Silk Road Headlines_17th July, 2019

Russia Approves 2000-kilometre BRI highway

The Russian government has approved the construction of a 2000-kilometre highway, linking Europe to Central Asia. The new road is called the Meridan Highway (not to be confused with an early-20th century U.S. road with the same name). Tolls will be charged for trucks and cars. The highway is part of a much larger 5000-kilometre planned road-project, which eventually may connect the German city of Hamburg with Shanghai.

The new Meridan Highway is part of China’s Belt and Road Initiative (BRI), and the project was reportedly confirmed by President Putin during the Second Belt and Road Forum for International Cooperation last April in Beijing. The developer of the highway is a company called Russian Holding, led by Alexander Ryazanov, a former deputy-chairman of Gazprom.

Russian Holding says construction has started and claims that it owns 80% of the land needed for the road. The four-lane highway will take about 14 years to complete. It will run from the Russian border with Belarus to the Russian border with Kazakhstan. Connecting roads to Uzbekistan, Kyrgyzstan and Tajikistan are under consideration as well. Russian Holding is also planning to develop several tourist resorts and logistics hubs along the road.

The Meridan Highway will cost $9.5 billion [Russia approves ‘Shortest’ Europe-China Highway]. Russian Holding hopes to lure private investors by promising a quick return, saying that the highway will break even in 12 years, based on the expected income from tolls. But private investments may not be enough, and the Russian government is seeking investments from China. The Russian government itself has no plans to invest [Russia to build new ‘Silk Road’ linking China].

Will China provide capital for the Meridan Highway? The country has heavily invested in a railway network,running from China via Kazakhstan and Russia to Europe. This railway is in service but suffers from a lack of customers [China’s Belt and Road hits a speed bump in Kazakhstan]. It seems unlikely that an additional, and competing, highway will manage to do much better.

Furthermore, there are no large Chinese or Russian investment plans for new highways in Kazakhstan. Lorries will have to use Kazakhstan’s existing patchy highway network, which will increase transit times. Finally, considering the planned resorts and local hubs, the Meridan Highway looks more like a Russian road with BRI sauce and not like a genuine BRI project.

But China may still be inclined to invest, as it doesn’t happen every day that a country gives you a 2000-kilometre highway to the west. Possibly flawed, but probably irresistible. And China got at least another 14 years to make a ‘road-improvement deal’ with Kazakhstan.

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