Raffaello Pantucci

A new piece for Jamestown Foundation’s China Brief as part of my ongoing research on China in Central Asia with Alex. This one focuses on China-Uzbekistan. I was also interviewed by the Italian Linkiesta on energy politics in Central Asia (for those who can read Italian), and did a presentation or two that haven’t shown up online. I have been a bit quiet of late as I have some large pieces in the pipeline and have been travelling a lot, so please forgive me. But keep an eye on this space, some very interesting stuff coming soon!

Uzbekistan’s Balancing Act with China: A View From the Ground
Publication: China Brief Volume: 12 Issue: 14
July 19, 2012 03:30 PM Age: 2 days
By: Raffaello Pantucci, Alexandros Petersen

The exact reasons for Uzbekistan’s decision to withdraw from the Collective Security Treaty Organization (CSTO) at the end of June remain unclear (Xinhua, June, 29; Russia Today, June 28, 2012). However, while Tashkent seems to have soured on the Russian-led regional organization, President Islam Karimov took time in June to pay a state visit to Beijing that included attending the Chinese instigated Shanghai Cooperation Organization (SCO). In addition to attending the SCO Summit, President Karimov held separate bilateral meetings with President Hu Jintao, signed a strategic partnership agreement and approved a raft of new measures to strengthen Sino-Uzbek relations (Gov.uz, June 8; Xinhua, June 7). At this high level, relations are clearly moving in a positive direction. The view from the ground, however, is far more complex with Uzbekistan’s traditional vision of itself as a regional powerhouse and industrial power potentially at odds with China’s growing influence in Central Asia.

A Strategic Partner

The main public take-away from the June 2012 Shanghai Cooperation Organization (SCO) Summit in Beijing was the organization’s decision to admit Afghanistan as “observer” member and Turkey as “dialogue partner” (Xinhua, June 7). When taken alongside the news that China and Afghanistan were to upgrade relations to a strategic partnership, the main international focus was on what this might mean for China’s future involvement in the war-torn country. This news story somewhat overshadowed the other big announcement to emerge on the fringes of the SCO Summit, the bilateral meeting between President Islam Karimov and President Hu Jintao during which the leaders signed a “Joint Declaration on the Establishment of Strategic Partnership Relations” (Xinhua, June 8). This came in the wake of a visit to Tashkent by General Chen Bingde, Chief of People’s Liberation Army (PLA) General Staff, who paid a bilateral visit to the capital during a regional trip that culminated in a pre-Summit meeting of military heads to plan future joint military exercises (Xinhua, June 4; PLA Daily, June 4). Although these sorts of regional summits and meetings are often more notable for the empty statements that are produced, the signals sent are loud and clear when read within the context of Uzbekistan’s regional diplomacy.

Karimov’s very presence at the summit was important, given that he makes a point of not attending similar Russian-sponsored summits or other multilateral get-togethers.  Tashkent’s foreign policy is fiercely independent—something emphasized in the decision to withdraw from the CSTO, where Uzbekistan had long resisted a number of the largely Russian instigated efforts to deepen integration. Consequently, the combination of President Karimov’s attendance at the SCO summit, the military meetings prior and the signing of a formal strategic partnership most likely signals genuine intent.  While the strategic partnership agreement itself covers areas from military exchanges to tourism programs, it is Uzbekistan’s willingness to allow China more access to its economy that stands out most.  Plans call for the development of joint special economic zones and greater Chinese involvement in the natural resource extraction, aviation and transportation sectors (Xinhua, June 3; September 23, 2011).

Even within the SCO, while Uzbekistan is resistant to get too involved at a military level, it still has permitted the establishment of the SCO Regional Anti-Terrorism Structure (RATS) in the capital Tashkent. Opened on January 1, 2004 and headed by an Uzbek Major General, RATS has an executive committee of officials drawn from each member state’s Ministries of Foreign Affairs, Interior Affairs or State Security (RATS SCO, November 30, 2004) [1]. While it is hard to discern how active the institution is, local analysts highlight its presence as significant within the context of Uzbekistan’s independent streak [2]. This is not to overplay Uzbekistan’s involvement of course—Tashkent has so far refused to participate in anything but an observer role in the biannual “Peace Mission” joint exercises (Eurasia Daily Monitor, June 19).

Beyond the SCO there are further tensions visible between China and Uzbekistan on security affairs. According to Tashkent-based analysts, the Uzbek government does not always feel that Beijing shares its concerns about international terrorism. The implication is that, while Uzbekistan views terrorism as a potentially existential threat, China considers it a secondary concern [3]. Furthermore, when focusing on Afghanistan, the main regional security challenge, Uzbekistan prefers to focus its relations and efforts at a bilateral level. This allows the country to concentrate its efforts through preferred local partners, such as Uzbek-Afghan general Rashid Dostum, rather than work at a government level. Relations between Kabul and Tashkent are currently on an awkward footing—something explained to the authors as the consequence of a high-level spat between leaders [4].

Investment at Arms Length

Tensions between China and Uzbekistan are also visible at a bilateral investment level. Uzbekistan boasts the only real manufacturing base in Central Asia and is protective of its factories and labor force.  According to several local businessmen who worked both with China and other countries, high tariffs are levied against many imported consumer goods with Chinese goods often targeted in particular [5].  Mid-level entrepreneurs interviewed and seen in Tashkent seemed to be doing a brisk trade in Chinese-made products that were modified or assembled in Uzbekistan to mask their origin. In contrast, large-scale Chinese imports or rentals of equipment—such as heavy machinery, agricultural and transport equipment—are encouraged as a way to boost Uzbekistan’s production [6].

Recent high-level meetings also have focused on Tashkent’s plans to reroute more of its natural gas, traditionally exported through Russia, into the China-Central Asia pipeline. During the recent meeting in Beijing, the two sides were reportedly “energetic and enthusiastic about the project,” though foreign observers have questioned the viability of some of the numbers being spoken about (Gov.uz, June 8) [7]. In particular, it is not entirely clear how they will achieve exports of 10 billion cubic meters to China in 2013 without missing quotas for export elsewhere or domestic demand (Reuters, May 17). One possible alternative being explored is the deepening of bilateral cooperation between China and Uzbekistan on solar energy and solar furnaces. Reportedly, the two sides have signed a bilateral memorandum of understanding to go into joint production [8]. In August 2011, the Xinjiang Garson Sun Wind Power Technology Company opened an office in Uzbekistan, part of a larger regional push (China Daily, August 16, 2011). A Chinese firm, the Holley Group, also have agreed to work with Uzbek partners to upgrade the Uzbek metering system (MeteringChina.com, June 14). Beyond energy, China has provided some infrastructure development in Uzbekistan, with China Road and Bridge Company (CRBC) participating in road projects alongside South Korean firm Posco (UzDaily.com, April 9).

Although this paints a picture of enhanced cooperation—and one that is seemingly deepening in the wake of the recent bilateral meetings between President Hu and President Karimov—there is an undercurrent of uncertainty. Chinese firms, while clearly present in Uzbekistan, have a relatively low visibility and encounter the same difficulties getting profits out of the country as other foreign firms. One way around this is to reinvest the profits generated from selling back office technology into the country, something that Huawei and ZTE—two of China’s largest telecommunications companies—currently are doing to make handsets in Uzbekistan.

From an Uzbek perspective, the priority is clearly to maintain a manufacturing base while living close to the world’s factory, China. Uzbeks have watched as neighboring states Kyrgyzstan and Kazakhstan slowly have found themselves overly dependent on China and are wary of falling into a similar position [9]. There is some evidence of this already taking place in Uzbekistan. One example given to the authors was that cotton packaging had been altered to meet Chinese demands specifically—something Beijing was able to impose because they are the largest consumers of Uzbek cotton [10]. Some in the country, however, have highlighted the potential for the state to profit from China’s increasing labor costs. Uzbekistan’s relatively developed manufacturing base, educated workforce and good infrastructure offer themselves as good alternatives. During a speech in Tashkent July 2011, World Bank Senior Vice President and Chief Economist Justin Yifu Lin spoke of Uzbekistan being in an excellent position to profit from the fact that countries like China, India and Brazil were slowly moving up the value chain (Blogs.worldbank.org, July 13, 2011). Foreign diplomats interviewed mentioned how they were taking business delegations around the country and at least one textile firm apparently was considering moving its manufacturing from China to Uzbekistan [11].

East Asian Balancing

Uzbekistan’s most prominent East Asian investment partner, however, is not China but South Korea.  With over $10 billion in total direct investment (as opposed to just over $5 billion from China), South Korea may not have the same geopolitical clout as China, but the relationship allows Tashkent to avoid relying too much on China and Russia (Korea Times, June 6). The partnership began just after independence with familial and small business links between the Soviet Koreans of Uzbekistan and their counterparts on the Korean peninsula.  It further blossomed into high-level investment partnerships and close personal ties between President Karimov and a succession of South Korean presidents.  It is not uncommon for Uzbeks who emigrate to find jobs and business opportunities in South Korea and the government in Seoul has provided direct aid—often linked to investment projects—to Uzbekistan (Korea Times, February 10, 2010). When driving through Navoiy Province in southern Uzbekistan, newly paved roads lead to a prominent cargo airport and to new factories and office buildings of the sprawling special economic zone developed by Korean companies as part of a Korean-Uzbek partnership.

Uzbek analysts and officials openly say that Karimov views South Korea and other Asian Tigers, such as Malaysia, as models for Uzbekistan’s development [12].  In doing so, he is not only crafting an economically positive narrative for the country’s future, but he also is balancing against China conceptually. Aware of the difficulties in using China’s growth pattern as a model to emulate, Uzbekistan sees countries like South Korea  as a more sound model to follow. The Asian Tigers are nearer in size to Uzbekistan and have managed the shift from a closed economy with authoritarian government to a more liberalized market economy well-integrated into the global economy. In keeping Uzbekistan’s economy relatively closed, Tashkent is not only maintaining a tight control over its economy, but it is also trying to forge a relationship with China that is not overly dependant with the giant to the east.  So far, cautious diplomacy, protectionist economic measures and strategic diversification have allowed Uzbekistan to be the master of its own destiny without overly antagonizing any of its regional partners.

Conclusion

Unlike in other countries in Central Asia visited by the authors, the general perception of China in Uzbekistan is far more positive [13]. When asking generally about the Chinese presence in the country, Uzbeks are curious and positive with none of the vicious rumors heard in neighboring countries—such as Tajik rumors that the work crews sent to work on construction sites are prisoners and that Chinese men are marrying local women. In part, this is likely due to the absence of a direct border with China, meaning the fears of annexation and mass Chinese immigration are less. Uzbeks spoken to at Beijing-sponsored Confucius Institutes or those learning Chinese at local universities were learning about China and its language out of curiosity, a desire for work or an eagerness to travel. Chinese businessmen reported finding success and establishing roots. At the same time, however, Chinese firms have the same problems faced by other foreign firms in Uzbekistan, including difficulties with getting profits out of the country and an awkward local bureaucracy. Uzbekistan is not instinctively hostile toward China, but rather is quite closed to the outside world more generally.

What is interesting to note is the gradual geopolitical alignment that is increasingly visible between China and Uzbekistan, though it is one that from the outside seems more balanced toward trade than security matters. While clearly part of a larger Uzbek balancing strategy; from a Chinese perspective, the result is a net positive one that accords with a vision that has its eye on the longer-term. For Beijing, a stable and prosperous Central Asia is the goal, allowing for trade as well as providing China with natural resources. To achieve this, China is willing to play whatever game is required. Beijing is able to accommodate Uzbekistan’s tendency to behave as a cautious actor, investing and forging a relationship with the country at a pace that fits with Uzbek concerns and that looks beyond artificial deadlines. In this way, China is able to offer Uzbekistan a partnership that stands in contrast to the fickle Western approach that oscillates between friendship and condemnation, something that helps belie underlying Uzbek concerns of competition from the rising Asian giant. Hardly a partnership of equals, Beijing’s approach has ensured that it has continued to be able to focus relations with Tashkent on its interests in the country.

Notes:

1. Author Interview, RATS Headquarters, Tashkent, May 10, 2012.
2. Author Interview  with Uzbek Official at a Foreign Organization, Tashkent, May 8, 2012.
3. Author Interview with Foreign Observer, Tashkent, May 11, 2012.
4. Author Interview with Uzbek Analysts, Tashkent, May 10–11, 2012; Author Interviews, Kabul April 30, 2012. Direct flights between Kabul and Tashkent are impossible and flights pass through Dubai or elsewhere. The authors flew Kabul-Dushanbe and then drove through Oybek border post to Tashkent.
5. Author Interviews with Local Businessmen, Tashkent, May 2012.
6. Author Interviews, Tashkent, May 9, 2012. The authors also saw numerous large Chinese-made trucks and other mobile machines at various locations in Tashkent and Samarkand.
7. Author Interview with Foreign Official, Tashkent, May 10, 2012.
8. Author Interview with Local Analyst, Tashkent, May 7, 2012.
9. Author Interview with Local Analyst,  Tashkent, May 8, 2012.
10. Author Interview with Uzbek Analyst, Tashkent, May 7, 2012.
11. Author Interview Tashkent, May 11, 2012.
12. Author Interview Tashkent, May 10, 2012.
13. In conducting research on China and Central Asia, the authors have visited Afghanistan, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.