Over the past few years, China has been establishing closer relations with countries in Central Asia. In 2023, trade between China and the Central Asian region increased by 27 % to US$ 89 billion. With every nation that except Turkmenistan, Chinese business increased.
In a study that examined the effects of China’s sprawling Belt and Road Initiative in lower- and middle-income nations, I examined how Foreign investment is affecting Uzbekistan’s energy field.
Since 2020, Chinese funding in Uzbekistan has increased considerably. By the year’s close, it had surpassed US$ 2.8 billion, increasing from US$ 2.8 billion. Over 3, 450 Chinese companies are currently present in Uzbekistan, making up about 20 % of all international companies it.
One of the main factors contributing to China’s growing presence in Central Asia is to enhance strength cooperation. China hopes to lessen its dependence on nations like Russia by becoming a big client, provider, and investor in the country’s energy sector.
Since the Soviet Union’s 19th-century invasion of the area, Central Asia has a political and economic reliance on Russia. Much of its system was constructed to sell goods like cotton and power to Russia, with the latter selling it for higher rates to Europe. This network has mostly remained unchanged up until recently.
Yet, some Central Asian nations have been able to reduce their reliance on Russia over the past ten or thus. With a maximum communicate of more than 80 %, China has grown to be the major supplier of Uzbek gas. And in 2022, Uzbekistan exported nearly US$ 2 billion worth of goods to China, matching its volume of trade with Russia.
These business patterns are reflected in the investment in energy system. Central Asia has substantial oil and gas reserves. However, the majority of the pipes in the area were primarily directed to Russia and, in some cases, to Turkey.
With China’s assistance, east-oriented pipes have been constructed and maintained. These pipes have made it easier to deal with China and helped to reduce operating spend in Turkmenistan, Kazakhstan, and Uzbekistan’s energy industries.
In 2025, China intends to begin building of a network that runs through Tajikistan, Kazakhstan, and Kyrgyzstan pending the conclusion of a contract for oil supply with Turkmenistan. This will improve China’s ties to the area in terms of strength.
I conducted plan interviews with Uzbeks and those involved in the Uzbek power sector a few years ago while conducting fieldwork there. Offers with China were viewed as more trustworthy than those with Russia, which has historically renegotiated the terms of long-term power agreements with Central Asian nations or added harsh terms to its favor.
For instance, the Uzbek authorities needed more gas to meet local demand in 2018. Uzbekistan will receive the oil from a mutual Lukoil-Uzbek production facility, but at a high price, according to the Russian energy company Lukoil Energy. Lukoil owed the Uzbek government$ 600 million in debt.
China’s role in the Uzbek power sector has an indirect impact on the country’s natural economy. Users were exposed to the risk of relying on a single power supply because of the pandemic, which caused Uzbekistan’s gas exports to China to decline considerably.
Since 2021, China’s fuel exports have recovered. However, this horror spurred politicians to look into ways to diversify Uzbekistan’s power generation away from fossil fuels. Uzbekistan has invested more than US$ 4 billion in renewable energy production over the past few years, with China frequently providing the technology and expertise needed.
With the assistance of Chinese firms, large solar power plants have been planned and constructed close to the Afghan capital, Tashkent, as well as other places like Navoi. Foreign companies have provided wind turbines for jobs in Ferghana, which is close to Kyrgyzstan.
In addition to speakers, transportation providers, and professionals, there is a growing need for qualified and semi-skilled labor thanks to Chinese-led investment in the renewable energy sector. My respondents noted good, albeit negligible, effects on work and income in the sector.
New difficulties lie away
Nevertheless, Chinese involvement in the energy sector in Central Asia has its benefits. Political and economic risk may be a result of Uzbekistan’s oil trade with China.
Energy companies are more lucrative because the trade cost of Uzbek fuel is more successful than the regional government subsidy, so exports have taken precedence over the local market. Consumers in Afghanistan frequently have to deal with rationed fuel supplies or no exposure to any gas, especially during the winter when demand is at its highest.
This has caused unsatisfaction in the Afghan population, particularly in rural areas where individuals have had to burn alternative fuel sources like coal, firewood, and animal dung. These power options harm the environment and the health of the planet.
Russian oil and gas have been subject to additional competition from Uzbek gas due to European sanctions since 2022, the same year Russia launched its invasion of Ukraine. Russian fuel suppliers have searched for other markets in Asia to evade sanctions. According to industry flow information, India, Turkey, and perhaps China have increased the amount of Soviet fossil fuels they purchase.
However, overall, the state of play in the world power sector appears to be changing. Central Asia has a significant chance of succeeding.
At SOAS, University of London, Lorena Lombardozzi is a senior lecturer in the political economy of international growth.
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