Now in its ninth year, the ambitious Belt and Road Initiative (BRI) may be on the verge of collapse.
The Chinese Communist Party (CCP) first introduced the BRI as a way to globalize China via the creation of innovative trade and infrastructure networks that would connect it to the rest of the world.
The BRI was inaugurated in 2013, and aimed to “facilitate trade and promote connectivity and cooperation among countries in Eurasia and some African countries.” The initiative also planned to develop two new trade routes connecting Asia to Europe.
Now, some are saying the project may be on its deathbed as financial and logistical challenges brought about by the war in Ukraine, rising geopolitical tensions, and sweeping sanctions imposed on Russia — a key trade partner for China — are threatening to completely derail it.
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And while the BRI has had a stranglehold on the rest of the world for the better part of a decade, the project is now facing a mountain of challenges as the invasion of Ukraine has forced it to restructure vital cargo routes entering Europe.
Since the invasion began in early February, China has been forced to reroute a key overland pass that originally went through Moscow via slower land routes across Belarus, Poland and other countries in Eastern Europe.
According to a report by China-Lusophone Brief, Russia was the top destination for BRI developments, in both number and value terms, with 122 projects valued at a whopping $287 billion. But now, with Russia effectively cut off from the global banking system, rising labor costs along with other logistical challenges have resulted in catastrophic losses for the BRI’s European sector.
Another roadblock facing the BRI is China’s strong business ties with Ukraine. Considering it one its “gateways to Europe,” China has been forced to wait much longer on its shipments to enter Europe via Ukraine. To make matters worse, most trains returning to China are often not carrying any goods back, resulting in massive economic losses for all parties involved.
China became Ukraine’s biggest trading partner in 2019, with overall trade totalling US$18.98 billion last year, according to data from the State Statistics Service of Ukraine.
Geopolitical tensions tied to the BRI
Many of the challenges facing the BRI also predate the invasion of Ukraine — with billions of dollars tied to Russian energy deals being another key factor.
And despite increasing pressure from the U.S. and its allies demanding that Beijing take a stand on the Kremlin’s war, China — has not condemned Moscow, instead criticizing NATO for inflaming tensions.
Some observers noted that the communist authorities may fear the extension of Western sanctions to cover China, and find themselves in a complicated position where they have to remain “neutral” in the public eye, yet have billions of dollars tied to Russian energy deals as well as its business with Ukraine.
“China is in a lose-lose situation with respect to Ukraine,” said Elizabeth Wishnick, a senior research scientist at CNA, a U.S.-based non-profit research and analysis organization. “If a Russian puppet state [in Ukraine] results from this conflict, Chinese companies will face sanctions and there will be self-imposed limits to business activity and intergovernmental ties, as in Crimea.”
Wishnick added that “if Ukraine retains its autonomy and sovereignty, China will face reputational costs due to the widespread perception in the US and Europe that the Chinese government has been an enabler, if not a supporter, of Russian aggression.”
China’s BRI challenges are not only linked to Europe. Protests erupting around the world are also connected to the Chinese project. Recently, Sri Lanka has been embroiled in a series of violent protests over the government’s mishandling of the economy, resulting in shortages of essentials and long power cuts throughout the country.
In the past, joining the BRI also came with high prospects of funding — often for large infrastructure projects. Now, however, banks are demanding feasibility studies amid rising debt and rampant corruption in Africa and some countries in the Asia-Pacific region.
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Experts also noted that Sri Lanka’s economic problems are tied to its dependency on trade with Russia, Ukraine and China. According to World Bank data, “Sri Lanka has $35 billion in total debt, of which $6 billion is owed to China for loans to fund BRI projects managed by Chinese companies.”
Although Sri Lankan President Gotabaya Rajapaksa asked China for an extension on its loans earlier this year, and asked for a restructuring of its debt, it was still ordered to repay $6.9 billion of their total foreign debt. The economically challenged country has since agreed to lease its Hambantota port to China for 198 years, raising concerns that the port could be used by the CCP to house a Chinese naval base.
China gains favors via the BRI
The CCP has also utilized the BRI to gain a strategic foothold across the world. After China made a big investment into Greece’s real estate sector, the Greek government blocked a EU statement criticizing China’s human rights abuses.
According to U.S. Secretary of Defense Mark Esper, “through its Belt and Road Initiative, the People’s Republic of China (PRC) has been leveraging its overseas investments to force other nations into suboptimal security decisions.”
In addition, all three of China’s central Asian gas pipelines run through Kazakhstan. According to Radio Free Europe, “In Kazakhstan, China has invested tens of billions of dollars, primarily into its lucrative energy sector, and used the country as a launching pad for its Belt and Road initiative.”