China is quietly reshaping Asia’s security order. Using its immense financial reserves Beijing either buys distressed state-owned energy companies throughout the world or invests in natural resources abroad to ensure its energy security and gain critical political leverage upon host countries. Loans, investments, or long-term energy contracts give China greater access to energy and compel states to reverse policies that Beijing opposes. In Russia’s Far East Chinese loans forced Russia to complete construction of the East Siberia-Pacific Ocean oil pipeline to China rather than to the Pacific coast, as it had preferred to do.
Against all sound principles of energy economics and politics, Russia is now beholden to a pipeline to one customer. Moreover, China will now also obtain major equity holdings in key Russian energy companies and fields in Asiatic Russia. Acknowledging its failure to reconstruct this region and devise a coherent policy for it, Moscow now eagerly solicits Chinese investment in its Far East and in Russia’s railroads, the main transport artery to and through this region. Moscow has even welcomed Chinese investment in Central Asia that it has always regarded as potentially threatening to its economic aspirations there.
China is also directly penetrating Central Asia. Despite their ambivalence about falling under China’s sway Central Asian states must accept huge Chinese loans and investments in infrastructure even as China clearly conducts policies inimical to their vital interests, e.g. Beijing’s water policies. Worse, at all official meetings, their leaders must publicly thank China for its largesse and promise to support Beijing’s repression against its Uighurs who represent a large minority in Central Asia, and policy on Taiwan, an issue of no consequence to them. These statements resemble nothing so much as medieval kowtows and local rulers’ ritualized obeisance in the ancient Chinese tributary system.
According to members of US non-governmental organizations, China also told the Kyrgyz government that if the US did not offer it enough money to keep the Manas air base open China could furnish the money, demonstrating its willingness to play a broker’s role and gain leverage with Washington and Bishkek. They also quoted German diplomats who noted that China is now committed to truly big investment projects and will not invest in Central Asia for less than $5billion. Since the US will not invest such sums and in many cases, especially those tied to support of the war in Afghanistan, is legally debarred from doing so, and Russia will promise but not deliver the goods, China, who has immense reserves, and will deliver without concern for recipients’ democratic credentials, stands poised to reap an enormous geopolitical harvest in Central Asia.
Similar trends are visible in Southeast Asia. China strenously purusues investments in Australia’s copper, gold, and aluminum sectors. It recently offered ASEAN members a $15billion credit and seeks to establish a $10billion investment fund for them for projects connected with construction, infrastructure, energy, resources, information, and communications. Beyond those projects China is offering large sums to the ASEAN and ASEAN plus 3 Cooperation Funds, and to individual Southeast Asian countries.
Chinese scholars are also discussing a free trade zone and vastly enhanced mutual Chinese-Southeast Asian investments in each other’s country, a strategy that can only enhance China’s presence in Southeast Asia’s economies. Furthermore, because of China’s relative strength and large cash reserves Asian countries like Vietnam are, according to David Pilling of the Financial Times, “humbly beseeching China” for almost $15billion of investnents in Vietnam’s bauxite. Finally China, in return for large investments in energy, pipelines, and mineral resources, has reversed Myanmar’s energy policies towards India and reoriented them towards China and could achieve the same in Bangladesh.
All these moves establish substantial and lasting political leverage in these countries. Meanwhile China also challenges the international fiancial order and demands that the US stop reconnaissance in its economic exclusionary zone. The days of Chinese silence are gone. Instead an assertive China is now actively creating for itself a sphere of influence not unlike the old tributary order in “Inner Asia”. And this is only the beginning of what will surely be an epochal transformation in world politrics.
Stephen Blank is Research Professor of National Security Affairs at the United States Army War College and has published extensively on both China and Russia.
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October 3, 2009
Jakob Schirmer, Georg-August-Universität Göttingen, Gold Contributor (134)