China’s Influence in Eastern Europe & the South Caucasus:
Since the beginning of Russia’s full-scale invasion of Ukraine, the PRC has refused to condemn Vladimir Putin, opposed economic sanctions, and abstained or joined Russia in UN votes related to the war. Moreover, various reports indicate the PRC has assisted Russia in circumventing Western sanctions and export controls thereby helping Putin finance the war. For example, China has overtaken Germany as the biggest single buyer of Russian energy, with oil, natural gas, and coal sales to China contributing $12.6 billion to Russia’s economy since the full-scale invasion of Ukraine.
Before Russia’s unprovoked war of aggression against Ukraine, PRC influence in Eastern Europe and the South Caucasus was modest compared to Russia and the European Union. However, PRC diplomatic and economic activity in Belarus, Ukraine, Moldova, Azerbaijan, Armenia and Georgia has grown since the end of 2013 with the launch of the Belt and Road Initiative as Beijing sees the region as a trans-continental link between Asia and Europe.
The PRC’s economic interest in the region has been most prominent in the infrastructure, energy, transportation, and agriculture sectors. The PRC is combining its economic activities with regional defense and security cooperation. In particular, Beijing has sought to build stronger defense ties with Ukraine, which inherited a large part of the Soviet military-industrial complex at the end of the Cold War.
The PRC has been cautious thus far not to run counter to Russian interests in these countries given Moscow perceives the region to be in its sphere of influence. These countries also calibrate their relations with the PRC with Moscow in mind. For example, following the 2014 Russian invasion, Ukraine turned toward the PRC in search of an export market to replace that of Russia. Belarus, Armenia, and Azerbaijan have also sought out the PRC as a partner to mitigate concerns of becoming overly dependent on Russia. However, the PRC’s “no limits” friendship with Russia casts doubt on this trend at least in Ukraine.
China’s Trade and Foreign Investment in Eastern Europe & the South Caucasus:
Belarus, Moldova, Ukraine, Georgia, Azerbaijan and Armenia have all joined the PRC’s Belt and Road Initiative.
In 2020, the PRC surpassed Russia as Ukraine’s largest bilateral trading partner (the EU as a whole is Ukraine’s largest trading partner). In 2020, Ukraine’s trade with the PRC amounted to $15.3 billion, with Russia $7.2 billion and with the EU as a whole $39.4 billion.
The PRC has primarily invested in Ukrainian infrastructure and renewable energy projects, including two Black Sea ports, a highway reconstruction project, $2 billion new line for the Kyiv metro, solar power plants and a large wind farm.
The PRC is Belarus’ third largest goods trading partner. As of 2020, the PRC is also Belarus’ largest export market for one of Minsk’s key commodities: potash.
China has so far financed at least 35 BRI infrastructure project in Belarus, but the most ambitious Belarusian-Chinese project by far is the Great Stone Industrial Park, which President Xi hailed as the “pearl” of the Silk Road. The China Exim Bank and the China Development Bank provided $3 billion in loans to develop the Park. As of mid-2022, 90 companies reside in the China-Belarus Industrial Park and benefit from its property, land, and income tax exemptions and other advantages.
China’s Trade and Foreign Investment in Eastern Europe & the South Caucasus (Cont’d):
According to World Bank data, from 2005 to 2020, Chinese trade turnover with Armenia, Azerbaijan and Georgia increased around 2,070%, 380% and 1,885%, respectively.
In 2019, Azerbaijan boasted the signing of several agreements worth over $800 million at the 2nd Belt and Road Forum for International Cooperation in Beijing.
PRC SOEs have received contracts to construct and modernize highways and railways in Armenia and Georgia, and one launched a new container railway link in Baku in September 2020 which will cut shipping times from China to Azerbaijan by a third.
In 2018, a PRC railway company was criticized for workplace conditions and the treatment of journalists in Georgia; despite this, another SOE with a track record of corruption, poor workmanship, and environmental issues was awarded a contract to reconstruct a Georgian road in 2020.
In 2019, Armenian officials criticized another company for poor highway construction and delays; later on, an investigation was opened regarding suspected tax evasion as well.
There is also significant PRC investment in the mining and energy industries in the region
In 2019, a Chinese aluminum company announced plans to invest $100 milion to develop an aluminum industrial zone in Armenia.
China’s Security and Defense-Industrial Cooperation in Eastern Europe & the South Caucasus:
Before Russia’s full-scale invasion of Ukraine, the PRC was Ukraine’s largest buyer of defense equipment, and Ukraine is the PRC’s second largest supplier of defense equipment after Russia. These deliveries have included diesel tank engines, gas turbines for naval destroyers, and turbofan engines for fighter-trainer jets, as well as aerial refueling tankers.
The U.S. is lobbying against the PRC’s aerospace company Skyrizon’s attempts to acquire Ukrainian Motor Sich, a global leader in helicopter and airplane engine maker. Skyrizon was added to the U.S. Commerce Department’s Military End User list in January 2021. A court in Kyiv stopped the deal last year and, in March, Ukraine sanctioned Skyrizon along with three other Chinese companies seeking to gain control of Ukraine’s aerospace industry.
Belarus is an observer and Armenia, and Azerbaijan are dialogue partners in the Shanghai Cooperation Organization (SCO), making Minsk the only European country represented in the organization. The SCO is a security-oriented organization that includes the PRC and Russia, among others.
The PRC is heavily involved in the joint development of Belarus’ Polonez multiple launch rocket system. Belarus also uses Chinese-made A200 and A300 missiles. The PRC also financed and launched Belarus’ first commercial satellite, Belintersat-1, in 2016. In 2018, the second Belarusian satellite, BSU-Sat 1, was launched by China.
Armenia’s first non-Russian weaponry purchase came from the PRC in the late 1990s – according to media reports, Armenia acquired new PRC AR1A multiple-launch rocket systems in 2013.
Following the Armenian Defense Minister’s visit to the PRC in 2017, the PRC also agreed to provide about $1.5 million in non-lethal assistance to Armenia.
In 2018 following a visit to Beijing, Azerbaijani Defense Minister Zakir Hasanov announced additional purchases of Chinese military-defense equipment, including radio electronic facilities and short-range tactical missiles
Huawei’s Activity in Eastern Europe & the South Caucasus
Huawei is active throughout the region. In Belarus, Huawei has been supplying video surveillance systems to the Lukashenko government since 2011.
In 2019, Huawei hosted a Ukraine Digital Transformation Forum, where it said that it had “helped Ukraine move from 2G to 4G and increase its mobile penetration from 8% to 65%.”
In Georgia—as well as in Armenia and Azerbaijan—Chinese mobile phones hold about one-quarter of the consumer market. In April 2021, Huawei’s devices were used by 8.6% of Georgia’s population.
Georgia and the United States signed a MoU on 5G security in January 2021. While China was not mentioned in the document, Huawei is implicitly targeted.
In 2017, Huawei signed an agreement to develop a “Smart City” project in Yerevan, Armenia; negotiations were supposedly still ongoing in early 2019.
Huawei also announced its intention to develop Azerbaijan’s 5G network in 2019. However, the future of its 5G network is not clear-cut after in December 2019, Ericsson and Azerbaijani communications service provider Azercell signed a three-year 5G MoU for the joint deployment of 5G projects.
China’s Soft Power in Eastern Europe & the South Caucasus
The region’s first Confucius Institute opened its doors in Belarus in 2007 and was housed by the State University; it was followed by others in Armenia in 2008 and Moldova in 2009, Georgia and Ukraine in 2010 and Azerbaijan in 2011. Ukraine and Belarus now each host six Confucius Institutes.
- Confucius Institutes are PRC funded institutions that are embedded in universities throughout the world to promote the PRC’s political agenda.
The PRC funded over $12 million in an Armenian school, with 400 student Chinese-Armenian Friendship School that includes Chinese-language curriculum in 2018.
The COVID-19 pandemic provided China with new opportunities to make inroads in the region by providing much-needed medical supplies and equipment. China sold 100,000 COVID-19 vaccines to Belarus; 100,000 to Georgia; 500,000 to Azerbaijan; 400,000 to Armenia; and 1,900,000 to Ukraine.
In April 2020, Armenia received a shipment of medical supplies and equipment from the PRC, which included both Armenian-purchased and PRC-donated goods. Prior to 2020, the PRC had also donated hundreds of buses and ambulances to Armenia.
*Last Updated: 10/25/2022