Wednesday, September 7, 2011

The Great Game in the 'Stans

Beijing overtakes the EU in bilateral trade
While China’s intense and growing interest in Central Asia has long been known, a new report brings home just how intense that interest is, and how Beijing has overtaken other powers in the last decade.

The report, titled “The New Great Game in Central Asia,” was released Tuesday jointly by the European Council on Foreign Relations and the Asia Centre. It shows that the European Union, long the most important trading partner with the five states that make up the Central Asian region, was overtaken in 2010. China trade in 2010 was 23 billion euros compared with 21 billion for the European Union. China, the report notes, “is clearly confident that it can reorient Central Asia towards Beijing.”

The region, which formerly made up a major geographical segment of the collapsed Soviet Uni0on, is a vast breadbasket, primarily growing cotton and wheat, with 60 percent of the population living in rural areas and agriculture accounting nearly a quarter of the region’s gross domestic product. The region is sparsely populated. With 66 million people but major infrastructure needs, the report says, “Central Asia is also a market for European equipment goods. The Silk Road still runs both ways.”

The biggest drawing card for all of the major powers, however, is oil, and hence the importance to the rest of the world. The lion’s share of EU trade with the region is with Kazakhstan and 88 percent of trade is made up of EU oil imports. The other states are minuscule trading partners.

Central Asia, the report says, has become “almost a laboratory for Chinese foreign policy.” Until the past few years, China’s reliance on Central Asian oil was said to be minimal and thought to be limited to less than 5 percent of its needs. Its geographical proximity to both Europe and China, however, makes the Central Asian region a valuable energy source, reducing dependency on maritime routes for both sides.

The trigger for China’s involvement was the Shanghai Cooperation Organization, which was launched in Shanghai in 2001 by the leaders of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan. The organization, known as the SCO, was primarily intended to deal with the region’s security concerns including terrorism, separatism and extremism. However, it appears that involvement in social development is growing quickly. It has signed a series of treaties on collective security to broaden cooperation on issues such as security, crime, and drug trafficking.

A number of joint military exercises have been held, starting in 2003. Since that time, the Stans, as they are sometimes called, have teamed up with Russia and China for large-scale war games. Chinese sources speaking with the authors of the report said their hope is for the SCO to become a “quasi-military alliance that would be able to veto a UN-based intervention in the region as well as carry out its own security actions.” However, the report notes, those security actions are likely to be focused on domestic issues rather than international ones, given the presence of large numbers of people in the region who are sympathetic to the plight of rebellious Uyghurs in the Xinjiang region of China.

That has implications for the large US Air Force base near Bishkek in Kyrgyzstan, which is critical to the US war effort in Afghanistan. The Chinese are “specifically critical of the US base,” the report says. “China is clearly hostile to a US presence so close to Xinjiang. Our analysts all look beyond the withdrawal of US forces from Afghanistan with a view to ensuring the security of the region and to containing the spread of the “three evils”. They are clear that China’s investment and aid packages – which actually dwarf trade figures – are also tools of influence to leverage the five states. They want to promote the SCO and Chinese financial centers – with some hedging between Hong Kong and Shanghai – for financial aid and share offerings from the region.”

Chinese policy is a mixture of rhetoric on trade, sizeable handouts, close attention to power politics “and a refusal to choose between Russia and the US – which they even see converging together against the Kyrgyz regime recently.” The SCO, they say, is a hedge against Western demands and potential UN resolutions, which may mean that it becomes a “fraternal alliance”, offering protection against transnational security threats and international demands, but still falling short of a traditional alliance.

The United States and Russia both have important strategic interests in the region. They are in competition over oil pipelines and the military bases. The European Union has begun to drive up investment in the region, with an aid package for 2007 to 2013 that totals US$719 million. India is seeking to increase its involvement as well, through the development of the TAPI oil pipeline. Japan and South Korea are both seeking influence as well, Japan through the Central Asia Plus Japan Framework

Thus the pressure on China to defend its interests in the region is rising as trade grows and China increasingly depends on Central Asian energy supplies. The Chinese leader Hu Jintao has visited the region three times in the past three years. Premier Wen Jiabao has also visited. So far china has poured more than US$10 billion in investment into the region.

“Any instability in neighboring countries runs the risk of threatening China’s own internal stability,” the report says. “Its greatest remaining security concern is Xinjiang and the fight against the “three evils” of separatism, religious extremism, and terrorism. China wants the Central Asian states to take a more active part in its fight against Uyghur separatist movements. The Central Asian countries have the largest Uyghur populations of any countries apart from China,” and many separatist groups are believed to be based there.

Despite China’s considerable economic influence, however, China has largely been unable to project its soft power into the region, as it has been unable to do in many areas of the world– if indeed it wants to. The report cites an opinion poll carried out in Kyrgyzstan, “which showed that just 1.36 percent of respondents considered China to be the country friendliest to Kyrgyzstan, as against 52.67 percent for Russia. Another survey found that 69 percent of Kazakhs saw China as the country representing the greatest economic threat to them.

China, the report’s sources say, “is in no position to outflank Russia and become the leader in the region in the medium term.” The Central Asian countries need Russia because it supplies them with workers to help deal with their labor shortage. Russia provides Central Asia with an essential transit route to European markets for their exports, and is itself an important market for agricultural and industrial goods. It is an important source of foreign investment and it assists in the cost-effective development of weapons systems and technologies for extracting energy resources.” Asia Sentinel

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