Connecting Eurasia: Kazakhstan’s place in China’s “silk road economic belt” project

Introduction

The idea of connecting Eurasia is by no means new. It had been actively advocated by the President of Kazakhstan Nursultan Nazarbayev in the early 1990s as the concept of “Eurasianism” had become one of major components of Kazakhstan’s foreign policy. By “Eurasianism” President Nazarbayev had meant the integration of mainly former Soviet republics in order to ameliorate the negative consequences of Soviet dissolution. In March 1994, Kazakhstani President proposed the idea of creating the Eurasian Union among former Soviet republics (1). The advantages of such a union were seen in the presence of common borders, vital supply routes, and great demand for one another’s exports.

The reason behind this proposal was hidden in Kazakhstan’s domestic economic policy where the Eurasian idea was extremely popular in the 1990s. After the Soviet collapse and further wide-spread economic crisis the only solution for the country’s economic predicament was seen the cooperation with Russia and former Soviet republics in the form of new confederation or some other forms of regional institution.

Although President Nazarbayev’s proposal had not been approved by the post Soviet countries, he continued to emphasize the willingness of Kazakhstan in working together with Russia and CIS countries. As President Nazarbayev pointed out in 1997: “I have formulated, and will continue to promote the idea of Eurasian unity which, I believe, has a strategic future. Kazakhstan alone cannot realize its great transit potential, nor can any other neighboring country do so. This should be done jointly, in close and mutually beneficial cooperation”, Kazakhstan was deeply committed to the idea of connecting Eurasia (2).

Fast forward two decades, Chinese President Xi Jinping during his state visit to Kazakhstan in 2013 proposed to join hands building a Silk Road Economic Belt with innovative cooperation mode and to make it a grand cause benefiting people in regional countries along the route.(3)’ In his speech titled “Promote Peopleto-People Friendship and Create a Better Future” at Kazakhstan’s Nazarbayev University, he further outlined the major five steps that need to be taken in order to implement this project. They include: 1) strengthening the communication among the partners, i.e. countries along the road should communicate with each other and make plans for future economic development through consultations; 2) improving road connectivity that would allow the participant countries to form a transportation network, which connects Asian and European countries from the Pacific to the Baltic sea; 3) facilitating trade among the partner-countries; 4) enhancing monetary circulation in order to avoid financial risks and be economically competitive; 5) strengthening people-to-people exchanges (4). The OBOR initiative, undoubtedly, is an ambitious and comprehensive framework aimed at building connectivity and cooperation among the Eurasian countries as well as facilitating the movement of goods, services, and people across borders.

As it can be easily noticed, President Nazarbayev’s Eurasian concept and President Xi’s “Silk Road Economic Belt” initiative coincided and the notion of connecting Eurasia became larger in scope and bolder in its objectives.

President Xi’s announcement of OBOR initiative in Kazakhstani capital Astana during his Central Asian tour, clearly illustrates the importance of Kazakhstan in promoting the land-based “Silk Road Economic Belt” project in Eurasia, as one of the main contributors to its successful implementation. It is the case mostly, since Kazakhstan, due to its unique geographic location, size and its logistics potential can become a major bridge in connecting the countries along this economic belt. Indeed, many observers of Kazakhstan have already noted that it is ‘the buckle of One Belt, One Road’ initiative given that Kazakhstan’s future economic growth depends on the development of transport infrastructure and regional trade (5). Moreover, Kazakhstan had presented itself as one of the 21 founding members of the development bank aimed at funding the infrastructure projects – Asian Infrastructure Investment Bank (AIIB) in October 2014 (6). Therefore, it is worth analyzing Kazakhstan’s place in implementing the OBOR initiative, in particular “Silk Road Economic Belt” project.

As any other grand projects, the OBOR project too, is by no means without major challenges. According to some analysts, there are at least two main challenges to China’s attempts in undertaking infrastructure connectivity in Eurasia. The first is related to Russia’s position on this project. Although Russia has joined the AIIB and agreed to cooperate in implementing the OBOR initiative after the prolonged hesitations,(7) it still sees the former Soviet region as its backyard, the so called ‘near abroad’. Hence, any foreign involvement in this region is seen as a countermeasure to Russia’s own regional project – Eurasian Economic Union (the EEU). The second challenge stems from the political and commercial risks of constructing infrastructure mostly in Eurasia, from Pakistan through Central Asia to the Baltic states. Such project appears to be unprecedented in history and there is no enough experience from the Chinese side.(8) Therefore, the following question arises. Is Kazakhstan likely to be the stable and contributing partner to China’s “Silk Road Economic Belt” project given its commitment to Russia-led EEU?

Current state of China-Kazakhstan economic relations and expectations with ‘Silk Road Economic Belt’ project

The backbone of strategic partnership relations between the two countries is based on economic interaction, in particular trade and investments. In the first half of 2015 the total bilateral trade turnover reached $5 bn, thus constituting 13.6% of total Kazakhstani foreign trade turnover. For instance, the shares of Kazakhstani import and export with China constituted 17% and 11.3% respectively, thus enabling China to become Kazakhstan’s second biggest trade partner after Russia (9).

Hence, Russia still remains to be Kazakhstan’s biggest neighbor not only in economic realm but also in political and security matters. Moreover, Kazakhstan is the one of the most enthusiastic participants of Russia-led regional economic and political institutions. The most prominent example of such an endeavor is the creation of EEU, which originated from a Customs Union in 2010. In 2014-2015 the founding states of this institution – Russia, Belarus, Kazakhstan – decided to extend the Customs Union into an economic union with a single market that shares 2.5% of world GDP(9). These countries committed to create a single market that aims at facilitating a free movement of goods, services, capital and labor via the coordinated economic policies (10). Furthermore, the union is thought to acquire common transport, agriculture and energy policies, with provisions for a single currency and even political union in the future. Hence, such arrangements and the pledge by member states to implement such agreements indicate that these countries are quite serious in their commitments. Especially, Kazakhstan has been the most committed participant of this project since its inception, as President Nazarbayev had offered it first in 1994 in the hope of making the break-up of Soviet economic ties less painful. However, this does not prevent Kazakhstan from supporting and taking part in the realization of the OBOR project. As Kazakhstani officials have repeated several times, Kazakhstan will seek to complement these two projects – both the Russian (EEU) and Chinese (OBOR) one – in order to capitalize on the possible economic benefits they might offer.

Therefore, this paper argues that Kazakhstan is likely to be the stable contributing partner to China’s OBOR project in spite of its commitments to Russia-led EEU. Kazakhstan represents itself as one of the enthusiastic countries that welcome Chinese grand vision in Eurasia. Kazakhstani officials continue to express their support towards the project, in particular ‘Silk Road Economic Belt’. Furthermore, they highlight its commonness with Kazakhstan’s ‘Nurly Zhol’ (‘Bright road’) program, which in turn aims at developing domestic infrastructure for the period of 2015-2019. It is the government program, which seeks to connect the Kazakhstani capital city to the main economic regions by building highways in the directions of Center South, Center – East and Center – By the same token, it is set to create jobs in light of the current economic crisis caused by the sharp falls in oil prices and Western economic sanctions against Russia, which in turn have affected Kazakhstan’s economy in a very negative way.

Such a coinciding nature of these two programs has been officially stated during President Nazarbayev’s state visit to PRC in September 2015, as he announced that ‘the synergy of the two programs – “Bright road” and the “New Silk Road” – are to open new opportunities for strengthening the strategic partnership between the two countries’(11). Since then, the ‘Bright road’ project has been sometimes seen by Kazakhstan as the part of the ‘Silk Road Economic Belt’ project. The rationale behind such bold statements is the fact that Kazakhstan has already become the major arena of the transcontinental logistics project. For instance, nowadays 250 thousand containers travel from the Chinese port of Lianyungang to Europe through the territory of Kazakhstan. Moreover, this traffic is expected to be doubled in 2020 (12). During his visit to PRC in December 2015, Kazakh Prime Minister Karim Massimov stated that “Kazakhstan is working to align the ‘Nurly zhol’ strategy with the ‘Silk Road Economic Belt’ to boost cooperation with China on trade, production capacity and infrastructure.”(13)

It should be noted that such infrastructure project is not new to China-Kazakhstan relations. One more overlapping project has been the ‘Western Europe-Western China’ international transit corridor. This $1.256 mln worth project was intended to increase the transport efficiency along the corridor, which would allow the transportation of the Chinese products to the European markets faster and safer than it had been operated via the traditional ways (i.e. Transsib highway and sea transportation through the Suez Canal). Thereby, it will allow China to transport its products to the European countries within 10 days, thus reducing the previously needed time period 3.5 times.(14) For its part, Kazakhstan saw this project as the way of improving its domestic infrastructure. Thus, the official line in Kazakhstan self-consciously supports the OBOR initiative, in particular ‘Silk Road Economic Belt’ given its massive potential in terms of infrastructure (railways, highways) building and overall aim to improve the connectivity in Eurasia.

Not only Kazakhstani officials support the Chinese initiative, analysts from Kazakhstani think-tanks also see the OBOR initiative as a positive development and hold an optimistic take on it. They argue that Kazakhstan and China have already forged a solid ground for the implementation of ‘Silk Road Economic Belt’ as the ‘Western China – Western Europe’ highway and ‘Kazakhstan – Turkmenistan – Persian Gulf’ railway can become an organic part of the new Silk Road(15). Marat Shibutov, the representative of the Kazakhstan’s Border Cooperation Association, argues that both Kazakhstan’s interests and China’s interests have coincided at the right time. For him, ‘Nurly zhol’ program cannot be implemented on its own, since Kazakhstan’s transit potential is being realized only due to the transportation of natural gas. However, he argues, nowadays the volume of gas delivery along the Russia – Central Asia line is shrinking as a result of reduced gas purchase by ‘Gasprom’ and the gas delivery to Iran’s direction heavily depends on politics. Thus, according to Shibutov, Kazakhstan’s ‘Nurly zhol’ program can only be warranted in case of China realizing its Silk Road Economic Belt plans.(16) Furthermore, Dosym Satpayev Director of the Risk Assessing Group alludes that Kazakhstan can cooperate with China in order to attract Chinese investments as the financial ability of Kazakhstan’s National Fund does not seem to be sustainable in the long In doing so, the analyst notes, Kazakhstan can rely on the AIIB as it shows a great interest in this financial entity. He highlights the role of joint Kazakhstan-China fund of direct investments with $500 mln initial capitalization that was established in the end of 2014. The significance of this fund stems from its purpose of investing in refining industry, energy, agriculture aside from infrastructure projects and logistics.(17) However, this does not necessarily imply that these two programs are in harmony as there are also negative impacts for Kazakhstan too. That is to say, as previous experience has shown most of the Chinese companies have tended to bring their own labor force in implementing their projects. This may not coincide with the purpose of ‘Nurly zhol’ because, as we noted above, one of the main goals of ‘Nurly zhol’ is the creation of new jobs. Nevertheless, as many see, there are clear advantages in joining the efforts from both countries in realizing these two projects. 

Conclusion

Chinese OBOR initiative is without doubt unprecedented in its scope and tasks. Some states have met its proposal with great caution, whereas many of the countries that directly lie at the heart of the project, have welcomed it by viewing it as the start of the new creative era of connectivity and interaction among states. Kazakhstan is not an exception in this respect since it has expressed self-conscious support for this initiative by recognizing its own role as a major transit country.

However, some observers doubted Kazakhstan’s enthusiasm by arguing that Astana’s commitment towards the EEU would not allow it to approve the project, let alone participate in its realization. However, as this paper argued Kazakhstan is likely to become the major contributing partner of China in its OBOR project, in particular its continental part – “Silk Road Economic Belt”. In doing so, the two regional projects the EEU and the OBOR – can be complementary in organizing the new economic, infrastructural landscape of Eurasia. As many have noted the coexistence of Trans-Pacific Partnership (TPP) and 21st century Maritime Silk Road in the Asia-Pacific Region, the coexistence of EEU and “Silk Road Economic Belt” is quite possible. It might be the case, since both the EEU and “Silk Road Economic Belt” – share a common goal of enhancing a free movement of goods, services, people and capital. In doing so, these two overlapping regional projects can comprise the software (EEU with its rules and regulations) and hardware (“Silk Road Economic Belt” with its highways, rail ways and bridges) of economic activities in the Eurasian continent.

Sourses

1. More on the Eurasian Union see N. Nazarbayev, Na Poroge XXI veka (On the Threshold of the XXI century), Atamura, Almaty, 2003:96-110.
2. NAZARBAYEV N., Poslanie Prezidenta Respubliki Kazakhstan N.A. Nazarbaeva narodu Kazakhstana «Procvetanie, bezopasnost’ i uluchshenie blagosostoyaniya vsekh kazakhstancev», Dolgosrochnaya strategiya razvitiya Kazakhstana “Kazakhstan 2030”, [Presidential Address to the People of Kazakhstan, Flourishing, Security and Prosperity for all Kazakh Citizens, Long-term Development Strategy Kazakhstan-2030], October, 1997, available at: http:// www.akorda.kz/
3. “President Xi Jinping Delivers Important Speech and Proposes to Build a Silk Road Economic Belt with Central Asian Countries” September 7, 2013, http://www.fmprc.gov.cn/mfa_eng/topics_665678/xjpfwzysiesgjtfhshzzfh_665686/ t1076334.shtml
5. Daniel Runde, “Kazakhstan: The Buckle in One Belt One Road” June 29, 2015 http://www.forbes.com/sites/ danielrunde/2015/06/29/kazakhstan-buckle-one-belt-one-road/
6. “The Memorandum of Establishing AIIB Signed” October 24, 2014 http://en.xinfinance.com/html/OBAOR/ Main%20Step/2015/77322.shtml
7. Alexander Gabuev, “Russia Joins the AIIB… Finally”, The Moscow Times, April 1, 2015 http://www. themoscowtimes.com/opinion/article/russia-joins-the-aiib--finally/518424.html
8. Tim Summers, “What Exactly is ‘One Belt, One Road’?”The World Today, September, 2015, 71, №5 https://www.chathamhouse.org/publication/twt/what-exactly-one-belt-one-road
9. The data is derived from the Statistics Committee of Kazakhstan’s Ministry of National Economy, available at: www.stat.kz According to it, Russia is Kazakhstan’s biggest trade partner with its 19.1% share in Kazakhstan’s total foreign trade turnover in 2015.
10. Rustem Falyakhov, “Godam Vopreki Tak Zhe Budem My Blizki” (We Will Remain Closer Despite the Time), May 29, 2014, Gazeta.ru http://www.gazeta.ru/business/2014/05/29/6052173.shtml
11. Evraziiskii ekonomicheskii soyuz. Voprosy I Otvety. Tsyfry I Fakty (Eurasian Economic Union. Questions and Answers. Indikators and fakts), [C]. Eurasian Economic Comission, Moscow, 2014, 21.
12. “Nurly Zhol I Noviy Shelkoviy Put Otkryvaiut Vozmozhnosti Dlya RK I KNR” (‘Bright Road’ and ‘New Silk Road’ are to Open New Opportunities for Kazakhstan and China), September 1, 2015, Kapital (Center for Business Matters) http://kapital.kz/economic/43285/nurly-zhol-i-novyj-shelkovyj-put-otkryvayut-vozmozhnosti-dlya-rk-i-knr. html
13. “Nurly zhol Yavlyaetsya Perspektivnoi Chast’iu Poyasa Noviy Shelkoviy Put’”, September 17, 2015 inform.kz
14. “Xi Calls for Closer China-Kazakhstan Economic Cooperation” December 16, 2015 http://news.xinhuanet. com/english/2015-12/16/c_134922945.htm 15“Znachenie proekta Zapadnaya Evropa-Zapadniy Kitai v razvitii regionov Kazakhstana” (The Importance of the Western Europe-Western China for the development of Kazakhstan’s regions), http://www.europe-china.kz/info/86, 2013-12-10
15. Sanat Kushkumbayev, “Perspektivy Realizatsii Proekta Ekonomicheskii Poyas Shelkovogo Puti I Gosudarstvennoi Programmy Nurly Zhol” (Prospects of Realizing the ‘Silk Road Economic Belt’ Project and ‘Nurly Zhol’ State Program), September 18, 2015 http://www.kisi.kz/ru/categories/geopolitika-i-mezhdunarodnye-otnosheniya/ posts/perspektivy-realizacii-proekta-ekonomicheskij-poyas-shelkov
16. Venera Gaifutdinova, “Kitaiskii Shelkoviy Put I ‘Nurly Zhol’ Poidut Odnoi Dorogoi” (Chinese Silk Road and ‘Nurly Zhol’ Are to Go One Path), May 12, 2015 http://forbes.kz/finances/integration/kitayskiy_shelkovyiy_put_i_ nurlyi_jol_poydut_odnoy_dorogoy