Posts Tagged ‘Uzbekistan’

A brief post in the wake of Islam Karimov’s death in Beijing for the site I post everything China-Central Asia related. As ever, this is something I have a few bigger things in the pipeline about. Somewhat related, spoke to the Associated Press about the attack on the Chinese Embassy in Bishkek, the Wall Street Journal about Anjem’s jailing, the Telegraph about the numbers of children being referred to Channel and Times about a new ISIS magazine.

Karimov’s Death Seen From Beijing

zhang-gaoli-karimov

Islam Karimov’s death is the realisation of a regional concern that many have long worried about: succession amongst leaders of the Central Asian states. The question of who comes next has been a persistent concern, particularly in Kazakhstan and Uzbekistan. Beijing is not immune to these worrries. On every visit to Beijing in which Central Asia has been a focus of discussions, there have been inevitable conversations with Chinese Central Asia analysts who have been particularly perplexed about what might happen in a post-Karimov Uzbekistan. Yet, now that this scenario has arrived, China seems unperturbed and experts spoken to seem equally unconcerned. Seen from Beijing, Uzbekistan post-Karimov is a case of business as usual.

The biggest indicator of China’s reaction to Islam Karimov’s death is how the leadership responded to the news of his demise. It came at an awkward time for China, with Beijing policymakers and planners consumed with the preparations and meetings around the G20 Summit in Hangzhou. Consequently, the best that Xi Jinping could muster was a formal note through the MFA to acting President Nigmatilla Yuldoshev praising Karimov as ‘true friend’ to China. He later dispatched Vice Premier Zhang Gaoli to the funeral as his special envoy, while Prime Minister Li Keqiang paid his respects at the Uzbek Embassy in Beijing.


This set of moves could be read as dismissive, especially given the importance of respect in the Asian context. Zhang Gaoli is ultimately the seventh ranked member of seven within the Politburo Standing Committee. Therefore, in some ways, he was the most junior senior person Beijing could send. In contrast Tajik leader Rahmon, Afghan leader Ghani and Russian Prime Minister Dmitri Medvedev attended. If Beijing was to punch at this weight, then presumably Prime Minister Li Keqiang should have attended.

But at the same time, there are no other state funerals that China has reacted to in this way. The most recent possible comparison that comes to mind was the passing of Lee Kuan Yew of Singapore, a leader who commanded such respect in life that he was able to muster meetings of the Politburo outside Beijing when he visited China. Yet when he passed away, Beijing sent Li Yuanchao. Like Zhang, Li Yuanchao was a Vice Premier, but only a member of the Politburo – a second tier of senior leadership made up of 25 of the most senior members of the Party. While important, Li is definitely junior to Zhang, a Standing Committee Politburo member – ie, one of Beijing’s most inner circle of seven who rule the country. Li, it is worth mentioning, appears to also have been Beijing’s representative at Nelson Mandela’s funeral, suggesting that he may be the unofficial Chinese representative to international state funerals.

Admittedly, this is a lot of ‘Pekinology’ tea-leaf reading. However, it does seem that Beijing’s leadership made some effort to show their respect to Uzbekistan in the wake of President Karimov’s passing, notwithstanding the fact that they were otherwise preoccupied with the world’s heads of state descending on Hangzhou for the G20 meeting.

Looking beyond this speculative analysis, there is further substance to Zhang Gaoli as the representative of China to Karimov’s funeral. As well as his role on the Standing Committee, Zhang is also head of the Leading Group for Advancing the Development of One Belt One Road, a group established in February 2015 which has been tasked with steering Xi Jinping’s great initiative across the Eurasian continent. Considering the importance of Uzbekistan within this context, it is possible that Zhang is in fact one of the more appropriate members to attend the funeral given the opportunity it also presented to interact with Uzbekistan’s likely new leadership. During his visit he – like the other eminent visitors who came to pay their respects – secured an audience with Prime Minister Shavkat Mirziyoyev in which they spoke about continuing ‘to promote the Belt and Road initiative, and enrich the connotations of their all-round strategic partnership by prioritizing economy, trade, energy, production capacity, traffic and security in bilateral cooperation.’

Interested to hear more about the broader context of Uzbek-China relations, I reached out to contacts in China working in the think tank and corporate sector about what they thought of Karimov’s passing. Professor Zhao Huasheng of Fudan University in Shanghai, one of the eminent dons of Central Asia research in China told me ‘I think it [Karimov’s passing] will have no significant impact on China-Uzbekistan relations, because there are no serious problems in bilateral relations. And there is no reason for the new leader not to maintain good relations with China. A peaceful and smooth transition of power is critical for stability in the country and for security in the region.’ The biggest prerequisite and issue on the table for Professor Zhao was that the country had a ‘peaceful and smooth transition of power.’ This view was confirmed by a couple of other Chinese experts spoken to, all of whom pointed to the fact that China’s pre-eminent concern was that Uzbekistan stayed on a stable trajectory. This in fact may have been the concern that had been expressed previously – with people worried that Karimov was the lid on a cauldron that might boil over without him, rather than the leader himself being the key lynchpin in the relationship.

There are in fact no indicators at the moment to suggest that the transition of power should be anything other than smooth, or that there will be an upending of Beijing and Tashkent’s warming relationship. While there has been some speculation that the likely successor (and now interim leader), PM Shavkat Mirziyoyev, may have an openness to a more productive and close relationship with Moscow than his predecessor, it is not clear this will come to China’s detriment. Mr Miriziyoyev has already established a relationship of sorts with President Xi as the individual who personally escorted President Xi Jinping to the airport when he visited Tashkent in June 2016, a visit during which President Xi was the first ever foreign leader to give a speech in the Oliy Majlis and the two leaders (President’s Xi and Karimov) together opened a railway line that China had helped build in the country.

Suffice to say all the indicators in China-Uzbek relations are positive (notwithstanding underlying concerns that are fairly common across the region towards the potentially overbearing nature of large Chinese investments), and it would be surprising if the new leader broke away from, or reversed, this relationship. Uzbekistan continues to want foreign investment, and China has proven a fairly reliable actor in this regard. While Moscow appears to be quite actively courting Tashkent in the wake of President Karimov’s death, Beijing is the one with the relationship on a steady upward trajectory. For Beijing, the priority remains that Uzbekistan stays stable and finds ways of incorporating and building into the ‘Belt and Road’ vision. Seen from Tashkent, there is no clear reason why this wouldn’t be a possibility.

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This is a slightly longer freeflowing piece for an old site I used to contribute to fairly regularly called The Interpreter, the blog for a great Australian think tank called the Lowy Institute. Was based off some reflections from some recent travel I got to do to China, Pakistan and Uzbekistan. I’ve been lucky with the piece getting some traction, including some nice tweets, Casey Michel quoting it in his piece about China’s energy relations with the region and the Australian Business Spectator magazine republishing it. Thanks Sam for publishing it, and goes without saying a lot more on this theme and style to come!

Another piece for Longitude, the Italian’s Ministry of Foreign Affairs magazine. Part of a special edition on borders it looks at China’s western land relations, building on the work I have been doing on this subject as part of the China in Central Asia project. It is done in conjunction with Sarah Lain, my new co-editor on the site and RUSI colleague.

Related to Syria, I spoke to La Presse about Syrian Chechen leader Omar al Shishani and Newsweek about threats to aviation.

Creeping Encroachment, China’s Western Surge

While many are concerned with territorial disputes in Southeast Asia, the fact that China is quietly expanding its presence westward often goes unnoticed. Beijing has now become a huge player in Central Asia’s Great Game.

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A PDF of the article can be found here: Longitude China Central Asia Borders

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.

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

A new piece for 东方早报 (Oriental Morning Post) the Chinese paper I occasionally write for, this time focused on difficulties that corporate China has encountered recently in Central Asia. As usual, the Chinese is on top, with what I submitted in English below.

潘睿凡   发表于2012-11-14 05:13
上月,吉尔吉斯斯坦传来新闻说,由中国人投资的金矿因与当地民众发生纠纷,不得不撤走工作人员,施工被中止。

  上月,吉尔吉斯斯坦传来新闻说,由中国人投资的金矿因与当地民众发生纠纷,不得不撤走工作人员,施工被中止。这不是中国公司第一次在吉尔吉斯斯坦遇到类似麻烦,也不是中国公司第一次在中亚遇到类似事件。

今年9月在乌鲁木齐召开的第二届中国-亚欧博览会上,温家宝总理强调了新疆作为中国与亚欧之间桥梁作用的重要性。博览会上,面对来自阿富汗、哈萨克斯坦、吉尔吉斯斯坦、塔吉克斯坦等国的高层领导,他特别指出:“新疆的改革开放和发展振兴,不仅惠及新疆各族人民,也将给亚欧国家带来更多的发展机遇。”发展新疆与这些国家都有着重要关系。

新疆并不是主要的海上通道或者现代贸易路线,显而易见,发展该地区的重要性在于发展与其接壤国家的通道。打开这些通道能进一步帮助增强中国与欧洲的联系,新开通的道路能直接将中国货品运入欧洲市场。

政府对此持非常积极的鼓励态度。利用进出口银行的贷款和国有企业部署,政府在新疆和中亚已经建造了公路,铁路也在建设中。中国政府还进一步鼓励国有企业在这些区域利用其丰富的天然资源进行投资。这些由国有企业打下的基础已经促使了新疆公司的发展,贸易商也在那里积极寻找向他们开放的新市场。我在去中亚地区旅游的时候发现了中国的贸易商、货物和工人,他们都为新疆的经济扩展起到了重要作用。

但是如今,这种增长正在日益遇到挑战。最近在吉尔吉斯斯坦的这类问题并不是首次发生,中国公司在这一区域也碰到过其他麻烦。这部分是因为中亚本身是比较困难的工作环境,也部分是因为当地的观念。在同哈萨克斯坦、吉尔吉斯斯坦和塔吉克斯坦人聊天的时候,我总是会被一些当地人对个别中国公司持有的负面影响和看法震惊。他们会告诉我各种所谓中国工人抢走工作和吃光附近所有动物的传闻。更严重的是,他们还告诉我,“个别中国企业不按劳或是按时付酬,为当地居民提供很差的工作,对工作人员也非常糟糕。”不管真实与否,他们所持有的印象是:“在中亚的中国公司只是把那里的原材料和商品带回中国,带进当地市场的则是质量有问题的产品。”

这种负面印象导致的正是吉尔吉斯斯坦目前所发生的事。必须承认,当地居民告诉我绝大多数外国公司在那里都有相近的问题。但差别在于,这些国家的公司并不直接帮助本国某一区域的发展。在中亚的中国公司与欧洲公司的本质差别是:对于欧洲公司来说,这仅仅是另一个遥远的市场所在;但对于中国公司来说,却是如果要发展新疆就必须得发展的家门隔壁的市场。

这也是为什么中国的决策者应该看重这个故事的理由。应该开始着手改变中国在中亚的形象,否则开发新疆和其接壤地带的战略都会受到影响。

如今所需要的是更为清晰的中国与中亚接触战略方式。除了依靠上海合作组织峰会和从新疆扩散的缓慢的经济政策,中国不妨做出更多努力来促使这些国家的经济发展。

这并不是一条简单的道路,但是,除非对于中亚采取某些实质性的政策,否则新疆区域发展战略就可能受到影响,这也会成为将来对发展整个国家大战略以及帮助中国走出经济滞胀产生负面影响的因素。

  潘睿凡  英国伦敦国际激进主义  研究中心副研究员   (李鸣燕 译)

Corporate China’s Challenges and Opportunities in Central Asia

Last month news came out of Kyrgyzstan that a local dispute at a Chinese owned gold mine had escalated to the point that staff had to be evacuated and operations shut down. This is not the first time that Chinese companies have had trouble in Kyrgyzstan. It is not in fact the first time that Chinese companies have had trouble in Central Asia more generally. Doubtless this is a problem that is considered far down the list of priorities for the new leadership in Zhongnanhai, but it has the potential to have a direct impact on China domestically. Unless Chinese companies get Central Asia right, it is going to be very difficult for the May 2010 work plan to develop Xinjiang to be effectively implemented.

In September this year at the second international China Eurasian Expo in Urumqi, Premier Wen Jiabao highlighted the important link that Xinjiang is between China and Eurasia. In particular he highlighted how ‘Xinjiang’s reform, opening-up and development will not only benefit people of all ethnic groups in Xinjiang, but also bring more development opportunities to Eurasian countries.’ Saying this at the Expo before senior leaders from Afghanistan, Kazakhstan, Kyrgyzstan and Tajikistan highlighted the importance of these relationships in developing Xinjiang.

Far from major sealanes and modern trading routes, it has always been obvious that the solution to developing Xinjiang lies in developing its links with the countries it borders. Opening up these links is something that will further help strengthen China’s connections with Europe, opening up roadways to directly link Chinese producers with European markets.

And the government has actively encouraged this. Using money from Export-Import Bank loans and deploying state owned firms it has built roads and is building rail infrastructure both in Xinjiang and Central Asia. It has further encouraged state owned companies to invest in the area, taking advantage of the rich natural resources that can be found. And the groundwork laid by state owned firms has been built on by Xinjiang companies and traders seeking new markets that have now been opened up to them. In my travels across the region, I found Chinese traders, goods and workers – many of them with strong connections back to Xinjiang, highlighting how they were helping expand Xinjiang’s economy.

But now this growth is increasingly encountering difficulties. The recent trouble in Kyrgyzstan is not the first of its kind, and in the past Chinese companies have had other problems regionally. Partially this is because Central Asia is a difficult environment to work in, but there is also a problem of local perceptions. In talking to locals in Kazakhstan, Kyrgyzstan and Tajikistan I was endlessly surprised by the negative reactions and beliefs they would have towards Chinese companies. People would tell me stories about how Chinese workers were stealing jobs, women and eating all the animals in sight. More seriously, they would tell me how Chinese firms underpay or pay late, offer bad jobs to locals and treat staff badly. Whether true or not, the general perception is that Chinese firms are in Central Asia to simply take raw materials and commodities back to China, while they flood the markets with low quality products.

The picture that results is a negative one that leads to difficulties like those currently being experienced in Kyrgyzstan. Admittedly, I was told by locals that most foreign firms encounter similar issues in Kyrgyzstan, but the difference is that these other companies are not playing a role in directly helping a part of their home nations develop. This is the key difference for Chinese firms in Central Asia versus European ones: for the European ones it is merely another distant market, for Chinese ones, it is a market next door that is important to develop if the policy to develop Xinjiang is to be achieved.

This is also why this story is something that is important for policymakers in Beijing. Unless something is done to improve China’s image in Central Asia, then the overall strategy of developing Xinjiang’s links with its border regions will be undermined.

What is needed is a clearer strategic approach to China’s engagement with Central Asia. China cannot solely rely on Shanghai Cooperation Organization (SCO) Summits and a slow economic policy that spreads out from Xinjiang. This approach is already causing some friction on the ground and this will only get worse. If China wants to establish a cooperative economic relationship with its Central Asian neighbours, then some efforts need to be made into establishing how to help these economies develop and not simply focus on extracting national benefit from them.

This is not an easy path to take, and Beijing’s new policymakers have an already crowded plate. But unless some effort is taken to forge an actual policy towards Central Asia, China will find its regional development strategy with Xinjiang falling down too. And this would be something that would have a hugely negative effect on any grander strategy to develop the country and help it move beyond the growing economic stagnation.

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 PantucciAlexandros Petersen

Presidents Hu and Karimov in Beijing (pic from here)

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, KyrgyzstanTajikistan and Uzbekistan.