No Loans—No Roads: Multilateral Financial Institutions and Their Effect on Regionalism

Abstract

Cooperation through the multilateral lending institutions is allocated a specific role in the regionalization of Central Asia. The chapter compares Sino-Russian interaction in the context of the multilateral lenders with the evaluation of the two powers’ participation in previous financial cooperation initiatives. The analysis enhances understanding of the effects of China’s and Russia’s engagement in this sector on regional cooperation in Central Asia. The role of multilateral lenders is more important because region-wide projects are more likely to be funded by multilateral bodies, particularly those connected to a specific region. The first section of the chapter discusses the background and setting for Sino-Russian cooperation in the financial sphere. The second section evaluates the SCO-driven initiatives of financial cooperation and demonstrates that they were slow to initiate, and had a very limited impact on the enhancement of regional connectivity. The third section examines the ‘newer’ financial institutions initiated by China—the Silk Road Fund and the Asian Infrastructure Investment Bank (AIIB), as well as the context under which they were created, the One Belt One Road Initiative or Belt and Road Initiative. This section aims to determine whether these different types of financial initiatives have a greater capacity to facilitate regional cooperation among Central Asian states. The chapter argues that there is continuity in the way Sino-Russia relations diminish the capacity of multilateral financial institutions designated for Central Asia. In that context, similarly to the earlier attempts at multilateral financial cooperation initiatives, the ‘newer’ China-initiated multilateral lenders are likely to serve the interests of major powers, and possibly, individual Central Asian states. They may also enhance ‘outward’ connectivity between certain Central Asian states and the major powers. However, these ‘newer,’ China-initiated, multilateral financial institutions are not designed to serve the function of connecting the region from within and are insufficient to enhance regional cooperation in Central Asia.