BACKGROUND: Evoking the 1948 Marshall Plan is a popular technique used by countries in transition to request aid for infrastructural and economic development. Academics studying developing states often use the success of the Marshall Plan in their arguments to promote investments as well as attract financial and development aid. In these instances, the intent is not to enact a policy directly mirroring the Foreign Assistance Act of 1948, which provided reconstruction aid to European nations following World War II. Instead, to draw upon the Marshall Plan today implies that such programs be comprised of political and financial elements. First, programs must have a specifically defined policy focus. Second, substantial financial engagement must be extended in order to stimulate economic development. It is the hope that policy-focused programs, accompanied by robust financial engagement, will trigger economic growth.
From 3-13 September 2013, the President of the People’s Republic of China, Xi Jinping, traveled to Turkmenistan, Kazakhstan, Uzbekistan, and Kyrgyzstan. Discussions between President Xi and the nations’ leaders aimed to secure Chinese access to the abundant energy deposits and construct land-based transit routes to export these resources and transport Chinese goods to European markets.
During the ten-day tour, President Xi Jinping signed an estimated US$ 48 billion worth of investment and loan agreements, with a focus on the energy, trade, and infrastructure sectors. This figure includes export agreements totaling over 100 billion cubic meters (bcm) of natural gas through a network of Chinese-funded pipelines.
Though the sum of the Turkmen agreements is not published, the leaders agreed to increase gas exports, complete the construction of a gas production plant, and begin transitioning the Galkynysh natural gas project into Phase Two of development with Chinese financing. In Kazakhstan the China National Petroleum Corporation’s (CNPC) purchase of ConocoPhilips’ shares in the Kashagan oil project was finalized and the two Presidents commissioned the first phase of the Beineu-Bozoi-Shymkent gas pipeline, and signed twenty-two contracts worth US$ 30 billion. With thirty-one agreements worth US$ 15 billion signed in Uzbekistan, the Presidents discussed increasing bilateral trade to US$ 5 billion by 2017 and constructing another eastbound natural gas pipeline. Additionally, China continued to extend scholarships for Uzbek students to study in China. Finally, in Kyrgyzstan about half of the total US$ 3 billion in signed agreements is allocated to extend the Turkmenistan-sourced gas pipeline, generating US$ 40 million per year in transit fees for the Kyrgyz. This agreement is accompanied by loans to modernize a heating plant, build an oil refinery, and construct a North-South highway.
The sheer number of contracts and robust financial investments garnered throughout the tour raises the question: is this economic engagement in Central Asia a demonstration of China’s unique version of the Marshall Plan?
IMPLICATIONS: It is evident that, among individual actors engaging the countries of Central Asia, China is unmatched. This is in spite of the global impression that Central Asia is within the Russian Federation’s sphere of influence and that the Central Asian nations are integrated – economically and strategically – with Russo-centric organizations, like the Commonwealth of Independent States, Eurasian Customs Union, and Collective Security Treaty Organization. However, bilateral trade and foreign direct investment (FDI) data contradict the claim that the Central Asian states operate solely as members of Russia’s sphere and instead support the reality of China’s growing economic influence.
Presently, bilateral trade between the Central Asian states and China is a hundred times greater than in 1992. On average Chinese trade with the region, including Tajikistan, surpassed Russian bilateral trade by US$ 3.7 billion in 2012. Business with the Chinese accounted for an average 33.3 percent of trade in each nation, compared to Russia’s 14.7 percent average. Considering foreign direct investment in Kazakhstan, Russia has been outpaced by China since 2010 – reaching US$ 2 billion in 2012 against Russia’s $392.8 million – and in Kyrgyzstan since 2011 – with $131.7 million against US$ 3.9 million that year.
In the energy sector, both natural gas and petroleum pipelines flow increasingly eastward. Sales of Turkmen gas to Russia’s Gazprom are steadily declining from a peak 46.3 bcm in 2008 to 10.7 bcm in 2010. This drop coincides with China’s US$ 8 billion loan to support Phase One of the Galkynysh project in 2008 as well as the construction of Lines A, B, and C of the Sino-Turkmen pipeline, with an agreement on Line D signed during the September 2013 trip.
China’s position on Central Asia fulfills the two requirements of modern Marshall Plan programs. China’s policy aims to economically unite the region as a transportation corridor for goods traveling from China to markets in the Middle East and Europe. Since the model of cooperation is economically based and without provisions for political integration, China will not challenge Russia’s official political primacy.
Even so, the distinct choices of Turkmenistan, Kazakhstan, Kyrgyzstan, and Uzbekistan to favor economic agreements with China over Russia are founded on three aspects. First, the purpose of China’s economic focus on Central Asia is to integrate the region, not create barriers, contradictory to Russia’s inclusive economic operation in the form of the Eurasian Customs Union. Second, China possesses a surplus of capital to offer, resulting in immediately deliverable and robust investments and loans; any other single-nation investor is incapable of the same feat. Third and finally, China’s financial support is not contingent upon concessions – particularly political – made by the beneficiary, unlike conditional circumstances surrounding support promised by Russia.
Thus – despite political and economic alliances with the Russian Federation – in actuality the Central Asian states are more closely engaged with China economically, revealed by the shift of the economic vector of development, and even the flow of the pipelines, from North to East.
President Xi’s September tour signaled a reinvigorated economic commitment to Central Asia. The US$ 48 billion in agreements is a demonstration of China’s unique version of a modern Marshall Plan, fulfilling both requirements with a policy focused on uniting the region through the development of transportation infrastructure and significant financial contributions. President Xi’s personal visit to each of the four nations is evidence of China’s intentions, and the exchange of high-level officials will continue to promote engagement with the Central Asian states. However China’s actions should not discourage the West, but instead prompt their increased participation to collaborate in the region.
CONCLUSIONS: Noncompetitive cooperation in projects like the Eurasian corridor will not only benefit Central Asia and China, but also Western Europe. The corridor’s capability to connect European and Chinese markets directly by land accelerates the shipment of goods three times faster than transport by sea, and drives the growth of small and medium-sized businesses along the route –a win-win scenario for everyone involved. Therefore, the competitive advantage of speed over sea transit must be exploited. The West commits substantial assistance to support the energy sector with about US$ 26.4 million of energy development assistance from the U.S. in 2011, US$ 50 million of funding for energy and transport projects by the EU from 2007 to 2010, and US$ 88 million dedicated by the EU to the Investment Facility for Central Asia. These Western investments support China’s mission to integrate Central Asia as a transportation corridor, adding more contributors to the team of Central Asian benefactors, thereby increasing the project’s chances at success. In addition, the products of investment in the energy sector from Western investors – including production consortium partners like ExxonMobil, Shell, and Eni – provide not only the extra revenue, but also infrastructure to support such lofty transportation developments as the Eurasian corridor.
Using the successes of these pioneering investments in the energy sector as a foundation, the West, Russia, and China will be able to effectively contribute to the development and economic stability of Central Asia. All parties, including the Central Asian states, must favor cooperation over competition in terms of economic engagement in the region in order to aid the developing states, and China’s Marshall Plan is only the first step.
AUTHOR'S BIO: Temuri Yakobashvili is a Senior Transatlantic Fellow at the German Marshall Fund of the United States.