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uyghur advice
09-11-04, 04:29
ENERGY AT THE SOURCE OF SINO-KAZAKH RAPPROCHEMENT
Stephen Blank 11/08/04

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China and Kazakhstan have moved rapidly over the past six months to strengthen bilateral relations. Although the two countries share a desire to increase security cooperation to counteract the rise of Islamic radicalism in Central Asia, energy-related issues are currently driving the Beijing-Astana relationship.

The long-planned construction of an oil pipeline linking the two nations, known as the Atasu-Alashankou route, finally commenced in late September. The route is an extension of a 400-kilometer Keniyak-Atyrau pipeline, which began operations in 2002. Already, officials are contemplating the construction of a gas pipeline to along with the Atasu-Alashankou oil route.

Kazakhstani officials outlined several potential gas export routes at an early October energy conference in Almaty. "The first scenario is to transport certain volumes of Turkmen and Uzbek gas through an already existing pipeline in southern Kazakhstan that supplies gas to Almaty," Uzakbai Karabalin, president of the KazMunaiGaz conglomerate, said in an interview with Kazakhstan’s Khabar Television. "The extension of this pipeline to the Chinese border is not technically difficult and this is a scenario to quickly organize gas supplies to China." Other options under consideration include a route through the southern Kazakhstani city of Shymkent, and another extending from the Russian city of Omsk, via Astana, onward to China.

The catalyst for pipeline consumption is China’s voracious appetite for energy. Chinese demand for crude oil imports, for instance, rose 31 percent in 2003 to 91 million tons. Beijing has expressed rising concern over its ability to meet surging demand created by the country’s rapid industrialization. This year China has been plagued by energy shortages leading to brownouts and blackouts. Accordingly, energy security has raced to the top of the Chinese Communist Party’s political agenda.

A large percentage of China’s energy now comes from the volatile Middle East. Such a situation is unsettling to China’s leaders, prompting them to aggressively pursue alternative energy sources in Africa, Russia, and now Central Asia. Of the available options, Kazakhstan, which sits along China’s western border, clearly makes the most sense. The transport logistics are daunting in arranging regular energy supplies between Africa and China. Meanwhile, Russia has proven a reluctant partner for the Chinese.

Russian energy producers, with likely support from the state, have steadily rebuffed China’s attempts to obtain energy supplies. For example, they blocked the sale of Slavneft to China, and appear to favor the construction of an Asian pipeline -- terminating at the Pacific port of Nakhodka -- that would be aimed directly at supplying the Japanese market. This route would be disadvantageous for China in that it would force Beijing to obtain Russian energy via Tokyo. Also damaging China’s hopes for easy access to Russian energy is Russian President Vladmir Putin’s determined effort to dismantle the Yukos conglomerate. Yukos was among the few Russian concerns that advocated stronger Russo-Chinese energy ties, including the construction of a so-called Angara-Daqing pipeline. China has expressed interest in buying parts of Yukos, in the likely event of its break-up. But energy experts doubt that Russian officials would allow Chinese firms to obtain significant equity stakes in Russian energy firms.

China’s efforts to gain access to Kazakhstani energy date to 1997, when the China National Petroleum Corp. (CNPC) purchased a 60 percent stake in Kazakhstan’s Aktobemunaigaz. At the time, the deal was seen as laying the groundwork for an oil and gas network extending from Aktyubinsk in Aktobe province to Alashankou, a Chinese border crossing. The project soon encountered difficulties – including labor issues and construction obstacles posed by tough terrain -- reaching a point in 1999 where there was talk of its cancellation. Had Russia proven more willing to ensure regular energy supplies to China via the Daqing route, the Chinese-Kazakhstani project may well have fallen by the wayside.

A combination of events in 2003 rekindled the spirit of Chinese-Kazakhstani energy cooperation. The US-led invasion of Iraq, in particular, reinforced the notion in China and elsewhere that energy sources in the Persian Gulf region are prone to instability. At the same time, Yukos’ troubles in Russia caused Chinese leaders to effectively abandon hopes for the Daqing pipeline. Meanwhile, Kazakhstan’s economic boom made cooperating with Astana seem increasingly attractive. Now, the effort to connect Kazakhstan to China’s Xinjiang Province and on to Beijing is proceeding at full-throttle.

The Atasu-Alashankou pipeline is projected to have a capacity to carry as much as 10 million tons of oil per year, costing upwards of $850 million to complete. Oil is envisioned to start flowing through the pipeline in late 2005. Depending on demand, China and Kazakhstan have an option to add an additional 10 million tons in capacity to the pipeline by 2011. To make full use of the Kazakhstani export route, China is simultaneously planning to invest up to $1.2 billion in building pipelines that would improve the flow of energy to industrialized areas on China’s eastern coast.

In gaining China as a customer for its energy, Kazakhstan not only opens the door for other avenues of bilateral trade, Astana also obtains a card that it can potentially play against Russia, or even the United States, in the Central Asia’s high-stakes energy game. Chinese-Kazakhstani energy cooperation makes it easier for Astana to resist Russian pressure to control Kazakhstani energy flows, and, more recently, to establish a Moscow-dominated gas cartel of former Soviet producers. Having China as a customer also allows Astana to drive a harder bargain in negotiations concerning potential Kazakhstani participation in the Baku-Tbilisi-Ceyhan pipeline. [For additional information see the Eurasia Insight archive].


Editor’s Note: Stephen Blank is a professor at the US Army War College. The views expressed this article do not in any way represent the views of the US Army, Defense Department or the US Government.

ANN
09-11-04, 06:38
I am wondering if the world has enough resources to satisfy china's insatiable appetite.

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