Wednesday, 08 January 2014

Kazakhstan Drifts to China Amid Tension with Russia

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By Dmitry Shlapentokh (the 08/01/2014 issue of the CACI Analyst)

Kazakhstan is a member of the Russian-sponsored Custom Union, and intends to join the Eurasian Union. Yet, Kazakhstan’s foreign policy indicates that it regards Russia as just one among several partners, with which it cooperates in some areas but also competes against in others. The transportation of oil and natural gas has increasingly become a bone of contention, whereas China has emerged as a viable alternative. China has provided Kazakhstan with alternative transportation routes such as railroads, along with considerable investment, providing alternatives to Russia as well as the West. Neither the Russian-led Eurasian Union, nor any Western economic or geopolitical construction, is likely to monopolize Astana's attention.

BACKGROUND: Kazakhstan's relationship with China started to develop early in the post-Soviet era amid Nazarbayev’s adherence to Eurasianism and emphasis of the uniqueness of Eurasian civilization as  a “symbiosis” of Slavs and the mostly Turkic peoples of central Eurasia, manifesting Kazakhstan's desire for not just economic but political integration with Russia. Yet, even at that time Kazakhstan engaged with a variety of partners, including China. Oil and natural gas emerged as the most important point of cooperation. Kazakhstan's desire to partner with China in extracting and exporting hydrocarbons was fully reciprocated by China which started to face considerable challenges in satisfying its energy needs.

Importantly, the very year of the USSR's collapse and the emergence of independent Kazakhstan coincided with an important threshold in China’s oil production and consumption, making China a net importer of oil in 1992. As it was becoming clear that Beijing would be unable to rapidly increase hydrocarbon production inside the country, increased energy imports became an economic as well as a strategic imperative. Chinese thinking in this regard went beyond the purely economic aspects of energy cooperation and saw the geopolitical implications of these projects. In this perspective, hydrocarbon imports from Central Asia, including Kazakhstan, were considered to be especially beneficial as the routes for delivering the essential raw materials were located outside direct U.S. influence.

Beijing thus started to increase its influence in Kazakhstan's hydrocarbon industry from the very beginning of the republic’s history. In the early 1990s, Kazakhstan followed the example of other former USSR countries of the and engaged in privatization, allowing China to buy some of Kazakhstan's energy enterprises. China and Kazakhstan later signed an agreement to build a pipeline for delivering oil from Eastern Kazakhstan to China, which was completed in 2005. Kazakhstan thus developed its relationship with China alongside its increasing cooperation with Russia. The very fact that Kazakhstan finally decided to join the Moscow-sponsored project of forming a Eurasian Union was mostly due to Kazakhstan’s desire to use old Soviet pipelines in order to transport Kazakh hydrocarbons to the West, a plan that Moscow opposed.

As a result of this and other problems, Kazakhstan's relationship with Russia in the energy sphere has become increasingly contentious. At the same time, Western companies have been unable to provide significant investment into Kazakhstan's economy. Consequently, China has taken advantage of the economic and geopolitical vacuum and Beijing is increasingly casting itself as Kazakhstan's major economic and implicitly geopolitical partner. The expansion of Kazakhstan's energy relationship with China has paralleled the increasing friction between Astana and Moscow.

IMPLICATIONS: In January 2013, Kazakhstan proclaimed that it would limit its imports of oil products from Russia, a prospect that invoked skepticism among several Russian analysts. Yet in April 2013, Kazakhstan limited Russia’s gasoline sales in the country and took other restrictive measures related to oil in dealing with Russia. Moscow assumed that Kazakhstan would have no choice and would finally cave into Russia’s demands. However, Moscow was wrong and China presented a viable alternative. Kazakhstan now sends its oil to Chinese refineries instead of Russian ones. In addition, Kazakhstan demanded a higher price for gas it had already committed to Russia and would otherwise divert deliveries to China. In July 2013, Kazakhstan sold a US$ 5 billion stake in the Kashagan oil field, one of the largest in the world, to China’s CNPC.

This and other actions by Astana hardly pleased Russia and Russian observers proclaimed that this move would lead to gas shortages in Kazakhstan. Still, Kazakhstan continued its effort to limit its hydrocarbon trade with Russia. In June 2013, Kazakhstan prohibited the use of bitumen from Omsk refineries. At the same time, the relationship with China continued to expand. In September 2013, China and Kazakhstan signed several deals related to gas and oil. In addition, Nazarbayev proclaimed that Kazakhstan and China now entered an era of “strategic” relationship. Emphasizing Kazakhstan’s desire to establish a closer relationship with China, Nazarbaev proposed that the two countries use national currencies in their trade. As recent events demonstrate, Kazakhstan's energy cooperation with China continues to develop. Kazakhstan also plans to ship oil to China via an ambitious railroad project, the southern tinge of which implies that China will be one of the major destinations of Kazakhstan’s goods and raw materials.

The question remains what broader geopolitical implications these developments will have and how the evolving economic cooperation between China and Kazakhstan should be understood in the context of Kazakhstan cooperation with other powers. The “multi vector” nature of Kazakhstan’s foreign policy is well known. Still this does not imply that Astana engages with various powers simultaneously in pursuit of the same goals. Instead, Astana looks to different partners to fulfill distinct needs. From Russia, it seeks a military or geopolitical backup in the case of conflict with China and Islamic terrorism, while economic benefits seem to become less obvious regardless of its continuous plans for joining the “Eurasian Union.”  

From the West, Astana expects some investment, technological and scientific expertise, and a possible military backup in case of a conflict not just with Islamists and China but even Russia, if Moscow would on certain historical junctions try to use force or threats of force in dealing with Kazakhstan. In the case of China, Kazakhstan primarily expects investment, new markets and trade routes. The geopolitical implication of this "multi-vectorism" is complex and wrought with contradictions, where major players like China and Russia could simultaneously constitute allies and competitors depending on the configuration of events. It is also unclear what trend will prevail. Yet if no major military or geopolitical shake up will compel Astana move close to Moscow, the China perspective will likely dominate Kazakhstan's actual foreign policy regardless of its numerous backup agreements with other players, including Russia, plainly because of China's increasing economic clout.

CONCLUSIONS: Kazakhstan is one of the cornerstones of the Moscow-designed Eurasian Union, implying a certain attachment to Moscow as a geopolitical center. However, the increasing tension with Russia especially over hydrocarbon trade indicates that the alliance with Moscow is just one among many vectors of Kazakhstan “multi vector” policy. Instead, China with its increasing economic clout has emerged as a significant competitor not only to Moscow but also to the West. While the geopolitical situation could change rapidly and dramatically, a continuation of the present trend implies that Beijing is becoming Kazakhstan's most important partner, regardless of the variety of other agreements and alliances that Astana has clinched or with other powers.

AUTHOR’S BIO: Dmitry Shlapentokh is Associate Professor of History, Indiana University at South Bend.

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