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SIEFF: Losing the resources game

Distracted America is missing opportunity’s knock

- The Washington Times - Thursday, July 22, 2010

While Washington sleeps, China is winning the great new game in Central Asia, locking up its rich natural resources.

U.S. interest in Central Asia is focused on three issues: First, keeping the Manas air base in Kyrgyzstan open to supply U.S. and NATO forces fighting the Taliban in Afghanistan; second, promoting democracy on Kyrgyzstan to make it a poster example for the region; and third, lecturing the other Central Asian nations on promoting democracy - a policy that has had a spectacular lack of success, except in making American armchair intellectuals feel good.

While we remain obsessed with those "historic" issues, China quietly has been locking up the second-largest reservoirs of easily accessible oil and natural gas on the planet in the Caspian basin. And now China has snapped up Kazakhstan's uranium deposits from under our noses, too.

Quiet, soft-spoken President Hu Jintao of China already has achieved far-reaching trade agreements with the three major energy-producing nations of Central Asia - Kazakhstan, Turkmenistan and Uzbekistan. And he has broken the historic monopoly that Russia - and the Soviet Union before it - had on controlling the trade and energy export routes of the Central Asian nations to their natural markets in the wider world. The United States has tried and failed to do that for more than 15 years. The Chinese made it look easy.

Mr. Hu broke the Russian monopoly on natural gas exports from the region when the new Turkmenistan-to-China pipeline started operating on Dec. 15, 2009. By April 27, the pipeline had delivered 1 billion cubic metersof natural gas to China. When the pipeline reaches its maximum operating potential and other gas pipelines feeding into it from Kazakhstan are completed, it will feed 40 billion cubic meters of gas - or 50 percent of China's total annual requirements, straight to Chinese markets.

Also on April 27, Chinese and Kazakh officials from neighboring border oblasts, or regions, agreed that Horgos, the eastern terminal in China of the Turkmenistan pipeline, also should be the transportation hub where the new superhighway systems of China and Kazakhstan will meet.

In effect, this decision confirms that Kazakhstan will have full access to Chinese markets for its energy and raw mineral exports.

The significance of this deal was underlined during Mr. Hu's deceptively brief visit to the Kazakh capital on June 12 and 13. While the world's attention - and that of the American media - was focused on the ethnic rioting in southern Kyrgyzstan, Mr. Hu and Kazakhstan's President Nursultan Nazarbayev celebrated the signing of two far-reaching new agreements.

One was to construct an 800-mile Kazakh spur feeding into the Turkmenistan-to-China pipeline, which already flows through Kazakhstan. The second one, of which details were not made public, vastly expanded China's purchases of Kazakhstan's uranium ore.

And Kazakhstan is by far the largest economic prize in Central Asia. With its abundance of natural resources, Kazakhstan's gross domestic product (GDP) is greater than the combined GDP of the other Central Asian countries. Astana, its modern capital, graced with several iconic Norman Foster buildings, rises from the vast steppe rather like Dubai and Abu Dhabi rise from the deserts that border the Arabian Gulf. Almaty is the region's main commercial center.

Kazakhstan is the world's leading exporter of uranium, having outstripped Canada in 2009. China has a ravenous hunger for uranium, which it needs to fuel 500 new power plants it plans to build by 2040. Chinese officials say the high quality of Kazakh uranium ore makes it the ideal fuel for their advanced-design reactors.

Meanwhile, the United States is being left at the starting gate.

It's very clear what the government of the United States should do: It should recognize the genuine tolerance and vastly improved standards of living achieved by the government of Kazakhstan for its people. And, as Ross Wilson of the Atlantic Council recommended at a July 12 conference in Washington, America's leaders need to pay some attention to business issues and opportunities in the region instead of focusing obsessively on human rights lectures that never deliver any discernible progress for the people they are supposed to help.

The U.S. government should focus on a coordinated, top-priority policy of constructive engagement so that U.S. corporations can win contracts in Kazakhstan beyond the hydrocarbons sector, where they have had a strong presence for years. The Kazakhs are eager to embrace the United States as a counterweight to their huge and potentially overbearing neighbors China and Russia.

There is real opportunity there. Kazakhstan has ambitious plans to upgrade and expand its agriculture to become a global food power, comparable with Canada, the United States, Argentina and Australia. There are ample opportunities for U.S. agribusinesses to penetrate that market and for U.S. companies in most sectors to find fertile soil for their investments and partnerships in that mineral-rich region of the world.

Kazakhstan should no longer be thought of as potentially the "next" Saudi Arabia. It already is. Its oil and natural-gas reserves are of sufficient quantity and quality to fuel strong economic growth for many years to come, and Kazakh society is largely open and welcoming to Americans.

Earlier this week, Angela Merkel led a high-powered delegation of Germany's largest corporations on a visit to Kazakhstan that resulted in $2.6 billion worth of new business for them. Meanwhile, the Obama administration has been busy lecturing Kazakhstan on its human rights record, which already is incomparably the best in the region, and tying U.S. credibility and prestige in Central Asia to a well-meaning but dangerously weak and incompetent government and collapsing political system in Kyrgyzstan.

It's time for clear thinking and one of those "new beginnings" the president is so fond of talking about.

Martin Sieff, a senior correspondent for Central Asia Newswire, is a former senior foreign correspondent for The Washington Times. His most recent book is "Shifting Superpowers: The New and Emerging Relationship Between the United States, China and India" (Cato Institute, 2010).

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