China and Turkmenistan recently laid the ground for a 30bcm gas pipeline that will start pumping in 2009. This was the second deal consummated by China for a pipeline originating in Central Asia, the first being the deal with Kazakhstan to ship oil in the Atasu-Alashankou pipeline that began operating in 2005. A planned extension to the Caspian will give China direct access to the Caspian Sea. Taking into account China’s construction of the Gwadar port in Pakistan and discussions of direct pipelines from Pakistan to China, the outlines of a potential Chinese energy strategy for the future come into sight.

BACKGROUND: China’s determination to connect to Central Asian energy sources is well known and the subject of much public discussion and research. Rising demand and limited domestic supply; as well as tying up Xinjiang (China’s main energy producing region and a source of continuing Muslim unrest) with Central Asia in a relationship of economic integration and trade to reduce unrest; and its continuing nervousness about foreign naval interdiction of its energy supplies are the main motives ascribed to China. But in its energy discussions and acquisitions from Iran to Central Asia appear the outlines of a network of energy pipelines, largely independent of Russia as well, which could furnish clues to a potential Chinese strategy in the future. Interestingly enough, Central Asian governments turn to China as well to enhance their independence from Moscow and increase their ability to diversify supplies to other markets in Asia. And Kazakhstan also has larger political ambitions to ensure its own safety as an indispensable player in Central Asia and regional key to the region. For example, Kazakhstan is building a pipeline to ship gas to China and ready to assist in constructing the Turkmenistan-China pipeline, which appears to be intended to traverse both Uzbekistan and Kazakhstan.

However, the larger impetus in this context is clearly supplied by China. China National Petroleum Corporation (CNPC) has recently signed two contracts with Uzbekistan for a joint production sharing agreement with Petronas, Lukoil and South Korea’s National Oil Corporation to explore for natural gas and develop deposits in the Aral Sea. The two states have also agreed to begin the Turkmenistan-China pipeline in 2008 at Alata, 20 kilometers from the Uzbek-Turkmen border. The projected pipeline uses existing sections of the old Bukhara-Ural pipeline, and will pass through Uzbekistan to intersect with the pipeline that Kazakhstan is currently building to transmit gas to China. Ultimately this gas will connect to internal Chinese pipelines all the way to Shanghai. In 2004, it also has signed other contracts with Uzbekistan for oil and gas cooperation.

China has also recently shown an interest in reviving the old 1997 UNOCAL project called CentGas to pump gas from Turkmenistan through Afghanistan and Pakistan to India, the new name being the TAP or TAPI line. Inasmuch as Pakistan has discussed pipelines from it to China, such gas as may come to Pakistan from either the TAP line or the prospective IPI (Iran-Pakistan-India) pipeline could give China new opportunities for gas from Central Asia. Hence, China is not only developing Gwadar, which could serve as a terminus for Iranian or Central Asian energy, it is holding talks with Pakistani officials while China’s Export-Import Bank is financing a White Oil pipeline project running from Port Qasim near Karachi to Pakistan’s north, which is intended to meet 75% of that country’s future oil needs. China’s Petroleum Engineering and Construction Company has begun construction on that pipeline in June 2006.

IMPLICATIONS: Through its rapidly expanding trade with India, Pakistan, Iran, and Central Asia, China is contributing substantially to the overall modernization and improvement of infrastructural capabilities throughout this region. Apart form the pipelines mentioned above and the port at Gwadar, China is also restoring the Karakorum Highway from the Indian Ocean to Xinjiang. If land, airline, maritime, and rail transportation nodes are taken into account, adding energy pipelines, power transmission, and communications linkages China is making an immense contribution to converting the entire region into a part of the developing Euro-Asian land bridge.

These trends do not pass unnoticed in Moscow despite the strong Sino-Russian relationship. The Putin regime, notwithstanding its ties to China, has long known that China could become Moscow’s most dangerous economic competitor in Asia as a whole, not just Central Asia. Equally importantly, Russian firms and the government deeply resent any effort by Central Asian states to escape Muscovite control and sell energy to other consumers. Thus Rosneft has managed to gain consent to transfer oil through the Atasu-Alashankou pipeline this year which could reach an estimated 51.3 million barrels of oil. However, this does not assuage Russian anxieties about these deals. Russia clearly regards any oil and gas that goes from Central Asia to China as being at its expense, since in its heart of hearts, it believes that this energy is really Russia’s energy. Indeed, Putin and Defense minister Sergei Ivanov publicly stated some time ago that Russia could take preemptive military action to defend pipelines in Central Asia since the USSR, i.e. Moscow, had built them and paid for them. This resentment of Central Asian energy shipments to China occurs whether Kazakh, Uzbek, or Turkmen deals with Beijing are concerned. But ultimately there is not much Moscow can do, since not only China and Central Asian states want these deals, Washington too has never publicly opposed any of them, indicating its support for the diversification of Central Asian options while wanting to minimize China’s reliance on Russia and Iran. Indeed, China has been the biggest beneficiary of Washington’s pressure upon Iran in terms of energy deals with Iran.

CONCLUSIONS: Undoubtedly, this Chinese policy of securing energy contracts with Central Asia and the larger vision of contributing to the overall development of its infrastructure will continue ,because it meets China’s and Central Asian governments’ strategic needs. China needs reliable energy sources, particularly landlines, because of its fear of the U.S. and to a lesser degree, Indian navies’ capacity for interdicting energy supplies in the Indian Ocean or the Pacific, or the Straits of Malacca. It also has other powerful strategic reasons for such deals relating to its policies for Xinjiang and Central Asia. At the same time, though, one can see a network of pipelines and of other arterial means of transportation of goods, including energy developing that could ultimately result in a direct connection to Iran. Given Tehran’s continuing intransigence on nuclear issues and the prospect of a major international crisis over that, Tehran’s belief that it can use the energy card as a weapon to distract or threaten its rivals becomes more important. And if China is so bound to Tehran by energy connections, either party may think itself sufficiently independent of other international constraints to take actions that might not otherwise have been considered. Under such circumstances either or both these regimes might think themselves sufficiently free of foreign and particularly American, but also Russian, constraints as to be able to act boldly with impunity in world affairs. While for now China’s energy acquisitions in Central Asia are seen as coming largely at the expense of Russian efforts to monopolize those supplies, those acquisitions might yet come to have an altogether different strategic significance.

AUTHOR’S BIO: Professor Stephen Blank, Strategic Studies Institute, U.S. Army War College, Carlisle Barracks, PA 17013. The views expressed here do not represent those of the US Army, Defense Department, or the U.S. government.