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Russia gives way to China in BRICS and SCO

Russia gives way to China in BRICS and SCO

This month saw a super summit of two organisations that are significant for both Russia and China. The 7th BRICS summit and 15th Shanghai Cooperation Organisation (SCO) summit, both held in Ufa, Russia, included the typical member-state declarations confirming cooperation on major issues such as counter-terrorism, ensuring stability and enhancing global economic development.

7th BRICS Summit Leaders Meeting, Ufa, Russia, 9 July 2015.

There were also strong indications, however, that these multilateral organisations are fast becoming platforms for China to promote its own projects, namely the Silk Road Economic Belt. Announced by President Xi Jinping at Nazarbaev University in 2013, the Silk Road is a key foreign policy vision for Beijing aimed at enhancing global trade, connectivity, financial integration and cultural understanding.

Although so far the project seems more of an umbrella term for large Chinese-funded energy and infrastructure projects in Central and South Asia, it has become a centrepiece of China's bilateral and multilateral relations and discussions. The growing references within the SCO on how it can participate in, and facilitate, the development of China's Silk Road Economic Belt initiative are subtly eroding Russia's position.

The biggest achievements of the BRICS summit were the ratification of the BRICS New Development Bank (NDB) and the US$100 billion reserve currency pool known as the Contingent Reserves Arrangement (CRA). China will be the largest donor to the CRA, providing US$41 billion with Russia giving US$18 billion, reflecting China's economic pre-eminence in the organisation. The creation of these two institutions was in fact officially announced at the 2014 summit in Brazil, but they came into force at Ufa.

The NDB, headquartered in Shanghai, will fund infrastructure and sustainable development projects in both BRICS and non-BRICS emerging markets. The Chinese Government has specifically identified the NDB as an institution that will facilitate the Silk Road's goal of financial integration. [fold]

Until recently, Moscow has been relatively quiet in its assessment of China's Silk Road Economic Belt proposal, in part because it was unclear what it actually means for Russia. But in May, Russia explicitly acknowledged the value of China's project, with Xi Jinping and Putin signing a joint declaration on integrating the Silk Road Economic Belt with the Eurasian Economic Union (EEU; a Kazakh-initiated but Russian-led economic integration project with members including Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan). On the sidelines of the SCO summit, Xi and Putin discussed 'concrete projects' for such integration. Gui Congyou, director of the Chinese Foreign Ministry's European-Central Asian Affairs Department, noted that both sides were willing to see the SCO as a platform for such integration. 

Russia is acutely aware that it cannot, and will not try to, compete with China's growing global economic influence, even if this extends into Russia's traditional sphere of influence in Central Asia. However, it's clear that China's dominance in both its bilateral relationship with Russia and within the multilateral organisations it has traditionally co-led with Moscow is increasing. As such, it's difficult to see how the Silk Road Economic Belt and the EEU could fully integrate, particularly given the much broader remit of the former. Instead, at least on a symbolic level, it's more likely that the EEU project will be subsumed by the wider Chinese project.

Of course, Russia and the EEU could benefit from greater investment under the auspices of the Silk Road Economic Belt. The Russian-led economic project has recently suffered from a variety of tensions, including a Russian economic down-turn, trade spats between members and at least the short-term loss of Ukraine. It could use a boost from China. China would certainly benefit from wider access to the single EEU market. Connectivity, a Silk Road priority, could certainly improve, as already highlighted by China's agreement to invest US$5.8 billion into the Kazan-Moscow railway, and to extend it to link Kazakhstan and China.

However, such cooperation will likely be on China's terms, and will be tagged more to the success of the overarching Silk Road Economic Belt project. As Alexander Gabuev has pointed out, China will invest 'only if it sees benefits'. 

China's Silk Road Economic Belt priorities align with and complement those of the mulitilateral organisations that met in Ufa. This helps protect Beijing against any accusations of Chinese dominance within the groups. However, the increasing discussion of the Chinese project in both summits indicates that these organisations could subtly become instruments of Beijing's foreign policy. The wording of the BRICS summit declaration directly echoed the goals outlined for the Silk Road Economic Belt, mentioning the need to strengthen connectivity, unimpeded trade and people-to-people connections. This demonstrates the prioritisation of Chinese foreign policy through its multilateral organisations. Thus, the hierarchy within BRICS and SCO is shifting in favour of Chinese goals. 

Russia appears to have fully accepted this. Although it continues to support the SCO's security mandate, in the lead-up to the summit Moscow has been willing to endorse a stronger economic mandate for the organisation. This is something Russia has historically resisted, as reflected in its previous opposition to the SCO Development Bank. To reap the benefits of closer relations with China, and in light of its shrinking economic options with the West, Russia appears willing to accept some loss of status in favour of China.

Photo courtesy of Flickr user GovernmentZA.

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