China’s spending on Russia’s Belt and Road drops to zero
Investments from China’s new Belt and Road Initiative in Russia have fallen to zero for the first time, indicating Beijing’s reluctance to impose sanctions in the wake of the Ukraine war.
Beijing did not make any deals with Russian entities under the Belt and Road Initiative program in the first half of 2022, according to a report by the Center for Green Finance and Development at Fudan University in Shanghai reviewed by the Financial Times.
Christoph Nedobel Wang, director of the center, said the threat of Western-led sanctions could have deterred China from investing in Russia. While its investment in Russia has slowed, China has deepened its involvement in the Middle East.
Nidopil Wang said the fall may be “only temporary” and that there was a “certainly strong connection between Russia and China”. He added that China’s purchases of Russian energy exports increased despite the war.
Russia has been among the biggest beneficiaries of China’s development spending through the Belt and Road Initiative, President Xi Jinping’s signature foreign policy and considered the world’s largest development program.
Since its establishment in 2013, China’s cumulative participation in the Belt and Road Initiative has reached $932 billion, including $561 billion in construction contracts and $371 billion in investments, according to the report. Belt and Road projects span sectors from ports to railways, data centers to mines.
The lack of Russian participation in 2022 was the first six-month period with no deals between China and Russia for the Belt and Road Initiative. Russia and China signed deals worth about $2 billion in 2021, researchers said.
China’s official lending commitments to Russia from 2000 to 2017 — which includes Belt and Road Initiative spending — totaled $125.4 billion, according to AidData, an international research laboratory at the College of William and Mary in Virginia. This includes $58 billion from the China Development Bank and $15 billion from China Eximbank, the country’s largest policy bank.
China still depends on Russian supplies for about 15 percent of its oil and 8 percent of its gas. New energy deals to expand these arrangements were concluded in early February, days before Russian forces were ordered to invade Ukraine.
Since the February invasion, Beijing has criticized international sanctions against Russia, although many of its companies are careful not to violate them.
Fudan University data showed that Saudi Arabia has now become one of the biggest beneficiaries of the Belt and Road Initiative as China strengthens its ties with Middle Eastern countries through massive deals in energy and construction.
Beijing signed deals worth $5.5 billion in Saudi Arabia in the first half of the year – more than any other country – as overseas Chinese investment has stabilized on a large scale. In 2021, Iraq was the largest beneficiary of the Belt and Road Initiative with construction deals worth $10.5 billion.
“It’s important and it shows… Focus on resource deals,” said Nidopil Wang.
The strengthening of China’s position in the Middle East comes after the United States officially ended its combat mission in Iraq and withdrew from Afghanistan. US President Joe Biden traveled to Riyadh this month, promising “not to withdraw and to leave a void that China, Russia or Iran would fill.”
The Fudan University report reflected the changing role and smaller footprint of the Belt and Road Initiative, which Beijing once described as the “project of the century.”
In the first half of 2022, there was a total of $28.4 billion in Chinese investment and contract cooperation across 147 countries in the Belt and Road Initiative, down from $29.6 billion in the same period last year.
The long-term decline in Belt and Road engagement comes in the wake of increased scrutiny of how project loans exacerbate financial pressures on weak governments. In the most recent example cited by critics, Sri Lanka, a beneficiary of the Belt and Road Initiative, defaulted on its sovereign debt in May.
While researchers do not expect China’s participation in the Belt and Road Initiative to return to previous peaks, the data indicated that the focus has been sharper on deals to secure access to strategic resources, including minerals used in the clean technology supply chain as well as oil and gas across the Middle East. East, Africa and Latin America.
“The Belt and Road Initiative is still very relevant,” said Nedobile Wang.