Courting Kazakhstan: Competition Over the First Notch in China’s Economic Belt

By Taylor Land

Kazakhstan: The Late Bloomer

As China develops into a global power, the strategic importance of Kazakhstan has increased immensely. It is the only Central Asian republic that shares a border with both Russia (4,000 miles) and China (1,000 miles). Additionally, Kazakhstan has the second-largest oil reserves among the former Soviet Union countries (behind Russia) and is a leading producer of uranium. With energy security becoming an ever-growing concern to China, these resources are not going unnoticed. Additionally, Kazakhstan has quietly accumulated a recent record of economic success. Between 2000 and 2013, the poverty rate fell drastically from 47 percent to 3 percent. In 2013, GDP growth was 6 percent and led to a per capita GDP of $13,000. In education, near universal primary school enrollment, mandatory and free secondary education, and high adult literacy and gender equality led Kazakhstan to rank 1st in UNESCO’s education development index in 2011. With its impressive progress and position as the core state in any integration project in the region, Kazakhstan is likely to be the frontlines of the tussle for regional influence between China and Russia.

Kazakh-Russian Relations: “We’ve been through so much together”

Kazakhstan’s traditional neighborly relations with Russia began with Czarist Russia and became fully ingrained when Kazakhstan came under Soviet rule. The integration was far-reaching, with the Soviets making Russian the official language (banning Kazakh). Russians were appointed to the Kazakh regional administration, further developing an extensive railroad infrastructure that connected the Kazakh and Russian people and enmeshed their economies.

Central_Asia_Ethnic
Ethnic Composition of Central Asia. Green indicates Russian, Purple is Kazakh. Source: Wikimedia Commons

Signs of Soviet rule persist today. A third of the Kazakh population are ethnic Russians, and a majority can speak Russian. As a result of economic interdependence during Soviet period, certain aspects of Kazakhstan’s economy are difficult to decouple from Russia. Currently, four major Russian energy companies (Gazprom, Lukoil, Transneft, and Rosneft) drive Russian policy in Kazakhstan. Their participation in local energy projects through these companies gives Russia access to oil and gas resources and a credible interest that binds the two countries. The railroads to Russia are still Kazakhstan’s primary transportation links to the outside world. Additionally, many of the current elites received their education in the USSR and the Federal Security Bureau (FSB), the successor to the KGB, is widely believed to maintain a full presence in the country.

However, the relationship has shown signs of erosion since the fall of the Soviet Union. The governments of both Russia and Kazakhstan have encouraged the separation of their ethnic populations. In 2007, Vladimir Putin initiated an incentive plan offering cash and other social benefits for repatriating ethnic Russians from Kazakhstan, as well as tightening restrictions on Kazakh immigrants. Meanwhile, Kazakh President Nursultan Nazarbayev has pursued policies with the aim of strengthening Kazakh identity. This includes making the Kazakh language official and encouraging ethnic Kazakhs abroad to relocate to Kazakhstan. These policies alienate ethnic Russians and drive them back to Russia. The effects on immigration were particularly pronounced in the mid-2000’s, when 30 percent of all immigration to Russia came from Kazakhstan (more than any other country).

Additionally, the Kazakh-Russian relationship has weakened as Kazakhstan’s large oil and natural gas reserves have attracted investment from the West (and China). In particular, the Tengiz and Kashagan oil fields on the Caspian Sea, which require extremely advanced technology and expertise, have benefitted from the involvement of the oil supermajors. This has had two major impacts on Kazakhstan: a greater sense of independence from Russia, and a greater appreciation of the benefits of economic diversification.

With this in mind, enter China.

Caspian_region_oil_and_natural_gas_infrastructure
Source: Wikimedia Commons / eia

Kazakh-Sino Relations: “You deserve better”

Wriggling free from Moscow’s influence is not an easy task for Russia’s neighbors under any circumstance, but having the world’s rising global power as an alternative may make the prospects for Kazakhstan considerably better. With China’s late 2013 announcement of the Silk Road Economic Belt, China announced its intentions of being Kazakhstan’s alternative. Though the development strategy is incredibly grandiose, encompassing the entirety of the Eurasian landmass and parts of East Africa, it should be understood as a tool of economic statecraft with the purpose of garnering influence in Central Asia. At the heart of China’s interest in Kazakhstan are two core desires: 1.) obtaining access to Kazak resources (oil, gas, and uranium) and the reliable transit of Turkmen gas and 2.) development of the Xinjiang Uygur Autonomous Region through economic cooperation and road/railway construction.

In November 2014, Kazakh President Nazarbayev announced Kazakhstan’s plan for infrastructure development and economic growth, dubbed the “Bright Road.” Chinese President Xi Jinping was quick to call attention to how well Kazakhstan’s new project complemented the Silk Road Economic Belt (both projects focus on infrastructure development). Just four months later, in March 2015, the two countries announced the signing of 33 deals worth an astounding $23.6 billion. The projects included the petroleum sector (primarily refining), but also included agreements on steel, non-ferrous metals, sheet glass, hydropower, and automobile projects (New Silk Road 2015). Moreover, the March announcement was followed by a September 2015 announcement that an additional 25 agreements worth $23 billion were signed, with 20 more unsigned agreements being negotiated. Again, the agreements included energy sector projects along with value-added projects in the transportation and chemical industries to assist with the overall development of Kazakhstan (Kazakh President Touts 2015). Details of the agreements have not been made public to date, but it is likely that China’s end-game is to create pipeline infrastructure that could re-route all of Kazakhstan’s oil production from its current destinations in Europe to China. A pipeline from Kazakhstan to China’s coastal regions already exists, but connecting infrastructure is necessary within Kazakhstan.

Despite the massive amount of cooperation between the Kazakh and Chinese governments, many challenges still exist before China can safely consider Kazakhstan to be in its sphere of influence. For one, the government is currently dominated by pro-Russian officials who, while open to development assistance from China, are likely to display loyalty to Russia if the contest intensifies. This is partially due to long-standing rapport, but also influenced by the FSB’s strong presence in Kazakhstan, which makes resistance unsettling at the individual level. This landscape could change if a shake-up occurs upon Nazarbayev’s succession (he’s currently 75 years old), but Russia has made efforts to ensure a pro-Russian replacement is selected. Additionally, the large Russian population in the north would create the potential for social unrest if a shift towards China further alienates the minority population. Additionally, it gives Russia the excuse it needs to invade and annex northern Kazakhstan, which happens to contain the country’s most valuable energy resources. This would be drastic, but it is not outside the realm of possibility if Russia views Kazakhstan as an indispensible buffer against an expanding China.

Outlook: Kazakhstan plays the field

Russia is likely to begrudge China for making an aggressive push into what it considers its backyard, but it is unlikely to have the capabilities to undermine the effort. Russia’s ties to Kazakhstan are weakening with every passing year. Russia has offered a fairly stable energy relationship (Kazakh energy supplies transit through Russia en route to Europe), but the direct route from Kazakhstan to China offers more security and seemingly unending demand from coastal China. Russia has invested in Kazakhstan in the past, but almost solely in an extractive capacity. China, on the other hand, is offering a more diversified array of development projects that assist with Kazakh industrialization. Additionally, China is taking advantage of Russia’s recent economic hardship (due to economic sanctions and low oil prices) and pre-occupation in Ukraine by using its vast financial resources to make a strong push for influence when Russia is least able to react effectively. It may require turnover amongst the political elites in Kazakhstan, but if China continues to offer a superior partnership to that offered by Russia, thinly veiled threats from the FSB will not be enough to stifle the momentum of China’s economic push. For the foreseeable future, this will likely manifest itself in a delicate balancing act on the part of Kazakhstan, which will attempt not to particularly favor either party. This strategy will be employed to extend the courtship from Russia and China as long as possible to help reach their development goals. The longer this act goes on, the more difficult it will be to determine where the country’s loyalties truly rest.


TL 3Taylor Land is a Master’s candidate at the Patterson School studying international security and economics. His core interests are geopolitics and macroeconomics, with regional interest in Europe and the Middle East. Taylor can be contacted at taylor.land@uky.edu

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s