2009-12-16 | Aleksandra Jarosiewicz

The gas pipeline from Turkmenistan to China, which runs via Uzbekistan and Kazakhstan, was officially launched on 14 December. The opening event featured the leaders of all the countries involved in the construction of the new transmission route. The launch of the pipeline is of great economic significance for the region because it offers the Central Asian states access to an alternative gas buyer to Russia, and because they can use this new position in negotiations with Gazprom to maximise their gas export revenues. The main consequence of this process is that Russia has lost some influence in the region while China has strengthened its position. The new gas pipeline is the result of the Central Asian states' policy of gaining more independence, and China's economic expansion in the region aimed at securing supplies of energy resources and building up its political influence, among other goals. Thus for the Central Asian states, the launch of the pipeline marks another step in the development of broader economic co-operation with China, which is intended as a counterbalance to the influence of Russia.
 

The Turkmenistan-China gas pipeline
 
The new gas pipeline is around 2000 km long (see Appendix) and will connect to a 5000 km-long internal Chinese gas pipeline (now under construction) at the Chinese-Kazakh border. Its target capacity, which it is planned to reach in 2012, is 40 billion m3; this means that the pipeline will enable the Central Asian states to transmit a substantial portion of their gas exports to China (Central Asian gas exports totalled around 65 billion m3 in 2008). The pipeline's capacity may be increased to above 40 billion m3. The route has been built at express speed – the construction works were officially launched in July 2008.
 

Origins of the new gas transmission route
 
The original concept of the new gas pipeline should be credited to the late president of Turkmenistan, Saparmurat Niyazov, who signed the first framework agreement for the construction of the new route in June 2006. At that time, Niyazov was interested in the Chinese direction because he sought to strengthen his position in negotiations concerning the price of gas exported to Russia; in the longer term, he also aimed to diversify Turkmenistan's gas export routes and permanently reduce its dependence on Gazprom (the de facto sole buyer of Central Asian gas), and on gas transmission via Russia. Niyazov's successor, Gurbanguly Berdymuhammedov, continued this policy for the same reasons, and finalised the agreements concluded by his predecessor. This paved the way towards the launch of construction work on the new route.
The other countries involved in the project, Uzbekistan and Kazakhstan, likewise sought to strengthen their position towards Russia by developing their economic co-operation with China. In the economic dimension, they viewed the new pipeline as an opportunity to diversify their gas export routes and obtain a better price for their gas. Finally, the construction of the pipeline was also expected to stimulate an influx of investments and economic development.
However, the construction of the new route would not have been possible without the involvement of China, which had been looking for sources of the energy needed to drive its economy, and had launched a global campaign to gain access to oil, and to a lesser extent gas resources. China's interest in Central Asian resources – and, more generally, the Central Asian markets and political influence in the region – dates back to the 1990s, although China has only made strategic investments in energy reserves and infrastructures in Central Asia in recent years.
Central Asia's location has been one of the important reasons for China's interest in the region: with its land border with the Middle Kingdom, Central Asia is potentially the most secure source of energy supplies, together with Russia. Moreover, Beijing perceives the Central Asian states as considerably weaker and more prone to reach compromise than Russia, the other potential supplier of gas and oil to China.
China's economic potential has also been a huge asset for Beijing (China's trade turnover with Kazakhstan has increased from US$824 million in 2000 to US$13.6 billion in 2008, according to ADB), as has its capability to make enormous investments in the region. China has financed the gas pipeline by itself, in addition to acquiring numerous oil and gas assets and providing a total of US$14 billion in loans to Turkmenistan and Kazakhstan in 2009 alone. China's loans were granted during an exceptional period, during the economic crisis and at the time when Turkmenistan was engaged in confrontation with Russia and had lost its gas export revenues as a result of supplies to Russia being interrupted.
Russia has also indirectly contributed to the emergence of the new gas pipeline by pursuing a policy aimed at preserving its dominance in the region, which prompted the Central Asian states in the 1990s to look to Beijing as a potential counterpoise for Russian influence. Moreover, Russia has been considering the West to be its main rival in the region while accepting the growing role of China (which it had previously perceived as a second-class opponent), in order to prevent the USA and the EU from gaining more influence and hindering the construction of westbound gas pipelines.
Finally, the West's inability to implement its plans concerning new gas export routes (Nabucco and the Trans-Caspian Pipeline) has also been an important factor in making the Eastern direction a more realistic export option for the Central Asian states.
 

The geopolitical dimension of the competition for gas in Central Asia
 
The Turkmenistan-China gas pipeline, along with the existing Kazakhstan-China oil pipeline, is part of China's strategy to expand its influence by developing economic co-operation with Central Asia and building energy infrastructures in the region (as implemented from 2005 to 2009). Its launch has changed the geopolitical situation in Central Asia almost irreversibly. It has established China as the main player next to Russia for the foreseeable future, one with a much stronger footing in the region than the EU has, and which has strategically important economic interests in the region (security of gas supplies, multi-billion investments in infrastructures and oil and gas fields). This makes Central Asia more important for China, which in turn means that Beijing will be more determined to defend its interests in the region.
Moreover, in the economic dimension, China has become a major buyer of Central Asian gas next to Russia. This may lead to tough competition, and not only in the economic dimension, once gas consumption in Europe increases again, as Gazprom's demand for the Central Asian resources would be stimulated.
For Russia, the launch of the pipeline marks the failure of its policy to monopolise gas export routes from Central Asia and keep the countries of the region politically dependent on Moscow (of which Turkmenistan has been the most egregious example). Moreover, China's strengthened position in Central Asia will prompt the smaller Central Asian states that do not have major energy resources, such as Tajikistan and Kyrgyzstan (which until now have been politically dependent on Russia), to more actively develop their co-operation with Beijing.
The launch of the gas export route to China will also have certain consequences for the West's attempts at gaining access to the Central Asian gas resources. On the positive side, China's involvement has expanded the Central Asian states' room for manoeuvre and made them potentially more willing to diversify their energy export routes. On the negative side, the West will have to match the conditions offered by China, by making enormous financial commitments and accepting such terms of co-operation as Turkmenistan or Kazakhstan propose.
 

The pipeline's importance for the Central Asian countries
 
The new gas pipeline has diversified the Central Asian states' export routes and markets, and has reduced their dependence on Russia for gas exports. The option of exporting gas to China will also serve as an argument in the talks with Gazprom concerning the price of the Central Asian gas and the terms of the potential transit of gas from the region to Europe via Russia. The gas pipeline is also part of the Central Asian states' broader co-operation with China, which serves to counterbalance the influence of Russia.
The new pipeline is particularly important for Turkmenistan, which depends on gas export revenue more than any other Central Asian state, and which has been exporting most of its gas to Russia. Thanks to the new route, Turkmenistan has gained a stronger position in the talks with Russia concerning the terms on which gas supplies to Russia are to be resumed (gas exports from Turkmenistan to Russia have been suspended since April). The pipeline has permanently diversified gas export routes and enabled Turkmenistan to maximise its profits from gas exports. However, it has not freed Turkmenistan of its transit dependence on Uzbekistan and Kazakhstan, which may lead to regional tensions. Tashkent and Astana have expressed interest in exporting gas to China, which means that Ashgabat will probably not be able to fully implement its contracts for gas supplies to China (Uzbekistan has been impeding the development of Turkmen exports to Russia for years).
The opening ceremony symbolically underlined the huge role that China has come to play in the region at the expense of Russia – the meeting brought together the leaders of the Central Asian states and China, and no representatives of Russia were present. China's growing involvement in the region leads to questions about Moscow’s possible reaction. Presumably, Russia will not give up its ambition to defend and strengthen its (objectively powerful) political and economic position in the region, even if its actions do not match China's in terms of the scale and dynamics of growth. Russia's initiatives will probably be presented during President Dmitry Medvedev's visit to Kazakhstan and Turkmenistan, which is scheduled for the second half of December. It is also apparent that Russia's position in Central Asia in terms of security will remain unchallenged in the foreseeable future. The Central Asian states and Russia's geopolitical rivals in the region have to take this into account as a factor that the Kremlin may use in the future to stop processes unfavourable to Russia.
 
 
 
 
Appendix
 
Parameters of the new gas pipeline
 
Length – Turkmen section, 188 km: Uzbek section, 525 km: Kazakh section, 1293 km
Capacity – the current capacity has not been officially disclosed; it has been estimated at around 13 billion m3 and is expected to increase to 30 billion m3 in 2011, reaching the target level of 40 billion m3 in 2012; China is considering increasing the pipeline's capacity to above 40 billion m3 of gas a year
Ownership – each section is owned by a company in which CNPC and the local partner hold 50% of shares each
Cost of construction – US$6.7 billion
 
Gas supply deals
The Turkmenistan-China gas contract (July 2008) for the supply of 30 billion m3 of gas over the next 30 years;
Annex to the Turkmenistan-China contract (June 2009) for the supply of an additional 10 billion m3;
Framework agreement between Kazakhstan and China (October 2008) for the supply of a maximum of 10 billion m3 of gas to China.
In addition, Uzbekistan has declared that it is willing to transmit 10 billion m3; the declaration may become reality because of the presence of Chinese companies in Uzbekistan.
No information on the price of gas is available; the price discussed in January 2008 was around US$195 per 1000 m3.
 

Permalink