Chinese energy investments drive Moscow’s interests in Central Asia

Chinese energy investments drive Moscow’s interests in Central Asia

With Russia’s economy in crisis and Central Asia coming in focus of Chinese energy strategy, the region is experiencing a long-term geopolitical shift.

Central Asian (CA) states, Kazakhstan, Turkmenistan, Uzbekistan, Kyrgyzstan and Tajikistan, have been part of the Russian interest sphere since the mid-19th century, first as part of Russian empire and later as the Soviet Union.

In 1991, the former Soviet Republics gained independence, but Russian political and economic influence remained strong. Immediately after the collapse of the Soviet Union, CA states joined the newly established Commonwealth of Independent States (CIS), followed in early 2000s by the establishment of Eurasian Economic Community (EurAsEC), and a decade later Eurasian Customs Union (ECU).

But a new trend has begun to gear up in Central Asia. As part of its efforts to establish a reliable source of energy for the rising economy, China has significantly increased the intensity of its economic activities in Central Asia, primarily by investing in large energy projects.

Due to its proximity and reliability, Central Asian energy is increasingly important for Beijing. Turkmenistan is already China’s largest natural gas supplier, and Beijing invested $45 billion in energy projects in Kazakhstan and Uzbekistan, including oil, gas and uranium deals.

Chinese-built pipelines have helped CA countries reduce their energy dependency on the Soviet-built pipelines running through Russia for oil and gas distribution. In addition, China overtook Russia as the region’s largest trade partner in 2010, with deals reaching $46 billion in 2012, compared to Russia’s $27 billion.

Currently, around 96 percent of Kazakhstan’s exports to China consist of energy resources and 52 percent of Chinese natural gas imports come from Turkmenistan. With plans to increase gas consumption and reduce its dependency on expensive LNG imports, this trend will almost certainly have an upward curve.

However, it is not all about oil and gas. According to Xu Hayan from the China Institute of International Studies, China could benefit from the region’s uranium reserves, renewable energy and quartz sand deposits– essential to the Chinese solar cell industry.

Although China is already severely biting into Russia’s Asian backyard in economic terms, unlike the Cold War rhetoric between Russia and the West, China is not trying to challenge Russian interests in the region at the moment.

But, according to Thomas Eder’s recent book China-Russia relations in Central Asia, this could change in the long run. With the increase of Chinese economic activity in Central Asia, we might see more confrontation between the two Asian powers, in particular if Moscow starts to perceive China not as a partner, but an adversary with a different vision of the economic, political and security order in the region.

Russia’s decision to annex Crimea is an interesting case in this respect. Moscow’s aggressive behaviour in Ukraine has certainly raised eyebrows in Beijing, considering China’s firm non-interference policy, but this will probably not have a strong impact on China’s generally pragmatic stance on bilateral relations.

However, potential economic sanctions imposed by the West could have a more profound resonance in Central Asia. Kazakhstan is currently the only Central Asian member of the Russian-sponsored Customs Union and Moscow’s key ally in the region.

Yet, the country is feeling the consequences of Russia’s failing economy. The situation can only get worse if Russia’s economy continues to deteriorate. The Kazakh tenge currency has already devalued by 19 percent in February following the devaluation of the Russian rouble.

The potential collapse of the Russian economy and Vladimir Putin’s indirect calls for the restoration of the Soviet Union are likely to make CA countries more uncomfortable about further integration with Russia, and might help them see China as the better alternative.

This will probably become even more acute as the current political elite that grew out of the Soviet political system is replaced by a new generation of leaders, in particular if Russian economic influence continues to dilapidate.

Russia will, however, remain a key player in Central Asia for some time. Traditional cultural, economic and security links with Moscow are still very strong and the CA countries are extremely dependent on Russia, whether through energy, trade or, as in the case of Kyrgyzstan and Tajikistan, through remittance coming from their migrants working in Russia.

But China is taking over— so far unobtrusively but decisively— and with the region in the gaze of Chinese energy security strategy we can expect further deterioration of Moscow’s influence, and further stirrings between the two giants.

About Author

Ante Batovic

Ante was previously a lecturer in International History at the University of Zadar where he specialised in Cold War and East European history. He was also a visiting fellow at the LSE IDEAS centre and the fellow of the Robert Schuman Foundation in the European Parliament. He holds a master’s degree in Global Politics from the London School of Economics and a PhD from the University of Zadar.