Gauging the Importance of China-Mongolia-Russia Economic Corridor in ‘One Belt, One Road’

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Ever since China unveiled its plans for two massive trade and infrastructure networks connecting Asia with Europe and Mediterranean through New Silk Road or ‘One Belt, One Road’ (OBOR) several countries including Central Asia and Mongolia have responded optimistically. Perhaps these countries are rediscovered today as a kind of a new Silk Road with tremendous potential for growth. In particular, Mongolia has been taking serious interest to be part of OBOR initiative because it does not want to miss the chance for development as Beijing aims to boost its “neighbourhood” or “peripheral” diplomacy.

In the past few years, China’s “peripheral” diplomacy has been yielding positive results through its periphery policy (zhoubian zhengce) or good-neighbouring policy (mulin zhengce) which aims at establishing good relationship with neighbours for ensuring secure environment in its periphery. Under President Xi Jinping, China has reprioritized country’s peripheral relations within its larger foreign policy portfolio. This marks a break with foreign policy since the era of Deng Xiaoping, which placed a focus on great power relations to ensure China’s growth and security.  While Xi administration continues to view great power relations as critical to China’s foreign policy strategy, elevation of peripheral relations as top priority is a paradigm shift. To support this shift, OBOR grand strategy has been initiated, which focuses first and foremost on the establishment of linkages between China and its peripheral states. China, on the other hand, seeks to use OBOR to establish more robust policy, facilities, trade, financial, and social ties with its peripheral partners that ensure greater connectivity with neighbouring states.

But what OBOR initiative is all about? On September 7, 2013, Chinese President Xi Jinping first spoke of Silk Road Economic Belt (SREB) in a speech at Nazarbayev University in Kazakhstan for reviving China’s contacts with the Silk Road nations. In another speech delivered on October 24, 2013 at Indonesian Parliament, he spoke of the importance of economic policy in China’s periphery diplomacy and proposed a 21st Century Maritime Silk Road (MSR) initiative. Together they came to be known as New Silk Road or OBOR, an even broader and more ambitious initiative. For the small states on China’s borders, new approach to periphery relations can potentially transform their domestic situations. From the Chinese point of view, greater engagement and connectivity with China may create more opportunity for many underdeveloped neighbours.

One such neighbour is Mongolia where China’s “peripheral” diplomacy has been working in full swing. Mongolia is now no longer views China in terms of a territorial threat but as a sustainable business partner for mutual benefits given that today China is Mongolia’s largest economic and trade partner, and the two sides have pledged to almost double their current annual trade to US $10 billion by 2020. It clearly indicates that ever since the normalisation of Sino-Mongolian relations began in late 1980s the two sides have come a long way to expand the scope of their bilateral relations. The recent thaw in their relationship also owes much to the OBOR initiative. Mongolia has not only agreed to be part of this initiative but also became a founder member of the China-initiated Asian Infrastructure Investment Bank. Therefore, the construction of an economic corridor linking China, Mongolia and Russia holds importance in the OBOR initiative that could benefit all the three participating countries who are also neighbours.

It may be pointed out that so far as China-Mongolia-Russia economic Corridor is concerned SCO’s Dushanbe and Ufa meetings held in 2014 and 2015 respectively were seen as proofs of China and Russia’s deepening coordination, not only regarding Mongolia but also regarding the greater Eurasian continent within the ambit of OBOR initiative. The China-Mongolia-Russia economic corridor has been described as the lifeline of the [OBOR] aorta because the SREB initiative fits together with Russia’s transcontinental rail plan and Mongolia’s Prairie Road or Grassland Road or the steppe road programme. A US$ 230 bln cost high speed rail line project linking Beijing and Moscow through the Mongolian capital Ulaanbaatar has already been agreed upon by Russia and China, which would basically reduce 7000-km journey from 6 to just 2 days. It has been noticed that this railway connectivity has potential to boost the China-Mongolia-Russia economic corridor besides promoting cooperation in railways, roads, energy resources, logistics, transportation and agriculture.

Last year, in June 2016, a development plan to construct the China-Mongolia-Russia Economic Corridor was signed by the three parties. The whole plan aims at strengthening trilateral cooperation through increasing the scale of trade, improving product competitiveness and facilitating cross-border transportation between the three countries.

Overall the plan emphasizes on developing transportation infrastructure and connectivity; intensifying port construction and supervision of customs, inspection and quarantine; promoting cooperation in production capacity and investment besides reinforcing economic and trade cooperation between China, Mongolia and Russia. According to China’s top economic planner, the National Development and Reform Commission (NDRC), the trade cooperation between the three countries is planned to be increased in areas like agricultural products, energy, service sector and building materials in addition to cooperation in software programme designing and data maintenance. In order to make this economic corridor feasible, multiple channels will be used for financing such as government investment, public-private partnerships and investment from International financial institutions like the Asian Infrastructure Investment Bank and the New Development Bank. These three countries, thus, rely on each other for a large amount of their economic sustenance.

Since numerous countries across Eurasia have seen challenges in their economic growth, China-Mongolia-Russia economic corridor may provide them opportunities to enter into cooperation as it will mean more security along border and a broader market within the framework of the OBOR. For, it is not only about putting in place physical infrastructure but who knows it may become a source of stability in future development of Eurasia as a whole largely due to the fact that it aims at connectivity including greater movement of people and exchange of ideas. Yet, China-Mongolia-Russia economic corridor is not without its challenges given that China had blocked Mongolia border last month after the Dalai Lama’s visit to Ulaanbaatar. Hence, cooperation and coordination between partner countries seem to be the way out for the successful implementation of this planned corridor.

Profile photo of Sharad K Soni
Prof. Soni is Director, UGC-Area Studies Programme, Centre for Inner Asian Studies, School of International Studies, Jawaharlal Nehru University, New Delhi.