3. Presentation is based on Research Report "Chinese Presence in Energy Sectors of
Central Asian Countries - Is It New Threat or New Opportunity?", which was
prepared during 2006-2011. The Report covers the issue of China's modern policy in
the energy sectors of Central Asian countries, including its' nature in the light of
interests of Russia, which is considered to be strategic partner of the regional states.
4. Introduction
Notion of the “Central Asia”
"Central Asia" means the area of central Eurasia comprising five states – Kazakhstan,
Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan – which were established by
their declarations of independence and the collapse of the USSR in 1991.
Central Asia is land-locked region.
On the one hand, during periods
when the state formations on the
territory of modern Central Asia were
integrated into the system of regional
and inter-regional economic ties they
experienced an intensive
development.
On the other hand, when these ties
collapsed there was an economic
recession.
5. Introduction
History of relations of China with Central Asia
The Central Asian region has traditionally been an area of special interest in the
foreign policies of China.
For many centuries the state formations on the territory of modern Central Asia were
integrated into a global system of economic (trade) ties, namely the Great Silk Road.
In the days of the Great Silk
Road, which flourished until
about 1500 AD, state staging-
posts, located on the territory
of modern Central Asia,
served as a transport bridge
between China and Europe. It
was China that drove the
economic development of the
region, being the principal
source of scientific knowledge
and technology.
6. Introduction
The development of shipping in
the Age of Discovery (the 16th
century) meant that sea
transport routes became more
important for world trade than
land routes such as the Great Silk
Road, and the relatively low cost
of transporting goods by sea led
to the geographical and
economic isolation of Central
Asia, which continued right up to
the middle of the 19th century.
7. Introduction
8. Introduction
In the latter part of the 19th
century, when Central Asia became
part of the Russian Empire it
became less isolated and developed
stronger economic links, mainly with
Russia.
As was the case during the heyday
of the Great Silk Road, especially
from the second half of the XIX
century Central Asia experienced an
economic upsurge. Central Asia
began to escape from its economic
and geographic isolation. Strong
trade links were forged.
9. Introduction
The fall of the Russian Empire in
1917 saw the beginning of a
radically different relationship
between Russia and Central Asia,
as the Soviet period was a time
of great economic progress for
this region.
Until the disintegration of the Soviet Union, Russia remained the main locomotive of
economic progress in Central Asia and played the major role in developing the modern
economic character of the region. As a result Central Asia’s states turned into a
developed agrarian-industrial republics with a high level of education, health care,
culture, art, science and public welfare. The disintegration of the USSR in 1991 led to
the virtual collapse of economic relations between the Russian Federation and the
countries of Central Asia, giving a boost to the development of economic relations
between these countries and the People's Republic of China.
10. Introduction
Economic interdependence
of Russia and Central Asia
The exceptionally close integration in the Soviet
period has resulted in the economies of Russia
and Central Asia (and other CIS countries)
remaining interdependent today.
11. Introduction
Interdependence of energy sectors and collapse of the USSR
During existence of the USSR energy sector of the Russia and Central Asian republics
used to be a single organism, vitality of which was secured by close links between all of
the key branches of energy sectors of these republics, and enhanced during the
decades of cooperation through operational schemes and algorithms of coordination.
In turn, functioning of the
branches of energy sector
was fully complied with the
objectives of the
development of real sector of
economy within the
framework of unified by
integrated and long-term
state plan and common
strategy for both Russia and
Central Asia in the fields of
policy, economy, and
security.
12. Introduction
Collapse of the USSR resulted not only in disappearance of the united economic,
political, defense, and energy area, but it also led to two other key main implications:
- undermining the key function of energy sector: providing sustainability of the
production of material values in general;
- tides of efferent- disintegration trends
supported by Russia and Central Asian
countries' policies on multiple-vector
course.
In consequence, many of the branches of
the energy sector (firstly, oil-and-gas
branch) of Russia and Central Asian states
ceased to comply with the strategic
objectives of development of real sectors
of their corresponding economies.
Nowadays energy sectors of Russia and
Central Asian countries mainly focused, at
the best, on short-term national interests,
and, at the worst, on specific corporate
and pure commercial business-purposes.
13. China in Central Asia
Stages of China’s energy policy
In the post-Soviet era, China’s energy policy in Central
Asia has been consistently placing greater importance
on the region as one of Beijing’s domestic and foreign
policy energy-related priorities.
In the first half of the 1990s, China’s economic interest in Central Asia was fairly
limited, concentrating mainly on trade with Kazakhstan and Kyrgyzstan. In fact, at that
time, the Central Asian countries never considered China an important economic
partner, their hopes being pinned on Russia and the West, as well as on some of the
financially attractive and culturally close Islamic states.
14. China in Central Asia
In the mid-1990s, China displayed the first flickers of interest in the Central Asian
energy complex, which has been steadily growing since that time along with Beijing’s
interest in other spheres of the region’s economy. China clarified its interests in
Central Asia to help promote the newly launched program of accelerated development
of its inland territories. But in general, in the latter half of the last decade of the 20th
century, the project activities of China and Chinese companies in the Central Asian
energy segment were concentrated in Kazakhstan’s oil and gas sector.
In the early 21st century, Chinese energy interest began gradually spreading to the
rest of the region to become diversified by the industry’s branches. Central Asia’s
importance was boosted by the changed economic, energy, and geopolitical factors. In
the wake of 9/11, the region, which had so far remained in the backwater of world
development, found itself in the center of hectic political activities.
Today, China is showing a lot of interest in the oil and gas of Kazakhstan and
Turkmenistan and in the nuclear power (uranium) production of the former. China is
paying enough attention to the energy complexes of the rest of the region.
15. Proportions of Chinese and Russian trade in overall foreign
trade of Central Asian countries
17. China in Central Asia
The role and place of energy in China’s
domestic and foreign policy
Domestic policy. China’s general strategy
is geared toward boosting the efficiency
of the planned and centralized state
administration and management of its
developing economy, while liberalizing
economic activities at home. This calls for
a balance between the traditional
socialist and the capitalist conceptual and
ideological attitudes, principles, and goals
designed to preserve the country’s
integrity and security and ensure its
sustainable development.
18. China in Central Asia
The national-state ideology and the leading role of the
Communist Party of China are never questioned.
Chinese energy complex is intended to ensure consistent development of all the
economic segments, social and economic stability, and stronger military and political
might. China’s energy policy was and is concentrated on the following:
(1) stage-by-stage development of the domestic raw material base of the national
energy complex;
(2) its accelerated technological modernization; and
(3) diversification of national power production by using all types of energy sources.
19. China in Central Asia
Foreign policy. China is seeking a place among the key players on the global economic
and political scene. It is placing its stakes on greater efficiency and attractiveness of
the Chinese economic model while trying to find a niche for the country in the global
processes and the quest for mechanisms of their efficient management badly needed
to preserve its integrity, sustainable development, and security, as well as its position
in the world.
Applied to the energy sphere,
the above means that Beijing
should protect its economic
interests and its influence in
the global and regional
energy markets by acquiring
firm positions in long-term
contacts with energy-rich
countries to guarantee a
consistent in flow of raw
materials into its energy
complex.
20. China in Central Asia
Today, its interests in Central Asia are concentrated on hydro carbons; tomorrow they
will spread to uranium.
21. China in Central Asia
The role and place of Central Asia and Russia. On the whole, Central Asia and Russia
plays a secondary roles in China’s energy strategy: it is a strategic rear to be relied
upon for greater political efficiency (in the security, economic, and energy spheres) of
China’s relations with the leading Western countries and Asia-Pacific neighbors, which
are priority vectors for China.
22. China in Central Asia
China’s energy interests in Central Asia
China and its companies are mainly
interested in the oil and gas sector of
Kazakhstan and Turkmenistan, the
hydrocarbon and export potential of
which look preferable. So far, the oil
and gas sector remains the core of
China’s economic and energy regional
policies; the Chinese, however, are
showing much more interest than
before in other economic branches as
well.
In recent years, China has been demonstrating a lot of interest in nuclear energy
(Kazakhstan); power production (Kazakhstan, Tajikistan, Uzbekistan, and Kyrgyzstan); and
coal mining (Kyrgyzstan). This means that China is gradually spreading its economic
influence to Tajikistan and Kyrgyzstan, two countries with no considerable hydrocarbon
resources, and Uzbekistan with considerable (so far not exported on a great scale) oil and
gas reserves.
23. China in Central Asia
Reasons of China’s energy interest
There are several reasons for China’s interest in Central Asian energy resources.
First, the region is
attractive both
geographically and
strategically: one of
China’s closest neighbors,
it is part of the Eurasian
heartland, which means
that China can rely on the
energy routes from
Central Asia as being fairly
secure.
24. China in Central Asia
Second, Kazakhstan, Turkmenistan, and Uzbekistan boast fairly large deposits of oil and
natural gas, the production of which can be increased; this means that these countries
can be regarded as alternative and additional (!) sources of hydrocarbons.
25. Kazakhstan China in Central Asia
The proven oil reserves of Kazakhstan are assessed at about 5.4 billion tons (about 3% of the
world’s total); the figures for gas are about 1.8 trillion cu m (about 2% of the world’s total).
Turkmenistan
The proven oil reserves of Turkmenistan are assessed at about 100 million tons (about 0.06%
of the world’s total), and gas reserves at about 2.9 trillion cu m (3.2% of the world total).
Turkmenistan assesses its oil reserves at 15 billion tons, and gas at about 24 trillion cu m.
Uzbekistan
The forecasted gas reserves of Uzbekistan are about 2.2% of the world’s total. Its share in the
world’s total gas production is 2.5%. In 2008, its proven gas reserves were assessed at over 2
trillion cu m; oil reserves at 82 million tons, and gas condensate at 160 million tons. The
figures for the republic’s forecasted gas reserves are 5.9 trillion cu m; for oil, 817 million tons
of oil; and for gas condensate, 360 million tons. In recent years Uzbekistan has been
producing over 60 billion cu m of gas, between 40 and 49 billion cu m of which are used inside
the country; 10 to 16 billion are exported. At the same time, Uzbekistan depends on oil
imports, this dependence increasing even more in the future. In 2011, it will have to buy no
less than 4.2 million tons of oil.
Kyrgyzstan and Tajikistan both have vast hydroelectric resources but practically no stocks of
non-renewable fuels. There are virtually no hydrocarbon deposits and only limited coal stocks
in these countries.
26. China in Central Asia
Third, Kazakhstan and Uzbekistan are rich in uranium (used for nuclear power
production), which adds another dimension to China’s greater interest in the region:
Beijing’s plans in this sphere are very ambitious indeed.
27. China in Central Asia
Fourth, Central Asia is very attractive as a possible transit area for Iranian and Mid-
Eastern energy resources: the land routes, much shorter and much cheaper than the
currently used U.S.-controlled marine routes, are potentially much more profitable
and effective; the fact that the region has a ramified system of pipelines (some of
them going toward Iran) adds to its attraction.
28. China in Central Asia
Fifth, theoretically, the
hydropower potential of
Kyrgyzstan and Tajikistan is fairly
tempting, however in the short-
term perspective the large-scale
development of these two
countries’ hydro resources is
unlikely to become an important
factor for the simple reason that
water and energy are the
region’s sore spots.
Uzbekistan and, to a lesser extent, Turkmenistan and
Kazakhstan (which heavily rely on the region’s water resources)
are very concerned about the intention of Kyrgyzstan and
Tajikistan (which control over 90% of the region’s water
resources) to build fairly large hydropower stations in their
territories. It does not seem likely that the water and energy
problem will be resolved in this economically and politically
fragmented region.
29. China in Central Asia
Shanghai Cooperation Organization (SCO) – very important regional institution
for China
30. China in Central Asia
31. China in Central Asia
From today's perspective, the most
realistic scenario foreseeable is the
gradual economic absorption by China
of the Asiatic part of Russia and some
parts of Central Asia.
