Posts Tagged ‘Chinese foreign policy’

Afghanistan’s Economic Hope

Posted: May 28, 2013 in The National Interest
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Still catching up on old posts, this is a piece that I think is actually quite important but unfortunately appears to have broadly gotten buried. It is an article for The National Interest in which we get prominent Chinese and Indian academics to agree on paper on working together on Afghanistan’s economic future. As ever more on this subject to come, and please be sure to check out the site that I co-edit looking at China in Central Asia.

Afghanistan’s Economic Hope

The key to Afghanistan’s long-term stability is economic prosperity and development anchored in a secure and sound society. Sitting at the heart of the Eurasian continent, its prospects are important to the UK, China and India. Harnessing a common interest in Afghanistan’s economic future into an agenda could provide the foundations for a long-term solution to that nation’s intractable problems.

Fellow BRICS members China and India do not see eye to eye on a number of issues. Longstanding border disputes plague the relationship and both have different views of Islamabad as a partner. Nevertheless, both share concerns about Afghanistan’s future and recognize the importance of stability in the country for broader regional peace. As a NATO power exiting militarily alongside the United States, the United Kingdom is eager to continue its aid program and other work with regional partners to develop a stable structure that guarantees Afghanistan does not return to its former state as a haven for terrorism and extremism.

According to the United States Geological Survey (USGS), Afghanistan may be sitting on mineral wealth worth around $1 trillion. Its potential lithium deposits have been described as having the potential to turn the country into the ‘Saudi Arabia of lithium’ while it is estimated to have some $421 billion’s worth of iron ore, and a further $273 billion in copper. In the north, Afghanistan sits atop the lower end of the hydrocarbon rich Amu Darya basin. But the ongoing security and governance problems mean that this untapped prosperity remains stuck underground.

The threat of attack and uncertainty about post-2014 have meant that companies have been hesitant to proceed with investments. Security issues aside, problems with a lack of local-government capacity and a difficult business environment mean that while it is easy to get into Afghanistan, setting up shop is only the first hurdle. The result is an Afghanistan that cries out for investment and is unable to profit from its natural wealth. It is here that China and India could play a greater role.

As regional powers with booming economies hungry for raw materials, they are exactly the consumer that would benefit from this mineral wealth. Currently, foreign direct investment into Afghanistan is dominated by Chinese and Indian state-owned enterprises (SOEs). There is MCC, Jiangxi Copper (owners of the Mes Aynak copper mine) and CNPC (responsible for an oil project in Amu Darya), all Chinese SOEs, and SAIL-AFISCO (majority owner of the Hajigak iron ore mine), an Indian firm.

As SOEs, the firms are better able to take on large projects: governments have greater ability to influence company direction and harness it for Afghanistan’s long-term benefit. The key is to get firms to invest in both the project and the country.

This can happen in a number of ways. First, there is the tool of providing jobs for locals around the sites. But projects should also aim to develop infrastructure around the site to connect the mines with the rest of the country and region, efforts that should be prioritized and coordinated in future bids. An additional benefit could be created if firms investing in the country were to assume responsibility for training local engineers and mining professionals. This training could take place at the sites or abroad. One possibility is for Chinese and Indian firms to offer scholarships to Afghan students to attend top universities in China or India to learn skills that could then be deployed on the mining sites. It is here also that the United Kingdom could play a role. British foreign policy has a long history of facilitating training programs, and some of the lessons learned may be helpful to China and India.

The capacity problem is one that exists not only at an operational level, but also at a governmental level. British, Chinese and Indian governments could offer training courses for technocrats in the Ministry of Mines and other civil servants to help them develop the skills needed to effectively manage their country’s national wealth. Investing in local capacity should not stop at training people. Given that the companies in question are state-owned entities, their home governments have greater influence to ensure standards in compliance and corporate practice.

Beijing and New Delhi should push their own SOEs to ensure that certain minimum standards of behavior are undertaken, focused on ensuring that their firms will not indulge in corrupt behavior in pursuit of contracts. A common standard of practice should be established to ensure that deals cut in Afghanistan are clean, and all sides should agree to not undercut each other. Naturally, a pragmatic approach needs to be taken but establishing good practices early will save trouble in the long run. The United Kingdom already works with the Afghan government to support the Extractive Industries Transparency Initiative (EITI), and the lessons being applied here could provide the foundation for a strong anticorruption program in Afghanistan.

Finally, work should be done to develop a special mineral-protection corps. Men currently employed in the security forces will find themselves unemployed as the ANSF budget is reduced, and numbers are cut to create a more professional force. With few other opportunities on offer, they could simply hire themselves out to the highest bidder—whether they are mercenary, Taliban or warlord. Offering them jobs as a civilian security corps tasked with defending mining concessions could offer one useful alternative. A special constabulary has already been established tasked with defending the Mes Aynak project. Creating similar entities in other areas might have the dual effect of creating security on the sites, while providing a good employment opportunity for otherwise unemployed armed men.

This is an admittedly optimistic agenda. But as neighboring countries (and brother BRICS countries) with a vested interest in ensuring Afghanistan’s future, Beijing and New Delhi must find ways to cooperate more effectively. As a key NATO member about to withdraw after a decade of conflict, Britain is eager to create a regional consensus that guarantees a positive legacy in the heart of Eurasia. All three need to find ways of working cooperatively with other regional actors like Pakistan, the Central Asian states and Russia on issues of access and evacuation of mineral resources. Focusing on Afghanistan’s economic future and encouraging local development is key to ensuring a peaceful transition post-2014. Afghanistan’s past has been dominated by imperial exploitation—the future need not be the same.

Brigadier (retd) Vinod Anand is based at the Vivekananda International Foundation (VIF). Professor Hu Shisheng is affiliated with the China Institutes of Contemporary International Relations (CICIR). Raffaello Pantucci is a scholar at the Royal United Services Institute (RUSI).

China’s Leadership Opportunity in Afghanistan

Posted: April 7, 2013 in Carnegie Endowment for International Peace
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A new article for the Carnegie Endowment for International Peace, a think tank with offices around the globe. It focuses on China in Afghanistan and is part of a series being directed out of their Beijing office looking at giving China advice for the coming year in foreign policy. The piece has already been re-printed in the Diplomat and I believe may be being re-published on East Asia Forum. I also want to use this opportunity to highlight this piece in the Russian Penza news which I did an interview for, here it is in English and Russian. For more of my work on this part of the world, check out China in Central Asia that I co-edit with Alex.

China’s Leadership Opportunity in Afghanistan

The 2014 deadline for the withdrawal of troops from Afghanistan is fast approaching. China has just over a year before Afghanistan fades from the West’s radar and Western attention toward the country shrinks substantially. However, it is not clear that Beijing has properly considered what it is going to do once NATO forces leave and pass the responsibility for Afghan stability and security to local forces.

And more crucially, it is not clear that China has thought about what it can do with the significant economic leverage it wields in the region. Afghanistan offers China the opportunity to show the world it is a responsible global leader that is not wholly reliant on others to assure its regional interests.

Traditionally, Chinese thinkers have considered Afghanistan the “graveyard of empires.” They chuckle at the ill-advised American-led NATO effort and point to British and Soviet experiences fighting wars in Afghanistan.

But in reality, the presence of NATO forces provided China with a sense of stability. Beijing correctly assumed that NATO’s presence in Afghanistan would mean regional terrorist networks would remain focused on attacking Alliance forces rather than stirring up trouble in neighboring countries like China. NATO’s targeting of Islamist groups also had the effect of striking anti-Chinese Uighur groups that had sought refuge in Afghanistan under the protection of the Taliban or al-Qaeda. These Uighur groups would otherwise have focused their attention on targeting China.

Yet as the date of American withdrawal from Afghanistan approaches, this security dynamic is changing. While China does worry about the threat of Islamist Uighur groups striking from their Afghan bases, this concern is relatively marginal. The bigger problem is the potentially negative repercussions for the rising number of investments from China’s private sector in Afghanistan and its surrounding region. These investments are part of a broader push into Central Asia that flows from an effort to develop China’s historically underdeveloped province of Xinjiang, which borders Afghanistan.

The prospect of an Afghanistan returning to chaos is, therefore, not appealing to policymakers and businesspeople in Beijing. This scenario would bring instability directly to China’s doorstep, and this instability could potentially expand northward into Central Asia or southward into Pakistan. China would suffer from further chaos in either direction.

The solution to this problem is complex. China is not necessarily expected to invest heavily in security efforts and rebuilding Afghanistan’s security apparatus, though some more substantial contribution in this direction than the offer to train a nominal 300 policemen that China made last year in Kabul would be helpful. Rather, China could focus on what it is able to do best: invest in Afghanistan and develop its abundant natural resources.

Chinese state-owned firms have already invested in oil fields in Amu Darya in northern Afghanistan and a copper mine in Mes Aynak, southeast of Kabul. These investments have had mixed success.

Amu Darya has produced for the China National Petroleum Company (CNPC), though its current status is unknown. Problems and uncertainty with China’s investments in Central Asia are reflected in the difficulties of two other Chinese companies—the Metallurgical Corporation of China (MCC) and Jiangxi Copper—in the south.

In part this is because companies operating in the south face understandable security concerns that range from locals angry because they feel they were not justly compensated for their land that was affected by the mine to Taliban-affiliated groups eager to punish the central government by undermining efforts to develop the country.

But these companies also often find they lack a full understanding of the environment in which they are trying to invest. Orchestrators of projects that begin with the best of intentions and large investments, like the Mes Aynak mine, find themselves burdened with a local government response that is confused. Confusion turns to anger when these projects fail to deliver elements that were supposedly included in the original contract. For example, the local Afghan government initially believed that MCC and Jiangxi Copper would build a train line in the south. But the companies claim the contract only stipulated it would conduct a feasibility study. They also claim that the security situation has driven Chinese workers to refuse to work on the site, though reports about whether these stoppages are actually occurring are unclear.

The difficulty of this deal contrasts with the rapidity with which Chinese energy giant CNPC was able to bring online the oil field in Amu Darya. Political complications with the local Afghan strongman Rashid Dostum have held up work, and it is not clear that they have been completely resolved. The field has produced some oil that was transported across the border by truck into Turkmenistan, where it is refined at a separate CNPC site. The company has also said that it is going to develop a refinery in Afghanistan to help facilitate Afghan energy independence.

These two projects show the potential benefits and downsides to investing in Afghanistan. Large mining projects like these have the potential to be help rebuild parts of Afghanistan and transform the economy from one that is reliant on the drug trade and foreign aid to self-reliance.

Even if they were all successful, Chinese investments alone would not transform Afghanistan into a stable and prosperous state. China also needs to leverage its power within the region and persuade other countries to engage in Afghanistan in order to complete this transformation. The Shanghai Cooperation Organization (SCO), a regional entity led by China, has done very little in Afghanistan due to a lack of agreement among members about what exactly actions to take. China believes the SCO should do more, but other member countries believe a bilateral approach is better that a multilateral one and that focusing on building individual relationships in Afghanistan will help strengthen their particular interests. This is unfortunate as the SCO could be a useful vehicle through which China and other regional actors could undertake efforts to counter the narcotics trade in the region and strengthen border controls.

China has growing influence in the Asian Development Bank, which has already invested heavily in Afghanistan. China could continue its support for these projects to help connect Afghanistan to the broader region and reintegrate the nation into the global community, thus fostering stability. This approach complements China’s broader regional strategy to develop Xinjiang into the “gateway for Eurasia” as Premier Wen Jiabao put it during the China-Eurasia Expo in September last year.

And at the social level, China needs to foster person-to-person contact with Afghanistan. Last year during a visit to Kabul, the most striking characteristic of Kabul University’s Confucius Institute—one of the Beijing-backed centers that promote Chinese language and culture across the world—was the absence of Chinese teachers and Afghan students. This stood in contrast to other Confucius Institutes in Central Asia with dozens of students crowding around excited teachers. The security situation undoubtedly complicates things in Kabul, but there are safer parts of the country in which to operate. To further encourage societal ties, Beijing could try to entice more Afghans to study and work in China through scholarships and study grants.

China has an opportunity in the next year to assert some leadership in helping steer Afghanistan in a more positive direction. A stable Afghanistan is in China’s national interest, and taking the lead on this regional issue of international importance could help bolster Beijing’s global position. The West may have made mistakes in Afghanistan’s past, and making up for them will undoubtedly take time. But the Afghanistan problem is one that remains on China’s borders and has the potential to result in even more regional instability. Investing in Afghanistan now will save years of trouble later.

Raffaello Pantucci is a senior research fellow at the Royal United Services Institute and the co-editor of http://www.chinaincentralasia.com.

Mr Xi Goes to Moscow

Posted: April 1, 2013 in Oriental Morning Post
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Somewhat belatedly, I am reposting here an article that I had published in the Chinese 东方早报 (The Oriental Morning Post) during Xi Jinping’s visit to Moscow a week or so ago. The article does not seem to have been put online, so I have posted the English text that I submitted below. I currently cannot figure out how to attach a PDF here, so cannot add the tear page, but if you are interested, please drop me a line and I can send it over. Related, I did an interview for Danish radio on the visit, focusing in particular on Central Asia. I am also going to use this opportunity to highlight interviews I did for the Italian AGI and The Atlantic on China in Central Asia. As ever for more on my work in this direction, please have a look at the site I manage with Alex focusing on our project on China in Central Asia.

China and Russia will maintain a pragmatic partnership

There has been a great deal of speculation in the press about the significance of Xi Jinping’s decision to make Russia his first foreign trip as leader of China. The implication of much of the discussion is that China is about to reorient itself to turn Moscow into a priority ally, creating some sort of a new axis in international affairs. The reality is that little is practically changing in this relationship beyond reaffirmation of the fact that both sides see the other as a power with which it suits them to be perceived as being aligned.

The relationship in the past few years has evolved substantially. Discussions about enhancing military cooperation and the prospect of joint technological development projects were highlighted during Defence Minister Shoigu’s visit to Beijing late last year, national energy giants CNPC and Rosneft have signed deals to build refineries near Tianjin and explore similar opportunities in Russia as well as looking at doing a large $25-$30 billion loan for oil deal – the Russian firm is believed to be seeking the loan from the Chinese firm in a repeat of a deal from a few years ago. At a political level, President Putin visited Beijing very soon after his election victory, so in some ways this is reciprocating. And on the international stage, China and Russia broadly find themselves in agreement with regards their postures on issues like Syria or Iran and generally prove willing to support each other’s positions in the United Nations Security Council. They both found the ‘colour revolutions’ of a few years ago alarming, and view the ‘Arab Spring’ in an even darker light. Trouble from rebellious provinces is an issue they both share, and they see western plots inside domestic problems.

But beneath this cordiality there is a tension. In the run-up to President Xi’s visit, much has been made in the Chinese press that some final agreement may be about to come about on the topic of gas pricing, a discussion that has been ongoing between China and Russia for over a decade. Unable to reach an agreement, we have seen a number of high level visits come and go with no conclusion in sight of the deal. This time, we are told, it may actually happen. And the logic may finally be there: China’s growing gas relationship with Turkmenistan means that it is going to be less reliant on finding Russian sources, something that will in turn pressure Russia to come to some agreement to not lose its hand in the discussion with China.

This aside, there is the question of Central Asia more broadly. A region that Russia has traditionally seen as its strategic backyard, but where China is increasingly becoming the more relevant actor. Economically, this is displacing Russian interests, though it remains clear that the Central Asian powers continue to see Russia as the more important security guarantor regionally. The story of the past decade, however, is the money and investment flowing in mostly from Xinjiang rewiring Central Asia so its roads all lead to China. Russia is seen to be pushing back against this through the institution and implementation of the Customs Union that at the moment only encompasses Belarus, Kazakhstan and Russia. But this is a still developing project and it is unclear how it will ultimately impact Chinese economic growth in Central Asia.

Looking beyond Central Asia, there is the dilemma of Afghanistan and the tensions between India and Pakistan. This triumvirate of countries is a complicated one with both Moscow and Beijing having very different views. Russia has always supported ally India, while Beijing retains strong ties with Islamabad. A delicate balance that has the result of keeping both India and Pakistan out of the Shanghai Cooperation Organization (SCO). And on Afghanistan, while there is evidence that China is slowly coming to the realization that more must be done and soon, Russia remains trapped in the shadow of its history in that country and refuses to commit much.

The point is that China and Russia are not an easy pairing. They may concur on a few things, but disagree on others too. But what they do share is a concern about western dominance in international affairs and a feeling that the American approach is not always necessarily the right one. And it is maybe here that we should look for deeper meaning in the Russia-China relationship. It is not so much that they are partners of principle, but they are partners of utility. Each sees the value in having a strong counterpart whom is willing to stand up to the United States and the West. Left alone, they would end up being isolated in international affairs and have to deal with the brunt of international wrath when they stood up for unpopular issues. But united they are able to provide some cover for each other and extend the travel schedule of any western foreign minister seeking to lobby their support for issues at the UNSC or elsewhere.

China and Russia remain partners of convenience. Their tentative gestures towards a real strategic partnership are likely to continue to edge gradually forwards, and mutual support will continue on the international stage, but the reality is that this is never going to be a holistic and firm axis in international affairs. Instead it will remain a utilitarian partnership that will provide each other with a useful ally when facing down against perceived western interventionism.

 

Raffaello Pantucci is a Senior Research Fellow at the Royal United Services Institute (RUSI) in London

Horse To Water

Posted: March 17, 2013 in Caravan
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A new piece for the latest issue of Caravan magazine, an excellent Indian publication that I would highly recommend. The piece is an evolution of a blogpost that we did for the China in Central Asia site a while ago, and of course part of the bigger project on the subject that Alex and myself are working on with Sue Anne helping us document it visually.

Horse to Water

China’s first faltering steps towards building trade links with Uzbekistan

By RAFFAELLO PANTUCCI | 1 March 2013

SUE ANNE TAY
At the 2012 Uzbekistan Tashkent China Xinjiang Business and Trade Fair, an Uzbek visitor photographs a scale model of a Chinese cotton-picking machine.
On a flight from Beijing to Tashkent, the capital of Uzbekistan, Sue Anne Tay, the photographer with whom I visited Tashkent in May last year, ran into a group of businessmen from China’s Xinjiang region. They were on a government-sponsored trip to the “Uzbekistan Tashkent China Xinjiang Business and Trade Fair” in Tashkent, to help build relations between Xinjiang and the neighbouring countries as part of an economic strategy laid out by Chinese Premier Wen Jiabao. As he put it, China wants to “make Xinjiang a gateway for mutually beneficial cooperation between China and other Eurasian countries”.

Unfortunately for this group of businessmen, they had to take a circuitous route to get through this gate. Because of a lack of direct flights from Urumqi to Tashkent at the time, they had been forced to re-route rather inconveniently through Beijing—a five-hour flight south-east followed by a six-hour flight west. In retrospect, the businessmen’s long trip was emblematic of difficulties they later faced in Tashkent.

We ran into them the next evening at a market in a small park behind a statue of Amir Timur, the 14th-century Asian emperor, in the centre of Tashkent. In the cool evening, traders, painters and other craftsmen had gathered to ply their wares to tourists. Some of the Chinese businessmen were getting their portraits drawn, frustrating the Soviet-trained draftsmen by constantly shifting to smoke cigarettes.

One businessman was intrigued by stalls set up near the artists. A forthright man with a flattop haircut typical of many middle-aged Chinese traders who have little time for the niceties of fashion, he had come to Tashkent to sell his food products to local traders. He was a natural leader, with the robust confidence of someone from a tough frontier province, which made his fascination at the outdoor market with faux vintage Soviet cameras all the more odd. Turning them over in his hands, he remarked on how authentic they were; I couldn’t help but think they had been made, like so many things in this world, in China. Using broken English, gestures, and my assistance as a Chinese–English translator, he proudly bargained down the cost of two cameras to $15.

Two days later, at the expo, this gentleman and the other Chinese businessmen were the sellers, trying to win over Uzbek customers for their products. Sponsored by the Xinjiang government, the expo was part of the Chinese autonomous region’s strategy to develop its economic ties with Central Asia. The companies represented all had operations in Xinjiang, though quite a few were from other provinces in China, such as Guangdong. This was also part of the central government’s strategy: richer eastern provinces were to give financial and other aid to their poorer counterparts and participate in the strategy of turning Xinjiang into a Eurasian gateway.

The expo, held in an exhibition hall in the northwestern corner of Tashkent, was underwhelming—a smattering of stalls were arranged in the centre of a much larger, imposing space, giving visitors the impression of being in a hangar. Sellers displayed everything from high-end power generation machinery and cotton-picking machines to uniforms (with a focus on the oil industry and military outfits), Uighur clothing, spices, sauces, car engine parts and electronics. Some exhibitors had carefully considered where they were travelling to—at one of the clothing stalls a sign proudly boasted that they sold ‘Turky Style clothing’, the unfortunate typo belying an attempt to tap into the Turkish-Uzbek ethnic connection. Another stall had a Chinese woman dressed up in what was supposed to be traditional ethnic Uighur attire, wearing a hat with what looked like a feather duster attached to it, as she tried to sell pillows, rugs, slippers and other homemade wool products. Compounding the hall’s feeling of emptiness was the thin crowd.

At one of the few stalls that were attracting a crowd, a Guangdong merchant selling electronics told me that his company “had been asked to invest in Xinjiang by the Guangdong government”. Having attended the expo before, he had an obvious edge over others and had had the foresight to bring along a Uighur salesman from his Urumqi office. Given Uighur and Uzbek are mutually intelligible languages, both spoken by Turkic peoples, the Uighur salesman was able to talk to curious locals and pitch them products. He proudly announced that the products on offer were all made in Xinjiang by Uighur workers, and told visitors to disregard the Guangdong branding. As proof, he pointed to the picture on a computer tablet box: a Google Android figure donning a hat of a style common to both Uighurs and Uzbeks.

Most others vendors had failed to bring someone who could communicate with locals; instead, the men sat around waiting for proceedings to end. At a stand trying to woo Uzbek companies to buy plots inside a new mall outside Xinjiang’s Kashgar city, one of the men who had had his picture drawn the night before was sitting with two of his colleagues. Bored and with no business prospects, they fiddled with mobile phones and remarked on how they, too, had been encouraged to come to Tashkent by the Guangdong government. (Although the trip had government sponsorship, they resentfully noted, they had to pay a fee to join.) It was only upon arrival that they realised Uzbekistan was an underdeveloped and poor market that was unlikely to have many companies eager to set up operations in China. “The Uzbek market is too small and low-income compared to the vast opportunities we have in Xinjiang,” said Tan Chao, a manufacturer of uniforms.

Dealing in goods of a vastly different scale, those manning the machinery companies’ stalls were less surprised by the slow foot traffic. At one stand, Liu Zhao, a cheery representative from a Siemens subsidiary that builds power stations, showed off a large model of a power substation. It had cost them somewhere in the region of 10,000 RMB (Rs 84,000) to ship the ping-pong table-sized model to Tashkent, a fraction of the money the company would make if it sold one, but he did not seem very optimistic about securing a sale. While my Chinese failed me as he went through the technical specifics of the project, he smiled pleasantly as he told me that people in Uzbekistan didn’t need products like the ones his company was offering, because “these people are at a very different stage of development”.

Soon after lunch, a local school was dismissed and there was a sudden influx of Uzbek children into the hall. The stall that particularly appealed to them was the one run by a company that made cotton-picking machines, a subsidiary of Chinese state-owned military aviation firm AVIC, which was hoping to tap the Uzbek cotton market, one of the top five in the world. But even the recent news that Xinjiang had set a cotton producing record was not helping their sales with locals, who apparently preferred American equipment. This left the Chinese businessmen to fight off eager children drawn not out of some financial stake in cotton, but rather by a large toy automobile that the company had sent along. The harassed vendors shooed away the children as they eagerly tried to play with the car, which was roughly the size of a microwave oven. Neither vendor spoke any Russian or Uzbek, but they had learned enough to say something approximating “no sale” to the young and old Uzbeks who pestered them to buy the model.

In the mid-afternoon, Duan Weiming, one of the clothiers, made a modest sale of some Western suits and received a down payment of a few hundred thousand in Uzbek som. Striding around gleefully with huge bundles of cash, he proclaimed that, given its lack of value, he would have no choice but to blow it all while he was in Uzbekistan—the Uzbek som is officially worth 1,800 per US dollar, but unofficially trades at around 2,800. When asked what he planned to spend it on, he responded, “Dinner, drinks and karaoke.” By 4 pm that day, the group at the expo concluded that the day was basically a write-off and that it was time to go home. Rounding everyone up, they hopped on a tour bus and went back to their hotel, enervated by the prospect of sitting through another day in the empty auditorium.

A few days later, over lunch with an Uzbek businessman whose company had helped sponsor the expo, we got a sense of how successful the whole enterprise had been. “Not very, to be honest, but better than last time,” he said. “More Chinese are coming.” A former government employee, he had seen the economic possibilities of China’s booming, dynamic manufacturing capabilities and had chosen to end a flourishing civil service career at a young age to go into business, with a focus on China. Though at the forefront of Sino-Uzbek relations, he was not optimistic about Xinjiang as the gateway for Central Asia. The province made low quality products and traders were, in fact, simply agents from elsewhere in China, he told us. But he admitted that the greater problem was the difficult business environment in Uzbekistan in general. Awkward red tape, worthless currency conversions and a political environment that took very careful manoeuvering meant that it did not matter how many trade fairs were held. “You can take a horse to water,” he told us, “but you cannot make it drink.” And with that his phone rang, dragging him off to do more business with China.

Russia and China May Compete Economically in Central Asia, But Not Militarily

Posted: February 1, 2013 in Bug Pit
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A slightly odd post in that it is not an article, but rather an interview I did with the author of the Bug Pit blog on Eurasianet that focuses on all things ‘military and security in Eurasia’. In any case, it was inspired as a result of the piece I recently did with Lifan for Open Democracy Russia, a piece that has been translated in Russian already and is apparently going to go up in Chinese as well. As ever, more on this topic more broadly to come.

Russia and China May Compete Economically in Central Asia, But Not Militarily

February 1, 2013 – 1:32pm, by Joshua Kucera 

Last week, Open Democracy Russia ran a very good series of articles on relations between Russia and China. One was especially interesting for EurasiaNet readers, about choices that the Central Asian states are having to make between integration with Russia or China. The piece concentrates on the economic sphere, in which, as the authors convincingly argue, integration with the two big superpowers is becoming mutually exclusive.

Of course, Russia and China also have their respective Central Asia integration schemes in the security sphere: China has the Shanghai Cooperation Organization, and Russia the Collective Security Treaty Organization. So I asked one of the piece’s authors, Raffaello Pantucci, an expert on Chinese-Central Asian relations, about whether there was going to be a similar reckoning in that sphere. Short answer: no. His more detailed thoughts:

The Bug Pit: Is there a similar looming choice to make for the Central Asian states, whether they prioritize ties with the SCO (dominated by China) or CSTO (dominated by Russia)?

Raffaello Pantucci: There is little similar looming choice with regards the SCO and the CSTO. In part this is since the SCO remains a relatively infant security entity, while the CSTO has the advantage of having lots of interoperable forces and equipment. Also, China has no interest in stirring up a security competition having a foreign and security policy that does its utmost to not seem threatening. Having said all of this, it is interesting to see how the SCO has developed as a security actor – it is maybe not as active as some initially thought it would be, but the Chinese are certainly taking advantage of the opportunities it offers to test out equipment and strategy. The ‘Peace Mission’ exercises they regularly undertake are ones that the Chinese are increasingly playing an active role in directing.

TBP: Why has the SCO not turned out to be as active a military organization as China seems to have originally expected?

RP: I’m not entirely sure that was always the focus from a Chinese perspective. The SCO was born out of the ‘Shanghai Five’ – a grouping that was established in the wake of the collapse of the Soviet Union to help delineate and demilitarize China’s borders with the newly former Soviet states Kazakhstan, Kyrgyzstan, Tajikistan and Russia. This grouping proved successful and it evolved into the SCO in 2001 with Uzbekistan’s accession. In its founding declaration, the members emphasize their ‘non-alignment, not targeting to the third country or region, and opening to the outside world.’ Instead, they focus on countering the domestic threat of three evils ‘terrorism, separatism and religious extremism’ – a very Chinese phrasing. Terrorism is quite a useful unifying rallying subject that all of these nations agree on, all of whom had (and for the most part have) active networks of some sort operating in their territory.

In fact, the Chinese have always seemed more interested in the economic aspects of the SCO, and analysts will say as much in conversation. Their emphasis has repeatedly been on developing the SCO as an economic actor, something they hope will help them strengthen their economic hand and links in the region. Looking at many of the recent economic moves and discussions within the organization – talk of an SCO FTA, an SCO Development Bank, the large loan vehicles through the organization – the impetus is all coming from Beijing.

TBP: Do you think that Central Asian governments would like the SCO to be more active? Is there any desire for China to balance Russia in the security sphere?

RP: When Alex and me were travelling in Kyrgyzstan, one of the more amusing stories we heard was that the roads the Chinese were building were being designed to carry the weight of a Chinese tank. This apocryphal story may be founded on little more than speculation, but it captures quite effectively a concern that bubbles barely beneath the surface in Central Asia. People in the small and under-populated Central Asian states are worried about being neighbours to the Chinese behemoth. Tracked out, it translates into little desire for China to step in as the main security guarantor. And in practice, the Chinese have not done much in direct security terms. Look back to the troubles in Kyrgyzstan in 2010 and there was no evidence of China stepping in – it was rather Russia that ended up standing up as the regional supporter.

A final point to make is that China has little desire to become the main security guarantor in the region. It cuts right against the national ethos of non-interference. Elsewhere around the world it has slowly found itself being dragged into such nettlesome security problems and it is still working out how to address them. Where possible, they would like to avoid this in Central Asia too.

TBP: What do Central Asian leaders expect from China and the SCO long-term? Will they eventually take a larger role in security?

RP: I don’t think the Central Asian leaders see the SCO as being on a trajectory towards a greater security role. The impression is that they see it as a useful way to engage more generally with China and manage Chinese regional goals. The fact that the other main regional security player Uzbekistan has been so hesitant to engage with the SCO as a security actor highlights the distance the Chinese still have to go to turn it into a regional security player that everyone will buy into.

The interesting long-term question is what exactly will the Chinese do if their economic interests are directly threatened by security problems. Will they simply write them off? Or rely on local actors to protect them? Or send their own forces in, either under a Chinese flag or the SCO? The answer at this point is unclear, and this is a question that Chinese policymakers are still struggling with.

China and Central Asia in 2013

Posted: January 20, 2013 in China Brief
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A kick-off to the new year with Alex on China-Central Asia with an overview for Jamestown Foundations’ China Brief. This is part of our ongoing project looking at China in Central Asia about which we have a number of large publications coming this year.

China and Central Asia in 2013

Publication: China Brief Volume: 13 Issue: 2
January 18, 2013 05:10 PM Age: 1 days

China’s Gateway to Central Asia, Khorgos, picture from here

In the last two years, China has emerged as the most consequential outside actor in Central Asia. As we have described in other writings, China’s ascension to this role has been largely inadvertent [1]. It has more to do with the region’s contemporary circumstances and China’s overall economic momentum than a concerted effort emanating from the Zhongnanhai. The implications for United States and NATO policy are nevertheless profound. Not only have the geopolitics of Eurasia shifted in ways little understood in Washington and Brussels, but the socio-political and physical undergirding of the post-Soviet space from Aktobe to Kandahar is being transformed.

Official Chinese policy in Central Asia is quiet and cautious, focused on developing the region as an economic partner with its western province Xinjiang whilst also looking beyond at what China characterizes as the “Eurasian Land Bridge…connecting east Asia and west Europe” (Xinhua, September 4, 2012). Chinese state-owned enterprises (SOEs) are active throughout the region on major infrastructure projects, but it is not clear how much they are being directed as part of some grand strategy as opposed to focusing on obvious profitable opportunities. The Shanghai Cooperation Organization (SCO), the main multilateral vehicle for Chinese regional efforts and reassuring engagement is a powerfully symbolic, but institutionally empty actor. Many smaller Chinese actors—ranging from shuttle traders to small-time entrepreneurs to schoolteachers and students posted to Confucius Institutes throughout the region—are the gradual vanguard of possible long-term Chinese investment and influence.

China’s engagement in Afghanistan is growing as U.S. and Western involvement wanes. Whether Chinese companies and diplomats remain in the event of a surge in violence and country-wide destabilization is a question that will be answered post-2014. For the moment, however, Chinese SOEs Metallurgic Corporation of China (MCC) and Jiangxi Copper are invested heavily in one of the world’s biggest copper mines at Mes Aynak (just southeast of Kabul) while China’s energy giant China National Petroleum Corporation (CNPC) is pumping oil in Afghanistan’s northern Amu Darya Basin. Currently, the firm is trucking the oil across the border to refineries in Turkmenistan, although plans are in place to develop a refinery on the Afghan side of the border. Plans also are moving forward for the construction of another string of the Central Asia-China pipeline from Turkmenistan to Xinjiang to pass through northern Afghanistan (Xinhua, June 6, 2012). CNPC and its subsidiaries already have cut deals with local authorities to ensure security in their operating areas. Should Afghanistan once again be split between a Pashtun south and a Tajik and Uzbek north, Chinese companies may have the relationships to continue operations under the protection of a new Northern Alliance. It seems that plans for the natural gas pipeline include distribution to local communities in northern Afghanistan [2].

Next door, at the source of the gas in Turkmenistan, CNPC and the Chinese government have carved out for themselves an envious position as one of the most influential outside players in Ashgabat, at least when talking in energy terms. The Central Asia-China pipeline, one of the most impressive feats in energy infrastructure construction, was completed in 18 months and now is slated to bring 60 billion cubic meters (bcm) of natural gas per year to China in the coming decades (Platts, August 31, 2011). These immense volumes—four times that planned for the Trans-Anatolian pipeline from the Caspian to Southeastern Europe—may require up to three different routes for the project’s separate strings. This route planned to traverse northern Afghanistan will offer an alternative to the more costly route through Uzbekistan and Kazakhstan [3].

Turkmenistan’s main energy and foreign policy priority at the moment is the realization of the Turkmenistan–Afghanistan–Pakistan–India (TAPI) pipeline southeast across Afghanistan to markets in Pakistan and India. During the project’s recent international road show, CNPC and Sinopec reportedly expressed interest in the project, even if it was unclear in what capacity [4]. For the sake of diversity, Turkmenistan’s leadership would almost certainly prefer non-Chinese companies investing in TAPI. During the Petrotech conference in New Delhi in October 2012, the acting Minister of Oil and Gas Industry and Mineral Resources Kakageldy Abdullaev made overtures to Indian firms to come and invest in Turkmenistan (Business Standard, November 27, 2012).

Further downstream in Uzbekistan, the government started to pump its own gas down the pipeline traversing its territory in September. The move was part of a 2010 agreement signed between the two countries for Uzbekneftegas to send some 10 bcm per year to China (Platts, September 24, 2012). In historically energy-poor Tajikistan, CNPC partnered with Total to purchase a share each of Tethys find in Bokhtar, at the eastern end of the Amu Darya Basin (Bloomberg, December 21, 2012). In Kyrgyzstan, a Chinese firm also has agreed to build a refinery in the Chui Oblast whilst acting Kyrgyz Economy Minister Temir Sariyev reported “China is interested in the construction of Kazakhstan-Kyrgyzstan-China oil pipeline and a gas pipeline from Turkmenistan via the south of Kyrgyzstan” (Azer News, December 4, 2012; Central Asia Online, April 27, 2012).

Beijing and Chinese companies have long cultivated a close partnership with Kazakhstan as a regional power and source of valuable resources (“Sino-Kazakh Ties on a Roll,” China Brief, January 18). While Western companies suffer in their attempts to bring offshore projects online in Kazakhstan’s Caspian waters, China steadily has become the largest outside energy investor onshore. China’s sovereign wealth fund China Investment Corporation (CIC) is set to buy into Kazakhoil Aktobe, Kazakhturkmunai and Mangistau Investments—a deal which according to some estimates will give Chinese companies control over 40 percent of Kazakhstan’s oil production (TengriNews, January 8). The Kazakhstan-China oil pipeline—completed in a number of stages throughout the last decade—is slated to operate at its full capacity of 20 million tons per year (tpy) by 2014 (EnergyGlobal, November 9, 2012).

Nevertheless, this rosy picture has another side. According to analysts spoken to in Astana, the fields to which China has access are older ones that have been exploited for years. Furthermore, local Kazakhs with whom the authors spoke do not have particularly positive perspectives on their Chinese employers. At a grander scale, the slow progress with the Kazakh side of the free trade zone at Khorgos on the border between the two countries just northeast of Almaty is further evidence of these tensions. Analysts and officials asked either side of the border have vague responses about delays with the site. Currently, the Chinese side teams with new markets, corporate offices, hotels and customs buildings, but the Kazakhstani side still has some way to go in bringing its infrastructure on par with its neighbor [5]. Khorgos is the crossing point from China into Central Asia for three developments: a Central Asia-China pipeline from Turkmenistan; a new highway that is under construction linking Almaty, Astana, the Caspian shore and Russia; and a second train connection between China and Kazakhstan that opened last month (Xinhua, December 22, 2012). A key component of China’s so-called “New Eurasian Land Bridge,” the Khorgos passage is one of the main arteries in the chain connecting China’s eastern coast with Western Europe through Russia and the Black Sea-Caspian region.

These difficulties are even more evident in Kyrgyzstan where there have been a spate of clashes between locals and Chinese workers. In October, reports emerged from a gold mine managed by the Zijin Mining group in Taldy-Bulak that locals had threatened to burn down a company office after the company allegedly was killed a local horse (RIA Novosti, October 22, 2012). Then, in January, a fracas broke out between Chinese and local workers after Chinese workers allegedly caught a local stealing. In the ensuing clash some 100 people were involved and 18 Chinese workers were injured, two seriously (Xinhua, January 11). Whilst Kyrgyzstan is a notoriously difficult environment for foreign investors with many other nation’s countries also experiencing problems, China seemed to respond with particular attention this time around. In response to the first incident, the head of the Chinese Chamber of Commerce in Kyrgzystan, Li Deming, wrote an op-ed stating “Kyrgyzstan still a mine field for investors” (Global Times, October 28, 2012). In December, during an SCO Prime Ministers’ Meeting in Bishkek, Premier Wen Jiabao met with his counterpart and reinforced this message encouraging “Chinese enterprises to expand investment in Kyrgyzstan” (Xinhua, December 4, 2012).

A much larger, potentially strategic, threat to Chinese investments in Central Asia, however, lies in Russian President Vladimir Putin’s proposed Eurasian Union. Most recently announced in October 2011, when President Putin laid out his plan in an article in the Izvestia newspaper, the notion has its roots in the Customs Union that was first proposed in the 1990s by President Nazarbayev of Kazakhstan. While slow to accept the idea, President Putin now has embraced the idea wholeheartedly to create a regional organization that would coordinate “economic and currency policy” between the countries of the former Soviet Union (Reuters, October 3, 2011). Currently, the Union is made up of Kazakhstan, Belarus and Russia, but, in Central Asia, both Tajikistan and Kyrgyzstan have expressed an interest in joining. What is not entirely clear is whether this is something that is taking place as a result of Russian pressure or whether this is a choice. In his annual statement to the Duma in December 2012, President Putin spoke of tightening requirements for the citizens of the Commonwealth of Independent States (CIS) to enter Russia with passports rather than simply ID cards as is the case at the moment. He left open the caveat, however, that free access would continue to be allowed for citizens of countries members of the Union (RIA Novosti, December 12, 2012). The potential implication to remittance-reliant Kyrgyzstan or Tajikistan is clear, creating an instant obstacle for the masses of young men from those countries who work in Moscow to send money back home to their families.

The issue for China is what impact this will have on China’s trade relationship with these countries. In particular, Kyrgyzstan is one of the key routes for Chinese goods into the region and for onward re-export—Ambassador Wang Kaiwen, China’s man in Bishkek, places the figure at $5 billion per annum. In commenting, Ambassador Wang also placed Kyrgyzstan’s trade with China in a broader context. As he put it, “trade between China and Kyrgyzstan is $5 billion, and China’s foreign trade is $3 trillion…so this [joining the union] is not a big problem” (Knews.kg, November 30, 2012). The point is that this is a relatively limited problem for China, but the repercussions in Bishkek are uncertain and potentially more substantial.

In many ways, this uncertainty places China’s 2013 in Central Asia in its appropriate context. It is increasingly clear that China is the most consequential regional actor that is making all the right moves to consolidate its interests. The regional impact and the reactions of both the Central Asian states and Russia to this growing preponderance remain to be seen. For Beijing, the relationship is an important one if they are to effectively develop Xinjiang, but their growing perceived dominance is something that is met with ambivalence regionally where nations like China’s money, but worry about its dominance. The dragon has clearly risen in Central Asia, but how the region will decide to respond still remains unclear.

Notes:

  1. Raffaello Pantucci and Alexandros Petersen, “China’s Inadvertent Empire”, The National Interest, October 24, 2012,chinaincentralasia.com/2012/10/24/chinas-inadvertent-empire/
  2. Author interviews, November 2012
  3. Author interviews, October 2012
  4. Author interviews in Ashgabat, September 2012
  5. Author observations at Khorgos, April 2012; and interview January 2013

Europe and China Cooperation in Central Asia

Posted: December 19, 2012 in Oriental Morning Post
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Another op-ed in the Chinese press, this time in 中文 for the Oriental Morning Post (东方早报). Looks at the question of Chinese-European cooperation on Central Asia. More detail on this topic coming soon. As usual, Chinese on top, English submission below.

中欧在中亚的合作前景

吉尔吉斯斯坦首都比什凯克最近有点忙。就在短短几周里，欧盟与中亚部长级会议和上海合作组织总理会议先后在此召开。虽然两者并无联系，但两大高层会议在吉尔吉斯斯坦召开不但显示了中亚的重要性，也体现了这一区域作为中欧之间桥梁的潜在作用。

目前中国在中亚是一支崛起力量。与日俱增的投资、对于天然资源的兴趣和区域制度的发展都在让这一区域重新转向中国。最近上合组织总理会议上，温家宝总理鼓励中亚各国充分利用中国提供的100亿美元贷款来建设这一地区的基础设施，即充分体现了这点。中国希望这一区域的经济能够腾飞，而更为重要的是能同时带动新疆的发展。

欧盟的部长级会议并没有这样远大的目标，而是再次强调了发展中亚对于欧盟的重要性。除土库曼斯坦首都阿什哈巴德之外，欧盟外长凯瑟琳·阿什顿访问了其他各国首都，并且利用这次部长会议机会强调“可能进一步发展我们之间的能源、贸易和经济关系”。欧洲在中亚的投资目前非常有限，这主要是因为缺乏机会，投资环境也非常不佳。但是毫无疑问，欧盟具有发展双方联系的意图和希望。

2007年，欧盟公布了中亚战略，内容范围非常雄心勃勃，意图为整个欧洲在中亚打造一份新计划。这一战略以欧盟的“欧洲伙伴政策”为表述，旨在增强欧盟对中亚的重心。在德国担任欧盟轮值主席国期间，作为历史上长期对中亚充满兴趣的国家，一手推动了这一战略。欧洲非常希望这能发展出一条更为实在的路径，通向这些长期来被他们忽略的中亚国家。

然而事与愿违，距这份战略公布至今已有五年时间，但并未见到任何实质性的发展。欧盟在中亚投入了大量资源，这非常显而易见，如果你驾车在中亚地区，会看到学校和开发项目工地上挂着欧盟的旗帜。除此之外，欧盟也通过一项叫做“中亚边界管理”的合作来帮助中亚各国进行边界控制，为落后的边境管理提供现代化训练和管理办法。但是，欧洲在此留下的足迹依然停留在非常表面的层次，绝大多数中亚国家并不会把欧盟当作这一区域的主要角色。如纳布科天然气输气管工程这样的大规模能源项目依然在无穷无尽的讨论谈判之中。

相比之下，中国在中亚的力量迅速崛起。过去一年里每个中亚国家我至少都去了一次以上，而在每个国家的官员、民众和分析家都告诉我中国是那里的新力量。有趣的是，虽然他们看到的是中国为这一区域带来的变化，但他们都宣称更想成为欧洲国家。欧盟模式许诺的稳定繁荣和国家发展是他们都希望能逐步达成的前景，而且他们强调自己愿意同欧洲做生意。照此看来，欧盟在中亚赢得了软权力。

但是，欧盟和中国在中亚取得的成就也突出了中欧间通过中亚进行结盟的潜在可能。中国对这一区域产生兴趣的本质是发展新疆战略。今年早些时候在乌鲁木齐举办的中国亚欧博览会上，温家宝总理说计划要把新疆发展成“亚欧的门户”。其想法是建立通过中亚、最终到达欧洲的联系。这将为新疆带来经济繁荣和发展，产生如当年“丝绸之路”那样将欧洲和亚洲相连的效应。

这对于各种有关方都是个非常具有吸引力的计划。这不仅仅将帮助达成中国区域发展的目标，还能为中亚带去繁荣，以及增强中国和欧洲之间直接贸易联系，这一切都将对经济发展产生重要作用。

当然，需要克服的障碍也不少。尽管中亚人民经常强调中国是这一区域的崛起大国，但他们也经常告诉我中国控制带来所谓的危险。吉尔吉斯斯坦和哈萨克斯坦的人们说中国公司给工人待遇过低，不够公平，塔吉克斯坦人则一直对中国男人娶走了他们的女人表示不满。显然，中国在中亚的软实力建设还有待提高。但是，中国公司可以向欧洲同仁学习一件事情：雇佣当地工人，为他们提供好的工作条件，改善他们的社会，这些都是中国在中非投资时能够用来改善自己形象的方法。同欧洲公司进行接触也许可以帮助中国投资者学习一下他们使用的战略。

这一切都将是个长期游戏。欧洲对中亚重燃兴趣，但这需要有更具体的行动跟进。但是如果中国愿意表达同欧洲作为伙伴在中亚共同发展的兴趣，那么这一定会引来欧洲更大的关注。虽然讨论“新丝绸之路”未免有些过时，但通过中亚铺开中欧之间的道路将会最终带来两方战略合作的果实。

(李鸣燕 译)

Europe in Central Asia

Bishkek, Kyrgyzstan has had a busy few weeks. In the space of a few weeks it has hosted a EU-Central Asia Ministerial meeting and then the Shanghai Cooperation Organization (SCO) Prime Minister’s Summit. Whilst unconnected, the two high level meetings in Kyrgyzstan show Central Asia’s importance, but also the potential for the region to act as a link between China and Europe.

Currently, China is the rising power in Central Asia. Its growing investment, appetite for natural resources and development of regional institutions are reorienting the region towards China. The recent SCO Prime Ministerial Summit in Bishkek highlighted all of this as Premier Wen Jiabao encouraged Central Asian powers to take advantage of the $10 billion loan that China was extending through the SCO to encourage regional infrastructure investment. The hope for China is that the region would develop economically, and more importantly, that it would develop in a way that would help encourage development in Xinjiang.

Europe’s Ministerial meeting was far less ambitious, but highlighted once again the importance that the EU attaches to developing Central Asia. Visiting all of the regional capitals except Ashgabat, Turkmenistan, European foreign minister Catherine Ashton used the opportunity of the Ministerial meeting in Bishkek to emphasize the ‘potential to further develop our energy, trade and economic relations.’ European investment in Central Asia is currently quite limited, trapped between a lack of opportunities and a very challenging investment climate. But clearly the hope and intention is there to try to develop this connection.

Back in 2007, the EU launched a strategy for Central Asia. The paper was ambitious in its scope, and aimed to lay out a new plan for Europe to engage with Central Asia. Phrased as being an expansion of the EU’s ‘European Neighbourhood Policy’ the strategy aimed to increase and target’s the EU’s focus towards Central Asia. Nurtured and launched under a German Presidency of the EU – a member state that has always had a keen historical interest in the region – there was a great hope that it might finally help develop a more practical approach towards a set of states the EU had long overlooked.

Unfortunately, in the five years since the strategy was launched, very little has tangibly been achieved. The EU has spent considerable resources in Central Asia – something that is visible on the ground as you drive around with European Union flags on schools and development projects around the region. It has also helped try to develop border controls across the region through a special Border’s Management Program that has tried to bring modern training and methods to Central Asia’s underdeveloped border guards. But its regional footprint is still very light, with most Central Asian countries not considering the EU one of the region’s major players. Large-scale energy projects like the Nabucco pipeline have yet to get going and are trapped in endless discussion rounds.

In contrast, they increasingly see China as a major player. Over the past year, I have been to all of the Central Asian countries at least once. And in each one, officials, citizens and analysts all told me that China was the rising power in the region. What is interesting is that while they all see the growing consequence of China in the region, they all aspire to be like European states. The model offered by the EU of stable prosperity and a developed state is something that they would all like to achieve eventually and they were eager to emphasize that they would like to do business with Europe. The EU, it seems, is winning the soft power conversation on the ground in Central Asia.

But these parallel achievements by the EU and China in the region highlight the potential for a great alliance between the EU and China through Central Asia. China’s interest in the region is in essence an extension of its strategy to develop Xinjiang. The underlying plan laid out during the China Eurasia Expo is to develop Xinjiang into becoming a ‘gateway for Eurasia’ as Premier Wen Jiabao put it in Urumqi earlier this year. The idea is to develop links through Central Asia and ultimately through to Europe. This would bring prosperity and economic development to a part of the country that has thus far suffered from underinvestment and under-development. It would also finally have the effect of rebuilding the Silk Road that used to bring Europe and Asia together.

This is a plan that has great appeal to all involved. It would not only help China’s goals for regional development, but also help bring prosperity to Central Asia, and finally, help improve direct trade links between China and Europe. All of which would have the net effect of improving prosperity.

Of course, there are a number of obstacles to overcome. While people in Central Asia were often eager to highlight that China was the rising power regionally, they were equally eager to tell me stories of the dangers of Chinese domination. People in Kyrgyzstan and Kazakhstan told stories of Chinese companies paying badly and treating workers unfairly, while Tajiks would repeatedly talk of Chinese men marrying their women. China has a great deal of soft power work to do in the region. But here is something that Chinese firms regionally could learn from their European counterparts. Hiring local staff, offering them good working conditions and establishing ways to help improve the societies in which they are working are methods that the Chinese investors in Central Asia might be able to help improve their image. Making contact with European companies regionally might be a way to try to learn some strategies they have deployed.

All of this is a very long-term game. Europe’s renewed interest in Central Asia needs to be followed up with more concerted action. But an expression of interest from China that Europe is a partner with which China would like to work with in helping regional development in Central Asia is something that could help spur greater European attention on the region. While it is cliché to talk about the New Silk Road, repaving the link between China and Europe through Central Asia could help finally bring the EU-China strategic partnership to fruition.

Local needs matter more than imaginary struggles in Central Asia

Posted: December 18, 2012 in Global Times
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Another op-ed on Central Asia for the Global Times, one of China’s English dailies. This time focused on looking beyond Great Games in Central Asia.

Local needs matter more than imaginary struggles in Central Asia

Global Times | 2012-12-17 19:25:05

By Raffaello Pantucci

Last month, Russia was reportedly ready to provide weapons worth $1.1 billion to Kyrgyzstan and $200 million to Tajikistan along with a further $200 million in petroleum products. In early June, China offered $10 billion through the Shanghai Cooperation Organization (SCO) to Central Asia. India has been focusing on developing a strategic partnership with Tajikistan since September, while the US always develops a stronger relationship with Uzbekistan.

There is a sense that we are returning to the “Great Game” in Central Asia. But this focus on abstract theories misses hard realities on the ground. Outside powers invest in Central Asia to advance their individual national interests, not out of a strategy directed against other powers.

Russia has long been a primary supplier of military equipment to Kyrgyzstan and Tajikistan: The money that Russia is providing will buy Russian arms and will help bolster an industry at home. And Kyrgyzstan and Tajikistan have long been the weak regional security links, providing a path into the Commonwealth of Independent States directly from Afghanistan. Drugs from Afghanistan can flow along the porous Tajik-Afghan border and from there into Kyrgyzstan, Central Asia and ultimately Russia.

Similarly, were the security situation in neighboring Afghanistan to deteriorate, then other threats could use this path. This is why Russia is willing to spend money to help strengthen the Kyrgyz and Tajik militaries. Certainly, a desire to keep American bases out of its backyard plays into the decision, but direct security considerations are the priority.

China has taken a different approach to Central Asia, one that is focused on economic and trade relations. For China, the main focus is to develop the region’s links with the Xinjiang Uyghur Autonomous Region to help the underdeveloped Chinese region grow and become a hub for Eurasian trade. The result is a strategy focused on building roads and rail links, infrastructure to support local development, as well as investing in exploiting the region’s rich natural resources.

While China has expressed concern in security threats emanating from the region, it remains a timid security power in Central Asia with some participation at SCO exercises, bilateral interaction about specific security concerns and training missions in Afghanistan.

For the US, the major interest at the moment is developing a stronger relationship with Uzbekistan, something that is largely built around the 2014 exit strategy from Afghanistan. The US and Europe have little direct interest in Central Asia beyond a useful route in and out of Afghanistan.

India, Iran, Japan, South Korea, Pakistan and Turkey all express an interest in the region, but have less to work with. Each one sees Central Asia through a slightly different lens, but all are ultimately interested in trying to strengthen their economic relations with the region.

And all of this discussion of outside powers forgets that Central Asians too have a seat at this table. As relatively poor countries that are still in a development phase, they frankly welcome the outside attention bringing them investment that they desperately need.

This is particularly true of Kyrgyzstan and Tajikistan, which unlike their other Central Asian partners lack abundant natural resources.

So when Russia comes and offers them substantial assistance, they are going to take it, in much the same way that regional leaders signaled their support for China’s policy toward the region when they attended September’s China-Eurasia Expo in Urumqi. Their hope was to be seen supporting China’s push to develop Xinjiang into the gateway for Eurasia and to see how they could also do well out of this approach.

Focusing single mindedly on the struggle between great powers in Central Asia often misses important details. Doubtless, regional geostrategy plays to some degree into Moscow’s considerations when providing weapons to Kyrgyzstan and Tajikistan, but there are equally immediate security concerns at play.

China’s rising profile in the region may make it look like the increasingly dominant power, but this is something that is taking place as a result of an intensive focus from China on the “develop the west” strategy.

The “Great Game” in Central Asia should be left in the past as we focus on the very real problems that exist in the region.

The author is a visiting scholar at the Shanghai Academy of Social Sciences. opinion@globaltimes.com.cn

China rapidly becoming primary player in post-war Central Asia

Posted: December 5, 2012 in Global Times
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An op-ed for China’s Global Times today, this one with Alex as part of our bigger project looking at China in Central Asia. The article was actually a response to Pan Zhiping’s piece in the newspaper which took cause with some of our conclusions in our longer National Interest piece.

China rapidly becoming primary player in post-war Central Asia

Global Times | December 04, 2012 20:10

Illustration: Liu Rui

Illustration: Liu Rui from here

By Raffaello Pantucci and Alexandros Petersen

China is on its way to becoming the most consequential actor in Central Asia. This isn’t a critical or a negative statement, but rather a reflection of a reality on the ground.

The heavy investments in Central Asian infrastructure and natural resources, the push to develop the Xinjiang Uyghur Autonomous Region, and China’s focus on developing the Shanghai Cooperation Organization into an economic player are slowly reorienting Central Asia toward China. None of this means that China is aiming to become a regional hegemon, but unless it is willing to write off considerable regional investment, it is going to find itself needing to engage in regional affairs in a more focused manner.

And these actions are likely to be interpreted regionally as hegemonic. A potentially very prosperous corner of the world, Central Asia, is in an early stage of development that could easily be pushed by instability in a wrong direction. China needs to prepare herself to step in and help resolve matters.

First among the potential storm clouds on the horizon is 2014 and the Western withdrawal from Afghanistan. The forces left behind will have a very limited and focused mandate. Their duty will be to protect diplomatic and aid communities and to focus on ensuring that groups like Al Qaeda cannot reform in Afghanistan and pose a threat to US or European interests. Their focus will not be on what the Taliban are doing in general or the instability that they might foster regionally. After over a decade of war, the Western public is tired of Afghanistan and has little appetite for war.

This casts a question over what is going to happen in Afghanistan post-2014, right on China’s border. China played a limited role in Afghanistan in the early years after the US invasion, but it has now invested considerable resources into the country that it will have to protect. It is also likely that instability in Afghanistan will have a knock-on effect into Central Asia, where China has even more investments. And all of this will end up having some sort of impact directly on Xinjiang, China’s long underdeveloped border region.

The US is in a very different position. It has security concerns from Central Asia and Afghanistan, but these will be addressed by the forces left behind. Some US companies have investments in Central Asia, but these are nowhere near as crucial as those made by Chinese firms.

As former national security adviser Zbigniew Brzezinski put it, the US is “too distant to be dominant in this part of Eurasia.” The reality is that the Pamir mountains are too high and the steppe too far away for the US to focus on the region.

China’s ascendant investments in Central Asia are something that also stands in contrast to Russia’s declining ones. This is a more complex picture, as Russia, for many of the same reasons as China, has a clear strategic interest in Central Asia. But it is no longer the regional hegemon that it once was.

Russia’s power has been diluted by growing Chinese interest and Western attention paid to the region as a strategic launching pad into Afghanistan.

On the one hand, Russia realizes that it has to do something about security post-2014 and so is investing military loans to Kyrgyzstan and Tajikistan. But at the same time, its regional security organization, the Collective Security Treaty Organization, has lost one of its most important members, Uzbekistan.

Even more significant in some ways is the recent statement by Russian energy giant Gazprom that it needed to evaluate its position in Central Asia as it had noticed that the region’s producers were “reorienting themselves toward China.”

And while it is clear that Russia still has influence regionally, it is not Russian firms that are putting up buildings, laying down roads and rail or investing in rebuilding the underdeveloped region.

Russia may still exert considerable diplomatic influence and soft power in the region, but it is clearly not investing a huge amount in the region.

Instead, seen from the ground, the scope and range of Chinese investments is clear, and China is increasingly shaping itself to be the most consequential power in the region.

This reality may be unpalatable to China, but it is something that it cannot avoid.

China is increasingly reshaping Central Asia to becoming its backyard rather than Russia’s and this will bring with it some regional responsibilities that China has not yet figured out how to address. China needs to formulate a proper strategy for Central Asia.

Raffaello Pantucci is a visiting scholar at the Shanghai Academy of Social Sciences and Alexandros Petersen is the author of The World Island: Eurasian Geopolitics and the Fate of the West (Praeger, 2011).opinion@globaltimes.com.cn

China in Afghanistan, a tale of two mines

Posted: December 4, 2012 in Financial Times
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A post for Financial Times Beyond Brics on China and Afghanistan, focusing in particular on the experiences of the two biggest Chinese investors there. For more on my work on China in Central Asia more broadly, please be sure to check out mine and Alex’s project site: http://www.chinaincentralasia.com. Thanks to Andrew for reading an early draft of this.

Guest post: China in Afghanistan, a tale of two mines

December 4, 2012 4:00 am by beyondbrics
By Raffaello Pantucci

Facing a heavy domestic agenda and growing foreign policy tensions in the seas to the east, it is unlikely that Afghanistan is going to be a major priority for incoming Chinese leader Xi Jinping.

Unfortunately, this does not mean the problems are going away. The contrasting fates of China’s large extractive projects in Afghanistan highlight a number of growing issues for the new administration in Beijing as the 2014 deadline for American withdrawal imposed by President Obama looms ever closer.

Up in the north, CNPC has started to extract oil from the ground in its project in the Amu Darya basin, while southeast of Kabul at Mes Aynak, the giant copper mine run by Metallurgical Corporation of China (MCC) and Jiangxi Copper has been put on hold while the Chinese firms reassess their ambitious plans for a project described by President Karzai as ‘one of the most important economic projects in Afghan history’.

This state of affairs is quite a contrast to earlier this year, when it emerged that CNPC was facing difficulties on the ground with reports of Chinese engineers being harrassed on site. This was despite the generous terms of the deal for Afghanistan: CNPC is paying 15 per cent royalty on oil, a 20 per cent rate of corporate tax and will give 50-70 per cent of its profits to the government, on top of building a new refinery. CNPC went into the deal with the Karzai family-linked Watan Group as local partner. All in all a very careful approach to investing in a risky country.

So the difficulties at the site and the staff harassment were a setback. In response, President Karzai’s Beijing visit in June included talks with CNPC, and also opened up discussions about developing a new pipeline to get CNPC’s gas out of Turkmenistan. CNPC is keen to develop another route to get gas out of South Yolatan, one of the world’s largest fields, possibly through northern Afghanistan and Tajikistan.

With the news that the field in Afghanistan is now producing, it looks like CNPC has cemented its position as a key investor in Afghanistan. The 25-year contract the company has signed has it extracting 1.5m barrels per year, and it is currently looking to extract 1,950 per day.

In contrast, the news from south east Afghanistan at Mes Aynak in Logar province is not nearly as positive. There, China Metallurgical Group Corporation (MCC) and Jiangxi Copper, the two Chinese state owned enterprises, were recently revealed to have withdrawn some of their operatives from the site. The reason given was security concerns with engineers reportedly spooked by a series of rocket attacks. Two weeks after these stories surfaced in the press, MCC president Shen Heting visited Kabul, meeting with Karzai and Minister of Mines Wahidullah Shahrani. In official read-outs from the meetings, security concerns were high on the agenda.

The picture may, however, be more complex than this. The Chinese companies have been accused of dragging their feet on the project, concerned about what is going to happen to the country after America officially withdraws in 2014. The important Buddist acheological remains at Mes Aynak are the subject of several campaigns, with researchers demanding more time to preserve the remains before mining commences. And the long-awaited rail line seems to be ever more distant.

Compensation for locals displaced by the site and the various ancillary projects alongside it has been slow to materialise. MCC also complained of Afghan partners being corrupt and inefficient, as documented in a US diplomatic cable revealed by Wikileaks.

All in all, it seems as though the Chinese companies were questioning their initial decision to invest. Looking back at the initial bids, it is clear that the Chinese bid high: offering a total investment $2.9bn (a figure that has been reported in fact as being as high as $4bn), $0.5bn more than the next offer. There were generous provisions for the Afghan government: a maximum royalty of 19.5 per cent and a bonus of $808m to the government as a signing bonus (the next closest was $243m).

MCC is concerned, along with others in the mining sector, about new legislation concerning mineral exploitation that is to be ratified by the Afghan government. Beyond Afghanistan, MCC has had other problems – its stock price in Shanghai has fallen from a high of over Rmb6 in 2009 to around Rmb2, and it recorded a net loss of $29m in the first half of 2012.

The contrast with CNPC’s experience in Amu Darya is stark. While CNPC is now producing from its site, the earliest possible production date now reported for Aynak is 2016. Clearly geography is something that has played in CNPC’s favor: northern Afghanistan is a relatively safe area compared to Logar province where Aynak lies.

The bigger question for China’s incoming leaders is how they are going to address Afghanistan once the US and Nato withdraw their primary responsibility for the country in 2014. China is not expected to take on a larger security role in the country: the PLA has little experience in such environments and such an aggressive approach is a world away from China’s non-interference policy.

China’s primary foreign policy tool is investment, mostly in Afghanistan’s natural resources: something it knows how to do very well from years of experience in frontier markets. However, this does not seem to be working in Afghanistan, with the government reportedly asking MCC to stay in Afghanistan. According to the Wikileak cable, Heting told American diplomats in October 2009 that ‘the Chinese government was urging the company to honour its commitments’.

The CNPC project may now be working, but the initial problems show that generous deals are no guarantee of a smooth passage. Beijing clearly has to re-think what it is going to do once 2014 passes. Afghanistan’s proximity to China and the potential knock-on implications in central Asia where China has invested a great deal make it is impossible to ignore.

China may not want to be dragged into Afghanistan’s interminable problems, but it seems impossible to imagine that they are not going to play some role. What this role ends up being is something that the new administration needs to calculate sooner than it wants.

Raffaello Pantucci is visiting scholar at Shanghai Academy of Social Sciences

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