Central Asia has long been stuck between a rock and hard place in terms of its geopolitical environment. Landlocked, with China to the east and Russia to the north and west, Central Asian leaders have had to balance their alliances with the powers that surrounded them.
In pre-Soviet times, Kazakh, Kyrgyz and Uzbek leaders would utilize relationships to gain wealth for their countries. After the dissolution of the Soviet Union it became more about security, making sure the newly-formed states were not overrun by the bigger boys. To this end, Central Asian states entered into regional cooperative organizations with China and Russia like the Shanghai Cooperation Organization in the hopes of controlling the influence each power exerted on the five nation states.
25 years on, this struggle to balance relations has failed and China is now poised to make a spectacular economic conquest of Central Asian markets.
In 2015, China became Uzbekistan’s largest trading partner with $3 billion worth of trade and Kazakhstan’s largest investor with 33 deals delivering $23.6 billion to the nation.
China has also focused heavily on Turkmenistan’s energy sector, where it has been purchasing some 30 billion cubic meters of gas a year since 2009 while providing substantial military aid. China also took over in Kyrgyzstan last month as the builder and partner in two hydropower projects.
Russia out and China in
The reversal in Russia’s dominant role in Central Asia is hardly surprising. Russia’s recent economic woes are well documented. Quite simply, they no longer have the money to support the region. As a result many countries have been left hanging, as is the case of Kyrgyzstan which recently had to cancel a Russian partnership on one of the aforementioned hydroelectric projects due to serious setbacks because of Moscow’s inability to fulfill their commitments.
Additionally, Russian ties may be becoming compromised due to Russia’s domineering behavior, with Moscow treating the region like its exclusive hoard. Buying oil and gas at below-market rates only to reexport it to elsewhere at a markup has pushed countries like Kazakhstan and Turkmenistan into the arms of China, which offers better trade terms. In this environment, it is easy to see why China has come to be viewed as an economic stabiliser and a necessity by Central Asian governments in the past few years.
The Eurasian bear turning into a dragon
This is not to say that China has not worked hard to cultivate its current position in Central Asia.
Starting with a $1 billion investment in the region in 2000, it has spent up to $50 billion in trade and investments in the region according to the IMF. From developing its western border regions; so as to ensure its capabilities for trade, to building infrastructure like highways, pipelines and railways throughout the region via the 2013 Silk Road Economic Belt (SREB) initiative, China is determined to secure the region as its own zone of economic interest and appears to be achieving this goal.
But there is risk in this strategy. Russia likes to view Central Asia as it personal Achilles heel and prefers to keep close ties in the region economically, politically and militarily. Understandably, China’s SREB project and their new round of investment in Russia’s backyard has set off alarm bells in Moscow.
According to Alexander Gabuyev of the Carnegie Moscow Center, “when China announced its Silk Road plan in Kazakhstan, it was met with a lot of scepticism and even fear by the Russian leadership … the feeling was, ‘it’s a project to steal Central Asia from us, they want to exploit our economic difficulties to be really present in the region’.”
To counter this push by Beijing, Vladimir Putin announced the development of the Eurasian Economic Union (EEU), as a way to tie Russia and the Central Asian region together more securely. However, the union floundered when the financial crisis hit Russia and it has since merged with China’s SREB Initiative.
Bears are tenacious creatures and, like them, Russia has not stopped trying to maintain its status.
In the past months, it has completed large-scale military exercises with Central Asian partners like Tajikistan. This sends China a clear message: Russia is still in the picture.
Vladimir Putin has also made an attempt to slow down China’s entry into these markets by imposing new import restrictions via the EEU.
Central Asia’s anti-Chinese leanings
There is some risk to China’s large investments in Central Asia with there being much public distrust and opposition among the Central Asian general population to their leaders’ love affair with China. Consequently, anti-Chinese sentiment is quite high in many Central Asian states.
In Kazakhstan last month there was a series of large protests over a proposal to privatize unused arable land, which Kazakhs feared would be sold off to China. The government has since backed down from the planned privatization due to the public outcry.
These protests are not isolated to just Kazakhstan. In Kyrgyzstan last year, the prime minister resigned due to a scandal over the awarding of a contract to a Chinese company and in 2012, 200 protesters blocked access to a Chinese operated gold mine.
All aboard the hype train
However, Central Asian leaders are pragmatists and many were left scrambling to fix their economies after the collapse of the regional, Russia-centric power dynamic. The long-term economic surety and prosperity that China is offering is not just an attractive offer; it will be a boon to their economies.
They will have roads, railways and other infrastructure built or updated without heavy costs to themselves. Through engagement with China, Central Asia will see new goods imported, new industries created and new markets for each of the five states.
As Kazakh foreign minister Erlan Idrissov stated, “Our philosophy is simple: We should get on board that train … We want to benefit from the growth of China and we don’t see any risks to us in that growth.”
This story first appeared at Global Risk Insights, May 23, 2016.