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Interview of the EEC Minister in charge of Energy and Infrastructure Adamkul Zhunusov with Rossiyskaya Gazeta on pairing of the EAEU and SREB

Interview of the EEC Minister in charge of Energy and Infrastructure Adamkul Zhunusov with Rossiyskaya Gazeta on pairing of the EAEU and SREB

12/6/2016

Russia, together with the other countries of the Eurasian Economic Union (EAEU), suggested more than 40 collaborative projects in the area of transport, claiming the co-financing of China. They should establish end-to-end logistics among China, the EU and the Eurasian Union and along related routes supplementing the main transport corridors of Eurasia (Western Europe - Western China, North - South, East - West, and the Northern sea route).

The details of the project and its expected effect on the economy were reported to "Rossiyskaya Gazeta” by the EEC Minister in charge of Energy and Infrastructure Adamkul Zhunusov.

The pairing of Russia and China was agreed in May 2015, but until now the Parties have been trying to determine an aspect matching the intention of China to build a powerful transit infrastructure in Asia leading to Europe. For Russia it is important to redirect to its territory a part of Chinese trade flows following now to the EU by sea, and at the same time attract Chinese money on its roads and transport hubs, create new jobs there.

On December 7, the list of projects will be discussed by the Transport Ministers of the EAEU countries, and this block will be included in the agenda of negotiations with China within the framework of pairing of the Eurasian integration and the Chinese Silk Road Economic Belt. For these projects, as confirmed by the Minister, the five countries have good reasons to make common cause with China in the negotiations.

- Adamkul Orokeevich, the Silk Road is a good image, and when will it start to materialize for us? I mean specifically the sphere of transport and infrastructure.

- I will have to disappoint all skeptical experts who questioned the interest of the EAEU countries in the opportunities of the multilateral format (of cooperation with China - editor). The interest is really high. We have now a little more than 40 proposals. Construction of new roads and renovation of the existing ones, creation of transport and logistics centers, development of key transport hubs, and so on.

We have to understand here that Beijing always sticks to economic reasonability, and it is important for us to properly articulate benefits for China from the development in the direction of the Eurasian integration. Today it is a market with emerging common rules in almost all spheres of the economy and for the population of over 180 million people. That is roughly a quarter of the densely populated Europe. And if we talk about the prospects of the pairing project, it is not just about its transit opportunities.

On the other hand, modernization and construction of the infrastructure have a number of advantages. Those are jobs, of course. Moreover, the implementation of infrastructure projects could be a driver for the development of national economies. In fact, the infrastructure is nothing but a set of industries, providing for the efficient functioning of social and economic systems at macro and micro levels.

- What is the implementation phase of these projects?

- It depends. Some of them are already implemented, some others are in their final stages or still only on paper.

- Will you give examples, please?

- Southern Railway Iran-Armenia. Due to its difficult geographical situation, Armenia is extremely interested in the development of relations with Iran. This corresponds to the vector of the Union for the conclusion of a free trade agreement with Iran. After the implementation of the project this road can run through Iran to Kazakhstan, China and further on. The real opportunity is not only a direct railway between Iran and other Gulf countries, but also the possibility of land transport among these countries and other States of the Silk Road.

- And Russia’s part is the high-speed railway Moscow-Kazan, isn’t it?

- Partly yes. There is another road from St. Petersburg to the border of Kazakhstan in the framework of international transport route “Europe-Western China”. As you may know, this is a very large investment project, covering the territory of Russia, Kazakhstan, and China. It envisages construction of a new highway and large-scale reconstruction of the existing one.

There is also a question about the development of transport and crossing capacities of Baikal-Amur and Trans-Siberian railways. Development of the Trans-Siberian railway is interesting not only for Russia, but also for Belarus, Kazakhstan, and China. The “Transsib” plays an important role in the delivery of products to the regions bordering on Europe not only from the Far East, but also from countries of the Asia-Pacific region. The transit from China to Germany by Transsib takes approximately 20 days less than by sea. Both projects will contribute to the significant increase in the international transport of goods, primarily goods in containers.

Russia also proposes inviting “Integrated transport and logistics company” (OTLK) in the negotiation framework. OTLK is actually a not purely Russian project - the company was created by railway administrations of Russia, Belarus and Kazakhstan as a container transit operator on the route China-Southeast Asia-EU and backwards. This project is the first and only of its kind, it is already successful, but requires further development.

- And what about other countries - Belarus, Kazakhstan, Kyrgyzstan?

- For Belarus, it means the construction of a high-speed railway from the border on Poland via Brest, Minsk and Orsha to Russia within the framework of the project “Berlin-Beijing”.

One of Kazakhstan’s proposals is the reconstruction of several highways and railways, construction of six transport and logistics centers, including in Pavlodar, Ust-Kamenogorsk, and Kostanai. The logistics centers are intended for the markets of the Ural-Siberian region of Russia with access to Chelyabinsk, Yekaterinburg and Omsk. As you can see, these mentioned projects are of interest for the EAEU partner countries, they will give a powerful impetus to the development of border regions of Russia and Kazakhstan.

Kyrgyzstan proposes considering creation of three transport and logistics centers and several railway construction projects as part of the pairing with the Silk Road. The most important of them is the railway China-Kyrgyzstan-Uzbekistan. The project will allow the Kyrgyz Republic to create a single internal rail network and connect the EAEU countries with China through its territory. This will form a new southern corridor of the continental bridge of Eurasia. And it is quite clear that the implementation of such projects will have a positive impact on the growth of the country's competitiveness in the international market of transit shipments.

- How will a shortlist of projects be generated before they can be discussed with the Chinese party, what are the priorities within the EEC mandate?

- We are still in the process of reviewing and harmonizing of the list of priority projects that can be included in the "road map" for discussion with China. Today, the parties have generally agreed only on projects in the fields of transport and infrastructure.

As for selection criteria, after some debates we came to the conclusion that the draft "road map" should meet three key criteria. First, focus on increasing and improving the efficiency of transit potential of the Union States and pairing with the transport system of China. Second, the need for funding, including certain stages of the project. And most importantly, two or more Union States should be interested in the project.

I think we will agree on the final version of the proposals at the meeting of heads of transport departments and submit the list to the EEC trade sector - to Minister Veronica Nikishina as the main negotiator with our Chinese partners.

- How will it correlate to the Main directions of the transport policy of the EAEU?

- System work on the list of infrastructure projects is an important part of the activity of the transport sector of the EEC and the competent authorities of the partner countries, including in the framework of this document. It will define the entire sequence of actions in order to create a common market for transportation services and the common transport space of the Union. We have almost finished developing the Main directions, and in late December we plan to report the results to heads of states within the Supreme Eurasian Economic Council.

Our missions are equal conditions for market access of transport services and infrastructure, creating competitive environment, harmonization of transport conditions and rules, and effective use of the common transit capacity. This will eventually lead to lower transport costs, increased traffic, increased availability of transport and citizens’ mobility.

- Adamkul Orokeevich, have you analyzed the indicative cost of all these projects?

- Based on those data that we have received from the countries, the total volume of all the projects is more than 30 billion dollars. But it's very conventionally, because, again, they are at different degrees of development and implementation. The cost of complex infrastructure projects is built at the stage of feasibility study, but it can evolve, sometimes significantly, because the transition from design to implementation could take several years.

- Does profitability of projects matter?

- Our goal is to develop a package of proposals. The EEC is neither a financial institution, nor an investment company. At the same time, our colleagues from the international infrastructure banks believe that every dollar invested in the Silk Road Economic Belt will bring a refund of 20 cent. This is high profitability, as you might know. But it all depends on the project, for some of them the expected payback period exceeds 20 years. And this is normal for such projects.

- How much money can be invested by China in these projects?

- The financial side of the issue is the subject of a separate discussion. Options of public and private partnerships, participation in projects on co-financing terms or crediting, or under concession are likely to be considered. Such proposals can be already heard from the partner countries on the EAEU. In general, it is about attracting financing from China, and the Union countries are very much interested in that. It is too early now to discuss the potential volume of this financing.