China’s goal to control Central Asia economically is bumping into Russia’s goal to keep Central Asia as a national security buffer against Middle East terrorist elements.
Geopolitical Futures’ new report titled “In Central Asia, Can China Really Compete With Russia?” suggests that with China’s ratio of exports of goods and services to GDP dropping from 36 percent in 2006 to 20 percent last year—the lowest ratio since Bill Clinton was U.S. president—Beijing is trying to export its excess manufacturing production and secure needed natural resources from Central Asia.
But China’s expansion is competing with Russia’s critical need to maintain influence in the post-Soviet Central Asian states of Tajikistan, Kazakhstan, Uzbekistan, Kyrgyzstan and Turkmenistan as a key buffer zone to separate the nation from the unstable Middle East and terrorist elements moving north through Central Asia.
Russia has historical links to the region and provides financial assistance to serve its strategic needs, rather than for economic gain. For almost three decades, Russia and the Central Asia nations have participated in the free-trade Eurasian Economic Union.
Despite its gross domestic product (GDP) plunging from $2.3 trillion in 2013 to $1.3 trillion in 2016 due to falling oil prices and Western sanctions related to the annexation of the Crimea in 2014, Russia wrote off $900 million of debt owed by Uzbekistan in 2016 and $240 million of debt owed by Kyrgyzstan in 2017.
With Russia financially constrained, Central Asia has become a key recipient of developing market funding from China’s “One Belt, One Road” (OBOR, also known as Belt and Road) initiative. Chinese companies now produce about roughly 20 percent of Kazakhstan’s oil. Over 80 percent of Tajikistan’s gold deposits are mined by companies partially owned by the Chinese. And over 700 Uzbekistan companies are being financed through Chinese bank loans.
China’s biggest investment in the region is the $8 billion development of Turkmenistan’s Galkynysh gas field and a pipeline to China that runs through Uzbekistan, Tajikistan and Kyrgyzstan. China now accounts for about 55 percent of all Central Asia trade, up from less than 10 percent in 2008.
Geopolitical Futures warns that “Central Asian countries could become ensnared in so-called debt traps” due to over-borrowing. China is owed $3.4 billion (21 percent of the state’s external debt) from Uzbekistan; $2.9 billion (48 percent of its external debt) from Tajikistan; and $1.7 billion (42.5 percent of external debt) from Kazakhstan. The economic burden is so high that Tajikistan agreed to lease 1 percent of its territory to China in 2011, and Turkmenistan sells natural gas to China at one third of market rates.
The Central Asian states entered into the “Collective Security Treaty Organization” with Russia in 1992 that made Russia their primary security guarantor. Although Uzbekistan subsequently withdrew its membership, Russia’s military has bases and facilities in Tajikistan and an air base in Kyrgyzstan; donated $5 million worth of armored reconnaissance and BRDM-2M patrol vehicles, a radar station and S-300 Favorit anti-aircraft missile system. Uzbekistan just ordered Russian Typhoon armored vehicles, BTR-82A armored personnel carriers, Tiger armored vehicles, Sopka-2 radar station, and plans to take delivery of 12 Mi-35M transport and combat helicopters.
The importance of the buffer zone for Russia and the security relationship for Central Asian countries was demonstrated last week when Islamic State militants on the Tajik-Uzbek border attacked a border post 30 miles southwest of Dushanbe, Tajikistan’s capital. The Tajikistan’s National Security Committee said 15 militants were killed; while Islamic State Amaq media claimed ten Tajik security force members were killed.
Geopolitical Futures highlights that after Western sanctions, “China became the only major power that was willing to increase bilateral trade and economic ties with Russia.” This makes it unlikely that Russia will confront China’s growing presence in Central Asia. But if and when the Western sanctions are removed, Russia may become more aggressive with China in asserting its historic dominance in the region.
Chriss Street is an expert in macroeconomics, technology, and national security. He has served as CEO of several companies and is an active writer with more than 1,500 publications. He also regularly provides strategy lectures to graduate students at top Southern California universities.