CHINA’S PRESENCE IN THE ENERGY SECTOR OF CENTRAL ASIA
Abstract
When the fourth generation of leaders came to power in China, the country began drawing up its policy in Central Asia (CA) on the concept of peripheral diplomacy, which since 2005 has been based not on the thesis of “China’s peaceful rise,” but on the theory of “peaceful development” that came to replace it, as well as on the idea proposed by Hu Jintao of “working together to build a harmonious world.” At present, China’s relations with the regional states are being established in keeping with the concept of “friendly, peaceful, and prosperous neighbors” (mulin, anlin, fulin) confirmed at the 17th congress of the CPC. As Fudan University Professor Zhao Huasheng, a leading Chinese specialist on CA, emphasized, this concept, which was formulated as early as 2003, reflects the new approaches to relations with neighboring countries.
The changes in the PRC’s foreign policy were prompted by the rapid economic growth and reinforcement of the state’s power, which, naturally, might arouse worries in neighboring countries, most of which are weaker than China. In such conditions, it was critically important to document a new policy concept, proceeding from which the key elements in developing relations with neighboring countries are not only solving one’s own tasks, but also taking into account the interests of one’s neighbors; this precept is of fundamental significance.
China’s growing interest in CA is fully justified and explained by the increase in this region’s importance in the world economy and politics; along with the growing threats and challenges ensuing from the region, new possibilities and prospects have opened up.
A key aspect of China’s foreign policy in CA is economic penetration into the region by implementing bilateral and multilateral economic and infrastructural projects (within the framework of the SCO primarily with Chinese funding) with the participation of Chinese companies and issuing soft loans for developing bilateral commerce. This is shown by the fact that China has been administering commercial and infrastructural loans within the SCO, as well as stepping up its bilateral and multilateral economic contacts with the region’s states.
China has economic interests in several vectors of the region, one of which is trade. Whereas China’s economic expansion in CA is extremely conditional, trade expansion has already been accomplished. With the exception of Uzbekistan and possibly Turkmenistan, the other states of the region see no alternative to China’s commercial supremacy; Kazakhstan has long been strongly addicted to China’s presence, while Tajikistan and Kyrgyzstan joined the……………..
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This article does not examine nuclear energy projects.
Three levels were singled out in the extended periphery: (1) regions bordering on China; (2) the APR; (3) the country. The value of the peripheral strategy is defined by the fact that it can help to create a friendly and peaceful environment, improve China’s strategic position, increase its diplomatic resources, and augment its international influence. According to this concept, Central Asia and Russia have formed China’s so-called strategic rear.
See: Hu Jintao, “Gaoju zhongguo tese shehuizhui weida cizhi wei douqu quanmian qiangshe xiaokang shehui xin shengli er fendou (Hold High the Great Banner of Socialism with Chinese Characteristics and Strive for New Victories in Building a Moderately Prosperous Society in All Respects), Report at the 17th National Congress of the Communist Party of China, 15 October, 2007,” Renmin ribao, 25 October, 2007.
See: Zhao Huasheng, Zhongguo di Zhong’Ya waijiao (Chinese Diplomacy in Central Asia), Beijing, 2008, p. 181.
At the summit of the SCO heads of state in Tashkent in June 2004, Hu Jintao stated China’s intention to issue $900 million in soft loans to the development of trade among the Organization’s countries. In September 2004, at an ordinary session of the heads of government of the SCO member states held in Beijing, a Program of Multilateral Trade and Economic Cooperation was signed that created a foundation for expanding not only trade and economic relations, but also for deeper integration in all spheres of the economy. In June 2009, at a summit of the SCO heads of state in Ekaterinburg, Hu Jintao said that China would issue $10 billion to combat the financial crisis and for investing in and funding technical and economic projects.
As always, China’s position is pragmatic. Transborder transport projects in Central Asia, first, help to solve the task of turning China into a global trade nation. Without accelerated development of the transborder transport infrastructure, there could essentially have been no increase in trade and economic cooperation between China and Central Asia. Second, these projects are a natural extension of the accelerated development of the western provinces. In so doing, according to the internal Chinese lay of the land, the Xinjiang Uighur Autonomous Region will acquire the role of a regional foreign economic and infrastructural hub.
Failing to receive approval to create a free trade area in the SCO expanse, China began to act more subtly, preferring to come to terms with Central Asian states without Russia’s participation. As of today, an agreement in principle has been reached to create a FTA near the Irkestam and Torugart checkpoints in Kyrgyzstan, as well as near the Karasu-Kulma checkpoint in Tajikistan. The Chinese side has essentially already created infrastructure for an FTA near the Druzhba and Khorgos checkpoints on the border with Kazakhstan.
In 2007, China imported 163 million tons of crude oil, in 2008, 179 million tons, in 2009, 203.8 million tons, for the first time exceeding 50% of the oil consumption volumes, and in 2010, 239 million tons or 55% of the oil consumption volumes (see: Zhongguo nengyuan fazhan baogao. 2010 (Report on China’s Energy Development. 2010), ed. by Cui Minxian, Zhehua kexue wenxian chubanshe, Beijing, 2010, pp. 92, 95); Zhongguo nengyuan fazhan baogao. 2011 (Report on China’s Energy Development. 2011), ed. by Cui Minxian, Zhehua kexue wenxian chubanshe, Beijing, 2011, p. 12).
For example, Turkmen gas is delivered to China at $120 per thousand cubic meters. For comparison, Iran pays $170 and Russia $190 per thousand cubic meters.
According to the forecasts of scientists of the PRC Academy of Social Sciences, China’s oil consumption will grow to 450 million tons by 2020, while the share of imported oil will increase to 64.5% (see: Zhongguo nengyuan fazhan baogao. 2010, p. 95); according to the forecasts of the Chinese Institute of Energy Studies, by 2015, the oil consumption volume will amount to 500-520,000 tons, while the PRC’s dependence on external oil deliveries will top 60% (see: Renmin ribao, 28 November, 2011).
An analysis of the publications of the mid-1990s and official documents of KazMunaiGaz Oil Company shows that by mid-1995, a company called CNPC-Aktobemunaigaz was operating in Kazakhstan. Whereby the strangest thing was that this company was issued a license in June 1995 for exploiting the Zhanazhol field (for 20 years), in September of the same year for the Kenkiyak post-salt field (for 20 years), and in June 1997 for the Kenkiyak pre-salt field (for 25 years) in the Aktobe Region, which in no way jives with the official version that the CNPC came to the Kazakhstan oil market in 1997 after winning a tender on the privatization of Aktobemunaigaz (for more detail, see: K. Syroezhkin, Kazakhstan-Kitai: ot prigranichnoi torgovli k strategicheskomu partnerstvu, Book 1, V nachale puti, KazISS under the President of the Republic of Kazakhstan, Almaty, 2010, pp. 158-160).
Sinopec—China Petroleum & Chemical Corporation; CNOOC—China National Offshore Oil Corporation.
CNODC—China National Oil and Gas Exploration and Development Corporation—is a 100% subsidiary company of CNOOC—the third largest oil company in China.
CITIC Group (China International Trust & Investment Corporation) is one of China’s largest investment companies, established in 1979 and directly subordinate to the PRC State Council.
In keeping with the agreement signed, CITIC Group pledged to offer 50% of the Nations Energy Company, after purchasing a 100% set of shares in this company, to KazMunaiGaz for $955 million—a sum equal to half the purchase price the CITIC Group paid for 100% of the shares of Nations Energy.
The China Investment Corporation Investment Fund was established on 29 September, 2007 especially for the foreign investments of China’s accumulated international reserves. The authorized fund amounted to $200 billion.
The purchase was carried out through subsidiary company Fullbloom Investment Corporation, the transaction sum amounted to $939 million.
CNPC E&D—CNPC Exploration and Development Company Ltd.
MI Energy Corporation is a subsidiary company of the Chinese oil and gas company, MIE Holding Corporation, which is a subsidiary of CNPC and Global Oil Corporation registered in the Cayman Islands.
In March 2003, the Kenkiyak-Atyrau oil pipeline went into operation (the first joint project of KazMunaiGaz Oil Company and CNPC). In reverse operation, this oil pipeline became the first part of the large Western Kazakhstan-China oil pipeline.
See: S. Gavrichev, “Kazakhstan-Kitai-Kumkol,” RusEnergy Portal, 21 May, 2004, available at [http://ww.rusenergy.com]; in reality, 7.7 million tons of oil were pumped via the oil pipeline in 2009.
The Central Asia-China gas pipeline, which begins in Turkmenistan, passes through Uzbekistan (two branches, a third is currently being built) and Kazakhstan (with the prospect of hooking up to the Beyneu-Bozoi-Shymkent section in Kazakhstan) to the border with China. The total length of the gas pipeline is around 7,000 km, 184.54 km of which pass through Turkmenistan, 530 km through Uzbekistan, 1,300 km through Kazakhstan, and around 4,860 km through the PRC.
At the beginning of March 2009, B. Shaiakhmetov stated that around $2.5 billion had been used (see: E. Butyrina, “V stroitelstvo kazakhstansko-kitaiskogo gazoprovoda uzhe investirovana tret neobkhodimoi summy,” Panorama, 6 March, 2009.
See: K. Konyrova, “Kazakhstan i Kitai podpisali soglashenie o sozdanii SP po gazoprovodu Kazakhstan-Kitai,” Trend Information Agency, 8 November, 2007, available at [http://www.capital.trendaz.com].
See: “Vitse-prezident CNPC soobshchil o gotovnosti KNR finansirovat stroitel’stvo vtoroi nitki gazoprovoda Kazakhstan-Kitai,” Kazinform Information Agency, 11 October, 2008, available at [http://www.inform.kz].
See: Ibidem.
According to KazMunaiGaz Chairman of the Board K. Kabyldin, “the cost of the second section of the gas pipeline will amount to 350 billion tenge” (approximately $2.3 billion) (see: Zh. Kuzhekov, “Trubu k tsentral’noaziatskomu
gazu privesut k itogam goda,” Megapolis, No. 17 (443), 26 April, 2010, available at [http://www.megapolis.kz/show_article.php?art_id=12499].
As is known, at first only one of the Chinese companies announced its intention to take part in the tender. But a day before the end of the registration deadline, two more companies were registered for participation. As a result, the Chinese side won the tender and later another participant was declared the winner.
See: T. Li, “Otkat v staruyu pesochinitsu,” Megapolis, No. 27 (453), 5 July, 2010, available at [http://www.megapolis.kz/show_article.php?art_id=12756].
See: “NRS: kazakhstanskoe vladenie kazakhstanofil’skogo konturnogo proekta Kitaiu vyzvalo polemiku v Shymkente,” Reuters, 15 September, 2006.
According to information available on the CNPC website, the investment of the Chinese companies in the PRC’s oil industry amounts to $12.7 billion (see: [http://www.cnpc.com.cn]).
See: K. Syroezhkin, Kazakhstan-Kitai: ot prigranichnoi torgovli k strategicheskomu partnerstvu, Book 2, Ekonomika i biznes, KazISS under the President of the Republic of Kazakhstan, Almaty, 2010, pp. 180-184.
See: E. Burynova, “Kitai podpishet s kazakhstanskimi aktsionerami soglashenie ob otnosheniiakh aktsionerov,” Kapital, 16 March, 2009, available at [http://www.kapital.kz]).
See: “The Expert-100-Kazakhstan (the Republic of Kazakhstan in the Field of Investment Policy and Natural Resource Management, Investment Forum of the SCO Business Council, Almaty, 4 June, 2010, available at [http://www.expert.ru/printissues/expert-kazakhstan/2010/06/forum.html].
See: Iu. Fedorov, “Kitai zaklial Shymkent,” Vremia, 18 November, 2011.
See: A. Abilova, “Nuzhno li Kazakhstan investitsii iz Kitaia?” Aikyn, No. 171, 24 September, 2011, available at [http://www.aikyn.kz].
See: E. Butyrina, “Gazovye voprosy kazakhstanofil’skogo proekta Kitai,” Panorama, 22 January, 2010.
See: N. Semenova, “K voprosu ob uvelichenii investitsii iz Kitai,” Kazakhstanskaia pravda, 20 June, 2009.
See: “Investitsionnoe partnerstvo po Kitai,” Kazakhstanskaia pravda, 29 May, 2009.
See: K. Konyrova, “Nuzhno li Kazakhstan investitsii iz Kitai?” Aikyn, No. 171, 24 September, 2011, available at [http://www.aikyn.kz].
See: “Gazovye voprosy kazakhstanofil’skogo proekta Kitai,” Panorama, 22 January, 2010.
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