China has been developing closer ties with countries in Central Asia over recent years. Trade between China and the Central Asia region grew to US$89 billion in 2023, an increase of 27% on the previous year. Chinese trade rose with every country there except Turkmenistan.
In my paper from June 2024, which is part of a collection of studies looking at the impact of China’s sprawling Belt and Road Initiative in low- and middle-income countries, I explored how Chinese investment is affecting Uzbekistan’s energy sector.
Chinese investment in Uzbekistan has grown significantly since 2020. By the end of 2022, it had reached US$4.5 billion, up from US$2.8 billion one year before. There are now over 3,450 Chinese companies in Uzbekistan, accounting for roughly 20% of all foreign companies in the country.
One of the main reasons for China’s expanding footprint in Central Asia is to intensify energy cooperation. By becoming a major buyer, lender and investor in the region’s energy sector, China is hoping to reduce its dependence on countries such as Russia.
Central Asia has been politically and economically dependent on Russia since the Soviet Union invaded the region in the 19th century. Much of its infrastructure was built to provide commodities like cotton and energy to Russia, with the latter selling it at high prices to Europe. This infrastructure has, until relatively recently, remained largely unchanged.
However, some Central Asian countries have been able to reduce their dependence on Russia over the past decade or so. China has become the main importer of Uzbek gas, with a peak share of more than 80%. And Uzbekistan exported almost US$2 billion worth of goods to China in 2022, matching its volume of trade with Russia.
Investment in energy infrastructure is taking place in a reflection of these trade patterns. Central Asia boasts significant reserves of oil and gas. But most of the region’s pipelines were traditionally directed towards Russia and, to a lesser extent, south-west to Turkey.
Pipelines have been built and maintained with China’s support that are directed towards the east. These pipelines have facilitated trade with China and have helped reduce operational waste in the energy sectors of Turkmenistan, Kazakhstan and Uzbekistan.
In 2025, China plans to resume the construction of a pipeline stretching from Turkmenistan through Uzbekistan, Tajikistan and Kyrgyzstan, pending the finalisation of a gas supply contract with Turkmenistan. This will further strengthen China’s energy ties with the region.
A few years ago, while I was carrying out fieldwork in Uzbekistan, I interviewed policy experts and those involved in the Uzbek energy industry. My interviewees saw deals with China as more reliable than those with Russia, which has in the past renegotiated the terms of long-term energy contracts with Central Asian countries or has added unfair clauses in its favor.
In 2018, for example, the Uzbek government needed additional gas to meet domestic demand. Russia’s Lukoil energy company agreed to sell the gas from a joint Lukoil-Uzbek production facility to Uzbekistan, but at a hefty price. The Uzbek government incurred debt to Lukoil worth US$600 million.
Chinese involvement in the Uzbek energy sector is also having an indirect effect on Uzbekistan’s green economy. During the pandemic, Uzbekistan’s gas exports to China dropped significantly, exposing operators to the vulnerability of relying on a single energy source.
Gas exports to China have recovered since 2021. But this shock prompted policymakers to explore ways of diversifying Uzbekistan’s energy production away from fossil fuels. Over the past few years, Uzbekistan has invested over US$4 billion in renewable energy production, with the technology and expertise often coming from China.
With the support of Chinese companies, vast solar power plants have been planned and developed near the Uzbek capital, Tashkent, as well as other cities like Navoi. Wind turbines have been supplied by Chinese firms for projects in Ferghana, near the border with Kyrgyzstan.
Chinese-led investment in the renewable energy sector has created further demand for skilled and semi-skilled labour, such as translators, logistics operators and engineers. My interviewees noted positive – albeit limited – effects on employment and wages in the sector.
New challenges ahead
There are, however, also drawbacks to Chinese involvement in central Asia’s energy sector. Uzbekistan’s gas trade with China is a possible source of political and economic vulnerability.
The export price of Uzbek gas is more profitable for energy companies than the local subsidized price, so exports have taken priority over the domestic market. Uzbek consumers often have to contend with rationed gas supplies or no access to gas at all, especially during the winter when demand is at its highest.
This has led to dissatisfaction among the Uzbek population, especially in rural areas where people have had to resort to burning alternative sources of fuel like coal, firewood and animal dung. These energy sources are harmful to health and the environment.
Western sanctions on Russian oil and gas since 2022, when Russia launched its invasion of Ukraine, have also created further competition for Uzbek gas. Russian gas suppliers have sought alternative markets in Asia to circumvent the sanctions. Trade flow data shows that India, Turkey and even China have increased the amount of Russian fossil fuels they buy.
But, by and large, the state of play in the global energy market seems to be changing. Central Asia is in a strong position to benefit.
Lorena Lombardozzi is a senior lecturer in political economy of global development at SOAS, University of London.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
