Uzbekistan’s Growing Role in Beijing’s Central Asian Strategy

Publication: China Brief Volume: 11 Issue: 1

The People’s Republic of China (PRC) is pursuing a variety of objectives in Central Asia. These objectives include securing regional states’ support in suppressing anti-Beijing Uighur nationalists and potential terrorist threats, giving Chinese firms access to energy resources as well as trade and investment opportunities, and securing diplomatic support regarding the status of Taiwan, Tibet, the Beijing Olympics, and other issues of foreign policy concern to Chinese leaders. Chinese strategists like to work with Central Asian states to balance the presence of the other great powers active in Eurasia, including Russia and the United States. The PRC leadership is especially interested in developing Central Asia’s transportation and other infrastructure that enhances these countries’ ability to serve as a transit corridor for Chinese economic activities in the region and beyond.

Uzbekistan is a natural partner in helping Beijing pursue these goals. The Uzbek regime is staunchly anti-terrorist and has eagerly worked with the Chinese authorities to disrupt anti-Beijing groups. Uzbek leaders considered their ties with the PRC as helping dilute Moscow’s preeminence in Central Asia. Uzbek officials are looking to the PRC to provide loans, investment, and customers for Uzbek exports. The Chinese-Uzbek energy partnership made considerable progress last year. Uzbekistan’s central location would result in serving as a pivotal component in most east-west networks. Last month saw the opening of yet another segment of the massive Turkmenistan-to-China natural gas pipeline that passes through central Uzbekistan (CentralASIA Newswire, January 6). Future years should see additional pipelines as well as east-west railroads being built on Uzbek territory. China’s growing economic and security presence in Uzbekistan and other Central Asian states may elevate their already good partnership to an even higher level in coming years.

Energy Ties

China’s growing energy needs represent a major force driving Beijing’s increased interest and involvement in Uzbekistan. Through its Energy Eastward Transportation Program, the PRC has been promoting the development of oil and gas pipelines that would direct Central Asian energy resources eastwards through secure land transport toward China. Energy imports from and through Uzbekistan can travel overland to the PRC and obviate the need for Beijing to rely on vulnerable sea lanes susceptible to disruption by pirates or foreign navies. Since these pipelines also pass through Xinjiang, they help generate growth in that ethnically troubled region of the PRC. The PRC State Council is reviewing a proposal to make Urumqi a regional energy center (New York Times, January 2).

One impediment to this plan has been that Central Asian’s Soviet-era energy pipelines either flow either westwards towards Europe or north to Russia. For this reason, PRC officials have been encouraging Chinese energy companies to purchase Central Asian energy assets and invest in the transportation and other regional infrastructure required to move these resources to China. Last year saw the inauguration of the PRC’s first energy pipelines with foreign countries, with one supplying liquefied natural gas (LNG) from Turkmenistan and the other delivering oil from Kazakhstan. They were joined this January by the formal opening of the first oil pipeline between Russia and China. The natural gas pipeline from Turkmenistan, which has the fourth largest volume of proven natural gas reserves in the world, is particularly important since it passes through Uzbekistan and Kazakhstan. Its 1,833-km route originates on the Turkmen-Uzbek border, passes through central Uzbekistan and southern Kazakhstan, and then ends at the border town of Khorgos, which is part of the Xinjiang Autonomous Region in northwest China. PRC internal pipelines then move the gas to the industries and consumers located in eastern Chinese cities such as Shanghai. Uzbekistan and Kazakhstan plan to construct connecting branch pipelines that will allow them to send their own natural gas to China (The Times of Central Asia, December 27, 2010).

Uzbekistan is one of the largest natural gas producers in the world. According to the Uzbek State Statistics Committee, Uzbekistan’s yearly output is approximately 60 billion cubic meters (bcm) (Central Asia General Newswire, December 27, 2010). Thus far, a lack of investment and export pipelines has resulted in most of Uzbekistan’s gas being used for domestic consumption [1]. Uzbek planners, wary of allowing Russian companies to obtain even greater control of their energy resources, have seen Chinese investment as one way to break out of this situation. Whereas Western energy companies have shunned Uzbekistan due to its stifling political atmosphere and arbitrary commercial practices, the Chinese have been more willing to assume political and economic risks, especially in the short-term, to secure a more enduring energy supply in the long term.

The Chinese-Uzbek energy partnership made considerable progress last year. In June 2010, the CNPC signed an agreement with Uzbekistan’s national oil company to purchase 10 bcm of natural gas each year. A spur to the Turkmenistan-to-China pipeline, which sent 4 bcm of natural gas to China in 2010, is under consideration to pump Uzbekistan’s own natural gas to the PRC (The Times of Central Asia, January 7). In December 2010, the Asia Trans Gas Uzbek-Chinese joint venture created by Uzbekneftegaz and the CNPC opened the second strand of Uzbek section of the Turkmenistan-to-China gas pipeline. It should allow the flow of LNG to the PRC through the pipeline to reach its expected annual level of 15 billion bcm in 2011 (UzReport.com, December 29, 2010). These volumes should meet half of the PRC’s annual demand for imported LNG (The Times of Central Asia, December 27, 2010). The CNPC is helping to explore and develop other Uzbek oil and gas fields, including those in the Aral Sea, Ustyurt, Bukhara-Khiva and Ferghana Valley [2]. A subsidiary of the China Guangdong Nuclear Power Corporation is prospecting for black-shale uranium in Uzbekistan’s Navoi Province (Radio Free Europe, April 4, 2010).

Trade and Investment

Besides securing access to Uzbekistan’s energy resources, the Chinese and Uzbeks also desire to expand PRC-Uzbek commerce and Chinese investment in Uzbekistan. With approximately 30 million citizens, Uzbekistan offers Chinese traders and investors the largest number of potential consumers among the individual Central Asian countries. In recent years, Uzbekistan, though lagging behind regional leader Kazakhstan, has achieved rapid economic growth rates that have helped raise the country’s still low per capita gross national income.

For its part, the Uzbek government in 2009 approved a program of modernization, technical and technological upgrading of key industries for the 2009-2014 period that anticipates some $20 billion of foreign direct investment (Asia Pulse, December 1, 2010). China is the logical source of such investment since Western investors are generally deterred by the Uzbek government’s arbitrary policies and repression of civil liberties while the Uzbek authorities want to limit the role of Russian entities in their economy. Uzbekistan lacks many national entrepreneurs or small businesses, so Chinese investors could fill a niche here and, ideally, impart some of their skills to Uzbek’s small but growing middle class (The Times of Central Asia, December 9, 2010).

During the 2005-2010 period, Chinese investments in Uzbekistan exceeded $2 billion dollars (Regnum News Agency, January 4). Last year, the PRC offered the Shanghai Cooperation Organization’s (SCO) Central Asian members billions of dollars in easy short-term credits to help them manage the regional implications of the global financial crisis. According to the Uzbek government, their country has used these long-term soft loans from the Export-Import Bank of China to support some 20 infrastructure projects worth more than $600 million [3]. Beijing has also proposed establishing a new multi-billion dollar SCO Development Bank, with China initially lending the proposed institution most of its money.

Uzbekistan, the largest producer of cotton in Central Asia, recently surpassed the United States as the main source of the PRC’s cotton imports. In addition to cotton fiber and energy products from the Caspian Basin, other Uzbek exports to China include metals, minerals, and food products. PRC officials have supported Uzbekistan’s joining the World Trade Organization (China Daily, May 26, 2005). PRC products fill a convenient niche in Uzbekistan’s market for low-end consumer goods. They are of higher quality than those from local producers or Russia and less expensive than Western imports. Chinese companies have also found many Uzbek customers for their machinery and equipment [4]. In contrast, Uzbekistan joined the Moscow-led Eurasian Economic Community in 2006, but left the organization two years later. It also has declined to join the new customs union taking shape between Russia, Kazakhstan, and Belarus.

Nevertheless, major increases in Chinese economic exchanges with Uzbekistan will require substantial improvements in the capacity and security of the country’s economic institutions and reductions in barriers to trade and investment. At the time of independence, Uzbekistan’s major roads, railways, and energy pipelines all flowed northward towards Russia rather than eastward toward the PRC.

In April 2007, the Chinese and Uzbek governments announced they would construct a 500-kilometer natural gas pipeline between their countries, with an annual capacity of 30 billion cubic meters (bcm) per year, which amounts to half of Uzbekistan’s annual gas production. Its entry into service will enhance Uzbekistan’s leverage vis-à-vis Russia’s Gazprom and likely force that giant energy company to pay higher prices for Uzbekistan’s natural gas [5]. Since China and Uzbekistan do not border each other, the pipeline would need to traverse another Central Asian country [6]. The two countries also intend to construct a 268-kilometer China-Kyrgyzstan-Uzbekistan rail line that would terminate in the Uzbek city of Andijan, near where the CNPC is developing Uzbek oil and gas fields (Radio Free Europe, April 4, 2010). At the moment, the parties continue to disagree regarding how to finance the project as well as the size of the rails. Kyrgyzstan’s high external debt has led its government to offer gold, iron, and other minerals in lieu of cash as its contribution. They also resist meeting China’s insistence on using a narrow rack gauge across the entire rail line (AKIpress News Agency [Kyrgyzstan], January 11).

Security and Defense

Chinese and Uzbek leaders have taken care to express their support for the other country’s security, internal stability, and territorial integrity. While PRC leaders fear secessionist movements and religious extremism among its national minorities, Uzbek leaders worry about domestic political instability as well as the remnants of the Islamic Movement of Uzbekistan (IMU). Media reports indicate that the IMU has revived some of its terrorist activities in recent years (See "Is there a Revival of the Islamic Movement of Uzbekistan?," Terrorism Monitor, October 28, 2010). Uzbek officials have turned to foreign partners, including China, for support in dealing with this threat. For example, since the April 2008 NATO summit in Bucharest, President Karimov has proposed a new "6+3" framework for addressing the conflict in Afghanistan. The new structure would operate under the aegis of the United Nations and attempt to promote Afghan reconciliation and reconstruction in the context of a regional security settlement. Karimov proposes to include all the countries bordering Afghanistan–Iran, Pakistan, Tajikistan, Turkmenistan and Uzbekistan as well as China—with Russia, NATO, and the United States participating as the major external actors involved in the conflict. Uzbekistan already is a major participant in the Northern Distribution Network through which NATO countries send cargo to Afghanistan.

Uzbekistan has traditionally been uneasy about Russia’s military presence in Central Asia, and has indicated concern regarding its bases in Kyrgyzstan and Moscow’s de facto annexation of Georgia’s separatist regions of Abkhazia and South Ossetia in 2008. Uzbek officials have assumed a prominent role in limiting the security mandate and military capabilities of both the SCO and the Moscow-dominated Collective Security Treaty Organization (CSTO). One of the strategies that Uzbekistan has pursued to weaken Russia’s military predominance in Central Asia has been to deepen security ties with other great powers on a bilateral basis, including with China, as well as develop its own military, which is probably the strongest of the five Central Asian states. Senior PRC and Uzbek defense leaders meet frequently at multilateral and bilateral events. Most recently, on November 30, 2010, PRC Defense Minsiter Liang Guanglie met Uzbek Deputy Defense Minister Rustam Niyazov in Beijing (The Times of Central Asia, December 3, 2010).

Conclusion
 
Both China and Uzbekistan benefit from their cooperation in trade, transport, energy, and regional security issues. Chinese trade and investment regarding Uzbekistan continues to grow, with Uzbek authorities especially interested in working with the Chinese to develop their transportation infrastructure and energy resources. Uzbeks support Chinese proposals to enhance the SCO’s economic role and have developed good security ties with Beijing within the SCO framework and bilaterally. Both regimes are staunchly opposed to regional extremism and collude to control potential opponents of either regime. Uzbek officials believe that their ties help dilute  Moscow’s preeminence in Central Asia—a goal shared by their Chinese colleagues if not so openly proclaimed by them.

Notes:

1. http://www.eubusiness.com/news-eu/uzbekistan-energy.4og
2. Ministry of Finance of the Republic of Uzbekistan, June 15, 2010, http://www.mf.uz/en/component/content/article/117-id-49.html.
3. Ministry of Finance of the Republic of Uzbekistan, June 15, 2010, http://www.mf.uz/en/component/content/article/117-id-49.html.
4. Niklas Swanstrom, "China and Central Asia: A New Great Game or Traditional Vassal Relations?" Journal of Contemporary China, 14: 15 (November 2005): 579-580.
5. Dina Rome Spechler and Martin C. Spechler, "The foreign policy of Uzbekistan: sources, objectives and outcomes: 1991-2009," Central Asian Survey, (July 15, 2010) 29: 2. 165.
6. Erkin Ahmadov, "Sino-Uzbek Relations and The Energy Politics of Central Asia," CACI Analyst, November 14, 2007.