China In Eurasia

For more than 18 months, pandemic-related restrictions introduced by China along its border with Kyrgyzstan have seen cross-border commerce dwindle and left the truckers and businesses who rely on the shuttle trade desperate for a financial lifeline.

Now, a new system proposed by the Kyrgyz government to kick-start trade between the two countries has truck drivers who make their living ferrying cargo across the border worried that prohibitive added costs could leave them squeezed even further.

"This scheme will harm [truck drivers], private entrepreneurs, and the state, too," Maksatbek Duisheev, the chairman of the Saparman Truckers Association, told RFE/RL's Kyrgyz Service. "They say that this is a proposal needed to comply with the Chinese side, but we have not been shown an official document. The whole situation is not clear."

The proposed system has already sparked a backlash, with about 400 drivers gathering on November 8 in the Kochkor district of Kyrgyzstan's eastern Naryn region to protest the new measures and sending an open appeal to President Sadyr Japarov's office.

Trade with China makes up a crucial portion of the Kyrgyz economy, but since the start of the pandemic in 2020, imports from China to Kyrgyzstan have fallen by 57.5 percent, with the number of trucks crossing with cargo declining 10-fold.

Bishkek has been desperate to raise trade back to pre-pandemic levels, a goal that has been hampered by coronavirus concerns from Chinese authorities who require rigorous and time-consuming health procedures to cross the border.

In order to better comply with Chinese COVID regulations and increase the number of cargo trucks crossing the border, Kyrgyz officials plan to create a so-called "sanitary zone" near the border crossing by Torugart, where a designated number of trucks will ferry containers with goods from China across a neutral zone between the two countries and load them onto Kyrgyz freight trucks.

According to a proposal, this service will be provided by Silk Way, an industrial and logistics center built along the Kyrgyz-Chinese border that is largely funded by Chinese investors.

While the new system could lead to cargo traffic recovering from its pandemic slump, Nabir Toktorov, chairman of the Association of Carriers of Kyrgyzstan, fears that truckers will be left bearing the costs, which could result in inflation and a decrease in the total amount of freight traffic.

Under the proposed new rules, drivers could be charged a fee ranging from $1,000 to $1,500 per truck for this service, which could cut into already thin profit margins. Adding to the anxiety and confusion, full details of the arrangement have not been presented to Kyrgyzstan's various truckers associations.

"They say that this money will go to the budget. But I don't understand this. If this money will not be used to pay taxes or repair roads, then on the basis of what law will they collect $1,000?" Toktorov told RFE/RL's Kyrgyz Service. "This is a robbery!"

Kyrgyzstan's State Customs Service did not reply to requests for comment from RFE/RL.

Restarting Cross-Border Trade

China is one of the last countries in the world to continue with a strict "zero-COVID" policy, which sometimes entails locking down entire cities if a single case is detected.

These tough measures have corresponded with rigid border controls and restrictions on the types of people and goods that have been allowed to cross the Chinese border. In addition to Kyrgyzstan, cross-border trade with Kazakhstan and Tajikistan has also seen a precipitous drop over the course of the pandemic.

More so than its Central Asian neighbors, Kyrgyzstan's economy relies heavily on imports from China, especially for goods such as electronics, textiles, and construction materials.

The effects of the pandemic border rules by China were felt quickly in Kyrgyzstan. By the end of March 2020, shortages of Chinese imports began to appear in the country and Bishkek sent a note to the Chinese authorities to ease restrictions on cross-border cargo transportation.

"Our imports are 2 1/2 times higher than exports and most of the imports come from China," Askar Sydykov, the executive director of the Bishkek-based International Business Council, told RFE/RL's Kyrgyz Service. "Continuous work on the Kyrgyz-Chinese border is very important for the country's economy. Even raw materials for light industry come to us from China."

For drivers making the trip throughout the pandemic, health measures at the border have led to lengthy delays and cut into the bottom line of truckers and companies alike.

Complicated border procedures now consist of a time-consuming disinfection process for trucks and goods arriving from Kyrgyzstan -- as well as checks on the drivers themselves -- that has sent wait times soaring and limited the numbers of trucks able to cross on a given day.

Only after completion of this process, which drivers say can take more than 90 minutes, are trucks allowed to cross the border. Upon leaving Kyrgyzstan, the container on the truck is unhitched and replaced by a full container of Chinese goods and then drivers then begin the process of returning to the Kyrgyz side.

The proposed measures that drivers protested on November 8 are intended to speed up this process and eliminate the bottlenecks at the borders that have developed over the course of the pandemic, although drivers who spoke to RFE/RL's Kyrgyz Service said the new system could create new opportunities for graft.

Several also raised concerns that Silk Way was selected for the proposal given that Adilet Kubanychbekov, who was appointed as the new head of the State Customs Service in October, previously served as the director of the industrial and logistics center.

Bishkek And Beijing

Kyrgyzstan is grappling with a contracting economy whose gross domestic product dropped 8.6 percent in 2020 and has remained sluggish throughout the pandemic.

Due to China's economic importance, smoothing relations with Beijing and boosting economic activity with its large neighbor have been a priority of Kyrgyzstan's current government.

Akylbek Japarov (no relation to the president), the chairman of Kyrgyzstan's Cabinet of Ministers, has taken up this issue since assuming his new role on October 12, addressing it in parliament and visiting the Torugart checkpoint along the border, where he vowed to increase the number of trucks allowed to cross and find new ways to boost the state budget.

The official once again pressed ahead on trying to improve trade with China and attract more investment from the country when he met with Chinese Ambassador Du Dewen on November 9. "We need to increase trade. The Cabinet of Ministers is ready to guarantee the safety of investors," he said during his meeting with Dewen, according to an official readout.

For the time being, drivers continue to be frustrated, both over the cost and ambiguity of government efforts to increase cargo traffic and due to many border crossings still not being fully operational.

According to Temirbek Shabdanalivev, the head of the Association of Freight Forwarders of Kyrgyzstan, this has led to many truckers and others involved in the transport sector being out of work or underemployed.

"Many drivers have been left without work and not just them, either. It's their assistants and the loaders and logistics people as well," Shabdanalivev told RFE/RL. "Our drivers call and ask what to do, whether to stage a protest or not. They say that there is nothing to feed their families."

Blackouts in Tajikistan, energy shortages in Ukraine, rising electricity costs across the Balkans, and short-term profits for state companies in Russia.

Those are some of the early ripple effects being felt across Eurasia from an accelerating global energy crisis caused by fuel shortages for power generation inside China and soaring prices across Europe that are affecting consumers and producers alike.

The deepening crisis taking hold across Europe and Asia also risks imperiling the global economy as it attempts to recover from the slowdown due to the coronavirus pandemic.

With winter approaching, the sudden energy crunch hitting the world is threatening already stressed supply chains, stirring geopolitical tensions, and raising questions about how ready the world is for a transition to greener forms of energy.

“The global energy price rally has affected economies all over the world, as the prices of oil, coal, and gas have risen,” Jack Sharples, an expert at the Oxford Institute for Energy Studies, told RFE/RL. “Furthermore, the energy crisis has exposed the inelasticity of our energy demand: Even with high prices, we keep consuming hydrocarbons because we have no readily available alternative.”

Chinese imports of coal from Russia have tripled compared to last year. The rising cost of natural gas has also given Moscow and Gazprom, its state-run gas company, additional leverage over Brussels as it pushes for final approvals for its new and controversial Baltic Sea gas pipeline to Germany, Nord Stream 2, which will bypass Ukraine.

China’s energy-producing neighbors, like Kazakhstan and Turkmenistan, have also seen a rise in demand for coal and gas, respectively, although those shipments have been slowed by logistical and production limits in delivering larger than planned quantities to China.

Elsewhere, North Macedonia’s government has held emergency meetings to address the unfolding crisis, announcing temporary funds to boost energy companies and introducing caps on electricity use for businesses.

Inside the European Union, disagreements over how to respond to the crisis are emerging, with some leaders asking the bloc for assistance and others -- like Hungarian Prime Minister Viktor Orban -- blaming the price hikes on the EU’s sweeping policies to combat climate change and reduce emissions.

“This energy crisis could affect how Brussels implements its flagship Green Deal climate policies, particularly the expansion of the EU’s emissions trading system,” Charles Dunst, an associate at Eurasia Group's Global Macro team, told RFE/RL. “The plans were already unpopular and the energy crisis is likely to [make any] support dwindle [even further] in the coming months.”

Origins Of An Energy Crisis

The current energy crunch first emerged in China, the world’s top manufacturer, as global demand for its products suddenly and unexpectedly shot upward this year as part of a post-pandemic economic surge.

Due to an unofficial Chinese ban on Australian coal, which had previously been the country’s top supplier, coal stocks were low. China’s electricity deficit was also added to by conflicting climate policies adopted within the country.

Chinese President Xi Jinping pledged that China would be carbon-neutral by 2060, leaving regional governments in China scrambling to bring emissions of carbon dioxide and other greenhouse gases in line with the set limits. As a result, factories were left dealing with electricity rationing and power cuts.

With coal supplies dwindling at home, Chinese power companies also turned to the natural-gas market, leading to purchases at an even faster rate than traders in Europe had been anticipating and causing prices to soar.

“The energy crisis has disrupted production in China, which risks further slowing global supply chains ahead of the West’s busy Christmas shopping season and beyond,” Dunst said.

Natural-gas prices have since hit a series of record highs.

In Europe, the prospect of supply shortages is growing as demand is also rising across Asia, where buyers have been prepared to keep paying a premium and outbid their European counterparts.

That disparity is likely to intensify after China ordered state-backed companies in October to secure energy supplies no matter the cost. Since then, imports of coal and gas have continued to grow.

The move by China suggests that other parts of the world will face an even tougher time securing the fuel they need, Dunst said.

Crisis And Opportunity

Amid the flux in the global energy market, Russian President Vladimir Putin has moved to leverage his country’s vast energy reserves.

During the pandemic, overall gas exports to the EU from Russia -- which supplies about 50 percent of the bloc’s imports -- fell because there was less demand as economic activity shrank. Although it has picked up again in Europe, this downward trend has been continuing, with lower supplies this year. This has led to European stocks being depleted, which in turn is driving up prices.

Putin and Russian officials have urged Germany to speed up its regulatory approval of Nord Stream 2, suggesting that it would provide a long-term solution to the country’s energy problems.

Meanwhile, on Russia’s eastern front, energy companies have moved quickly to meet China’s growing demands, supplying three times as much coal this year to the country as during 2020, according to Chinese customs data.

“The current two-front energy crisis presents a short-term window of opportunity for Moscow to push for the realization of its energy projects in Europe under sanctions and to strengthen its position as energy supplier to China,” Vita Spivak, an analyst at the consulting firm Control Risks, told RFE/RL. “While the current crises appear to be mostly the result of post-coronavirus economic development, energy shortages might present themselves in the future as the world is trying to embark upon the ‘green transition.’”

Moscow has pivoted to supply China’s evolving energy needs with oil and gas accounting for more than 60 percent of Russian exports to China, a trend that could continue as China weans itself off coal and relies more on gas.

The Power of Siberia pipeline launched in 2019 already provides gas to China, with plans for its output to increase in the future. A second pipeline, Power of Siberia 2, is also under discussion.

In the meantime, Russia continues to have its attention on coal.

Moscow announced it would temporarily halt coal shipments to Ukraine starting on November 1, saying that it was needed for domestic consumption, despite increasing its exports to other countries.

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Further down the line, Russia is also looking at how to ramp up its coal supplies to China and is currently investing $10 billion into railroad infrastructure in its Far East in order to meet future Chinese needs before the country progresses on its transition to alternative energy sources.

“In order to leverage its position, Moscow has to ensure the relevant energy export infrastructure is in place, which presents a challenge within this window of opportunity,” said Spivak. “Moscow realizes that the window of opportunity to sell its hydrocarbons to Europe and China is limited.”