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China’s One Belt, One Road Initiative And The Middle East Is A Crossroads, Part 1, Afghanistan, Armenia, Bahrain, Egypt And Georgia

ArmchairTechInvestor, May 24, 2018, by Brad Peery

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Below are summaries of the OBOR initiatives in the countries covered in the Middle East Part 1.

Afghanistan

*In May 2016, Afghanistan signed a Memorandum of Understanding (MOU) with China on the One Belt, One Road (OBOR) Initiative. The aim is to foster cooperation that includes policy coordination, infrastructure development, trade and investments. Projects implemented include a cargo railway connecting China to Northern Afghanistan and a direct flight between Kabul and Urumqi. China has committed to invest $100 million in OBOR projects in Afghanistan.

In August, 2017, the U.S. implemented a new Afghanistan policy which adds 4,000 U.S. troops to facilitate the efforts directed at terrorists and criminal networks while expanding the use of unmanned aircraft and special operations teams.

China is Afghanistan’s third largest trading partner, with bilateral trade estimated to have been over $1 billion in 2015. Afghanistan is in the middle of some very large OBOR investments being made by China. There is a China-Pakistan Economic Corridor in which China is investing $46 billion. China is making a very large commitment to Pakistan. With militants using Pakistan as a sanctuary to attack Afghanistan, some uncertainty is introduced into how the investments China is making in Afghanistan will tie into the larger OBOR plans for the area. China and the U.S. should be partners in Afghanistan, as both need a peaceful country and a stable government.
*China’s Belt and Road Meets Trump’s Afghanistan Plan
Could China play the good cop while the U.S. plays the bad cop?
The Diplomat, By Yu Fu, December 21, 2017

Armenia

**Armenia borders Iran and Turkey in the Middle East, and is at the crossroads between Asia and Europe. It has mountainous terrain and is rich in minerals that include aluminum, iron, gold and silver. As a way station on the original Silk Road, Armenia has planned a new rail link to Iran and a new North-South highway which will allow goods to be transferred from Armenia’s southern border to Georgia and beyond to Black Sea ports that include Batumi and Poti in Georgia.

Armenia is a small country with a GDP of about $10.6 billion. It has not been formally invited to join the OBOR Initiative. “There is no formal invitation to the country,” says Hrant Abajyan, Armenia’s trade representative to China in Beijing.

Armenia states that it is convinced that the Initiative will be important in developing relations between participants, and that “it can and must be an *integral and indivisible part of this initiative.”
**Making sense of Belt and Road – The Belt and Road country: Armenia
EUROMONEY, By: Chris Wright, September 26, 2017

Bahrain

***Bahrain is an island country in the Persian Gulf. It is connected to Saudi Arabia by the 15 mile long King Fahd Causeway. It is the smallest country among the six-member Gulf Co-operation Council (GCC). More than 50% of the people in Bahraini are expatriates, including Indians, Pakistanis, Bangladeshis and Filipinos. Bahrain has signed free trade agreements with the US, Singapore and the European Free Trade Association.

Bahrain has a double taxation agreement with China. Many Chinese enterprises have set up businesses in Bahrain. They include the Bank of China, the China Harbour Engineering Company and Huawei. Huawei, which may be banned in the U.S. because of possible spying by the Chinese government, opened its first Middle East IT tech center in 2012. Mainland China company Chinamex partnered with Bahrain’s Diyar Al Muharraq and built Dragon City, a retail and wholesale mall development modeled on the UAE’s successful Dragon Mart. Dragon City began operations in December 2015.

The six member-countries of the GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE) are considered an important trade region and was the EU’s fourth-largest export market in 2016.

**“According to Bahrain’s Minister for Transportation and Telecommunications Kamal bin Ahmed Mohammed, the ambitious multi-trillion-dollar Belt and Road Initiative (BRI) by China could become a great opportunity for the Gulf nations.
The Gulf region, which is a central location of the BRI, is a prime market for China and vice versa.”
***China’s ‘One Belt, One Road’ is a ‘win-win’ for GCC – Bahrain Minister, GulfInsider, May 13, 2018

Egypt

Egypt’s GDP growth rate was 4.3% in 2016, and reached 5.4% in the March quarter of 2018. The Suez Canal is a vital shipping lane that connects the Mediterranean Sea with the Red Sea. To double the shipping capacity of the Canal, the Egyptian government started the Suez Canal Corridor Area Project (SCCAP) in August 2014. The project will include industrial and technology parks in addition to the new Canal sector. Revenue is projected to increase to $15 billion in 2023 from $5.3 billion in 2015. with the SCCAP expected to spur foreign investment and create jobs.

****Egypt should be able to serve as the hub for OBOR Initiative into the Middle East and Africa. With Egypt viewed by China as one of the five most attractive countries for mergers and acquisitions potential, their relationship has been elevated to a “strategic partnership”. There is now a growing new commercial relationship between them.

New elements in attracting Chinese capital are new standards that define and require that developments be green. The definition of green is being developed by China to suit its own needs.
****Greening the belt and road: opportunities for Egypt, Middle East Institute, By Deborah Lehr and Yasser Elnaggar January 23, 2018

Georgia

One Belt, One Road Network
ArmchairTechInvestor, May 24, 2018, by Brad Peery

*****Georgia is well situated to be an important participant in the OBOR Initiative. It is located at the eastern part of the Black Sea. Russia is north and northeast and to the south are Armenia and Turkey. Georgia is a logistics and transshipment corridor to the Caucasus mountains and Central Asia. 60% of all types of its overland international freight are in transit. Infrastructure upgrades are underway at the major seaports of Batumi and Poti. There are several other planned projects, as well as the construction of a deep-sea port at Anaklia. This port will accommodate larger vessels. All of these projects should strengthen the country’s logistical importance.

Former Georgian President had a disastrous plan to build skyscrapers that would house 500,000 residents. The city of the future is today an array of tetrapods that form a breadwater for the Anaklia Black Sea Deep Water Port, which Georgia hopes will be a key link on China’s OBOR initiative.

This is the foundation for the Anaklia Black Sea Deep Water Port, Georgia’s bid to become a key link in China’s sprawling Belt and Road Initiative. The bid to construct the $2.5 billion port was expect to go to Chinese investors, but instead went to a group of Americans and Georgians. A key factor was that of the jobs going to Chinese workers, an estimated 6,400 jobs will go to Georgians, easing the 12.5% unemployment rate. In Pakistan, the Chinese port development there resulted in the jobs going to the Chinese.

The South Caucasus offers the West an attractive alternative to other OBOR trade routes. Georgia is more geopolitically palatable than Iran. Tbilisi, where the port is located ranks favorably in global indices measuring corruption and ease of doing business. Also, Georgia signed a Deep and Comprehensive Free Trade Agreement with the EU that became effective in 2016 allowing Georgia to serve as a logistics hub with the EU. China followed suit with a bilateral free trade agreement that came into effect on January 1, 2018.

Georgia became directly involved in OBOR 2016 when it joined the Asian Infrastructure Investment Bank (AIIB), a $100 billion fund designed to finance Belt and Road projects. Georgia has signed an agreement under which the bank will provide $114 million to build the Batumi Bypass Road, a new highway to connect Georgia’s outlying areas through a series of mountain tunnels.

Georgia seems to have avoided the pitfall of having China build and manage its most important port project and instead can manage its three ports as a integrated program, with the larger vessels going to the Anaklia port.
*****With Port Project, Georgia Seeks Place on China’s Belt and Road.
Georgian infrastructure remains underdeveloped, which could leave Anaklia disconnected, Eurasianet, Bradley Jardine, February 21, 2018

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