Posts Tagged ‘China-Kyrgyzstan’

Been quiet for a while as am getting very caught up with administrative things which are driving me a bit crazy. Have some more writing which I will publish over this week, mostly around my China looking west work, and more pieces hopefully in the pipeline, but the big push over the next few weeks is going to be my UK Jihad book. Am hoping for more reviews around that. So far, have had the Evening Standard and a very nice write-up based off the book in The Times. More hopefully en route.

This aside, have spoken in the past month to the South China Morning Post about extremists on campus in Guangzhou University and China in Central Asia, to the BBC about new government measures to handle extremist preachers, to the Daily Mail about ISIS, Voice of America about China, to the Associated Press about the attacks in Tunis, Bloomberg about China’s counter-terrorism policy going out and China getting Uighurs sent back to China, El Mundo about al Muhajiroun, and to the Times about ISIS using deaf mutes in its videos. There are also likely others, but cannot find links.

The main body of this post, however, is my submitted written testimony to the US-China Economic and Security Commission (USCC) where I had the honour to testify last month on China in Central Asia. The hearing was an excellent opportunity to hear a lot of the top experts on Central Asia in the same place at the same time. Please note that the footnotes seem not to have survived posting here, please follow this link for the full PDF.

March 18, 2015

Raffaello Pantucci

Director, International Security Studies

Royal United Services Institute for Defence and Security Studies (RUSI)

Testimony before the US-China Economic and Security Review Commission

Looking West: China and Central Asia

 

Background

 

In September 2013 during a visit to Astana President Xi Jinping spoke of establishing a ‘Silk Road Economic Belt’ (SREB) that would ‘open the strategic regional thoroughfare from the Pacific Ocean to the Baltic Sea, and gradually move toward the set-up of a network of transportation that connects Eastern, Western and Southern Asia.’ Made during the President’s inaugural visit to Central Asia, the speech was both an articulation of a policy in a region that had been underway for around a decade, as well as the first declaration of a foreign policy vision that has increasingly shaped China’s own projection of its approach to foreign affairs. Founded in Central Asia, the SREB and the development of trade and infrastructure corridors emanating from China that it has come to symbolize, is slowly becoming Beijing’s dominant and most vocalised foreign policy strategy and is possibly set to be the defining public narrative for Chinese foreign policy under Xi Jinping.

 

Xinjiang

 

To understand the SREB in its proper context, it is important to first understand Xinjiang. Xinjiang occupies approximately a sixth of China’s landmass, with around 1.5% of its population (at around 22.09 million according to the 2011 census). It is home to large oil and gas reserves (about a fifth of the national total of oil), and has about 40% of the nation’s coal reserves that are close to the surface and of good quality (coal remains one of China’s main sources of electricity generation). It also has a major agrarian industry, with 70% of China’s tomatoes grown in the province, making the region one of the world’s major sources of ketchup and tomato paste. Xinjiang is a region that is beset with tensions focused around ethnic rivalries. Home to Uighurs, a Turkic speaking people’s whose language, culture and ethnicity is closer to Uzbek or Turkish, the region has faced community tensions between Uighurs and Han Chinese for decades. Uighurs were once a majority in the region. PRC census data from 1953 indicates that at the time the province was 75% Uighur and 6% Han, a figure that today stands instead at around 40+% each according to the 2011 census. There is resentment against the growing presence of Han Chinese, with the Uighur population feeling that their identity and culture is slowly being eroded down as Beijing profits from the region’s natural wealth.

 

Since the People’s Liberation Army (PLA) conquered Xinjiang in 1949, the region has faced tensions with angry Uighurs occasionally rising up against the state or inter-communal violence erupting between the growing Han population and the increasingly minority Uighur one. This has expressed itself in terrorist violence at home and abroad. Groups of Uighurs have travelled abroad into Central Asia or Afghanistan, where they have connected with extremist groups and created training camps to prepare to return to China and fight.

 

Most recent attention, however, was focused on July 2009 when rioting in the region’s capital led to an estimated 200 deaths as mobs of Uighurs rampaged through the city attacking, and killing, Han Chinese. The next day, counter-marches took place with angry Han taking to the streets to protest both against the Uighur-led atrocities, but also the failure of the government to protect them. The local government’s failure to quell the violence was so dramatic that President Hu Jintao had to embarrassingly leave the G8 Summit in L’Aquila to return home to manage the crisis. The result of this was a change in leadership in the region, with of the removal of a number of local figures from their positions (for example, Li Zhi, Communist Party Secretary in Urumqi, and Xinjiang Public Security Bureau head Liu Yaohua) and most dramatically, a year later, the removal of long-time regional party boss Wang Lequan.

 

At the same time as changing the regional leadership, on May 17-19, 2010, Beijing hosted a major conference on the region. The Xinjiang Work Conference was hosted in Beijing by the CCP’s central committee and the State Council, involving then President Hu Jintao and then-Premier Wen Jiabao, as well as both of their successors Li Keqiang and Xi Jinping. This was a rare but significant work conference about a specific region (a number have been done for Tibet), and it led to a number of new policy approaches to the region by Beijing. Focusing on ‘leapfrog development’ the main thrust of the conference was economic development as the key to solving the region’s problems. Amongst the raft of economic measures was the developed of a twinning policy between more affluent provinces in China and prefectures in Xinjiang. For example, Shanghai took on responsibility for parts of Kashgar – something that translated in practice to the transfer of Shanghai officials to work in the region for a year, the delegation of a portion of Shanghai’s GDP as financial support for the region, and delegation visits from Shanghai to the region to advise on developing institutions and structures that had added to Shanghai’s prosperity. State and provincial companies are actively encouraged to invest in the Xinjiang, while different provinces would attempt to teach the parts of Xinjiang that they are responsible for some of the things that helped their success. For example, Shenzhen helped Kashgar develop a Special Economic Zone. Another innovation was the transformation of the then relatively moribund Urumqi regional trade fair into a Eurasian Expo, aimed at bringing in traders, businessmen and officials from across the Eurasian landmass to Urumqi – a city described by an Urumqi official to the author as the ‘closest big Chinese city to Europe.’ Economic investors from Europe and elsewhere were actively encouraged with preferential benefits and gentle persuasion. For example, a Turkish-Chinese business park was developed just outside Urumqi to bring Turkish investment into the region. German carmaker VW was encouraged alongside its Chinese joint venture partner SAIC to build a sedan factory in the region. Central Asian businessmen and traders were actively targeted for the Eurasian Expo, and another Special Economic Zone was established at the border crossing with Kazakhstan at Khorgos. And finally, funding was allocated to develop infrastructure, roads, rail and airports across the region to enable Xinjiang to become ‘a gateway for mutually beneficial cooperation between China and other Eurasian countries’, as put by Premier Wen Jiaobao during the Second Eurasian Expo in Urumqi in September 2012.

 

China’s policy towards Xinjiang was not, of course, solely one of economic investment. Alongside this surge of inward investment (something that had been underway for some time through various ‘develop the west’ initiatives) was a growth in security spending in the region. Emphasis was placed on trying to strengthen the security forces in the region and stamp out the periodic bouts of violence that continue to plague the region. China’s approach was in essence a binary one of heavy economic investment and heavy security clampdown. The balance between these two seemed to be shifted back in favor of ‘stability’ (or security) in the wake of a second Xinjiang Work Conference under Xi Jinping’s leadership in January 2014. However, the State Council also emphasised the importance of economic investment when it announced in June 2014 that the Xinjiang government was to spend approximately $130 billion to develop the region’s infrastructure.

 

But for both the security and economic surges to work, there was clearly a need to develop stronger links to the region around Xinjiang, and it is here that Central Asia starts to play a prominent and key role. Abutting Xinjiang, Central Asia is China’s westernmost periphery. Scattered around the region are pockets of Uighur populations – with major communities found in ethnically proximate Uzbekistan, Kyrgyzstan and Kazakhstan. In Kazakhstan in particular, Uighurs play a substantial role in the nation, with current Prime Minister Karim Massimov an ethnic Uighur. In Pakistan, relatively large Uighur communities live along Pakistan’s side of the Karakoram Highway. Within these communities and countries, China sees concern and Beijing and Urumqi security chiefs have developed strong links with their local counterparts (at a bilateral level, but also through the Shanghai Cooperation Organization) to ensure that, should any dissident Uighurs flee across the border, they will be rapidly repatriated.

 

More visible than this strong security bond, however, is the huge level of economic activity and investment that is slowly spilling across the border into Central Asia from China. Something that has always happened naturally given the borders, traditionally nomadic people’s and the nature of trading across Central Asia, it has increasingly taken on a life of its own as Chinese investment has poured in to refurbish and revitalize the trade routes across the region. The logic to this growth is simple: Xinjiang is as landlocked as the Central Asian countries it abuts. If Beijing is going to ensure that the region prospers, then it will need to be better connected to the world. Given the relative land proximity to Europe, it therefore makes more sense to develop the region’s physical links into Central Asia, not necessarily for Central Asian prosperity in itself, but rather to ultimately help transport Chinese goods to Eurasian and European markets (and vice versa). Hence the need for infrastructure that helps re-connect and re-wire the Eurasian landmass from China to Europe. Ultimately, if Xinjiang is going to benefit from the push for economic investment within China, it is going to have to have somewhere to trade with and through. Logically, conduit for this has to be Central Asia.

 

China’s Economic Surge into Central Asia

 

It is in many ways the economics of China’s push into Central Asia that is the most significant external aspect of this ultimately domestic policy response. The narrative of Chinese investment into the region used to be one of mineral extraction and exploitation. A late entrant into Central Asian energy through investments in Kazakhstan, CNPC purchased aging Soviet oil fields in Aktobe, western Kazakhstan and rapidly built an oil pipeline back to China. Built with great speed and efficiency, the pipeline became the symbol of China’s relations with the region. Most perceived China as viewing Central Asia simply as a large source of fuel and minerals that it could exploit to feed the seemingly insatiable energy needs its economic development required. This view was further affirmed through CNPC’s major investments into Turkmenistan, where the country has been one of the few to successfully operate and buy Turkmen gas. CNPC has become one of the largest supporters of the Turkmen national budget, through gas purchases and the development of almost four different pipelines to transport gas back to China.

 

This superficial view of China’s growth in the region misses the reality on the ground whereby China is slowly becoming a dominant player in a vast array of different economic areas. From Kyrgyzstan, where the import and re-export of Chinese goods plays a huge role in the national economy, to Tajikistan that is increasingly becoming one of China’s biggest debtor partners. To better understand the breadth and depth of China’s economic influence in the region, it is useful to look at the extent to and manner in which China operates in the energy industry, one of the dominant industries in which China participates in Central Asia.

 

As has been mentioned, China is the major player in Turkmenistan, where it is the sole country that is able to get substantial access to Turkmen hydrocarbons. Russian volumes have shrunk and Iran has had difficulty paying in cash (offering barter instead), making China the preferred player in Ashgabat. This is a similar story in Kazakhstan, where China has not only constructed one of the quickest-built pipelines ever in the country, but it has also bought 8.33% of the supergiant oil field Kashagan, purchasing American firm ConocoPhilips’ stake. Buying into a project run by a multi-national consortium is a new endeavor for a Chinese company in Kazakhstan. It is also a major purchaser of Kazakh uranium. In 2014 Kazakhstan’s state-run nuclear energy agency Kazatomprom said that 55% of Kazakh uranium production was exported to China. In Uzbekistan, China has signed contracts to extract some gas and build a pipeline across the country from Turkmenistan. It has also aided in developing electricity re-metering , as well as helped the country to develop its solar panel production capability, and refurbish solar furnace factories.

 

Tajikistan, until relatively recently considered a very energy poor country, made discoveries of large potential gas reserves in the Bokhtar region. Chinese company CNPC partnered with Canadian Tethys and French Total to undertake further exploration. Downtown Dushanbe, once famous for its blackouts, now has a large Chinese-built thermal power plant that provides electricity to the city through the cold winter months. A major producer of hydroelectric power, Chinese firms have explored the possibility of both exporting Tajik hydroelectric power, but also building some of the infrastructure to support it. And finally, Kyrgyzstan, remaining energy poor has nonetheless benefited from Chinese attention in the energy field. While Russian firm Gazprom remains a major player in the nations energy mix, CNPC has offered to build refineries in the country, as well as helping connect the country upgrade and build power transmission lines. China is a player across Central Asia’s energy fields, not solely in extractives.

 

The funding for these projects comes in a number of different ways. In some cases, like a coal-fired plant in Dushanbe, the project was one that is offered by a Chinese firm in exchange for preferential treatment on another project. In other cases, it is funded through Chinese policy bank loans that are offered at preferential rates and stipulate that the implementing party must be Chinese. One example of this structure is the decision to build a camera monitoring system in Dushanbe to help monitor traffic in the city. Money was offered through an ExIm Bank loan, and the implementer was Chinese telecoms giant Huawei. This approach is not actually novel to the region, with both Korean and Japanese banks offering similar structures in regional contexts, but the scale and size of Chinese loans and rapid implementation is significant.

 

Increasingly one can see China assisting in the rewiring of roads, railways, pipelines and electricity grids across the region so that all lead back to China, or at least in some way benefit China’s access. All of this helps connect up what is happening in Central Asia with the all-important domestic strategy in Xinjiang. Consequently, the economic push into Central Asia by China comes from a blend of economic forces as a result of the economic investment into Xinjiang, as well as the ongoing outward push by Chinese firms and money.

 

Enunciating a strategy

 

While this is how things have been playing out on the ground for many years, prior to Xi Jinping’s SREB announcement, China’s investment strategy for Xinjiang and Central Asia was not something that had been directed or enunciated in any clear or coherent way from Beijing. The closest thing to a regional strategy document can be found in the Xinjiang Work Plan and its acknowledgement of the importance of developing markets and routes into Central Asia to improve Xinjiang’s prosperity. In 2011, Chinese academic and Dean of Beijing’s international school Wang Jisi offered some sort of academic theory to the logic of this push in his influential writing about China’s March Westward. But there was no clear policy expression or formulation offered until Xi Jinping visited Central Asia in 2013 and laid out his SREB vision, in essence symbolizing Xi Jinping’s desire to take ownership over a reality that had been going on for some time and stamping his brand and leadership on an overarching policy concept around it.

 

And since the announcement of this belt, and the later addition of the Maritime Silk Road in a speech in Indonesia in October 2013, amalgamated into the phrasing ‘one belt, one road’ there has been a further surge in development and investment to make this vision a reality. At home, the Silk Road has now become a project with huge implications across the west of the country. Maps have been issued showing the city of Xi’an as the starting point, while $79.8 billion has been announced into investment into Gansu. A further domestic fund of some $16.3 billion has been announced for supporting Silk Road projects at home. Mostly infrastructure investment projects, there have also been more specific investments emanating from provinces in Western China to Central Asian countries – like $800 million invested by Henan into Tajikistan. On the ground such investment efforts can be found in Tashkent in the form of trade fairs bringing Xinjiang traders to the region, as well as in markets across the region that are filled with low-end traders and larger property or market owners who have spent a decade or more in Central Asia building up empires of market stalls, local factories and real estate portfolios.

 

Externally, this surge of infrastructure investment is also clearly visible in the form of a growing constellation of investment banks being directed out of Beijing, as well as the expansion of the concept of the SREB. From an initial vision that seemed focused on Xinjiang development through Central Asia, it has now become something that spans the Eurasian landmass (more than 60 countries now see themselves in its route), but has also developed offshoots in the Maritime Silk Road, the Bangladesh-China-India-Myanmar (BCIM) Corridor, and the China-Pakistan Economic Corridor (CPEC). Each of these is less developed compared with the SREB, but at the same time all reflect logical trade corridors that China would like to open up. China has already started to explore how to develop the necessary infrastructure in each case.

 

One of the main reasons why this push seems more credible than previous efforts is the volume of funding that China is pushing towards the projects and the array of development bank vehicles they are creating to help make it a reality. The Asian Infrastructure Investment Bank (AIIB), the BRICS Bank, and the earlier discussed but never realized Shanghai Cooperation Organization (SCO) Development Bank, are all expressions of this. Whilst the AIIB and BRICS Bank are not singularly focused on Central Asia, the model of development they are focused on is one that reflects China’s experiences in Central Asia, using the lever of economic infrastructure investment to help foster trade corridors and routes that ultimately connect China to its markets. The focus on infrastructure reflects not only the reality of a region that has infrastructure huge demand for investment in this area, but also a Chinese policy outlook that is shaped by the concept of regional connectivity and development of a prosperous neighbourhood. This underlying concept is something that has been present in Xi Jinping’s foreign policy outlook from the beginning of his presidency. This is highlighted when in October 2013 he held a rare foreign policy work conference focused on ‘peripheral diplomacy’, meaning China’s relations with its proximate neighbours.

 

Regional repercussions

 

The biggest question in this Chinese push, however, is how the region is going to react to it. Looking to Central Asia in particular, China has played a very careful and sensitive game. This is most clearly exemplified in the SCO, that was first developed as the Shanghai Five, a cooperative grouping focused on delineating China’s borders with the former Soviet Union in the wake of the latter’s collapse. In 2001, Uzbekistan joined China, Russia, Kazakhstan, Kyrgyzstan and Tajikistan, and the SCO was formed with a Regional Anti-Terrorism Structure (RATS) founded in Tashkent. From there, the organization has continued to operate, using counter-terrorism as its main rallying flag, but with little evidence of it developing too much more beyond this. Chinese thinkers and officials have tried to push the SCO in a more economic and development direction, but this has largely been met with skepticism and hesitation by regional powers, in particular Russia, who has hesitated to let the SCO develop too much more beyond its current mandate. At the same time, China’s hesitation to get involved in hard security questions regionally means that the Central Asian members of the organization continue to prioritize the security relationship with Russia over China (though there is some evidence that this is starting to change).

 

With Russia, the question of underlying tensions has remained a major issue, though whenever Chinese officials and experts talk of Russia in a Central Asian context, they go to great lengths to highlight the fact that they would do nothing that would contradict their Russian counterparts interests in Central Asia. For their part, Russian experts recognize that China is the coming force in Central Asia, but seem willing to accept it and highlight that most regional leaders see Moscow as their key international partner who is also able to play a much more decisive security role than Beijing. There have been some deals recently where Russian firms have lost contracts in favor of Chinese companies – for example, the redevelopment of the Manas Airbase in Kyrgyzstan in the wake of American withdrawal, is something that has been passed on to Chinese firms rather than Russian Rosneft who was initially believed to be taking the contract. But at a larger strategic level, both powers seem to have reached a modus vivendi in Central Asia that does not necessarily reflect the strategic balance in outsiders eyes, but that functions for them on the ground.

 

The other key regional question hanging over the region is Afghanistan (and Pakistan). For Central Asia, it is Afghanistan that is seen as the great potential destabilizer, and there is the concern that the massive investments into the SREB that have been done into Central Asia may be negatively impacted should Afghanistan become once again an exporter of instability. This is a concern that Chinese officials will express, though most often when talking about Afghanistan they will express concern that Uighur extremists might once again use the territory as a training ground to export violence back to China. China has increasingly been playing a role in Afghanistan, in particular in trying to offer itself as a broker between the Taliban and authorities in Kabul, as well as mineral extraction, economic investment, and some regional collaboration. But at the same time, it is unclear that Afghanistan necessarily features as part of the SREB, except in some of its northern regions that offer themselves as routes to Iranian and other Middle Eastern markets, in one of the routes offered in Chinese publications of where the SREB actually flows.

 

The biggest regional problem that China faces with its SREB in Central Asia, however, is the question of Sinophobia. Something that is palpable on the ground at times in the resentments that people feel towards Chinese businessmen and traders, there is a noticeable sensitivity when discussions come up about Chinese redrawing boundaries in certain parts of Central Asia. In Tajikistan, online discussions about land deals between Chinese state owned agri-businesses and Tajik authorities were blocked to reflect the perception on the ground that these deals were the government selling the nation to China. In Kazakhstan a similar deal was announced by President Nazarbayev in 2009, but the public outcry against it led to him walking back on the initial deal. Relatively small countries by population, the Central Asians fear overwhelming by China, a sentiment that can also be found in Russia’s border regions with China. This is not only about numbers of people, but also in the fact that all of the Central Asians want to become manufacturing hubs themselves, something that is going to be very difficult when they sit next to the world’s manufacturer.

 

China is not unaware of this Sinophobia, and has attempted through various means to undertake a soft power push in the region. For example, there is a growth number of Confucius Institutes in the region. They have also funded specific research projects in countries like Kazakhstan by local experts and opinion formers to help both shape the individuals views, but also to understand better the nature of the sinophobia so they can react to it. Travel to Aktobe, a city where CNPC plays a major economic role, and it is almost impossible to find a visible Chinese presence in the city. Chinese workers stay outside the city in a compound in an old sanatorium.

 

US Relations and impact

 

From a Chinese and Central Asian perspective, the US’s role is complicated. In the first instance, it is important to understand a bit more of the theory behind the policy. When Professor Wang Jisi drafted his influential work on the need for China to March Westward, his thinking was not only based in trying to get China to focus on its immediate periphery and develop its west, but also to try to get Chinese officials to refocus from their almost obsessive attention to China’s relations with the United States and maritime powers. This underlying logic highlights how to some degree China sees its push into Eurasia as something that it is doing without the United States. At the same time, China has shown itself to being increasingly willing to cooperate with the United States in Central Asia, with a willingness to undertake joint programs in Afghanistan, as well as explore discussions with American officials about what cooperation could be undertaken collaboratively in Central Asia.

 

At the same time, regionally, the United States is seen as something of an erratic actor. With the drawdown from Afghanistan, and the oscillating American attention to Central Asian powers, there is a regional perception that the United States is a fairweather friend or only focuses on the region when national interests are threatened (like in the wake of September 11, 2001). Furthermore, the United States is seen as not offering the same opportunities as China – while there was an interest in the New Silk Road highlighted by then-Secretary of State Hilary Clinton in a speech in Chennai in 2011, little has come from that beyond an expression of interest by the United States in creating a north-west corridor through Afghanistan. Projects like the Turkmenistan-Afghanistan-Pakistan-India pipeline or CASA 1000 are slowly moving forwards, but without the financial push or heft of China behind them, progress is much slower than China’s efforts.

 

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Slightly delayed posting of my latest piece, this time with my sometime co-author and friend Li Lifan looking again at China-Russia and Central Asia. This was part of a series that Ben edited at Open Democracy Russia which seems to have attracted some attention. As usual, a lot more on this topic coming soon as part of mine and Alex’s project on China in Central Asia.

Decision time for Central Asia: Russia or China?

LI LIFAN and RAFFAELLO PANTUCCI 24 January 2013

Vladimir Putin’s attempts to draw the countries of central Asia into his fledgling Eurasian Union creates a dilemma for some of them: if they take up his offer, they might lose their valuable trading links with China. Li Lifan and Raffaello Pantucci discuss their options.

If one turns enough of a blind eye, it is easy to be optimistic about Central Asia. Wily diplomats from Kyrgyzstan and Tajikistan are masterfully playing off the great powers. Kazakhstan and Turkmenistan are turning into hubs in their own right – and nobody can tell plucky Uzbekistan what to do. This is nobody’s backyard, and attempts by neo-imperialists in Moscow, Washington and Beijing to play games in the region are only strengthening the hands of the Central Asian states themselves. This is a comforting picture – which is why Western policymakers love it – but it looks increasingly false as President Putin tightens the screws.

Why a Eurasian Union matters

Russia’s desire to strengthen its sphere of influence in Central Asia seems to be intensifying. The first sign came in October 2011 when Russia’s ‘national leader’ published his vision for a Eurasian Union in the Gazprom-Media owned daily Izvestia. Here Putin stated that the Customs Union with Belarus and Kazakhstan that would come into force on 1st January 2012 was just the beginning – and that it would expand ‘by involving Kyrgyzstan and Tajikistan. Then, we plan to go beyond that, and set ourselves the ambitious goal of a higher level of integration – a Eurasian Union.’

The Russian president is said to dream of his third term being his ‘geopolitical presidency,’ where he will make up for the lost ground and lack of achievement in foreign affairs that he views as his main failing. The transformation of the fledgling Customs Union into the Eurasian Union of his dreams is the centrepiece of this strategy. Whilst Kazakhstan seems to have already decided that it wants to be a part of the Union (and its president, Nursultan Nazarbayev is credited for first raising the idea of a Customs Union back in 1995), for the Central Asian states of Kyrgyzstan and Tajikistan this is a potential turning point, forcing a decision on which partner they want to prioritize: China or Russia?

The way Central Asian states will turn — to Russia’s Eurasian Union or to China — is the test for influence in the region. Photo: (cc) Wikimedia/IvaNdimitry

Deciding whether to follow Putin into the Eurasian Union will be a decisive choice for both states in the year ahead, as it will force them to choose which they want to risk: the GDP they get from trade with China or the GDP generated from remittances from their nationals working in Russia. Putin has thrown down the gauntlet – they will now have to make up their minds whether their economic future is going to be closer to Moscow or Beijing. Their dichotomy is not quite as black and white as this, but this is nevertheless a power test. The choices they make will decide whether Russia or China has a stronger say in Central Asia.

Kyrgyzstan’s dilemma

There is a simple reason why Putin’s union matters so much to Kyrgyzstan and Tajikistan: trade with China. Unlike energy rich Kazakhstan, already in the Customs Union, Bishkek and Dushanbe’s economies are dependent on business with Beijing. Kyrgyzstan’s ‘shuttle trade’ business with China, where small traders cross borders as ‘tourists’ with their goods in suitcases in order to avoid Customs duties, accounts for roughly a third of its GDP.

On the other hand there is fear in Bishkek that if they do not deepen integration with Moscow then the millions of migrant workers it exports to Russia – whose remittances are also equivalent to a third of GDP – will be forced to carry international passports, or suffer far reduced quotas. The nightmare is that they will eventually end up barred from Moscow’s labour market by a full visa regime – something nationalist elements in Russia, including charismatic opposition leader Alexey Navalny, have been calling for.

These fears are well grounded: in December 2012 Putin warned that within three years he wanted to end the post-Soviet practice of migrants from the CIS being able to come to Russia on their internal passports, effectively ID cards – but Customs Union members will be exempted from the new requirement for international passports. Polls conducted by the independent Levada Centreshow over 60% of Russians supporting tighter immigration controls.

Visa-free admission to Russia and access to the Russian labour market may be soon be a thing of the past for Kyrgyz migrants. Photo: (cc) Shutterstock/FotograFFF

That free access to Russia can no longer be taken for granted is not lost on Kyrgyzstan. But at the same time the Kyrgyz elite fears that joining a Eurasian Union would mean effectively losing control over its border tariffs and regulations, and would destroy the rich network of new trade routes that are tying them into China, bringing them cheap goods and enabling a substantial re-export economy. These trade routes are economic lifelines for this fragile state – and for this network the Customs Union has all the potential to be a total disaster. As a former Kyrgyz cabinet minister put it to one of us in Bishkek last year, it would ‘decimate’ the country’s key markets in the south at Kara Suu and Osh. In his words, ‘almost every’ small business in Kyrgyzstan is reliant on trade with China and any new tariffs or rules would entirely change the local economy.

China: vulnerability and official indifference

Chinese officials insist that the expansion of the Customs Union matters little to them. Ambassador to Bishkek Wang Kaiwen put it succinctly to reporters in late November when he said: ‘Kyrgyzstan’s entry into this Customs Union will not affect trade relations with China.’ Kyrgyz-Chinese trade, he pointed out, oscillated somewhere between $5-$10 billion per annum, a figure that was ‘a small problem’ dwarfed by China’s overall foreign trade of $3 trillion. The question of whether ‘to join or not…should be your decision.’

This blunt response hides a complex reality. It is true that in the grand scheme of things, China’s trade with Kyrgyzstan is a drop in the ocean. The problem for China is that it is a drop that comes from one of the most troubled parts of one of its most restive provinces. China is not investing massively in its trade infrastructure with Central Asian countries for reasons of charity – but to stabilize its own restive Xinjiang Uygur province by turning it into a trade hub for this region.

The Eurasian Union would have a potentially damaging effect on the substantial investment China has made on both sides of its border. The erection of a Russia controlled tariff barrier between China and Kyrgyzstan is likely to have a chilling effect on trade coming out of Kashgar, at a time when the Chinese government has invested a great deal into trying to develop the southern city. Capital of a part of Xinjiang that has faced heightened ethnic tensions for decades, the government has spent a lot of money re-developing the old city and establishing a Special Economic Zone with the aim of turning it into a hub for Central Asian trade.

According to recent figures China invested some $91.91 billion into infrastructure in its ‘western provinces’ – an area that covers Tibet, Guizhou and Xinjiang. This is a focused strategy and Xinjiang sits in the middle of it. All of this will be threatened if suddenly traders no longer find it profitable to send their goods along the roads winding into the CIS from Kashgar. At the same time these traders’ choice of markets is surprisingly limited: without a route through Kyrgyzstan or Tajikistan they would have to travel through the Khunjerab Pass to Pakistan. The problem there is the roads on the Pakistani side remain woefully under-built. Their only other possible border crossing would be with Afghanistan, which remains firmly closed at time of writing.

Seen from China, these are unanswered questions. When one of us asked a group of academics in Urumqi, the capital of Xinjiang, what they thought of the Customs Union’s impact to China, they shrugged and in vague terms said they were ‘waiting to see’ if the Customs Union would actually come to pass across the whole region. In Shanghai and Beijing, everyone has stories of friends who have conducted surveys in the region that highlight its unpopularity. But this is largely behind closed doors. The official line is that espoused by Ambassador Wang, that ‘Kyrgyzstan’s entry into Customs Union will not affect trade relations with China.’ Nothing to see here, keep moving on…

A losing game for small states?

This used to be the sort of situation where Central Asians were in their element, masters of the game of playing one partner off against another. Kyrgyzstan in particular has cannily used access to its Manas airbase to extract large chunks of money from both America and Russia. This time it seems as though Moscow is playing a much harder game, forcing Bishkek into a decision that could ruin one aspect of its economy or another. How this plays out may end up determining the shape of the Kyrgyz economy. For all the talk about China in Central Asia, Putin is still able to compete with Beijing – and the choices made in Bishkek and Dushanbe will make it clearer whether Moscow is still the world power it dreams of being.

Another post for the site I manage as part of my China and Central Asia work, this time looking at my experiences visiting the Irkeshtam Pass between China and Kyrgyzstan. A fascinating trip, with some of the pictures courtesy of the lovely Sue Anne Tay.

The Irkeshtam Border Pass Between China and Kyrgyzstan

By Raffaello Pantucci

The red arrow and circle indicate the Irkeshtam border pass. Picture from here.

In what can only be described as a cosmic coincidence or evidence of some deeper significant trend that I can only guess at, on either sides of the Irkeshtam Pass between China and Kyrgyzstan we found Japanese backpackers. The surprising part was that our visits to each side of the border took place some five months apart from each other. Ardent Japanese travellers aside, there were few other obvious similarities on the two sides of the border. In fact, what differences there were seemed to be weighted in favour of the Kyrgyz side, where the road was in better shape than its Chinese counterpart.

Leaving one morning from Osh with a driver a local Chinese teacher had helped us source, our trip to Irkeshtam on the Kyrgyz side was a relatively painless one. The road was for the most part tarmacked and aside from a bumpy part in the mountains, in good condition. Funded in part by the Asian Development Bank, the Islamic Development Bank and the Chinese government, the China Bridge and Road Corporation (CBRC) had built most of the road (often as subcontractor to the international projects) – a Chinese state owned enterprise whose management office we came across as we zoomed along on the Kyrgyz side. Wandering into the compound we found a few Chinese engineers who said that the project was due to finish in spring 2012. They worked from April to October of each year when weather conditions were bearable. An hour or so down the road, we came across their colleagues, Chinese men huddled in in heavy green military coats directing large trucks of granite as they worked to asphalt the road.

As with many borders in the region, there is a gap between the actual border and where they check passports before you get to the line of demarcation. On the Kyrgyz side, a small camouflage painted mobile home sat by the side of the road with a simple metal barrier across the road itself. The young Kyrgyz guard manning the barrier waved vigorously at us as we tried to take pictures, though he seemed a lot less threatening once we noticed that his AK-47 did not have ammunition clip.

The border itself was a dusty parking lot with giant shipping trucks with Customs (海关) emblazoned on the sides edging around each other. A lone donkey wandered through the chaos as various truckers and other loafers used facilities, shopped at the mini-mud buildings selling food, cigarettes and other provisions or had meals at the rudimentary restaurants. One Uighur-Chinese driver (who had in fact helped ferry hapless Japanese backpacker Takeshi through the pass) told us eagerly that he was on his way to Uzbekistan with a truckload of ‘stuff’ – when asked to specify he said various electronica and low-end Chinese products. He was more interested to hear about Shanghai and the business prospects there.

In contrast, the Chinese side of the border was visibly policed with more solid structures at the actual border post – a big white tiled building and men in warm uniforms guiding the truck traffic. Present in early spring (we did the trip to Kyrgyz side in October, the Chinese side in April), there was still snow on the ground and written into it in the mountain above the post was the phrase 中国民爱 (roughly translated as China loves its people). Unlike the dusty Kyrgyz side, the Chinese side was a small village of concrete buildings with a police station, Sinopec office, restaurants, hotels and grocery stores. On the road before the encampment was an odd building with a giant football on top of it. Behind it was a walled area with cameras on top that our driver informed us was some sort of military installation.

While the border itself was relatively developed, there was a dramatic contrast in the state of the roads up to it on the Chinese side. Whilst likely done by the same company as that on the Kyrgyz side, the road on the Chinese side was a potholed mess and for a substantial period we were drudging through dirt and knee-deep snow. Our driver steadily became more exasperated, chain-smoking his way through two packs of cigarettes as we battled on and his carefully cleaned car turned into a mud coloured mess with a broken bumper. Ploughing through a blizzard we saw large trucks abandoned by the side of the road, battered by the treacherous road conditions. We had been warned the ride would be difficult, though given the excellent state of the Karakoram Highway and most infrastructure in China, we figured this could not be that bad. We were wrong: it was a bumpy ride from almost the moment we left Kashgar.

The reason for this rather surprising inversion in road quality is that the road to the border on the Chinese side is in the process of being re-built, due to be finished by 2013. Something visible along the way as we saw teams digging holes and moving large pieces of concrete around to support the road. A city is being built along the way at a previously minute village called Ulugqat that currently serves as an entertainment spot for the customs officers and workers on the road and at the border – but is mostly a muddy mess with giant construction going on everywhere. The customs post before the border ‘dead-zone’ on the Chinese side was a more substantial creation, with a small soldiers’ cabin across the road from a much larger official customs building with Chinese flags and logos all over it. In contrast to their Kyrgyz counterparts, these soldiers had ammunition clips in their guns as well as new uniforms that contrasted our increasingly bedraggled appearance.

Unlike its northern counterpart the Torugut Pass, Irshketam is open most of the year. One of the key crossing points for China into Central Asia, it provides a route for Chinese products to get to Kyrgyz markets as well as travel up into Russia, across into Uzbekistan and beyond both to Europe and Iran. Much of the material brought across the border ends up in Kyrgyzstan’s crowded Osh or Kara-Suu bazaars, an arrangement in danger of being destroyed if the Kyrgyz elect to join Putin’s Eurasian Union and a subsequent tariff barrier is erected between the Kyrgyz and Chinese economies. When we put this to officials in Kyrgyzstan they told us it was potentially devastating. Chinese we asked seemed less concerned. Partially because the market loss would be negligible in terms of China’s overall trade volumes, but also since they believe that the entire Eurasian Union project is unlikely to amount to much. As a Chinese academic put it to us, the Eurasian Union will clash with Kyrgyzstan’s WTO membership and the expectation is that the Kyrgyz would rather be part of the global economy than be a pawn in Russia’s expansionist agenda. This outlook was supported by evidence on the ground where China is clearly making investments in turning this road into a major artery for its Central Asian trade.

Another ribbon in the latticework that is the New Eurasian Landbridge.

 

Another piece on China-Kyrgyzstan, this time for a new outlet within Jamestown Foundation, their China Brief. Lots of on-the-ground detail from my recent trip, with even more to come in the following weeks and months.

China’s Slow Surge in Kyrgyzstan: A View from the Ground

Publication: China Brief Volume: 11 Issue: 21November 11, 2011 02:54 PM Age: 4 hrs
By: Raffaello Pantucci, Alexandros Petersen

Chinese Ambassador Wang Kaiwen with the Kyrgyz Premier

Kyrgyzstan’s recent peaceful presidential elections did not feature China as a campaign issue. For the most part, they focused on domestic issues and where foreign policy seeped in, it was mostly in the positive light that most Kyrgyz see Russia and separately its regional customs union, or perennial whipping boy the U.S. “transit hub” at Manas airport, outside Bishkek. Subsequent to the elections, the winner Mr. Atambaev declared: “In 2014 the United States will have to withdraw its military base from the ‘Manas’ international airport” (www.regnum.ru, November 1). China was not mentioned at all, even though a series of conversations and interviews up and down the country in the weeks prior to the election revealed a strange sense of unease about Kyrgyzstan’s growing dependence on China.

The paradoxical and unfocused nature of this concern was best exemplified in a pair of interviews conducted in Bishkek with a former cabinet-level minister and a young Kyrgyz e-businessman. The former official spoke in concerned terms of Kyrgyzstan’s “economic dependence” on China and the fact that “all small- to medium-sized enterprises (SMEs) in the country had to deal with China” [1]. The businessman on the other hand saw China as a giant opportunity: one has to “just look at a map” to see how important the country is going to be for Kyrgyzstan [2]. While exact figures are hard to come by, a visit to a number of Kyrgyzstan’s large bazaars in Bishkek, Osh and Jalal-Abad all show high volumes of Chinese goods and, in some, long-term Chinese traders from as far away as Fujian province. While income from the U.S. airbase is important (according to the Congressional Research Service, accounting for some $501.5 million or 5 percent of GDP in 2010) and remittances from Kyrgyz in Russia or Kazakhstan remain a key provider of income in the country; it seems increasingly clear that China is bringing Kyrgyzstan into its economic sphere of influence [3]. The question that seems to bother some Kyrgyz is what the potential implications are in the longer term.

China has taken a three-fold approach to Kyrgyzstan, accompanied by an informal fourth pillar and the overarching umbrella of the Shanghai Cooperation Organization (SCO). In the first instance, it has focused on economics and facilitating trade between the two countries, including infrastructure development. Roads linking Kyrgyzstan to China are being redeveloped by Chinese state-owned enterprises like the China Road & Bridge Company (CRBC), that won the tender in 2007 to complete a project partially-funded by China to develop the road from Osh to the Irkeshtam Pass with China [4]. Due to be completed next year, a drive along it in September confirmed this schedule was being kept with the road almost completed. In other instances, the Chinese government has offered development in exchange for local mining concessions (www.24.kg, August 26). A practice emulated at a more local level by smaller Chinese mining firms south of Jalal-Abad (Reuters, September 21). The question of a China-Kyrgyzstan-Uzbekistan train line continues to go unresolved, with skeptical observers interviewed in Bishkek pointing out that similar Chinese projects elsewhere overcame their difficulties rapidly, while officials tell the press that difficulties are focused on the question of how to rationalize the different gauges that would need to be deployed (AKI Press, October 12).

In parallel to this infrastructure development and trade encouragement, China has started to make a soft-power push in the region. This has come in the form of establishing a pair of Confucius Institutes in Bishkek with subsidiary branches in Osh and Jalal-Abad. Part of the international network of Confucius Institutes, they are focused on teaching Chinese language to young Kyrgyz, using Kyrgyz-Chinese text books and leveraging faculty and administrators brought in on two-year cycles from partners Xinjiang University and Xinjiang Normal University. Based on a recent count by a teacher at a university in Bishkek, the authors were told the Confucius Institutes and teaching stations had somewhere in the region of 4,000 students in total at every level across the country—a number that pales in comparison to the number of young Kyrgyz able to speak Russian or English. This large and growing figure probably reflects the opportunities that young Kyrgyz see in China or with Chinese firms in Kyrgyzstan. While the Confucian Institutes focus on language learning to prepare students to use Chinese in a business setting, teachers appear eager to stimulate their students’ interest in other aspects of China’s culture and history giving informal classes in tai chi, paper cutting and Chinese dressmaking.

There are other aspects to China’s cultural influence in the region. In early 2009, the Kyrgyz government accepted a Chinese offer of 20,000 television receivers for individual homes in the Batken Oblast in southern Kyrgyzstan. Given the mountains and distance between Bishkek and certain isolated southern areas, locals were using antiquated receivers for their televisions and consequently getting news from Uzbekistan that painted the Bishkek leadership in a bad light. According to a senior foreign ministry official spoken to in Bishkek, part of the exchange that the Chinese government extracted for the receivers was to allow CCTV Russian to be broadcast directly into the country [5]. In addition to this, however, locals in Osh report they are able to receive Xinjiang Television on their receivers without cable packages and are often surprised to find Kyrgyz language broadcasts included in the daily programming [6]. At a more practical level, the Chinese government has donated Yaxing buses and tractors for Kyrgyz farmers to use (Xinhua, July 30) [7]. In June 2011, the Chinese Ambassador announced a donation of some $14.3 million to Kyrgyzstan to fix roads, power stations, and to support the construction of the railroad in the country (AKI Press, June 20).

The third pillar of Chinese interests in the country is far more opaque: China’s security interests in Kyrgyzstan. Primarily focused on security threats directly linked with Uighur terrorist networks in China, the Chinese government has focused these relations at a very secretive and direct level and little is known publicly about how China has conducted its relations in this field. Stories and rumors abound of China seeking extradition of specific Uighurs (IRIN News, January 29, 2004). In one case recounted to the authors by a Kyrgyz official focused on religious affairs, at the Chinese government request, police in Bishkek aggressively suppressed a protest by Falun Gong supporters outside the Chinese Embassy. It was unclear if this was before or after the Kyrgyz court decision to revoke Falun Gong’s registration in the country (Associated Press, February 26, 2005).

A fourth informal pillar also exists to Chinese-Kyrgyz relations: the growing community of cross-border traders and the smaller local Chinese SMEs that are focused on developing interests in Kyrgyzstan. From a Chinese perspective, this community is one that needs to be assisted occasionally, such as when the Chinese government arranged buses and airplanes to evacuate Chinese citizens caught up during the riots in southern Kyrgyzstan last year (Xinhua, June 17, 2010). Chinese academics spoken to in Shanghai have expressed some concern about the number of Hizb ut Tahrir members amongst this community of traders, but this does not seem a live concern on the ground where there is little evidence of extreme religiosity amongst the Chinese traders found in Osh, Jalal-Abad or Kara-Suu bazaars. Chinese SMEs are focused in the mining industry and also have invested in a cement factory in Kyzyl-Kyia. In some cases, these firms have encountered local problems with accusations of poisoning and environmental despoliation, or with local groups expressing anger at outsiders coming in and taking what they see as their natural wealth. According to numerous local officials and foreign observers, however, this anger is not directed specifically at Chinese firms, but is a more general rage against all outside investors in the extractive industries [8].

Overlaying China’s bilateral relationship is its regional multilateral framework, the Shanghai Cooperation Organization (SCO). For Kyrgyzstan, the SCO is primarily an international opportunity. Though almost universally regarded by ordinary Kyrgyz and foreign ministry officials alike as an exclusively Chinese vehicle, it is cautiously welcomed as a balance against Russia’s Collective Security Treaty Organization (CSTO) and the Moscow-led regional Customs Union that is actively courting Bishkek [9]. That said, Kyrgyz spoken to are quick to note that the SCO very loudly did nothing when political violence and ethnic strife rocked their country in 2010 (Xinhua, June 21, 2010). Its supposedly bringing together of China, Russia and the Central Asian states (except for Turkmenistan) to jointly combat the “three evils” of separatism, terrorism and extremism rings hollow when residents of Osh look at their half-empty, burnt out market. In interviews, Kyrgyz inside and outside the government wondered why China does not assert itself more politically through the SCO, though few would welcome such an eventuality [10].

Perhaps most important for a small state like Kyrgyzstan is the regular opportunity the SCO provides for dialogue on a range of issues with neighboring Central Asian states, especially Uzbekistan [11]. With a closed border and the ever-present fear of perceived bullying from Tashkent, the SCO’s regular head-of-state, ministerial and expert-level meetings provide a venue in which to reduce tensions. Having been beaten by Pakistan for the rotating seat on the UN Security Council, Bishkek will welcome the international attention it receives as the SCO chair and the host of its summit in 2013 (24.kg, June 16).

The real test for the SCO will come once Western forces begin to withdraw in earnest from Afghanistan and the region. The year 2014 is bandied about in Kyrgyz political discourse as the moment that Kyrgyzstan will be abandoned to the great powers of the region or the restitution of Kyrgyz sovereignty once the United States leaves the Manas airbase (Associated Press, November 1). It is an open question what role the SCO could play in a post-Afghan withdrawal environment with officials, academics and foreign observers met in Beijing and Bishkek concluding the SCO was not going to do much [12]. Aside from Russia’s historical baggage with Afghanistan and a general lack of capacity from the Central Asian SCO members, a key reason behind this lack of action is a Chinese unwillingness to become too visibly involved in either local political disputes or larger geopolitical games.

For Kyrgyzstan, this contributes to a sense of uncertainty, bordering on foreboding, about China’s presence in the country and the region. With China on the other hand, it is not clear what the nation wants or has the capability to do in Afghanistan, though its larger regional strategy is clearer. In the medium and longer-term the priority for China in Central Asia remains ensuring stability and development—something that is going to require more effort with Kyrgyzstan specifically given the nation’s poverty and lack of natural resources. Typical of Beijing’s cautious approach to international relations globally, China probably will continue to increase its presence and influence slowly. This will help develop the region abutting China’s restive western province Xinjiang (both in economic terms locally, but also as a transit route for Chinese goods to elsewhere) and hopefully, from a Chinese perspective, increase prosperity there too. This ultimately is the key to understanding Chinese involvement in Central Asia where the priority remains developing the region with a view to helping development in Xinjiang.

For Kyrgyzstan in particular, the main threat and difficulty to China comes in the form of the nation becoming a failed state that provides a shelter for separatist and terrorist networks seeking to launch attacks within China. Currently, it seems China has established strong connections and is willing to provide funding to prevent such groups from developing much capacity in Kyrgyzstan. In terms of becoming involved in fixing ethnic tensions within Kyrgyzstan, China however has expressed little interest in becoming involved, focusing instead on providing aid and reconstruction support when it is useful or requested. Typical of China’s approach to international relations elsewhere, this is all conducted in a quiet manner, something that will likely do little to improve local confidence in Chinese aims. Kyrgyzstan will continue to seek to assert its independence in policymaking by balancing the great powers off each other, but China’s slow surge has an ever-larger impact on the policy agenda even if it is not part of the public discourse.

Notes:

[1] Authors’ interview with former cabinet level minister, Bishkek, October 19, 2011
[2] Authors’ interview, Bishkek, October 19, 2011
[3] Jim Nicols, “Kyrgyzstan: Recent Developments and U.S. Interests,” Congressional Research Service, May 11, 2011
[4] Sebastien Peyrouse, “Economic Aspects of the China-Central Asia Rapprochement,” Central Asia-Caucasus Institute, Silk Road Paper, September 2007
[5] Authors’ interview, Bishkek, October 20, 2011
[6] Authors’ interview, Osh, October 25, 2011
[7] Yangzhou Yaxing Motor Coach Company Press Release, September 3, 2009, http://www.yaxingkeche.com.cn/en/News.aspx?id=9e5e7e19-76cc-47e5-8e8b-7d16ab378210
[8] Authors’ interviews, Bishkek and Osh, October 2011
[9] Authors’ interview, Bishkek, October 17, 2011
[10] Authors’ interviews, Bishkek, October 2011
[11] Authors’ interviews with foreign political observers, Bishkek and Osh, October 2011
[12] Authors’ interviews, Bishkek and Beijing, October 2011