Publication: Eurasia Daily Monitor Volume: 2 Issue: 75

With its already enormous resources in the Caspian region, Kazakhstan’s oil and gas sector has begun to turns its attention toward China’s rapidly developing Xinjiang Uighur Autonomous Region.

On April 4, the Committee for Sino-Kazakh Energy Cooperation held its inaugural meeting in Astana. The deputy chairman of China’s State Committee for Economic Development and Reform, Chan Gobao, announced that construction of the first phase of the 920-kilometer Atasu–Alashankou pipeline would be completed by December 16. The pipeline will transport Kazakh oil for processing in Western China. The pipeline is projected to initially pump 10 million tons of crude oil annually, gradually increasing the capacity of the pipeline to 20 million tons annually by the year 2010.

However, the Chinese side has some doubts about whether Kazakhstan’s ailing oil industry can supply that amount of crude. Therefore the first contract signed between the two governments is fixed at around 7.5 million tons. Nevertheless, the executive manager of Kazakhstan’s state KazMunayGaz oil and gas company, Kairgeldy Kabyldin, hastened to say that some Russian oil companies have also shown interest in pumping their oil through this pipeline (Ekspress-K, April 5).

Kazakhstan and China signed their first pipeline agreement in 1997. Since that time the Chinese National Petroleum Company (CNPC) has secured its position in Aktobe region, establishing the CNPC-Aktobemunaygaz joint-stock company. Last year the Chinese company produced no more than 5 million tons of oil. According to the region’s leading oil expert, Bayan Sarsenbina, the Chinese company, even in cooperation with other oil producers, will not be able to supply 10 million tons to ship through the pipeline to Western China in coming years.

The Chinese are not primarily interested in deals to develop their oil industry’s infrastructure. Rather, Beijing has a long-term political strategy that serves its own interests, while locking in a reliable partner to boost oil production. When CNPC owned oil shares in Aktobe region, the Chinese side signed a contract promising $4 billion of investment in 20 years, but now rising oil prices make Kazakhstan a source of cheap crude oil for China, while the CNPC appeases the Aktobe regional government with insignificant taxes, occasional charitable campaigns, and handouts to the poor (Zhas Alash, April 7).

Kazakh government officials welcomed the economic boom in western China because it provides a huge energy-resources market for the country. The Chinese State Committee for Economic Development and Reform announced that China might import 145 million tons of oil in the next 15 years. The Kazakh-Chinese Committee for Energy Cooperation also discussed the possibility of building a 7,000-kilometer gas pipeline from the Karashaganak oil field to China. But Chinese members of the committee complained about the high transportation costs for gas and refused to consider the project (Ekspress-K, April 5).

While it might welcome the economic investment, Kazakhstan’s population remains fearful of the political and demographic threats connected to expanding Chinese economic and trade ties. China has always used the lack of qualified oil specialists in Kazakhstan as an excuse to bring in large numbers of Chinese labor to work in the oilfields of West Kazakhstan, while unemployment among the local population continues to grow. Consequently, employees of Chinese companies often face financial and social discrimination. Amid the growing public resentment, Kazakhstan’s Deputy Minister of Labor and Social Protection, Bauyrzhan Ashitov, disclosed a government plan to recruit 20,000 foreign oil specialists this year. This decision provoked strong protests.

The local population had been led to believe that the Atasu–Alashankou oil pipeline would create hundreds of jobs in western and southern Kazakhstan, alleviating long-standing social problems. But some sources say that CNPC now intends to hire 10,000 Chinese workers to construct the pipeline. Locals fear that many of the guest workers will ultimately try to settle in Kazakhstan permanently.

The famous Kazakh writer Sherkhan Murtaza believes that ongoing Chinese migration poses a greater threat to Kazakhs than did 300 years of Russian rule. The Russians tried but ultimately could not deprive Kazakhs of their ethnic identity. Kazakhstan may not be so lucky with the Chinese. Murtaza argued that Kazakh law should be amended to forbid Kazakh girls from marrying Chinese citizens.

The government of Kazakhstan appears to have lost track of migration flows. No one in the Migration Agency can provide accurate numbers of how many Chinese live in Kazakhstan illegally, although independent sources indicate that hundreds live in the cities of Pavlodar, Aktobe, and Semey without being registered. The head of the Almaty migration police admitted that the local force could no longer take any effective measures to stop the tide of Chinese migration (Zan Gazeti, April 8).

However, Beijing has chosen to disregard this resentment and is continuing its advance toward distant markets and resources via Kazakhstan. China has skillfully exploited its diplomatic leverage within the Shanghai Cooperation Organization, the India-Russia-China axis, and the chill in US-European relations to its advantage.

Quite recently, the visiting chairman of the French Senate, Aymeri de Montesquiou, spoke with his Kazakh counterpart, Nurtay Abykayev, about building a narrow-gauge railway to link Europe and China via Kazakhstan. He also spoke in favor of a gas pipeline to China (Kazakhstan Today, April 6).

In another effort to expand its economic interests in Kazakhstan, China secured Astana’s de facto support in fighting Muslim separatists in East Turkestan. In October 2004 the Supreme Court of Kazakhstan branded the Islamic Party of East Turkestan as a terrorist organization. Apparently, this will not be the last of Kazakhstan’s political concessions to China.

Broadly speaking, Chinese expansion poses serious political and demographic threats not only to Kazakhstan, but also to the region as a whole. It will be deterred only by concerted actions and common policy among all Central Asian countries. But the current atmosphere of relations among these states is far from amicable.