Parts of this article were adapted from the authors’ “China and Central Asia: A Significant New Energy Nexus” in The European Financial Review, April 30, 2013, accessible here.
Over the past decade China has aggressively developed its energy cooperation with Central Asia, which has an abundance of oil and natural gas deposits, and relative political stability. Through its energy relationship with Central Asia, China not only diversifies its access to new energy sources but also gains greater flexibility in playing regional geopolitics that advances its broader national interests.
Kyrgyz traders in Karasuu bazaar, Osh region, loading a shipment of televisions that came in from Xinjiang. Photo by Sue Anne Tay
China’s economic influence in Kyrgyzstan has been growing rapidly over the past decade. Thanks to Kyrgyzstan’s early membership in the WTO and its generally free economic environment, the country became a major importer, re-exporter and transporter of Chinese goods. As a result, bazaars have become major economic lifelines for Kyrgyzstan, concentrating great amounts of wealth and benefiting hundreds of thousands of people.
Although Chinese economic presence in Kyrgyzstan (and the wider region) is yet to translate into political influence, there are indirect political consequences for Kyrgyzstan. Over the past few years, shuttle traders importing Chinese goods have been at the forefront of the debate as to whether or not Kyrgyzstan should join the Russia-Belarus-Kazakhstan Customs Union (CU). There are mixed feelings towards the union.
On May 29 Kazakhstan, Belarus and Russia signed into existence the Eurasian Economic Union (“EEU”), set to come into force in January 2015. The EEU’s aim is the economic integration of ex-Soviet countries, based on a European Union-style collective model. It builds on the Customs Union, signed in 2010, which implemented a common customs territory and removed internal border controls between the three states. Against the backdrop of a shifting geopolitical landscape sparked by events in Ukraine, and strengthening Russian and Kazakh bi-lateral relations with China, the original vision of the EEU may no longer be viable. Although they wish to show they have a diversified partner base, Kazakhstan and Russia also want to avoid perceptions of any overt economic threat to its shared Chinese partner. This is particularly relevant to Kazakhstan, which has in fact suffered economically from the initial implementation of the Customs Union, as laid out below.
Various Russian media outlets have loudly and repeatedly declared that China supports Moscow’s view on Ukraine. Recently, in an interview on Russian state television, Foreign Minister Sergey Lavrov characterised China as “our very close partners” with whom he has no doubts.
On the face of it, this interpretation is accurate, but the reality is far more complex, with China uneasy about Russia’s actions though it may share Moscow’s concerns.
Turkmenistan’s southeastern desert, not far from the border with Afghanistan, is a forbidding place. Its bleak, dusty vistas are punctuated by the ruins of ancient caravansaries: once rest stops on the old Silk Road. But, the silence of that long lost East-West artery is now regularly broken by the rumble of Chinese truck convoys. These are not ordinary tractor-trailers, either: they move slowly carrying massive loads of natural gas extraction equipment, and according to Turkmen officials, the shepherds’ bridges and village roads have had to be reinforced from the impact of their weight. The equipment is headed to one of the top five natural gas fields in the world; Formerly known as South Yolotan-Osman, in 2011 the field was renamed “Galkynysh” or “revival” in Turkmen. The name is apt because this gargantuan reserve of natural gas is the prize motivating CNPC, China’s largest oil company, to revive the old Silk Road — only this time by pipeline. Continue reading →
After years as Eurasia’s energy bully, Russia’s state-controlled natural gas monopoly, Gazprom, is getting a taste of its own medicine. Even as Gazprom seeks to build the tallest skyscraper in Europe as its new headquarters in St. Petersburg, pressure from Russia’s neighbors led to a 15 percent decline in the company’s profits last year, eating into the state budget. Moscow’s single-minded focus on gas exports in an effort to become, in the words of President Vladimir Putin, an “energy superpower” has crippled its ability to adapt to profound changes in the global energy landscape — from the shale gas revolution in North America to the dynamism of new market players such as Azerbaijan. Having spent the last decade making enemies in Central Europe and Central Asia, Gazprom and Russian decision-makers are now reaping what they have sown. Continue reading →
On April 2, 2013 Alexandros Petersen conducted an interview with Chris Rickleton, a Bishkek-based analyst and Instructor at the American University of Central Asia.
You have conducted in-depth research into Chinese plans for a refinery at Kara Balta in Kyrgyzstan. What exactly are these plans and on what sort of timetable are they to be carried out?
The refinery is already behind schedule, but is expected to be built by July of this year, and operating at full capacity by September. Local media reported some tough talk in January between Chu Chan, the director of Zhongda, the Chinese state-owned firm that will run the refinery, and Kyrgyz Prime Minister Jantoro Saptybaldiyev. Saptybaldiyev was clearly very keen to see the refinery working as soon as possible and asked Chu why the facility still hadn’t been built. Chu referred to “misunderstandings” having led to the wrong equipment being delivered to the site. Chu also wanted the “sanitary zone”, which governs the distance residential homes can be from the refinery, reduced from 500 metres to 300 metres, which would have helped the company out in some of its compensation battles with local residents. When Saptybaldiyev rebuffed this offer, Chu reminded him that the company have already paid something like $4,000,000 in taxes and that they will have invested $250 million into the project by the time it is up and running.
The way Central Asian states will turn — to Russia’s Eurasian Union or to China — is the test for influence in the region. Photo: (cc) Wikimedia/IvaNdimitry
If one turns enough of a blind eye, it is easy to be optimistic about Central Asia. Wily diplomats from Kyrgyzstan and Tajikistan are masterfully playing off the great powers. Kazakhstan and Turkmenistan are turning into hubs in their own right – and nobody can tell plucky Uzbekistan what to do. This is nobody’s backyard, and attempts by neo-imperialists in Moscow, Washington and Beijing to play games in the region are only strengthening the hands of the Central Asian states themselves. This is a comforting picture – which is why Western policymakers love it – but it looks increasingly false as President Putin tightens the screws.
Why a Eurasian Union matters
Russia’s desire to strengthen its sphere of influence in Central Asia seems to be intensifying. The first sign came in October 2011 when Russia’s ‘national leader’ published his vision for a Eurasian Union in the Gazprom-Media owned daily Izvestia. Here Putin stated that the Customs Union with Belarus and Kazakhstan that would come into force on 1st January 2012 was just the beginning – and that it would expand ‘by involving Kyrgyzstan and Tajikistan. Then, we plan to go beyond that, and set ourselves the ambitious goal of a higher level of integration – a Eurasian Union.’
While the concept of a “New Silk Road” of trade, transport and telecommunications connections across Eurasia was formally endorsed by the US State Department, it is Beijing and Chinese companies that have taken the lead in realizing the immense infrastructure projects that will tie the mega-continent together. The latest is the completion of a second railway link between China and Kazakhstan at the burgeoning Khorgos crossing point and Special Economic Zone. This nearly 600-kilometer section is part of a larger project that connects China’s eastern port of Lianyungang with Kazakhstan’s rail system and points west toward Russia and the Caspian region. Chinese officials refer to it as part of the New Eurasian Land Bridge from China’s ports to Western European ports such as Rotterdam (Global Times, December 22, 2012).
Plans call for the railway to handle 20 million tons of freight by 2020, increasing to 30 million by 2030. The 292-km Chinese portion of the project was built for less than $1 billion—relatively inexpensive by global standards. Khorgos is already the key border crossing for the Central Asia–China natural gas pipeline from Turkmenistan and a new highway network under construction. According to Kazakhstan’s Minister for Transport and Communications Askar Zhumagaliyev, 800 km of this Western Europe–Western China highway will be completed in 2013, with much of the route running alongside the just-completed railway (Tengrinews, December 20, 2012). Continue reading →
Last month, Russia was reportedly ready to provide weapons worth $1.1 billion to Kyrgyzstan and $200 million to Tajikistan along with a further $200 million in petroleum products. In early June, China offered $10 billion through the Shanghai Cooperation Organization (SCO) to Central Asia. India has been focusing on developing a strategic partnership with Tajikistan since September, while the US always develops a stronger relationship with Uzbekistan.
There is a sense that we are returning to the “Great Game” in Central Asia. But this focus on abstract theories misses hard realities on the ground. Outside powers invest in Central Asia to advance their individual national interests, not out of a strategy directed against other powers. Continue reading →
Foreign Minister Lavrov meets State Councillor Dai. Picture from here
State councillor Dai Bingguo’s visit to Russia this week for strategic security talks has once again focused attention on the supposedly close relationship between the two BRICS powers.
An image of alliance thrown up by their parallel voting in the UN and Western analysts’ inability to look beyond former cold war alliances mean that suspicion is often cast on a relationship that has as many fractures as it does cohesion. The reality is China and Russia disagree as often as they agree.
On the chaos in Syria, the two have shown they are willing to support each other by holding up the UN as a reason for their refusal to countenance action on Syria. But while both may see eye to eye on this issue, this is not always the case. Looking in the annals of Security Council resolutions over the past few years, one can find a few instances where China or Russia found themselves abstaining alone.
Uzbekistan’s decision to withdraw from the Russia-led Collective Security Treaty Organization (CSTO) for the second time does not come as much of a surprise for long-time observers of Tashkent’s foreign policy. Before finally calling it quits, Uzbekistan’s leadership had expressed frustration with the group’s overtly anti-Western guise, its fealty to Moscow and its pretensions at competition with NATO and the Shanghai Cooperation Organization (SCO). Uzbek forces have not participated in the group’s military exercises and President Islom Karimov made a point of not attending CSTO summits. In contrast, his recent visit to Beijing for the SCO summit was highly publicized, as was a new strategic partnership agreement signed with China. Continue reading →
On the surface, this week’s Shanghai Co-operation Organisation (SCO) summit will be another marker in the organisation’s steady development as a serious player in regional and, increasingly, international affairs. Below, however, a growing tension between China and Russia is starting to show.
The two powers increasingly see their interests diverging in Central Asia. They are close allies in the UN Security Council, but on the ground China and Russia are steadily moving in different directions.
And it would seem that the SCO is not the only reason for his visit. In initial discussions, the summit was to be held in Shanghai. But, primarily at Moscow’s instigation, the decision was made to hold the conference in Beijing. Given that this was Putin’s first visit to China in his new role, he was eager to ensure that it was held in the capital so he could combine the summit with a state visit to Beijing, highlighting the importance of the bilateral over the multilateral in Russian minds.Russia’s hesitation with the SCO is observable in several ways, not least in President Vladimir Putin’s travel schedule. His first foreign visit since regaining the reins of power took him to Belarus, Germany and France, before coming to China this week.
Vladimir Putin’s return to the presidency in Russia was predictably controversial in Europe and America. In Beijing, the official read-out provided by Xinhua highlighted a positive conversation, with President Hu Jintao stating with “confidence that Putin’s new presidential term would see faster progress in building a stronger and richer nation”. That statement affirmed the importance of the Sino-Russian axis as a pole in international relations. Putin, the quintessential Russian chess master, has a very clear sense of where Russia’s future must lie, and needs Beijing onside if he wants to carry this out.
The Sino-Russian relationship has had its ups and downs. As Putin put it recently, “there are some sources of friction”. The joint Chinese-Russian veto last month of a UN resolution on Syria attracted attention. But, beyond this, tensions persist as Russia proves implacable in discussions over energy pricing, and tries to develop a “Eurasian Union” to counter China’s successful inroads into Central Asia. The resultant price increase is detrimental to Chinese interests and delays economic integration under the auspices of the Shanghai Co-operation Organisation (SCO).
On a recent visit to China, Turkmenistan President Gurbanguly Berdymukhamedov smiled broadly as he was awarded the title of Emeritus Professor at Peking University. Yet his satisfaction was probably less the academic distinction than a lucrative energy export deal he had signed earlier that day — 65 billion cubic meters of natural gas, roughly half of China’s 2010 gas consumption, would eventually flow from Turkmenistan’s massive fields to China’s seemingly insatiable consumers.
This end-of-year agreement prompted some observers to proclaim that gas-rich Turkmenistan had achieved a coup against regional political powerhouse Russia: For years, Moscow has been negotiating a gas export deal with Beijing, but what would it do now that China was receiving so much supply from Turkmenistan? Yet that analysis is backwards: Rather than a Turkmen power play, the natural gas deal was a geopolitical chess move by Beijing, whose fundamental interest in the region is both raw resources, and raw power. While the West is focused on constraining China’s actions in the Asia-Pacific, Beijing is capitalizing on vast space for influence to its west in Central Asia.