The rationale of Chinese approach toward the Caspian Sea area

Beijing approach toward the Caspian Sea area has proved to be a fruitful support to meet the energy needs resulting from Chinese economic growth. In the years of maturation of the Good Neighborhood foreign policy, Beijing was, in fact, developing a parallel growth of industrial activities, so extensive as to require increasing amounts of energy resources to meet production needs. Partnerships concluded with the countries of the eastern shore of the Caspian Sea have been the sublimation of Beijing neighborhood policy practiced towards them. Similarly, the absence of conflicts and tensions in the Central Asian space has allowed China to build the necessary infrastructures in order to transport eastward energy resources quickly and with sure success. This suggests that the foreign policy of good neighborhood has been functional to China in order to meet the sensitivity of its western neighbors and to create optimal conditions of safety and mutual trust through which it could more easily satisfy its need for energy supply.

In fact, the political and security partnership has proved to be a successful premise with respect to commercial approaches put in place by the other partners of the republics of the Caspian Sea area - mainly Russia, European Union, United States - such as to make China an ideal partner for business.

Russia is also part of the confidence building measures (CBM) process among SCO partners and promotes various forms of partnership and cooperation with the countries of the Caspian area, but within a framework closely linked to the traditional relations inherited from the period of Soviet domination, which taint its image of an equal partner. For the newly independent former Soviet republics, building their own national identity and presenting themselves as equal partners was a priority. This wasn’t possible with Russia, since the previous relationship of dependence consolidated unequal positions difficult to overcome, particularly in the transition phase of the 1990s. The rise of China in post Soviet space introduced a new element, based on a formally equal relationship, the recognition of the partner status as autonomous and independent entities and based on complementarity of interests. This approach was therefore very different from previous dependence or subjection relationships.

For its part, the European Union has proposed an overly bureaucratic approach, sometimes affected by diversity of views among members and, at times, paternalistic, due to the numerous requests for regulatory compliance and corporate taxes to potential governmental partners. Cumbersome and lengthy bureaucratic procedures related to the implementation of joint projects in the energy sector were not conductive in building a partnership with the Central Asian countries which, at the time of independence, strongly need to undertake a development path as fast as possible and without any kind of further difficulty. Since China does not require regulatory compliance inside states and ensures rapid realization of joint projects, it represents both a qualified partner and a guarantor for the institutional stability of partner countries.

The United States, finally, is an element of strangeness unable to enter more firmly within the regional framework. Even if it has considerable financial resources available, however, compared to China, it lacks an efficient policy of supporting relationships with the leadership of the partner states.

Therefore, China has the characteristics of financial efficiency, political reliability and, not least, geographical contiguity that make it an ideal partner for the energy resources producer Caspian Sea countries. In fact, over the past two decades, the neighborhood policy practiced by the Beijing authorities has evolved into a real energy diplomacy, which is based on a comprehensive approach in which the needs of China’s energy supply match its own political and commercial interests with the interests of the countries with which it establishes partnerships in the energy sector.

Therefore, commercial, economic, infrastructure improvement and partnership policies represent the different elements of the Chinese energy diplomacy, which allow Beijing to establish long term energy partnerships and to build oil and gas pipelines running from the producing countries directly in the territory of China, thereby reducing the role of other extra regional importers of energy resources.[1]

The political and strategic long-term partnership established with its western neighbors enables China to count on a premise of loyalty to the agreements reached, thereby ensuring in the future the possibility to build infrastructure oriented eastward able to come directly to the Chinese territory without intermediaries and without risk to the safety of the pipeline. Certainly, for China to qualify in the long run as an importer preferable to other importers outside the region, it is necessary that the benefits of the cooperation with Beijing are much more profitable, compared to those that could be offered by others.

Given the geographical proximity of China with producing countries of the Caspian basin and due to political and strategic ties linking partners each other, the rising of China into the regional energy market has forced the end of the Russian monopoly in the management of the energy distribution network. The advantage is twofold: thanks to the new partnership with Beijing, on the one hand the Central Asian countries are not bound by a single buyer and have the possibility to export even to the east; on the other hand, China has gained an important source for the differentiation of its energy supply, until then dependent from the countries of the Persian Gulf for more than half of its oil needs.

The reasons orienting the interest of China to the energy resources of Central Asia and, in particular, of the Caspian Sea can be summarized as follows:

  • - the geographical proximity to China makes most safe the transit by land with respect to imports from the Persian Gulf, which must pass through the critical points of the straits of Hormuz and Malacca;
  • - China gets rid of excessive dependence on imports from the Persian Gulf region, whose instability is a cause of concern for Beijing;
  • - from the point of view of the Central Asian countries - that are landlocked and without developed infrastructure networks - the geographical proximity to China creates excellent conditions for the construction of new pipelines, and this helps Beijing in its competition with other energy resources importers countries such as India, Japan or

South Korea.[2]

Differentiating the source of energy supply implied for China choices regarding both the energy resources and the types of transport. In other words, the decision to initiate large-scale imports of energy resources from the Caspian Sea basin (in the broad sense) imposed a change from ship to land transport and implicated a partial conversion of imports from oil to gas. In addition, since many fields in the Caspian area are exploited by western companies, the Chinese companies preferred to work in fields already operating, difficult to exploit or located in unstable countries frowned upon by the international community. From a technical point of view, Chinese companies have chosen instead to use methods of extraction already known and consolidated, in order to minimize the operational risks.

The main aspects of the relationship between China and the Central Asian republics (geographical diversification of energy sources; reduction of oil dependence and increase of gas consumption; reduction of purchases by large international companies already active on the the Caspian Sea basin market) are, therefore, the basis of Chinese energy diplomacy.[3] In order to complete the picture, it must be added, however, an essential element which is not properly linked with energy security, but purely political, consisting in the unconditional support granted by China to the leadership of the countries with which it establishes economic partnerships.

China arrived in the Caspian area relatively late, but its involvement has been steadily growing and maturing during the 1990s. This is due to several reasons. First, during the Soviet period it was not possible to maintain the traditional trade ties that existed since ancient times along the so-called Silk Road. Reaching the deposits of the Caspian Sea basin was, indeed, difficult for a combination of political (internal dynamics of the Soviet system), and geographical (distance from the Chinese border Caspian deposits) reasons as well as for infrastructure issues (lack of pipeline geared toward east). Nevertheless, the result of the combined effect of neighborhood policy with the Chinese energy diplomacy has allowed a penetration of the energy market based on political bonds which can ensure the establishment of long-term partnerships.

Another tool of consolidation of the Chinese presence in the Caspian basin could arise from signing in Moscow on 6 December 2013 of a memorandum for the creation of an SCO Energy Club, which should became a platform for discussing energy related issues, including demand and consumption of energy, energy cooperation between producers and consumers, new technologies and innovations. The idea of forming an energy club was introduced for the first time in 2004, in order to create a common energy space in which the SCO members could discuss the political decisions on issues such as: price liberalization, standardization of tariffs for transportation of energy resources, development of unified common tax base, coordination of actions at the level of suppliers in order to avoid unnecessary competition between them.

  • [1] N. Janardhanan, China’s Search for Energy and its Strategy Towards Central Asia, Global Data-DMW Business and Market Research, Hyderabad, 2009.
  • [2] Ibid.
  • [3] K.E. Calder, China’s Energy Diplomacy and its Geopolitical Implications, The Edwin O. Reischauer Centerfor East Asian Studies, 2005.
 
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