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.
Contrary to previous pledges and contracts worth billions of dollars, Beijing did not conclude new deals with Russian entities under the Belt and Road program in the first half of 2022, according to new data.
The findings were part of a report by the Center for Green Finance and Development at Fudan University in Shanghai reviewed by the Financial Times. The report said that as investments in Russia slowed, China deepened its involvement in the Middle East.
Christoph Nedobel Wang, director of the Center for Green Finance and Development, said the threat of Western-led sanctions could have deterred China from investing in Russia.
But he said the fall could be “only temporary” and that there was “certainly a 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 main beneficiaries of Chinese development spending through the Belt and Road programme, a hallmark of President Xi Jinping’s foreign policy, for years.
Official lending commitments from China to Russia from 2000 to 2017, 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, China’s two largest policy banks.
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, A few days ago Russian forces were ordered to invade.
Since the February invasion, Beijing has criticized international sanctions against Russia, although many of its companies have been cautious not breach 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 $5.5 billion in new deals in Saudi Arabia in the first half of the year – more than any other country – as overseas Chinese investment broadly stabilized. In 2021, Iraq was The biggest beneficiary of the BRI . initiative With new 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 to “not turn away and leave a void that will be filled by China, Russia or Iran”.
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 with increasing scrutiny of how project loans are exacerbating financial pressures on weak governments. In the latest example used 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 indicates that the focus is increasing sharply 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. Africa and Latin America.
“The Belt and Road Initiative is still very relevant,” said Nedobile Wang.