BACKGROUND: China has in recent years become a dominant actor in Central Asia in terms of economic investments in infrastructure, railways and pipeline projects. Beijing has methodically enhanced its geo-economic presence in region, gradually excelling its regional competitors, particularly Russia, despite the stark differences in the strategic approaches of these powers in Central Asia.

In September 2013, China’s leader Xi Jinping put forward the grandiose economic project “Silk Road Economic Belt” as a permanent and substantive trade-economic initiative to connect China to Europe via Central Asia. With an initial funding of US$ 40 billion, the project will provide a considerable share of China’s economic investments in Central Asia, laying the ground for involving the South Caucasus in China’s geo-economic plan. Geographically, trade routes through the South Caucasus could connect Central Asia to Europe, providing an alternative to unpredictable Russia and avoiding the currently unstable Middle East. Beijing’s interest in the South Caucasus should be seen primarily in the context of its ability to connect with Europe.

Contemporary relations between Armenia and China were established in a common communiqué signed in 1996, opening for the first mutual declaration between Armenia and China on economic, political and defense cooperation in September 2004. Over a decade later, and as Armenia faces an increasingly tense international situation, China’s Embassy diligently initiated the visit of Armenia’s president to Beijing. Via its new declaration with Armenia, Beijing seeks to define its functions, political disposition and political-economic agenda in the South Caucasus.

These recent Chinese efforts represent an attempt to engage Armenia and the South Caucasus in general in the “Silk Road Economic Belt,” in order to employ existing or potential transit capacities. Chinese investment in the South Caucasus on par with Central Asia could transform region into a trade corridor, integrating it both with the EU and with Asia.

IMPLICATIONS: In its approaches to Central Asia, China has not prioritized the geopolitical aspect of its policy in the region, instead pursuing largely geo-economic objectives. In comparison with Central Asia, the South Caucasus is a small region, consisting of three internationally recognized states with different political orientations and frozen conflicts, affected by the competing political activities and interests of the EU, Russia, Iran, Turkey and the U.S. The realism in Beijing’s economic objectives in the South Caucasus therefore hinges on its willingness to become engaged in the regional geopolitical game. The South Caucasus with its geographical and geopolitical specifics is far beyond China’s traditional spheres of influence, which Beijing cannot afford to ignore in its calculations.

However, Beijing’s recent activity in the region and the political accents of its declaration with Armenia makes clear that Beijing grasps the region’s geopolitical realities and looks to slowly but persuasively boost its political influence and economic presence.

From Armenia’s point of view, a boosted relationship with China is a tangible chance to restore the foreign policy balance that was disrupted as a consequence of Russia’s policy of coercion against Yerevan since September 2013. In addition, Armenia’s deplorable economic situation and the growing public discontent towards its political elite favored the decision to join the Eurasian Union, calling into question country’s sovereignty and development.

After this decision, Armenia’s opportunities are limited, whereas it only three years ago had a substantive option to integrate closer with Europe through an Association Agreement with the EU. The developing ties between Armenia and China are likely favorable to the EU as well, as they contribute to diminishing Russia’s predominant influence over Armenia’s politics and economy, which could in turn stimulate more independent negotiations with the EU.

China is first and foremost interested in expanding its economic and geopolitical interests to the South Caucasus, viewing Armenia as a convenient target for the first political and economic approach. Suffering from economic and political decline, Armenia will accept any even minor economic or political initiative that will reduce its almost complete dependence from Russia and motivate its integration with the EU – China’s main partner in the Silk Road project.

Armenia’s strategic and geographical properties also speak to a complementary Chinese interest. The partnership with Armenia appears to be important in terms of maintaining a geopolitical balance in the region. Regarding the energy sector, Beijing during the meeting on March 24-26 demonstrated a conspicuous interest in Armenia’s hydro-electric and nuclear capacities, particularly highlighting the importance of detailed discussion on the construction of new nuclear power plant. This initiative, which will likely be elaborated soon, has the potential to substantively reduce Armenia’s dependence on Russia for its energy supply.

Beijing plausibly realizes that Russia will react negatively to any international initiative with Armenia, as Russia seeks to strategically isolate the South Caucasus as its geopolitical prerogative. Therefore, any independent international political activity by Armenia threatens to reduce Russia’s influence in region, especially if such activities include geopolitical and geo-economic initiatives that imply integration with partners other than Russia. To this end, China’s extension of its Silk Road project to the South Caucasus can be viewed favorably by the EU and to some extent by Turkey and Iran.
Simultaneously, Moscow should not underestimate the threat that Beijing’s gradual integration of Armenia into its economic sphere poses to Russian interests. A case in point is Russia’s failure in Central Asia, where Moscow no longer opposes Beijing’s economic rapprochements with its Central Asian partners and allies. Also in the South Caucasus, Russia over time risks becoming excluded by competing economic and political projects. 

CONCLUSIONS: China’s declaration with Armenia is a first step in its approach to the South Caucasus. The prospect for a nuclear deal with Iran has opened alternative avenues for China to implement its “Silk Road Economic Belt” across the Central Asia, through Iran and the South Caucasus towards Europe, promoted by Xi Jinping. A favorable geopolitical outcome in Armenia will boost China’s motivation for regional projects with Azerbaijan and Georgia, cultivating new realities in the South Caucasus.

As for Armenia, the new prospects raise the question of whether the country’s leadership may succeed in shaping at least an economic equilibrium between Russia and China, bearing in mind its failure to establish a European foreign policy dimension in the aftermath of its decision to join the Eurasian Union.

AUTHOR’S BIO: Eduard Abrahamyan holds a PhD from Yerevan State University. He is currently based at the University of Westminster, and is a fellow of Policy Forum Armenia, Washington DC.

Image Attribution: Jakob Breivik Grimstveit and Wikimedia Commons