Accomplishments and setbacks

The arrival of China into the Caspian Sea area has been slow, but steady and profitable. Laying the foundations of a complex partnership, based on mutual benefit and the lowering (at least as a trend) of the regional security threats, over the course of two decades China consolidated beneficial and long lasting partnerships. This combination of good neighborhood policy and energy diplomacy allowed Beijing to ensure long term energy supply, together with further expansion of cooperation in other economic sectors. Indeed a key feature of China’s energy diplomacy had been the so called oil for loan strategy, i.e. the concession by Chinese banks of generous credits - aimed, among other things at energy infrastructure development - repayable over the long term at a low interest rate and with energy supplies.[1] In this way, Beijing ensures the continuity of energy cooperation in the long run.

In this privileged position, China is Russia’s direct rival even more than EU and the USA. For the countries of the region is preferable binding to China rather than to a former hegemonic power such as Russia, which still maintains a dominant posture. The privileged relationship with China frees the countries belonging to the production and distribution energy resources system of the Caspian Basin from the dependence of Russia and offers favorable possibilities of export that would be unthinkable towards the West (at least not in the medium term).

China offers safe and easy to implement business opportunities thanks to a remarkable ability to ensure costly investments completed in a relatively short time, unconditional political support to partner countries in both domestic policy issues (non-interference in internal affairs) and in foreign policy ones (benefit of having a member of the Security Council of the United Nations as ally), accompanying agreements in the energy sector with partnerships in other areas (economic, education and training) that facilitate the growth of partner countries. For all these reasons, China is a disturbing element in the marketing strategies of the other extra regional importers.

The special partnership between China and the Caspian Sea countries has been reinforced by the state visits of President of the People’s Republic of China, Xi Jinping occurred from 3 to 13 September 2013. During his long journey Xi Jinping participated to G20 group summit in Russia, to the SCO Summit in Kyrgyzstan and held state visits in Turkmenistan, Uzbekistan and Kazakhstan. He discussed about energy, trade and infrastructure with all the regional leaders, signing an estimated $48 billion worth of investment and loan agreements, including export agreements totaling over 100 billion cubic meters (bcm) of natural gas through a network of Chinese funded pipelines.

Nowadays bilateral trade between China and Central Asian states is a hundred times greater than in 1992 and Chinese trade with the region surpassed Russian bilateral trade by $3.7 billion in 2012. Currently, Chinese business with each Central Asian state accounted for an average 33.3% of trade in each country, while Russia’s average is 14.7%.[2] Besides the reinforcement of the traditional fields of trade and cooperation, the September journey highlighted the boost of infrastructure and transport projects as a medium term goal of Beijing.

In fact, during his tour of Central Asia, Xi Jin Ping introduced the new large-scale regional project of the Silk Road, thereby establishing a new phase in the development of land transportation projects, based on the Caspian region key role. Actually, the economic corridor of the Silk Road is part of the Chinese comprehensive transportation strategy which aims to support China’s ambitions in a number of fields: establishing a well-functioning logistical structure for transportation of Caspian energy resources to China; developing a land transportation corridor for Chinese exports to Europe; creating a land bridge with Iran. Summarizing, China aims to diversify energy supply routes strengthening its position in the region and diversifying land routes to Europe, alternatives to those via Russia.[3] Hence, the Chinese need to further develop the project of a railway linking China and Western Europe passing through Central Asia and the Caspian Sea area. Based on the ancient Silk Road route, the railway aims to became a connection between China’s eastern port of Lianyungang with Kazakhstan’s rail system then pointing west toward Russia and the Caspian area to Western European ports such as Rotterdam.

Of course, bilateral cooperation in the different fields of interest and infrastructural projects can be fulfilled only if all the regional partners share a peaceful environment and a cooperative spirit. Actually, the Central Asian space next to the eastern shore of the Caspian Sea is an area that China holds in enough stability and balance in order to create the best environment for the implementation of business. On the contrary, the business opportunities offered by Western partners are characterized by greater challenges, generally speaking depending on the political divided environment made by different actors with different aims and needs. Instead, China is able to manage alone and without any interference its own policy towards the Caspian Sea region.

The presence of China as a partner in some states bordering the Caspian Sea expands the competition for supremacy in Eurasian space and makes Beijing a challenger for every other state or company who has an interest in the area. It is, however, a competition in which China has an advantage over other competitors: its comprehensive approach achieves security conditions for the business that other potential partners cannot offer. The Caspian area states - who are in need of infrastructure investment and political support - are therefore an ideal partner for China, which is able to satisfy the different needs of their political-economic system.

The partnerships established between China and the Caspian Sea basin countries go beyond the simply commercial-economic level and imply that the other actors (western or Russia) interested in energy resources should adopt new kinds of partnership. Actually, China’s success towards Caspian Sea generates concern in Beijing opponents in the region, but at this time they have not still carried out a more effective political and strategic approach.

Given that the combined policy of good-neighborhood and energy diplomacy of China in economic terms represents a successful strategy, attractive to Beijing partners, it has to be considered that a relationship with China has also very heavy political and social implications. While it appears advantageous for Eastern Caspian states to gain a prominent partnership with China, it is also true that they are caught in a sphere of political and economic influence in which China harnesses their financial and social choices. In an extreme case, this would even put them back into a situation not too different from the Soviet domination era.

With the aim of keeping an effective control over its own resources, each Beijing’s partners should seek hence also to achieve other partnerships. While maintaining a privileged relationship with China, each energy supplier should aim at differentiate buyers in order to ensure its own energy security from a selling point of view, thus limiting any implication of political dependence.

  • [1] C. Frappi, M. Montanini, (2014).
  • [2] T. Yakobashvili, “A Chinese Marshall Plan for Central Asia?”, The Central Asia and the Caucasus Analyst,16 October 2013.
  • [3] “China moves toward the Caspian Sea”, Vestnik Kavkaza, 14 March 2014.
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