Connectivity in Post-COVID-19 Eurasia

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In recent years, Eurasia – the vast space stretching from Eastern Europe to Central and East Asia and from the Baltic Sea to the Indian Ocean – has become the crucial geo-economic chessboard of the 21st century. In this macro region, Russia and China have been laying the foundation for an alternative post-liberal political and economic order. Now, due to the impact of the coronavirus pandemic, the European Union might need to dramatically redefine its approach to connectivity across Eurasia in general, as well as its relations with China and Russia in particular. While this presents new risks for the EU, it also opens unexpected opportunities. Depending on the shape China and Russia will be in at the end of this current crisis, the EU can use these opportunities to adapt its 2018 connectivity strategy to the emerging era, get more space for maneuvering in this difficult triangular relationship, and develop a new Eurasian dimension for its foreign and trade policy based on a more geostrategic approach.

Please note that the arguments in this paper are based on the assumptions that the United States will continue to pursue technological decoupling from China and the current geopolitical struggle between the two countries will persist. Although the outcome of the November 2020 presidential elections will be crucial for determining the foreign policy of the United States and its strategic approach to Europe for the next four years, the United States will continue to promote a national agenda based on geo-economic and geopolitical competition after 2021. Neither a second Trump administration nor a new Biden administration will fundamentally change the isolationist attitude that the country currently holds toward China. Also, either administration would keep decoupling from Europe – at least in the short term. In the case of a Biden administration, however, a rapprochement with Europe is more probable. Still, US conflicts with China could result in a limited pragmatic-tactical rapprochement rather than the renewal of the transatlantic alliance in order to promote a global agenda centered on the enforcement of Western values and technological standards.

The World after COVID-19: Three Major Trends Impacting Eurasia’s Connectivity and the EU

While the coronavirus pandemic has dramatically reshaped the EU’s political priorities for helping member states with economic recovery, Brussels should remain engaged on the global level and be ready to seize some of the emerging opportunities across Eurasia. Three broader trends, which could be noticed before the outbreak of COVID-19 but have been accelerated and augmented by it, are currently reshaping this macro region and will indirectly impact the EU’s connectivity strategy there.

First, connectivity across Eurasia will presumably be less Sinocentric and less driven by China’s Belt and Road Initiative (BRI) as supply and value chains will be more regionally diversified and localized. Despite this development, China will neither give up on the BRI nor reduce its scope. In the long term, China will be much more focused on digital, green, high value-added, and low-carbon manufacturing. In the short- to midterm, however, China’s image as a supplier of critical industrial goods, parts, and components will suffer. Domestic economic difficulties have already forced Beijing to reassess its investment priorities. Meanwhile, China’s aggressive diplomatic attempts to impose its post-pandemic narrative have increased skepticism abroad. Together, these factors could present a chance to reorganize value and supply chains and advance alternative connectivity strategies beyond and independently from the BRI and China.

Second, while Russia’s relations with China will retain their strategic character, Russia will also be more willing to diversify its economic and diplomatic relations in Asia and toward Europe as its attitude toward China evolves. The coronavirus crisis will not change the Kremlin’s general foreign policy attitude toward Beijing, nor will it cause Moscow to concede much to the EU’s normative model. Moscow will try to further prioritize economic, industrial, and geostrategic sovereignty – both at the national and regional level. Weakened by the combined effect of collapsing oil prices, reduced energy demand in Europe, and the economic lockdown, Russia might, however, become even more technologically, economically, and infrastructurally dependent on China. More than in the past, it will probably carefully consider the need to diversify its economic and diplomatic relations both within Asia and toward Europe. Amid the coronavirus pandemic, the Russian government is indeed concluding that it is not only losing maneuvering space vis-à-vis Beijing, but also that its economic dependence on China – particularly in strategic technologies like 5G – is growing. Meanwhile, Beijing’s ability to leverage its position and technologies is growing as well.

Third, decoupling production networks at the global level will lead to recoupling at regional levels and competition with China over supply; value chains in third markets in Europe, Asia, and Africa will increase. Decoupling the production networks among China, the US, and potentially the EU will more likely lead to regional “nearshoring” rather than a simple renationalization of production. In the long term, Europe will no longer be able to disguise its industrial autarchy as strategic autonomy. In fact, growth, technological innovation, industrial development, green energy generation, and consumer markets will still gravitate around the macro region of Eastern Eurasia and the Asia-Pacific and eventually along the nexus of Southeast Asia, India, West Asia, and Africa. Competition with China over supply and value chains, markets, and technologies, as well as connectivity initiatives, will increase – along with the EU’s need to increase external engagement.

Against this backdrop of a changing Eurasian landscape, the EU must adapt the scope, instruments, and strategic direction of its connectivity strategy.

The EU’s Evolving Approach to Eurasia’s Connectivity

The EU Connectivity Strategy of September 2018 was an initial and much needed answer to ongoing integration processes in Eurasia. By confronting China – and to a lesser extent, Russia – with an alternative, sustainable, and inclusive connectivity concept, the EU reaffirmed its beliefs in the liberal model as an instrument for defining a sustainable global and regional order, particularly in this vast and crucial macro region.

Almost two years after its launch, however, the strategy still needs to be brought to life. It is currently more accurate to describe it as a technical document and list of the EU’s instruments and potential cooperation partners than a strategic blueprint for action. Moreover, the strategy still lacks substantial dedicated financial resources. While the new multi-annual financial framework (MFF) for 2021 to 2027 was supposed to identify funds for the connectivity strategy, it was completely reworked in the context of the European Recovery Fund to support economic recovery in member states. The details of the funds of the Neighborhood, Development, and International Cooperation Instrument are yet to be determined. While the pandemic response of “Team Europe” specifies that the six Eastern Partnership countries will receive extra funds, there is currently no budget allocation from other European Commission programs targeting the broader Eurasian space. Even in the European Union’s direct eastern neighborhood, where the EU remains a major investor, its financial means still have only granular distribution and coordination. To put things in perspective, the investments required for the completion of the core of the Trans-European Transport Network (TEN-T) – including its extension to the eastern neighborhood – would amount to between 500 million and 1.5 billion euro until 2030.

Through connectivity, the EU can start to redefine its relations with China and Russia.

Already before the outbreak of the coronavirus pandemic, the EU had at least started to rethink its approach to the world. At the end of the Juncker Commission, a tougher approach toward China was emerging. Moreover, the initial leitmotif of Ursula von der Leyen’s European Commission and Josep Borrell’s mandate as Commission Vice-President and High Representative of the Union for Foreign and Security Policy was a more geopolitical Europe. As Borrell affirmed in his introduction speech in October 2019, the EU “needs to learn the language of power.”

The EU’s self-image has, therefore, apparently evolved from being technical-normative to more “geopolitical-regulatory-normative” – an approach that aims to combine the power of its regulatory framework with the attractiveness of its normative and value model. Proclaiming its geopolitical ambitions is doubtless a small yet important step for the EU, and kick-starting the implementation of its connectivity strategy has become part of this new narrative. Efforts to this end have been made on three main fronts, which also represent starting points for Europe to redefine its relations with China and Russia in the post-COVID-19 era:

1. Showing greater self-confidence in the power of regulatory legal norms and technical standards. While this shift in attitude can generally be seen as a central element of defining a more geopolitical Europe, Romana Vlahutin, EU Ambassador at Large for Connectivity in the European External Action Service (EEAS), also considers it a key asset for implementing global connectivity in line with European values – so-called sustainable connectivity.
2. Reassessing geographic priorities and harmonizing political and financial instruments with a focus on regional connectivity. Examples include better coordinating and aligning TEN-T corridors with the Caucasus and Central Asia transport corridors via Central Eastern Europe, as well as greater participation by the EU and Germany in the Three Seas Initiative.
3. Developing connectivity partnerships to promote norms and standards for sustainable, green, and digital connectivity with new, like-minded partners beyond the transatlantic relationship. The partnership on connectivity signed with Japan in September 2019 is an initial step in this direction.

Limits of the EU’s Approach Toward the China-Russia Challenge

When it comes to shaping its relations with two great powers such as Russia and China, the European Union still lacks a more flexible understanding of how to reconcile its geopolitical aspirations with realistic action. The EU needs to make fluid adjustments to its goals, instruments, and limited financial means on its intended journey to becoming a regulatory standard setter (on which it bases its newly declared assertiveness) and a globally, naturally accepted normative power (which defines the essence of its value-based liberal model).

To be sure, the EU should not give up on promoting its core values, such as human rights, freedom of the press, and data protection. Nor should it stop attaching conditionality when promoting sustainable connectivity across Eurasia. While these values will remain essential elements of a more geopolitical Europe, institutions in Brussels will need to better differentiate between the need to defend them at home from external interference and the wish to establish or enforce them abroad with their limited capabilities.

In fact, China is already becoming a normative power throughout Eurasia. It has proven that it is ready to set technological and political standards with the BRI as well as its Made in China 2025 and China Standards 2035 initiatives. In addition, it has not been shy to promote its “community of shared future for the mankind,” a value set in polar opposition to the Western-liberal model.

At the same time, Russia’s junior status in its partnership with China, as well as the current impasse in the post-Soviet integration project, have not prevented Moscow from recognizing the long-term necessity of “pivoting to Asia” and trying to find an autonomous role in the new Asian century – albeit a more marginal and less assertive one than Moscow was used to playing in a Europe shaped by Western institutions, norms, and values.

Moreover, a common understanding of multilateralism among the three players is lacking and both the Russian and Chinese governments actively oppose the European regulatory framework for Eurasia’s connectivity. Consequently, in order to promote the European Union’s core values and defend Western multilateralism, Brussels will have to negotiate hard and be ready to exploit any possible chance to leverage the advantages of the EU’s regulatory and market power. It should not, however, assume that Moscow and Beijing will either agree to the EU’s normative terms or necessarily refuse any compromise. In a more fluid, geopolitical world, normative values also become part of more transactional negotiations.

Different Strategic Objectives in Moscow and Beijing 

Against this backdrop, the EU – although it is currently both complacent about its normative model and unwilling to grasp the transactional and more variable nature of the new international system – now has a geopolitical chance to exploit the growing frictions between Moscow and Beijing. Doing so would improve Europe’s chances to advance its agenda for sustainable connectivity across Eurasia by defining common technical and regulatory standards for trade, transport, and green technology value chains.

In fact, while the Chinese-Russian relationship appears to be solid, it is based on distinct and asymmetrical power leverages. It is also complicated by differing understandings of the regional, continental, and global order, as well as a still unclear conceptualization of each country’s respective role in it. The coronavirus pandemic has only added to the growing feeling by Russia that China’s technological and economic embrace is as much needed as it is increasingly uncomfortable.

At a time when relations with the United States are deteriorating amid an escalating trade war, China seems more interested in cooperating with Europe. This interest will only grow in a post-pandemic world. For China, the EU is an essential source of technological know-how and end market. China also needs the EU to legitimize its actions within the existing international system and multilateral institutions for as long as possible while it works to create parallel, Chinese-dominated governance institutions.

Russia, on the contrary, is decisively more interested in being recognized as a global power by the United States than “returning to Europe.” As Moscow’s assessment of the complex and increasing asymmetrical relationship it has with Beijing becomes more critical, however, it also sees revitalizing its economic and financial relations with single European countries as a necessary means of hedging its bets with China. Moscow has recently sent diplomatic signals to that end. For example, it lowered the level of diplomatic participation in the recent digital BRI forum chaired by China’s Foreign Minister Wang Yi.  

At first glance, Beijing and Moscow still seem unwilling to cooperate with the EU on its normative terms. In a world that will be affected by the COVID-19 pandemic for the foreseeable future, however, both could become more interested in – or forced into – ad hoc and flexible cooperation on select issues. Both could ultimately be compelled to come to terms with Europe as a leading setter of technological standards and, thus, to the normative conditionality that comes with that position.

Policy Recommendations

The initial attempt of Ursula von den Leyen’s European Commission to reposition the EU as a geopolitical power – with a global agenda for developing a green and digital economy, implementing industrial autonomy, and forging new connectivity alliances such as the one with Japan – is important and encouraging. Given the new realities described above, however, the EU can no longer avoid tackling the core strategic question of how to approach China and Russia.

Starting with Germany’s presidency of the Council of the European Union in the second half of 2020, the EU should focus on strengthening the external dimension of its green, digital, and industrial strategies, which will prove crucial for their implementation. With presumably even less resources to be dedicated to external action, the EU should concentrate on consolidating its efforts – both financial and logistical – into  putting its connectivity strategy into action, using it as a catalyst to reach its digital, green, and industrial goals across Eurasia, Asia, and eventually Africa. Given the limited means that it has at its disposal, the EU should take action in these four directions in order to maximize opportunities while balancing expectations:

First, the European Union should develop a more transactional approach to China and Russia. Henceforth, the EU should proactively engage Russia and China in a dialogue about their respective visions for a future economic, political, and security order in Eurasia – while simultaneously reaffirming its own commitment to liberal values. Europeans should, however, bear in mind that any shared vision for Eurasia based on an a priori acceptance of our “universal values” will not be easy to achieve. Where visions digress, the EU should be pragmatic, focusing on the export of its technical-regulatory norms and standards in sectors such as green energy and connectivity, electricity, industrial digitalization, and new low-carbon value chains, for example those in the production of hydrogen or battery cells.

Because of its strong economy and market, the EU has leverage when it comes to harmonizing different regulatory and normative spaces or establishing cross-regional markets and infrastructure networks. In the energy and electricity sector, for example, it should promote its green agenda less ideologically and more pragmatically by reinforcing the external action of such bodies as the European System of Network Transmission Operators (ENTSO). The EU should also turn them into platforms for dialogue, particularly vis-à-vis countries in its immediate eastern and southeastern neighborhoods – from the Baltics to Ukraine and Turkey – that will be or already are synchronized with the EU’s power grid. In the transport sector, the external dialogue function of bureaucratic bodies, such as the European Union Agency for Railways (EUAR), should be strengthened along with the creation of a supranational agency for the coordination and implementation of TEN_T.

Establishing an intra-governmental and intra-agency dialogue with China and Russia – as well as with other small and mid-sized powers along the nexus of the Baltic, Black, and Caspian Seas – that is targeted for each particular sector could help to clarify common interests or structural differences. Thus, it could be a first step toward achieving the long-term goal of creating shared rules for a common playing field in these regions.

Second, given the current reconfiguration of the power balance in both Eurasia and the Chinese-Russian relationship as a consequence of the COVID-19 pandemic, the EU needs to seize the opportunity to reengage Russia on both the bilateral and multilateral level, if political circumstances allow. This is likely to be a long-term task because it would require not only a minimal consensus among EU member states, but also more willingness by Russia to make concessions on the implementation of the Minsk Agreement related to the ongoing conflict in eastern Ukraine. Still, by reopening a strategic dialogue, both the EU and Russia could regain maneuvering space vis-à-vis China.

Bilaterally, the EU could approach Russia to discuss potential cooperation in advanced industrial production, new low-carbon value and supply chains (hydrogen), and energy efficiency, with a specific focus on the regions of western Russia. Because bilateral EU-Russia reengagement will not prove sufficient, the EU could also explore multilateral and trilateral formats for cooperation. The EU Commission’s openness for a structured dialogue with the Eurasian Economic Union presents one multilateral option. Trilaterally, the EU could discuss expanding its existing connectivity cooperation with Japan to Russia’s Far East and Northeast Asia. It could also kick-start a dialogue with Moscow and New Delhi to connect planning for the Indo-Pacific with the Great Indian Road and the North-South Transport Corridor.

Third, given the regionalization and decentralization tendencies of global value chains and energy markets accelerated by the COVID-19 pandemic, the EU connectivity strategy should be used to help create more resilient and diversified supply and value chains. The focus should be placed on fewer fields that are crucial to connectivity: digital connectivity, value chains related to new low-carbon technologies such as hydrogen and renewables, regional electricity grids, the integration of intra-regional transport networks, and support for the relocation and diversification of European supply chains across Eurasia. In doing so, the EU should look beyond Russia and China; it should keep privileging its direct neighborhood in the east but not limit its action to it, expanding its radius to Central Asia, Southeast and West Asia, and eventually North and East Africa.

Fourth, as direct political cooperation among the EU, China, and Russia might remain difficult, the EU should also strengthen the transnational and subnational dimensions of its action. Ideally, it should use the digital dimension of its connectivity strategy as an instrument to strengthen inter-city and inter-regional cooperation on urban mobility, smart cities, and smart grids. Considering the emerging role cities and regions have as both agents of digital and green connectivity and incubators of industrial innovation, the EU should foster city-to-city and region-to-

region partnerships with cities and regions across Eurasia more decisively.

Under current circumstances, a more holistic, flexible, and creative-strategic approach to the Chinese and Russian challenge – one that is simultaneously less normative-ideological – is needed to tackle the risks resulting from the coronavirus pandemic. Only if the EU can turn its connectivity strategy from an unimplementable document into a useful instrument and blueprint for action can it seize the significant geopolitical opportunities offered in turbulent post-COVID-19 Eurasia.

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This policy brief is part of the project “EU-Russia-China – Central Asia Strategic Dialogue on Connectivity,” implemented by DGAP in cooperation with the Russian International Affairs Council (RIAC) and with the support of the German Federal Foreign Office. As a follow-up to the previous study “Eurasia: Playing Field or Battle Field?” (DGAP, August 2019), it incorporates input from workshops held in Berlin and Moscow in September and December 2019. The author would like to thank DGAP Director Daniela Schwarzer and Head of the Robert Bosch Center Milan Nič for useful comments.