China’s investment in Russia’s new Belt and Road Initiative has fallen to zero for the first time, signaling Beijing’s reluctance to impose sanctions after the war in Ukraine.
Unlike past multibillion-dollar commitments and contracts, Beijing did not enter into new deals with Russian entities under the One Belt, One Road program in the first half of 2022, according to new data.
The findings were part of a report by Fudan University’s Center for Green Finance and Development in Shanghai, which was reviewed by the Financial Times. The report says that by slowing down investment in Russia, China has deepened its engagement with the Middle East.
Christoph Nedopil Wang, director of the Center for Green Finance and Development, said the threat of Western sanctions could deter China from investing in Russia.
But he said the fall could be “only temporary” and that there is “definitely strong interaction” between Russia and China. He added that despite the war, China’s purchases of Russian energy carriers have increased.
Russia has been among the main beneficiaries of Chinese development spending for many years under the Belt and Road Initiative, a hallmark of President Xi Jinping’s foreign policy.
According to the international research laboratory AidData at the College of William and Mary in Virginia, China’s official loan obligations to Russia from 2000 to 2017 amounted to $125.4 billion. This includes $58 billion from the China Development Bank and $15 billion from the China Exim Bank, China’s two major political banks.
China is still dependent on supplies from Russia for about 15% of oil and 8% of gas. New energy agreements expanding these arrangements were concluded in early February. days before Russian troops were ordered to invade.
Since the February invasion, Beijing has been critical of international sanctions against Russia, though many of its companies are cautious. don’t break them.
Data from Fudan University 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 states through major energy and construction deals.
Beijing struck $5.5 billion worth of new deals in Saudi Arabia in the first half of the year – more than any other country – as Chinese foreign investment broadly ground to a halt. In 2021 Iraq was largest beneficiary of BRI with $10.5 billion in new construction deals.
“It’s important and it shows. . . focus on resource deals,” Nedopil Wang said.
The strengthening of China’s positions in the Middle East occurred after the US officially completed its combat mission in Iraq and left Afghanistan. US President Joe Biden visited Riyadh this month, pledging “not to go away and leave a vacuum that will be filled by China, Russia or Iran.”
The Fudan University report reflects the changing role and dwindling of BRI, once touted by Beijing as the “project of the century.”
In the first half of 2022, total Chinese investment and contractual cooperation in the 147 BRI countries was $28.4 billion, up from $29.6 billion in the same period a year ago.
The long-term decline in participation in the BRI comes as more attention is paid to how project loans exacerbate financial pressure on vulnerable governments. In the most recent example used by critics, Sri Lanka, a BRI beneficiary, defaulted on its sovereign debt in May.
While researchers do not expect China’s participation in the BRI to return to past peaks, evidence suggests that the focus is on deals to secure access to strategic resources, including minerals used in the cleantech supply chain and oil and gas Middle East. Africa and Latin America.
“The Belt and Road Initiative remains very relevant,” Nedopil Wang said.