Monday, 19 June 2017

China – Pakistan Economic Corridor: An Opportunity for Central Asia? Featured

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By Fuad Shahbazov

June 19,  2017, the CACI Analyst

In May 2017, China hosted an international summit in Beijing gathering 28 heads of state from four continents and representatives of various international organizations. The summit was devoted to the Belt and Road Initiative, referring to overland and maritime routes across the Eurasian landmass. One of the most significant moments of the summit was the meeting between China’s and Pakistan’s leaders and the signing of a new agreement (MoU), adding to the US$ 46 billion already pledged for the China-Pakistan Economic Corridor (CPEC), a network of rail, road and energy infrastructure. During the event, Pakistan’s Prime Minister Nawaz Sharif met with the leaders of Kazakhstan, Uzbekistan, and Kyrgyzstan, requesting their investment in CPEC.  

 

Gwadar Port 1

BACKGROUND: CPEC is the flagship project under the Belt and Road Initiative and has been seen as a "game changer" in the regional geopolitical discourse since it was formally unveiled in April 2015. It has become the foremost bilateral initiative between China and Pakistan and has a budget of over US$ 46 billion. As part of this initiative, an opening ceremony was held on May 6, 2016 in the city of Sukkur in Pakistan's Sindh Province, marking the beginning of construction of a section of highway between Sukkur and the city of Multan, which will be part of a network of highways connecting the cities of Peshawar and Karachi.
Most Pakistani policymakers laud CPEC as a prospective substantial boost to Pakistan's economy. For China, the project will ease its mutual connectivity problem with the Persian Gulf region, Africa, Europe, and Central Asia. Being part of a landlocked but resource-rich region, Central Asian countries desire improved access to regional markets including Pakistan, China, India and the countries of West Asia. In this regard, CPEC constitutes a strategic opportunity for Turkmenistan, Uzbekistan, Kyrgyzstan, and Tajikistan to transport their goods and market them more competitively on the regional and global market, while fostering regional economic and trade connectivity. Pakistan aspires to access Central Asia via Afghanistan to meet its energy needs and transport goods to the region. Moreover, CPEC has been portrayed as an opportunity to reshape the economic and political order in Central Asia by promoting a network of trade routes, political cooperation, and cultural exchange.

IMPLICATIONS:  Since the late 1990s, China has invested heavily in the energy and transport infrastructure of the five Central Asian countries. Thus, China’s state oil and gas company China National Petroleum Corporation (CNPC) has built a Central Asia-China gas pipeline, which transports natural gas through the route Turkmenistan-Uzbekistan-Kazakhstan-China. In addition to the existing pipeline, providing a supply of 55 billion cubic meters per year (bcm/y), launching a new pipeline will increase the volumes of gas from Central Asia to China by 30 bcm/y by 2020.

China has long been a key driver of infrastructure investment and construction in Central Asia. Chinese state-owned companies have built highways, railways, bridges, and telecommunication systems, including the two most important Central Asian road connections, Osh-Sarytash-Irkeshtam and Bishkek-Naryn-Torugart in Kyrgyzstan, the Dushanbe-Chanak highway in Tajikistan, and electrified the Angren-Pap railway line, connecting the Fergana Valley with the rest of Uzbekistan.

In addition to trade revenues and access to resources, China’s economic strategy in South and Central Asia is based on the assumption that building economic prosperity in South Asia will help alleviate the threat posed by radical Islamists groups in Central Asia. These groups see the growing Chinese influence in the region as a real threat and in order to marginalize them, China needs to ensure the economic benefits cascade down to the general populations of Central Asia. By connecting Central Asian countries to CPEC, China also intends to cultivate new markets in the region, which have significant growth potential, and boost its goodwill with neighboring countries.

In this context, several Central Asian countries welcome the implementation of CPEC. “The CPEC is a project that will guarantee progress and prosperity in the region” said Turkmenistan’s President Gurbanguly Berdimuhamedov in March 2016 during a meeting with Sharif. The statement should not come as a surprise, since Turkmenistan was allowed to use the newly modernized Gwadar deep-sea port in Pakistan in the beginning of 2016, granting the country access to the Indian Ocean. Additionally, Turkmenistan plays a vital role in the implementation of the long-awaited TAPI (Turkmenistan–Afghanistan–Pakistan–India) pipeline, which is also a strategically important part of the CPEC project. 

Tajikistan also eyes access to Gwadar, which could indeed form a junction for connecting Central Asia with the rest of world. During a visit to Islamabad, Tajikistan’s President Emomali Rahmon assured Pakistan resolute support for the infrastructure projects under CPEC, providing greater connectivity between Pakistan and Tajikistan. There is currently a lack of significant road and railway connections between Dushanbe and Islamabad, yet Tajikistan could provide a road link for Pakistan with other Central Asian countries through its Gorno-Badakhshan Autonomous Province. However, this would require the construction of a new highway due to Tajikistan’s mountainous terrain.

Uzbekistan’s Deputy Prime Minister Ulugbek Rozukulov made similar remarks during his visit to Islamabad in December 2016. The participation of energy-rich Uzbekistan in the CPEC project could potentially double Pakistan’s energy supply for the next six years, allowing it to provide small provinces with permanent energy. Uzbekistan has proven natural gas reserves of 66.2 trillion cubic feet, yet its outdated energy infrastructure is not capable of transferring natural gas to Pakistan. Therefore, within the framework of CPEC, CNPC will be in charge of developing new gas fields, logistics, and commissioning infrastructure facilities in the country during the summer of 2017.

Kazakhstan, another important Central Asian actor, is also seemingly eager to launch joint projects under the CPEC framework. In 2015, former Prime Minister Karim Massimov highlighted the importance of the CPEC project for Kazakhstan and the Central Asian region.

Although CPEC seems highly promising regarding the future economic growth of the involved countries, the issue of regional security remains a major concern for China and the Central Asian countries. The main stumbling block in the deepening multilateral relations between Central Asia, China and Pakistan is the worsening situation in Afghanistan. The exchange of goods and delivery of hydrocarbons to Pakistan depends on the normalization process in Afghanistan, since it constitutes the shortest transit route for Central Asian countries to connect with Gwadar in Pakistan. Despite all Pakistan’s efforts in recent years to counter local terrorist groups on the Afghanistan-Pakistan border, no significant result has yet been achieved. Thus, the growing radical Islamic militancy in the region seriously complicates the perspective of partners from Central Asia. 

CONCLUSIONS: The China-led CPEC project is set to reinvigorate not only Pakistan’s economic structure but also the economies of Central Asian countries. It will allow regional countries to develop their outdated and neglected energy sectors and infrastructure. To a great extent, the success of CPEC is contingent on Pakistan’s ability to ensure security and stability along the planned route. CPEC could further incentivize Pakistan and Central Asian countries to redouble efforts to resolve the crisis in Afghanistan, which currently hampers the prospect of building transit routes across the region. Moreover, the fact that much of the infrastructure investment within CPEC is slated to run through Pakistan’s insecure provinces – Khyber Pakhtunkhwa and Baluchistan, where Gwadar is located, constitutes an additional challenge to the participation of Central Asian countries in the project. 

AUTHOR’S BIO:  Fuad Shahbazov is an Expert-Advisor of the Foreign Policy Analysis Department of the Centre for Strategic Studies under the President of Republic of Azerbaijan.

Image source:  wikimedia.org accessed on 18.06. 2017

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The Central Asia-Caucasus Analyst is a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program, a Joint Transatlantic Research and Policy Center affiliated with the American Foreign Policy Council, Washington DC., and the Institute for Security and Development Policy, Stockholm. For 15 years, the Analyst has brought cutting edge analysis of the region geared toward a practitioner audience.

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