At the end of September 2019, the European Union (EU) and Japan signed an infrastructure deal to coordinate their transport, energy and digital projects linking Europe and Asia [DW, 2019]. The accord, signed by Japanese Prime Minister Shinzo Abe and President of the European Commission Jean-Claude Juncker, formalizes Japan’s involvement in a new EU-Asia “connectivity” strategy that is set to be backed by an approximately €60 billion fund [Reuters, 2018]. The EU’s “connectivity” strategy was published in September 2018 and adopted by the European Council in October 2018: this is Europe’s attempt to formulate a response to the Chinese Belt and Road Initiative (BRI). This alliance between the world’s third-largest economy and the EU can become a serious competitor to the BRI. In this context, for Central Asia and Kazakhstan, it can open up new opportunities, but also increase risks. To assess the situation, it is necessary to understand what tasks the EU sets for itself as part of its strategy and analyze the actions of Japan.
The EU strategy is based on three pillars. First, “connectivity” projects have to be economically, environmentally and socially sustainable in the long term. Second, the EU will connect with Asia by transport, digital and energy links, and people-to-people networks. Third, “connectivity” must be rules-based and transparent. The strategy can be seen as a new attempt aimed at transforming Eurasia through regulations and standard setting, and Central Asia will be one of the regions where this new approach will be actively implemented.
It should be noted that in the early 1990s, after the collapse of the USSR, the EU already tried to gain direct access to Central Asia through its programs: via creating the Transport Corridor–Caucasus–Asia (TRACECA) and the Interstate Oil and Gas Transportation to Europe (INOGATE) program, as well as the TACIS program which provided technical assistance to the CIS to support transition to democracy and market economy. Programs had different results, but, in fact, they did not fully achieve their major goals both in the political-economic transition and the transport-infrastructure field. Obviously, the previous EU strategy had a political background, so this time the EU does not put political reforms at the center stage of its new strategy for Eurasia.
Now the EU focuses on the transformation that has to be carried out through setting and developing compliance standards and good governance norms. Projects should have to be transparent and opinions of people affected by them must be heard, based on appropriate private consultations [EU, 2018a]. This, for example, involves engaging consulting companies that will evaluate transport-transit projects and then publish findings for general public. Another interesting example is the joint work of the EU and China in evaluating the railways that connect them: in 2018, they decided to carry out a joint study to identify the missing links and bottlenecks and improve the capacity of the hubs, as well as the quality of transport services [RailFreight.com, 2019]. The joint study was continued in 2019, but it is not clear when the results will be published.
The format that the EU proposes today tries to take into account the weaknesses of the Chinese initiative. China-funded projects are generally less open to local or international companies and frequently lack transparency. Furthermore, China typically provides loans to countries rather than direct investments, which can result in a debt trap. Sometimes it seems that Beijing is not interested in the sustainability of projects. Moreover, China tries to obtain state guarantees for its loans, thereby removing risks for itself: if local authorities do not implement a project, it will only be their responsibility.
However, one of the weaknesses of the new EU strategy is the financial component. The strategy’s fund includes an investment framework of up to €60 billion in order to guarantee, inter alia, sustainable investment in connectivity projects. In addition, the EU counts on the private sector, as well as national, international and multilateral financial institutions. Some funds can be raised from the EU’s external action budget that has been increased to €123 billion for 2021-2027, €10 billion of which will go to Asia and the Pacific [EU, 2018b]. Therefore, connecting Japan to the EU strategy looks like an opportunity to increase its financial strength.
In its turn, Japan also tried to balance China’s efforts, offering $110 billion through its investment initiative [MFA of Japan, 2015]. Then, to make its own position stronger, Japan started reinforcing partnerships with the United States – through the Trans-Pacific Partnership, as well as Australia and India – through the agreement on joint investment in third countries [Pajon and Saint-Mezard, 2018], as well as via strengthening cooperation with the same countries in the military field. All these actions were aimed at countering China in the Asia-Pacific region. Simultaneously, as part of the development of relations with Eurasian countries, Japan intensified contacts with Central Asia, with Prime Minister Shinzo Abe touring the five countries of the region in 2015 [Japan Times, 2015]. The Japanese leadership also actively tries to develop cooperation with Russia in the Far East.
Eventually, Tokyo and Brussels have decided to join forces. The alliance looks promising because it is united not only by the desire to oppose China but also by democracy values and common infrastructure development goals. During the G20 forum in Osaka, Shinzo Abe proposed to approve principles that infrastructure projects must be transparent and sustainable. These principles must apply to debt burdens as well as environmental and labor standards.
The actions of the EU and Japan are an attempt to restrain the active steps of China, because they are concerned, firstly, by China’s growing political influence in Europe and Asia-Pacific. Hungary, Greece and now Italy are examples of countries where China’s influence is substantial, causing intra-European divisions and blocking EU-level criticism of China. Second, both Japan and the EU are afraid that the development of relations between countries with weak democratic institutions and China in the digital sphere will lead to further deterioration of freedoms. For instance, the Central Asian governments try to develop “sovereign Internet” following the example of China, implement digital forms of control [Tengrinews, 2019], and collect personal information of citizens, although at the same time they are either careless about private data protection or neglect the right of citizens to privacy of their data.
Joining forces by Japan and Europe can be seen as an important step in countering China. The strategy proposes a model for “connectivity” and a blueprint for building up international support for the values they share. As for the countries of Central Asia, it is important to have an alternative option for the development of infrastructure. Japan and the EU will certainly have stricter standards of participation and management, but in return it will be possible to receive more sustainable projects and avoid the risks associated with the BRI. On the other hand, the actions of Japan and the EU have a clear geopolitical context, and direct competition of external players can present the Central Asian countries with a strategic dilemma, and, as a result, disrupt the realization of the transit potential of Eurasia.
References:
DW (2019). EU-Japan take on China’s BRI with own Silk Road. Retrieved from https://www.dw.com/en/eu-japan-take-on-chinas-bri-with-own-silk-road/a-50697761. Accessed on 12.10.2019.
EU (2018a). Connecting Europe and Asia – Building blocks for an EU Strategy. Retrieved from https://eeas.europa.eu/sites/eeas/files/joint_communication_-_connecting_europe_and_asia_-_building_blocks_for_an_eu_strategy_2018-09-19.pdf. Accessed on 14.10.2019.
EU (2018b). Questions and answers: the EU budget for external action. Retrieved from https://europa.eu/rapid/press-release_MEMO-18-4124_en.htm. Accessed on 14.10.2019.
Japan Times (2015). Abe says Japan can reap ¥3 trillion in Central Asia projects. Retrieved from https://www.japantimes.co.jp/news/2015/10/27/national/politics-diplomacy/abe-vows-support-kazakhstans-plan-introduce-nuclear-power. Accessed on 13.10.2019.
MFA of Japan (2015). Announcement of “Partnership for Quality Infrastructure: Investment for Asia’s Future”. Retrieved from https://www.mofa.go.jp/policy/oda/page18_000076.html. Accessed on 13.10.2019.
Pajon, Céline and Isabelle Saint-Mezard (2018). The Japan-India Economic Partnership: A Politically Driven Process. Retrieved from https://www.ifri.org/en/publications/notes-de-lifri/asie-visions/japan-india-economic-partnership-politically-driven-process. Accessed on 14.10.2019.
RailFreight.com (2019). EU and China to analyze sustainable rail transport corridors. Retrieved from https://www.railfreight.com/beltandroad/2019/04/15/eu-and-china-to-analyse-sustainable-rail-transport-corridors/. Accessed on 13.10.2019.
Reuters (2018). EU unveils Asia infrastructure plan, denies rivalry with China. Retrieved from https://www.reuters.com/article/us-eu-asia/eu-unveils-asia-infrastructure-plan-denies-rivalry-with-china-idUSKCN1LZ1XF. Accessed on 13.10.2019.
Tengrinews (2019). “You press, and the person’s data comes out” – Tokayev instructed to digitize Nur-Sultan. Retrieved from https://tengrinews.kz/kazakhstan_news/najimaesh-vyihodyat-dannyie-cheloveka-tokaev-poruchil-381038/. Accessed on 12.10.2019.