China’s successes in establishing itself in Central Asia have been furthered in recent months. After the agreement signed with the Tajik aluminum smelter in spring, during the fall Beijing has once again confirmed its place in the gas and nuclear sectors in Kazakhstan, to Russia’s disadvantage but to the benefit of the Kazakhstani authorities, who as a result will gain in autonomy in strategic domains.
BACKGROUND: In May 2008, China followed in Russia’s tracks by establishing itself in the development of the Tursunzade aluminum smelter, Tajikistan’s main industry. The Tajik Aluminum Company and the Chinese National Corporation for Heavy Machinery (CHMC) signed an agreement for the construction of two factories in the Yavan district that will supply TALCO with raw aluminum for further refinement. The materials required to make aluminum (quartz and coal clay) will be mined from the Chashmasang deposit, situated fifty kilometers from the capital Dushanbe, and which would be able to supply the smelter for the next fifty years. In addition, the Chinese partners are negotiating with TALCO over the construction of a factory for the production of coal and graphite. The project will be financed to the tune of US$ 30 million by China but will also receive aid from the ADB and the EBCD since the total project will cost about 1 billion US$. Currently, the inputs for TALCO are supplied from Russia, China, and the Baltic states, and this could be the first time that the smelter is supplied with materials mined in Tajikistan itself. This agreement revived discussions about China’s possible participation in the Rogun hydroelectric plant project, on which the Russian company RUSAL has set its sights but withdrew from the project in 2007.
However, the country in which China has recently reaffirmed its place as Central Asia’s key energy partner is Kazakhstan. At the beginning of November 2008, CNPC and KazMunayGas signed an export agreement for 5 bcm of gas annually to China. This gas is extracted from the Aktobe sites being exploited by Chinese (AktobeMunaiGas) and to date has mainly exported gas to Europe via Russian gas pipelines. Both companies also confirmed the two-phase construction of a Sino-Kazahkstani gas pipeline, which will form part of the great Sino-Central Asia gas pipeline. It will travel over 1,300 km from the Uzbek border to the Khorgos border post and will include five compression stations along its path. Several sections are to be constructed: one between the Uzbek border and Shymkent, another between Almaty and Khorgos, and lastly above all a North-South section which will link the Beyneu-Akbulak deposits to Shymkent via Kzyl-Orda, with a first-phase capacity of 5 bcm by 2011 and full capacity of 10 bcm per year from 2014-2015. Half of the 10 bcm will go to China, while the other half will be reserved for domestic Kazakhstani consumption. The development of the Sino-Central Asian gas pipeline will therefore enable Astana to get significant transit rights for both Turkmen (Ashgabat is going to deliver 30 bcm to China) and Uzbek (probably 10 bcm) gas.
Lastly, some days later, China confirmed its nuclear partnership with Kazakhstan. The Kazakhstan National Atomic Energy Agency, Kazatomprom, has signed two agreements with the China National Nuclear Corporation (CNNC) and China Guandun Nuclear Power Company (CGNPC) which make provision for multiple bilateral collaborations. Several joint-ventures under 51 percent Chinese control will be created to supply Beijing with natural uranium and, after 2013, to collaborate in enriching it. Kazatomprom has been supplying nuclear fuel to Chinese reactors since 2007: it sells China natural uranium, which China enriches before sending on to the Ulbinsk factory, located at Ust-Kamenogorsk in east Kazakhstan for its transformation into fuel. Kazatomprom’s director Mukhtar Dzhakishev announced that from now the company aims to participate directly in the construction of Chinese nuclear power plants so it can gain experience in this sector and offer its services to countries other than China. There are also plans for the joint exploitation of uranium deposits in Kazakhstan: those of Irkol (Kzyl-Orda region) which has estimated reserves of 750 tons, and Semizbay (Akmolinsk region) with reserves of 500 tons for CGNPC, and Zhalpak (South-Kazakhstan region) whose reserves are put at 750 tons for CNNC.
IMPLICATIONS: The implications of this strengthening of China’s presence are multiple. China is succeeding in making inroads into Central Asia at Russia’s expense: Moscow seems to have had difficulties keeping the promises it made to the Tajik authorities to take partial control of the hydroelectric sector, and that of aluminum, which is linked to it. In Kazakhstan, China, which has already produced a massive rise in Central Asian gas prices and ended the Moscow-imposed regime of low prices, is resolute about challenging Gazprom’s monopoly. The prospect of China-Kazakhstan cooperation in gas is not limited to 10 bcm of the Beyneu-Shymkent section: the possibility of extending the pipeline’s capacity enabling it to carry a share of production from the immense Karachaganak site is also mentioned regularly, causing concern in Gazprom. The Russian company is also concerned about the increasing loss in importance in Beijing’s eyes of the Sino-Russian Altay pipeline project, relative to the growing importance of the Central Asian scene.
On the Kazakhstani side, one can notice the transformation of Kazatomprom into a holding capable of managing the whole nuclear cycle from the mining of primary resources to the construction of reactors including the enrichment of uranium. In fact, since 2006 Kazakhstan has had a 10 percent stake in the shares of the American maker of nuclear reactors, Westinghouse Electric Co., via Toshiba. The Ulbinsk metallurgy factory, which currently only operates at 30 percent of its capacity, could then become a key piece of Kazakhstani strategy, which is to respond to the ever growing demand of China and Japan for nuclear energy. Kazakhstan’s considerable uranium resources (almost 20 percent of known world resources, estimated at between one and one-and-a-half million tons) justifies its global ambitions since it could produce, according to official figures, 15,000 tons of uranium by 2010, 27,000 tons by 2020, and maintain this level until 2050.
KazMunayGas’ rapprochement with China has a triple effect in the energy domain: Kazakhstan will win the rights to transit Turkmen and Uzbek gas, accentuate Gazprom’s feeling of no longer being the master of the game, and put an end, at least in part, to the gas shortages in the southern regions of the country. Indeed, the Beyneu-Shymkent-Almaty section will enable a three- or fourfold increase in the quantity of gas available in the Zhambul and Alma-Ata regions as well as in the city of Almaty itself. The Kazakhstani authorities will therewith be rid of a related problem, that of the difficult partnership with Tashkent concerning the delivery of gas. Uzbekistan in effect tends not to provide regular deliveries or to play at gas blackmail in its relations with Kazakhstan. Astana also hopes to avoid the critiques issuing from a section of the political class, which is concerned about Beijing’s grip over the Kazakhstani energy sector and denounces the sale of national resources to the Chinese neighbor. This is the case, for example, with the project for the Ekibastuz electricity plant in the Pavlodar region and the high-voltage line Ekibastuz-Xinjiang, which have no provision for connection to neighboring Kazakh consumers. The power stations will thus increase Kazakhstan’s export potential but not remedy domestic consumption shortages. The Sino-Kazakhstani gas pipeline will avoid this criticism as it will also service the local population.
CONCLUSIONS: Though Russia’s still evident dominance in Central Asia cannot be thrown into question, China is nevertheless continuing to make inroads and to capture parts of the market in the region. Weak states such as Tajikistan have everything to gain from the involvement of international actors, whoever they are, while Kazakhstan is enlarging its room for maneuver and continues to make a name for itself as a regional power in key domains such as the nuclear industry, which at present is enjoying more favor due to decreases in the price of hydrocarbons. China’s growing presence in Central Asia is thus in direct competition with Moscow’s plans for the region. Though for the time being both powers may have managed to fulfill their aims without coming head-to-head, this situation will in all likelihood change in the coming years: China is experiencing exponential growth and devouring primary resources, while Russia is using its economic revival to specialize in primary resources and heavy industry.
AUTHOR’S BIO: Sebastien Peyrouse is a Senior Research Fellow with the Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center. He is the author of Turkménistan, un destin au carrefour des empires (Paris, 2007, in French), among other books.