moscow spends $300 mln a year in financial aid to Sukhumi, which many Russian analysts consider “lost money”, and it is reasonable to assume that similar sentiments are widespread among the influential elites of the Russian Federation. Therefore, the chances of resumption of the Georgian–Abkhazian railway operation at the expense of the interests of Sukhumi are quite high in the emerging realities, when Tbilisi is trying to get rid of the excessive care of the West, and the Russian Federation needs a fast and cost-effective railway route to Turkey.
Given the need for reliability and control of the entire logistics system of the South Caucasus, it can be assumed that Beijing could and probably will play the role of the trade operator. This is the case, which would have given the PRC the opportunity to solve several tasks at once. First, to establish full control over the “Middle Way” route, ending in the Circum-Pontic region. Second, to become a beneficiary of the “North–South” project, with the possibility of financial and political influence on the trade routes connecting Russia with Turkey and Russia with Iran. Third, to eliminate the threat of Turkic consolidation, geography of which is almost identical to that of the regions covered by the Chinese-sponsored “Middle Way” of transcontinental trade. And, in summary, the fourth is to carry out political and economic expansion into the interior of the continent, with the aim of outdoing the West in its actions to fill the vacuum, The Russian Federation is a part of the post-Soviet world, which was formed in the post-Soviet space after the collapse of the USSR and the weakening of the RF.
In the light of what has been said about the South Caucasus, it is of particular interest whether Armenia fits into the logistical, communication and political architecture that Beijing is trying to build in the region. And, accordingly, is there a chance that a similar declaration of partnership can be developed and signed between the PRC and the RA?
Full-fledged political and diplomatic relations between the two countries have been established since 1992-93 with the opening of reciprocal embassies in Yerevan and Beijing. Since the 2000s, this relationship has been complemented by an economic component, which coincided with the beginning of the financial and industrial boom in the PRC and the emergence of the RA from the post-war socio-economic crisis. For 15-20 years the countries have been exchanging visits of high officials: Armenia – at the level of presidents and prime ministers, China – members of the State Council (the highest party-political body in the PRC) and ministers of the Foreign Affairs. As a result of the numerous meetings and discussions between the countries, more than 70 agreements, memoranda and communiqués were signed, covering political, trade, visa issues, scientific and educational programs, cultural exchanges, tourism, etc. However, the only document related to Chinese global transcontinental trade projects was signed in 25.03.2015 “Memorandum on Promotion of Cooperation in the Building of the Silk Road Economic Belt within the Framework of the Armenian–Chinese Joint Commission on Trade and Economic Cooperation between the Ministry of Economy of the Republic of Armenia and the Ministry of Commerce of the People’s Republic of China”. The signing of the memorandum took place at a time when Beijing had already officially announced its intention to create a transcontinental consortium of countries interested in participating in the mega-project “New Silk Road”, later renamed “One Belt, One Road”. At that time, the PRC was intensively studying the complex capabilities of all countries and was also working with potential geographical beneficiaries of the announced program to develop options for trade routes and infrastructure.
Judging by the information from the media and reports of state agencies in the period from 2015 to 2018, the government of S. Sargsyan had some experience with the Chinese side regarding the Iranian–Japanese–Armenian route, which includes the construction of a highway through Syunik to Yerevan and further to the Georgian border. It was then that the project of the railroad line, which the Armenian side tried to include in the investment programs Beijing initiated since 2014, appeared on the agenda of the “Silk Road Foundation”. Tehran, for its part, has also actively promoted plans to include the Armenian–Iranian route in the Chinese megaproject and expressed readiness to participate in the financing and construction of the Meghri–Kapan–Sisian broadband highway, which would cross the mountainous forest area of the former “Goris Hook”.
These projects passed discussion and evaluation procedures in Beijing. The prospects of their final approval were not clear, but the Chinese side showed every sign of willingness to continue working towards optimal solutions. An indirect confirmation of the successful negotiations was the process of large-scale construction of the new 4-hectare Embassy of the People’s Republic of China in Armenia, the foundation stone of which was laid by Chinese Ambassador to Armenia Tien Erlong, who said that this event “reflects the new quality” of Armenian-Chinese relations.
It should be noted that the change of power in Armenia was received with restraint in Beijing, and the Chinese side was primarily interested in the attitude of the new Armenian leadership towards the Armenian-Iranian route project and the ideas already developed within its framework. Perhaps it was to clarify these details that the visit of the Chinese State Councilor and Foreign Minister Wang Yi to Yerevan in May 2019 and the visit of Prime Minister N. Pashinyan to Beijing in the same month were linked. According to the Armenian side, Yerevan confirmed its intention to continue cooperation with Beijing based on previous agreements, but after 2020 China suddenly cooled down on the “Armenian project”. Obviously, two factors caused this. First, after the 44-day war, Azerbaijan established control over most of the NKR, including the areas bordering Meghri from the east and the Iranian border from the south. Second, Armenian diplomacy has taken a step that Beijing perceives as an unfriendly gesture. The fact is that on August 2020, RA signed a statement on behalf of the International Alliance for Religious Freedom on the coronavirus pandemic and religious minorities. This document, initiated by the administration of D. Trump, according to international experts was mainly directed against the PRC with its “policy of oppression of Uyghur Muslims” and other religious minorities, and caused the expected wave of outrage in China. It is not known whether the incident was a rash move by Yerevan or whether the RA authorities took this step consciously, but somehow the Armenian “demarche” was received very negatively in Beijing. According to Armenian political analysts, it was a “gross mistake” by Yerevan that caused the PRC to cease active cooperation with the RA within the framework of the “One Belt, One Road” program and to noticeably cool down its political-diplomatic plan towards Yerevan. As a matter of fact, after the mutual visits in May 2019, the high-ranking officials have not contact on public platforms. Meanwhile, after the events of 2020, Beijing has significantly increased its working contacts with Tbilisi and Baku within the framework of the “One Belt, One Road” project, resulting in a joint declarations on strategic cooperation.
02.07.2024, a little more than a week after the signing of the Azerbaijan–China Declaration, the Ambassador Extraordinary and Plenipotentiary of the People’s Republic of China in the RA Fan Yong in his farewell speech on the conclusion of his duties in Yerevan did not mention the preparation or, at least, the possibility of the return of the Armenian–Chinese relations to the above-mentioned level. The Ambassador listed several achievements of the sides in the field of economic cooperation and emphasized that in 2023 trade between the two countries will exceed the figure of $2 bln. However, his words about the fact that the PRC “participates in the construction of the strategic route “North–South” connecting the northern and southern parts of Armenia” proved to be the most symptomatic. Judging by the formulation of the Chinese diplomat, Beijing considers the Armenian North-South Highway as a project of exclusively domestic importance and, at least for the moment, not interesting in terms of its integration into the “One Belt, One Road” program.
Therefore, based on the analysis of the recent years’ developments and the visible lull in the political-economic relations between Armenia and China, it can be concluded that at the present time the PRC is not preparing a corresponding document with Yerevan, which would confirm Beijing’s interest in the Armenian–Iranian route and, in general, in N. Pashinyan’s idea of the “Crossroads of peace”. Perhaps, considering the tense situation around and within Iran, Beijing is trying to separate the “Middle Way” from the borders of the Islamic Republic and the zone of unresolved Armenian–Azerbaijani conflict along the Nakhijevan–Syunik–Nagorno-Karabakh line. The very high potential for destabilization on the northern Iranian border could jeopardize Chinese investments in the Armenian–Iranian route. It is also possible that Beijing does not want to facilitate the IRI’s easy exit to Europe through Armenia and Georgia, which in the long run may contribute to the warming of Iran–West relations and break the algorithm of Tehran–Beijing ties that allows the Chinese market to steadily consume significant volumes of Iranian hydrocarbons at affordable prices. Finally, it is possible that Beijing is facing with some pressure from Baku, which does not want the Iranian-Armenian route to be realized, especially at the expense of Chinese investment and control.
In contrast to the Chinese position, the importance of the Armenian Syunik as a transit route is demonstrated by the genuine interest of India and the United States. Moreover, India is studying the possibility of a Syunik transit along the “North–South” axis, while the US is already promoting the idea of an Armenian transit route within the “East–West” axis. From the rhetoric of American diplomacy, which is once again trying to mediate between Yerevan and Baku, it seems that the control over Syunik is becoming an idée fixe for the US. Intensive visits of American diplomats and politicians in Yerevan, statements of the Secretary of State A. Blinken after the meeting of A. Mirzoyan and D. Bayramov on 11.07.2024 in Washington, as well as the trip on the same day of the US Ambassador to Armenia Christina Quinn to Kapan suggests that the USA have a “compromise plan” for the organization of the route through Syunik, which must satisfy both Yerevan and Baku. And, most importantly, deprive Tehran of the legal and political bases to prevent a transit route that is not in the interests of the IRI.
Perhaps it could be a kind of synthesis between the “extraterritorial corridor” that Baku seeks and a “free economic zone” under a nominal sovereignty of Armenia that Yerevan wants to achieve. In this context, the statements of some Turkish politicians about the need to give Syunik a broader status as an “administrative and territorial entity within the RA” look intriguing. It does not seem that this idea is a brainchild of Turkish circles only, and not a product of American political technology centers, because they have already distinguished themselves by developing various programs within the framework of the Armenian–Azerbaijani settlement. However, the point is that regardless of the “hybrid” status of the “Syunik Corridor”, the USA is considered as its operator, if they can persuade the reluctant Baku to forcefully sign a peace treaty with Yerevan.
It is also noteworthy that the US has not shown any negative attitude to India’s accentuated interest in an Armenian–Iranian route to the Black Sea. On the contrary, the strategic “North–South” project, of which New Delhi is the main beneficiary, can fit organically into Washington’s global plans. In this case, the US will be able to “balance” the Chinese logistics architecture in the South Caucasus with its own system, competition with which will significantly level both the economic and political influence of Beijing on the developing region.
The review of the events in the South Caucasus suggests that under difficult conditions for the Russian Federation and given the limited capabilities of Iran and Turkey, the Black Sea–Caspian Sea axis is becoming a competitive arena for extra-regional powers. The United States, China and, to some extent, India show all the signs of a multi-level penetration into the South Caucasus, with a consciously balanced and “compromised” approach. It demonstrates that the 3+3 political platform initiated by Moscow and Ankara is essentially anachronistic and does not reflect the true configuration of forces and processes in the region. And if the US, China and India manage to find the key to coexistence, interaction and even complementarity of trade and logistics projects in the conditions of competition of their global trade projects, it will radically change the current geopolitical organics of the region, which began to form three centuries ago.
(1) The Russian original was posted on our website on 13.07.2024.
