Till the late 1980s, the current Central Asian states were part of a great big giant that we used to call Union of Soviet Socialist Republics. For more reasons than one, which we are not going to get into at this point in time, when USSR collapsed, it resulted in the emergence of new states that were promised to beckon the region into a new era of political and economic reforms where they will not be getting their playbooks from the Kremlin.
However, it was the sort of division that was never really going to be one in any case considering the fact that the fates of Central Asian states have always been intertwined with that of Russia. Russia might not hold dominion over the region but the old inclination towards Russia was never going to diminish. Detaching themselves completely from Russia was never going to happen and even today, it is quite apparent that deep down, these states have never really moved on from independence and heavily rely on Moscow for sustenance.
However, things might change just a little bit now that a new player is in town, clad in a shiny armor and all the tools that could woo away the audiences. China has formed quite a partnership with Russia in a bid to further its regional strategy and take it very close to the European borders, something that has the Old Continent worried and could in the near future, also make the Russians feels insecure.
Voss Capital is long Nintendo, Avid and Extreme Networks despite “Software bubble”
Voss Capital's Voss Value Fund was up 19.91% for the third quarter, while the firm's Voss Value Offshore Fund was up 19.88%. Both funds are now in the green for this year after erasing the damage that was done in March. Year to date, the Voss Value Fund is up 2.41%, while the Voss Value Read More
Russia, China and Central Asia not only share borders, but also follow the same ideology that has made such a triumvirate possible.
As things stand, two out of five Central Asian states have enough financial clout to support their economy but even then, they cannot achieve their lofty ambitions without the help of Russia and China because the landlocked states have historically relied heavily upon trade routes. For this reason, these states have no choice but to maintain cordial relations with their neighbors for their survival and to ensure that they do not end up being on the wrong side of the mountain if things go south.
Keeping these things in mind, these states were quick to join hands with both regional giants on every platform, including CIS, BRICS and SCO.
Turkmenistan and Kazakhstan are blessed with oil and natural gas but the recent dip in oil and gas prices in the international market especially after the Ukraine crisis, has left a big dent in their economies.
Earlier this May, in what was his fifth visit to Russia since becoming president, President Xi Jingpin reached an agreement with President Vladimir Putin to coordinate China’s One Belt One Road (OBOR) initiative with the Russia-led Eurasian Economic Union (EEU) in Central Asia. And although this new arrangement looks all too good to be true on paper and will definitely bring plenty of economic incentives for all stakeholders in the short term, there are equally numerous visible and invisible barriers that might render this deal unsustainable in the long term.
In the last 18 months or so, Russia and Central Asia have faced a lot of economic challenges that have had quite a deep lying effect on their respective economies. Russia’s GDP went down by almost two percent in the first quarter of 2015 largely due to tumbling oil prices and Western imposed sanctions. The ruble lost almost half of its value in August 2015 which was yet another setback to an economy that was on the rise a couple of years back. As a result, it trickled down on Central Asia. Declining oil and gas revenues really hit Turkmenistan and Kazakhstan on the face which consequently resulted in lost revenues, currency devaluation and reduced gas exports to Russia.
Heartland and Rimland theory adapted by Beijing?
The Heartland Rimland theories which were given way back in the 19th century, state that whosoever controls Eurasia, will rule the whole continent. Eurasia is the central point of Asia, a connection, a door between two continents with extreme potential. Any nation that has complete access to this particular area, will have the bragging rights, both in the political and economic sense. Indeed, Beijing must have kept a close eye on the happenings in the region and literally adapted those theories in real life. In 2014, China’s trade with the region had reached $50 million, a figure that for the first time in history, exceeded that of Russia which is a clear sign that the Chinese are in for the long haul and will in the near future, aggressively pursue their policy of controlling the region.
Each year, China receives up to 55 billion cubic meters of natural gas from the Central Asian network of pipelines which is just one part of revitalizing the Old Silk Route, a policy that Beijing has been aggressively pursuing in silence.
Central Asia is a vital clog for Chinese OBOR initiative but despite Beijing’s huge investments in recent years, risks are abound. The fact that Russia’s longstanding influence in the region is not going to wane anytime soon means that any partnership with the landlocked states will have to go through Russia which means that Moscow will always be on the lookout for their share of the spoils. That might not have held true before the Ukraine crisis but since then, Russia has been exploring all potential avenues that could put it in a strong footing in front of the West.
A power struggle that could complicate things
All in all, it is safe to say that the grass is not as green and fertile as it appears to be from the outside. China’s long term need for oil and gas resources in order to meet its ever-growing demand for energy means that Beijing cannot afford to make a slightest mistake in their policy that could trigger a response from Moscow. The Russians stand to gain a lot from Central Asia just like the Chinese which means that this is a territory that has many pitfalls peppered all over the place and a slightest miscalculation could deal a jarring blow to both superpowers and their long term aims of regional dominance.
China has a big interest in the internal policies of the Central Asian states but becoming more directly involved in the politics of these states (which is expected to happen considering the ever-deepening economic relations) is something that will make Moscow feel a little insecure. Caution is order to the day as things stand for both sides but it is quite clear that China is no more a bystander in the New Great Game; it is in it for the long haul and although it would very much want Russia to be on the same wavelength, one cannot fantasize this particular relationship to be a very smooth affair.
Moreover, the enormous security challenges like drug trafficking, religious radicalism, corrupt regimes and terrorism means that China and Russia are walking on a very thin rope at the moment that could give away at the slightest hint of distrust and shatter a house that for now, is indeed made of glass.