C3S Paper No. 0094/ 2015
This study focuses on the measures that China is taking to attain its required energy resources from Central Asia and the needs behind those measures. China is the world’s largest populated country, with a rapidly growing economy. The GDP is estimated to have grown at 11.4 per cent in 2007 and is expected to reach an average 6.6 per cent per annum by 2020.China’s spectacular economic growth is largely responsible for its rising energy demands, and it will continue further. China’s rising energy demand will soon reflect in international politics because of its demand for oil imports. Significantly, Chinese oil and gas companies started acquiring foreign oil assets to satisfy domestic demands.
The Chinese economy will drive energy demand to grow 4-5 per cent in 2015. China faces challenges to its energy security, such as human resource challenge, differences in the social environment which reduces the attraction for multinational company, problems relating to China’s mode of production and development, imbalance of energy demand and supply, thirst for consumption of high quality energy resources, and emerging terrorism. This energy drive can be satisfied by economic growth, industrialisation, urbanisation, and by increasing exports.
China’s natural gas supply is limited compared to that of oil. It is because of environmental concerns, chronic energy imbalance and rising petroleum imports[i]. That made China develops its natural gas reserves, which are currently used for industries and residential cooking.
China’s dependence on oil:
1993-6.3%
2000-30%
2004-46%
(Source: EIA-2006)
The figures given in the graph above are substantiated with the number for the year 2020, which is 3.8 billion cubic meters.
After the disintegration of the Soviet Union the Central Asian states started developing their international relations especially with China. China’s geo political interest in Central Asia is to get oil and gas resources and corner the regional market. Central Asia is vital to China as it second only to the Arabian Gulf in terms of oil resources. The republics of Central Asia namely Tajikistan, Uzbekistan, Turkmenistan and Kazakhstan which are located in centre of Eurasia have abundant energy resources.
The projects include Uzbekistan and China’s venture to link energy pipelines from the Central Asian countries to China’s western border. In 2009 the Chinese Premier Li Peng visited Turkmenistan along with the prime ministers of other Central Asian countries to inaugurate the Atyrau-alashankou oil pipe line which runs from Kazakhstan to China. China has invested in transport and communication in Uzbekistan. The energy projects are being supported by development of infrastructure, such as the construction of roads and tunnels in Tajikistan and the expansion of roads between Kyrgyzstan and China. China also supplies low interest loans to Central Asian countries.
These efforts prove the importance of Central Asia to the Chinese government by bilateral co-operation and multilateral interest. China is an important actor and has strong foreign relations with this region, but China doesn’t have hegemonic ambitions here.
China is not the only country depending on Central Asia’s resources. Western Europe, Russia, India and the United States are interested as well. China’s interest in Central Asia was considered a threat by United States, which might affect the interests of the latter. Central Asia’s location made it a strategic pivot globally.
China tries to get a hold on Central Asia by demonstrating goodwill, granting trade sophistication and long term loans. China doesn’t involve itself in Central Asia’s domestic issues but Russia and U.S do so, thus making Central Asia move closer to China.
Country-wise Energy Relations
One Central Asian country China is engaging with is Turkmenistan. Turkmenistan is supplying more gas to China in 2015 than to Russia. China has become the largest trading partner of Turkmenistan, while Turkmenistan has become the third largest partner of China in Common Wealth of Independent States(CIS). China and Turkmenistan had put into operation the world’s largest natural gas pipeline in December 2009. They also maintain close co-ordination and co-operation in international and regional affairs.
On the other hand Uzbekistan initially didn’t prefer trading with China and restricted the access of Chinese business men by limiting the visas. But in the first half of 2013 the bilateral trade increased by 60% with the help of New Silk Road Economic Belt (NSEB)[ii]. China has become the second largest trading partner of Uzbekistan.
Tajikistan is Central Asia’s poorest country. The friendly relations and co-operation between Tajikistan and China are built on the foundation of mutual benefit and development. Both the countries are linked by rivers and mountains. Tajikistan’s leader Amomali Rahmon, and Chinese premier Xi Jinping signed 16 documents, according to which China will invest USD 6 billion into Tajikistan’s economy. Although Tajikistan has comparatively lesser source of oil and gas, its geographical position between Turkmenistan and China is significant in terms of being a transport route[iii].
Kazakhstan is Central Asia’s largest nation, with a huge economy. It has a population of 16 billion, with a high level of literates. Kazakhstan is a country rich in fossil fuels. China supplies Kazakhstan with defence equipment, military training and intelligence information regarding terrorist threat. China has invested billions of dollars for oil in this region, with an aim of increasing total major oil and gas pipeline links between the two countries. Kazakhstan’s ties with Russia had constrained the relationship with China. Despite this, Russia-China trade link venture through Kazakhstan[iv].
Geographically Kazakhstan has close ties with China as it shares its border with China’s western provinces. Kazakhstan, a country with rich natural resource can help Beijing by creating jobs for its citizens. China is also focusing on infrastructure projects like roads, rail roads, bridges, airports, and pipelines. Kazakhstan accounts for a small portion of China’s oil imports- in 2004 China imported 1.19 million tonnes of crude oil.
Although Kyrgyzstan has no energy resources to offer, it has linkages with China based on hydroelectricity[v].
The construction of ambitious gas pipeline called Tajikistan Afghanistan Pakistan India (TAPI), connects the Caspian gas fields in Turkmenistan to Afghanistan, Pakistan and finally India. However there are visible barriers to the fulfilment of the project, such as India’s relation with Pakistan, which restricts transiting across their border. Instability in Afghanistan also undermines the viability of the project.
Above all, China in order to respond to the challenges, formed the Shanghai Co-operation Organisation (SCO) in 1995. Beijing’s fundamental objective via this organisation is to counter the penetration of the United States in this region, to promote the reinforcement of Chinese influence, and to extend the relationship with the rest of the Central Asian countries. China being a powerful actor can help bring politically stability in Central Asia.
Conclusion
According to IMF’s recent statistics, oil exporting countries in the Caucasus, Central Asia (CCA) region is to have large export and revenue loss. Oil prices have declined by 55% since September 2014 mainly because of demand and supply factors. All the countries in this region are expected to face a fiscal deficit in 2015[vi]. The oil in the Middle East is diminishing and also it is a politically volatile region, so Central Asia offers a better alternative. It has the advantage of geographical proximity. However China faces several challenges in the region. Nevertheless SCO offers an efficient platform for security in Central Asia. In light of these developments, it remains to be seen how China will maintain its Central Asia energy policy in the coming decades.
References:
[i] Nilklas Swanstrom, ”China’s role in Central Asia: Soft and Hard power”, Centre for World Dialogue
www.worlddialogue.org/content.php?id=402
[ii] Raffaello Pantucci, “Looking West: China and Central Asia”, April 16, 2015 http://chinaincentralasia.com/
[iii] Nadin Bakhrom, “Tajikistan considers price tag on relations with China”, Silk Road Reporters December 20,2014. www.silkroadreporters.com/2014/12/20/tajikistan-considers-price-tag-relations-china/
[iv] Martha Brill Olcott, ”China’s unmatched influence in Central Asia”, Carnegie Endowment For International Peace, September 18, 2014. http://carnegieendowment.org/2013/09/18/china-s-unmatched-influence-in-central-asia
[v] Qin Jize In Bishkek and Cheng Guangjin, “China, Kyrgyzstan to boost relations”, CHINADAILY.com.cn, December 05, 2012. www.chinadaily.com.cn/china/2012wensco/2012-12/05/content_15985879.htm
[vi] International Monetary Fund, “Falling Oil Prices Hurt Exporters Across Mideast, Central Asia “, IMF Survey Magazine, January 21, 2015. www.imf.org/external/pubs/ft/survey/so/2015/CAR012115A.htm
(K. Jennie Tresa is an intern with Chennai Centre for China Studies. As a statutory requirement of her academic course in Stella Maris college, she is required to carry out research in a think tank on identified issues in China under the guidance of the members of C3S. The views expressed in this article however are of the author. E-mail: jennietresar15@gmail.com)
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