Tuesday, August 23, 2005

China recently scored a victory in the Great-Game struggle for influence in Central Asia. On Monday, China National Petroleum Corp. reached a $4 billion deal to buy Canada’s PetroKazakhstan, which produces about 150,000 barrels of oil a day in Kazakhstan. The deal, if consummated as expected, will consolidate China’s economic presence in the energy-rich and geopolitically important region, with potential consequences for U.S. interests.

In a meeting yesterday with reporters and editors at The Washington Times, Foreign Minister Kasymzhomart Tokayev was sober about China’s rising clout. He said he encouraged a U.S. executive to bid on PetroKazakhstan, but the executive told him, “It’s very difficult to compete with the Chinese.” The difficulty for U.S. and other companies is that Chinese firms are willing to overpay for foreign assets, if those purchases will bolster China’s clout abroad and help it secure energy resources. In that regard, the companies serve as a platform for Beijing’s foreign policy goals, while U.S. firms consider market factors.

“We believe in Kazakhstan that there is no alternative to having a good, cooperative relationship with this country,” Mr. Tokayev said, regarding China. “We don’t have the choice of selecting our neighbors,” he added. When asked how Kazakhstan sees the competition for influence in the region, Mr. Tokayev said, “Our credo is to maintain the balance of interests” of the big powers.

Mr. Tokayev recognized China’s ascendancy in the region. “The potential and ambitions of China are growing,” he said. China is already financing construction of an $850 million oil pipeline from Kazakhstan to China, capable of moving 400,000 barrels of crude a day. It is due to come on line in December. Also, Chinese interests own about 60 per cent of another major Kazakh oil producer. In Uzbekistan, China National Petroleum signed a $600-million oil joint venture.

Also, Mr. Tokayev pointed to a $900 million loan that China has offered to countries in the Shanghai Cooperation Organization — comprising China, Kazakhstan, Kyrgystan, Russia, Tajikistan and Uzbekistan. Mr. Tokayev said that, unlike the United States, Beijing is not pushing the countries of the region to institute democratic reforms. “You have to take this into account,” he said, in considering China’s influence.

Indeed, it was the Shanghai Cooperation Organization that said in a July statement that “coalition member states” involved in Afghanistan that have bases in Central Asia (in other words, the United States) must set a timetable for leaving the bases. Mr. Tokayev said that “other countries” in the organization had argued for issuing a stronger statement that specifically mentioned the United States, but Kazakhstan had argued against them. He declined to mention those other countries, but many analysts believe China was probably one of them. In a different initiative on July 29, Uzbekistan told the United States it has three months to leave its base there.

U.S. and Chinese interests in Central Asia do converge on the counter-terror front. In the competition for energy assets and regional influence, though, Washington and Beijing appear to be rivals.

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