Nearly a year ago a study prepared by the experts of the Armenian Center for American Studies (“ACAS”) raised a hypothesis that the United States and its allies would use all available means in the shortest possible time to curb China’s growing influence in Central Asia, the Middle East, the South Caucasus, and elsewhere, in particular, by suppressing the “Belt and Road” mega-initiative.[1]
In the article on “China’s Quest for the Status of Global Superpower and the U.S. Resistance” it was specifically mentioned that “…one of the main stages of the competition will be Central Asia, as this region has the utmost importance for the Chinese “Belt and Road” initiative…” At the same time there was an argument that “China continues to move towards this status [of Global Superpower] spreading its influence in Asia, Europe, and other regions. On its path, China will be continuously using the full toolkit of soft power investment policy. The main method of spreading its influence will be the implementation of a major investment policy. The main targets will be infrastructure investments, especially when they are to be interconnected with the “Belt and Road” Initiative.”[2]
The inevitability of American activation was considered as a counterbalance to all this. According to the authors, “Fierce competition between the U.S. and China will continue over the next three decades. It is not easy for the United States to cede its status as the world’s number one superpower; it will use every possible means in the path of this competition to prevent China’s rise or break its fast pace. From sanctions to pressures for issues concerning China’s internal affairs- these will be the main instruments of pressure on China. The United States will focus on issues related to China’s national-religious minorities, which the United States considers China’s Achilles’ heel. The United States will exert pressure on both bilateral and multilateral platforms, from the International Religious Freedom Alliance to other U.N. agencies. It is not ruled out that the United States will define China’s actions in connection with the Uyghurs as genocide, which will become an additional tool of pressure in the hands of the international community. It is obvious that the United States perceives the full potential and impact of the “Belt and Road” initiative for the entire Eurasian region, with all the political and economic levers that China will gain as a major investor and initiator.”[3]
During the G7 meeting in June 2020, the “Built Back Better World” (“BRW”) project was publicly announced, the aim of which is to suppress Chinese growing influence.
The Essence of the “Build Back Better World” (B3W)
The B3W, is an idea that stemmed from a conversation between Prime Minister of the UK Boris Johnson and US President Joe Biden, where they discussed B3W framing and slogan, which aimed at creating something that was ambitious in practice. “Build Back Better World” was previously used as a slogan by Biden in his presidential campaign.[4] This ambitious project was publicly announced during the G7 Summit in the UK on June 11-13, 2021. The US White House published a fact sheet presenting more details on B3W on June 12. According to the information provided B3W is “an affirmative initiative for meeting the tremendous infrastructure needs of low- and middle-income countries.”[5]
Given that the World Bank estimated that there is a cumulative $40+ trillion of infrastructure needed in the developing world through 2035, therefore the objective of the newly announced initiative is to help narrow that infrastructure gap in the developing world, which has been exacerbated by the COVID-19 pandemic. Though a lot of concrete details are still to be worked through, according to senior administration officials it will have a decentralized structure by G7 and other like-minded partners coordinating in mobilizing private-sector capital in four main areas- climate, health and health security, digital technology, and gender equity and equality.[6]
B3W is a values-driven, high-standard, and transparent infrastructure partnership that incorporates the following principles:
- Values-Driven. Infrastructure development will be carried out through sustainable manner- financially, environmentally, socially and will provide a transparent source of financing.
- Good Governance and Strong Standards. The project will be implemented by high standards and principles, in terms of the environment and climate, labor and social safeguards, transparency, financing, construction, anti-corruption, and other areas.
- Climate-Friendly. The investments within the project will be made in accordance with the goals of the Paris Climate Agreement.
- Strong Strategic Partnerships. A taskforce will be established with G7 partners to coordinate, harmonize their actions, and increase its impact and reach.
- Mobilize Private Capital Through Development Finance. Infrastructure investment will be through a responsible and market-driven private sector, together with high standards and transparency in public funding.
- Enhancing the Impact of Multilateral Public Finance. The US will incorporate the standards developed by multilateral development banks and other international financial institutions to ensure appropriate and effective use of resources.
The B3W project will cover a wide geographical area- from Latin America and the Caribbean to Africa to the Indo-Pacific.
In terms of financing the B3W will mobilize such US financial institutions as the Development Finance Corporation, USAID, EXIM, the Millennium Challenge Corporation, and the U.S. Trade and Development Agency, and complementary bodies such as the Transaction Advisory Fund. This implies that the project will ultimately promote the US economy and create new jobs. Although there is little meat on the bones so far with regard to the B3W project, the available data provides that the capital will be mobilized both from public and private sectors with an emphasis on the latter.[7]
Though the fact sheet stressed that more details will be included in the G7 Leaders’ Communique, there wasn’t actually much new information provided. The communique confirmed the ideas included in the fact sheet of the White House and indicated that the taskforce that should be established to develop practical proposals will report back to the US and its G7 partners in Autumn.[8]
B3W as an Alternative to the “Belt and Road Initiative” (BRI)
The BRI project of China initiated in 2013 has posed a significant challenge to the United States- the only superpower of the world. To counter the growing Chinese influence in the world, the United States has utilized a number of instruments, among which is the newly established global infrastructure initiative of B3W. According to senior administration official the initiative is not only an alternative to the BRI but will “beat the BRI by offering a higher-quality choice.”
Talking about the B3W project President Biden highlighted that he had proposed “a democratic alternative to the Belt and Road Initiative: the Build Back Better.” For him, through this project they are not only in a contest with China per se, but a contest with “autocrats, autocratic governments around the world, as to whether or not democracies can compete with them in the rapidly changing 21st century.” It becomes clear that the democratic standards will be the core of the project. The idea of the project president presents in the following way: “By harassing the full potential of those who are harassing, we’re going to have to try and change things.”[9]
US National Security Advisor Jake Sullivan describes B3W as a “convergence among likeminded countries, among the world’s democracies…that will be a high-standards, transparent, climate-friendly alternative to the Belt Road Initiative.” [10]
Based on the information available so far, the following key differences between the B3W and the BRI can be singled out.
- 59% of BRI projects are owned by government entities, whereas the private sector accounts for only 26%. The remaining part includes public-private ventures. The main way of funding is the bank loans through government and private institutions. However, these loans have come to create large amounts of debt for the developing countries who are unable to repay the loans, a situation, which Washington has labelled as “debt trap.”[11] In comparison, though the B3W project will provide for the capital both from public and private sectors, including US state institutions, the main focus of the project will be the mobilization of private capital. The amount of money being circulated is the gap of $40+ trillion in the developing world through 2035. However, as the US National Security Advisor Jake Sullivan has indicated the US and its G7 partners are not going to pretend that they are going to fill the entire gap, but they are going “to try and make a real dent in it between now and 15 years from now.”[12]
- Another key difference is that B3W is a value-driven project, therefore the key element for the initiative is the transparent financing sources. Chinese side has tended to secrecy. Thus, when negotiating a loan agreement China has intentionally decided to keep the terms of the agreement secret. An example is the case of Kenya, where activists are suing Kenyan government to provide the details of the loan agreement that financed the rail from Mombasa to Nairobi.[13] Thus, the B3W is aiming to overcome this issue, by offering transparency and openness.
- Another difference between these two projects is the political precondition raised by the B3W. One of the aims of this project is to show that “democracies and open societies can come together and deliver a positive choice to meet some of the biggest challenges of our time”. Generally, there is a strong emphasis on democracy and is viewed as a precondition for joining the new initiative. In comparison, the Chinese BRI did not demand such a precondition by choosing democracies over autocracies or vice versa.[14]
- Also, the B3W project stresses climate issues as one of the four areas of focus and includes the principle of making climate-friendly investments that would be consistent with achieving the goals of the Paris Climate Agreement. The issue of climate is of central importance for the Biden administration who rejoined the Paris Climate Agreement after his predecessor withdrew from it and Biden also appointed John Kerry as Special Presidential Envoy for Climate which highlights the importance of the issue for him. Thus, this makes B3W significantly different from the BRI, as China does not raise this issue when making investments and is itself the largest contributor of global emissions.
B3W is a rather ambitious project, which includes a number of challenges and obstacles.
- A serious obstacle for B3W can be the lack of uniform China policy among G7 partners. While the US, UK, Canada and France have adopted an anti-China stance, Italy, Germany and the EU want to build a “cooperative relationship” with Beijing. On the other hand, Japanese government’s stance on China is even more ambiguous. Given the contesting character of the B3W with regard to BRI, it will be hard for G7 countries to implement a fully competitive policy towards China. Germany, for example, views China as a critical market for its high-tech manufacturing products and automobiles. Meanwhile, Germany’s chancellor Angela Merkel, agreeing that China is a “systemic competitor,” considers that Beijing is a partner on issues such as climate protection. She said at the meeting: “Without China, we would never be able to achieve solutions in these areas.”[15] So, it is possible that Germany will not want to be seen as too enthusiastic in its support of B3W lest it antagonizes Beijing. [16] Given that the EU has signed an investment agreement with China, and Italy, a G7 member, is a BRI participant, the either/or dimension of B3W and BRI is unlikely to come into reality as bluntly as some are forecasting.[17]
- Another serious obstacle is whether the G7 countries would be able to raise the necessary amount of money especially when such an amount of money is more than the combined GDP of the seven countries in 2020. Besides, the US is record high in debts and the UK’s financial deficit has hit a record high in the last 50 years with its national debt expected to rise to 93.8 percent of GDP next year.[18] Moreover, these same countries that propose to raise private capital for the infrastructure in middle- and low-income countries still seek foreign often Chinese capital in order to upgrade or develop new ones. [19]
- On top of that the infrastructure project will require more time for a return, which might be a significant factor when mobilizing the private capital. The investors need to see what the market return would be or be provided with other incentives.[20]
- Last, but not least, China has already signed cooperation agreements with 140 countries and 31 international organizations within its BRI project, while B3W is a newly-established initiative and it will take some time for it to start its activities and engage such a big number of countries and organizations.[21]
Armenia’s role in the implementation of the B3W project
In recent years, Armenia has been facing quite serious economic problems. The 2018 revolution, the formation of an inexperienced government, the rise in commodity prices, the Coronavirus, the war unleashed by Azerbaijan and Turkey, as well as the decline of general economic indicators have put Armenia in a rather difficult situation. Armenia has brought its foreign debt to an uncontrollable threshold, which, among other factors, has become the basis of internal political, social and economic crises. During the last 4 years, 3 parliamentary elections have been held in Armenia, but the political crisis does not disappear.
Armenia used to pay great attention to the implementation of the “BRI” project, but is not actively involved in these processes in any manner. Nowadays Armenia needs financial resources, foreign investments, which can regulate the difficult economic situation to some extent. Given the defeat in the last war, Armenia still has hostile relations with Azerbaijan and Turkey, which still keep their borders with Armenia closed, demanding that Armenia provide a land route through its territory that will connect Turkey with Azerbaijan. Armenia seriously needs to attract foreign investments and loans. This means that Armenia will accept the first available credit, grant and other financial means, especially if they are at cheap interest rates. At the same time, Armenia will soon receive €2.6 billion in financial assistance from the EU, which is the largest financial assistance ever received by Armenia. It should also be taken into account that in the coming years Armenia will most likely expect to receive financial support from the US within the framework of the Millennium Challenge Corporation and other organizations. Most probably the foreign assistance to Armenia from the US will also go high in numbers. This means additional impact on Armenia, as such financial flows could have a serious impact on economic development and job creation. The prospect of infrastructure development will interest Armenia. During the Soviet years, Armenia was famous for its health resorts, most of which did not function after the collapse of the USSR. Armenia had a serious technological base during the Soviet era, which could also become a leading branch of the economy in case of possible investments (for example, the Yerevan Institute of Physics, the Institute of Mathematics, the field of astrophysics, etc.). Armenia is the best example among developing countries that can prioritize the availability of fast and cheap loans, investments, grants and other financial resources, though this does not imply the denial to take part in the Chinese initiative. Armenia should have concrete calculations as to how to be engaged in both projects as well as to implement individual cooperation.
Conclusion
Given the lack of information, analyzing the available information on the new project, the following conclusions can be drawn. The B3W project announced by the G7 countries including the United States has the potential to become a serious challenge for the Chinese BRI project. The G7 is preparing for a tough confrontation with China in the field of “global economic project” competition. At the same time, the G7 plans to invest all of its political influence and political weight in this competition, trying to curb the prospects of the BRI by investing more funds in the shortest possible time. In this regard, we can single out a few factors that were initially taken into account by the authors of the B3W project in an attempt to create a more effective, more attractive platform. In general, the goal of the B3W project is to create the most favorable financing model for developing countries, and be one step ahead of the Chinese project. In this context it is necessary to consider the view spread in the United States that the investments and loans received by the countries from China are a sort of trap for the recipients who can find themselves under the influence of China in a very short period.
Financial factor
As with any investment program, the amount of investment and the time factor are crucial. First of all, it should be noted that the G7 project envisages attracting more financial resources. If the Chinese project envisages a potential investment of 1+ trillion dollars, the initiative of the G7 envisages a potential investment of 40+ trillion dollars. In addition, the flow of funds should be at the expense of both US government corporations (Development Finance Corporation, USAID, EXIM, Millennium Challenge Corporation, U.S. Trade and Development Agency) and the private sector. This means public-private partnership, which usually facilitates investment, improves the investment climate, and reduces risks. In other words, the available financial means can include the capital of large American credit organizations, as well as the capital of public, private organizations of EU, Canada, Japan and other countries. Despite the fact that it is not yet clear what kind of investments we are talking about, they will most likely be cheap loans provided to countries to finance the construction or renovation of various types of infrastructure that can serve the main directions of the B3W project, ie. climate, health և healthcare, digital technologies, gender equality and equality. These include, for example, infrastructures in developing countries, such as health facilities and sanatoriums, medical centers and medical facilities, health research centers, laboratories, other environmentally friendly plants, organic food, agriculture, as well as programs promoting women’s involvement in business, environmental programs, transportation systems, etc. In other words, speaking of pure infrastructure, we can mean, for example, infrastructure that did not function after the collapse of the USSR, which in some countries are morally worn out due to lack of funds, but have all the prerequisites and intellectual capacity to ensure their revival. Most likely, the B3W project will give priority to the countries that were planned to be a potential part of the BRI project. This will allow these countries to receive financial investments in a shorter period of time, and later to refuse Chinese investments and loans.
Time factor
The time factor is one of the most important factors that must always be taken into account. In addition to the larger funding, the B3W project plans to be implemented sooner than BRI. If, according to preliminary estimates, the Chinese BRI project is to be fully operational by 2049, the B3W project envisages providing funding to developing countries by 2035. It is obvious that this can also be of great importance for the countries concerned. Raising more funds in the economy can be a lifeline for developing countries, many of which are in dire financial straits, especially due to the coronavirus pandemic.
The geopolitical component
We must also take into account the geopolitical realities that may hinder the implementation of the Chinese project. In particular, it should be borne in mind that the withdrawal of US troops from Afghanistan will pose serious challenges for the Middle East, as well as for Central Asian countries, which in turn may affect the roadmap for the BRI project, as Central Asia is vital for the Chinese BRI project. Let’s not forget that the United States is working hard to operate effectively within the C5+1 format, which is a platform for deepening political relations with 5 Central Asian countries, and is a key component of American influence in the region. The complex political realities in Afghanistan, Pakistan, and Central Asia, as well as possible clashes between Central Asian countries, could pose a serious challenge to the timing of the Chinese BRI initiative.
Political component
Biden’s instructions to US intelligence recently to find out whether Covid-19 was of laboratory origin could be seen as an attempt to put additional pressure on China, which could unite the international community. Let’s not forget that unlike Trump, the Biden administration does not call Coronavirus a Chinese virus, but the whole logic of this assignment should be considered on the same plane. More pressure on China in the coming years can be predicted by the G7 countries on the spread of the coronavirus, human rights, religious freedom, minority rights, etc. The aim of these pressures will be the decline of China’s international prestige, which will facilitate the progress of the B3W project and the suppression of the Chinese BRI project.
Geographical component
It should be noted that geographically, the B3W project will also try to involve larger geography than the Chinese BRI project. According to the official announcement, geographically, the B3W project will be global in scope, from “Latin America and the Caribbean to Africa to the Indo-Pacific.” Of course, this does not mean that the BRI project cannot be extended from China to Latin America and Europe, but it is obvious that some countries will avoid participating in the implementation of the Chinese project, as they already have their alternative project. This, of course, will affect the geography of the both projects. In this regard, the initiators of both projects will wage a fierce struggle for unconditional influence in Central Asia, the Middle East, the South Caucasus, the member states of the “Three Seas Countries” Initiative, and in other regions and countries.
Final remarks
As to date, there have been no hearings or extensive discussions in the US House of Representatives or Senate on this issue. According to the schedules of both Chambers, there is no such bill on B3W in the agenda yet.
Such discussions will be planned in the nearest future and it will become the cooperation of the legislative and executive bodies within the framework of this project. Given the general political situation in the United States, we think there will not be many Representatives or Senators who will oppose the proposed bill on counterbalancing China. In general, there is a consensus in the American establishment that the United States should take steps to reduce Chinese influence around the globe. That is why, there will be no powerful opposition to the project. At the same time, it is possible that there will be some people in the Congress who can oppose the spending of huge financial resources, but not the program itself. From legal perspective the B3W project can be approved for the implementation by the Congress or by the executive order of the President. But if there are any budgetary financial resources that might be involved in the project, the role of the Congress is crucial under the US Constitution. As for the implementation of this program in different countries, the main implementers of the programs will most likely be USAID, Millennium Challenge Corporation and other program agencies, which already have extensive experience in this field. It is not ruled out that in the course of time new organizations and agencies will be created with a narrower and more specific field of operation.
We strongly recommend to monitor this issue and keep the process under the center of attention as the new development can rise very actively.
References
[1] Սարգսյան Ս., Գևորգյան Ա., Մուրադյան Ա., Չինաստանի ձգտումը գլոբալ գերտերության կարգավիճակի եւ ԱՄՆ դիմադրությունը, Հայկական Քաղաքագիտական Հանդես 2(14) 2020, 95-132։
[2] Ibid.
[3] Ibid.
[4] Background Press Call by a Senior Administration Official After G7 Plenary Session Two, White House, June 12, 2021, https://www.whitehouse.gov/briefing-room/press-briefings/2021/06/12/background-press-call-by-a-senior-administration-official-after-g7-plenary-session-two/
[5] FACT SHEET: President Biden and G7 Leaders Launch Build Back Better World (B3W) Partnership, White House, June 12, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/06/12/fact-sheet-president-biden-and-g7-leaders-launch-build-back-better-world-b3w-partnership/
[6] Background Press Call by a Senior Administration Official After G7 Plenary Session Two, supra note 4.
[7] FACT SHEET: President Biden and G7 Leaders Launch Build Back Better World (B3W) Partnership, supra note 5.
[8] Carbis Bay G7 Summit Communiqué, White House, June 13,2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/06/13/carbis-bay-g7-summit-communique/
[9] Remarks by President Biden in Press Conference, White House, June 13, 2021, https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/06/13/remarks-by-president-biden-in-press-conference-2/
[10] On-the-Record Press Call by National Security Advisor Jake Sullivan on the President’s Trip to Europe, White House, June 17, 2021, https://www.whitehouse.gov/briefing-room/press-briefings/2021/06/17/on-the-record-press-call-by-national-security-advisor-jake-sullivan-on-the-presidents-trip-to-europe/
[11] Amanda Lee, Belt and Road Initiative debt: how big is it and what’s next?, South China Morning Post, July 19, 2021, https://www.scmp.com/economy/china-economy/article/3093218/belt-and-road-initiative-debt-how-big-it-and-whats-next
[12] Press Gaggle by Press Secretary Jen Psaki and National Security Advisor Jake Sullivan En Route Brussels, Belgium, White House, June 13, 2021, https://www.whitehouse.gov/briefing-room/press-briefings/2021/06/13/press-gaggle-by-press-secretary-jen-psaki-and-national-security-advisor-jake-sullivan-en-route-brussels-belgium/
[13] B3W vs BRI: Can U.S. outdo China in Africa with infrastructure initiative?
Arirang News, June 29, 2021, https://www.youtube.com/watch?v=xLCIZY_er1w
[14] Background Press Call by Senior Administration Officials Previewing the Second Day of the G7 Summit, White House, June 12, 2021, https://www.whitehouse.gov/briefing-room/press-briefings/2021/06/12/background-press-call-by-senior-administration-officials-previewing-the-second-day-of-the-g7-summit/
[15] Ho Wah Foon, Could G7’s B3W rival China’s BRI?, Phnom Penh Post, 27 June 2021, https://m.phnompenhpost.com/opinion/could-g7s-b3w-rival-chinas-bri
[16] Dnyanesh Kamat, Biden’s B3W proposal won’t be a serious threat to China Arab News, June 14, 2021, https://arab.news/zmqz6
[17] Huma Yusuf, B3W vs BRI, DAWN, 28 June, 2021, https://www.dawn.com/news/1631926
[18] Song Lin, G7 infrastructure plan can hardly rival BRI, June 14, 2021, https://www.globaltimes.cn/page/202106/1226107.shtml
[19] Francesca Ghiretti, B3W: Building an Alternative to the BRI or Falling Into the Same Trap?, Diplomat, 22 June, 2021, https://thediplomat.com/2021/06/b3w-building-an-alternative-to-the-bri-or-falling-into-the-same-trap/
[20] What Is The ‘Build Back Better World’ Partnership And How Is It Different From The Belt And Road Initiative? Silk Road Briefing, June 13, 2021, https://www.silkroadbriefing.com/news/2021/06/13/what-is-the-build-back-better-world-partnership-and-how-is-it-different-from-the-belt-and-road-initiative/
[21] Song Lin, supra note 18.