How strategically important is the Shandong Peninsula

Russia and China are expanding strategic cooperation

The Middle Kingdom is Russia's most important trading partner. The following figures impressively demonstrate how close the ties between the two Eurasian great powers have become: bilateral trade broke the US $ 100 billion mark for the first time in 2018. Russia's Minister of Economic Affairs, Maxim Oreschkin, expects the volume of trade to double to US $ 200 billion in the medium term. With 5,000 companies, China's presence on the Russian market is now stronger than Germany's with around 4,600 companies. The Chinese delegation at the Saint Petersburg Economic Forum (SPIEF) included more than 1,000 participants for the first time in 2019.

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Transport corridors on water and land planned

As part of the Chinese government's multi-billion "Belt and Road Initiative" (BRI), the two countries want to further expand their economic cooperation. But in order for the flow of goods to flow on the new Silk Road, transport corridors must first be developed.

China wants to connect Russia's Northern Sea Route with the Maritime Silk Road. The route along the Russian North Sea coast shortens the delivery route from Asia to Europe by 40 percent compared to the route through the Suez Canal. Since the distance is only 14,280 instead of 23,200 kilometers, the journey time is reduced from 34 to 23 days. In addition, the Northern Sea Route, which could be ice-free all year round from 2040, can be used by ships with greater drafts.

In his May decrees, President Vladimir Putin set the goal of quadrupling freight traffic on this Arctic shipping route to 80 million tons by 2024. In addition, the head of state was open to connecting the Northern Sea Route, which China calls the Polar Silk Road, to the maritime Silk Road.

The total investment in the development of the Northern Sea Route is around 10 billion euros. The port of Murmansk on the Kola Peninsula is being developed into the most important transport hub and largest logistics hub on Russia's North Sea coast. For example, the Chinese Poly Group is investing 275 million euros in Murmansk in the construction of a coal terminal with a capacity of 18 million tons per year.

On land, the Europe-West China transport corridor is being expanded by road and rail. The most important projects are the "Meridian" toll highway and the Moscow-Kazan high-speed train line (the realization of which is currently being postponed by President Putin, while the Russian Railway RZD is proposing at least the construction of the Moscow-Vladimir section, as of September 10, 2019). Numerous new logistics hubs are planned to cope with the increasing volume of freight.

The growing freight traffic between Europe and China also offers German companies business opportunities. The logistics service provider Hellmann and the United Transport Logistics Company of the Eurasian Railway Alliance (UTLC ERA; https://www.utlc.com) work together to transport goods between China and Europe. Hellmann and UTLC have been delivering vehicles from Bremerhaven to the Chinese metropolis of Chongqing every day since April 2019. The Rhenus company opened a logistics center in the Voronezh region in May 2019. From there, agricultural products will in future be transported to China and Europe on the new Silk Road.

Selected Russian-Chinese major infrastructure projects

Project name Investment amount Implementation period and project status Implementer / general contractor
Construction of the Russian part of the Europe-West China transport corridor US $ 10.4 billion (of which 60% from the Russian state budget) Project planning phase, planned start of construction: 2021; Part of the infrastructure plan until 2024 Rosavtodor (Russia); potentially: China Communication Construction Corporation, CECC, Shandong High-Speed ​​Group
Russian part of the "Meridian" toll highway up to US $ 9.5 billion (potential donors: Vnesheconombank, UK Lider and Awtodor) Preparatory and project planning work, financed by RHK; Part of the infrastructure plan until 2024 ZAO Russkaja Holdingowaja Kompanija (RHK, Russia)
Construction of the "Rostech-City" business center and a technopark on the site of the former Tuschino / Moscow airport 1.27 billion euros under construction; planned completion: 2021 Russian Direct Investment Fund (RDIF), https://rdif.ru; Russian-Chinese Investment Fund (RCIF), http://rcif.com; Silk Road Fund, http://www.silkroadfund.com.cn; Mubadala Development, https://www.mubadala.com
Construction of stations and tunnels for the second underground subway ring line / Moscow 685 million euros under construction; planned completion: 2022 China Railway Construction Corporation (CRCC), https://english.crcc.cn
Construction of a deep water port / Jantarny, Kaliningrad region 446.4 million euros Negotiation phase China Harbor Engineering Company, http://www.chec.bj.cn; Government of the Kaliningrad Region, https://gov39.ru
Creation of a cross-border conurbation Blagoveshchensk-Heihe (Russian-Chinese project to develop an economic, transport, logistics and tourism center) / Amur region and Heihe province k. A. planning phase City of Blagoveshchensk, http://bit.ly/Blagoveshchensk; Heihe City Council,

Source: Research by Germany Trade & Invest

China is investing in fillets of the Russian economy

Russia and China are currently realizing 70 projects worth US $ 20 billion, reports the Russian-Chinese government commission on investment cooperation. Chinese money mostly flows into Russian projects through state funds or state holdings. However, Chinese investments are only flowing into certain strategically important areas of the Russian economy such as energy, transport, infrastructure, the aviation industry and agriculture.

Further information can be found in the article "Chinese companies are increasingly involved in Russia": https://www.gtai.de/MKT201909138010

For example, China National Petroleum Corporation (CNPC) and the Silk Road Fund have stakes in Novatek's Jamal LNG gas liquefaction plant. In June 2019, CNPC and the China National Offshore Oil Corporation (CNOOC) also acquired a 20 percent stake in Novatek's Arctic 2 LNG plant.

Sinopec signed a letter of intent to form a joint venture with Sibur to build the $ 7.9 billion Amur gas chemical plant in the Amur area. Rosneft and CNPC work together to explore and extract raw materials. CNPC has the right to acquire a minority stake in the Rosneft deposits in Siberia.

Russia's largest mobile communications provider MTS and the Chinese telecommunications supplier Huawei have agreed to set up 5th generation (5G) mobile communications networks in all Russian metropolises. A pilot zone at the Moscow VDNKh exhibition center went into operation this summer.

Selected Russian-Chinese, politically supported large-scale projects

Project name Investment amount (billion US $) and donor Implementation period and project status Implementer / general contractor with nationality
Arctic LNG-2 / Gydan Peninsula, Yamalo-Nenets Autonomous District 25.5 (10% funding each from CNPC, CNOOC, Mitsui, JOGMEC and Total) Planned completion: in stages from 2023 to 2026 Novatek; Supplier of the LNG plant: Technip FMC (Russia)
Amur gas processing plant (Amurski GPZ) / Amur region 21.5 (Consortium of Gazprombank, China Development Bank and ING) under construction; Commissioning of the 1st stage: 2021, the 2nd stage: 2025 Gazprom, NIPIGaz (Russia)
Development of the Pajacha oil field / Krasnoyarsk region 20,6 Preparatory work; Start of drilling: 2024 Neftegasholding (Russia) and China National Chemical Engineering Company (CNCEC)
Development and production of the wide-body aircraft CRAIC CR929 and the large helicopter Advanced Heavy Lift (AHL) 20,0 Project planning; Commissioning: 2023 China-Russia Commercial Aircraft International Company (CRAIC, joint venture of the Russian OAK and the Chinese COMAC); Rosvertolyoty (Rostec Holding)

Source: Research by Germany Trade & Invest

Joint research and development projects

In addition, Russia and China are intensifying their research cooperation. Together they plan to found a "valley of the intellect", which is to be realized by the Association of Technical Universities of Russia and China (ATURK, http://asrtu.ru) and Huawei. Scientists from both countries are to do research there together. In addition, the Russian Direct Investment Fund (RDIF) and the China Investment Corporation (CIC) are investing US $ 1 billion in the creation of a Russian-Chinese scientific and technological innovation fund to research artificial intelligence, new materials and space technologies.

Russia and China want to push back billing in dollars

In view of the geopolitical conflicts between the USA and China (tariffs) and Russia (sanctions), the two countries want to cooperate more closely in the future. To protect themselves from further US sanctions, Russia and China are pressing ahead with the de-dollarization of their trade relations. In June 2019, the heads of state Vladimir Putin and Xi Jinping agreed to increasingly use the national currencies of the ruble and yuan in future. For this purpose, a billing system similar to SWIFT is to be set up between the VTB-Bank and the Industrial and Commercial Bank of China from 2020. In the future, clearing will also be based on national currencies.

Further information on the economic situation, industries, business practice, law, customs and tenders in Russia can be found at http://www.gtai.de/russland.

At http://www.gtai.de/seidenstrasse you will find numerous other GTAI reports on the topic of the new Silk Road.