TED Case Studies

The New Silk Road: Boon or Boondoggle?

• IDENTIFICATION
• LEGAL CLUSTERS
• GEOGRAPHIC CLUSTERS
• TRADE CLUSTERS
• ENVIRONMENT CLUSTERS
• OTHER FACTORS

I. Identification

1. The Issue

 
With the collapse of the Soviet Union in 1991, the eight Newly
Independent States (NIS) of the Caucasus and Central Asia gained
the somewhat dubious gift of independence.  The first Post-Soviet
decade has been for the most part a tragic story for these nations
of the “Eurasian Heartland,” as they seek to come to terms with 
their respective post-colonial legacies, develop stable civil-
societies, and attract the necessary aid and investment to develop
viable States. To this end, the leaders of these NIS sought to 
redevelop the long-lost 6,000 km network of caravan routes that once
linked China to Rome, the ancient “Silk Road.”  According to the
leaders of these NIS, what was once inaccessible country closed to
the West by the Ottoman Empire in the 15th century, would be reborn.
Much newsprint has been devoted to drawing parallels with the 19th
century’s “Great Game” between Russia and England for control 
of Central Asia.  In the 21st century, however, great power 
competition for regional influence is a losing game for all 
sides unless a New Silk Road is undertaken with a clear 
understanding of the conditions on the ground. 

2. Description

Introduction

A case study of the international effort to build the New
Silk Road reveals numerous political,economic,and environmental
challenges that are part and parcel of the integration of markets, 
capital, and ideas known collectively as "globalization."  The 
course of events in the development of TRACECA from 1993-1999 
reveals ample reason to dispute the "if you build it, they will come" 
argument that democracy will follow from the promotion of trade.
The costs of building and maintenance on the New Silk Road will 
exceed any readily available funds from the transit countries. 
Additional hidden costs reside in the inevitable bribes, kickbacks,
and other sorts of corruption that a public works project of this 
magnitude would entail, further rendering the likelihood of a low-cost
shipping alternative to and from East Asia improbable. 


TRACECA:The New Silk Road


This proposal, known alternately as The New Silk Road, or Transport
Corridor Europe-Caucasus-Asia (TRACECA) was enthusiastically received
by European Union (EU)and the United States when it was proposed in
May, 1993, by Central Asian leaders meeting with the EU in Brussels.
The vision of a superhighway not only of asphalt, but of rails, 
pipelines, and fiber-optic cables stretching from Rotterdam to China’s
Yellow Sea Coast seemed full of promise not only to firms who would build
these systems, but also to those who sought to prosper from the region’s
wealth in minerals, cotton, oil, and natural gas. Europe’s support
was grounded in the prospects of a cheaper shipping route to and from East
Asia. American support for the project added the consideration of 
promoting geopolitical stability in the form of promoting democracy
while discouraging efforts by Russia or Iran to exercise hegemony
in the region.  TRACECA has been viewed as  “a win-win situation,” 
according to former Presidential Special Advisor on Caspian Basin 
Diplomacy, Richard Morningstar. 



From Brussels to the most recent World Economic Summit in Davos, 
numerous pronouncements,summits, and conferences have passed among
the 33 countries involved in building the New Silk Road. Touting 
strides made towards creating a viable shipping alternative to the existing
trans-oceaninc shipping routes or Russian-owned Trans-Siberian rail lines--
numerous problematic aspects have prevented the realization of the New Silk Road.  

The EU has already invested over $80 million in the region, and has helped
secure over $300 million from international lending institutions to repair 
old roads and build new rail lines,stations, and ports.  The related Caspian
Sea energy development projects have brought nearly $12 billion in investment
hundreds of oil, gas, and construction firms into the region, with total 
investment expected to top $50 billion dollars over the next 25 years. 
The European Union supports the development of TRACECA's east-west route 
in order to realize the following objectives:



To support the political and economic interdependence of states by 
ensuring their ability to gain access to world markets.

To encourage regional cooperation.

To attract aid from International Financial Institutions and
investment from comapnies wishing to take advantage of a skilled 
labor force, and the regional market.

To link TRACECA to exisiting Europran road and rail systems.



Developing a New Silk Road


The effort began in May 1993 with the Brussels Conference. A summit
of representitives from member countries' foreign and trade ministries
reviews the deficiencies in the region's transportation infrastructure,
allocating 15 million euros toward trade and transport projects.
Four working groups were also formed, which have met periodically since
1993 to adress specific development initiatives in the following issue areas:





 Trade Facilitation

 Road Transport

 Rail Transport

 Maritime Transport



In these working groups, the proposed route across Central Asia was
finalized. Transport costs were calculated compared to maritime,
air, and exisiting land routes through Russia. The most challenging
issue has been the ongoing effort to come to an agreement on 
construction cost sharing and the simplification of border-crossing.

In April of 1997, officials met in the Georgian capital of Tblisi.
This conference focused on connecting the western extensions of
the New Silk Road to exisiting European transport routes through 
the Black Sea littoral countries, Bulgaria, Romania, and Ukraine. 

In September 1998, a presidential-level conference, proposed by 
presidents Eduard Shevardnadze of Georgia and Heidar Aliyev of 
Azerbaijan, in the Azer capital of Baku. By 1998, TRACECA 
networks centered in the Caucasus had quadrupled commercial cargo
transshipped in the region to four million tons.
     

"Bumps in the New Silk Road":Political, Economic, and Environmental
 

Despite the EU's repeated proclamations of TRACECA complementing
existing routes through Russia, Russian officials have protested
vociferously at Western inroads into what they regard as a "sphere
of influence."  Russia's most recent campaign in Chechnya was in no
small part related to preserving Russian oil and gas pipelines in 
the region, and should offer a warning to those advocating developing
TRACECA without Russian input.


Political: Geopolitics of the New Silk Road
Soviet-era infrastructure was designed primarily to link each Soviet
Republic to Russia. As a result, sparse, poorly-repaired highways 
rarely connect cities directly, and a phone call from the Georgian 
capital of Tblisi to Baku, the capital of the neighboring state of Azerbaijan 
can find itself routed by way of Moscow.  Separatist conflicts scar 
the entire region, from the Armenian-Azeri dispute over the enclave of
 Nagorno-Karabakh to Islamic fundamentalist terrorism in Tajikistan. 
In addition to the burdens of building a state from the ground up, these 
countries must also contend with the environmental aftershocks of the Soviet
Union's most flawed projects, such the diverting of the Aral Sea, and the
haphazard disposal of countless tons of chemical and nuclear waste.


Economic: Will TRACECA Facilitates Crime and Corruption?
This windfall of trade and investment intended to build TRACECA comes
to a region where wages are left unpaid for months at a time, resulting
in rampant corruption at every level of government in every country.
Kazakhstan and Uzbekistan in particular have become synonymous with
bureaucratic nightmare to would-be investors who navigate the Byzantine
labyrinth of conflicting regulations, payoffs, and arbitrary seizures 
of capital. 

Gross human rights violations have been recorded in states of the 
Caucasus and Central Asia according to international observers,
who additionally have declared that these countries have yet to see
a single post-independance election that fully conforms with international
norms. The notion of promoting democracy through stimulating trade
and investment is the prevailing argument among the project’s supporters.

According to the State Department's most recent Narcotics Strategy
Control Report issued annualy by the State Department's Bureau for
Internatioanl Narcotics and Law, virtually every country in the Caspian
region has been identified as a transit state for opium and cannibus to Europe.
Turkmenistan, Kazakhstan, and Kyrghyztan were also identified as cultivators
of these illicit crops. The North American Free Trade Agreement(NAFTA)
deregulation of trade among Mexico, the United States, and Canada has
led to an explosion of transport of goods both legal and otherwise. 
TRACECA holds a similar promise to Europe.

 Environmental Devestation Along the Silk Road?