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Russia Seeks Investment, Trade Links on China's New 'Silk Road'

by Daniel Schearf

   MOSCOW --

   Russia's President Vladimir Putin is heading to China Sunday to join
   leaders of 27 other nations at the One Belt, One Road (OBOR) summit in
   Beijing.

   The massive China-led project aims to revive the ancient Silk Road and
   maritime trade routes by expanding investment in infrastructure linking
   Asia, Africa and Europe.

   While China plans to invest tens of billions of dollars in the
   ambitious vision, few details have been made clear on how the project
   will proceed.
   Russia wants investment

   A lack of specifics and long-term prospects for the project has led
   some observers to conclude China's new Silk Road so far is about
   politics and symbolism. But analysts in Moscow say Russia is mainly in
   it for the money.

   "First, Russia's economy desires foreign investments and it hopes to
   get some funds through OBOR," said Petr Topychkanov of the Carnegie
   Moscow Center. "Second, Russia wants to bring new drive to the dying
   Eurasian Economic Union by connecting it with OBOR. Third, Russia wants
   to compensate the vanished economic agenda of the SCO (Shanghai
   Cooperation Organization) with the Chinese-led OBOR. Fourth, Russia
   wants to make European countries more nervous with the prospects of
   Russian-Chinese economic cooperation."

   Banners promoting the Belt and Road Forum for International Cooperation
   are placed between skyscrapers in the central business district in
   Beijing, May 11, 2017.

   China in the last few years has invested more than $300 billion in
   projects in One Belt, One Road countries, and Chinese officials say
   more than 50 agreements will be signed at next week's meetings in
   Beijing.

   Leaders attending the summit include the other two founding members of
   the struggling Russia-led Eurasian Economic Union (EAEU), Belarus and
   Kazakhstan.

   "Russian interest in the OBOR project in general is attracting
   additional Chinese investment into the Russian infrastructure and
   industry sectors," said Vasily Kashin, a senior research fellow at the
   Center for Comprehensive European and International Studies at Moscow's
   Higher School of Economics. "Russia is also trying to achieve a high
   level of coordination between the Chinese OBOR policy and the Russian
   policy concerning the Eurasian Economic Union."

   Russia established the EAEU in 2015 with the aim of integrating
   economies of former Soviet states. However, critics say the Kremlin
   uses the group for geopolitics and influence, and other members have
   shown little interest in deepening economic ties.

   Russia looking east?

   Western sanctions against Russia over its military involvement in
   Ukraine have led some Russian officials and analysts to say Moscow will
   pivot to the east for its political and economic future.

   "China did provide significant loans for the Russian state-owned
   companies currently under the Western sanctions, helping them a lot,"
   Kashin said.

   Russia-China trade is recovering from a 2014-2015 slump and was up 26
   percent in the first quarter of 2017, to nearly $25 billion. China's
   exports to Russia rose 22 percent while China's imports from Russia
   were up 30 percent in the first four months of this year.

   "China is Russia's most important individual trading partner. Its share
   is growing, and it is already a significant source of investment, loans
   and technology. However, it will take China a long time to overtake the
   EU in these roles," Kashin added.

   An attendee at a conference looks up near a portrait of Chinese
   President Xi Jinping with the words "Xi Jinping and One Belt One Road"
   and "One Belt One Road strategy," in Beijing, April 28, 2017. The "Belt
   and Road Forum" opens Sunday.

   There has been no dramatic pivot by Russia away from the West and
   toward the East, but there is a gradual trend for trade in that
   direction.

   "The share of the APEC countries, not just China, but Japan and Korea
   as well, in Russian trade has been growing at the expense of the EU for
   a long time," Kashin said. "The process did speed up after the
   beginning of the Ukrainian crisis, but not dramatically. Turn to the
   East is inevitable since the European market for Russian commodities
   will likely have long-term negative growth, because of EU economic
   stagnation and industrial decline.

   "However, building the necessary infrastructure and negotiating the
   trade deals with the Asian countries will take Russia years," economic
   researcher Kashin added. "The historical dependence on the single
   European market will be overcome, probably at some point in the late
   2020s to early 2030s."

   Developing relationship

   Russia-China relations are developing steadily but are sometimes
   exaggerated by Russian officials for propaganda purposes.

   "The leaders of Russia and China came to a point where they clearly
   realized the possibilities and limits of bilateral relations,"
   Topychkanov said. "Despite comments from some experts about the
   possibility of any kind of union between Russia and China -- let it be
   political, economic, or military -- there is no chance for such a
   union.

   "Even the bilateral trust between both countries isn't limitless," the
   Carnegie associate added. "In short, Russia and China value the
   visibility of friendship between them, but they can't transform it in
   deep-rooted strategic relationships and long-term, mutually beneficial
   economic cooperation."

   China's New Silk Road initiative has attracted more interest as the
   United States under President Donald Trump has looked inward and pulled
   out of global trade deals.

   But Russia does not see OBOR as a future substitute or even competitor
   for trade pacts like the formerly U.S.-led Trans-Pacific Partnership.

   "I doubt, that Russian officials think about OBOR and Russia in the
   context of global trade," Topychkanov said. "For Moscow this remains to
   be the issue of both bilateral cooperation with China and regional
   economic networks."

   Olga Pavlova' contributed to this report.