Defence & Arms
China’s Silk Road Strategy Converges with Damascus
By Christina Lin, Jamestown China Brief 19/8/10
Aug 20, 2010 - 3:11:08 PM

The Caspian region is becoming enmeshed in a web of overlapping political, military, trade and energy interests of countries extending from Asia, to the Middle East, to Russia, to Europe. Given the rising instability of Middle East energy supplies, the Caspian basin has emerged in prominence as an alternative resource for the world's growing energy consumers. It is estimated that the Caspian Sea is home to the world’s largest reservoir for oil and natural gas after the Persian Gulf and Russia [1]. Historically, Russia had a monopoly of influence in the region during the Soviet era, but after 1991 the United States began making inroads into the region to reduce Russia’s influence over the newly formed independent states [2]. In recent years, both China and the European Union have stepped up their presence and have become active players in the region. Other new players albeit smaller but with increasing footprints include countries such as India, Japan and South Korea. Of the various players, China has the fastest growing presence in the region—driven by its voracious energy appetite but also enabled by the Shanghai Cooperation Organization (SCO) framework. As China embarks on its “look west” development Silk Road Strategy, Syria’s “look east” policy appears to be converging with Chinese interests at the Caspian Sea. The interplay of China’s growing footprint in the Caspian region via its modern Silk Road—reinforced by Syrian President Assad’s nascent “Four Seas Strategy”—will have important implications for the United States, the European Union and other allies.

China’s Current Footprint in the Caspian Sea Landscape

Over the past few years, China has poured investments into Central Asia and the Caspian region—especially Kazakhstan and Turkmenistan—with two main infrastructure projects:  the Kazakhstan-China oil pipeline and the Turkmenistan-China gas pipeline (also known as Central Asia-China gas pipeline). Below is a brief overview of Chinese investments in the Caspian region countries.

Turkmenistan:  Beijing’s main economic interest is gaining access to natural gas in Turkmenistan—Central Asia’s largest gas producer. It has granted loans worth $3 billion to be used to exploit South Yolotan gas reserves (estimated as the fourth largest gas reserve in world) [3]. Its largest energy infrastructure project—the Central Asia-China Gas Pipeline—linking gas fields in Turkmenistan to Xinjiang— was inaugurated in December 2009. The 1,833 km pipeline, starting near a Chinese developed gas field in eastern Turkmenistan, is expected to reach full annual capacity for $40 billion cubic meters (bcm) by 2012-13 (Reuters, March 11). Additionally, 37 enterprises with Chinese capital shares operating in Turkmenistan implemented 57 investment projects, amounting to over $4.163 billion (State News Agency of Turkmenistan, June 20). In June 2010, Turkmen President Gurbanguly Berdimuhamedov announced a $2 billion trans-Turkmen pipeline project to connect the China-Central Asia pipeline east of Turkmenistan to the country’s western resources—the same reserves traditionally exploited by Russia and earmarked for the U.S./EU-backed trans-Caspian Nabucco project [4]. In August 2010, President Berdymukhamedov further sought a $4.1 billion soft loan from China State Development Bank to develop the South Yolotan gas field (Associated Press, August 13; Reuters, August 13).

Kazakhstan:  Beijing has invested $16 billion into the Kazakh economy. Out of this, $8.9 billion is investment, $1 billion is low-interest loans and almost $6 billion covers the cost of acquired assets [5]. In November 2009, Chinese state-owned CNPC tied up with Kazakh state firm KazMunaiGas in a $2.6 billion deal to jointly take over Kazakh oil producer MangistauMunaiGas. Additionally, China gave Kazakhstan $10 billion in loans to finance various projects (Reuters, March 11). In October 2009, a Chinese investment company bought an 11 percent share in Kazakh oil major KazMunaiGas E&P for $939 million. KazMunaiGas E&P, the listed subsidiary of KazMunaiGas, is one of Kazakhstan’s top three oil producers, and the total volume of its proved and probable reserves, as at the end of 2008, is 241 million tones (1.8 million barrels) [6]. In June 2010, CNPC signed an agreement with KazMunaigas to build the second phase of the Kazakhstan-China Gas Pipeline in a bid to tap gas reserves in southern Kazakhstan (People’s Daily, June 14).

Azerbaijan: In 2009, bilateral trade reached $300 million (Crescent Online, June 18). In June 2010, Prime Minister Artur Rasizade and a member of Standing Committee of the Political Bureau of the Communist Party of China, Secretary of Centra