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China strengthens presence in Kazakhstan

BEIJING: In recent weeks, China has significantly expanded its economic presence in the energy-rich Central Asian nation of Kazakhstan, where a number of countries including India and the United States have in the past few years been in a scramble for a share of its vast resources of oil and gas.

In the last couple of months, through the acquisition of oil companies by State-owned enterprises, the extension of a 3,000-km oil pipeline and a number of “loan for oil” deals, China has seemingly strengthened its grip over the country’s energy resources.

On Thursday, the Xinjiang-based Guanghui Industry company received approval from China’s top economic planning body, the National Development and Reform Commission, to acquire a 49 per cent stake worth $40.5 million in a Kazakh oil company. This will allow the company develop oil and gas fields in the Zaysan region.

This deal follows the recent completion of the extension of an oil pipeline which gives China unrivalled access to Kazakhstan’s oil resources. The 3,000-km pipeline, which runs to the Caspian Sea’s oil fields, has a 10 million ton-a-year capacity, which both countries have already agreed to double.

The moves, analysts say, have great geo-political significance. Both Russia and the United States have competing interests in securing access to the region’s energy resources.

India’s interests have in the past also clashed with China’s in securing oil fields in Kazakhstan, most notably in 2005 when the Oil and Natural Gas Corporation (ONGC) and the Mittal group lost out on a bid to acquire one of Kazakhstan’s biggest oil companies to the China National Petroleum Corporation (CNPC).

The State-owned CNPC currently has a stake in a number of oil producers in the country, while the presence of Indian oil companies remains relatively limited.

China has, since April, stepped up its efforts to secure oil and gas resources in Central Asia, which are important to the country’s growing energy needs.

The financial crisis has severely impacted Kazakhstan. Faced with a dire financial situation, the government has turned to China for support, striking a number of “loan for oil” deals.

In April, the two countries agreed $10 billion worth of loan for oil agreements, which gives Chinese companies access to a number of oil fields. China is also in the process of building a pipeline from Turkmenistan, which also has vast gas reserves.

“China is moving fast and systematically taking advantage of Kazakhstan’s economic situation to move before either the Western countries or Russia,” said Arun Sahgal of the Institute of Peace and Conflict Studies in New Delhi, who has studied India’s interests in the region. “Kazakhstan, with a projected 4.5 million barrels a day, is critical for China’s energy security.”

Mr. Sahgal said India still remained a “bit-part player” in the region’s dynamics and called for a more “proactive policy” if India was to not lose out in getting a piece of the region’s energy pie.

Analysts say India’s way forward would lie in co-operating more with Moscow in finding ways to garner a foothold in the region.

“Ironically, in the energy sphere, the U.S. and China have common objectives in that both would like to break the Russian hydrocarbon monopoly and offer alternative exit-routes for the region’s energy resources,” said Zorawar Daulet Singh of the Centre for Policy Alternatives, New Delhi.

“If China is increasing its profile in Central Asia at the expense of Russia and India, why should not Moscow and New Delhi explore options to coordinate policy?”

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