The Ukraine crisis may disrupt the Belt and Road but an old China hand sees it re-energizing the China-EU trade relationship. 

The China-proposed Asian Infrastructure Investment Bank (AIIB) moves into its new head office at the Asian Financial Center in Beijing in early 2020. The multilateral development bank aims to promote development across the world by developing itself into a new type of high-performance institution for international cooperation. 

If not the world, Asia is definitely Chris Devonshire-Ellis’s oyster. By his own admission, he likes to spend winters in Sri Lanka and summers in Mongolia and Russia. When I caught up with him, he was in his office in Singapore. In China, he founded his company, Dezan Shira & Associates, in Shenzhen in 1992 and today, it is a behemoth with 25 offices in seven countries and regions across Asia. They provide multifaceted services, from market entry to foreign investors to HR and technology for businesses and individuals in China, India, ASEAN member countries, Russia, and other countries along the Belt and Road.

Dezan Shira & Associates is a pioneering legal firm with a colorful history and Chris has cornered a well-ensconced niche as one of the earliest “legally responsible persons” on the Chinese mainland. When he founded the company, there were no lawyers, only “legally responsible people.” To be one of them, Chris, who hailed from British shipyard owning gentry in Devonshire, had to master intricacies of Chinese law at a public library in Hong Kong in the evenings to pass the exam to get a license. Then he took the test in Guangzhou, cleared it, and got his license, setting up a representative office in a hotel as that was the law then.

The recent Ukraine crisis has gripped the attention of the world. In the middle of this crisis, we asked Chris about the impact it could have on the Chinese economy and the Belt and Road Initiative (BRI), especially as the main overland route of the initiative, going to Europe from China via Central Asia, Russia, and Belarus, is now facing disruptions.

The China-Europe Railway, a major BRI project, links Chinese cities with 23 countries and 175 cities in Europe. Last year, the China-European Union traffic jumped up by over 100 percent with a record 15,183 train trips on the Eurasia route and 1.46 million TEU containers transported, according to Chinese rail authorities. The conflict and sanctions on Russian and Belarusian ports and other business entities are likely to see considerable disruptions if the situation continues to fester.

For example, Zyxel Communications Corp, a maker of routers and switches based in the Taiwan region, recently announced it had stopped shipping to Europe by China Railway due to the conflict. Ukraine’s Odesa Port has been closed, and Danish shipping giant Maersk announced it was selling its over 30 percent share in Russian port operator Global Ports Investments.

Chris, like all legal professionals, is cautious and believes it’s too early to get a bearing on things with certainty. However, a realignment of the Belt and Road and supply chains between the East and West is on the cards since businesses will seek out other routes. The Suez Canal, a well-known and well-trusted alternative, is still operational. Besides, he foresees secondary routes coming to the fore.

He mentions two options specifically. One is developing the southern route of the Belt and Road passing through Central Asia and then going through the Caspian Sea region. Shipments can pass through the Port of Baku in Azerbaijan, proceed to Kazakhstan’s western Aktau Port, then cross Uzbekistan and subsequently Georgia and Turkey to reach the Black Sea. From there, there are multimodal routes to southern Europe. Though this southern route of the Belt and Road has “some inefficiencies at present” and needs a lot of infrastructure improvement, he says with investment it can become a trade and investment hotspot.

The second one is the International North-South Transport Corridor. This is an over 7,000-kilometer ship, rail, and road corridor running from South Asia, especially Mumbai in India, through Baku, Iran’s Chabahar Port, the Middle East, and then reaching East Africa.

All this of course has geopolitical implications. Leaving aside Iran and changing relations between China and India, what impact could the Russia-Ukraine conflict have on China-EU business relations, given that many Western countries are unhappy that China did not agree to sanction Russia, nor did it vote to support the resolution at the United Nations General Assembly demanding that Russia “immediately, completely, and unconditionally withdraw all of its military forces from the territory of Ukraine within its internationally recognized borders?”

This is literally a trillion-dollar question.

In 2021, China-EU trade amounted to US $800 billion while the EU’s trade with Russia in goods notched up a respectable US $200 billion. Chris’s take is: “I think this will have impacts on the EU’s Global Gateway Initiative, which is being portrayed as a competitor to China’s Belt and Road Initiative, but rather than competition, we are going to see more cooperation. This has actually already started to happen.”

The cooperation Chris mentions here is referring to a railway project in Turkey that is being funded by both the European Bank for Reconstruction and Development and the Asian Infrastructure Investment Bank (AIIB). The nearly 70-kilometer high-speed railway line will go from Istanbul to Bulgaria’s border and is estimated to cost about € 1 billion. The Halkali-Kapikule line, which will have both freight and passenger trains, will be part of the EU Trans-European Transport Network as well as part of the Europe-Caucasus-Asia Transport Corridor meant to boost trade and transport in Central Asia, the Black Sea basin, and the South Caucasus region.

Chris calls this “indicative of more pragmatic cooperation between the EU and China.”

While the anti-China and anti-Russia rhetoric comes from politicians, the business community “that is responsible for generation of profits, paying taxes, and keeping the fiscal revenues of the EU afloat” will keep China-EU trade ties moving forward because, “It is not practical to cut Europe off from both Russia and China, that’s clearly absurd.”

He thinks what’s happening with Russia will actually enable the EU to have greater involvement in the Belt and Road. “Rather than always looking at it from a negative perspective, we are going to see increasing amounts of collaboration between the EU, China, and businesses within both.”

Another development because of the Ukraine crisis, as he sees it, will concern a collaboration in regional payment systems and definitely a boost for the Chinese renminbi.

China has its own Cross-Border Interbank Payment System (CIPS). The development of CIPS began in 2012. According to a Reuters report, CIPS had transactions amounting to nearly US $13 trillion in 2021.

The use of renminbi is also expected to rise in Central Asia and the Eurasian Economic Union, of which Russia is a member, and China also has relations with.

SUDESHNA SARKAR is a journalist and editor based in Beijing. A former commentator for a regional program of Deutsche Welle Radio, she follows China’s development, culture, and international links.