China Russia Central Asia

Inroads into Eurasia

David Lewis on Russia and China’s tug of war over the states along the Silk Road

An egg seller in Xinjiang delivers his produce. The Chinese autonomous region remains relatively undeveloped, something the Beijing government hopes to change through its One Belt, One Road project

Once dusty outposts of the Soviet Union, the five states of Central Asia are under reconstruction. New roads, railways and pipelines are reconnecting the region to the outside world.

Along with investments in infrastructure, external powers are bringing their own visions of state-building and regional order: China is promoting its New Silk Road initiative, also known as One Belt, One Road; Russia advances a Moscow-centric ‘Greater Eurasia’; while Western states push for open markets and political reform.

Rapid geopolitical change is matched by changes in society. Central Asia’s young and growing population is on the move, in search of education, jobs and new opportunities. Its oligarchs embrace the world of offshore finance, superyachts and luxury property. A lucky few manage to study in London or Shanghai. Millions more work on building sites and oilfields across Russia. Several thousand have ended up fighting with Islamist groups against the Assad regime in Syria.

Central Asian governments are ill-equipped to keep up with this rapid pace of social and political change. President Islam Karimov died in Uzbekistan in early September 2016 after nearly 30 years in charge, leaving an opaque struggle for power behind him. President Nursultan Nazarbayev of Kazakhstan has led the country since independence in 1991, and presides over an increasingly authoritarian regime. Turkmenistan remains one of the most isolated and repressive countries in the world.

President Emomali Rahmon of Tajikistan runs a government dominated by his close family. Only Kyrgyzstan retains some political pluralism, but it has been plagued by political instability.

Complex domestic politics are closely intertwined with equally complex geopolitics. Moscow still dominates the security of the region, with military bases in Kyrgyzstan and Tajikistan. But Chinese trade with Central Asia and the Caucasus has increased tenfold since 2005, up from only $5 billion in 2005 to more than $48 billion in 2014.

Beijing has promised at least $40 billion more in investments in trade and transport infrastructure. That could transform the region over the next decade. But there are many other players with a stake in the region. And the relationship between Russia and China is far from simple. Central Asia could be the place where their interests diverge.

Eurasian regionalism
A conventional narrative highlights the post-colonial decline of Russian influence in Central Asia and the growing impact of a rising China. Yet, Russia’s cultural  links, and its security, economic and political levers, still make it the key player in the region. Russia has come to view Eurasia as an important sphere of  influence in Moscow’s drive to recover a regional and global role. The emphasis on ‘Eurasianism’ provides a vague philosophical framework for a new Russia identity that is shifting away from Europe and the West.

The Eurasian Economic Union (EEU), launched in 2015, embodies this Eurasianist idea. The bloc unites Russia, Kazakhstan, Kyrgyzstan, Belarus and Armenia in a customs union. A supranational body, the Eurasian Economic Commission (EEC), manages internal trade and sets external tariffs. Customs posts were dismantled on internal borders, but in other ways the EEU has not lived up to official hype. There are still hundreds of exceptions to tariff-free trade inside the bloc, and Russia’s involvement in a series of sanctions regimes has sparked off mini-trade wars among its members. Sceptical critics still see it primarily as a Russian geopolitical play to consolidate Moscow’s influence in the region rather than the technocratic project it claims to be.

The biggest problem for the EEU’s future is Russia’s economy, forecast to contract by 1.2 per cent in 2016. Currency volatility contributed to a 26 per cent drop in trade inside the EEU in its first year of operations. Russia has no spare funds to invest in poorer EEU members to make accession easier or to buy influence. A Russian-Kyrgyz $1 billion development fund has struggled to find ways to boost the Kyrgyz economy after EEU accession. A lack of funds makes it difficult to expand the EEU to include poorer states such as Tajikistan.

Russia’s main support to Central Asian economies is through the remittances sent home by millions of Uzbek, Tajik and Kyrgyz labour migrants. Kyrgyz migrants in Russia send home more than $1 billion a year, an important boost for such a small economy. EEU rules have made it easier for them to live and work in Russia. But many Tajik and Uzbek migrants, who do not benefit from the new rules, are finding it harder to get jobs and are returning home. Remittances to Uzbekistan have fallen from $6.67 billion in 2013, according to Russian Central Bank figures, to just $3.05 billion in 2015.

Russia’s economic influence may have declined, but over the past decade it has intensified military links with Kazakhstan, Kyrgyzstan and Tajikistan, all members of the Moscow-based Collective Security Treaty Organization. Russia has a permanent airbase in Kant, Kyrgyzstan, and stations an army division at bases in Dushanbe and Qurghonteppe, Tajikistan. Uzbekistan and Turkmenistan have rejected any Russian military presence, but fighting in northern Afghanistan during the summer of 2016 has worried officials in both countries, and given Moscow a chance to make its presence felt. In June 2016, Russian defence minister Sergei Shoigu visited Turkmenistan, a breakthrough in Russia’s attempts to regain some influence in that isolationist state. Moscow will be hoping that post-Karimov Uzbekistan is more open to Russian security influence.

China’s New Silk Road
China takes a very different approach to the region. It avoids bureaucratic institutions and instead embraces flexible, bilateral deals and cross-border trade and investment. Chinese-led institutions are loose groupings, such as the Shanghai Cooperation Organization (SCO), founded in 2001 by all the Central Asian states bar Turkmenistan, with Russia and China, to promote regional security and economic cooperation. It cooperates on counter-terrorism policy and holds joint military exercises, but it is more of a talking shop than a ‘NATO of the East’.

China would like the SCO to play a stronger economic role, and has pushed for an SCO free trade area. Russia has blocked such moves, and instead sees the SCO as the kernel of a ‘Greater Eurasia’, Moscow’s geopolitical fantasy of an arc of western-sceptic countries from Turkey, Iran and Syria through Central and South Asia to China. At a summit in Tashkent in June 2016, India and Pakistan were invited to join the SCO, but the more it expands, the more dysfunctional it will become. Russia pushed for Iran to be included, but China and other members were more cautious.

In the long term, the SCO is likely to be eclipsed by the Silk Road Economic Belt, the continental arm of China’s ambitious One Belt, One Road initiative. China has backed it with a $40 billion Silk Road Fund and potential investments from the new Asian Infrastructure Investment Bank (AIIB). The initiative aims to develop trade routes through Central Asia to Europe and the Middle East and boost flagging economic growth inside China by exporting spare capacity abroad. China sees it providing secure trade routes and energy supplies and improving stability in its troubled Xinjiang province.

The rhetoric often outpaces reality. Ambitious maps of trade routes and pipelines gloss over difficult political tensions on the ground. Transport costs across Central Asia are much higher than for sea routes: bureaucracy and corruption makes crossing borders in the region time-consuming and expensive. Uzbekistan’s autarkic economy and strict border regime represents a major obstacle to regional trade and transit.

Economic development alone will not resolve the political challenge of Xinjiang. As China expands its presence in the region, it may become more vulnerable. Uighur militants were suspected of involvement in a terrorist attack on the Chinese embassy in the Kyrgyz capital Bishkek on August 30, 2016. Hopes for a boost to Chinese soft power in the region are likely to be disappointed. Anti-Chinese sentiment is widespread in Kyrgyzstan and Kazakhstan. Mass protests erupted in Kazakhstan in May 2016 against plans to lease farmland to Chinese investors.

But the new infrastructure is changing maps of the region regardless. China has already built pipelines from Kazakhstan and Turkmenistan. More are planned. The AIIB approved its first projects along the Silk Road Economic Belt in June 2016, including a road-building project linking Tajikistan and Uzbekistan. A Chinese-funded rail link opened between Tashkent and the Fergana Valley in Uzbekistan in 2016. A 2014 east-west rail link across Kazakhstan now links Chinese exporters to the Caspian port of Aktau. This opens up a route across the Caspian, to Azerbaijan, where the Baku-Tbilisi-Kars railway is due to open in 2017. Alternatively, exporters can try a new 925km railway that links Kazakhstan with Iran via Turkmenistan, launched in December 2014.

Competition or cooperation?
The key question is whether these grand designs will lead to geopolitical cooperation or potentially destabilizing competition. Until the rupture with the West over Ukraine, Russian officials tended to view Chinese plans in Central Asia as a threat. But the need for Chinese political and economic support after 2014 led to a rethink. A summit between presidents Putin and Xi in May 2015 agreed that China and Russia would aim to coordinate the EEU and the Silk Road Economic Belt. Talks and bureaucratic plans have ensued, but nothing of substance has emerged. On paper the two projects are still incompatible. China views the EEU as an obstacle to its goal of unencumbered trade across the SCO area and beyond. Russia wants to maintain Eurasia as its own sphere of influence, and often views cooperation with China primarily as a way of challenging the West.

Since both projects are flexible and vague about implementation, there is plenty of scope for Russia and China to avoid open conflicts. Central Asian leaders will seek to avoid any tensions and use geopolitical competition to their own advantage.

What is most notable is the marginalization of western influence in the region. A US ‘New Silk Road’, launched by Hillary Clinton in 2011, focused mainly on Afghanistan, and offered no new funding. The European Union lacks a serious strategy in the region, despite its significant trade with countries such as Kazakhstan.

Western governments and international organizations should take these new initiatives seriously and find ways to get involved. Co-financing with the AIIB is one option. Initial discussions with the EEU are overdue, at least on a technical level.

Donors might also support a stronger role for civil society in determining the direction of these vast projects. Most grand initiatives in Central Asia are dreamt up in Beijing, Moscow or Washington. Local people are seldom consulted. However, to achieve a lasting positive impact in the region, trade and investment projects also need to respond to the economic and social needs of the many disenfranchised and marginalized communities in Central Asian societies. Otherwise, far from promoting social stability, grand reconstruction projects in Central Asia may become further sources of tension in an already troubled neighbourhood.