As construction resumes on the North-South Corridor, a large number of Han Chinese contractors can be spotted mingling with local workers near the small industrial town of Maralik. This highway project, the largest undertaken in Armenia’s independent history, is expected to plug the country into the world economy, by providing better access to seaports in Poti and Batumi, as well as Iranian markets in the South. SinoHydro, a Chinese State-owned construction firm, has taken responsibility for completing a stretch of road connecting Armenia’s second largest city of Gyumri to the Georgian border to help accelerate the much-delayed project.
This undertaking is not People’s Republic of China (PRC)’s only significant investment in the tiny Caucasian republic’s transportation infrastructure. Another Chinese firm recently concluded a feasibility study for the construction of a rail line linking Armenia to rail hubs in Iran. Armenia, it turns out, is strategically located to benefit from China’s much-touted Belt and Road initiative. This trillion-dollar undertaking, a flagship project for Chinese President Xi Jinping, aims to reorient the flow of global trade toward the Middle Kingdom, by financing and constructing of a series of highways, rail links and shipping routes across much of Eurasia and Africa. You Zhengsheng, chairman of the National Committee of the Chinese People’s Political Consultative Conference, explained this policy like this: “China is willing to work with Armenia to consolidate the political and public opinion foundations for bilateral relations, and jointly push forward the Belt and Road Initiative and practical cooperation.”
This newfound interest was symbolized last year in a ground-breaking ceremony attended by the PRC’s Assistant Foreign Minister Li Huilai on the site of a new 40,000-square-meter embassy compound expected to become the second largest in the former Soviet Union. The compound’s emplacement, just down the road from the US embassy, (itself once the largest American diplomatic structure in the world) serves as a visual manifestation of China’s growing interest in Armenia.
Diplomats in Yerevan and Beijing have penned cooperation agreements for agriculture, energy production, infrastructure development and even military assistance. Last year, former defense chief Vigen Sargsyan returned from a diplomatic visit to Beijing with pledges totaling $1.5 million in additional military aid.
China’s presence stretches to education as well. Over the summer, Prime Minister Nikol Pashinyan joined Chinese Ambassador Tian Erlong at the inauguration of the Chinese-Armenian Friendship School in Yerevan. This state-of-the-art school, which cost $12 million to build will accommodate up to 500 young Armenian students who will learn Mandarin and Chinese culture on top of the regular Armenian curriculum.
This school is not the first Chinese educational institution operating in Armenia. The Confucius Institute, a controversial Mandarin language center with links to the Chinese Communist Party, has been running two branches in Armenia since 2009. Chinese universities have also begun competing with their European and American counterparts for Armenian students.
Armenia has been more than welcoming of this attention. The Sargsyan government had already been pursuing a quiet policy of rapprochement with China for years. For Yerevan, the benefits are apparent: the Armenia would gain access to no-questions-asked financial assistance from Chinese banks and import Chinese technology at a fraction of the cost than the original western IT rate. The strategic advantages are just as straightforward: the good grace of a rising world power which could act as an alternative to the country’s traditional balancing act (a policy known as complementarism) between Russia and the West.
According to analysts, China’s behavior can be best described as predatory and crypto-colonial.
China is already Armenia’s third largest trade partner, trailing only behind the European Union and Russia. This 41 percent year-on-year increase in trade turnover comes as Armenian producers look to the Chinese market for Armenian wines, technology and agricultural products, while Chinese firms take advantage of Armenia’s lax environmental regulations to invest some $500 million in at least three Armenian mining operations.
The Pashinyan administration looks set to maintain this strategic leverage. With a high-level intergovernmental conference taking place last fall, Armenian policymakers have been discussing increased economic and political cooperation with their Chinese counterparts.
Though Beijing repeatedly touts the mutually beneficial nature of its infrastructure and trade projects abroad, experiences in other developing countries have shown that closer ties with China usually come with strings attached. According to analysts, China’s behavior can be best described as predatory and crypto-colonial. Critics have accused Beijing of exploiting underdeveloped countries through a strategy known as “Debt-trap diplomacy.”
Last year, Sri Lanka was forced to hand over a newly constructed seaport to the Chinese People’s Navy after defaulting on loans owed to Chinese banks. In the meantime, newly-elected governments in Pakistan, Malaysia and Nepal have turned down fresh loan offers from China and promised to open investigations into previous contracts.
With the North-South Highway already dramatically over budget, it remains yet unclear how Yerevan intends to pay up.
Hrant Abajyan, Armenia’s trade representative to China in Beijing, doesn’t appear to be worried. According to him, Armenia has everything to gain from closer relations with China. “There are no compromises because there are no problems,” he told interviewers. “There are no issues that don’t match each other. China has always been a friendly nation for Armenia. We are in a great relationship.”
Abajyan’s collective ideas are not universally shared. Two years ago, Armenia extradited 78 Taiwanese nationals suspected of fraud to the PRC, rather than rival Taiwan under pressure from Beijing. The PRC has been known to pressure states in which it has a substantial presence for solidarity in the international arena.
Questions have also been raised about the business practices of some of the Chinese state-owned companies operating in Armenia. SinoHydro, the company tasked with building three sections of the North-South Highway, has been tied to human rights abuses and shady business agreements across the world. Meanwhile, the Chinese consulting firm which published the feasibility study for the railway link to Iran is at the center of its own controversy.
With the North-South Highway already dramatically over budget, it remains yet unclear how Yerevan intends to pay up. A study by the Centre for Global Development warned that Armenia may be at risk of falling into China’s debt-trap, which owns over $340 million of the country’s public debt. According to the International Monetary Fund, this high share of foreign debt is a source of continued vulnerability for Armenia, despite sustainable rates of public debt.
So far, the advantages of this new relationship with China may seem to outweigh the risks, but for policymakers in Yerevan, the question is: for how long?