Sunday, April 20, 2014


Qishloq Ovozi

What’s China’s Game In Central Asia?

China's Prime Minister Wen Jiabao (left) and his Kyrgyz counterpart review Kyrgyz honor guards at Manas airport in December, 2012.
China's Prime Minister Wen Jiabao (left) and his Kyrgyz counterpart review Kyrgyz honor guards at Manas airport in December, 2012.
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A lot has been written in the last decade about China’s increasing influence in Central Asia -- some of those articles were mine. This giant neighbor of Central Asia had little presence in the region 15 years ago but seems to be everywhere now.

Many knowledgeable and well-respected scholars have characterized China’s interest in Central Asia as being part of a very patient, long-term strategy to achieve dominance over the area. I won’t argue with that.

But for a moment it is worth leaving the playing field of the zero-sum game and considering some simple reasons for China’s interest in Central Asia -- and Central Asia’s interest in China -- now and during the next two or three decades.

General Liu Yazhou of China’s People’s Liberation Army perhaps summed up China’s interest in Central Asia best when he said, “Central Asia is the thickest piece of cake given to modern China by the heavens.”

Central Asia’s energy resources -- oil, natural gas, uranium -- are the cake.
China needs these resources to fuel its economic growth and Beijing is seeking them everywhere in the world.

But why send oil tankers half way around the world when numerous pipelines, railways, and roads are being constructed in Central Asia, largely with Chinese money. All that can bring oil, gas, uranium, and various minerals from Central Asia to China. And the Chinese loans that the Central Asian governments are accepting to develop their oil and gas fields and build the infrastructure needed to export these resources to China are in fact pre-payment for goods to be received later.

For example, China has loaned Turkmenistan more than $10 billion to develop the massive Galkynysh gas fields and build the pipelines from the field. Some gas from Galkynysh will eventually go to China and the first $10-billion worth won’t earn Turkmenistan any money as Ashgabat will be paying back the loan.

Some might say China is sucking Central Asia dry of its resources. But what options do the Central Asian states have? Who else can purchase Central Asia’s oil and gas?

To the south Afghanistan cannot pay, Iran already has oil and gas, and to the north so does Russia.

Any of the Central Asian states, those that have oil or gas, would be glad to export to Europe. The problem is that most export routes to Europe pass through Russia, a legacy from their days as part of the Soviet Union.

Kazakhstan, the oil baron of Central Asia, is an example of the sort of obstacle that creates.

Kazakhstan produced some 82 million tons of oil 2013, and roughly one-third of that was exported via the Caspian Pipeline Consortium pipeline that runs through Russia. That leaves some 54 million tons.

Late last year Kazakhstan renewed a deal with Azerbaijan that in 2014 allows some 4 million tons of Kazakh oil to be exported to Europe, most via the Baku-Tbilisi-Ceyhan pipeline, one of those few routes to Europe. Kazakhstan does have an oil swap deal with Iran. International sanctions on Iran have led to a reduction in how much oil Kazakhstan sends across the Caspian Sea to northern Iran in return for a like amount at Iranian Persian Gulf ports. But, in September 2012, a top official at the state company KazMunaiGaz (Vice President Daniyar Berlibayev) said at its peak the volume reached only 3.5 million tons. That leaves somewhere around 48 million tons of oil, far more than domestic needs.

For Turkmenistan, with the world’s fourth largest gas reserves, the situation has been even worse. For most of the 1990s, before the pipeline to Iran was completed, Turkmenistan shipped its gas via Soviet-era pipelines through Russia to Ukraine, Georgia, and Armenia, the customers Moscow and a transit company selected (while Russian gas went to European countries). Ukraine’s debt to Turkmenistan was regularly in the hundreds of millions of dollars; the three countries combined sometimes owed Turkmenistan $1 billion, and those were the days when the cost of gas was about $50 per 1,000 cubic meters, not the $400 it costs many countries now.

So with limited potential paying consumers at the moment, the prospect of one day soon selling some 65 billion cubic meters to China is difficult to pass up (China only pays Turkmenistan about $195 per 1,000 cubic meters). And for Kazakhstan and Uzbekistan the prospect is equally sweet and immediate.

Turkmenistan gets something else from its relationship with China.

Some have raised eyebrows when noticing that the China National Petroleum Corp is the only foreign company to have a much-coveted onshore contract to develop a Turkmen field -- the Bagtyyarlyk (Happiness) field, with estimated gas reserves of some 1.3 trillion cubic meters (that’s enough to fill all the European Union’s gas needs for about two years). It is also located on the sliver of Turkmenistan that lies on the east side of Amu-Darya, generally speaking, Uzbekistan’s side. Central Asia is a region of ill-fitting borders drawn by Soviet mapmakers. A river would be an easy way of dividing two countries. But with Chinese workers at Bagtyyarlyk, Uzbekistan, with roughly six times the population of Turkmenistan, is unlikely to press a claim.

China definitely has influence in Central Asia as, currently, the major investor in the region. But it’s nearly all due to China’s self-interest, what China can get, that’s driving this investment.

That is pretty much where Chinese interest ends.

For instance, there is no Chinese investment in construction of hydropower projects in Kyrgyzstan and Tajikistan (though Chinese companies are working on power transmission lines and electric substations in both countries). There’s potential for profit for any investor in Central Asian hydropower, but the electricity Kyrgyzstan and Tajikistan don’t use is already destined to go to customers in Afghanistan and on the subcontinent.

A half decade ago it appeared China was gaining some military clout in Central Asia when the Shanghai Cooperation Organization was conducting large joint military exercises. But Russia saw this and for the last few years has been building the presence of the CIS Collective Security Treaty in Central Asia. Moscow has secured long-term deals for military bases in Kyrgyzstan and Tajikistan is about to essentially rearm the militaries of those two countries.

In any case, Beijing has enough worries with its Muslim Uyghur population in the Western Xinjiang Region, just across the mountains from Central Asia. It’s unlikely China would want to have the roughly 50 million Muslims in Central Asia in its sphere of political influence right now.

What about the Chinese workers coming to Central Asia?

The increasing number of Chinese merchants opening stalls at Central Asian bazaars is a reason for concern, as it could spark local conflicts, same with the Chinese farmers in Tajikistan.

As for Chinese in Central Asia working at oil and gas fields or building roads, the Chinese government and Chinese companies also have to find work for their people. And the Chinese government can easier keep track of budgets and timetables with its own people at the sites, though especially in Kazakhstan there have been problems because of Chinese oil workers being paid more than their Kazakh counterparts.

Irredentists in China have produced maps that lay claim to huge areas of the Asian continent and it is possible this ancient and patient people have territorial acquisition plans that they see being realized sometime four or five generations in the future.

Central Asia has a finite amount of energy resources and, given current export plans and projects, four or five generations in the future it might not look so attractive to China anymore.

-- Bruce Pannier (Yerzhan Karabek of RFE/RL's Kazakh Service helped in preparing this report.)
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About This Blog

Qishloq Ovozi is a blog by RFE/RL Central Asia specialist Bruce Pannier that aims to look at the events that are shaping Central Asia and its respective countries, connect some of the dots to shed light on why those processes are occurring, and identify the agents of change. Content will draw on the extensive knowledge and contacts of RFE/RL's Central Asian services but also allow scholars in the West, particularly younger scholars who will be tomorrow’s experts on the region, opportunities to share their views on the evolving situation at this Eurasian crossroad. The name means "Village Voice" in Uzbek. But don't be fooled, Qishloq Ovozi is about all of Central Asia.

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