News | Central Asia - China - The New Silk Roads A Fair Deal for China’s “Favourite Periphery”?

Reconsidering mineral and water resource management strategies within the BRI in Central Asia

Information

The Kurpsai Dam on the Naryn River in Kyrgyzstan, partially financed with Chinese loans. Photo: Yulia Kalinichenko

Central Asia is positioned to be one of the key pillars of China’s Belt and Road Initiative (BRI), through which it hopes to take advantage of Central Asia’s strategic geographical location as a land-based transit corridor between China and markets in Europe. The region is also valuable in and of itself for hydrocarbon and mineral resources to sustain China’s economic growth.

The interest in promoting BRI projects is mutual. With a total investment package of over 25 billion US dollars since the BRI was announced in 2013 and overall trade turnover reaching almost 50 billion, Central Asia has turned into one of China’s favourite peripheries. As a side-effect, however, massive investments bear a considerable financial burden and political risks to Central Asian countries. Tajikistan and Kyrgyzstan are already in the risk zone of excessive debt to China. Investment packages in other countries are in the form of massive loans. While taking on debt to finance infrastructure projects is expected to trigger local economic development, too much debt is dangerous if it fails to boost local economies, place too much burden on the environment, or improve the livelihoods of the majority of the population.

Farkhod Aminjonov is an Assistant Professor at the College of Humanities and Social Sciences, Zayed University, UAE. His research focuses mainly on energy security, energy governance, and sustainable development.

Within the BRI, Central Asia is expected to be transformed by its people-to-people contacts, by infrastructure networks, as well as by energy and industrial projects that would enhance the region’s participation in the China-centred new Eurasian economic and geopolitical order. Central Asia’s unprecedented dependence on Chinese investments and infrastructure interconnectivity and the fact that most national economic development programmes are now aligned with BRI masks several risks for the Central Asian regimes and, by extension, for Beijing itself. This article provides an analysis of the two susceptible areas of cooperation between China and Central Asian states, the level of risks posed by ignoring of which should not be underestimated: transboundary water resources management and mineral resources development.

  • Taking full advantage of local governments’ receptivity to Chinese loans, Beijing has been promoting projects—minerals processing, exploration, and mining technology development—with high expectations but a limited positive contribution to the development of local economies and the livelihoods of the local people.
  • Despite the fact that parties can now address a long-postponed problem of unregulated transboundary water objects and the use of shared surface water resources between China and Central Asian riparian states within the BRI framework, these issues still remain unresolved.

If not timely and adequately addressed, the environmental, economic, and social sensitivity of these issues, which is already triggering public discontent in some Central Asian countries, may adversely affect the sustainability of the BRI project for all parties concerned.

Drawbacks of the Mineral Resources Management Strategy and the Risk of Public Discontent

Chinese accelerated economic expansion under the BRI is now forcing Central Asian authorities to carefully weigh the cost and benefits of attracting Chinese contractors. Apparently, one of the most conflicting areas within the BRI is mineral resources management and the mining industry. The initial expectation was that mineral resources would attract investments to distant rural areas of mountainous Tajikistan, Kyrgyzstan, and Kazakhstan, which usually lie outside government and business investment priorities. The growing interest of Chinese business in the region’s mineral resources was supposed to provide inhabitants of the rural settlements close to the mining sites with employment opportunities, extend power and road infrastructure, and improve living standards overall. Yet the mining sector turned out to be one of the most corruption-prone sectors within the BRI, where state licences for the development of mineral resources are only resold to Chinese bidders without encouraging much local participation. Chinese mining companies attract Chinese qualified personnel, Chinese technologies and equipment, and, in this particular sector, even Chinese workers to operate mining sites. As a result, exploration and development of mineral resources is often accompanied by land lending, high levels of corruption, and limited contribution to local economies, leading to growing public discontent.

A flare-up of anti-China demonstrations occurred in Kyrgyzstan in 2019. Almost 300 villagers in the Naryn region assaulted Chinese mine workers at the Solton Sary gold mine in August 2019, accusing them of polluting the water supplies and demanding the shutdown of the mine. The protests in Naryn were not the first attempts to counter the presence of Chinese mining companies. Chinese miners at the same gold mine were also attacked in 2011. The Chinese-managed Taldy-Bulak Levoberezhny gold mine was shut down in 2012 after clashes between local employees and Chinese workers. In neighbouring Kazakhstan, local employees and Chinese workers clashed in 2015 at a Chinese-owned copper field.

The share of mining in Tajikistan’s industrial sector has increased from 1 percent in 2000 up to 25 in 2018, primarily in the hands of Chinese companies. Moreover, in exchange for the country’s energy projects and loans, authorities have signed off on exclusive rights for mineral resource extraction and land use to Chinese counterparts. China now controls almost 80 percent of silver and gold mining in Tajikistan. Unlike their Kyrgyz and Kazakh neighbours, Tajiks are reluctant to publicly confront opaque Chinese projects within BRI. However, the conflict of interest is real and local businesses are using other means to turn the missed opportunities in Tajikistan’s favour. For example, the Chinese Kaisun mining company was charged twice the profit tax (20 million US dollars) in Tajikistan. When the company approached the court for protection of its rights, the court supported local authorities. Another case was when the general manager of Joint Venture Zeravshan complained that it was becoming extremely difficult to sign new agreements and that the company failed to buy another gold mine because the Tajik side asked for an unreasonable price. While the Chinese offered up to 400 million yuan (approximately 60 million US dollars), the Tajik government asked for 500 million dollars.

Central Asian authorities often highlight that BRI projects will boost domestic economies and raise living standards. Local people’s expectations of the mineral resources development and mining projects to trigger their local economies are particularly high. Current projects, however, suggest that their expectations remain, to a large extent, unmet.Benefits for the local economy are tempered, as mostly Chinese materials, technology, equipment, and workforces are used for mineral resource extraction. A growing number of opaque mining projects trigger public discontent and could pose a serious threat to the success of the entire BRI in the region. Thus, it is important for Central Asian agents to reconsider their development strategies within BRI, which is currently turning the country into China’s mineral resources appendage. Strong local participation requirements (local materials, equipment, and services) should be introduced to allow suitably qualified local companies to leverage their participation in these projects.

BRI to Exacerbate Water Tensions in Central Asia

The lack of effective governance mechanisms regulating transboundary water resources in Central Asia and the environmental, economic, and political risks it poses was openly acknowledged by the former President of Kazakhstan, Nursultan Nazarbayev, in 2017 during his statement at the Belt and Road Forum for International Cooperation in Beijing: “It is important not to miss complex environmental issues, including the problem of rational management of water resources of intercontinental transboundary rivers.” The issue of transboundary water management, however, is not only excluded from the BRI priority cooperation list, there is not even a specific reference to it in policy documents related to the initiative. Industrial development projects within the BRI as well as China’s potential engagement in the region’s hydropower development could exacerbate the conflict dynamics between the parties concerned.

BRI’s economic success places too great of a burden on water management and irrigation systems in Central Asia, and unless an effective water governance mechanism in general and the management of transboundary rivers in particular is determined within the BRI, it could trigger large-scale conflict dynamics in the region. Considering the sensitivity of the issue, the analysis in this section suggests starting with a less encompassing but equally important segment of collaboration—mitigating water and environmental risks by sharing water management experience and advanced technologies within BRI.

China shares 110 transboundary river basins and lakes with 18 countries, most of which are not regulated by any international treaty.In almost all of those cases, China is the upper riparian state, which gives it an advantage in exploiting transboundary water resources. China has a lot of unresolved issues with downstream riparian states. Expecting quick progress within BRI towards establishing an effective formal mechanism for the management of transboundary water resources would be problematic. However, given the level of political sensitivity and the possible environmental, economic, and social costs of ignoring the issue for the success of the BRI in the region, prioritizing it is only a matter of time. After all, Chinese engagement with Central Asian countries has both direct and indirect implications for the region’s water security and environmental sustainability.

The Threat to the Sustainable Management of the Transboundary Water Resources in Central Asia

The main transboundary rivers between northwest China and Central Asian countries are the Ili River, Irtysh River, Emil River, and Aksu River. China’s push to revitalize its north-western region has affected water allocation in transboundary rivers, which in turn affects socio-economic conditions and the ecosystems of the neighbouring countries.

The Irtysh is the main source of freshwater for around 15 million people living in the north-eastern regions of Kazakhstan. Any projects on the Chinese side diverting water upstream could therefore threaten Kazakhstan’s urban and industrial development. The strategic importance of the Irtysh River has grown with Xinjiang province’s rapid economic development, and China has intensively exploited the river for the past 20 years for irrigational and industrial needs, which in turn has decreased the level of the river’s water on Kazakhstani territory.

Another major point of concern is the transboundary Ili River and the fact that the river accounts for 75 percent of total inflow to one of the largest Asian lakes—Lake Balkhash, located in Kazakhstan. Chinese extension of the irrigation lands, construction of a reservoir, and a canal to divert water from the Ili River may pose a threat to the survival of Lake Balkhash’s rich ecosystem. Some experts even draw parallels between the environmental and political impact of Chinese irrigation planning in Xinjiang with the Soviet cotton irrigation scheme in Kazakhstan and Uzbekistan that caused the Aral Sea catastrophe.

There are, of course, some successful examples of cooperation along the transboundary rivers. In 2011, China and Kazakhstan launched a Friendship Joint Water Diversion Project on the Khorgos River—a 150 km tributary of the Ili River, under which parties agreed to a 50-percent share of the diverted water to moderate flood damage and secure water supply for the ecosystem. This, however, is the only local initiative that resulted in a broader framework for water cooperation. The slow progress towards establishing an effective water sharing mechanism could be explained by the vital importance of transboundary water for the economic and social development of the north-western regions of China.

Chinese Hydropower Projects and the Risk of Water Insecurity

Fundamental disagreements between the region’s demand for water for irrigation and the use of water to generate electricity, along with disputes over energy supplies and the construction of large hydropower plants (HPP), have led to a conflict between upstream (Tajikistan and Kyrgyzstan) and downstream (Uzbekistan, Kazakhstan, and Turkmenistan) countries. To avoid provoking confrontation from either side, unlike elsewhere in the world, Beijing first decided to refrain from engaging in the development of large HPPs and dams in Central Asia. With the political leadership change in Uzbekistan and new prospects for intra-Central Asian water cooperation, China is now showing interest in the region’s hydropower.

In 2012, China International Water and Electric Corporation completed the 300-megawatt-capacity Moynak HPP in Kazakhstan. The two sides have been negotiating the possibility to build several other dams along the Ili and Shilik rivers, including Turgusun-3 HPP with a capacity of 115 megawatts. The largest Chinese hydropower project in Central Asia would be a five-dam, 480-megawatt cascade on the Tentek River in the Almaty region. Chinese state-owned company Sinohydro is also planning to invest around 550 million US dollars in building a dam and HPP on the Zeravshan River between Tajikistan and Uzbekistan. There have also been informal talks about Beijing’s interest in importing Central Asian hydroelectricity from Kazakhstan, Kyrgyzstan, and Tajikistan.

Chinese engagement in exploiting the region’s hydropower potential, especially within the broader framework of BRI cooperation, may indirectly affect water distribution within the Central Asian region and trigger renewed conflict dynamics. Water required to produce hydroelectricity at the newly built HPPs may affect water discharge for irrigation purposes to downstream countries. Thus, acknowledgement and incorporation of environmental limitations into the BRI framework of cooperation is critical to minimize the risk of confrontation over water distribution and management of transboundary rivers in conflict-prone Central Asia.

As an upper riparian state, China wants to retain flexibility in entering agreements that bind its hands and limit its options, especially within the BRI framework. The concession from Beijing on the management of transboundary rivers in favour of any Central Asian state could set a negative precedent within the BRI, in which all other downstream countries will demand similar mechanisms. Thus, even if a certain form of regional framework is established, China will most likely have little incentive to comply with international water norms. Besides, as long as there is no effective intra-Central Asian transboundary water management mechanism, it would be naïve to expect Beijing to take the incentive and establish one against its own interests.

At the same time, water cooperation is more than just working through official channels and intergovernmental arrangements. There are ways to build trust and improve cooperation on water resource management at different levels within the BRI framework. The safest ways for Central Asian states to engage China in mitigating water and environmental risks is by asking the latter to share experience and advanced technologies in using water efficiently and modernize the region’s irrigation system. The problem of water distribution in Central Asia is not of quantity but rather quality of irrigation infrastructure. The irrigation system in Central Asia is outdated and highly inefficient, with most water never reaching the fields due to poor maintenance of the irrigation infrastructure. Prioritizing knowledge and technology sharing for water projects supported by sound science and good hydrological data within the BRI, could, at this stage, be the starting point for broader cooperation between China and Central Asian states over the management of transboundary water objects.

Conclusion

Beijing will certainly be cooperative with its Central Asian counterparts over such sensitive issues as transboundary water management and the development of mineral resources. Yet the incentives to reconsider the management of the Central Asian transboundary water and mineral resources will need to come from within the region. Central Asia benefits from certain expected gains of the BRI projects, but it is also suffering from the necessary losses.

To address the aforementioned issues, Central Asian states must not be mere policy-takers, but rather ought to be able to shape the success of the initiative. If not addressed in a timely and adequate manner, mismanagement of mineral and water resources in Central Asia—which is already triggering a local discontent—may adversely affect the sustainability of the entire BRI initiative.