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Russia, China Sign Raft Of Deals And Will Integrate The Eurasian Economic Union, New Silk Road

Russian President Vladimir Putin (left) with Chinese President Xi Jinping (right) during a meeting at the Kremlin on 08MAY2015. Photo courtesy of the Russian Presidential Press and Information Office.

Russian President Vladimir Putin (left) with Chinese President Xi Jinping (right) during a meeting at the Kremlin on 08MAY2015. Photo courtesy of the Russian Presidential Press and Information Office.

Russian President Vladimir Putin and Chinese President Xi Jinping on Friday signed a decree for cooperation in tying the development of the Eurasian Economic Union (EEU) with the New Silk Road economic project.

Russia and China also signed a number of energy, trade, and finance deals on Friday, which are aimed at strengthening economic ties between the two nations.

Putin said the integration of the EEU and China’s New Silk Road project paves the way for building a common economic space in Eurasia.

“The integration of the Eurasian Economic Union and Silk Road projects means reaching a new level of partnership and actually implies a common economic space on the continent,” Putin said after the meeting with Xi, who was visiting Moscow to attend the 70th anniversary celebration of the defeat of Nazi Germany in World War II.

“The EEU and Silk Road projects can harmoniously supplement each other,” Putin said.

A common economic space is the next stage of economic integration after a free trade area and a customs union, according to a statement from the Russian and Chinese leaders.

The statement also said that both sides are considering the creation of a free trade zone as a long-term goal.

“The sides support the launch of a dialog mechanism between the EEU and China for conjugating the Eurasian economic integration and the construction of the Silk Road economic belt,” the statement said.

The Silk Road economic belt project envisages creating a transport, energy, and trade corridor between Central, South Asia, and Europe and is aimed at tying China with European and Middle Eastern markets.

China has allocated $40 billion in funding for the project through a special fund and has been said to have injected $62 billion of its foreign exchange reserves into two state-owned policy banks in order to support lending for the project.

Russian-Chinese Deals

China will invest $5.8 billion for the construction of the Moscow-Kazan High-Speed Railway, Putin said. The railway will be extended to China and will connect the two countries through Kazakhstan. The railway will become part of the route of the new Silk Road project, which is aimed at tying China with European and Middle Eastern markets. The total cost of the Moscow-Kazan high speed railroad project is $21.4 billion.

The Moscow-Kazan High-Speed Railway.  Image courtesy of the Siberian Times.

The Moscow-Kazan High-Speed Railway. Image courtesy of the Siberian Times.

Russia’s largest gas producer Gazprom and China’s National Petroleum Corporation (CNPC) signed an agreement on gas supplies from Russia to China through the Western route. The two companies also extended their strategic partnership agreement for five years, according to Gazprom’s CEO Aleksey Miller.

russia-china-gas-deal

Putin also said that Moscow welcomes Chinese companies’ involvement in gas production in the Russian Arctic and Sakhalin offshore fields.

Putin said that Russia and China will continue to develop financial sector cooperation, including a broader use of the ruble and the yuan in mutual settlements.

Russia’s largest lender, Sberbank, signed a $966 million agreement with China’s Development Bank and also agreed on financing $256.4 million for an industrial project by Sberbank.

The bank agreement is aimed at developing “long-term cooperation between Sberbank and China Development Bank in the area of financing foreign trade operations between Russia and China,” Sberbank said.

Putin noted that the Sberbank deal with its Chinese partners provides credit lines in national currencies.

Russia’s state-owned VTB Bank and the Export-Import Bank of China signed a $483.2 million loan facility agreement to finance trading operations between Russia and China.

Putin also highlighted the launch of new financial instruments, such as the trading of ruble-yuan futures on the Moscow Stock Exchange.

Russia and China also agreed to create a leasing company to promote the sale of the Russian Sukhoi Superjet-100 passenger aircraft to China and Southeast Asia.

Russia and China will also develop a new heavy helicopter, called the Advanced Heavy Lift, which will be able to lift 38 tons and operate in mountain areas and perform in any kind of weather conditions.

Russian Direct Investment Fund (RDIF), the Russia-China Investment Fund (RCIF) and the People’s Government of Heilongjiang Province agreed to launch a $2 billion fund targeting investment in agricultural projects in both countries.

The share of Chinese investment in Russia may soon reach 20 percent and amount to 40 percent in the medium to long-term, according to the CEO of RDIF Kirill Dmitriev.

The Eurasian Economic Union is an economic and political bloc which consists of Russia, Kazakhstan, Belarus, and Armenia, with Kyrgyzstan set to join soon.  The treaty to form EEU went into full effect on January 1, 2015. The population of the union is over 170 million people and its gross domestic product (GDP) is expected to reach $3 trillion next year.

eurasian economic union EEU

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  1. Pingback: Chinese Investment In Russia Could More Than Double In 5 Years | EMerging Equity - May 21, 2015

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