Pipeline politics in Central Asia

The opening early last month of a new Central Asia-China gas pipeline is the latest demonstration of Beijing’s growing influence over the natural resources of the region. China’s voracious appetite for energy resources has led to intriguing developments in its relationship with Russia and its Central Asian neighbors, and it is tempting to see in them a new chapter in the long-running battle for supremacy in the region. But while some take solace in such rivalries, we must recognize that all countries have a stake in the development of Central Asia and should help to ensure that it does not become a breeding ground for unrest and instability.

Central Asia is at the intersection of Asia, Europe and the Middle East. Once situated along the main trade route between East and West, it has been a backwater for over a century, serving to link more strategically pressing areas despite possessing some of the world’s largest reserves of oil, gas and metals. Countries in Central Asia have endured autocratic, repressive governments’ exploitation of that natural wealth and the resulting instability. In recent years, Islamic fundamentalist groups have been effective in marshaling public anger over misgovernment. They have made the most inroads in Afghanistan, but progress is evident throughout the region.

China and Russia have focused on the region for several reasons. They both hunger to exploit its vast mineral wealth. They worry about the danger of contagion from unrest that might spill over borders. They both seek to extend their influence, and deny similar opportunities to geopolitical rivals. Working together, Russia and China have used the Shanghai Cooperation Organization to engage the key nations of Central Asia in joint security efforts, and to promote mutually beneficial economic development.

That cooperation has not kept Beijing and Moscow from competing with each other for influence in Central Asian capitals, however, particularly in the field of energy resources. Traditionally, energy resources from the region have flowed north and west through Russia. Dependence on Russian infrastructure makes Central Asia governments nervous, which China has been quick to exploit. Beijing has provided $10 billion in loans to finance projects in Kazakhstan and another $4 billion to Turkmenistan. During a recent visit to Kazakhstan, Chinese President Hu Jintao offered another $3.5 billion to help finance non-energy ventures in a bid to help diversify the Kazakh economy.

Pipelines are key instruments of influence. Already operational is a 1,300-km pipeline that carries natural gas from Kazakhstan to China, the first such route to completely bypass Russia. During his December visit to Kazakhstan, Mr. Hu opened a section of the new, 1,833-km pipeline, which starts in Turkmenistan and reaches China’s Xinjiang Uighur Autonomous Region via Uzbekistan and Kazakhstan. The entire pipeline was formally opened days later during Mr. Hu’s visit to Turkmenistan.

Once it reaches full capacity, the new pipeline will have a capacity of 40 billion cubic meters (bcm) a year, significantly reducing Turkmenistan’s dependence on Russia. Moscow has in the past purchased about 50 bcm a year from Turkmenistan, but the two countries fought last year over the details of a gas supply agreement and who was responsible for an explosion in a pipeline in April. It was no surprise that Russian President Dmitry Medvedev followed Mr. Hu to Turkmenistan to talk energy issues.

Beijing’s gains come at Moscow’s expense. Russia had taken about 70 to 80 bcm of Central Asian gas annually, which it then exported to Europe or used itself, allowing it to redirect Siberian gas to European markets — again, maximizing Russian influence in the region. Gas exports were significant not just in themselves, but also because they provided a means for Russia to acquire interests in downstream companies in Europe. With Russian natural gas production now stagnant, the loss of Turkmen gas considerably diminishes Russian leverage.

The new pipeline also changes the dynamics of China’s negotiations with Moscow to secure Russian gas. The two countries concluded a memorandum on the supply of natural gas in March 2006, but no final contract has been agreed. This matters to Japan, as it too could use the natural gas that will flow through the pipeline. At this point, however, it appears destined to go to China.

Competition is and will remain a defining feature of the relationship between China and Russia. But both governments are also smart enough to recognize their shared interests, and work together when possible to realize them. Helping to stabilize the countries of Central Asia is one such concern. Both Moscow and Beijing are aware of the dangers posed by political instability on their own door steps. That will reign in their competitiveness — and it should inspire other nations to get involved as well. Abstract calculations of the balance of power should not overshadow the very real consequences of neglecting this critical region.