Xi cements China's position in Central Asia

By bne IntelliNews September 16, 2013

Clare Nuttall in Astana -

Chinese President Xi Jinping's tour of Central Asia in early September was an economic coup for China, which scooped up energy deals across the resource rich region. While China is still competing for political influence in Russia's traditional stomping ground, as the world's second largest economy its greater financial clout means it is winning the economic battle.

With Xi's visit focusing on the region's three main hydrocarbons producers - Kazakhstan, Uzbekistan and Turkmenistan - Beijing's priority was clearly securing access to more oil and gas. However, Xi also outlined his vision for deeper economic cooperation, the Silk Road Economic Belt, and sought Central Asian support in the security sphere, demonstrating that Beijing's agenda goes beyond access to raw materials.

Xi kicked off the tour in Turkmenistan, China's top natural gas supplier, on September 3, joining his Turkmen counterpart Gurbanguly Berdymukhamedov to open new infrastructure at the Galkynysh field - one of the world's largest - which will allow Turkmenistan to start pumping gas from the field eastwards to China. That will help the Central Asian state boost exports to China in the coming years to 65bn cubic metres (cm) annually, according to officials in Ashgabat, having sent 20bn cm last year. Both Turkmenistan and China plan to go ahead with expansion of the Central Asia-China gas pipeline, including Line D, which will follow a new route via Uzbekistan, Kyrgyzstan and Tajikistan to the Chinese border.

Xi visited neighbouring Kazakhstan shortly before the long-awaited launch of production at the offshore Kashagan oilfield. An agreement on China National Petroleum Corp's acquisition of an 8.3% stake in Kashagan was signed during the visit on September 7. The $5bn deal was widely expected after Astana blocked the sale of the stake to India's OVL, confirming the strength of China position in Kazakhstan's oil and gas sector.

Around $30bn worth of deals were signed during Xi's visit to Kazakhstan, and a further $15bn in Uzbekistan. Meanwhile, Kyrgyzstan will receive $3bn in loans for energy and infrastructure projects.

Smooth as silk

China is now the top trading partner of most of the Central Asian republics, and among the top three for every country in the region. Trade between Kazakhstan and China will exceed $30bn in 2013, China's ambassador to Kazakhstan, Le Yucheng, told Kazakhstani state media.

While in Astana on September 7, Xi outlined his vision for the future, the co-called Silk Road Economic Belt, in a speech at the Nazarbayev University. The proposal envisages a free trade zone spanning China and Eurasia; a region that "boasts a 3-billion population and a market that is unparalleled both in scale and potential," Xi said, according to Xinhua.

It is not clear how the belt would fit alongside the existing Russian-led Customs Union, which is also planning expansion within the Eurasian region. However, Russia was not ignored during Xi's Central Asian tour, with a flight to the G20 summit in St Petersburg sandwiched between his Central Asian visits, and the tour ended with the Shanghai Cooperation Organization (SCO) summit in Bishkek, which includes both China and Russia.

As China's geographic backyard, Central Asia is highly important to Chinese security. Across the region, concerns are growing about the impact of the 2014 withdrawal of international troops from Afghanistan, which borders China's Xinjiang region as well as three of the five Central Asian republics. Beijing is looking to neutralise the threats of insurgency from beyond China's borders, and growing Uighur nationalism and unrest within Xinjiang. Building strong security relations with Central Asia is seen as a tool for achieving these goals.

"Countries in the region not only face the opportunity to achieve common development by taking advantage of their economic complementarity, but also face the common threat of external intervention and the three evil forces," Chinese Foreign Minister Wang Yi said in a statement at the conclusion of the summit.

Central Asian governments have become increasingly reliant on Chinese support since the onset of the 2008 crisis, as other sources of finance dried up. China's policy of non-interference in the internal affairs of the Central Asian republics - a point reiterated by Xi during his visit - is also a welcome contrast to western leaders who have tried to balance their hunger for Central Asia's natural resources with enough criticism for their lack of democracy and respect for human rights to appease audiences back home.

However, this is not always reflected at grassroots level, where there is a growing tide of anti-Chinese sentiment. In an extreme example, work has been suspended twice at a mine operated by China's Kaidi in south Kyrgyzstan after violent protests. With chronic underemployment in Tajikistan, the use of Chinese construction workers for road building and other construction projects has also sparked resent, while Kazakhstan has seen sporadic clashes between local and Chinese oilfield workers.

Despite the economic benefits, the steadily growing trend of Chinese engagement in Central Asia has not yet gained full political acceptance.

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