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James Durso

James Durso

James D. Durso is the Managing Director of Corsair LLC, a supply chain consultancy. In 2013 to2015, he was the Chief Executive Officer of AKM…

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Who Will Compete With China In Central Asia?

  • Central Asia is growing in economic importance on a global level.
  • China’s strategy for Central Asia is to secure economic gains and to build an alternate trade corridor in the event of a U.S.-led naval blockade of China’s maritime trade routes.
  • Both the U.S. and Gulf Nations are vying for influence in the region through a whole host of cooperation programs.
Coal China

Instead of being “Being Fustest with the Mostest” in Central Asia, an area of intense interest to China and Russia, the U.S. and Europe may be “too little, too late.” The dwindling relevance of Washington and Brussels to Central Asia was on display when Chinese leader Xi Jinping hosted the leaders of the five Central Asia republics at the China-Central Asia Summit in Xi’an, the terminus of the ancient Silk Road. (In the future, the meetings will alternate between China and a Central Asian capital; the next meeting will be in Astana, Kazakhstan in 2025.)

Xi unveiled his vision for Central Asia that was, like most top-level political documents, laden with vague declarations like “helping each other,” “common development,” “universal security,” “shared future,” and that old Beijing favorite, “win-win.”

China’s strategy for Central Asia is to secure economic gains and help alleviate the high youth unemployment rate, create prosperity in the Xinjiang region to calm separatist tensions, and to build an alternate trade corridor in the event of a U.S.-led naval blockade of China’s maritime trade routes.

Kazakhstan’s president, Kassym-Jomart Tokayev, responded “We consistently assert that Central Asia is a creation place. We oppose turning the region into a place of geopolitical confrontation” and Turkmenistan’s president, Serdar Berdimuhamedov, added, “As emphasized, the peoples of our countries have centuries-old friendly relations, a vast experience of interaction and good neighborliness.”

But despite all the official bonhomie – and group pictures – the leaders put pen to paper and, according to Silk Road Briefing, “…approved US$3.72 billion in regional grants, signed 54 major multilateral agreements, created 19 new regional platforms and signed a further 9 multilateral cooperation documents.”

Related: Natural Gas Prices Plunge Further Amid Rise In U.S. Stockpiles

Among the agreed points were to coordinate China’s Belt and Road Initiative with the republics’ national development strategies, upgrade border checkpoints, expand agricultural exports to China, award scholarships to Central Asian students to study in China, and develop cooperation in the fields of irrigation and green energy.

Kazakhstan and China signed 47 agreements worth $22 billion which should increase trade, a record $31 billion in 2022, and investment. China is one of the five biggest investors in Kazakhstan with a total investment exceeding $23 billion. Kazakhstan’s exports to Russia increased 15% in 2022, and trade turnover by September 2022 was $18.4 billion, but Astana would be more comfortable if Moscow adopted the philosophy “When you’re only No. 2, you try harder” in its dealings with its now-wary Central Asian neighbor.

Uzbekistan and China adopted a “comprehensive strategic partnership” and inked 41 official documents, and Chinese and Uzbek businesses concluded $25 billion in deals. The official agreements addressed joint efforts in higher education, alternative energy, agricultural innovation, hydroelectric power, and logistics.

A “comprehensive strategic partnership” is just below a “comprehensive strategic co-operative partnership,” which is generally regarded as the highest level of bilateral relations for China. Uzbekistan now joins Kazakhstan and Turkmenistan as the third Central Asian republic at this level of engagement with China, giving China privileged access to the two biggest economies in Central Asia, and the country with 10% of the world’s natural gas reserves, that all sit astride Eurasia’s East-West transport links.

So where were America and Europe when all this was going on?

Their leaders were at the G-7 meeting in Tokyo where they castigated China for “economic coercion” which probably caused some confusion in Beijing as Washington is the source of economic sanctions “that currently cover 29 percent of the global economy and 40 percent of global oil reserves,” according to the Quincy Institute.

But even if it was momentary bemused by the G-7 outburst, Beijing probably welcomed the opportunity to contrast threats from the G-7 with what it could highlight as practical steps to grow mutually beneficial partnerships.

The U.S. announced its strategy for Central Asia in 2019 with an emphasis on the republics’ “sovereignty, independence, and territorial integrity,” but it was in reference to the U.S. occupation of Afghanistan. After the hasty U.S./NATO retreat from Afghanistan in 2021, the republics know their utility to the Americans in limited and they must find partners that will help them increase economic opportunity for their mostly under-30 populations. The U.S. hasn’t helped with relatively small projects like the Economic Resilience in Central Asia Initiative that trumpeted a $50 million effort to “diversify trade routes, expand investment in the region, and increase employment opportunities” – which is what China intends to do at industrial scale. (The U.S. did, however, provide significant economic assistance to the republics in the immediate post-Soviet period.)

The American actor Woody Allen said, “80 percent of success is showing up” and that is something an American president has never done in Central Asia. The presidents of Russia, Vladimir Putin, and China, Xi Jinping, leave nothing to chance: Xi has visited every one of the republics and has been to Kazakhstan four times and Uzbekistan three times; Putin has visited Kazakhstan twenty-seven times (the countries share a 7,644-kilometre border), and has been to Kyrgyzstan and Tajikistan at least a dozen times each.

China’s Belt and Road Initiative has pumped about $40 billion into the region, but recent surveys by the Central Asia Barometer showed a decrease in public sentiment towards China, even as China increases local investment. (Positive sentiment was down in Kazakhstan and Uzbekistan since 2017, but held steady in Kyrgyzstan.) If Russia has a weak presence in future years this is an opportunity for the U.S., Europe, and India, Japan, Turkey, South Korea, Singapore, and the Persian Gulf petrostates to build grass roots support.

The Persian Gulf states have increased their investment in Central Asia and no longer regard the area just as a place to exercise their falcons. The government-led development of the Gulf states appeals to the leaders of the republics and can offer a counter-weight to China’s projects.

The Gulf states have invested in traditional projects, such as coal and chemicals, power generation and distribution, cargo handling, and oil pipelines, and ACWA Power of Saudi Arabia recently committed over $2 billion for a wind farm in Uzbekistan’s Karakalpakstan region, part of a $12 billion commitment to the country.

Aside from all that cash, the Gulf states can create good will by helping the republics rediscover and preserve their history and heritage by assisting the restoration of local Islamic heritage sites, such as the Bibi Khanum Mosque in Samarkand, Uzbekistan. And it gives the local leaders the opportunity to not be beholden to one primary creditor – China.

Investing in Central Asia also gives Saudi Arabia and the United Arab Emirates the opportunity to establish a foothold to the North of their competitor Iran. Relations between the Arabs and the Islamic Republic are improving lately, but it is prudent for the petrostates to diversity their political portfolio at the same time they are diversifying their foreign direct investment. And allying with the republics gives the Gulf Arabs allies in multilateral organizations such as the United Nations and the Organization of Islamic Cooperation.

The U.S. can also make gains even though it can’t match China’s investments in the region. It can deploy the expertise of organizations like the U.S. International Development Finance Corporation to address areas of concern to Central Asia, such as the impact on the cotton crop caused by reduction in the flow of the Amu Darya river due to the Afghan Taliban’s irrigation canal project.

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Washington can also help the region though mechanisms such as the C5+1 Regional Border Security Program, and by helping local participants in the Global Methane Pledge (Uzbekistan, Kyrgyzstan) achieve their goals, and lobbying Turkmenistan, whose methane leaks exceed the carbon emissions of the United Kingdom, to join the pledge.

One element of China’s progress has been its readiness to transfer technology, which it has done in Kazakhstan, Uzbekistan, Kyrgyzstan, and Tajikistan. Local leaders may argue that China can advance regional connectivity if it transfers the technology to help the region develop a high-speed rail network, as it recently did in Thailand.

The good news for Central Asia is that it has China’s undivided attention; the bad news is that it has China’s undivided attention. But the region can pursue its development objectives and not be in thrall to creditor China or the social engineers in the U.S. and Europe. The region used China to balance the U.S., Europe, and Russia, and can now deepen its relations with the Gulf states, Turkey, India, Japan, South Korea, and Singapore to offset the China influence.

One result of the China focus may be more local coordination by the republics. Uzbekistan’s president Shavkat Mirziyoyev started this trend by resolving outstanding border demarcation issues after he assumed office in 2016. The worsening water crisis caused by Afghanistan’s diversion of the water of the Amu Darya will force close collaboration on this most sensitive issue for the water-starved region between countries with water but little energy (Kyrgyzstan and Tajikistan) and countries with energy but less water (Kazakhstan, Turkmenistan, and Uzbekistan.) Success in this task will reinforce cooperative habits that will ensure the future benefits of China’s investments in the republics don’t all go one way.

In 2017, the Asia Development Bank estimated Asia would have to invest $1.7 trillion dollars annually until 2030 to maintain growth momentum, tackle poverty, respond to climate change, and, now, recover from the COVID-19 pandemic. The funding would be shared by the public and private sectors. Central Asian leaders are acutely aware their plans for economic and liberalization are limited by infrastructure shortfalls and will be receptive to partners who will share funding and know-how to help the region be not just a low-cost workshop or provider of natural resources, but a full partner in 21st century Asia.

By James Durso for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on June 03 2023 said:
    Despite the Ukraine conflict, Russia remains the master of Central Asia. It controls all the oil and gas export routes, provides employment to hundreds of thousands of Central Asian youths, has expanding trade with them and also provides markets and security guarantees for countries of Central Asia.

    When China’s economic and geopolitical interests are added to this equation, the end result is that Central Asia will be dominated by the China-Russia strategic alliance to the virtual total exclusion of the United States and the EU well into the future if not permanently.

    The Central Asian countries hear from Western countries only when they need their energy resources. By contrast, Russia and China provide markets and financial aid.

    A central part of China’s strategy is its Belt & Road Initiative (BRI)” which is part and parcel of the new emerging World Order being ushered in by the strategic Chinese-Russian alliance. The BRI has already pumped China’s Belt and Road Initiative has pumped $40 bn into the region.

    The Central Asian countries realize that a new World Order is emerging and they are forming their alliances accordingly.

    China and Russia will continue to dominate the entire energy resources of Central Asia well into the future exactly as their influence is on the ascendency in the oil-rich Arab Gulf region while the United States’ is ebbing fast. This is a win-win situation for both Russia and China.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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