And it is possible to get substantial profits from the transportation of these cheap somethings. Therefore, many countries from Central Asia to Africa and Latin America, are interested in the transit route through their territory, and Azerbaijan is no exception.
As for China… The Asian giant, which has witnessed a miraculous rate of economic growth in the last 30 years, is now moving confidently from being the center of economic power to being the center of political and military power. In the face of vehement protests from the US, mild objections from the EU, and Russia’s loyalty, the official Beijing is realizing this intention step by step. Behind the famous “One Belt, One Road” mega-project put forward by the head of state in 2013 is the goal of making China a major military and political power in the world. The so-called New Silk Road project will connect China with more than 80 countries in Asia, Africa and Europe. So far, more than 125 countries and 29 international organizations have joined the project at one level or another.
The project aims to form a common position between the countries on both sea and land trade routes from China to Europe. In fact, within the framework of the project, which it presents as a modern version of the Great Silk Road, China is investing in transit traffic, ports and other infrastructure in the countries along the trade routes. Beijing intends to spend a total of $1.2 trillion for this purpose. Another area of Chinese investment is the application of 5G technology in the countries involved in the project, which the United States and the European Union rightly consider a threat to their information security.
At first glance, it does not seem unusual: the country that initiated the project is spending money out of its own “pocket” to move it forward. However, the fate of the infrastructure projects financed by China in various countries as part of this process shows that in fact Beijing is not spending out of his own pocket: studies show that China allocates funds for projects on very severe terms. For example, China’s interest rates on projects in African countries are almost twice as high as the World Bank’s. Besides, the bulk of work on the infrastructure projects funded by China is carried out by major Chinese companies.
The first to fall into China’s “One Belt, One Road” trap were African countries. So far, 37 out of 54 African countries have borrowed from China under this project. Beijing has invested over $180 billion in infrastructure projects in Africa.
China began its financial “conquest” of Africa in 2000. In 2009, it left the United States far behind in terms of investment in Africa, and in 2013 the trade turnover with the continent reached $210 billion.
China’s direct investment in Africa was $500 million in 2003, while it exceeded $20 billion in 2013. Africa currently owes China more than $180 billion.
In 2017-2020 alone, China spent $143 billion on infrastructure in Africa as part of the project. At present, for example, 70 percent of Djibouti’s foreign debt is to China. The saying “China bought Djibouti for $8 billion” is becoming proverbial in the world.
China’s interest in the black continent is not accidental. First of all, Africa is rich in oil, gold, aluminum, titanium, diamonds and other resources. There are also rare metals in Africa that are necessary for China’s electronics production. Poor African countries do not have the financial means to extract these metals, and China masterfully takes advantage of this fact.
On the other hand, labor is very cheap and protection of workers’ rights is non-existent in African countries with their rapidly growing population. China also benefits from this factor: about 15,000 large Chinese companies currently operate in African countries.
China also uses African countries for political purposes: 37 African countries, which are financially dependent on Beijing, unanimously support all China’s proposals at the UN tribunes.
Beijing is also expanding its military presence in Africa. In 2017, it established its first foreign military base in Djibouti, and according to the latest information, it is also about to build one in Namibia. The military base in Djibouti gives China access to the Suez Canal, and Namibia has the richest uranium deposits in the world. China is rapidly increasing the number of nuclear power plants to minimize the share of coal in energy production. At the same time, Beijing has doubled the number of nuclear warheads in the past 15 years.
China is also moving towards Europe, if somewhat slowly. In 2019, the Chinese leader paid an official visit to Italy, and documents were signed on Rome’s official accession to “One Belt, One Road”. As a result, Italy is the first of the G7 countries to officially join the project. China and Italy have signed a memorandum on this. In total, 10 agreements worth €20 billion have been signed between China and Italy. Under these agreements, China will invest heavily in the Italian ports of Trieste and Genoa. These ports will be connected by rail to Duisburg, Germany. Duisburg is considered to be the final destination of the New Silk Road from China to Europe.
Before Italy, 13 small EU countries signed an agreement with China on cooperation within the “One Belt, One Road” project.
China has no intention to content itself with Italy in Europe. Beijing is planning to invest heavily in terminals in the ports of Rotterdam, Hamburg and Piraeus. The Chinese state-owned company COSCO has taken a lease of container terminals in Piraeus for 35 years. It has also taken a lease of the largest ports in Pakistan, Djibouti and Sri Lanka for 99 years. To achieve all this, China initially lent large amounts to these countries and then leased ports from the countries in its debt bondage on favorable terms. This is why the European Union and the United States fear that Italy will become China’s “Trojan horse” in Europe.
In addition to Africa and Europe, China exerts economic influence on a number of Asian countries. Tensions between Pakistan and China have been rising recently. Although they have yet to reach political circles, tensions have accelerated in the economic sphere. Pakistan, a participant of China’s “One Belt, One Road” initiative, has benefited greatly from Beijing’s generous donations. Or rather, it has fallen into the trap of Chinese investment and cheap credit. By June 2022, Pakistan must repay China $9.5 billion in commercial loans.
Pakistan, which borrowed $16 billion from China after the conflict with Afghanistan, was unable to repay it and had to lease out Gwadar, the country’s largest port, with all its revenues to China. China’s revenue during the 99-year lease is estimated at only 12 percent of Pakistan’s debt to it. This clearly shows how successfully China has benefited from its carrot-and-stick approach.
Economics expert Elman Sadigov says that “One Belt, One Road” is one of the most ambitious projects not only in China, but in the world in general. “The project was first announced by the Chinese leadership in 2013. There are three main routes. China supports the construction of infrastructure within the project in the countries through which these routes go. One of the routes goes through Pakistan. In this regard, we can say that Pakistan, a brotherly country, has fallen into the debt trap of China’s loans ($22 billion for energy projects, $11 billion for motorway and railway construction) under the “One Belt, One Road” project in the past 8 years. Although many countries have attracted loans for infrastructure projects under this project, they later realized that it was a trap. For example, Malaysia has canceled a $50 billion investment agreement. There is serious dissatisfaction in African countries. Pakistan has appealed to China to ease credit conditions. It is likely that China will soften after gaining concessions in several other areas. Another interesting fact is that many countries that borrowed from China have asked to ease conditions because they are buried in debt and have difficulty repaying their loans.”
According to the expert, the path chosen by China is very clever and cunning. “In return for the heavy loans, China has the opportunity to fully influence the countries that get them. There is another thing here that makes me wonder. All countries in the credit trap are poor and developing. But those who take and approve these loans cannot be random people. The miscalculation is interesting.
There is misappropriation of loans, corruption and so on. But this is a different matter. The issue is loan repayment. Because if the loan repayment period for long-term projects (as well as for a project with an investment payback period of 20-30 years) is 8 years, then this loan must be repaid at the expense of other sources. If these sources are not calculated correctly, the result is catastrophic. There are those who have already learned from the fate of the trapped countries, and I think that the process will deepen. Malaysia, Myanmar and Nepal have suspended $10 billion worth of projects and refused Chinese loans. The United States and Europe have a capitalist approach, they are innovating and civilizing wherever they go. China’s only goal is to subjugate the countries it goes to. So, the purpose behind the “One Belt, One Road” project is quite clear. ”
Azerbaijan also aspires to be part of the “One Belt, One Road” project. In recent years, the country has taken serious steps to make freight transportation from China to Europe and vice versa more convenient than other routes, and infrastructure projects are being implemented. Azerbaijani officials have repeatedly stated that the country claims the benefits provided by China under the project. We are talking about the financing of infrastructure projects first and foremost. However, China is not interested in cooperating with Azerbaijan in this area. The explanation is very simple: Azerbaijan has the opportunity to repay the loans it will receive! Even if China allocates several billion dollars in loans, it will not be difficult for Baku to repay it on time. For this reason, China has focused on Uzbekistan rather than Azerbaijan and Kazakhstan. In 2019, China accounted for 26.2 percent of foreign investment in Uzbekistan. There are 100 Chinese companies in Uzbekistan, 52 of which are exclusively Chinese-owned. China’s annual investment in Uzbekistan is expected to rise up to $5 billion by 2025.