By Tao Wang and Rachel Yampolsky
Beijing should approach its partnership with Moscow in Central Asia with a degree of caution.
Leaders in Beijing and Moscow have both been making a concerted effort to extend their connections with Central Asia in recent months. In July, Russia hosted the latest BRICS summit as well as a gathering of the Shanghai Cooperation Organization in Ufa near the border with Kazakhstan. Earlier, in May, on his fifth visit to Russia since becoming president, President Xi Jinping reached an agreement with President Vladimir Putin to coordinate China’s One Belt One Road (OBOR) initiative with the Russia-led Eurasian Economic Union (EEU) in Central Asia. While both countries have clear economic incentives to cooperate in this region in the short term, they will need to overcome a number of hurdles to set their partnership on a path that can be sustained further into the future.
In the past year, Russia and its Central Asian neighbors have faced sobering economic challenges. Russia’s GDP contracted by almost 2 percent in the first quarter of 2015, at least in part as a result of the falling price of oil and Western sanctions, and the ruble lost nearly half of its value against the dollar in August 2015 compared with one year earlier. The impact was felt in Central Asia too, given its close economic interdependence with Russia. Both the oil- and gas-exporting nations of Turkmenistan and Kazakhstan saw declining oil and gas revenues, currency devaluation, and reduced gas exports to Russia, a market that is now oversupplied given weakened European demand. Remittances are another source of income suffering strong disruption – the World Bank has estimated that remittances of some Central Asian countries have fallen by as much as 30 percent since last year. This has a dramatic impact when seen in the context of the share remittances that make up of these countries’ GDP, half in the case of Tajikistan.
Meanwhile, China’s trade with the region reached $50 billion in 2014, a figure that exceeded that of Russia for the first time. According to calculations by the authors based on figures from the Heritage Foundation, total Chinese investment in the region reached $30.5 billion between 2005 and the first half of 2014, including an extensive network of oil and gas pipelines, oil and gas exploration, power plant financing, and even electric grid construction in Tajikistan. The China-Central Asia network of pipelines could supply up to 55 billion cubic meters of natural gas to China every year, or more than half of China’s total gas imports.
Read the full story at The Diplomat