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Asia Insight

Belarus buddies up with China as an alternative to Russia

Ukraine conflict spawns a 'peculiar geopolitical competition'

DIMITRI SIMES, Contributing writer | Russia, Caucasus

MOSCOW -- When Belarus secured a $500 million loan from the China Development Bank late last month, it revealed the news with a defiant message for Moscow.

Russia had dragged its feet on a promised $600 million loan to Minsk. So as Belarusian Finance Minister Maksim Yermalovich announced the deal with the Chinese, he made it clear his country no longer needed or wanted the Kremlin's money.

"We do not consider the loan of the government of the Russian Federation as a source of funding and, in fact, are not negotiating on this loan," he said. "We have not provided any requests to the Russian side. We do not expect to receive the Russian loan."

Russia has shrugged this off, at least in public. But some analysts warn that rapidly growing economic and security ties between Belarus and China could become a new source of regional friction.

"After the start of the Russo-Ukrainian conflict, China undoubtedly became not just an important economic partner for Belarus, but also a military and political one," said Arseny Sivitski, director of the Center for Strategic and Foreign Policy Studies in Minsk.

Both sides have their reasons.

The outbreak of the Ukraine crisis five years ago unnerved Belarus and spurred the government to reduce its dependence on Russia. China appeared to be a pragmatic alternative to the European Union -- one that would not insist on, say, a commitment to human rights.

Beijing, meanwhile, wanted a new route around Ukraine to Europe for its Belt and Road Initiative.

Yury Shevtsov, director of the Center for European Integration, echoed Sivitski's view that Ukraine was a game changer and suggested Belarus is using ties with China to gain leverage in difficult negotiations with its giant neighbor.

"The significance of Belarus for China has grown since the start of the conflict in Ukraine, so Belarus expects more support from China in all matters, including in economic quarrels with Russia," Shevtsov said.

The shift in trade is clear. Turnover between Belarus and China rose by 17.1% in 2018, reaching $3.5 billion. Only Russia and Ukraine did more business with Belarus.

Beijing is also stepping up investment, as exemplified by the new $500 million loan.

Back in April, when Belarusian President Alexander Lukashenko visited China, the countries sealed two other major loan deals: The Chinese Development Bank provided 100 million euros ($110.9 million) to Belarusbank, while the Export-Import Bank of China agreed to supply 65.7 million euros to Belarusian Railway.

The most ambitious Belarusian-Chinese project by far, though, is the Great Stone Industrial Park.

Chinese President Xi Jinping once called it the "pearl" of the Belt and Road -- a 112-sq.-kilometer complex on the outskirts of Minsk that can accommodate 200,000 workers. Not only is Great Stone the biggest foreign investment project in Belarus, it is China's largest overseas economic project.

Belarus seeks to bring foreign investors to the park by offering tax breaks and access to the 183 million customers in the Russian-led Eurasian Economic Union. China, for its part, hopes to turn the park into a key logistics hub for trade with the EU.

So far, Great Stone has attracted $1 billion in investment and 56 foreign companies, including Chinese technology heavyweights like Huawei and ZTE.

"Belarus is located in central Europe, which can help bring our products to the large European market," Du Xiaofeng, vice president of contractor Chengdu Xinzhu Road and Bridge Machinery, was quoted as saying by China Daily.

Chinese President Xi Jinping and Belarusian President Alexander Lukashenko meet at the Second Belt and Road Forum in Beijing in April.   © Reuters

Before 2014, Beijing had planned on making Ukraine its economic bridge to the EU. Chinese companies explored multibillion-dollar investments there, including a $10 billion deep-water port in Crimea.

But after Russia annexed Crimea and conflict broke out in Eastern Ukraine, China was forced to hedge, although it still has some Ukrainian port and expressway projects in the works.

"China shifted its attention from Ukraine to Belarus as a more stable and predictable government, with relatively low military and political risks," Sivitski said. "[Belarus] has a favorable location from a geographic and logistical point of view for China. It is not far away from the sea ports and there are numerous European land transits going through Belarus."

In 2015, Xi Jinping became the first Chinese leader to set foot in Belarus in over a decade. During that trip, Xi and Lukashenko inked a package of deals valued at $15.7 billion.

Xi has called the Chinese-backed Great Stone Industrial Park in Belarus the "pearl" of the Belt and Road Initiative.   © Reuters

The blossoming relationship extends to military cooperation, including joint development of weapons.

After watching the Ukraine crisis unfold, Belarus felt threatened by Russia's military exercises on its border and by Moscow's demands to open a military base on its soil. Minsk also felt snubbed by Russia's refusal to sell its Iskander missile system at a discount.

Once again, Belarus turned to China. Shevtsov told the Nikkei Asian Review that Beijing played a major role in helping the country develop its own missile system -- the Polonez. Initially, upon its introduction in 2015, the system was even fitted with Chinese A-200 rockets.

Lukashenko, when he met Chinese Defense Minister Wei Fenghe in 2018, said, "China has played a decisive role in strengthening Belarus' defense capacity."

As yet, Moscow has shown little apprehension about Belarus and China's burgeoning partnership.

When asked about the $500 million loan, Kremlin spokesperson Dmitry Peskov said it was not Russia's concern. "We can't say anything about lending from the Chinese side," he said. "This is the sovereign right of our Belarusian comrades."

Russia does not regard China's growing economic influence in Belarus -- and the rest of the former Soviet Union -- as inherently problematic, according to Alexander Lukin, a China expert at the National Research University Higher School of Economics in Moscow. He told Nikkei that unlike the West, China is not trying to pull Russia's partners in the EEU into a rival economic bloc.

"China's economic influence does not presuppose that these countries will join some system of obligations, like a free-trade zone," Lukin said. "On the contrary, China is negotiating with the EEU, so there are no contradictions here."

Moscow certainly prefers having China operate in its backyard than the U.S. "The Russian government views China's influence as the influence of a friendly government, and therefore more positive or acceptable than influence by the United States," Lukin said.

"While it would, of course, be better if Russia's influence also grew, if pushed to choose between China and the United States, then China is the better option."

Sivitski, however, sees potential for tension.

He argued that Belarus now has an incentive to strengthen ties with the EU to bolster its standing in China's Belt and Road. This could spark concerns in Moscow that Minsk is pivoting away from the EEU.

"For China, the primary goal is to enter the European market, and for this reason, it pushes countries located between it and the EU to deepen cooperation with Brussels on the level of institutional ties," he said.

"If we analyze China's activities over the past few years, we see that it has the most success cooperating with countries that have either already signed an agreement on association and free trade with the EU, or who might become members of the EU in the future."

Sivitski noted that while Russia strongly opposed Ukraine signing the EU association agreement in 2013, China urged Kiev to do so.

That could foreshadow a "peculiar geopolitical competition" between Russia and China in the post-Soviet space, he suggested -- a competition in which Beijing encourages partners like Belarus to look west.

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