Summit "Central Asia - EU". Sanctions and activation of old projects
The Eurocup has opened
January ended with another major EU-Central Asia summit, which was held in Brussels. Unlike past events related to the work of the European Union in this area, the current summit was marked by a number of really loud statements.
In particular, the well-known J. Borrell spoke out:
“Brussels needs Central Asian countries in order to make anti-Russian sanctions effective.”
They say that just a few years ago the region was in the wilderness, but now everything is different, and Central Asia has become a true “center”.
Since all this was stated within the framework of an event dedicated to investments in infrastructure projects, in particular in the one called the “middle corridor” or the Trans-Caspian route, the words of J. Borrell sounded very frankly.
However, observers in the Caucasus and Central Asia were more impressed not by the traditional Russophobia of the European official, but by the amounts that were discussed at the summit - 300 billion euros of EU investment. In addition to such significant financial volumes at “sometime in the future,” financing of 10 billion euros was indeed agreed upon in Brussels.
Compared to the first amount, this seems modest, but this is the first such one-time infrastructure package from the EU to the region. The seriousness of the intentions is given by the fact that the next day it was announced that 50 billion euros would be allocated to Ukraine to support the financial system and weapons. That is, the “Euro-box” has opened.
It must be understood that, by and large, the issue for the European Union was not a shortage of funds. All EU countries have reserve funds, and the European Union itself as a confederal state unit. It is much easier for Brussels to print funds. However, in this case, the EU had to take quite serious steps in conditions when Washington is busy in many other areas.
Including going through approvals with Bratislava and Budapest, playing “number one” for the first time in the last few years. Even Britain now finds itself more preoccupied with Palestine issues.
All this means that the “Atlantic team”, despite all the contradictions, frictions, and private game strategies, is quite viable, despite the statements that “everything there will soon fall apart,” “all production will flee from the EU,” farmers will litter Paris and etc. From a political point of view, despite the smells on European streets and strikes, Brussels feels quite confident. Turkey was tied economically over the past year, Sweden and Finland joined NATO, Hungary and Slovakia extracted concessions from themselves and made them themselves.
In this case, could the scenario come true that the EU will begin to implement other projects related to an active position in regional investments?
Yes, if they start printing funds not only for Kyiv, but also for Central Asia. The EU can start while the US is busy elsewhere.
The €300 billion figure has puzzled observers in Central Asia. Of course, in a short time they will understand that the stunning figure was and is not intended for this region specifically, but is the general investment budget of the European Union as part of the infrastructure modernization of “developing countries” as a whole - from Africa to Latin America under the Global Gateway (GG) program. In fact, it was under the “Global Gate” brand that part of the summit was held.
The project should be viewed in conjunction with other infrastructure initiatives such as the Blue Dot Network (BDT), B3W and PGII. All of them, in one way or another, must compete with the Chinese Belt and Road Initiative, with its routes and corridors of the “new silk roads”. The number of Western bloc projects is determined by too wide a circle of initiating participants, whose interests are very difficult to fit into the framework of one project.
So, BDT is an idea of the USA, Japan, Australia, Great Britain and Switzerland. With the support of the OECD, it is more of a set of future regulations and standards for investment appraisal and project lending. In some ways, this is reminiscent in concept of the UNIDO standards, only in a significantly expanded format.
B3W (Bring Back a Better World) is an infrastructure initiative under the banner of the GXNUMX. All the same projects for the construction of roads, bridges, ports, logistics centers, laying communications and communications, energy, for “developing countries”, but with an emphasis on the inclusion of the Baltic countries and Eastern Europe.
PGII (Partnership for Global Infrastructure and Investment) is an initiative of the G7 and Southeast Asian countries. Over the past year, they tried to include India and the countries of the Middle East or the so-called. future "Indo-Abrahamic bloc".
In terms of working with African countries, again, India and the Middle East, as well as developing routes through the Caucasus and the Caspian Sea to Central Asia, the Global Gateway project has already been involved.
We see that at the conceptual level, the scope of all four infrastructure initiatives is truly significant and is in no way inferior in scale to Beijing's ideas.
All these projects, one way or another, would have to fit into the even larger strategies of the Trans-Pacific and Trans-Atlantic Partnerships, which the Obama administration did not bring to its logical conclusion.
Therefore, they were implemented later and separately, funds were allocated very limitedly, standardization and coordination took a long time.
During this time, although China worked alone, China took several steps forward based on clear results in the form of the construction of specific facilities and increased trade flows. Here, again, the issue was not the availability of financial resources, but the management of processes.
China administered them better, the goal setting was stricter. On the other hand, the danger for China was that the establishment of management of such projects by Western competitors could begin to shake the confidence of the Chinese partners, of whom formally there are already 139 countries in its initiative. But these are partners, not founder-initiators, unlike Western projects.
As could be seen from the results of previous investment forums, the Western bloc has developed its own division of labor: the USA - the Middle East, India and Southeast Asia, Brussels - Africa, Transcaucasia and Central Asia, London - Turkey, Transcaucasia, Afghanistan and Pakistan.
It is clear that it was difficult to build in practice not an ideal, but simply a working system, even from the point of view of diplomatic administration. This is too much of a challenge even for the Atlantic fans of “multifactor models.” Nevertheless, the process proceeded in fits and starts.
In response, Central Asia, from mid-2022, chose to unite into its regional foreign policy bloc (Group of Five). Since then, we have been seeing the events “USA – Central Asia”, “EU – Central Asia”, “GCC – Central Asia”, “Russia – Central Asia” taking place one after another.
It’s easier to coordinate interests this way when proposals come from everywhere, which are not always supported financially, but often require political certainty. Kazakhstan and Uzbekistan generally preferred to conclude a Union Treaty at the end of 2022. On the other hand, almost all GXNUMX countries chose to carry out a number of reforms aimed specifically at increasing investment attractiveness. Astana replaced the political system, Tashkent made profound changes to the constitution.
Last year, China was the first to take the initiative in this region, announcing a large-scale investment program for Central Asia at the summit in Xi’an. The European Union performed extremely modestly in the summer, but now it is obvious that it prefers to somehow make up for lost time. And Brussels has certain prerequisites for this.
Buy sanctions compliance
If you look at it in detail, EU investments in the region over 10 years amount to about 105 billion euros - that is, the same 10 billion euros per year, it’s just that they were not previously presented as part of the EU’s foreign policy program, and even specifically directed against Russia.
Outwardly, everything looks like European officials are going to buy compliance with the sanctions regime in the region for similar money. A gesture that is quite consistent with the level of J. Borrell, but not at all with the European investment structures and politicians of Central Asia, who have been fed stories about investments in infrastructure for years from all four directions of geography.
However, everything has its own nuances.
Let's take the region's trade turnover. Trade turnover with China is about $52 billion per year (27%), with the EU - about $48 billion (25%). The direct accumulated investments of China over 15 years are around $65 billion, the European Union – 105 billion euros over 10 years.
However, the region's debt to China among the Central Asian countries reaches 55–60% of GDP. Compared to structures associated with the US and EU, only Kazakhstan has similar indicators. This means that while investing less in direct investment in infrastructure and production, China lent more to mutual trade. Europe, on the contrary, if you don’t take Kazakhstan, where Western finance has been very significant since the 1990s.
That is, by investing less in the long term, Beijing in the region won in terms of profitability in the operational period, including Europe. Just last year in Xi'an, China took concrete steps to double direct investment, even providing the region with free tranches worth $3,7 billion, which is already extremely difficult for China, which has an extremely difficult time writing off debts or doing anything for free. serious step.
Brussels has something to respond to China in terms of financial injections, but, unlike China, its Achilles heel in this direction is several factors.
The first is a weak market by EU standards, which is cut off from the main trade arteries. For China, Central Asia is a natural trading region and an important internal continental route. For the EU, this is more of a kind of “tribute to geopolitics”, where by building qualitatively different trade routes and networks, Turkey will receive the first profit, and only then Europe, and then in volumes that will be percentages of the total.
The second factor is forced competition for some resources. The departure of France and Germany from West Africa, on the one hand, looks like an indisputable victory for Russia and China, and France loses not only uranium or part of the gold, but also receives the threat of losing significant deposits that lie from these countries in the Bank of France.
Paris essentially financed the purchase of resources for pennies, having African financial reserves. However, now it is precisely this position that forces France and Brussels to intensively search for these natural resources near us - in Central Asia, in addition to trying to get satisfaction in the form of sanctions and political squabbles between Moscow and the countries of the region. There is nothing to say about Armenia, here everyone is playing with N. Pashinyan three or four hands.
Again, partners from Washington are constantly trying to pin the implementation of the Trans-Caspian pipeline project from Turkmenistan to Azerbaijan and further through Turkey to Europe on Europe. But not only are these ideas already more than twenty years old, but even in the case of a completely hypothetical implementation, this, firstly, will not provide cheap natural gas for the EU, secondly, it will again give additional income to Turkey, thirdly, for For Turkmenistan, this project, despite all the external benefits, is rather a headache.
All major funds for the development of natural resources come from China; the main and permanent market is China. For Ashgabat, the most rational route would be the implementation of the same old project for the sale of natural gas to Afghanistan, Pakistan and India. But it is he who hangs in the air all the time.
What the European Union can and will do is seriously compete for green energy projects in Central Asia in exchange for resources, and may well also boost maritime transport through the Caspian Sea.
However, what will the main struggle be about if Brussels and Beijing decide to approach Central Asia, what is called “using an integrated method”?
These are not even transport routes, which everyone talks about everywhere, but again, electricity and heat generation together with systemic projects for rational water use.
Anyone who, in addition to roads and trade, invests in the regional hydraulic system, increasing its efficiency, will be able to get more over a long period of time than from the movement of containers and an increase in goods flow. And the deeper and further Afghanistan digs its Kosh-Tepa canal, which can take up to a quarter of the entire Amu Darya drainage, the more serious this issue becomes. This is where players will be able to promote “real geopolitics,” including for or against Moscow.
It is difficult to say who will win this fight, China or the Western bloc. Each side has enough money, but Beijing has better goal-setting. On the other hand, it is the EU (together with international structures) that has saddled itself with the theme of “ecology”, “green energy”, etc., and it has its own strengths in this.
So far, China is more concrete in terms of solutions and benefits, although it is also somewhat late with good proposals. In the long run, due to these factors, Europe will most likely lose to China in the region, but in the near future Brussels may well increase its political weight, which will complicate relations between the region and Russia.
For Russia
Traditionally, it should be said that this is good or bad for Russia.
Firstly, it should be noted that our total direct investments over 20 years also amount to a significant amount - $40 billion, with a trade turnover of $36–37 billion. Obviously, we will not be able to increase our share on a large scale, like Beijing or Brussels, but our 20% of foreign trade is a significant place in the economy and politics of the region.
We, apparently, need to finally decide on one or several market niches in which we will work for a long period, whether it will be a specific industry or several industries.
Modernization and long-term operation of power grids, if political resources allow it, or something else, but it is clear that with such competition and available funds we will not take the region “for ourselves”, we will not build a special economic zone from all others. Here you will have to choose something specific from many directions, and certainly in close coordination with China.
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