6 May 2022, NIICE Commentary 7911
Neeraj Singh Manhas

Originally called ‘One Belt One Road’, China’s Belt and Road Initiative (BRI), designed to boost China’s image and influence with at least 146 countries to date, is faltering and the strategy may be doomed in the aftermath of Russia-Ukraine war. The barriers and delays caused by sanctions against Russia for the invasion of Ukraine have sped up the demise of China’s Belt and Road Initiative’s global strategy.

The BRI is a global infrastructure development initiative aimed at China and emerging economies that trade with or border China. It is an attempt to reclaim the ancient Silk Road and increase China’s power. The BRI is the world’s most audacious economic development and infrastructure project. However, critics argue that the BRI projects pose risks to participating countries including debt traps.

Prior to the sanctions, China exploited Russia as a handy transit location for BRI equipment and supplies being shipped into Europe. China transported its freight over the China-Europe railway to St. Petersburg, Russia, and then across the Baltic Sea to Central Europe. China was obliged to reroute its freight around Russia and into Europe via slower land routes through Belarus, Poland, and other nations because of the sanctions.

China’s BRI strategy was introduced for the first time in 2013 by Chinese President Xi Jinping. The strategy is divided into two components: on land, via the “Silk Road Economic Belt” that connects Central Asia, Central and Eastern Europe, and Western Europe; and on water, via the ‘Maritime Silk Road’ that connects Southeast Asia to South Asia, the Middle East, Africa, and Europe via the South China Sea and the Indian Ocean.

War-torn Ukraine, located at the Eurasian continent’s crossroads, serves as a vital gateway to Europe from Asia and is a vital source of energy, food, and military technology for China. Other nations along the BRI’s delivery route, such as Belarus, Poland, and Romania, have also been impacted by the Russian-Ukrainian conflict. Belarus, for example, has faced a slew of collateral sanctions because of its decision to align with Russia.

A Chinese media outlet on March 31, 2022 described how the sanctions against Russia and Belarus were forcing trains to route around these countries including Ukraine. As a result, shipments into Europe are being delayed while trains returning to China are often empty. It is unknown how long this disruption will last.

China’s participating BRI companies have noted that cargo and transportation delays are not the only problems they face. In addition to that, the sanctions and resulting turmoil have created logistical hardships, rising labour costs, and difficulties in settling trade agreements since Russian banks are no longer a part of Society for Worldwide Interbank Financial Telecommunication (SWIFT), the bloodline of the global financial system.

Meanwhile, citizens in Sri Lanka, a critical node on the BRI’s maritime route, are protesting the country’s poorest economic performance since 1948. This little island nation’s tourism and tea industries are reliant on commerce with Russia and Ukraine. However, the war between these two countries is causing Sri Lanka’s economy to deteriorate, and the country’s economic problem has morphed into a political crisis. However, Sri Lanka’s economy did not collapse because of Russia’s invasion of Ukraine. It started when China utilized its BRI strategy directly to debt trap Sri Lanka and the situation has since devolved into a political nightmare.

Sri Lanka has a total debt of USD 35 billion, of which USD 6 billion is owing to China for loans to build BRI projects handled by Chinese businesses, according to World Bank data. These initiatives involve the development of infrastructure such as ports, airports, and rail lines. Sri Lanka agreed in 2017 to lease its Hambantota port in the Indian Ocean to China for 99 years at a cost of USD 1.1 billion to assist reduce its debt to China. In 2021, the lease was extended for an additional 99 years. Sri Lanka is required to repay USD 6.9 billion of its foreign debt this year. However, this is improbable given the country’s meagre foreign reserves of USD 2.3 billion. Sri Lanka requested a debt restructuring from China in January 2021 to meet this gap. China, on the other hand, is yet to respond.

Indonesia, on the other hand, is feeling the heat after being the first country to join China’s water-based maritime silk route plan. Indonesia is under pressure to conform to China’s expanding influence in Southeast Asia and South China Sea expansion. Indonesians are sceptical of Chinese investments according to a survey released on 5 April 2022, by Australia’s Lowy Institute. Almost half of respondents said that within ten years, China would become the most dangerous country. 60 percent of Indonesians favoured collaborating with other countries to curb the Communist Party of China’s (CPC) influence.

The BRI juggernaut aims to incorporate China into a variety of zones of influence along its borders and in emerging countries. Beijing participates in debt-trap diplomacy, similar to China’s state capitalism, in which the  Communist Party of China provides enterprises with cheap equity and debt. While one may argue that China’s BRI is only focused on gaining world control or preventing western economies from continuing to dominate, it is almost certain that China is purchasing political influence in a number of the world’s growing economies, but success has evaded them.

Neeraj Singh Manhas is a Director, Indo-Pacific, at Raisina House, India.