The Silk Road between a Rock and a Hard Place: Russian and Chinese Competition for Central Asia's Energy.

• Author: Skalamera, Morena
• Position: COMMENTARY

China's displacement of Russian economic influence in Central Asia is generating great interest in Western academic and policy circles, but this research has, as yet, yielded few analytical nuances. This article attempts to shed light on the under-researched question of what explains Central Asian governments' failure to more effectively capitalize on the growing Central Asian rivalry between Russia, China, the United States, Turkey, Iran, South Korea, Japan, and other regional powers that, since the early 1990s, has been overwhelmingly directed towards strategic energy considerations and hydrocarbon interests.

Introduction

For centuries, from the first Tsarist-era conquests in the 18th century and through 70 years of Soviet dominance in the 20th century Russia ruled the massive but thinly populated region of Central Asia. Central Asia is composed of arid steppes and mountains running from Siberia in the north, to the Pamir and Karakoram Mountains in the south and the Caspian Sea in the west. This massive area was generally known as Turkestan until the Soviet Union began to create smaller composite republics composed loosely along linguistic lines. Five republics were founded under the Soviet principle of economic collectivization, centralized political institutions and the Russian language as a lingua franca. Central Asia's abundant resources--including oil, natural gas, minerals and cotton- went toward sustaining the Soviet economic machine, and road, railway, and pipeline networks linked the region to Russia. (1)

After the breakup of the Soviet Union, Central Asia's mineral riches and strategic proximity to Afghanistan and Iran prompted Russia, the former imperial overlord, to maintain close ties there. Energy exports from Central Asia were highly vulnerable to Russian pressure, with the Russian energy giant Gazprom controlling the only pipeline, built in the Soviet era, to transport natural gas from Central Asia to foreign markets. Until recently, Gazprom had been purchasing natural gas from Central Asia at between $70 and $150 per 1,000 cubic meters and then reselling it -either in the Russian domestic market at heavily subsidized prices, or in Europe and elsewhere for hefty dividends. Dependent on Soviet-era transit pipelines, Kazakhstan, Turkmenistan and Uzbekistan were forced to submit to the former imperial overlord's price markdowns. It was this domination that prompted all of the Central Asian governments to begin exploring what options China, the regions new economic superpower, might be able to offer. China has made truly great strides in the last decade, precisely in the energy geopolitics of Central Asia. It has courted Central Asia with the promise of cheap loans, upgraded energy and transport infrastructure, and freedom from energy shortages and energy-related pollution. Russia's history of heavy-handed threats to cut off supplies of oil and gas to its neighbors has made Beijing's job all the easier. China is at present the region's main source of foreign loans and the main market for its hydrocarbon exports. Gas pipelines are often arteries carrying geopolitical influence, and they increasingly head east to China.

Power Transition and the Role of the Central Asian Republics

The larger context of the change occurring in Central Asia is a power transition underway from Russia to China. Along the way, a great deal of literature has been devoted to addressing how the Central Asian states have adapted by playing the great powers off one another for their own benefit, and how, in this new "Great Game," the Central Asian states no longer play purely passive roles, but instead have become important players in their own right, especially in the energy sector. (2) Central Asia expert, Alexander Cooley, observes that, in settings where several patrons or great powers vie for influence, the authority and influence of any one state are potentially diminished. (3) Political scientist Annette Bohr concurs, noting that following Kazakhstan's lead, all of the Central Asian states have begun to adopt a 'multi-vector' foreign policy in order to gain maximum bargaining power with Russia, China, and the United States. (4) This is especially true of the governments of oilrich Kazakhstan and gas-abundant Turkmenistan (where local leaders had diversified away from the Soviet monopoly and exploitation of their resources), both of which appear to be pursuing a multi-vector strategy and emerging as independent players on the Eurasian energy map.

This paper takes issue with such an interpretation, however, contending instead that the Central Asian heads of states (with the partial exception of Kazakhstan) have failed to take full advantage of their energy wealth due to the reluctance of local rulers to harmonize their foreign policies and present a united Central Asian front when dealing with external partners, thereby failing to reap maximal benefits. In a similar vein, the evidence does not support the proposition that Central Asian elites have been able to directly play one external power off the other to extract increased assistance or better contractual terms over the years. Initially, Chinas growing involvement had the benefit of providing the necessary investment capital to begin to break the states' dependency on Russia. Reduced Russian influence did not, however, prompt the former Soviet states of Central Asia to formulate and consolidate their own independent energy strategies. Instead, both regional hegemons, China and Russia, have been able to apply the "divide and rule" tactic, with greater gains for themselves. Central Asia experts, Alexander Cooley and Marlene Laruelle, define this logic as 'supporting a client state and backing its claims in local disputes or conflicts in exchange for securing economic deals and political loyalty. (5)

The main argument presented here is that the current situation is due to the continued wavering of local leaders' foreign policies between Moscow and Beijing. This, in turn, stems from deficiencies in domestic politics, namely the inability of the Central Asian elites to show political vision beyond short-term tussles (the exception being Kazakhstan, which stands out for its strategic thinking) and to create an institutional environment that would enable the government to act in the long-term interest of the local people. Two factors, in particular, have been crucial in undermining Central Asian leaders' ability to project their economic interests internationally: their zero-sum minded politics and inability to work together to advance common interests in the face of large-power competition, and the influence of vested interests on policymaking.

It would be reasonable to expect that the reality of increased competition over the region's oil and gas riches would prompt local rulers to increase their efficiency, find ways to diversify their energy trade ties, and get more creative about their investment needs. But in highly opaque and tightly-controlled systems based on clientelism, Beijing's growing hold over Central Asia's energy infrastructure and markets through its $1 trillion Belt and Road plan has meant that the benefits of such competition have been lost over time. If Chinese credit comes devoid of any political demands relating to governance and human rights, it also lacks interest in good governance, meaning that China does very little to engage with the local communities i.e. to ease tensions between Chinese workers and their host communities, preferring instead swift, top-down, government-to-government deals. (6) Initially, Central Asian rulers welcomed China's involvement in the region, especially due to the economic benefits that China's colossal plan to build infrastructure across Eurasia offered. China avoided any discussions of domestic political affairs, which was also seen as positive. (7)

Growing Chinese economic investment, however, which operates under the sway of the Belt and Road Initiative, is currently viewed with a great deal of suspicion and resentment. Chinese companies, which profit handsomely from their energy deals in Central Asia, often employ Chinese workers for pipeline construction and energy extraction. These workers frequently clash with locals who resent being relegated to secondary positions. In 2009, China National Petroleum Corporation (CNPC) reportedly dismissed Turkmen workers who protested against wage arrears. (8) The shift to China, moreover, has happened so fast that Central Asian leaders worry about China's long-term intentions and fear a possible Chinese migration. (9) These concerns are most acute in Kazakhstan and Kyrgyzstan, where Chinese economic presence is the greatest and is expected to increase in the long term. In Kazakhstan, Chinas plans to farm out one million hectares of arable but uncultivated land prompted large-scale protests. (10)

Even as ordinary Central Asians feel nervous about Chinese economic inroads, they are now left with fewer options, particularly after the United States and Western forces' withdrawal of combat troops from Afghanistan in 2014. Instead of having buttressed their economic position and political independence, most of the Central Asian countries were content with simply swapping their previous overwhelming dependence on Soviet-era pipelines and investment for a "Panda hug" from China.

More recently, several hawks in the Kremlins military and political establishment have developed a vision of a "Great Russia" with strong ties to the former Soviet republics in Central Asia, reflecting Russia's increasingly status-driven posture in international politics. (11) In resurgent Russia, greater preeminence is given to "clawing back value" in a region where, in Fyodor Lukyanov's words, "Russia doesn't want to be seen as China's junior partner." (12)

Some observers now claim that Central Asians are having second thoughts about their growing energy partnership with China and turning...