Kazakh President Nursultan Nazarbayev’s visit to China on February 21-23 was his fifteenth since Kazakhstan’s independence. Yet few have observed that Kazakhstan’s relations with China, resting on expanding energy collaboration since the 1990s, are today evolving to reflect rapidly growing cooperation in areas as diverse as manufacturing, shipbuilding, transport, technology, and trade. It is in these areas that Nazarbayev has secured monumental deals during his visit to the “Middle Kingdom”, and it is development of these sectors that, with a balanced approach, could consolidate rather than weaken the sovereignty of Kazakhstan in the long run.
BACKGROUND: During his three-day visit to China, Nazarbayev met with President Hu Jintao, the Chairman of the Standing Committee of the National People's Congress Wu Bangguo, and the Premier of the State Council Wen Jiabao. The sides signed eight agreements in the spheres of energy, industrial financing, and transport. China agreed to lend US$ 1.7 billion to the Kazakh sovereign wealth fund Samruk-Kazyna and provide a US$ 5 billion dollar loan for a petrochemical complex. More than 1,000 Chinese companies are currently active in Kazakhstan’s energy, manufacturing, and transport sectors.
Nazarbayev’s visit has secured the participation of the China National Petroleum Corporation to develop the Urikhtau gas field in western Kazakhstan and US$ 1 billion from Beijing to build an oil refinery in the Kazakh city of AtyrauIn 2008, I. Chinese firms are now acquiring assets across the Caspian region. In Kazakhstan, Chinese companies account for a fifth of the country’s oil production. This has allowed China to surpass Russia’s stake in Kazakhstan’s oil production by a factor of 2.5. Most recently, the Chinese private oil firm MIE has acquired assets of the Kazakh oil and gas explorer Emir Oil for US$ 170 million.
During the visit, the sides also set out to expand their nuclear energy cooperation, with Kazakhstan agreeing to supply China with 55,000 tons of uranium. Nazarbayev emphasized that Kazakhstan was ready to meet 40 percent of China’s uranium needs. The country’s uranium resources, the second largest in the world, constitute 19 percent of global reserves. In 2009, Kazakhstan became the world’s largest producer of uranium, beating rivals like Canada and Australia. The nuclear energy deal reflects another important facet of the growing bilateral energy cooperation.
The countries further agreed to jointly build a high-speed railway line between Astana in the north and Almaty in the south by 2015. The line will run at a speed of up to 350 km/h, providing service to 5 million passengers every year and reducing what usually is a long trip to a much quicker four-hour travel. China’s experience and technology in the field of railway building are attractive to Kazakhstan. China’s high-speed railways are already the world’s longest and fastest. Beijing now aims to expand its national high-speed railway lines from the current 6,920 km (4,300 miles) to more than 16,000 (9900 miles) by 2020.
Perhaps the most intriguing has been the agreement reached to create a Kazakh-Chinese university in Kazakhstan to facilitate technological exchange and innovative education. As Nazarbayev remarked: “Our agreements to create a Chinese-Kazakh supercomputer center in Astana and open a Kazakh-Chinese university to study and implement Chinese innovations in Kazakhstan hold big prospects”.
IMPLICATIONS: Energy cooperation still tops the bilateral relationship, enabling Kazakhstan to diversify its relations with Russia, the U.S., and the EU, which are coveting the country’s energy resources. In 2005, Nazarbayev stated unequivocally that, "we are again witnessing superpower rivalry for economic dominance in our region. We have to address this new global and geo-economic challenge correctly. We have a choice between remaining the supplier of raw materials to global markets and wait patiently for the emergence of the next imperial master or to pursue genuine economic integration of the Central Asian region. I choose the latter”. This logic has been driving Kazakhstan’s multi-vector foreign policy as the country has sought expanded collaboration with various actors in diverse fields of energy, trade, transport, and even education.
Remarkably, it is no longer only the Chinese state-owned energy companies but also private firms that have started penetrating the Kazakh energy market. Meanwhile, Kazakhstan and China are building a new pipeline to deliver gas from the Urikhtau deposit to China. Beijing’s energy cooperation with Central Asian states has already undermined a Russian near-monopoly on the region’s energy exports. In 2006, China and Kazakhstan launched a 2,200 km-long (1350 miles) oil pipeline connecting the two countries. Three years later, they opened another pipeline to deliver gas to China bypassing Russia. This pipeline is part of the Turkmenistan-Uzbekistan-Kazakhstan-China pipeline project, which aims to provide China with 40 billion cubic meters (bcm) of gas annually by 2013 – a decent amount given China's current annual gas needs of about 100 bcm.
But trade, transport, and education are also emerging as strong pillars of cooperation between Astana and Beijing. In 2008 the trade between them constituted more than two-thirds of the total trade between China and Central Asia. Kazakh-Chinese trade, in turn, grew from US$ 300 million in the first year of Kazakhstan’s independence to more than US$ 20 billion in 2010, although Kazakhstan’s resources currently make up about two thirds of the joint trade. Kazakhstan clearly seeks to position itself as a transit hub in Eurasia, linking markets in Europe, Southeast Asia, and the Middle East. Recently, Astana has obtained a US$ 2 billion loan from the EBRD for the planned US$ 5.32 billion Western Europe – Western China transport corridor scheme. But Kazakhstan first needs to become a similar hub from within. Hence the push by its authorities to develop domestic transport infrastructure, including through external deals, like the one with China to jointly construct a high-speed railway line connecting the country’s north and south. This is geopolitically significant for yet another reason. For the first time in Kazakhstan’s young history of independence, it is Chinese technologies and resources, not American or Russian ones, which will be used to build the railway line across the country.
A similar balancing strategy is attempted in the sphere of education, on which the Kazakh leadership has relied to enter the club of the world’s 50 most competitive economies. It is already home to Russian, American, and Turkish universities, and is now also looking to benefit from the Chinese experience in the effort to build a more hi-tech and innovative economy.
CONCLUSIONS: The pace of economic development displayed by these two neighboring countries predictably suggests their multi-faceted cooperation will grow even stronger with time. In this light, Nazarbayev’s recent visit to China and the reached agreements provide a good starting point for more active collaboration not only in the trade and energy field, but also transport and education, among other areas. A more comprehensive bilateral cooperation could add a further balance to Kazakhstan’s domestic economy and its external engagements with the rest of the world.
AUTHOR’S BIO: Roman Muzalevsky writes on Eurasian affairs and security for the Jamestown Foundation in Washington, DC. He can be reached at muzalevsky@hotmail.com.