China and Kazakhstan enter new level of cooperation.

By bne IntelliNews September 9, 2013

Chinese President Xi Jinping paid a 3-day visit to Kazakhstan during his Central Asia tournée. While in Kazakhstan, he presented at Nazarbayev University in Astana a new Chinese strategy on Central Asia. The parties also signed dozens of agreements cementing and developing the current level of cooperation between both countries.

The main concept of the new Chinese strategy on Central Asia is comprised within Great Silk Road concept which assumes development of economic cooperation with the region through the following measures: development of communicational infrastructure including rail tracks and roads in order to establish a corridor from Pacific Ocean to the Baltic Sea, facilitation of trade and investment through proper arrangements, promotion of local currencies in order to immune the relations from financial risks and to strengthen people-to-people contacts (Chinese President offered 30,000 government scholarships to Shanghai Cooperation Organization member states).

At the same time, Chinese leader declared that China and Central Asian countries should compare their economic strategies and work together to formulate plans and measures for regional cooperation. He also declared that China would never interfere in the domestic affairs of Central Asian countries. According to him, China is also not seeking a dominant role in regional affairs. Xi Jinping urged mutual cooperation in fighting three evil forces” terrorism, extremism and separatism.

The statement indicates that China will continue to focus on economic issues in its strategy towards Central Asia and will traditionally refrain itself from meddling into the domestic issues. At the same time however, the offer proposed to Central Asia is very competitive to economic integration process pursued by Russia in the region (the Custom Union and Common Economic Space), in which Kazakhstan participates and Kyrgyzstan and Tajikistan are eager to enter. Thus, in fact, China by developing economic cooperation with Central Asia is undermining Russian position in the region and as the number of agreements and scope of cooperation shows – China is very successful in this policy.

At the bilateral level the parties signed 22 contracts worth around USD 30bn. Among the most important are:

Agreement between national oil and gas holding KazMunayGas and CNPC under which China will purchase an 8.33% stake in the giant Kashagan offshore oil field development project (to remind, Kazakhstan blocked Indian ONGC from purchasing the stake and instead itself bought into it for USD 5bn). The parties also signed agreement on comprehensive strategic partnership program. As part of the deal, China will provide USD 3bn loan for development of the second phase of Kashagan field. The deal on Kashagan will be concluded later this month or in early October.

Memorandums on cooperation between national holding Baiterek and China's Development Bank and Chinese Exim Bank. The value of the cooperation projects is estimated at USD 3bn and USD 5bn correspondingly, according to Baitarek representative.

Agreement on Kazakhstan’s access to Chinese port of Lianyungang which will give Kazakhstan an option to exports its goods to Pacific area as well as to serve as a transit country for goods from Europe.

Samruk-Energo and China International Water and Electric Corporation concluded an agreement on building the Kerbulak Hydropower Plant on the Ili River.

The parties also signed agreement on cooperation in cosmic area which is crucial in the context of Kazakhstan’s disagreement with Russia over terms of use of Baikonur cosmodrome. There are speculations that Kazakhstan may be eager to make the cosmodrome an international facility and will seek cooperation with China in implementation of the project.

The signed agreements indicate that energy remains a priority in relations between Kazakhstan and China and Astana is not afraid of further tightening the cooperation. Until now, Kazakhstan was selling to China stakes in rather depleted fields with no prospects for increasing oil output. The recent deal indicates that Kazakhstan identifies China as the most promising partner in energy sphere and will increase oil shipments to this country on the expense of the West (oil from Kashagan was supposed to fill Baku-Tbilisi-Ceyhan pipeline going across the Caucasus to the EU, according to the USA East-West Corridor geopolitical concept).

Moreover, the agreement between Baitarek and the Chinese banks indicate that Kazakhstan will seek China’s help in modernization of its economy – Baitarek is a state agent responsible for introducing innovations to the economy. Generally, the signed agreement prove the growing economic cooperation between China and Kazakhstan which is not being held back by Kazakhstan’s participation in the Customs Union. In more general context, the ongoing tournée (Xi Jinping will also visit Uzbekistan and attend in Shangahai Cooperation Organization summit in Bishkek later this week) shows China’s strong position in the region which was perceived as Russian backyard.  

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