As part of its Belt & Road Initiative, China has courted both Armenia and Azerbaijan. With the two Countries engaging in their worst military clash since 2016, Beijing will have to walk a diplomatic tightrope.
A new escalation of the long-standing border dispute between Armenia and Azerbaijan in the Nagorno-Karabakh region has already become the worst military clash since the last flare-up of tensions in 2016.
Both sides declared martial law and initiated either full (Armenia) or partial (Azerbaijan) mobilisation of their armed forces, using rockets and artillery which resulted in hundreds of civilian and military losses that made this clash the deadliest since the 1990s.
The possible outcomes of the conflict are either the resumption of the negotiation process, which has been deadlocked in recent times, or further heating up of tensions with armed clashes.
Turkey has actively supported its long-time ally Azerbaijan, demanding Armenia to stop its occupation of Azeri territory. Russia has good relations with both countries and has called on them to de-escalate tensions. While Russia has closer military ties with Armenia, it has also been expanding its economic cooperation with Azerbaijan, which makes it a proponent of peaceful resolution.
China has also called on both sides to resolve their differences through dialogue. The South Caucasus region, acting as a link between the Middle East, China, Russia and Europe has huge strategic significance. China has recognised this fact through its Belt & Road Initiative. China commenced its more active participation in regional affairs in 2015, inking agreements with Georgia, Azerbaijan and Armenia.
In 2016, the Asian Infrastructure Investment Bank granted Azerbaijan a US$600 million loan to finance partial construction of the Trans Anatolian Natural Gas Pipeline Project through Turkey.
In 2019, Azerbaijan and China signed deals worth over US$800 million, invigorating bilateral cooperation in the non-oil sector. Increased trade has contributed to deepening ties in 2018, bilateral trade turnover hit US$1.3 billion, making Azerbaijan China’s largest trading partner in the region and accounting for 40 percent of Chinese trade in the South Caucasus.
China is interested in the Baku-Tbilisi-Kars Railway, developed within a larger Trans-Caspian International Transit Route, as part of the Belt & Road Initiative. It currently serves as the shortest way to deliver Chinese goods to Turkey and reduces delivery time to Western Europe from over a month to 15 days.
Meanwhile, Azerbaijan and Kazakhstan are developing an Asia-Europe Telecommunications Corridor, which will be useful for Belt & Road Countries, making Baku a new internet exchange point, along with Amsterdam, Frankfurt and London.
While Azerbaijan is actively taking part in Chinese infrastructure connectivity projects, Armenia is also demonstrating openness to China, signified by the Memorandum on Promotion of Cooperation in Building the Silk Road Economic Belt signed in 2015.
China-Armenia contacts have historically been closer than Chinese-Azeri interactions. The South Caucasus’ first Confucius Institute was opened in Armenia in 2008. The country is host to the second-largest Chinese embassy on post-Soviet ground.
Economic cooperation is also on the rise, hitting a high of US$941 million in trade turnover in 2019, surpassing the previous record of US$711 million in 2018.
While the US$50 million in aid China has given Armenia since 2012 is not huge, it reflects Beijing’s desire to be a more proactive participant in regional affairs. This has been mostly limited to economic penetration into the region without political or ideological pressure.
Armenia’s economy pales in comparison with that of oil-rich Azerbaijan. Armenia’s gross domestic product is 3.5 times smaller than Azerbaijan’s (US$13.6 billion versus US$48 billion), as is its population (3 million versus 9.9 million). But Armenia is attractive to China as a transport alternative and potential extra stronghold in the region to safeguard its interests in the Middle East.
A flagship infrastructure project in Armenia is the North-South highway, part of a larger Persian Gulf-Black Sea trade corridor encompassing sea, railway and road interconnectivity, which is aimed at connecting the length of the country – from Iran to Georgia and beyond
Should the project be completed, it would be for China a safe alternative to other regional transport routes because it goes through China’s most established Middle East partner – Iran. In 2019, a Chinese company was involved in building a part of the highway.
In May 2019, Chinese President Xi Jinping reaffirmed China’s wish to deepen political, economic and cultural ties with Armenia. In 2018, China pledged US$1.5 million in military aid to Armenia.
Although China has opted for a neutral stance in the current conflict, it faces a difficult dilemma. Azeri experts and media often highlight that China supports Azerbaijan sovereignty and integrity, and opposes secessionism in Nagorno-Karabakh, to avoid double standards in relation to Taiwan.
However, given that China is seeking closer ties with Armenia, the border dispute calls for careful diplomatic manoeuvring. If in the past, China has stressed its support to territorial integrity of Azerbaijan, today the rhetoric has softened to simply a plea for dialogue and restraint.
No matter what the outcome of current flare-up is, it is clear that China is not seeking an intermediary role given that it doesn’t have political influence with both countries – unlike Turkey or Russia – nor does it want to choose sides.
China seems to assuming a “business as usual” posture, pushing ahead with its agenda on a bilateral basis, without deliberate involvement in the Armenia-Azerbaijan rift.