China is making a mark.
The country recently became Armenia’s third-largest trading partner. A $12 million Chinese-Armenian Friendship School was built in Yerevan last year. In 2017, Armenia became host to the second-largest Chinese embassy in the former Soviet Union and mutual tourist visa requirements were lifted. At the same time, Chinese companies are constructing highways and railroads all across Asia. Chinese satellite systems are being implemented worldwide and ports are emerging throughout the Indian Ocean. Chinese media companies are taking over television stations in Africa and military bases are surrounding the South China Sea. When you connect the dots, you begin to understand China’s master plan: a multi-trillion-dollar development scheme known as the most ambitious in modern times, involving almost 130 countries and growing. Considered a renaissance of the Silk Road, everywhere from Uruguay and New Zealand to Pakistan, Italy and, yes, Armenia, have been added to the roster.
It’s called the Belt and Road Initiative (BRI), “a transcontinental long-term policy and investment program which aims at infrastructure development and acceleration of the economic integration of countries along the route of the historic Silk Road.” But maps show that even countries across the Atlantic Ocean are involved in some way. While Chinese investments in Armenia include everything from education, IT and infrastructure to trade and agriculture, Armenia is just a minor player in a much bigger game.
It might appear that China can do no harm in its generous offerings—for many reasons. China was one of the first countries to recognize Armenian independence in December 1991, establishing diplomatic relations, which has recently increased exponentially. Along with the embassy, China established the first Confucius Institute in the South Caucasus at Yerevan State University. Economist Dr. Gevorg Mantashyan has been interested in China’s involvement with Armenia since before the Belt and Road Initiative, and follows the relationship closely. “I would love to see developed relations between Armenia and China on trading, on research and technology,” he says.
In an interview with EVN Report, Mnatsakan Safaryan, Head of the Division of the North-East Asia and Asia-Pacific Department of Armenia’s Ministry of Foreign Affairs said that increasing relations with China are among the prime interests for Armenia in the short and long term.
“Until now, investments from Asian countries have not been very high; it’s a very modest figure. But trade volumes with Asian partners are growing,” Safaryan says. “China in particular is one of our top trade partners as of 2018.” Chinese-Armenian trade soared by over 29 percent in 2018, amounting to $771 million, making it Armenia’s third-largest trading partner after the EU and Russia; 86 percent of that figure were exports of Chinese goods to Armenia. China has provided at least a total of $50 million in aid to Armenia since 2012 and has been providing technological assistance grants in sectors such as transportation, public health and digital equipment since 1999. “The scope of relations is quite big and covers many areas of economy, culture, education, science and people-to-people contact,” Safaryan explains. So, Armenia’s interest in China or vise versa, is as multifaceted as it is tempting.
At the opening ceremony of the Chinese-Armenian Friendship School, Prime Minister Nikol Pashinyan said that having many Armenians speaking Chinese was an “economic necessity.” According to the Orbeli Analytics Research Center, the fifth unit of the Hrazdan thermal power station (TPS) received 80 percent of its repair and reconstruction investment from China. Dalian Guoming Group, a world-renowned Chinese company in the field of aluminum manufacturing, announced in February 2019 its intention to invest about $100 million in the creation of an industrial zone in Armenia. The Chinese Commercial and Industrial Bank (ICBC) has flirted with the idea of investing in solar panels, and China has already begun providing agricultural supplies to Armenia. China will also provide Armenia with about $1.5 million in military assistance, and the Chinese company New Yida invested $5 million in a new mineral water production and bottling factory in Armenia. Chinese tourism to Armenia increased by almost 60 percent in 2018 and will likely continue to climb as a result of the new visa-free regime.
Armenian relations with Asia as a whole are also on the rise. “We continue stable projects with India, China, Japan, and sometimes South Korea and Singapore,” says Safaryan. These include investment protection agreements, human resources collaboration, tourism influx, visa agreements, trade and technology.
Armenia in the Belt and Road Initiative
“What we do in terms of economic and trade cooperation [with China] can be considered as part of Belt and Road,” Safaryan explains. In 2015, Armenia signed the Memorandum on Promotion of Cooperation in Building the Silk Road Economic Belt (a sub-term for BRI). But Armenia’s neighbors are much more involved in Belt and Road. “We have this difficulty of having blockades with our neighbors and [many countries] have sanctions on Iran,” says Areg Hovhannissian, the Director of the Asia-Pacific and Africa Department in the Ministry of Foreign Affairs. Armenia is also entering the Asian Infrastructure Investment Bank, which is a major source of investment for countries worldwide, including those under Belt and Road.
Looking at some of China’s collaborations with Armenia’s neighbors puts into perspective exactly how much is spent on BRI countries, and how small Armenia’s role is despite the heightening relations. Georgia and China signed a free trade agreement in 2018, and China purchased 75 percent of Poti Free Industrial Zone shares (Poti is a major port in Georgia). China and Azerbaijan signed an $800 million economic package deal this year, and China invested in Azerbaijan’s Baku International Sea Trade Port in Alat, another BRI project. China also launched a new freight train between Bayannir (in China’s Inner Mongolia Autonomous Region) to Tehran, Iran and has invested $400 billion in Iran’s energy and transport sectors. This connection between China and Iran will also be useful once the long-awaited North-South highway meant to link Armenia with Iran, Georgia and the rest of Europe is completed. “Sanctions cannot last forever, and relations can improve,” says Hovhanissian. “It’s a good opportunity and we are looking forward to having this solid contribution to Belt and Road. Because through Iran, Armenia can be a very safe alternative for transportation of goods from Asia to Europe. We are optimistic.”
The North-South highway was to be completed in 2016, but several issues surrounding corruption and poorly-formulated deals delayed the pursuit. It will, however, soon be completed with the help of Chinese contractors and the Asian Development Bank (ADB). “There was a report from ADB that included a 5 year plan mentioning that they are going to make more of an effort to complete the [highway] as soon as they can,” says Safaryan. This 550 km-long highway will connect to Georgia’s East-West highway leading to the major port cities of Poti and Batumi, providing Armenian cargo trucks with faster and safer access to seaports connecting to Europe, Russia, and Turkey.
Suzanne Ogden, a Political Science Professor Emeritus at Northeastern University with an expertise in Chinese politics says that there are some quite positive benefits from BRI investments, however, countries need to be cautious: “…[L]ong term, countries could—unless agreements with China are written carefully—find themselves giving up sovereign control over their own assets.” Ogden’s remarks refer to one of BRI’s red flags: China’s Debt-Trap reputation.
Belt and Road’s Debt Traps
At least eight countries involved in the Belt and Road Initiative are at risk of facing serious repercussions from their ties with China, mostly in their inability to repay the debts. A study evaluating the risk of debt trap for countries involved in the Belt and Road Initiative explains the implications of large loans when the country’s economy cannot uphold such numbers. “Domestic spending on infrastructure and social services may be sacrificed in order to service the debt, with the problem compounded when governments borrow additional funds just to meet debt servicing needs,” it states. And many BRI countries are swamped with problems of their own, such as poverty, corruption and conflict. “These [countries] are great targets for any country that wants to invest and knows how to take advantage of the corruption, conflict and dictatorships,” says Ogden. “But, keep in mind that the U.S. throughout its history, especially since World War II, often used techniques of manipulating and taking advantage of corrupt and dictatorial governments.”
So China’s tactics are no stranger to the global stage. This also means, however, that BRI developments sometimes have hidden or long-term costs that come at the expense of other nations. In Southeast and Central Asia, China’s construction of roads and railroads has often come along with loan agreements that give China exclusive development rights for corresponding stretches of land. “You can imagine,” says Profesor Ogden, “even if it is as few as 10 years of exclusive eco-zones for Chinese companies, within those 10 years, the Chinese could completely dominate the entire area and beyond.” Sri Lanka, for example, was forced to hand over a port to China in a 99 year lease, and Pakistan handed over a port in Gwadar to China as well.
Overall, Safaryan assures that Armenia’s current debt to China is close to zero, preventing any risk of Armenia handing over sovereign control. The approximate $25 million loan signed in 2014 is projected to be paid without resulting in debts, according to Safaryan. The average term to maturity is projected to be 16 years which is twice that of typical foreign loans, and the Ministry of Finance expects minimum risk in servicing the debt. That being said, Armenia’s enthusiasm towards China should continue to be met with caution moving forward: “Our government is already very cautious in engaging in more debt from anywhere,” Safaryan explains. “Armenia is working with multilateral financial institutions. Apart from that, our experience with the Chinese side has been positive in terms of our financial engagements.” He also agrees that China’s scheme in the Belt and Road Initiative is much bigger than just trade and economics.
According to the International Institute for Asian Studies, the West has monopolized globalization until now, and BRI is an opportunity for China to also reconstruct international communication, to “exercise China’s discourse power, and to develop the nation’s soft power in the age of globalization.” China’s so-called “soft power” is in fact maneuvering its way into education, media and the societies of countries involved in BRI––including Armenia.
Beyond Just Trade
Yerevan State University has a strong partnership with the People’s Republic of China through a Chinese Academy of Social Sciences, Beijing University of Technology and the first Confucius Institute in the South Caucasus. Confucius Institutes have been established across the world. They even exist at American universities and are expanding in Belt and Road countries. The institutes base their premise around teaching Chinese language, culture and contemporary society. Students receive a prestigious education through a Chinese lens as well as better job prospects and scholarships, especially for students from BRI countries.
The institute has been criticized for pushing a Chinese agenda as well, something which the Chinese government and the institute body deny. There are several hundred institutes worldwide, and close to 100 in American colleges. Pennsylvania State University and the University of Chicago for example, have terminated their relationship with the institute with concerns that the educational programs were a form of Chinese propaganda. This debate, however, remains ongoing because the U.S. has historically been skeptical of China. But it is important to note that this Western skepticism does not pertain to Armenia. Hovhanissian and Safaryan agree that they have not found issue with the Institute in Armenia.
What’s more, the Chinese government spent $12 million on the Armenian-Chinese Friendship School, which has about 400 Armenian students enrolled, from ages 10 to 18, and teaches extensive Chinese language. At the opening ceremony, Prime Minister Pashinyan said: “I hope that this school will become a channel through which Armenians will gain more in-depth knowledge of the enormous influence which China and Chinese civilization have had on the development of humankind.” He referred to it as a “new page” in Chinese-Armenian relations, which he hopes grow closer, reported Azatutyun. Pashinyan added that China and Armenia have “many common interests.” To conceptualize Armenia’s enthusiasm towards China, the Chinese Embassy in Yerevan hosted a China Grand Prix for the school in November 2019 where 5,317 people participated in an online quiz about China. Chinese Ambassador Tian Erlong said at the ceremony that “our Armenian friends’ interest towards Chinese culture and history pleasantly surprised us,” and that “Armenian-Chinese relations entered a new phase as part of the Belt and Road Initiative.”
In Pakistan, the Chinese military has been increasing its presence since the port was handed over due to its debt-trap fate. China overall has been gaining more naval access in the Indian Ocean, and more control over the water trade-routes or what they call Belt and Road’s “Maritime Silk Road.” But China says that its presence is primarily for peacekeeping operations. The United States on the other hand, has around 800 military bases in over 70 different countries, so China’s military expansion abroad is not unusual behaviour for a large world power.
China has been sending non-lethal military technology to Armenia, according to Hovhanissian. There have been talks of further military cooperation between the two countries, and China’s Foreign Minister Wang Yi has expressed Beijing’s willingness to promote a peaceful resolution to the Nagorno-Karabakh conflict, but concrete initiatives are yet to be seen.
The South China Sea, on the other hand, has not seen such luck. China’s building of an artificial island chain close to Vietnam through which one third of maritime trade passes, has seen the destruction of marine life, construction of ports, missile shelters, fuel warehouses, water and ammunition, air strips, aircraft hangars and a vast extension of China’s exclusive and dominating economic zone in that region. The South China Sea has been essentially taken over by Chinese military and monopoly. “I’ll say that it’s easy to notice the changes in the South China Sea initiated by China” admits Mantashyan. “In conversations I’ve had among experts from the Philippines, Malaysia and Vietnam, these countries are quite worried about these changes. They are noticing the increasing presence of China, and thinking about their new role.”
Technology and Media
China established what is called the Beidou Navigation System as part of the BRI. Beidou is a satellite navigation network similar to Google maps, and currently has 35 satellites. Pakistan has been Beidou’s guinea pig country, but the system will be introduced to other BRI countries by 2020. Since Beidou serves civilians as well as militaries of those countries using the navigation system, China will be able to track all activity, including military activity. The Chinese government refers to this as part of the Information Silk Road or the Digital Silk Road. “We should build bilateral cross-border optical cable networks at a quicker pace, plan transcontinental submarine optical cable projects, and improve spatial (satellite) information passageways to expand information exchanges and cooperation,” states a white paper published by the Chinese government.
To emphasize China’s reach, Beijing opened the China Remote Sensing Satellite North Polar Ground Station in Kiruna, Sweden, and a satellite ground station in the Patagonia region of Argentina, enabling an enhancement of China’s space program and also its army’s C4ISR capabilities (command, control, communications, computers, intelligence, surveillance and reconnaissance). It is important to note that the United States currently has 901 satellites which is more than double the amount of Russia (153) and China (299) combined; thereby, China’s venture does not compare to the U.S. might in this regard.
There is also the Belt and Road News Network, an international organization providing analyses and journalism surrounding the Belt and Road Initiative through its online news platform. The Chinese government has also created Belt and Road Media Cooperation Union, and the Belt and Road News Alliance to engage with media companies in BRI member countries. The Belt and Road Media Cooperation Union, “will integrate media resources along the Silk Road for more potential cooperation in terms of program production, dissemination and marketing operations to build a new industrial ecosystem,” states its manual, adding that its aim is to share “authentic, accurate, inspiring and intriguing stories of the Belt and Road.” So far, 43 global media organizations in BRI countries have joined as of March 2017 –– Armenia has not yet been included.
Chinese state media companies have entered television markets in Africa, airing Chinese-regulated news and TV stations. But the reach of China’s media presence abroad is unmatched to that of the United States. AT&T, Walt Disney and Comcast Corp are just a few examples of American corporations who control media worldwide. CNN News alone is aired in over 200 countries and Google Earth is one of the most frequently used satellite systems in the world. With regards to China, both Foreign Policy and Der Spiegel have reported instances where these stations have censored negative coverage of China.
But for Armenia, China’s involvement has not surpassed providing technological equipment. “Armenia managed to digitize public television thanks to China’s support. And there are forthcoming projects for public television,” says Hovhannissian. Generally, the Belt and Road Initiative invests in helping countries innovate and improve their access to technology, the extent of this depends on the country.
In fact, China also began talks of installing the Huawei “Smart City” in Yerevan. Huawei’s Smart Cities are being implemented everywhere from Germany to Singapore and are designed to modernize cities. They require the installation of thousands of security cameras in public spaces, including facial recognition technology to identify people and license plates. Erica Marat, an analyst of post-Soviet security policies, wrote in a 2018 policy memo that, despite its improvements on urban life, “the tools also offer a structure to potentially expand authoritarian control over people and public spaces.” She also noted however, that former Soviet countries are generally unconcerned with privacy issues, which is quite the opposite of the U.S. and Australia, which have banned Huawei.
To speculate if Chinese President Xi Jinping is using Belt and Road to push a positive image of himself and a Chinese agenda is not uncommon, especially from the West. The Belt and Road Initiative’s environmental impact and investment in coal has also been criticized, along with its debt-traps, control tactics and propaganda. But many have also commended China’s ambitious pursuit of connecting the world and making trade, IT and development more efficient, especially for emerging economies like Armenia. Mantashyan, Hovhanissian and Safaryan also foresee the positive benefits of diversifying Armenia’s culture and economy through cultural exchange and tourism.
For a leading world power to seek more influence is not a stranger to history. With China’s rampant globalization and shifting world presence, some predict that China will soon claim the 21st century––its investments in Armenia are just minor stepping stone in doing so.
For now, the small, freshly revolutionized country of Armenia has enjoyed China’s bounties and plans to continue to accept them. The Belt and Road Initiative in Armenia and the South Caucasus has so far proved to be optimistic. The best way for Armenia to remain afloat in the slow flooding of Chinese influence is to tread lightly with loans and welcome economic diversification and development. According to Safaryan, “Relations with China are among the priorities of our government’s foreign policy. China is an important partner for Armenia.”