Chinese Leader Follows Silk Road, Signs Energy Deals

Central Asia, rich in oil and gas, is of critical importance to China’s growth strategy.

While the American “pivot” to Asia seems stalled in light of the Syrian crisis, China’s pivot west, to Central Asia, is in full swing. Crisscrossing the region, in a path reminiscent of the Silk Road, President Xi Jingping has been making numerous well received speeches and deals from Ashgabat to Astana.

Unsurprisingly, many of the agreements arising from this trip relate to the energy sector. In Turkmenistan, the Chinese leader helped inaugurate the start of production at the world’s second largest gasfield, Galkynysh, while also finalizing a deal for the Chinese state-owned energy corporation, China National Petroleum Corp, to build facilities which should process 30 billion cubic meters of gas per year.

Additionally, while the first stage of development at Galkynysh was carried out by contractors from China, South Korea and the United Arab Emirates, the second stage will be implemented by China’s oil and gas giant alone.

In Kazakhstan, China signed a package of agreements worth some $30 billion. Included were deals on collaboration in space exploration, coal energy projects, joint management of the Dostyk hydroelectric complex and an economic cooperation plan through 2020. A key feature of the agreements made Saturday was a shareholding agreement between CNPC and the Kazakh state oil and gas company, KazMunaiGas, for a stake in the country’s Kashagan oilfield.

Kashagan, discovered in 2000 in the Kazakh portion of the Caspian Sea, is described as the largest oil find in the last forty years. The field is being developed by several partners including ExxonMobil, Japan’s Inpex, KazMunaiGas, Shell, Total and with Italy’s Eni which is responsible for phase one of the field’s development. CNPC acquired an 8.33 percent stake in the project earlier this month.

Xi is next bound for Uzbekistan and then the Shanghai Cooperation Organization Summit in Kyrgyzstan. At each step so far in his Central Asia tour the Chinese president pronounced, in word and signature, his nation’s vital interests in the region.

“As they say, close neighbors are closer than distant relatives. We assign high priority to our relations with the Central Asian countries,” the president said in a speech at a university in Astana.

The republics of Central Asia, especially those with significant energy reserves, will continued to rely on China as a ready and rising market. There are numerous pipelines in the works throughout the region, both as a result of dynamic discoveries in the last two decades and a desire on the part of those states’ leaderships to diversify their options by looking east.

Central Asia, in many ways a waning priority for the United States, is of rising importance for China and perennial importance for Russia. In 2012, Kazakhstan’s largest export partner was China (21 percent), followed distantly by Russia (9.9 percent). In the import realm, however, the dynamic is somewhat switched with Russian imports a full third of total imports and Chinese just over a quarter.

Russia still views the former Soviet states in Central Asia with a paternal eye but China recognizes the region as an essential aspect of its growth strategy.

Correction: An earlier version of this story incorrectly claimed that KazMunaiGas had sold half its shares in Kashagan to CNPC when the latter actually acquired them from ConocoPhillips.