Caucasus look to China for investment
China’s economic expansion into the former Soviet sphere appears to have hit obstacles as promises of projects tend to fall through, investment comes with strings attached and China opts for loans rather than cash.
But China’s role appears to be growing in the south Caucasus, which includes Armenia, Azerbaijan and Georgia.
The troubled region is unflatteringly known in Beijing as a “middle corridor” in China’s ambitious Belt and Road Initiative (BRI).
An economic slowdown in Iran, Russia and Turkey has boosted interest in China in the south Caucasus.
China is Armenia’s second-largest trading partner with bilateral trade rising by nearly 50 per cent in the first half of this year.
But much of the recent Chinese investment is linked to the BRI.
Vasif Huseynov and Ayaz Rzayev of the Centre for Strategic Studies in Baku write: “The promises of the BRI fall short of the reality on the ground. Most of the promised investments have not yet realised and most joint undertakings announced remain in the planning stage.”
The Baku-Tbilisi-Kars (BTK) railway, which was launched in October last year, and developments in the Trans-Caspian International Transport Corridor (TITR) have been changing China’s role in the region.
All three states believe the BRI can help them in their goals to transform into a link between Europe and Asia.
Azerbaijan and Georgia, in particular, are heavily invested in the rapid development of the TITR.
Azerbaijan, with the largest economy of the three, has trade with China that has grown by approximately 800 times from US$1.5 million in the early 1990s to US$1.3 billion last year, making up about 9 per cent of the gas-rich state’s foreign trade.
China is currently Baku’s seventh-largest trade partner.
The BTK railway has been financed primarily by Azerbaijan and Turkey.
But China is involved in other regional projects.
In 2016, China’s Asian Infrastructure Investment Bank (AIIB) approved its biggest loan to date for the construction of a gas pipeline connecting Azerbaijan to Turkey and southern Europe.
The AIIB lent US$600 million to the Trans-Anatolian Natural Gas Pipeline (Tanap) scheme (pictured).
Bilateral trade with Georgia reached US$939 million last year from its 1990s level of US$3.68 million and making China the third-largest trade partner to Tbilisi.
The Trans-Anatolian Natural Gas Pipeline under construction. Picture credit: YouTube