China is showing more of an interest in Central Asian countries than in Russia, and Beijing requires two things from them: a corridor to the West, and minerals. For China, Kazakhstan has become the gateway to the continent. In 2018, China invested 1.5 billion dollars in its neighbour. However, China is still not the main investor in Kazakhstan, a niche occupied by the Netherlands and America.
China is building railways and logistics centres in Kazakhstan. Beijing sends two-thirds of its goods to Europe through the Khorgos cross-border cooperation centre. But China invests almost 90% of its funds not in Kazakh roads, but Kazakh oil. Today, Beijing controls one-third of all the oil production in Kazakhstan.
In Kyrgyzstan, Chinese firms have built two refineries, and are currently building roads. They also control four of the six largest gold deposits.
China is also mining gold in neighbouring Tajikistan. 1,500 Chinese farmers rent land here, and China has even set up a military base in the east of the country, to guard roads into Afghanistan and fight against the Islamists.
Uzbekistan has also promised to help China fight the Islamists. China’s economic presence in the country is still minor, but Beijing plans to develop Internet communications, and build automobile, cement and textile factories there.
Turkmenistan has become one of the countries most dependent on China. After the Central Asia–China gas pipeline was launched in 2009, Dushanbe began selling its gas to Chinese companies rather than Gazprom. Today, about two-thirds of Turkmen gas goes to China, accounting for a quarter of the country’s GDP.
Although China is yet to become the main investor in the region, it is already the main lender. Beijing offers low-interest loans on the proviso that Chinese equipment, materials or labour be bought in return. Kyrgyzstan’s debt to China is worrying – it amounts to a third of its GDP. Tajikistan has leased 18,000 hectares of land to China in exchange for having its loans written off for fifty years. Meanwhile, Tashkent continues to borrow money from Beijing for vanity projects such as the world’s tallest flagpole, the region’s largest theatre, and a new parliament building.
One of the transport corridors of the Chinese One Belt One Road initiative should pass through the Caspian and the Caucasus, although China is not yet active in that region.
Georgia signed a free-trade agreement with China, hoping to attract goods and investments. The newly built Baku-Tbilisi-Kars road should become part of the Belt and Road. The Georgian port of Anaklia has signed agreements concerning Chinese cargo deliveries via the Azeri and Kazakh ports of Baku and Kuryk. The trade turnover is not increasing, however, and the half-empty Tbilisi Sea Plaza trade centre remains China’s largest investment in Georgia.
China has given Azerbaijan money for the construction of the Trans-Anatolian gas pipeline, which supplies Caspian gas to Europe, bypassing Russia. China is also financing the construction of Alat port near the capital, Baku, and Chinese companies are investing heavily in Azerbaijan’s traditional commodities of oil and gas.
While China was helping Azerbaijan diversify its gas sales, it also helped Armenia diversify its weapons procurement. Armenia was the first country in the post-Soviet region to buy complex weapons systems from China, such as AR1A multiple rocket launchers. Cooperation in other areas has been weak, and the largest investment so far has been in a mineral-water plant.
But Eastern Europe retains a key role in China’s strategy, since China regards the region as the gateway to the EU market.
China’s fascination does not extend to all countries, however. Moldova is of marginal interest to Beijing, which only plans to finance the building of 300 kilometres of roads.
Initially, China played a leading role in the Belt and Road project. In 2013, it announced plans to build a deep-water port and an industrial park in Crimea, but these were abandoned due to Russia’s annexation of Crimea.
Chinese investments in Ukraine amounted to just 85 million dollars in 2018.
Chinese companies have reconstructed Yuzhny port near Odessa, and are also financing the construction of the Odessa-Nikolayev road. China also invests in Ukrainian gas production, but is more interested in food than Ukrainian gas.
China is the main purchaser of Ukrainian agricultural produce. Three years ago, Ukraine became China’s largest grain supplier, overtaking America which had held that position for thirty years. Grain and foodstuffs make up almost half of Ukraine’s exports to China.
Beijing is also interested in Kyiv as a partner in the defence sector. Motor-Sich produces aircraft engines which are mounted in Chinese Hongdu L-15 training aircraft.
Belarus is a window to Europe for Beijing. Three of the four trains connecting China with the EU pass through it, and run ten times more frequently than four years ago.
China’s direct investment remains negligible, however. In 2018, Belarus received only 190 million dollars. Beijing has offered Minsk loans worth 22 billion dollars, but they must be used to buy Chinese materials and equipment. Belarus has only used one-seventh of those funds – for the construction of a mining and processing plant, hydroelectric power plants, and modernising a tyre-production plant.
Many projects have proved to be failures. Cement factories modernised using Chinese loans have become unprofitable. A battery plant built by the Chinese was never launched, due to environmental-standards violations. A wood-pulp mill emitted a terrible stench which its Chinese builders were unable to eliminate, so their contract was terminated.
Successful Chinese projects are a Geely car assembly plant and the Belarusian–Chinese Great Stone Industrial Park. The park currently has 58 residents, including electronics, electric car and agricultural machinery manufacturers, plus transport and construction companies.
While the economic effects of Belarusian–Chinese cooperation are small, the political effect is more significant. Whenever the Belarusian government is unable to secure loans from Moscow, it requests money from Beijing. Minsk now owes China more than 3 billion dollars, or one-fifth of the national debt.
China has helped Belarus reduce both its financial and military dependence on the Kremlin. When Moscow refused to sell Iskander missile systems to Minsk, Belarus created Polonez systems with a comparable range, thanks to assistance from Beijing. Additionally, Belarus intends to produce drones in cooperation with China.
China’s desired goals in the post-Soviet region are simple: to raise its political influence; to acquire a corridor to the West; and to gain necessary resources (foodstuffs, metals, oil and gas). The Chinese authorities have dubbed their Westward advance “the creation of the New Silk Road”. For the eastern part of that route, China is investing in key sectors of Central Asian economies, often controlling them, but Chinese billions have yet to be poured into the western section – the Caucasus and Eastern Europe.
Still, even China’s limited presence is helping post-Soviet countries reduce their reliance on Russia. China has helped Azerbaijan supply gas to Europe; Ukraine has found a new buyer for its agricultural produce; Armenia has a new supplier of weapons; and Belarus sees it as both a weapons supplier and a sponsor.
Slowly but surely, China is building economic, political, and even military ties with the countries that Russia calls its “near abroad”, but Beijing will not be asking for the Kremlin’s permission to expand.
The explainer was part of Belsat TV news show That Way (Vot Tak) aired on 29.01.2020
Аlyaksandr Papko, belsat.eu
Photo: Li Gang / Zuma Press / Forum