chinese expansion in central asian states – truth or paranoia?

By: Khadisha Akayeva (Kazakhstan), Klara Zhyrgalbek kyzy (Kyrgyzstan), Bakhtovar Safarov (Tajikistan), Aisulu Mukhamedkalieva (Kazakhstan), Ilgis Maisalbek uulu (Kyrgyzstan)
A fragment of YouTube video from Kazakhstan TODAY channel. January 2019
China is one of the main investors in Central Asian region with growing influence.
Attitude of Central Asians to China
Land protests in Almaty, 2016
Anti-Chinese protest in Bishkek. Kyrgyzstan, 2019
Is Chinese influence growing in the region?
Certainly, it is. This is no surprise – economically strong countries cannot but influence their closest – weaker – neighbours. However, we cannot disregard that China counts largely on investments in other states.

If in 2002 direct investments of China in other countries were 2.7 billion dollars, in 2019 they were 129 billion.

China invests actively in Central Asia. The main portion of funds is provided in the form of direct investments, credits and soft loans.

We cannot say that the influence of China on the economy of Central Asian states has increased significantly in recent years; it has been strong for a long time. In terms of economy, some states depend so much on China that when the economic giant leaves the region, the residents of these states encounter hard times.
Statement No. 1: Half of Kazakhstan oil belongs to China
In early 2013, the website of a serious Kazakhstan newspaper specialising in economy of Kazakhstan, cited the words of Murat Auezov, a prominent public figure in the country, that almost half of Kazakhstan oil belongs to China.

Moreover, talks about "China seizing our oil" take place very often.

Is it really so?
The deposits of Kazakhstan, according to the Constitution, may not be sold. The state may only grant a short-term license for exploration and production.

We are going to talk about it.

Kazakhstan has 220 deposits, including five largest ones.

In 2018, the country produced 90.3 million tonnes of oil. 59.8% is produced at three deposits by the following companies:
The Chinese national oil and gas corporation (CNPC) holds shares in one of these companies, North Caspian Operating Company. Their number is at little as 8%.

Overall, the stocks of shares are distributed as follows:

Chevron (USA) — 50%,

KazMunaiGaz (Kazakhstan)— 20%

ExxonMobil (USA) — 25%

LukArko (France and Russia) — 5%


North Caspian Operating Company:

AgipCaspian Sea B.V. (project operator) - 16,807%

KMG Kashagan B.V. (Kazakhstan) - 16,877%

Total EP Kazakhstan (France) - 16,807%

ExxonMobil Kazakhstan Inc. (USA) - 16,807%

Shell Kazakhstan Development B.V. (United Kingdom and Holland) - 16,807%

CNPC (China)— 8,333%

Inpex (Japan) — 7,563%

Karachaganak Petroleum Operating B.V.:

Royal Dutch Shell plc (Netherlands, United Kingdom) — 29,25%

Eni (Italy) — 29,25%

Chevron (USA) — 18%

Lukoil (Russia) — 13,5 %

KazMunaiGaz (Kazakhstan) — 10 %.
Well, these companies produce 60% of oil. Where are the remaining 40%?
There are two Chinese companies on the oil market of Kazakhstan - CNPC and Sinopec. There is also CITIC Canada Energy Limited which was previously 100 percent owned by China, but recently, Kazmunaygaz, owned by the government of Kazakhstan, bought a 50% stake.

Kazakhstan-China Joint Venture CNPC-Aktobemunaigaz is one of the five largest oil-producing companies of Kazakhstan. This company holds 50 per cent of shares in another large oil company – KMK Munai. The main company in the tandem of CNPC and Aktobemunaigaz is the Chinese party, which was emphasised in the auditor's report for 2018:

"The main company that controls the Group is the China National Petroleum Corporation (hereinafter referred to as CNPC). On September 26, 1997, China National Oil and Gas Exploration and Development Corporation (hereinafter, CNODC), the subsidiary of CNPC, purchased 66.7% of common stock in Aktobemunaigaz from the Government of the Republic of Kazakhstan represented by the Privatisation Department of the ministry of finance of the Republic of Kazakhstan on the basis of the share purchase agreement."

Thus, the volume of oil produced by CNPC-Aktobemunaigaz can be assigned to China. China, according to akim of Aktobe region Ondasyn Urazalin, produces 70 per cent of oil products and 90 per cent of gas in Aktobe region.
However, the majority of oil is produced not in Aktobe region, but in Atyrau region. In 2018, it produced 52 per cent of all oil.

In Atyrau region, the largest producers of crude oil and associated gas are the branch of North Caspian Operating Company N.V. (Kashagan deposit), Tengizshevroil (Tengiz deposit), and Embamunaigaz.

In Caspian Operating Company N.V., as noted previously, the Chinese party holds 8.8% of shares. Tengizshevroil does not have China as a member, and the founder of Embamunaigaz is a state-owned company.
Kyzylorda region with the Kazakhstan-China oil pipe "Atasu-Alashankou" also stirs interest. 27% of oil produced here is exported to China.

Who produces it?

The largest oil companies in the region are Kazgermunai and PetroKazakhstan Kumkol Resources.

Kazgermunai is equally owned by PetroKazakhstan Kumkol Resources and KazMunaiGaz.

67% of PetroKazakhstan Kumkol Resources belong to China and 33% belong to Kazakhstan.
The last region we are going to discuss is Mangistau, the second largest region by oil production (after Atyrau region).
Photo: BBC World Service
The largest companies here are Mangistaumunaigaz, Ozenmunaigaz, Karazhanbasmunai, and Buzachi Operating LTD.

50% of Mangistaumunaigaz belong to China and 50% belong to Kazakhstan.

50% of Karazhanbasmunai belong to Kazakhstan and 50% belong to CITIC Canada Energy Ltd, which is fully controlled by the government of China.

In turn, Buzachi is controlled by China and Netherlands.
Verdict: Manipulation.

If we consider this issue in terms of "the right to produce 40% of Kazakhstan oil was granted to China", let's look at these two points:

- 60% of oil are produced not by China (see largest oil producers);

- Yes, one half in many companies belongs to China, but their number is not 40% given that another half belongs to a national or foreign operators.
Statement No. 2: Kyrgyzstan won't be able to pay its debts to China
The most frequent concern about China that can be heard from ordinary Kyrgyzstanis is that China will take a portion of Kyrgyzstan as repayment of debt.

These are the things voiced by prominent political observers and activists who call the citizens on social media to "pool" some money to pay out the national debt to China. However, the amount to be pooled to pay out Kyrgyzstan's debt to China is about 1.7 billion dollars, which is 40% of the country's national debt
Kyrgyzstan activists shared a video online where they ask to "pool" some money to pay out Kyrgyzstan's national debt to China. Bishkek-based respondents interviewed by Sputnik are not happy about this idea.
Fake or truth? Let's analyse.
Naryn region, Kyrgyzstan
Meet Naryn region, which shares border with China in the south. Residents of Kyrgyzstan are afraid of losing it.
Is the situation really so bad and will Kyrgyzstan fail to pay out its debt to China?
The national debt of Kyrgyzstan is large. We've looked at the data and made up a chart:
If we calculate the share of national debt in the GDP, we'll have another picture:
What does it mean?
The GDP of Kyrgyzstan has been growing since 2015 and now it is 8 billion dollars. According to the World Bank, it will increase by 4 per cent annually.
Experts in economic relations between China and Central Asian states state that Kyrgyzstan has nothing to fear. The national economy is growing steadily, which means that Kyrgyzstan will make the next instalment payment in 2024.

According to the Ministry of Finance, in 2024 Kyrgyzstan will have to pay 250 to 300 million dollars to China. This amount is large, but not unpayable. Dick van der Kley, programme director of the Australian think-tank China Matters, who specialises in relations between China and Central Asia, said it in the interview to Novaya Gazeta.

To repay a portion of debt to China in 2024, the budget of Kyrgyzstan should grow 2.1 times annually. In 2018, the deficit of the national budget of Kyrgyzstan was 2.6 times less than in 2017.
Horror stories about the territorial expansion are exaggerated. The population in China is unequally distributed along the country. The closer to large cities, the higher the density of population.

The density of population gets low closer to borders; it is less than 50 people per one square kilometre on the outskirts.
Population density in China. ©
Verdict: Manipulation

Fear of China among Central Asians used to be great back in the Soviet times. Now China has the same danger to a weaker country as any other stronger country.

However, "seizures of territories" is not what we should fear. Economic dependence of Kyrgyzstan on one source that doesn't belong to the state poses more threat.
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