China’s New Central Asian Investments: A Quick Guide

China’s been busy lately. The Prime Minister of China, Xi Jinping toured of four of the Central Asian states. The story is well covered, and his tour is just one facet of China’s global resource grab. Earlier this week the news broke that China is renting 1/20th of Ukraine, or an area the size of Armenia, for agricultural purposes. China is resource hungry and does not have the same political pressure the United States or European governments, where their populations want to know the government links business to human rights concerns. The Chinese are ready to pay and the Central Asian countries are eager to sell.

Here’s a quick breakdown of who’s shaking whose hand, and why – and if you reduce this all down to ‘because of the New Great Game,’  I’ll kick you. This post looks at each country and their bilateral deals with China over the past few weeks.

Turkmenistan: The big news from Xi’s visit was the inauguration of the Galkynysh gas field in southeast Turkmenistan. A government official speaking to Reuters stated that Turkmenistan plans to launch production next year.  Xi’s appearance at the ceremony is being taken as a sign of the primacy of China in Turkmenistan’s energy market:

Xi and his Turkmen counterpart, Gurbanguly Berdymukhamedov, simultaneously pressed two symbolic start buttons – two globes the size of basketballs decorated with national flags – to ignite flares at a gas processing plant that towered over the surrounding landscape of sun-baked desert and sand dunes (Marat Gurt for Reuters).

China is now the primary importer of Turkmen gas, and according to China’s Global Times, gas from the Central Asian country now accounts for roughly half of China’s gas imports. Additionally, the article states that China is now Turkmenistan’s largest trading partner.

Finally, the WSJ reports that “Additionally, China Development Bank has signed a financing agreement with Turkmengaz for an undisclosed amount.”

Tajikistan: Xi did not stop in Tajikistan on his Central Asian tour; however, Tajik President Rahmon and Xi met in Bishkek prior to the SCO summit, and inked a deal to build a natural gas pipeline to China from Tajikistan, transporting Turkmen gas. President Rahmon’s office stated that the investment would bring $3 billion from China to the Tajik economy.

Tajikistan has stated that it wants to foster closer ties, particularly to China’s western region, Xinjiang. There has also been discussion in the past month about a potential free trade area to foster economic growth: “The free trade area is likely to be in Taxkorgan Tajik autonomous county in the southwest of the Xinjiang Uygur autonomous region, said Matlubkhon Davlatov, first deputy prime minister of Tajikistan.”

Tajikistan is also poised to act as the chair of the SCO for 2014.

Kazakhstan: Energy was naturally the main focus of reporting on Xi’s visit to Kazakhstan. Xi and Kazakh President Nursultan Nazarbayev formalized and agreed to the purchase of 8.33% of the Kashagan oil field for a reported $5 billion. Kashagan, a massive offshore oil field in the Caspian, solidifies Kazakhstan’s status as a major resource state for hydrocarbons. Kashagan is thought to hold 13 billion barrels of recoverable reserves of oil. Xi also attended another infrastructure inauguration, this time for the Beineu-Bozoi pipeline, which transits gas to the southern part of the country and will begin to send gas to China in 2015.  Like Berdymukhamedov in Turkmenistan, the Kazakh President called for increased links with China specifically focusing on the development of automobile and railway links between China and Western Europe.

Kyrgyzstan: Kygryz officials told the media that China is the number one foreign policy priority for their country. Kyrgyz Foreign Minister Erlan Abdyldaev stated that there were no political differences between China and Kyrgyzstan, which is sure to dismay some of the human rights activists in Kyrgyzstan. The two countries made a pledge to “upgrade bilateral cooperation and achieve common development.” This agreement included: “joint efforts to upgrade bilateral trade structure, create conditions for importing products of each other, expand trade volume, and improve the laws and regulations governing trade exchanges.”

Education deals were also made, with a declaration stating that 1,500 Kyrgyz students would receive scholarships from Beijing, and Bishkek reiterating support for the establishment of Confucius Institutes (non-profit Chinese culture centers establish around the world and aligned with the Chinese government) in Osh.

Security cooperation was also a focus of discussion, with pledges to mutually fight against ‘terrorism, extremism and separatism’ reiterated. Like Tajikistan, Kyrgyzstan is looking for greater economic cooperation and ties to the Xinjiang region.

Uzbekistan: China is Uzbekistan’s second-largest trading partner and economic/energy ties were further solidified with Xi’s visit, when Uzbek President Islam Karimov and Xi signed $15 billion in deals, Eurasianet reports:

Details were not immediately released, but the report said the deals included contracts in the oil and gas industry, where Sino-Uzbek economic cooperation has been expanding since Uzbekistan started exporting gas to China in September 2012, and also agreements in the uranium sector, which Tashkent is eager to develop. Other deals covering trade, energy, investment and financing were also signed, a report on the People’s Daily website added.

In conclusion:

Perhaps the biggest coup for China was convincing all five Central Asian countries to agree to work together on pipelines that will criss-cross the region. It remains to be seen how effectively these pipelines will be, but China seems willing to spare no expense in their hydrocarbon quest.

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