Russia BRI: ‘turn to the east’

Chinese BRI investments in Russian Far East reached US$1.6 billion in 2022, China trade up 31% 

Western analysts often state that China’s Belt and Road investments into Russia have effectively stalled following the Ukraine conflict, however they miss the bilateral subtleties. In fact, Chinese investment into Khabarovsk Krai (Province) in Russia’s Far east reached US$1.6 billion in 2022, according to the regional Governor, Mikhail Degtyarev.

According to Degtyarev, 26 new investment projects worth 133 billion rubles (US$1.6 billion) were launched in the area in 2022, including a large-scale infrastructure project to help build the Pacific Railroad.

“This project is comparable to the historical construction of the BAM (Baikal–Amur Mainline railway). It is the first private railroad in Russia to have a length of 500 kilometers. In a short period of time, we have already built 100 kilometers.” Degtyarev stated.

The Russian Pacific Railway, also known as the Northern Latitudinal Railway, is a project designed to expand capacity along the existing Vladivostok eastern terminus of the Trans-Siberian railway and then head north, into Khabarovsk and further into the Russian Arctic.  It is being designed to have an annual capacity of 23.9 million tonnes of cargo, and will shorten the routes from deposits in northern parts of West Siberia to Russian ports along the Eastern seaboard and ensure development of the Arctic and Russian Pacific seaboard. The immediate precedence has become the upgrading of Trans-Siberian Rail capacity towards the East and trade with China and East Asia.

The reason Western analysts often get Chinese BRI investment data into Russia wrong is a combination of a lack of on the ground research, geopolitical misunderstandings of the China-Russia dynamic, and a biased geopolitical perspective. In fact, China has been investing in Russia and continues to do so. Often this goes under the radar and isn’t mentioned as ‘BRI’ due to political considerations – having Chinese investments entering Russia hasn’t always been the way in which the Kremlin wishes to promote such investments. However, that doesn’t mean such investments do not exist.

Russia Briefing

Khabarovsk Krai Province in Russia’s Far East

Among these more opaque BRI investments into Russia’s Khabarovsk last year include a mining and processing plant at the Kutyn gold deposit in Tuguro-Chumikansky, and a tin ore mine and processing plant at Solnechnaya, while a copper and tin producing plant in the Solnechny district is also nearing completion. Chinese investors have also begun developing the Malmyzhsky copper deposit.

Degtyarev also noted that Khabarovsk successfully introduced a simplified procedure for granting land to businesses without them having to bid for import substitution projects last year, particularly in agriculture. That also drew Chinese and other investors to the area.  In early 2023, the opportunity was extended to individual Chinese and other friendly country investors, entrepreneurs, and existing legal entities involved in import substitution, who can now buy a land plot for these purposes for the symbolic sum of 1 ruble.

Degtyarev noted that Khabarovsk has been actively boosting cooperation with neighboring China’s Heilongjiang Province over the past year, with trade between the region and China up 31%, and cargo turnover up by 106% year-on-year as of the end of 2022.

The region also continues working on the Russo-Chinese joint trans-border development territory on Bolshoi Ussuriysky Island, where both Russian and Chinese companies are residents. They receive significant benefits for export-import operations, making the territory a de facto free-trade zone.

Degtyarev stated that “We are seeing a turn to the East. There is growth in cargo turnover, growth in industrial production as a whole, and growth in the gross regional product. The Eastern part of the country is now pulling the economy, because the Western regions, unfortunately, faced sanctions and the collapse of its logistics chains.”

Republished from Russia Briefing, April 24, 2023.