How Energy is Powering China’s Relationships With Central Asia

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China is increasingly looking to Central Asia as a major energy partner, with joint projects expected to be on the agenda at a regional summit from Thursday.

Chinese President Xi Jinping and his counterparts from Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan will be in the northwestern Chinese city of Xian for a two-day China-Central Asia summit, an event that comes as China faces growing decoupling pressure from the US-led West.

“As a neighbouring region to China, Central Asia has been at a prominent place in China’s overall diplomatic landscape, and energy cooperation is an effective means to push forward cooperation in other areas from the economy to security and other political issues,” said Cui Shoujun, an international relations professor with Renmin University in Beijing.

Stretching from China in the east to the Caspian Sea in the west, Central Asia – traditionally considered Russia’s backyard – has abundant reserves of oil, gas and coal, particularly in Kazakhstan, Uzbekistan and Turkmenistan.

There is also huge untapped hydropower potential in Tajikistan and Kyrgyzstan, according to the World Bank.

Energy cooperation between China and Central Asia started as early as the 1990s, when Beijing, after over two decades of economic opening up, pushed its enterprises to invest overseas.

In 1997, state-owned China National Petroleum Corporation’s (CNPC) maiden acquisition was a 60 per cent stake in Aktobemunaigas, an oil and gas company in Kazakhstan’s northwestern Aktobe province.

Hailed by Chinese state media as “a model of cooperation” between China and Kazakhstan, the deal paved the way for the construction of a 2,200km (1,360-mile) pipeline to deliver oil to China’s northwestern Xinjiang, a frontier region crucial for the country’s political and ethnic stability.

China made further inroads into Central Asia in 2009 when then-Chinese president Hu Jintao, joined by his counterparts from Turkmenistan, Uzbekistan and Kazakhstan in Samandepe in eastern Turkmenistan for the launch of the Central Asia-China gas pipeline.

It was the first cross-border gas project China had taken part in, and involved four Central Asian countries. In the following years, two other pipelines began operation.

Zhu Yongbiao, a professor at Lanzhou University’s school of politics and international relations, said that compared with other major powers, China was a “stable and reliable energy partner” for Central Asian countries.

A natural gas exporter itself, the US mainly buys petroleum from Canada, Mexico and Saudi Arabia. Russia is traditionally a major importer of energy resources from Central Asia, however, disagreement over pricing and supply issues has cast a shadow over the energy trade and the risks of secondary sanctions are now running high since Russia’s invasion of Ukraine.

Meanwhile, the lack of infrastructure has ruled out Europe from sourcing fuel from Central Asian countries – at least in the near term.

“This is why China has become an important market and a very promising one [to these countries],” Zhu said. “Energy cooperation with China also means a lot to the overall development of Central Asia.”

He said pipeline natural gas and oil imports from Central Asia were considered to be more secure and cheaper, with the price often only 10 per cent of that of US liquefied natural gas.

“In terms of safety risks, imports from Central Asia have distinct advantages compared with those transported by ship or rail.”

Energy ties between China and Central Asia also appear to have been unaffected by the war in Ukraine, according to Erica Downs, a senior research scholar at the Centre on Global Energy Policy at Columbia University.

Last year, Central Asia supplied more than two-thirds of China’s pipeline gas imports – the bulk of it from Turkmenistan, which has the world’s fourth-largest gas reserves after Qatar, Iran and Russia. China also imported 2½ times more natural gas from Central Asia than from Russia, she noted.

“The war is certainly not harming China-Central Asia energy cooperation. China appears poised to increase its pipeline gas imports from Central Asia,” Downs said.

In September, China said work had started on a long-delayed fourth natural gas pipeline – known as Line D – between Xinjiang and Turkmenistan via Kyrgyzstan and Uzbekistan. Six months later in Moscow, Russian President Vladimir Putin said he and Xi had reached an agreement on the Power of Siberia 2, which will deliver 50 billion cubic metres of natural gas a year from Russia’s Yamal Peninsula in western Siberia to China via Mongolia.

However, construction on Line D has been postponed several times and it is not known when it will be completed. It is also not clear when construction of the new China-Mongolia-Russia natural gas pipeline project will start.

Observers said this underscored Beijing’s strategy of diversifying energy sourcing, now a top priority in China’s energy security policy.

“It’s worth noting that China is currently much more reliant on Central Asia than Russia for natural gas so increasing imports of Russian gas helps China diversify its pipeline imports away from Central Asia,” Downs said.

“A key indicator of how concerned China is about its growing reliance on Russian gas is whether it gives a green light to the Power of Siberia 2 natural gas pipeline that Putin is eager to see built.”

Discussion over China’s energy security heated up in winter when natural gas supply from Central Asia was disrupted because of local power shortages. There have also been calls since the Ukraine war for China to learn a lesson from Europe and further diversify its energy imports to ensure stable supply.

Cui, with Renmin University, said China would continue to invest in the energy industry in Central Asia.

“Central Asia has a rich reserve, but the problem is the lack of production capability, which means this could be a great cooperation potential.”

Source : South China Morning Post