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China In Eurasia

An aerial view shows coal being loaded onto trucks near a coal mine in Datong in China's northern Shanxi Province on November 2.

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.

An employee checks a gas valve at the Atamanskaya compressor station, part of Gazprom's Power of Siberia gas pipeline, outside the Far Eastern town of Svobodny, in the Amur region of Russia. (file photo)
An employee checks a gas valve at the Atamanskaya compressor station, part of Gazprom's Power of Siberia gas pipeline, outside the Far Eastern town of Svobodny, in the Amur region of Russia. (file photo)

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.

A coal stacker in Russia’s Far East prepares shipments to customers in China, South Korea, Japan, and elsewhere in Asia.
A coal stacker in Russia’s Far East prepares shipments to customers in China, South Korea, Japan, and elsewhere in Asia.

“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.

Smoke belches from a coal-fueled power station near Datong in China's northern Shanxi Province. (file photo)
Smoke belches from a coal-fueled power station near Datong in China's northern Shanxi Province. (file photo)

“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.

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.”

Czech Senate speaker Milos Vystrcil (left) awards Taiwanese Foreign Minister Joseph Wu with the highest Senate honor during his visit to Prague on October 27.

Welcome back to the China In Eurasia briefing, an RFE/RL newsletter tracking China's resurgent influence from Eastern Europe to Central Asia.

I'm RFE/RL correspondent Reid Standish and here's what I'm following right now.

Taiwan Takes Center Stage In Europe

Joseph Wu, Taiwan's foreign minister, just wrapped up a whirlwind tour that took him to a handful of Central and Eastern European countries where he looked to boost the self-governing island's international profile.

I sat down with Wu for an interview during his stop in Prague, where we talked about his current trip, tensions with Beijing, and Taiwan's lessons for other countries navigating complicated ties with China.

Finding Perspective: Wu had a simple warning for countries in Europe and elsewhere that find themselves increasingly tied to China economically and politically: "They should think twice."

A key part of Wu's trip is shoring up support as many countries across the continent are growing frustrated with Beijing. Central to that message is Taiwan's pitch as a small, open, and democratic alternative to China.

That message is likely to get a mixed reception and it faces a tough uphill battle.

For starters, only 15 countries currently have official diplomatic relations with Taiwan and apart from the Holy See, none of them are in Europe.

Most countries transferred their formal ties to Beijing from the 1970s onward and with China's economic and political power rising across much of the world, Taipei has found itself with few official friends.

Why It Matters: By all measures, the trip was a success for Taiwan.

Wu received warm welcomes in the Czech Republic and Slovakia and was embraced on the sidelines in Brussels by several members of the European Parliament, leading to tough statements from Beijing to those that welcomed him.

While many countries in Europe are unlikely to turn away from China and the lure that its economy offers European businesses, the Taiwanese trip -- and the embrace of Wu -- marks a sea change of sorts that many governments will be walking a more defiant line with Beijing in the future.

For Taiwan, that's an important step forward.

Read more

● You can watch some video excerpts from my sit-down with Wu here, which was produced by my colleague Stuart Greer.

● U.S. Secretary of State Antony Blinken met with Chinese Foreign Minister Wang Yi as part of the G20 summit in Rome over the weekend, where Wang blamed the current Taiwanese leadership for the uptick in tensions.

● During a CNN interview following the meeting, Blinken said that Washington had not changed its "one China" policy regarding Taiwan when asked about early comments made by U.S. President Joe Biden, where he said that Washington could come to Taipei's defense in the event of a conflict.

Expert Corner: More From Taiwan's Foreign Minister

We're doing things slightly differently this week. Here are some more selected quotes from my wide-reaching interview with Foreign Minister Wu in Prague on October 27.

On tensions in the Taiwan Strait: "The way we see it is that the U.S. commitment to Taiwan has been very consistent...and the U.S. explanation is also very clear, that U.S. policy remains unchanged. So, that is how we feel. But again, Taiwan is responsible for its own defense, and we want the United States to help in the process of Taiwan acquiring more defense capabilities, and this is what we are asking the United States for."

On his Europe trip: "What China wants to do is to make sure that Taiwan is dangling out in the international community alone -- no friends, no support. But, of course, as minister of foreign affairs my responsibility is to make sure that Taiwan has friends out there."

On how Beijing sees Taiwan: "Whenever Taiwan is gaining something, or having a new friendship, or being able to do something on the international stage, the Chinese would think that they are losing and they want to cut back on Taiwan's international participation. So, in that sense, it's a very direct competition between Taiwan and China on the international stage."

Do you have a question about China's growing footprint in Eurasia? Send it to me at StandishR@rferl.org or reply directly to this e-mail and I'll get it answered by leading experts and policymakers.

Three More Stories From Eurasia

1. A New Chinese-Funded Base In Tajikistan

Tajikistan's parliament approved construction of a new Chinese-funded base in the country, RFE/RL's Tajik Service and myself reported.

We also reported on an alleged proposal outlined in documents seen by RFE/RL that were sent from the Chinese Embassy in Dushanbe to Tajikistan's Foreign Ministry, which offered ownership of a separate base where Chinese personnel are already based in Tajikistan near the Afghan border.

The Details: The new facilities are not a military base and Tajik officials told my colleagues in Dushanbe there will be no Chinese personnel posted there.

Beyond that, few tangible details were put forward.

Construction of the new facility was approved in Tajikistan's lower house of parliament on October 27 as lawmakers voted on the agreement reached between Tajikistan's Interior Ministry and China's Public Security Ministry.

Tajik First Deputy Interior Minister Abdurahmon Alamshozoda said the facility would be located in the village of Vakhon, near the border with Afghanistan, in the country's remote Gorno-Badakhshan Autonomous Province. The base would be run by the country's Rapid Reaction Group -- special forces that operate under the purview of the Interior Ministry.

It's important to note the Tajik and Chinese ministries involved in this project. Both cover policing and have wider paramilitary powers, but neither oversees the military.

Tajik lawmakers said the new base would carry out policing duties focused on combating organized crime.

Now to the other bit of news here....

According to a communique sent from the Chinese Embassy in Dushanbe to Tajikistan's Foreign Ministry and seen by RFE/RL's Tajik Service, Tajik President Emomali Rahmon offered to Chinese officials to transfer full control of an existing Chinese base in the country to Beijing and waive any future rent in exchange for military aid from China.

The base referred to in the documents appears to be one RFE/RL reported about a few weeks ago, which is believed to have paramilitary units from China's People's Armed Police.

We don't know if the offer was accepted or not. The Chinese Embassy in Dushanbe did not respond to a request by RFE/RL's Tajik Service about the proposal and a Chinese Foreign ministry spokesperson simply said that "China has no military base in Central Asia."

The Takeaway: As several regional experts noted about the report, this development points to Beijing's added focus toward Central Asia, which appears to be accelerating since the Taliban's takeover of Afghanistan.

"Developments like this were coming, but the instability in Afghanistan has accelerated things," Temur Umarov, an expert on China in Central Asia at the Carnegie Moscow Center, told me. "In the future, we might see Chinese military and intelligence cooperation intensify across the region."

2. Huawei In The Balkans

The Chinese technology giant Huawei signed secret deals with people close to Serbia's state-owned telecommunications company to allegedly win contracts, leaked documents show.

My colleague Iva Martinovic from RFE/RL's Balkan Service and I reported on the news and followed up on an investigation by the Organized Crime and Corruption Reporting Project (OCCRP) and the Serbian-based Crime and Corruption Investigation Network (KRIK) based off documents obtained through the Pandora Papers leak.

The Story: The documents show secret offshore payments made to Igor Jecl, a former executive for Telekom Srbija, Serbia's state telecoms firm, worth $1.4 million in contracts, loans, and consulting fees, as well as an apartment from an offshore company that was given by Huawei for "consultancy," which financial experts told OCCRP "raises red flags for corruption."

The leak also shows that at least $1.16 million (1 million euros) went into offshore companies owned by Jecl and Milorad Ignjacevic, a prominent Serbian lawyer who had business ties to Telekom Srbija.

Iva followed up with Huawei and Telekom Srbija about what's revealed in the leaked documents and I spoke with several experts about how Chinese companies operate in the Balkans. Read the full report here.

Jecl's whereabouts, meanwhile, is unknown. Repeated attempts to reach him for comment received no reply. Records show he no longer appears to maintain an address in Serbia and his company registered in the British Virgin Islands has been closed.

3. 'The Network Wars Have Begun'

I interviewed Jonathan Hillman, an expert on China's Belt and Road Initiative (BRI) at the Center for Strategic and International Studies and author of the new book The Digital Silk Road: China's Quest To Wire The World And Win The Future.

You can read my full write-up and interview here.

What You Need To Know: Although the pipelines, roads, and grand infrastructure projects of China's BRI have garnered the most attention as part of Beijing's efforts to expand its economic and political influence around the world, Hillman focuses on the unfolding digital side, which he argues will make up the new battleground for growing competition between China and the United States.

From 5G to AI-enabled surveillance systems and fiber-optic cables, Beijing and Washington are fighting for control over the networks of the future and, as Hillman writes in his book, "the Network Wars have begun."

In this vein, it is the fight for the markets of tomorrow.

China's success would bring commercial and strategic benefits to the country and allow Beijing to hold the reins on global finance, communications, and the flow of data, which could all be reshaped to better fit its geopolitical interests. (All of which are advantages currently enjoyed by the United States.)

As Hillman told me, expect things to keep heating up on this front. "We have only seen the first phase of the U.S.-China technology competition and it has been mostly focused in developed countries," he said. "But the real competition is set to play out across the developing world."

Across The Supercontinent

Up In The Air: China resumed a direct air-trade link with Afghanistan to restart pine-nut shipments in a bid to assist the country as it deals with a deepening economic and humanitarian crisis, Radio Azadi, RFE/RL's Afghan service, reported.

Pine nuts are a key staple for Afghanistan and their export to China in the past is estimated to generate around $800 million in revenue annually.

What Does China Want?: Here are two podcasts looking deeper into Beijing's ambitions in Afghanistan and Central Asia. The first is an episode of RFE/RL's Central Asia-focused show, The Majlis, and the other is a recording of a live RFE/RL discussion hosted on Twitter Spaces about China and Afghanistan. Take a listen!

Beijing's Turn: While Taiwan's Wu was carrying out his Europe tour, Wang, China's foreign minister, visited a handful of European countries of his own, including Serbia, where President Aleksandar Vucic reiterated his support for Beijing's "One-China Policy," RFE/RL's Balkan Service reported.

An Elusive Visit: Kyrgyz President Sadyr Japarov said that he intends to make his first visit to China as soon as the COVID-19 situation in the country stabilizes, RFE/RL's Kyrgyz Service reported.

To Be Continued: That vague date is also apparently holding up finalizing construction of a long-standing China-Kyrgyzstan-Uzbekistan railway project.

According to RFE/RL's Uzbek Service, Beijing has finalized the documents with the Uzbek side, but is waiting on things to be settled with Kyrgyzstan, which will reportedly take place during Japarov's trip to China, whenever that actually may be.

One Thing To Watch

U.S. President Joe Biden on October 31 blamed Russia and China for any disappointment over the level of commitment by G20 leaders to fight climate change.

That lack of commitment appears to be carrying over to the COP26 UN climate talks. Chinese President Xi Jinping won't address the COP26 talks in person or by video, and will send in a note instead.

Now, Xi hasn't left China in 21 months, but his absence and low-level engagement are particularly notable for a country responsible for almost one third of global greenhouse-gas emissions.

At the G20, there was frustration with China, which submitted a new climate pledge that did not significantly change its plans to grow emissions through this decade. Expect those same talking points to air at COP26 and beyond.

That's all from me for now. Don't forget to send me any questions, comments, or tips that you might have.

Until next time,

Reid Standish

If you enjoyed this briefing and don't want to miss the next edition, subscribe here. It will be sent to your inbox on Wednesdays twice a month.

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About The Newsletter

In recent years, it has become impossible to tell the biggest stories shaping Eurasia without considering China’s resurgent influence in local business, politics, security, and culture.

Subscribe to this dispatch in which correspondent Reid Standish builds on the local reporting from RFE/RL’s journalists across Eurasia to give you unique insights into Beijing’s ambitions and challenges.

The newsletter is sent on the first and third Wednesdays of each month.

To subscribe, click here.

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