REPORT
THE BELT AND ROAD INITIATIVE IN KAZAKHSTAN: Does the geopolitics of China’s outward investments put the brakes on decarbonisation? LEGAL NOTICE
This publication is a deliverable of MISTRA GEOPOLITICS, which is funded by MISTRA - The Swedish Foundation for Strategic Environmental Research. It is further supported by a grant of the German Federal Foreign Office.
Federal Foreign Office Supported by www.auswaertiges-amt.de
Published by adelphi research gemeinnützige GmbH Alt-Moabit 91 10559 Berlin, Germany + 49 30 89 000 68-0 [email protected] www.adelphi.de
Author Daria Ivleva (adelphi)
Cover and back page photos Views of Kazakhstan’s capital Nur-Sultan by Almira / Unsplash
Layout undstoffers Designbüro, www.undstoffers.de
Place and date of publication Berlin, January 2021
Disclaimer The analysis, results and recommendations in this paper represent the opinion of the authors and are not necessarily representative of the position of any of the organisations listed above. For the texts in this publication, adelphi grants a license under the terms of Creative Commons Attribution-NoDerivatives 4.0 International. You may reproduce and share the licensed material if you name adelphi as follows: “© adelphi, CC-BY ND 4.0”. Photographs and graphics are not covered by this license. In case of doubt please contact adelphi prior to reusing the material.
© 2021 adelphi THE BELT AND ROAD INITIATIVE IN KAZAKHSTAN: Does the geopolitics of China’s outward investments put the brakes on decarbonisation?
By Daria Ivleva, adelphi
Acknowledgments: The author wishes to thank Dennis Tänzler, Director of International Climate Policy at adelphi, for his support and input throughout the work on the study, as well as Kalle Hallding, Co-Director of the Mistra Geopolitics Programme and Senior Research Fellow at Stockholm Environment Institute (SEI), for his invaluable comments. Emily Wright and Jonathan Smith kindly edited the text. TABLE OF CONTENTS
EXECUTIVE SUMMARY 6
1 INTRODUCTION 8
2 THE BELT AND ROAD INITIATIVE: GEOPOLITICS AND DECARBONISATION 9
2.1 INTRODUCING THE BELT AND ROAD INITIATIVE 10 2.1.1 Key features of the BRI 10 2.1.2 An initiative intentionally left vague? 12
2.2 THE BRI AS A CASE FOR GEOPOLITICS OF DECARBONISATION 16
2.3 THE BRI AND THE PARIS AGREEMENT 17
2.4 THE BRI AS A GEOPOLITICAL VENTURE 21 2.4.1 Manifold motives 21 2.4.2 A cause for concern? 24
3 THE BELT AND ROAD INITIATIVE IN KAZAKHSTAN 26
3.1 DECARBONISATION IN KAZAKHSTAN 27 3.1.1 Cross-cutting policies 27 3.1.2 Sectors 28 3.1.3 Progress and entry points 32 3.1.4 Needs and barriers 32 3.1.5 In sum 33
3.2 CHINA’S INVESTMENT IN KAZAKHSTAN 34 3.2.1 The growing economic links of China and Kazakhstan 34 3.2.2 The investment portfolio 36 3.2.3 Potential for “decarbonisation fits” 41
3.3 A BRIEF GEOPOLITICS OF CHINA’S INVESTMENTS IN KAZAKHSTAN 43 3.3.1 Connectivity projects 43 3.3.2 Interaction with Russia 44 3.3.3 Interaction with other Central Asian countries 45 3.3.4 Perceptions of China in Kazakhstan 46 3.3.5 In sum 47
3.4 HOW DOES GEOPOLITICS INTERACT WITH DECARBONISATION IN SINO-KAZAKHSTANI PROJECTS? 48 3.4.1 Securing land “lifelines” 49 3.4.2 Securing and diversifying supplies of commodities 50 3.4.3 Expanding technological leadership and new opportunities for heavy industries 51 3.4.4 In sum 52
4 4 CONCLUSIONS 53
4.1 REFLECTING UPON THE FINDINGS: THE PUSH AND PULL OF DECARBONISATION GEOPOLITICS 53
4.2 IMPLICATIONS FOR EUROPEAN CLIMATE DIPLOMACY 54 4.2.1 Push factors: observations for the EU-China relationship 55 4.2.2 Pull factors: entry points for European diplomacy towards BRI target countries 57
5 REFERENCES 59
FIGURES, TABLES AND TEXTBOXES
Figure 1 The partner countries, economic corridors and maritime routes of the BRI 9
Figure 2 BRI investments in corridor economies 11
Figure 3 BRI financing in the Belt and Road corridor economies 14
Figure 4 Interactions between geopolitics and decarbonisation 16
Figure 5 Three perspectives on decarbonisation 17
Figure 6 Annual investment needed in 126 BRI countries to align with a two-degree world in comparison to global clean energy investment in 2018 19
Figure 7 Policy landscape in Kazakhstan 28
Figure 8 Infrastucture investment in Kazakhstan 33
Figure 9 Dynamics of gross FDI inflow to Kazakhstan, USD billion 34
Figure 10 The 55 Sino-Kazakhstani investment projects 41
Figure 11 BRI-related infrastructure in and around Kazakhstan 44
Table 1 Sino-Kazakhstani foreign trade indicators, USD millions 35
Table 2 Sino-Kazakhstani investment projects 40
Table 3 Number of commercial vs. strategic Chinese projects in Central Asia 48
Textbox 1 How close are international investment flows to beingcompatible with the Paris Agreement? 20
Textbox 2 Is the geopolitical dimension of the BRI a threat? 24
Textbox 3 Data and definitions 36
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EXECUTIVE SUMMARY
ANALYSIS
China’s Belt and Road Initiative (BRI) is a prime example of how decarbonisation processes interact with geopolitical dynamics. The successful implementation of the Paris Agreement depends on the emissions trajectories of the BRI partner countries and the infrastructure choices they make today. China’s support to energy, transportation and industrial projects might influence some of these choices, and these investments often underpin the geopolitical aspirations of China and its partners. Therefore, the BRI clearly stands at a juncture between geopolitics and decarbonisation. The initiative is broad in approach, reflecting China’s global ambition, rather than a portfolio of projects that all share certain characteristics. China and its partner countries’ motivations are manifold. The specific projects and geopolitical context vary across the different target countries and regions, and, therefore, so do their potential implications for climate action. This is why this report adopts a case-study approach and looks in detail at China-financed projects in Kazakhstan.
Kazakhstan is of interest as a case study for several reasons. Firstly, it has a key role in the BRI vision as a major transit country for at least two of the six economic corridors, and is therefore key to achieving many of the geopolitical aims of the BRI. Secondly, the broad portfolio of Sino-Kazakhstani projects provides for a differentiated picture of the links with decarbonisation. Thirdly, in Kazakhstan, China’s overseas investments interact with a tension in national policies: the country is highly dependent on fossil fuels and heavy industries, but also has ambitious decarbonisation policies and overarching visions for economic transformation.
In Kazakhstan, BRI investments match up with host government’s development priorities in energy, industry, transport, and agriculture sectors. The majority of these investments support the present emission-intensive economic model (e.g. in heavy industries, fossil fuels and transport infrastructure) although there are some low-carbon initiatives in the mix (mostly renewable energies). The projects related to extracting and transporting fossil fuels started before President Xi Jinping announced the BRI in 2014. However, the portfolio of projects that the two countries have strategically developed since then to strengthen industrial capacities also includes oil refineries. There would likely be more opportunities for low-carbon cooperation if the government of Kazakhstan actively pursued them. With regard to geopolitics, the BRI in Kazakhstan is developing in a context that is relatively favourable to it. The strategic interests of Kazakhstan and China are aligned to a high extent, and the partner countries have to date managed to strike a power balance with Russia. No major conflicts with other Central Asian states hinder progress.
The report finds no specific Chinese geopolitical interests that would act as a significant brake on decarbonisation in Kazakhstan. In a hypothetical situation without Chinese investment, Kazakhstan would likely still follow a high-emission path. As investments from China are not the biggest source of foreign direct investment and as Kazakhstan’s policies mostly support high-emission development, the choice of high-emission infrastructure does not seem to be motivated primarily by the BRI. At the same time, several entry points for climate-compatible cooperation exist. If Kazakhstan began decisively implementing decarbonisation policies, the Sino-Kazakhstani partnership could potentially help pursue low-emission transitions as well as a joint geopolitical agenda. This would especially be contingent on finding low-emission connectivity solutions on the necessary scale, as this is a key common geopolitical interest. However, such options are currently absent from the policy discourse in Kazakhstan and from the bilateral project portfolio. Even though geopolitics does not emerge as a primary challenge for decarbonisation in this case study, other economic and political barriers to emission reduction are evident. Furthermore, the analysis outcome would likely be different in a case where the investment and geopolitical goals of Chinese actors are less aligned with national priorities. It is worthwhile assessing the extent to which geopolitical dynamics supports climate diplomacy in every specific case, as the next section clarifies.
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POLICY IMPLICATIONS
The case of Kazakhstan shows that both push and pull factors, that is, China’s goals and the decarbonisation context on the recipient side, are important. In our case study, these factors are fairly well balanced. However, this balance as well as the significance of geopolitical motives might be very different in other BRI target countries, leading to a different interaction of geopolitics and decarbonisation.
Concerns that the BRI is likely to lock-in high-carbon infrastructure and that its geopolitical ambitions stand in contradiction to its “greening” need to be contextualised. Generally, the high-carbon status quo in most economies makes it hard to assess the relative influence of BRI investments. Although in this case study geopolitical and slow decarbonisation dynamics reinforce each other, it is also possible that an accelerated decarbonisation pathway could align with the geopolitical goals of the BRI, though this assessment is of course rather speculative. With regard to policy entry points, many levers are therefore in the decarbonisation processes in the BRI target countries and China, and the role of geopolitics should not be overestimated prior to analysing each specific case. Furthermore, it points to the importance of considering how actors’ geopolitical goals can be integrated into a decarbonisation agenda, rather than simply seeing them as a factor that can hinder decarbonisation.
The BRI is more than a credit line – it is a central instrument and agenda of Chinese economic diplomacy that aims to strengthen the country’s position as a global power. Therefore, it cannot be understood entirely through an economic lens. Instead, analysts have to disentangle the nexus of economy and geopolitics. The BRI finance flows and the motives behind them, including possible blind spots, need to be analysed in each geographical context. We can expect “greening” the BRI to be a paramount task due to the economic incentive structures for investment and due to geopolitical dynamics. For this comprehensive endeavour, our analysis offered three major takeaways for European climate diplomacy.
• Greening the BRI (“push”) and raising climate ambition in the BRI target countries (“pull”) are both essential to achieving low-emission development. To grasp the push and pull factors fully, and to act on them effectively, we need to understand their geopolitical dimension, in interaction with the economic rationale.
• “Push”: In Sino-European relations, geopolitical considerations need to be balanced with cooperation for a safe climate and safeguarding other global commons. Conversely, climate cooperation should keep track of the geopolitical context. Areas for specific engagement are green finance, sustainable connectivity and exploring the incentives the EU can mobilise through other important fields of engagement such as trade and investment relations.
• “Pull”: European actors can support and enable climate action in countries such as Kazakhstan by continuing, ramping up and coordinating efforts in five areas of cooperation: climate and energy, development, trade and investment, science and education, and peace and security.
• Engaging with China and the BRI target countries will not only require cooperation on climate topics but a comprehensive, cross-cutting approach to international relations and diplomacy – both within an increasingly challenging geopolitical landscape. Protecting the global commons needs to be a compass, not an add-on for diplomacy in facing these geopolitical challenges.
• An accelerated domestic transformation in the EU and its Member States has the power to influence the structure of economic, financial and geopolitical incentives for fostering climate-compatible economies beyond European borders. Europe can demonstrate that low-emission development does not spell economic demise or a marginal position on international markets, but might lead the way to a future-proof, more equitable prosperity.
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1 INTRODUCTION
Geopolitics and decarbonisation are interlinked. The geopolitics of a future, decarbonised world would look differently from what we see today, and create new opportunities and challenges. At the same time, decarbonisation processes, while largely shaped by national states, are embedded in the international context and, specifically, into geopolitics. Geopolitical goals and motives of states influence how they approach lowering their emissions and restructuring their energy systems – or even whether they do this at all. Geopolitics shapes public agendas, sometimes pushing climate policy measures and cooperation down the priority list, while at other times supporting them. As the chances of a successful decarbonisation might change due to geopolitical dynamics, there is a need to understand how – and if there is anything to be done about it.
This paper looks at a specific example: the Belt and Road Initiative in Kazakhstan. The Belt and Road Initiative (BRI) is geopolitical to a significant extent, even though it is challenging to get a full picture of the motives and interests that guide this effort. In fact, the BRI varies in different countries, and so are likely the goals and motives of China in every specific target region. To understand this more thoroughly, the study has looked at the example of Kazakhstan. Economic cooperation between the two countries has grown in recent decades, and Kazakhstan is among the key target countries of the BRI. Can this help Kazakhstan lower greenhouse gas emissions or will it likely lock in high-carbon pathways for the Kazakhstani economy? And how is this influenced by the geopolitical setting, in particular?
This paper begins by presenting the Belt and Road Initiative and discussing both its geopolitical and climate aspects. It then turns to China-financed projects in Kazakhstan to attempt an assessment of their links to decarbonisation. For this, it first looks at the national context of decarbonisation in Kazakhstan, outlining cross-cutting and sectoral policies of the country that will influence its greenhouse gas emission trajectories in the future. It highlights the successes, entry points and challenges. An analysis of the investment portfolio of China in Kazakhstan throughout the different sectors follows, while venturing an initial evaluation of decarbonisation impact. The study then puts the project portfolio in the geopolitical contexts of the Sino-Kazakhstani cooperation, highlighting which geopolitical considerations could shape its decarbonisation impact. The paper concludes with general reflections on geopolitics of decarbonisation based on the case study and ideas for European climate diplomacy on where the entry points to support decarbonisation might lie in view of the BRI impact.
A scene at the Xuanwu Lake in Nanjing, China. Source: Hassaan Malik / Unsplash
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2 THE BELT AND ROAD INITIATIVE: GEOPOLITICS AND DECARBONISATION
Polar Silk Road
New Eurasian Landbridge China-Mongolia- Russia Economic Corridor
China-Central Asia-West Asia Economic Corridor China- Indonesia Economic Corridor
China-Pakistan Economic Corridor
st 21 Century Maritime Silk Road
rail terminal/juncture oil and gas transfer point Country originally listed by China International Trade rail terminal/juncture and gas transfer point Institute as belonging in the BRI oil and gas transfer point oil transfer point rail terminal/juncture and Country which was subsequently gas transfer point railway in operation joined to the BRI rail terminal/juncture and railway projects oil transfer point Silk Road Economic Belt year round shipping route economic corridor seaport seasonal shipping route seaport and oil and gas pipeline in operation gas transfer point future gas pipeline seaport and gas transfer point oil pipeline in operation
Figure 1 The partner countries, economic corridors and maritime routes of the BRI Source: Kohli and Zucker 2019, p. 12
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2.1 INTRODUCING THE BELT AND ROAD INITIATIVE
2.1.1 KEY FEATURES OF THE BRI
In September 2013, President Xi Jinping announced the Silk Road Economic Belt (SREB) at the Nazarbayev University in Astana. In December 2013, Xi presented the Maritime Silk Road (MSR) in Jakarta. These two concepts constitute the Belt and Road Initiative (BRI), also referred to as One Belt, One Road (OBOR) (Kohli and Zucker 2019: 7).
With “Vision and Actions on Jointly Building the Silk Road Economic Belt and the 21st-Century Maritime Silk Road,” the National Development and Reform Commission, the Ministry of Foreign Affairs, and Ministry of Commerce issued the first official blueprint for the BRI in March 2015 (Ghiasy and Zhou 2017: 2). It points out the aims and structure of the BRI as well as its five priority areas: policy coordination, connectivity, trade and investment, financial integration, and people-to-people exchange (Kohli and Zucker 2019: 8).
Initially, 65 countries geographically located around China and along the historic Silk Road signed agreements to be part of the BRI, but the scope broadened substantially, now including African, Latin American and Caribbean countries. This makes the BRI a truly global effort (Kohli and Zucker: 12). By the end of January 2020, China had signed 200 documents in total, including with 138 countries and 30 international organisations (Government of China 2020).
In the Eurasian space, the BRI aims to build six continental economic corridors for which, among other things, it provides rail, road and energy connectivity (see figure 1): “the China–Mongolia–Russia Economic Corridor, the New Eurasian Land Bridge, the China–Central Asia–West Asia Economic Corridor, the China–Indochina Peninsula Economic Corridor, the China–Pakistan Economic Corridor, and the Bangladesh–China–India–Myanmar Economic Corridor” (World Bank 2019: 3). The economic corridors connect to maritime routes.
A truck is driving on a road in Cental Asia in the vicinity of the Chinese border. Source: Dina Julayeva / Shutterstock
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While energy is the largest sector (Kohli and Zucker 2019: 17), followed by transportation, the BRI also invests in a number of industries, metals and minerals, real estate, agriculture and other branches (see figure 2 for the sectoral mix of projects in 30 countries along the six economic corridors).
Metallurgy and mining Other
5% Construction and 4% real estate 7% Energy and electric power Chemical 13% engineering 46%
Transportation 25% and shipping
% of USD 575 billion
Figure 2 BRI investments in corridor economies Source: World Bank 2019, p. 38
BRI is part of China’s reach for global influence (Godehardt 2016b: 2). Under Xi Jinping, China became increasingly proactive on the international stage, possibly even aiming to transform the global order more in accordance with its own vision that offers an alternative to approach to current structures (Godehardt 2016a; Krumbein 2019: 1). This goes beyond the influence on the Asian neighbourhood or economic rent seeking. China is pursuing the position of a global power – politically, economically and culturally (Godehardt 2016b: 2). This is a source of unease for the United States, Japan and the EU (Hilpert and Wacker: 5; Heath and Gray 2018; Ghiasy and Zhou 2017: 10). With its varied project portfolio and manifold goals in almost all regions of the world, the BRI is an instrument for and an indicator of this ambition.
BRI is an element in the broader landscape of Chinese lending oversees that has some distinctive features. China helps finance projects through loans (lending money to a project), equity investment (foreign direct investment and acquiring shares in companies) and portfolio investments (buying sovereign bonds). With different group of countries, the mix of theses debt types varies (Horn, Reinhart and Trebesch: 37). BRI efforts include loans and equity investments (Kohli and Zucker: 15).
China has historically been an active international lender with strategic goals, and its role has grown especially in the last 20 years with its GDP (Horn, Reinhart and Trebesch: 4, 7, 9). Its debt claims amount to USD 5 trillion or 6% of global GDP. 50 countries with highest debts to China on average owe the country 40% of their reported external debt (ibid.: 7). About half of China’s lending is not disclosed to international institutions. One of the reasons for these “hidden debts” is that Chinese contractors often undertake the work and sometimes even receive the funds directly from the Chinese institutions, skipping the debtor’s account (ibid.: 9).
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Modern architecture in Beijing, China. Source: Li Yang / Unsplash
Critically, “China’s overseas lending is almost entirely official (state-controlled)” (Horn, Reinhart and Trebesch 2019: 2). The BRI is supported mostly by the China Development Bank (CDB), the Export-Import Bank of China (Ex-Imp-Bank) (Kohli and Zucker 2019: 16; Aminjonov et al. 2019a: 1-2) and also involves other banks, state-owned companies and other actors (Bessler 2015: 10; Hillman 2018: 4-5). The CDB and the Ex-Imp-Bank are supervised by the State Council and the Ministry of Finance and manage special-purpose funds such as the Silk Road Fund (SRF), created for the BRI (Horn, Reinhart and Trebesch 2019: 71; Bessler 2015: 3). The Asian Infrastructure Investment Bank (AIIB) is considerably involved in the BRI. AIIB concentrates on infrastructure investments and was established around the same time as the BRI, in 2014 (Ghiasy and Zhou 2017: 3; Hirsch et al. 2019: 39). The institutional set-up of this multilateral development bank (MDB) allows for a “far-reaching control” by China, similar to the control of Japan and the US at the Asian Development Bank (Ransdell 2019: 137, 152). Domestically, the Ministry of Finance of China has the leading role with regard to AIIB (Hirsch et al. 2019: 40).
2.1.2 AN INITIATIVE INTENTIONALLY LEFT VAGUE?
Analysing the motives and goals behind the BRI and their factual realisation in a given region (see Hillman 2018) is far from straightforward. Firstly, the BRI is no clear-cut concept or action plan with a set of goals that strictly guide selection and implementation of projects (Kohli and Zucker 2019: 11). It is not always easy to draw a line between BRI projects and other Chinese investment abroad (Aminjonov et al. 2019a: 1; World Bank 2019: 39). The fact that a project is part of the BRI does not automatically imply conclusions about it. A multitude of actors is involved in shaping Chinese investment abroad, both in China (Hillman 2018: 4; Godehardt 2016a: 20) and in its partner countries – and it would be an oversimplification to assume they are all motivated by the overarching goals of the national governments, pursuing strategic pre-defined interests with the BRI (Hillman 2018: 5; Pieper 2020).
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A bridge in Dalian, a major financial and logistics hub at the Yellow Sea. Source: Jerry Zhang / Unsplash
Secondly, the sheer geographical scope of the BRI, now going far beyond its neighbourhood, makes the initiative’s projects very heterogeneous: In different regions of the world, Chinese actors pursue different goals and encounter different political and institutional conditions that shape their opportunity structure. For geopolitical goals that China pursues in these regions, the location matters per definition. For instance, “Myanmar has a key strategic role in terms of energy supply, in maritime access to the Bay of Bengal, as a land connector to the Road, and in development plans for the underdeveloped Yunnan province.” (Hallgren and Ghiasy 2017: 6) While “Kazakhstan is a linchpin for trade and transport links on the Eurasian continent.” (Zogg 2019: 1)
Thirdly, the BRI is serving many purposes in China’s external and domestic politics, rather than having one single, e.g. geopolitical, thrust. Many interests and purposes, domestic and external, co-exist under the BRI (Ghiasy and Zhou 2017: 5; Hallgren and Ghiasy 2017: 2; Kovrig 2017). It also bundles strategies and efforts that predate it (Godehardt 2016a: 21; Pieper 2020). It unites different strands of China’s economic diplomacy and gives them an umbrella vision, a boost and a name (Mardell 2019) – among others, a successful public relations coup, judging by the number of analyses it generated (Kaczmarski 2019). Therefore, it is unsurprising that the BRI encompasses so many different activities and that it is at times quite difficult to determine what is part of it and what is not. Stating that the BRI is X is similar to stating that Chinese economic activities abroad are X; such a statement calls for a clarification of context and more precision.
The BRI brings together its predominantly economic rationale with foreign policy (Eder 2018: 2; Ghiasy and Zhou 2017: 5-6; Kovrig 2017). The chapter 2.4. discusses these links in an attempt to distinguish the role of geopolitics in this trade and investment endeavour. At this point, it is important to highlight that the core economic workings of the BRI are versatile, too. Generally, it reflects the “new normal” of the Chinese economy with its different features. Leaders of the financial, trade and economic sector expect several things of it, as stated by Hu Huaibang, Chairman of the China Development Bank.
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120 140
100 120
100 80 80 60 60 40
Billion USD 40 Percent of GPD Percent
20 20
0 0 Nepal Kenya Serbia Jordan Albania Djibouti Georgia Belarus Vietnam Moldova Armenia Pakistan Malaysia Maldives Tanzania Lao PDR Lao Mongolia Myanmar Tajikistan Sri Lanka Sri Indonesia Cambodia Uzbekistan Kazakhstan Bangladesh Timor-Leste Turkmenistan Kyrgyz Republic Kyrgyz Russian Federation Russian Bosnia and Herzegovina and Bosnia BRI investment (left axis) BRI investment share of GPD (right axis)
Figure 3 BRI financing in the Belt and Road corridor economies Source: World Bank 2019, p. 40
“On the one hand, we should gradually migrate our low-end manufacturing to other countries and take pressure off industries that suffer from an excess capacity problem. At the same time, we should support competitive industries such as construction engineering, high-speed rail, electricity generation, machinery building and telecommunications moving abroad.” (cited in Cai 2017: 13)
Jin Qi, former Chairman of the Silk Road Fund, stated that China could help other developing countries to industrialise and Chinese investment can “help facilitate international production cooperation, and reorganise global production chain. For China, it means helping the country to export high quality production capacity, equipment, technical know-how and developmental experience.” (cited ibid.)
This means investing abroad is seen as support to both traditional heavy industry and new sectors, including high-end manufacturing. Political imperatives of development of the last decades have led to production capacities in different industries the Chinese market can no longer absorb, and Chinese companies welcome business opportunities abroad (Ghiasy and Zhou 2017: 6; Turaeva, Glinkina and Yakovlev 2018: 72). Furthermore, China seeks profitable investment opportunities for its capital surplus, among other things, as government bonds become less attractive (Hilpert and Wacker 2015: 4; Ghiasy and Zhou 2017: 8). As projects supported by China often employ Chinese contractors, the BRI provides such opportunities (Horn, Reinhard and Trebesch 2019: 9; Turaeva, Glinkina and Yakovlev 2018: 71). Technological expansion could also help establish China as a market leader, setting standards for others in certain fields, e.g. 5G, high-speed rail (Cai 2017: 9-10; Hellendorf and Rühlig 2020: 182). Moreover, intensifying economic relationships with its neighbours could help China improve the situation in some of its poorer regions on the outside borders, tackling the challenge of uneven development in the country (Cai 2017: 6-7; Ghiasy and Zhou 2017: 6).
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Finally, the picture of the BRI is so complex because of the data challenges. The efforts to calculate the exact investment volumes demonstrate this well. The Emerging Markets Forum, commissioned by the World Bank, researched the initiative and found it impossible to put one reliable number on BRI investments. As there is no single project pipeline, no data repository and no regular reporting on the whole of the BRI, rather different numbers could give an indication of the scope of the initiative (Kohli and Zucker 2019: 16). One such number is the total “loan commitments and disbursements of all Chinese banks to BRI countries” by the end of 2018 amounting to USD 580-600 billion. This compares to WB, ADB, AfDB & IADB loans of USD 490 billion during 2013-2017 (ibid: 16-17). The China Global Investment Tracker sets the complete BRI investments through 2013-2019 at USD 730 billion (AEI 2020).
The Global Development Policy Center (CDPC) at Boston University monitors Chinese outward investments in energy sector. CDPC calculates that the BRI had invested USD 183.4 billion in the energy sector by the end of 2019 (Gallagher 2019).
A World Bank study focusing on the connectivity aspect of the BRI, quantifies the investment in 71 “corridor economies”1 with USD 575 billion, USD144 billion being in the transportation sector (World Bank 2019: 37). However, if the transportation funding is assessed bottom-up (based on project information), it rises to USD 304 billion (ibid: 39). The same study estimates a wide range of the BRI investment shares in different countries’ GDPs (ibid: 40; see figure 3)
The time horizons are of essence as the BRI is a relatively recent initiative, and many projects are in the planning phase. The BRI finance volume for completed projects (2016) was USD66 billion (ibid: 38). Furthermore, as many projects are co-financed by several actors, Chinese investment leverages more funding. Projections of a recent study by Tsinghua University, VividEconomics and Climate Works Foundation indicate that, on average, Chinese investment could help leverage 7.8% of the total investment until 2030 in the 17 main target countries of the BRI (Ma et al. 2019: 18).
There are estimates that up to USD 2-4 trillion until 2049 will be disbursed through the BRI but, due to high uncertainty such numbers, these should be treated with extreme caution (Kohli and Zucker 2019: 8).
These difficulties concluding anything with regard to BRI as a whole make a case-study approach particularly fruitful. This enables a more detailed look at the particular geopolitics, set of goals and interests on both the sending and receiving sides as well as look thoroughly into the available data. This case study considers all Chinese investment in Kazakhstan, including the specifics of its institutional setup and interlinkages with Kazakhstani strategic documents.
1 This includes countries from Sub-Saharan Africa, East Asia and the Pacific, Europe and Central Asia, the Middle East and North Africa and South Asia. For the full list, see Appendix A in World Bank 2019, p. 135.
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2.2 THE BRI AS A CASE FOR GEOPOLITICS OF DECARBONISATION
The BRI is an adequate case study of geopolitics of decarbonisation because it is intimately connected to both fields (see next section). It has a significant geopolitical dimension, as a major pillar of Chinese economic expansion policies that are – at least partly – targeted at increasing the country’s political weight in the world, and have an important geographic component. At the same time, the BRI invests in infrastructure that will shape decarbonisation pathways for years to come.
The processes of decarbonisation are multi-faceted and non-linear. They are influenced by a multitude of factors, and therefore can be analysed in different ways. Cherp et al. 2018 present three major perspectives, specifically with regard to energy transformations, but applicable to decarbonisation in general: political, socio-technical and techno-economic. Our conceptual framework for the geopolitics of decarbonisation (see figure 4; Ivleva and Tänzler 2019) suggests that these three perspectives (and often their interactions) already accommodate international and specifically geopolitical factors. Therefore, the field of study highlights the geopolitics in low-emissions transformation processes rather than introducing this as an additional angle (ibid.).
While all three perspectives include a certain role of infrastructure, Cherp et al. 2018 highlight it as a factor particularly for the techno-economic perspective (see figure 5). This approach is concerned with resource flows and markets. It connects directly to geopolitics, as these items are often a part of international competition for power. The international fossil fuel markets offer many examples, but so do infrastructure and connectivity efforts, as exemplified by the BRI. Therefore, infrastructure is an important interface of geopolitics and decarbonisation.
As the case study discusses the projects, it shows that the BRI also affects the socio-technical dimension, e.g. by spreading technologies, and might shape the political dimension of decarbonisation, by possibly altering opportunity structures of decision-makers in the target countries. In sum, there is sufficient reason to believe it could indeed interact with decarbonisation patterns, as the following sections proceed to highlight.
Figure 4 Interactions between geopolitics and decarbonisation Source: own elaboration based on Cherp et al. 2018, p. 186
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DECARBONISATION
Techno-economic dimension
Resources Demand
Infrastructure
Innovation systems State goals
Regimes & niches Technology diffusion Political interests Institutions & capacities
Socio-technical dimension Political dimension
Figure 5 Three perspectives on decarbonisation Source: based on Cherp et al. 2018, p. 186
2.3 THE BRI AND THE PARIS AGREEMENT
Among other concerns, the high carbon intensity of Chinese outward investment abroad figured in many analyses (Americo 2017; Ascensão et al. 2018; Mathews and Tan 2017: 4). Particularly, there is a worry China might be using outward investments to “export” its carbon-intensive industries as they face more difficult conditions at home (e.g. Shepard 2020; Kley 2016; Watts 2019). Multiple actors call for greening the BRI, e.g. BRI International Green Development Coalition (BRIGC) (UNEP no date), and China announced an improved and greener BRI 2.0 during the second Belt and Road Forum 2019 (Carey and Ladislaw 2019). Given the changes towards the “new normal” of the Chinese economy quoted above, the country’s search for economic opportunities for its old industries in neighbouring markets might indeed affect the decarbonisation pathways of other countries. The debates on carbon leakage or consumption- based emissions have long demonstrated a jurisdiction can influence emission dynamics beyond its borders (e.g. Görlach and Zelljadt 2018; Chen et al. 2018). Such transboundary effects may apply to China – though in its case, the assumption seems to be that the government supports industry opportunities abroad, instead of industries going abroad as a side effect of climate policies (Americo 2017).
In fact, by building infrastructure and stimulating growth, the BRI can drive GHG emission increases in several ways:
• Exploration and use of fossil fuels: Most of China’s outward investment is in fact investment in the energy sector, which is dominated by fossil fuels (Gallagher 2019). Diversifying the supply of fossil fuels is indeed the motivation between some BRI efforts (Ghiasy and Zhou 2017: 6-7). However, the BRI renewables portfolio has been developing rapidly: Projects with 12.6 GW capacity received equity investments during 2014-2018 (over 450 MW before that date and 67.9 GW of coal power during the same period). “93% of wind and solar equity investments and 94% of coal equity investments went into South and Southeast Asia.” (Greenpeace 2019).
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Passengers at the Guangzhou Train Station, one of the biggest in China. Source: hiurich granja / Unsplash
• Transport volumes and trade: Investing in railroads, roads and ports increases trade. Long-distance transportation volumes without ambitious action will drive emissions (ITF 2019).2 In the face of the “unprecedented efforts” the decarbonisation of the transport sector – currently powered by fossil fuels to 92% – requires (ibid.), the influence of the BRI on the opportunities for this in its “corridor economies” begs many questions. However, the BRI also includes urban transportation projects, which in fact help decrease emissions (Nedopil Wang 2020).3
• Increasing industrial production: China is investing in branches such as chemical engineering or metallurgy (World Bank 2019: 38). More industrial production, especially with the heavy “polluting” industries (Tracy et al. 2017: 77), would drive emissions. But if the BRI helped introduce technologies to increase efficiency of resource use and processes or develop capacities and skills for an economic shift, it could also contribute to a sustainable transformation.
• Increased construction: Finally, construction activities themselves are a significant emission driver, requiring production of energy-intensive materials, such as cement and steel, and energy for the construction process (Ascensão et al. 2018; UNEP 2019: XXIV-XXV). Furthermore, it can damage ecosystems (WWF 2017: 3-4, Zoi 2019: 16-20), including ones that capture carbon. With such significant scale of investment, this should be duly considered.
Stimulating economic development through investment in infrastructure is a core mechanism to achieving the BRI’s multiple goals (see sections 2.1.2 and 2.4). Can we expect this to be green growth? The study by Tsinghua University, VividEconomics and Climate Works Foundation assessed the chances of achieving the two-degree goal in the 126 countries4 of the BRI. It looks at the different sectors mentioned above and compares a business-as-usual scenario with best available options for low carbon development.
2 While compared to a baseline scenario, increased trade will only lead to moderate emission increases, this tells us little about the compatibility of BRI investments in connection with the Paris Agreement. 3 This is a structurally different case than that of freight transport: expanding public transportation systems decrease emissions, while increases in freight transportation drive them. 4 Many calculations are based on 17 key countries the study identifies (see footnote 74 on p. 53 of the study).
18 The BRI itself provides an important opportunity to initiate such actions, given its focus on infrastructure investment and the potential it offers to support low-carbon development by combining policy, finance, expertise Report Methodology and technology resources from the international community. Decarbonizing the Belt and Road is a first of its kind quantitative REPORT THE BELT AND ROAD INITIATIVE IN KAZAKHSTANprojection of the potential carbon emission trajectories of Belt and To this end, we propose a series of interconnected interventions Road countries. in countries involved in the Belt and Road Initiative, in China and internationally. The focus of our proposed roadmap is on the potential for leveraging financing arrangements in accelerating the low carbon transition, Tsinghua CFD defined the set of 17 B&RCs for analysis, estimated the whilst recognising that this is only one part, albeit an important part, of the Chinese BRI investment into those countries and predicted future GDP ambitious actions required. growth patterns. Vivid Economics then used these GDP projections as input for energy demand and carbon emission modelling to illustrate different carbon pathways for the B&RCs up to 2050 and the scale of the 2DS challenge. 900 The 2DS pathway is based on the International Energy Agency’s Energy POWER TRANSPORT BUILDINGS INDUSTRY Industry Technology Pathways scenarios for future energy use and emissions. Finally, Buildings Vivid Economics estimated the physical investment requirements along 750 Transport different pathways to assess where financing gaps may emerge in the future. Power 600 A detailed explainer of the methodology is available in the full report.
450
300
150 Investment Needs ($ Billion) Investment Investment needs (USD Billion) Investment
0 BRI 126BRI 2DS 126 Investment2DS Investment BNEFBNEF – Global - Global Clean Clean Energy Energy (Annual(Annual average Average 2016-2030) 2016-2030) InvestmentInvestment in Power in Power Only Only (2018) (2018)
Figure 2. Annual green investment to align with a 2DS world for the 126 B&RCs is 2.4 times Figure 6 Annualglobal clean investment energy investment needed in 2018in 126 BRI countries to align with a two-degree world in comparisonSource: to Vivid global Economics, clean IEA energy (2017), Bloomberg investment New in Energy 2018 Finance (BNEF, 2019) Source: Ma et al. 2019, p. 6
Business-as-usual developments in the 126 countries would lead to these countries accounting for two thirds of global GHG emissions by mid-century (as opposed to 28% in 2015), and this is far from compatible with the Paris Agreement. But even with the so-called “best in class” growth scenarios5 the global temperature would not stay well below 2°C. To accomplish this, radically new, yet unseen low-carbon development strategies would be needed, calling for huge investments (Ma et al. 2019: 20-21).
Figure 6 illustrates that the annual average investment required between 2016 and 2030 to bring the 126 countries onto a pathway compatible with the temperature increase of below two degrees is more than
double of DECARBONIZINGthe global investment THE BELT AND in ROADclean - Apower, GREEN FINANCEbut also ROADMAP includes transport, buildings and industry EMBARGOED UNTIL SEPTEMBER 2ND AT 09:00 UTC + 08:00 investments in addition to power sector investments.6 The study furthermore calculates that, on average, the investments6 of the BRI in its 17 key target countries would account for 7.8% of total investments in these countries (ibid: 18).
Though the study does not explicitly bring together the projected BRI investment and the investment needs for a two-degree compatible transformation, its calculations show that the BRI investment represents a significant financial flow for many countries that has the potential to influence their infrastructure. While at the same time, embarking on low-emission pathways for these countries requires significant financial inputs. Whether they do this or not, it will have a major impact on the chances of the international community to protect the climate, given the projected and growing share of their emissions. Without actively promoting low-emission solutions, BRI investment will drive emissions.
5 “The ‘Best in Class’ scenario divided countries into five equally-sized income tranches based on their 2015 level of GDP per capita and trained the model on the set of countries in the bottom quartile of CO2 per capita emissions in each tranche for each sector. This ensured a like-for-like comparison, whereby the growth pathway of a given country was based on a peer group that had experienced a similar stage of development. By focusing on the bottom quartile
of CO2 per capita emissions in each tranche, the ‘Best in Class’ scenario represents the most carbon efficient growth relationships observed in history.” (Ma et al. 2019: 13) 6 This underlines the point that expecting BRI investments not to drive high-carbon development means expecting them to be a notable exception from a rule for global development.
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Textbox 1 How close are international investment flows to beingc ompatible with the Paris Agreement?
How does the climate-compatibility of global investments compare to the BRI? Currently, it is impossible to assess how much of the global investment in new infrastructure and equipment are compatible with the goals of the Paris Agreement: such data is only available for 2% of the global fixed capital formation7 (Jachnik, Mirabile and Dobrinevski 2019: 7). We know especially little about to what extent finance flows not explicitly designated for climate purposes undermine climate goals (ibid: 27). According to WRI tracking, only half of the 50 largest banks have sustainable finance commitments. On an annual basis, these commitments are much lower than fossil fuel investments for most of these banks. “Only seven banks have annualised sustainable finance targets greater than the amount of finance they provide for fossil fuel-related transactions each year.” (Pinchot and Christiansen 2019)
Official development cooperation is not yet set up “to support transformative climate action in developing countries” either (OECD 2019a: 118). A conservative estimate of the OECD “places official development finance for upstream and downstream fossil fuel activities at USD 3.9 billion annually over 2016-17.” (ibid: 104) While renewable power investments are a success story and have exceed funds for fossil capacities annually since 2008 (Bridle et al. 2019: 3), the existing stock makes decarbonisation of electricity difficult. With existing and planned policies, the World Energy Outlook 2019 sees “no decline in annual power- related CO2 emissions” by 2040, despite a swift transformation of the sector (IEA 2019: 5). Energy demand driving sectors such as heating, transportation and energy-intensive industries might actually face greater transformation challenges than power generation.
Given the importance of infrastructure choices for future emissions and the challenges for greening the global finance flows, China’s overseas investment is a highly relevant study subject for anyone seeking to increase climate ambition. Exporting (outdated) overcapacities is only one aspect of this. If Chinese outward investment has the potential to influence other countries future energy generation and demand structure, we need entry points to make this more compatible with sustainable development. The business case and enabling conditions of green investment are part of the answer. As China’s outward investment and, specifically, the BRI is part of its global ambitions, geopolitics is another important piece of the jigsaw to find the entry points for aligning it with the goals of the Paris Agreement. The next chapter looks into more detail at the geopolitical motives of the BRI.
7 “Gross fixed capital formation (GFCF), also called ‘investment’, is defined as the acquisition of produced assets (including purchases of second-hand assets), including the production of such assets by producers for their own use, minus disposals. The relevant assets relate to assets that are intended for use in the production of other goods and services for a period of more than a year. The term "produced assets" means that only those assets that come into existence as a result of a production process are included. It therefore does not include, for example, the purchase of land and natural resources.” (OECD n.d.)
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The skyline of Chongqing at night. Source: Jerry Wang / Unsplash
2.4 THE BRI AS A GEOPOLITICAL VENTURE
Our framework for the geopolitics of decarbonisation understands geopolitics in a narrow sense: “relations between the conduct of a politics of power oriented toward the international level and the geographic frame in which it is carried out” (Steinmetz 2012: 2). Therefore, we speak of geopolitics when international politics is shaped by geographical factors or geographies are shaped by international politics (Ivleva and Tänzler 2019: 7-8). Based on this, we understand geoeconomics as a subcase of geopolitics when the interaction of geopolitics and economics is at the forefront. This includes both primarily seeking economic benefits through geopolitics and shaping geopolitics predominantly through economic means.8
2.4.1 MANIFOLD MOTIVES
Academic literature and the media discuss the geopolitics of China’s outward investments extensively, and assessments vary from the BRI’s potential to close infrastructure gaps, foster trade and increase welfare, to the sceptical and bleak views of it as an instrument of dependence and control (Hillman 2018: 2; World Bank 2019). This is not surprising, given the relatively opaque set-up, vagueness and versatility of the initiative, as well as different standpoints vis-à-vis Chinese international ambition.
Generally, the BRI is a geopolitical, or more precisely a geoeconomic endeavour, as it combines domestic and international economic imperatives with foreign policy – all with a marked geography component. As stated above, the economy, politics and culture interact in China’s political vision of a global network, making it difficult to distinguish the different motives and instruments of its international relations: China explores the geographical space for economic advantages, which increases its international political influence (Ghiasy and Zhou 2017: 8). Economic dependencies could also be used to move the BRI target countries to account for China’s political positions and interests (e.g. 16+1 Forum, the Balkans) (Szczudlik 2019: 30; Kaddik et al. 2018; Heath and Cray 2018; Ghiasy and Zhou 2017: 10).
8 This does not include cases when geographical factors are merely used for economic gains – this would be missing the necessary element of international politics.
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Globally, the BRI contributes to several tracks of China’s geoeconomic aspirations:
• China combines different expansion strategies in order to achieve cross-system interactions and synergetic effects, increasing its influence. The geographic, technological and discursive levels feed into each other, creating a multi-pillar strength position that is greater than the sum of its parts. (Kohlenberg and Godehardt 2018: 2; Godehardt 2016a: 5). Discursive power strategies promote China as a counterweight to “Western” or “liberal” discourses (Kohlenberg and Godehardt 2018: 3).
• China creates international financial institutions (notably, the AIIB) as an alternative for the Bretton- Woods institutions dominated by “Western” powers. It attempts to strengthen its currency as means of international payment which, beyond the economic benefits, fosters political independence (Bessler 2015: 7; Ghiasy and Zhou 2017: 8; Hilpert and Wacker 2015: 4)
• China boosts its high-end industry, innovation and competitiveness in external markets, which also strengthens its international leadership and possibly provides an additional geopolitical lever. Exporting and promoting its own technological standards (e.g. high-speed rail, telecommunications) is part of this (Cai 2017: 8-11; Kohlenberg and Godehardt 2018: 2-3). Researchers of the European Think-tank Network on China see “a broader geopolitical rivalry over high technology, which includes 5G, Artificial Intelligence (AI), semi-conductors, the Internet of Things (IoT) and quantum computing” as posing “new questions over network security (e.g. backdoors) or vulnerability to foreign influence” (Hellendorf and Rühlig 2020: 182).
• China provides for its resource supply and energy security by investing in raw material exploitation and transportation projects in resource-rich countries and diversifying its energy imports (Eder 2018: 2; Ghiasy and Zhou 2017: 19; Wrießnig 2017: 2).
While the geographical scope of the BRI has grown substantially, the literature also points to specific geoeconomic goals in Asia-Pacific to strengthen China’s position as a regional power:
• The BRI should help put China at the centre of regional economic and political dynamics, countering Western dominance (Hilpert and Wackert 2015: 4; Ghiasy and Zhou 2017: 9-10). It has been interpreted, among other things, as an answer to the US attempts to “pivot to Asia” through intensifying trade and investment relationships, especially with the Trans-Pacific Partnership (TPP)9 (Hilpert and Wacker 2015: 3). In the long-term, China might also be expecting to increase the EU-Asia economic ties, reducing the importance of the US as a global economic power centre (Ghiasy and Zhou 2017: 10; Holzer 2020: 192).
• China is creating land corridors or “‘continental lifelines’ through which essential food and non-food products can flow in the event of trade wars, sanctions or US naval interdiction of transit.” (Ghiasy and Zhou 2017: 6) The lion’s share of China’s energy imports passes through the US-controlled Strait of Malacca, but since 2000s, China has been building energy transport infrastructure along the BRI corridors to diversify fossil supply (Ghiasy and Zhou 2017: 6-7; Kaczmarski 2019).
• China aims to foster stability along its borders and in the neighbourhood by alleviating the “economic imbalances” that is believed to breed conflict (Ghiasy and Zhou 2017: 9). The socio-economic development of its peripheral regions such as the “conflict-prone Xinjiang” province is advanced by connecting them to the neighbouring markets (ibid: 8). At the same time, the BRI is building infrastructure in the poorer countries around China, promoting development to mitigate security threats and strengthen strategic ties (ibid: 8-9).
9 As the Trump Administration no longer supported the TTP agreement, the remaining countries transformed it into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in force since 2018.
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The sculpture “Golden Bridge on Silk Road” at the Olympic Green, ahead of the 2017 Belt and Road Forum for International Cooperation. Source: testing / Shutterstock
• China is seeking to enable deeper security cooperation in Asia with a more prominent role for itself, instead of structures involving the US. Fostering development through BRI should contribute to trust- building while also requiring more active Chinese engagement in peace and security matters in Asian countries. The 2014 New Asian Security Concept also reflects these ideas (Ghiasy and Zhou 2017: 9; Hallgren and Ghiasy 2017: 6).
China’s leadership emphasises the openness and mutual benefits of the initiative, deepening exchange and cultural ties, contrary to the image of the BRI being an effort crafted by China to pursue its goals (Godehardt 2016b: 20; Ghiasy and Zhou 2017: 11; Holzer 2020: 191; Pieper 2020).
Looking back on section 2.1 and the motives just cited, what is the role of geopolitics in the BRI? Or in accordance with our suggested definition: To what extent do geographical factors and international politics interact in the BRI, as opposed to merely fostering economic goals? This question, also discussed by many observers (Ghiasy and Zhou 2017: 5), is difficult because Chinese strategies have various dimensions that support each other. It also presupposes a clear-cut set of objectives and ways to achieve them that the BRI does not provide.
Some aspects are not explained by economic motives exclusively. For instance, China’s international lending and some infrastructure projects are not strictly profitable, but need to be seen as a part of a multidimensional strategy (Horn, Reinhard and Trebesch 2019: 7; Kohlenberg and Godehardt 2018: 2-3). Other efforts are likely to be economically driven and produce foreign policy side effects. Furthermore, different actors might have different motives for their involvement in the BRI. A project might be politically promoted because it contributes to an overall BRI strategy in the region while implemented by actors who mostly seek economic gains.
The present case study will focus on the geopolitical goals in Central Asia (as described in this section). In full awareness that, in some cases, this could be an artificial delineation, we closely scrutinise the geopolitical in the BRI for two reasons. Our theoretical framework of geopolitics of decarbonisation suggests a narrow, more specific definition of geopolitics (as opposed to the term’s broad “journalistic” use). Furthermore, this helps us avoid an implicit assumption that the BRI is entirely driven by geopolitics.
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2.4.2 A CAUSE FOR CONCERN?
Chinese investment abroad and the BRI in particular have been a subject of lively academic and political discourse. These discussions include the following concerns:
• Many outside observers point out that China might be using this investment to impose its political views on other countries or prevent them from contesting these views (Szczudlik 2019: 30; Kaddik et al. 2018; Heath and Cray 2018; Schmitz 2019; Tian 2018: 27).
• Other concerns include the economic and fiscal risks, especially through the unsustainable amount of debt that partner countries might accumulate, but also the financial risks of large, long-term projects for China itself (Kohli and Zucker 2019: 17; Ghiasy and Zhou 2017: 8; Pieper 2020).
• Finally, there are concerns regarding good governance and effects on social, environmental or legal standards (Kohli and Zucker 2019: 18; Ascensão et al. 2018; WWF 2017).
While acknowledging the importance of these concerns, this study does not seek to analyse them in full. It scrutinises the BRI in Kazakhstan as a case study for the geopolitics of decarbonisation, based on the framework introduced above. This has three conceptual implications. Firstly, the analysis focuses on the BRI’s potential contribution to a carbon lock-in, without implying that this is the only or the biggest concern with every given BRI project. Secondly, the conceptual framework understands geopolitics as a particular area of international relations, constantly present in most actors’ strategies and not reprehensible per se. Finally, this paper considers a full range of possible interactions, positive and negative, between geopolitics and decarbonisation.
Textbox 2 Is the geopolitical dimension of the BRI a threat?
Geopolitical goals are part of international politics – and often enough a subject of critique or concern, contingent on the standpoint and interests of the observer. Notably, an emerging economy government might see the BRI as an opportunity while many Western European and US actors are sceptical (Aitzhanova 2019: 64; Otero-Iglesias and Esteban 2020: 26; Ghiasy and Zhou 2017: 10), as the initiative holds different things in store for them. This paper does not venture a normative assessment of the geopolitics of the BRI. Instead, it asks how geopolitics and power strategies of actors are linked to preserving the global commons. However, without acknowledging of the fact that the BRI is often pondered as a geopolitical threat, the discussion would be incomplete.
Is there a reason for worry about the geopolitics of the BRI? Establishing this would require scrutiny into the following questions. Against which standards and principles should geopolitical strategies be measured? How do other actors fair against these principles? How do Chinese outward investment strategies compare to those of other global powers? Asia expert Shada Islam, for instance, explains a “simple one-dimensional narrative about China” as an adversary and “ideological enemy” with it challenging Europe as a global power, on economic, geopolitical and identity levels. China “has shaken the system” (Islam 2020).
Of course, geopolitical strategies need a critical evaluation and the fact that they are widespread does not justify them. A plausible critique should clarify against which norms such strategies are a problematic instrument of international politics. A competition for power and seeking support for one’s positions might not be enough per se. It should also elaborate transparently why the positions and actions of China are considered problematic from the specific position, e.g. of the EU or a BRI target country.
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From a European perspective
European countries look for strategies to deal with deteriorating Sino-American relations and to avoid instrumentalisation by one side or the other. Europe seeks to continue doing business with China and to preserve the interests China might be contesting. There is a shift towards the language of rivalry and geopolitical competition between Europe and China, reflected in EU’s 2019 China strategy:
China is, simultaneously, in different policy areas, a cooperation partner with whom the EU has closely aligned objectives, a negotiating partner with whom the EU needs to find a balance of interests, an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance (EC and HR/VP 2019: 1).
The EU connectivity strategy “Connecting Europe and Asia” (September 2018) shows that the EU is also increasingly aware of the strategic dimension of connectivity (Holzer 2020: 184-185) for which it aspires “sustainable, comprehensive and rules-based” nature (EC and HR/VP 2018: 2).10
In relation to the BRI, we can highlight two arguments in the literature that may be cause for concern, if substantiated and valid in a specific context:
China’s cooperation includes “ideational connectivity” (Kohlenberg and Godehardt 2018: 3). With this, China aims to shape international discourse by re-interpreting neutral concepts such as openness and inclusivity in way that they can take it up with Western political concepts. “China intends to limit the territorial reach of the liberal system in the long term. According to Beijing’s interpretation, parts of Latin America or Eastern Europe should no longer be located in the global West.” (ibid.) A rivalry of norms, especially obscured by discursive strategies, calls for caution and response strategies by Western actors (Krumbein 2019: 4).
China’s geopolitics might contradict specific European core interests. While economic and technologic competition per se is legitimate, other issues might call for caution. One example of such a trend is the expansion of 5G, which might endanger digital security and the functioning of core infrastructure (Hellendorf and Rühlig 2020: 182). Furthermore, if China is seeking to foster political divides among the European countries through the 16+1 Forum, which concentrates on economic and investment cooperation instead of merely choosing a more effective way of cooperation with some of its partners (Szczudlik 2019: 30), this is a reason for concern as well.
10 The Europa Connectivity Forum’s description states the strategy “is a first concrete manifestation of facilitating much deeper ties between Europe and Asia in promoting shared values and joint interests: from upholding the rules-based, multilateral order and developing high standards for digital and physical infrastructure, to embracing sustainability and clean technologies.” (EC 2019) This reads much like an answer to discussed BRI concerns.
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Traffic in Kazakhstan's capital, Nur-Sultan. Source: Andrei Orekhov / Shuttrerstock
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Section 2 has shown that the BRI is as multifaceted as China’s diplomacy itself, stretching across very different regions. It is an umbrella concept covering a wide range of projects that simultaneously support many of China’s aspirations – for domestic and external political and economic gains. Therefore, asking whether the geopolitics of the BRI could hinder or spur decarbonisation, and what follows for policy makers, seems to beg the follow-up question of “Where?” In other words, to understand whether geopolitics impacts decarbonisation and how, one needs to unpack the geopolitical factors as well as the decarbonisation drivers and challenges at play. In light of the complexities discussed above, in the case of the BRI this could prove rather difficult unless the analysis is limited to a specific geographical context.
A case-study approach allows a necessary deep dive into the interlinkages of geopolitical motives behind the BRI activities and national decarbonisation dynamics. Kazakhstan is chosen for the following reasons. Firstly, it has a key role in the BRI vision as a major transit country for at least two of the six economic corridors, and is therefore an important element for achieving many of the geopolitical aims cited in 2.4.1. Secondly, the broad portfolio of the Sino-Kazakhstani projects potentially provides for a more complex picture of the links with decarbonisation. Thirdly, Kazakhstan’s policy landscape shaping emission pathways is in itself interesting, as the country is highly dependent on fossil fuels and heavy industries, but also has some ambitious decarbonisation goals and overarching visions of economic development that may go along with decarbonisation. Therefore, China’s overseas investments interact with a tension in national policies, potentially able to make a difference.
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3.1 DECARBONISATION IN KAZAKHSTAN
In order to understand the possible impacts of China’s investment on decarbonisation pathways of Kazakhstan, we need a picture of the national climate policy landscape and the country’s ambitions and barriers in this regard. This would allow better-founded assumptions of the possible decarbonisation prospects without Chinese investment and, therefore, its impacts. The study does not discuss the internal political economy at length. An analysis of government policies and investment data seems a fair approximation of what infrastructure and industrial capacities shape Kazakhstan development pathways, even though it does not provide sufficient insight into the political process behind it.11
3.1.1 CROSS-CUTTING POLICIES
In 2012, Nursultan Nazarbayev presented the strategy Kazakhstan 2050. It is a comprehensive socio- economic development vision that sets the goal of becoming one of the 30 most developed economies by 2050. Among others, this includes diversifying the economy, making it less dependent on the extraction and export of raw materials and more reliant on manufacturing, innovation, and knowledge (Nazarbayev 2012). Embedded in this transformation, the 2013 Concept for Transitioning to Green Economy provided a sustainable development vision (Kazakhstan 2013).
The Green Economy Concept establishes six main avenues for action: sustainable water use, sustainable and high-productivity agriculture, energy efficiency, power sector development, waste management, and the reduction of air pollution. Reducing GHG emission is not at the centre of the Concept. It includes one explicit goal – 40% less GHG emissions from the power sector between 2012 and 2050 as well as ambitious goals for renewable power and energy efficiency (Kazakhstan 2013: 7).12
Kazakhstan established its emissions trading system (ETS) as early as 2013.13 It covers about on-half of all national emissions. It includes the power sector and centralised heating as well as energy consumption related emissions from extractive industries and manufacturing (oil and gas mining, metallurgy, chemical) and some processing industries (cement, lime, gypsum, and brick production) (ICAP 2020).14
The next major step in national climate policy was the 2016 Nationally Determined Contribution (NDC) with absolute, economy-wide GHG reduction goals: 15 or 25% (unconditional and conditional, respectively) between 2012 and 2030, including LULUCF (Kazakhstan 2016: 1). Carbon Action Tracker rates this as insufficient (CAT 2019), while modelling suggests that both goals are achievable (Kerimray et al. 2018: 312). Currently, Kazakhstan is working on a long-term low-emission development strategy that might provide a clearer vision of the economic trajectories the country envisions to achieve its climate goals (DiwEcon 2020: 2).
Kazakhstan’s environmental governance is based on its Ecologic Code. The country is currently reforming this basic legal act to create stronger environmental rules. Major components are the introduction of the Best Available Techniques (BAT) to adhere to for certain industries, environmental impact assessment (EIA) and the “polluter pays” principle (Abakhanov 2020).
11 Looking at different actors in one sector – for instance, in energy supply on the Kazakhstani and the Chinese side – would be a valuable approach. Yet this paper is concerned with a whole-of-economy perspective, and to analyse all economic sectors, it has to resort to necessary simplifications. 12 The power sector accounts for about 18% of all current emission (MoE 2019: 34,66). 13 The Kazakhstani ETS was established in 2013, paused for reforms in 2016-2017 and re-started in 2018. 14 The cap was set in coherence with the 2020 goal of reducing emissions by 5%.
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3.1.2 SECTORS
To understand how China’s investment interacts with the decarbonisation prospects of the host economy, this chapter analyses what sectors are responsible for most emissions and how sectoral strategies envision their mid- to long-term development. These strategies co-exist with the higher-level cross- cutting policies (see figure 7). The following subsections give an overview of the main sectoral emission sources and development strategies.
Energy Fossil fuels dominate the energy sector that represents over 80% of national emissions (MoE 2019: 43, 53). Coal is the main fuel for power generation (69% in 2017) (DIWEcon 2020: 64). Furthermore, the energy infrastructure is outdated and inefficient (Kazenergy 2019: 116). Therefore, a fuel mix shift and efficiency increases offer big mitigation potentials. The necessity to invest in updating the infrastructure could be an entry point to invest in low-emission options (ibid: 114). Social reasons play in important role in energy tariff-setting (ibid: 151).
Strategy “Kazakhstan 2050”
The Nation’s Plan – Strategic Plan for Development of the The Concept of Transitioning 100 concrete steps Republic of Kazakhstan up to 2025 to Green Economy 2030
NDC (15/25% less emissions 1990-2030, economy-wide)
Work in progress: Low-Emission Development Strategy for 2050
Ecologic Code (under revision)
ETS
Energy Industry Transport Buildings Agriculture & Waste land use
Fuel and Energy State State State State Sector Programme Programme for Programme of Programme for Development Industrial and Infrastructure Housing the Develop Concept Innovative Development Construction ment of the until 2030 Development “Nurly Zhol” “Nurly Zher” Agro-Industrial for 2020-2025 for 2020-2025 for 2017-2021 Complex for 2017-2021
Gas Sector Regional Development Programme until 2020 Development Concept until State 2030 Programme Business Roadmap 2020
Figure 7 Policy landscape in Kazakhstan Source: own elaboration, based on a figure produced within a project for GIZ Kazakhstan
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A winter landscape with wind power turbines in Kazakhstan. Source: Teow Cek Chuan / Shutterstock
The main thrusts of the energy sector development are established in the Green Economy Concept, the Concept for Fuel and Energy Sector Development until 2030 and the Gas Sector Development Concept until 2030. Kazakhstan aims to generate 50% of its energy from low-emission sources by 2050.15 The interim goals are 3% by 2020 and 10% by 2030 (Kazakhstan 2013; Kazakhstan 2014b). State programmes also pursue further development of fossil resources (Kazakhstan 2014a, Kazakhstan 2014b). Use of natural gas is discussed an important option for lowering emissions, and gasification of regions is a key goal of energy planning (Kazakhstan 2013: 32; Kazakhstan 2014a; Kerimray et al. 2018: 307).
The newly established renewable power auctioning is successful and lowers prices. In 2019, the share of renewable power generated was 2.3% (2.4 GWh). Currently, Kazakhstan has 97 entities of over 1.26 GW total capacity (a doubling of installed capacity compared to 2018) (Kazhiev 2020). Achieving the 50% goal would require ensuring appropriate grid integration and resolving storage and flexibility issues.
Energy efficiency is an important policy imperative, established also in the energy efficiency law of 2012. Many instruments have been established and existing policy goals are being achieved, but a lot more needs to be done (Kazakhstan 2014b; Kazenergy 2019: 167ff.). Industry and transportation are major fossil energy consumers, discussed separately below. Energy consumption in buildings, both for lightning and for heating, represents a major challenge (Kerimray et al. 2018: 308).
15 This includes nuclear energy, which currently faces much criticism and is not developed actively. It excludes large hydropower that is already well developed in Kazakhstan (DIWEcon 2020: 64).
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Industry The economy of Kazakhstan relies greatly on heavy, energy-intensive industry: fossil industries, extraction and processing of minerals and metals, chemicals (UNECE 2019a: 281ff). In 2015- 2019, 65-85% of exports were commodity-based, mostly hydrocarbons and metals (Statistical Committee 2020). The technical equipment is outdated and inefficient, with high levels of pollution and waste (Kazakhstan 2014b; UNECE 2019a: 287ff, 297). Furthermore, the regions of Kazakhstan differ substantially in their development and available infrastructure (Kazakhstan 2018a).
The emissions from industrial processes make up for 7.5% of the total. Emissions related to energy combustion by the industry16 are over 10% of total emissions (MoE 2019: 45, 137). Industry is the largest consumer of electricity, and many enterprises have their own generation sources (Kazenergy 2019: 123). All industry- related emissions have been growing rapidly since 2000 after a significant fall between 1990-2000 (MoE 2019: 39, 81, 137), despite the fact that most energy-related industry emissions are covered by the ETS.
The Strategic Plan of Development of the Republic of Kazakhstan 2025, State Programme of Innovation and Industrial Development 2020-2025, the State Programme of Infrastructure Development Nurly Zhol and the State Programme of Regional Development outline the mid-term plans of the country. These reflect the goals of updating the industrial infrastructure, and further developing and improving the existing branches. The long-term vision for the economy foresees a diversification of production and exports along with increased innovation and higher-end manufacturing, with more even regional development (Kazakhstan 2018b; Nazarbayev 2012).
A shift away from heavy, energy-intensive industries, while increasing the efficiency of the remaining capacities, could reduce emissions. But this would require a strong political mitigation vision to avoid rebound effects. None of the programmes integrate climate policy concerns, and available modelling only concentrates on technical mitigation potentials, which are limited (MoE 2017: 112f, 116f; Hoogzaad et al. 2016).17 The expansion of traditional industries and a diversification by adding new branches and exports (Helm and Syzdykov 2019) is likely to increase emissions.18
Transport Transport-related energy emissions (almost 7% of total emissions) have been growing rather steadily, dominated by road transport, and are projected to increase (MoE 2019: 99; MoE 2017: 113). The 7th National Communication projects a low mitigation potential, but it also only considers single affordable technological options, not a structural change of mobility and freight patterns (MoE 2017: 113). Most of the freight is transported on roads, and freight volumes have been growing (UNECE 2019b: xiii, 7). Electrification of the transportation sector remains very low (Kazenergy 2017: 241) and connection to the energy sector planning to be able to cater to an increased demand is still needed (DIWEcon 2020: 68). Urban public transportation is underdeveloped and the cities suffer from high levels of congestion and air pollution (UNECE 2019a: 161ff).
The State Infrastructure Programme Nurly Zhol is an important building block of Kazakhstan’s long- standing strategy to become a major transportation hub capitalising on its central geographic position (Pieper 2020). The country is heavily investing in roads, while also building up some key railroad connections. Kazakhstan used its own funds to implement the Programme during 2014-2019 but also received multilateral support (Aitzhanova 2019: 66-68).
16 This exculdes energy industries. 17 The cited examples are the Seventh National Communication (2017) and the Technology Roadmap for sustainable cement production. The former includes modelling of economically viable options for industry in Kazakhstan that concludes that industry does not offer much potential for emission reductions. The data on these options are incomplete and possibly outdated. 18 In the past, energy efficiency gains (SC MNE RoK 2019: 34) did not lead to emission decreases.
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Mounted shepherd and a herd of sheep in the Altyn Emel National Park in Kazakhstan. Source: Charlotte Venema / Unsplash
Agriculture and land use Emissions from agriculture are around 10% of the total (MoE 2019: 208). Land use is an emission sink. In the agricultural sector, animal husbandry is the major source of emissions (UNECE 2019a: 307). With its State Programme of Development of the Agro-Industrial Complex 2017-2021, the government of Kazakhstan is pursuing a major expansion of agricultural production, both to increase self-reliance for domestic food supply and in agricultural exports (ibid: 312). Furthermore, through the Law on Pastures, the government is seeking to combat land degradation and desertification (ibid: 311). Agricultural expansion and growing meat production will drive emissions, even though the modelling in the Seventh National Communication suggest several technical options to slow down their growth (e.g. through better manure management and biogas facilities) (MoE 2017: 118ff, 125).
Waste Waste accounts for a small share of emissions. However, waste emissions have been growing rapidly (MoE 2019: 38-39). Improving the management of all types of waste – from industrial to solid municipal waste and sewerage – is a pressing issue in Kazakhstan. Waste management goals are still based on the 2013 Green Economy Concept; the State Programme on waste was discontinued in 2016. A number of initiatives such as the scheme of Extended Producer Responsibility and city efforts to establish separate waste collection are in place (UNECE 2019a: 203ff).
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3.1.3 PROGRESS AND ENTRY POINTS
Kazakhstan established several ambitious sustainability goals, among which the goals for the energy sector are especially relevant to mitigation. There is a general understanding that the economy should evolve and change structurally. The Green Economy Concept offers a first comprehensive analysis of sustainability gaps and calculation of sustainable policy impacts on the economy. Kazakhstan has an elaborated structure of strategic public policies and good planning capacities. The country is already working on a long-term low-emission development strategy.
Kazakhstan has achieved substantial progress on renewable energies with regard to project activity, increasing capacity and reducing prices through auctioning. As Kazakhstan is a country with abundant and cheap fossil fuel resources and with no domestic renewables industry, this progress is noteworthy. With regard to energy efficiency, there has been a lot of activity, and the country has been reaching its goals. The economic effectiveness of energy efficiency measures is a challenge, but there is arguably a market for energy efficiency technologies and solutions.
Kazakhstan was also among the early movers on emissions trading. Covering major energy-consuming sectors, it is an important mitigation instrument. While it might be too early to judge the effectiveness of the reformed system (the first trading period after the relaunch is ongoing), having the necessary complex procedures in place is a good starting condition for increasing the efforts in the future.
Finally, there are many co-benefits of mitigation action in Kazakhstan, e.g. with regard to the modernisation of the economy. Planning processes and policy documents need to reflect this better, for which a more struc- tured assessment of low-emission options would be helpful. The knowledge base to assess how the country’s overarching development priorities can be achieved with lower-emissions options is currently insufficient, but e.g. the process of the of the long-term strategy could help to close this gap (see DIWEcon 2020).
3.1.4 NEEDS AND BARRIERS In Kazakhstan, the largest share of infrastructure investment goes to high-emission energy, industry and transport (see figure 8, OECD 2019b: 110, 112, 118). A vision of a reformed and less resource-dependent economy co-exists with mid-term political action that prolongs business as usual. Therefore, the steps towards achieving high-level goals are not clear.
Mitigating emissions has not been a guiding concern of the Green Economy Concept or of sustainability policymaking in recent years. It is not clear whether the different green economy goals will lead to substantial emission reductions. There are only a few policies with specific mitigation goals: the NDC, the ETS and the 2030 emission reduction goal in the power sector in the Green Economy Concept. Sectoral policies do not reflect these overarching goals and many seem to head in the opposite direction.
A major barrier is the abundance of fossil fuel resources, both because Kazakhstan is dependent on fossil fuels domestically for its industries and households and because it draws on their exports economically. The oil and gas sector alone accounts for a fifth of the country’s GDP, 0%7 of total export earnings and 44% of state budget revenues (2018) (Kazenergy 2019: 10). The actors in the fossil fuel sector therefore have significant political weight. While important co-benefits and international commitments can spur domestic climate action, the motivation for a country to reduce fossil exports that are already “up and running” is weak. This makes it vulnerable to global demand reductions that are necessary to achieve the goals of the Paris Agreement (Ivleva et al. 2017: 19ff). It is committed to diversifying its exports, but this does not imply reducing fossil fuel exports in absolute terms. In February 2020, the Kazakhstani government announced the State Geological Exploration Program for 2021–2025 to discover further fossil and mineral resources, noting that only 25% of Kazakhstan’s reserves is sufficiently explored (Press service of the Prime Minister 2020).
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Infrastructure Transport projects Industrial projects projects by sector by sub-sector by sub-sector In USD million In USD million In USD million
Mining and Oil and gas Roads; Airports Intermodal Copper production Fabricated metal products quarrying pipelines Railways 532 461 26 47 Machinery and equipment 14 563 37 565 59 Railways Cement 407 4 460 489 Basic metals Manufacturing 2 151 28 103 Coke and refined Water petroleum 471 2 398
Transport 39 954
Upstream Electricity oil and gas Roads Chemicals generation Electric power 62 083 34 442 22 586 12 206 transmission and distribution 690
Figure 8 Infrastucture investment in Kazakhstan Source: OECD 2019b
To find a way out of the fossil fuel dependency for domestic energy supply, strong political will would need to guide the process. There is already a commitment to clean power by 2050, but, despite the mentioned initial progress, the roadmap towards it remains opaque. Major industries such as metallurgy and chemicals are energy-intensive and rely on secure and cheap energy supply. Domestic energy prices are comparatively low, and it would imply a high political risk to raise them. At the same time, energy- poor households have no access to central heating and often use coal in stoves. A transition to low- emission energy system would need to be accompanied by supporting these economically vulnerable groups, e.g. through subsidies (Kerimray et al. 2018: 299, 311).
3.1.5 IN SUM
The chapter has shown that strategic policies and most infrastructure investments in Kazakhstan still largely look towards high-emission options – or at the very least, do not integrate mitigation aspects into sector development. These sectoral mid-term development strategies exist in parallel to a series of ambitious sustainability goals established in higher-level policies. Support for renewable energy and energy efficiency are not matched by a specific, overarching vision of reducing emissions. They represent an add-on to business-as-usual development strategies.
The BRI investments might well help support this trend and prolong the life of high-carbon infrastructure. But they could also help mend present infrastructure gaps and support the long-term transformation of the Kazakhstani economy as laid out in the country’s overarching strategies by building new low-carbon infrastructure. Both scenarios require a demand by Kazakhstani government and the willingness to cooperate on the Chinese side. The next section looks into the Sino-Kazakhstani economic cooperation and joint projects.
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3.2 CHINA’S INVESTMENT IN KAZAKHSTAN
3.2.1 THE GROWING ECONOMIC LINKS OF CHINA AND KAZAKHSTAN
China’s economic ties with Kazakhstan have developed dynamically over the past 15 years. In 2017, China was Kazakhstan’s second biggest trade partner after Russia (DIWEcon 2020: 34). It is also the second largest importer of Kazakhstani commodities over the period of 2014-2018 after Italy (Chatham House 2018). It held the fourth position with regard to foreign businesses working on Kazakhstani territory (Strategy 2050).19
China is not the largest source of foreign direct investment (FDI), but its presence has been increasingly noticeable since mid-2000s. Since 1991, USD 330 billion in FDI arrived in Kazakhstan from more than 120 countries, according to the Kazakh government. EU countries and Switzerland accounted for over the half while the US and China provided 15% and 5% of these investments respectively (Zhussupova 2019). It has been ranking annually between the 3rd and 5th largest source of FDI during the period of 2010-2018 (Seitov 2019).
Kazakhstan has been eager to attract investments to processing industries (Kazakhstan 2018a), in the above-mentioned effort to build up the sector vis-à-vis resource extraction. This share was significantly higher throughout 2009-2018 then in the preceding decade, but still barely superseded 5% of the total FDI (see figure 9). Overall, the FDI still concentrates on the extractives (Dodonov 2019: 244). China invests in many sectors in the country, not just commodities, while especially the strategic investments since the announcement of the BRI go to non-extractive industries, as will be discussed in the following.
28.9
26.5 Gross FDI inflow to Kazakhstan 24.3 Gross FDI inflow in the processing industry 24.1 23.8 22.2 Gross FDI inflow from PR of China 21.3 21.4 21.4 21.0 19.4
15.4
12.1
8.3 7.9 6.0 5.66 4.6 4.1 4.6 5.13 4.08 3.46 3.67 3.42 2.8 2.54 2.59 2.1 1.9 2.13 2.24 1.3 1.7 1.2 1.83 2.4 0.7 1.0 0.5 0.4 0.1 0.2 0.6 0.8 1.0 0.5 0.35 0.68 1.08 1.7 1.7 2.2 0.98 0.1 0.2 0.3 0.1 0.2 0.1 0.2 0.1 0.2 0.4 0.2 0.4 0.4 0.8 0.9 1.8 0.8 1.0 1.1 1.5 0.4 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Kazakhstan has been participating in the “One belt, One Road” initiative
Figure 9 Dynamics of gross FDI inflow to Kazakhstan, USD billion Source: Kazakh Invest 2019
19 856 entities with Chinese participation were active in Kazakhstan. Russia (5969), Turkey (1556) and Uzbekistan (897) held the first three positions.
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In bilateral trade, fossil fuels exports to China have played an important role. Lower overall trade volume numbers after 2014 reflect the decrease in oil price (Aitzhanova 2019: 64). Metals, especially iron, copper and chromium, as well as agricultural products, make up the other major exports. China is one of the major buyers for Kazakhstani metals. For copper and chromium, Kazakhstan has been among the top ten and top five suppliers for China in recent years, respectively (Chatham House 2018). During 2016- 2018, fossil fuels have been the top imported commodity by volume, but metals and minerals headed the list in monetary terms (Chatham House 2018). Kazakhstan imports manufactured goods such as phones and machines as well as clothes and footwear from China (Zoi 2019: 29).
2013 2014 2015 2016 2017 Exports to China 14,373.70 9,799.40 5,480.10 4,214.90 5,777.70 China‘s share in exports (%) 16.97 12.33 11.93 11.46 11.95 Imports from China 8,364.50 7,357.20 5,087.80 3,665.70 4,692.20 China‘s share in imports (%) 17.14 17.82 16.64 14.56 15.99
Table 1 Sino-Kazakhstani foreign trade indicators, USD millions Source: Shibutov 2018 in Aitzhanova 2019, p. 65
Looking more closely into fossil fuels exports, there are some noteworthy trends for an assessment of possible motivations of Chinese investments. Between 2013 and 2018, China’s imports from Kazakhstan of coal plummeted by over 60%, while of oil – also decreased by over a third, but of natural gas – almost doubled (Chatham House 2018). In the structure of Chinese oil imports, Kazakhstan’s share has been declining fastest – 36% between 2013 and 2018, and it was only the 25th biggest supplier for China in 2018. For Kazakhstan, China imports oil from Kazakhstan, but it is surpassed by European importers and South Korea (OEC n.d.). At the same time, Chinese actors are involved in oil production from most of the Kazakhstani oil fields (Aitzhanova 2019: 64). China National Petroleum Corporation (CNPC) made major acquisitions since the end of the1990s, enabling it to decide whether to use the crude to satisfy Chinese demand or to sell it on the international market (Turaeva, Glinkina and Yakovlev 2018: 70; Pieper 2020). The equity share of Chinese companies in the Kazakhstan’s oil production was about 18% in 2018 (Kazenergy 2019: 56). However, the production in many fields with core Chinese participation is declining (Aitzhanova 2019: 64). On the contrary, natural gas trade has been developed rapidly and successfully – with amounts doubling during 2013-2018. In this period, Kazakhstan ranged between 8th and 12th most important supplier to China, with Australia, Myanmar, Qatar and Turkmenistan competing for the top three positions (Chatham House 2018).
Kazakhstan certainly plays a major role in the BRI. Xi Jinping fist announced “Silk Road Economic Belt” at the Nazarbayev University in Kazakhstan in September 2013 (Pieper 2020). In 2015, the two countries signed a bilateral agreement on investment and industrial cooperation, and under this framework, the parties agreed on a list of joint strategic projects (Kazakh Invest 2019a) discussed in more detail in section 3.3. The three joint priorities of the BRI in Kazakhstan are “transport infrastructure, trade and the manufacturing industries” (Pieper 2020). The countries continue working on a joint institutional framework for further strategic development of the industrial cooperation, including during regular joint events and forums (e.g. Kazakhstani–Chinese Coordination Committee on industrial and investment cooperation, Kazakh–Chinese Business Council).
Kazakhstan aligned its Nurly Zhol State Programme for Infrastructure Development with the BRI soon after it was announced, recognising the opportunities to use Chinese funds to move its own infrastructure goals forward (Pieper 2020). The text of its 2020-2024 version mentions the BRI explicitly (Kazakhstan 2019). This indicates a high level of agreement between the elites of the two countries and a strategic dimension with regard to these investments. Kazakhstan counts on Chinese investment to complement its economic development plans, expressed in strategic documents, such as Nurly Zhol, the State Programme of Industrial and Innovation Development, Business Roadmap 2020 (Aitzhanova 2019: 66-69; Aminjonov et al. 2019b).
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3.2.2 THE INVESTMENT PORTFOLIO
The following discusses the main categories of Chinese investments in Kazakhstan, reflecting upon their possible joint strategic interests, based on the information in chapters 3.1 and 3.2. The empirical basis and the important constraints of this discussion as well as a clarification of the role of the BRI concept are in Textbox 3. This section furthermore comments on how the investment structure evolved over time, especially after the announcement of the BRI in 2013.
Textbox 3 Data and definitions
Methodological note on project data This paper builds on two different sources to draw conclusions on the project portfolio of China in Kazakhstan: 1) the databank compiled by researchers of the CADGAT project, which tracked Chinese investment in Central Asia before the publication of the government project list (Aminjonov et al. 2019b); and 2) the list of the 55 projects of the bilateral agreement of China and Kazakhstan (Kazakh Invest 2019b). Some of the 55 projects (of later date) were not in the CADGAT databank (earlier date). These two project lists were consolidated. Online research helped crosscheck the information of projects where double counting seemed probable and amend project detail in accordance with the government information for those of the 55 projects that were already listed by CADGAT.
The projects have a different status – from implemented and running to only planned or considered. The list of 55 projects indicates three groups: implemented (15), ongoing (11) and considered (29). The status of the projects on the CADGAT list is not clear: some might not be implemented, even though the project end date listed is already in the past (due to an older source of information). The end date is unknown for 33 of 134 projects. The information for fossil-fuel related projects was verified and amended, whenever available, due to their special significance for this paper. Yet, verifying the status of every project in the database was not possible. For some, respective information might not be available.
For some projects, no information on cost is missing. Another limitation is that the information of the share of Chinese actors in the total project volumes is not available. Therefore, the data has a high degree of uncertainty. This paper mainly assesses the overall sectoral structure of the investment portfolio, for which the data provides a solid basis. However, numbers and volumes of projects are only indicative.
The numbers and volumes of the projects on the different lists are as follows:
• CADGAT – 92 projects (1997-2024) of USD 90.9 billion
• Government list – 55 projects20 (2014-2025) of USD 27.6 billion
• Consolidated list – 133 projects (1997-2025) of USD 98.8 billion
20 Of these, only 15 were already on the CADGAT list, and for several projects, details differed. So discrepancies are noticeable, which makes us cautious towards the project information that is available beyond the official 55 project list. Some of the projects were mentioned twice, needed to be split up into two etc. This is why the overall numbers do not add up: adelphi added 40 projects to the list, but the overall number is only higher by 32.
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Clarification on the concept of “BRI projects” It is important to note that assigning projects to the BRI is not straightforward. “Reliable information on which projects officially become ‘BRI projects’ is hard to come by” (Piper 2020) and “nobody really knows what a BRI project is and what it is not” (Vakulchuk 2019). With regard to the general context discussed in chapter 2, the establishment of the BRI indicates that the Chinese government started using the investment abroad more strategically as part of its international politics. Therefore, to this study, the 55 projects under the bilateral framework agreement of 2015 are of special interest. This list might indicate the strategies of both partners and what they are willing to communicate as priorities (while there are more ongoing bilateral investments).
There is no official document stating that the 55 projects of the bilateral agreement are all part of the BRI, while official communications do not draw a clear line (Pieper 2020). This goes along with the observation that the BRI is more of a general concept and does not come with a list of projects that all follow specific goals, radically setting them apart from “non-BRI” projects by China. Moreover, it some times subsumes projects that started before the BRI itself. Therefore, there is a merit in assuming that all projects financed by China after the host countries signed Memorandums of Understanding to be part of the BRI could be part of the initiative. For both the decarbonisation and geopolitics aspects of the research interest of this study, it does not matter whether a project is officially referred to as a BRI project.
Industry The economy of Kazakhstan, along with extractive activities, is characterised by the importance of heavy industries that are very energy and emission-intensive. The Kazakhstani government aims to continue strengthening its traditional industries, but also seeks to foster new sectors (e.g. light manufacturing) on its way to a more diversified, more skills-based and knowledge-intensive economy. Furthermore, it seeks to achieve more regional cohesion by developing the infrastructure of weaker regions (see chapter 3.2.1). These goals offer entry points for cooperation with China.
Indeed, the most projects both in number (53) and in funds (USD 40.7 billion) are in the industry sector. Here, the chemicals and petrochemicals are the leading subsector (25 projects of USD 27.4 billion), with the biggest share of funds dedicated to petrochemical enterprises such as the modernisation of two oil refineries, and the production of polypropylene and mineral fertilizer. Mining is the second biggest industry, followed by processing of metals and minerals. Manufacturing endeavours follow, including the automotive industry and industrial machines. There are also two recycling projects – PET and hydrocarbon chemical waste. Several of the industry sector projects refurbish or revive existing plants while others invest in new branches. There are also several projects concentrating on developing industry clusters, such as Taraz Chemical Park or the Saryarka AvtoProm assembling of vehicles for JAC Motors.
Energy Kazakhstan relies on fossil fuels domestically and for export and plans to increase their exploitation. Oil, coal and gas are all exported (IEA 2020a). Domestically, all three resources also play a major role (IEA 2020b). The government puts special efforts in further developing the use of its natural gas reserves, both for export and domestic use (Kazakhstan 2014a).21 In fact, the key Sino- Kazakhstani project of Beyneu-Bozoy-Shymkent (BBS) gas pipeline enabled both increased export to China through the connection to the Central Asia-China gas pipeline and to delivering the fuel to Kazakhstani major cities and regions (Kazenergy 2019: 15). The high potential and ambitious goals for renewable energy and energy efficiency as well as the energy infrastructure needs also offer opportunities for Chinese investors.
21 According to Kazenergy, there is competition for natural gas supply between domestic and export use (Kazenergy 2019: 15).
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The exact layout of the oil refinery of PetroKazakhstan, a joint venture by China National Petroleum Corporation (CNPC) and KazMunaiGas, in Shymkent. Source: Vladimir Tretyakov / Shutterstock
China has invested heavily in the energy sector (34 projects of USD 32.9 billion overall). 19 projects of USD 31.4 billion are fossil-fuel based, mostly oil and gas pipelines (six projects, USD 14.2 billion) and production (seven projects, USD 14.9 billion). There is one project on coal processing and one on LNG production. Four projects are related to power generation, including one Combined Heat and Power project. The number of projects on renewable energy is similarly high, but the investment is much lower: 15 projects with a total of USD 1.5 billion. The projects amount to almost 1 GW capacity22: 435.8 MW in hydropower, 312 MW in wind power and 220 MW in solar power. A large hydropower station (300 MW) and three solar power projects (170 MW) have been implemented. One of the planned projects (2019-2021) involves the production of solar equipment. Several projects rely additionally on EBRD funding.
Transport Building transportation corridors in the Eurasian space with Kazakhstan as a major hub is a vision that Kazakhstani and Chinese actors share. Kazakhstan seeks to capitalise on its geographic position as a country connecting different parts of Eurasia. China, as noted above, aims to intensify the goods transfer across the continent, both for export purposes and for securing its own supply. Some of the most symbolic projects like the dry port and the special economic zone of Khorgos Eastern Gate are in the transportation sector (Aitzhanova 2019: 67; Ruel 2020). However, doubts around the profitability of the project have been reported, and its scale is regional rather than continental (Ruehl 2019).
22 For comparison, total installed capacity in Kazakhstan is expected to reach 1.6 GW by the end of 2020 (Press Service of the Prime Minister 2019a).
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The 16 transportation projects have a total budget of USD 15.7 billion.23 Six motorways (USD 10.3 billion), three railroads (USD 1.6 billion) and three ports (USD 0.5 billion) add to the prestige effort in Khorgos (USD 281 million). Kazakhstan invested substantial national funds through Nurly Zhol in these efforts (Aitzhanova 2019: 68). While the CADGAT database includes the East Europe-East China highway, the finance – USD 6.6 billion – was largely provided by multilateral banks, including the World Bank and ADB, and complemented by Kazakhstani public funds, as the highway was part of Nurly Zhol 2014-2019 (Pieper 2020; Press service of the Prime Minister 2019b). Finally, two projects, of nearly 3 billion jointly, are planned in public transportation in Almaty (metro) and Nur-Sultan (light rail transit). However, both are listed by the government among the 29 “under consideration”, and the Nur-Sultan project is reported to be frozen (Masanov 2019).
Agriculture and food In the agricultural production, Kazakhstan also pursues an active expansion strategy. The country has high potential for agriculture (wheat, meat production etc.), but it faces major problems of water scarcity on the one hand and of low efficiency on the other (UNECE 2019a: 299-308). The government is therefore pushing for increasing production, with better equipment and more fertilisers, and the processing of agricultural products, e.g. one of the indicators in increasing export of processed agricultural goods (ibid: 311-312).
Chinese investments in agriculture amount to USD 1.3 billion in 19 projects and concentrate on processing of crops (9 projects of USD 1.1 billion)24. Another eight projects with far lesser value of USD 233 million focus on animal products (mostly meat, but also dairy and fish). Finally, there are two small projects related to irrigation (USD 1.8 million).
Development of the investment portfolio over time The sectoral split of the 55 strategic projects, implemented and planned as part of the bilateral framework agreement of 2015, is similar to the overall structure just introduced. A sectoral breakdown according to a governmental source is presented in figure 10 (Kazakh Invest 2019a). Chemicals and petrochemicals account for the half of all funds. With regard to the number of projects, the energy sector makes up the majority, of which most are renewable energy projects, followed by mining and metallurgy.
One notable difference is that the oil and gas production and pipelines investments are not part of the 55 projects, and most of them are of an earlier date (before 2015). Projects related to petrochemicals, including the modernisation of the Shymkent refinery, are part of the bilateral agreement. The focus of new investments might have moved up along the value chain of hydrocarbons, while of course China continues its participation in the upstream sector through the infrastructure already built and shares previously acquired, and the pipeline infrastructure built largely caters to present needs.
23 For comparison, current transport infrastructure investment in Kazakhstan accroding to OECD data amounts to USD 40 billion (see chapter 3.1). 24 The industry includes the deep processing of crops for chemical uses, in accordance with the classification by the government of Kazakhstan.
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Past (end date Present (end End date Total until 2019) date after 2019) unknown
Nr USD mln Nr USD mln Nr USD mln Nr USD mln
Industry 53 40 733 15 6 882 23 18 579 15 15 273
Chemicals and petrochemicals, 25 27 467 5 4 116 10 11 194 10 12 158 incl. oil refineries
Minerals and metals extraction 9 7 230 1 0 8 7 230 0 0
Minerals and metals processing 6 3 045 2 150 0 0 4 2 895
Manufacturing (automotive, 8 2 490 5 2 239 2 31 1 220 machines etc.)
Other (building materials, 5 501 2 377 3 124 0 desalinisation etc.)
Energy 34 32 917 15 21 465 17 3 122 2 8 330
Fossil 19 31 427 11 20 923 6 2 174 2 8 330
Oil/gas production 7 14 930 4 6 560 1 0 2 8 330
Gas pipelines 3 12 200 3 12 200 0 40 0 0
Oil pipelines 3 2 009 3 2 009 0 0 0 0
Power generation 5 2 188 1 154 4 2 034 0 0
Renewables 15 1 490 4 542 11 948 0 0
Transportation 16 15 665 8 8 750 8 6 915 0 0
Roads 6 10 339 1 6 600 5 3 739 0 0
Public urban 2 2 971 0 0 2 2 971 0 0
Railroads 3 1 574 3 1 574 0 0 0 0
Ports 3 500 3 500 0 0 0 0
Dry ports 2 281 1 76 1 205 0 0
Agriculture 19 1 365 12 486 4 350 3 530
Crop-based products 9 1 131 5 307 2 320 2 504
Animal products 8 233 5 177 2 30 1 27
Irrigation 2 2 2 2 0 0 0 0
Finance and IT 5 8 113 1 13 0 0 4 8 100
People to people 7 0 0 0 0 0 7 0
TOTAL 134 98 794 49 36 132 52 28 965 33 33 697
Table 2 Sino-Kazakhstani investment projects Source: own elaboration based on Aminjonov 2019b
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Energy 55 Kazakhstan-Chinese joint projects by industry 15 projects USD 2 384 mln Machine building Food industry Energy 5 projects Mining and 9% USD 387 mln metallurgy 27% 15%
Chemistry and petrochemistry 12 projects 18% 9% USD 13 909 mln Others Food industry 22% Others 10 projects Chemistry and USD 3 766 mln petrochemistry
Mining and metallurgy 8 projects The projects are expected to create about USD 5 980 mln 20 000 permanent jobs
Machine building Since 2015, 15 projects worth To date, 11 projects worth 5 projects USD 3.9 bln have been USD 3.7 bln are being USD 1 163 mln implemented implemented
Figure 10 The 55 Sino-Kazakhstani investment projects Source: Kazakh Invest 2019
According to the CADGAT database, the pipelines are not “branded as the BRI” (Aminjonov et al. 2019b). This might point to the aspiration of the Kazakhstani government to highlight that strategic investment in the 55 projects with China helps shift the economy and the exports away from raw materials and toward processing of these materials and manufacturing. As noted, the government presents these joint projects as in line with Kazakhstan’s development priorities and laws, and controlled by Kazakhstani actors (e.g. Kazakh Invest 2019a, Sevostyanova 2019).
At the same time, fossil fuel production and pipelines still account for around one third of the overall budget of projects with Chinese participation considered in this study (keeping in mind the caution needed with these calculations due to data constraints noted above). Continued exploitation of natural resources is an important part of economic development strategies, albeit in a more diversified economy.
3.2.3 POTENTIAL FOR “DECARBONISATION FITS”
We have seen that emission-intensive branches dominate the development policies of Kazakhstan and its investment portfolio. Chinese investment goes along with this high-emission, business-as-usual trend, as the joint project portfolio of China and Kazakhstan shows.
However, there are several areas where China’s investment could contribute to lowering emissions in the Kazakhstani economy, if the government of Kazakhstan implements a comprehensive and consistent decarbonisation strategy. In this case, China could provide additional resources. But it would be unusual
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and unlikely to expect key decarbonisation incentives for Kazakhstan to come from Chinese investments.25 If Kazakhstan embarked on a decarbonisation pathway, the two countries could potentially explore the following areas of mutual interest and the conditions needed for beneficial cooperation.
• Renewables: To decarbonise Kazakhstan’s economy, renewable electricity is needed not only in households, but also for transportation and for the energy-hungry industry. Furthermore, renewable sources for heating are underexplored. China is already planning and implementing several renewable energy projects in Kazakhstan, including one project for solar elements manufacturing. As the latter pursues ambitious renewable goals and the former has a well-established industry that offers comparatively low prices, this could become a promising cooperation area, also supported by geographic proximity. Ideally, Chinese investments could contribute to building up a Kazakhstani renewable industry.
• Energy efficiency: Investing in new energy and industry infrastructure could contribute to replacing the outdated equipment and reducing the energy-intensity of the GDP. With the right policy framework, this could be a building block for bringing down emission levels. However, not much information is available on possible ambitions, with an exception of modelling for the Seventh National Communication and a Roadmap to lower emissions from cement production, which both provide narrow insights (MoE 2017: 112f, 116f; Hoogzaad et al. 2016). As Chinese investors have already been involved in many industrial projects, often refurbishing existing facilities, there might be possibilities for further cooperation.
• Light manufacturing and other new industries: Kazakhstan is eager to build up its higher-end industrial and manufacturing capacities. Investing in light manufacturing and digital industries, for instance, could lower the emission footprint of the Kazakhstani economy, if this helps reduce the share of heavy industries. However, based on available studies, it is impossible to say what level of ambition it could support and whether this would be compatible with the goals of the Paris Agreement. It is not a priority, rather a possible side effect of industrial policies, and there is no decarbonisation strategy for the sector. To target Chinese investments to these ends, the national government would need a more specific roadmap for industrial transformation.
• Low carbon transportation: It is certain that the connectivity and the freight volume will increase, given that both countries share this goal and increased demand in transportation is a global trend (ITF 2019). Therefore, it is important to use the potentials for low-emission transportation. In urban areas, the pressure to clear the skies and streets and enable mobility for everyone might be a sufficient push for more sustainable urban transportation projects, such as the light rail in Astana. Chinese investors might help cater to the financing and technology needs. China already produced conventional cars in Kazakhstan. While individual e-mobility is rare in Kazakhstan (due to high cost and lack of infrastructure), if this market were to develop, this could be another area of cooperation. While freight transportation will need decarbonisation solutions relying on international coordination, no vision is available for it in the Sino-Kazakhstani cooperation as of yet.
• Processing of agricultural goods: More efficient use of agricultural products and techniques might help reduce emissions connected to agricultural activity. Mitigation potentials are quite uncertain in face of the major expansion planned by the government in the sector.
• Waste management: Beyond the existing projects, Kazakhstan could further profit from the waste management technologies, which could also decrease emissions.
25 In the absence of national political will, even if all the BRI only invested in green projects, these would likely complement, not replace high-carbon activities.
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3.3 A BRIEF GEOPOLITICS OF CHINA’S INVESTMENTS IN KAZAKHSTAN
China has been expanding its influence in Central Asia both economically and strategically, strengthening its status as regional power prior to and through the BRI (Turaeva, Glinkina and Yakovlev 2018: 66-67, 69). The relationship with Kazakhstan has been an important element of these aspirations. As an indispensable piece of Eurasian economic corridors of the BRI, the country is instrumental to the mechanisms the initiative employs (see section 2.4.1). This fits with Kazakhstan’s own “multi-vector foreign policy”, as the country seeks to turn the vulnerability of its “land-lockedness” into “landlinkedness”, diversify its energy transportation infrastructure, reduce its dependence on Russia and benefit its economy (Pieper 2020).
3.3.1 CONNECTIVITY PROJECTS
The recent rail and road infrastructure improvements in Kazakhstan contribute to decreasing transport times across Eurasia. This further increases and deepens China’s economic reach, and diminishes its dependence on sea routes. When complete, new infrastructure in Kazakhstan will become the connecting piece between China and Europe on routes that go through Russia as well as Turkey. It will also connect China to Turkmenistan and Iran (Pieper 2020; Aitzhanova 2019: 68; Kaukenov 2019: 179-183). Many essential pieces of these routes are already completed (Press service of the Prime Minister 2019b). Much of the investment was multilateral or Kazakhstani under the framework of Nurly Zhol (Pieper 2020; Aitzhanova 2019: 68; Press service of the Prime Minister 2019b).
A prominent project is the West Europe-West China highway from the Lianyungang port on the eastern coast of China to Moscow and Saint Petersburg in Russia. In Kazakhstan, the highway goes from the dry port of Khorgos on the border to China along the southern border, where the economic hub of Almaty is located. Then it crosses the country from the South to the North, before entering Russia. The southern part – from Khorgos via Almaty to Shymkent – is also connected to Bishkek and Tashkent. Besides the physical construction of this route, Kazakhstan invested in its own terminal in Lianyungang. This way, the containers are handled by the same company, KTZ Express, at their point of departure on the eastern coast of China and in Korghos where they enter Kazakhstan, further speeding up the logistics. Chinese investments also contributed to the creation of routes from the centre of the country to the West, connecting it to the Caspian Sea. Therefore, the Kazakhstani Caspian ports of Aktau and Kuryk26 (the latter is part of the BRI) are a nexus for more routes and grow in importance (Rakhmetulina and Karipova 2019: 1619-1621; Piper 2020; Kaukenov 2019: 179-183; Aitzhanova 2019: 66-68).
In terms of energy connectivity, Kazakhstan in important supplier and transit country for natural gas27 through the China-Central Asia gas pipeline (Kazenergy 2019: 17). The Kazakhstan-China pipeline transports Kazakhstani and Russian crude oil, while overall accounting for a small part of Kazakhstani oil export flow. With its western Kenkiyak-Kumkol and its eastern Atasu-Alashankou sections, it crosses almost the whole territory of Kazakhstan (Kazenergy 2017: 54-55). China has been present in Kazakhstan’s oil production sector since 1990s and invested in oil pipelines since mid-2000s, while the natural gas infrastructure projects are newer. All Sino-Kazakhstani pipeline projects, however, predate the BRI and are not in the list of 55 strategic bilateral projects (chapters 3.2.1 and 3.2.2). Notably, “energy projects in Kyrgyzstan, Tajikistan, and Turkmenistan, were mostly implemented after 2010” (Aminjonov et al. 2019c: 1), i.e. at a later stage than in Kazakhstan.
26 These are connected to Makhachkala (Russia), Baku (Azerbaijan) and Neka (Iran) on the opposite sides of the Caspian Sea.
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Polar Silk Road
New Eurasian Landbridge
China-Central Asia-West Asia Economic Corridor
rail terminal/juncture railway in operation Country originally listed by rail terminal/juncture and China International Trade railway projects Institute as belonging in the BRI gas transfer point rail terminal/juncture and shipping routes oil transfer point Country which was subsequently gas pipeline in operation joined to the BRI seaport future gas pipeline gas transfer point Silk Road Economic Belt oil transfer point oil pipeline in operation economic corridor
Figure 11 BRI-related infrastructure in and around Kazakhstan Source: Linn and Zucker 2019, p. 2
3.3.2 INTERACTION WITH RUSSIA
By the end of 2000s, China secured direct access to fossil resources in Central Asia to which it had been barely connected previously (e.g. Brill Olcott 2010; Kazcmarski 2019). This involved a power play with Russia. Around the millennium, the Central Asian fossil exports went through Russia, whose priority was to prevent the EU from importing these directly at a lower price. A 2007 trilateral agreement with Turkmenistan and Kazakhstan on a new gas pipeline was to secure Russia’s intermediary position, but in wake of the economic crisis, the project stopped. Instead, China’s loan for pipeline infrastructure provided Turkmenistan with leverage against the Russian pressure to renegotiate prices. Russia accepted the arrangement as its own fossil state companies had debts with China and it still kept its position on the European market. The fact that this tense situation did not result in conflict showed that Russia was willing to accept China’s economic power in Central Asia as creditor and trade partner (Kazcmarski 2019). Diversified gas supply also allowed China to assert its interests with regard to supplies from Eastern Siberia (Carlson 2018: 33-34).
27 Natural gas is transported to China from Turkmenistan via Uzbekistan and Kazakhstan.
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Because of China’s increasing presence in Central Asia, some observers expected tensions with Russia. Until now, a conflict of the two powers over the influence in Central Asia did not materialise, as they sought to avoid it (Carlson 2018: 38; Kazcmarski 2019). When the BRI was announced, the Russia-led Eurasian Economic Union (EEU) and the Shanghai Cooperation Organisation (SCO) already existed as multilateral structures in Central Asia. The SCO was established by China, Kazakhstan, Kyrgyzstan, Russia and Tajikistan in 2001 – Uzbekistan, India and Pakistan joined at a later stage. It provided a platform for security cooperation, but failed to evolve due to differences between China and Russia. While China sought deeper economic integration, it was unwelcome to Russia, as it would to strengthen China even more. China was reluctant to coordinate energy policies through the SCO (Kaczmarski 2019).
Some experts state that the EEU contributed to lower profitability of China’s manufactured goods exports to Kazakhstan, this being an additional motivation to expand economic ties in other ways (Kaukenov 2019: 172). Initial plans to integrate the EEU and the BRI (Carlson 2018: 38; Kaukenov 2019: 177-178) have stalled. The EEU is an instrument of Russia’s “defensive regionalism”, as the country effectively negotiates EEU tariffs with China. In this way, it controls Kazakhstan’s economic relations with its neighbour and prevents the country from advocating for China’s positions with other EEU countries. However, EEU members still have trade policy competence, and Kazakhstan is reluctant to change this (Pieper 2020). At the same time, Russia makes sure to profit from the BRI projects in its Far East as well as through transportation routes connecting its European parts to BRI economic corridors, instead of being side- lined by new corridors through Eurasia that lie beyond its territory. “Both Nur-Sultan and Moscow attempt to engage with and contain Chinese business interests, aware that a tectonic geopolitical shift is underway which they hope to be able to co-manage in one way or another” (Pieper 2020).
The interaction of the regional visions of Russia and China is a balancing act. China appraises the Russian idea of Great Eurasia, underlines the economic nature of its interest in the region and emphasises the rivalry with the US, while omitting possible challenges to Russian self-identification as a regional leader. This enables Russia to uphold the great power rhetoric and reaffirm its position as the dominant security actor, despite losing influence while China gains economic weight in Central Asia (Carlson 2018: 39; Kaczmarski 2019). Kazakhstan, specifically, is cautious with regard to military cooperation with China (Pieper 2020). However, the BRI increasingly raises questions of whether China would get involved with security dynamics in the initiative’s target states and to what extent it could cause conflict with Russia (Carlson 2018: 39; Kaczmarski 2019; Pieper 2020). In turn, Russia, unable to compete economically, accepts China’s economic ambitions in the region, while keeping some level of control through the EEU. It also emphasises the rivalry with the West and avoids topics and framings that are controversial for China (Carlson 2018: 39; Kaczmarski 2019).
3.3.3 INTERACTION WITH OTHER CENTRAL ASIAN COUNTRIES
The success of the BRI connectivity agenda will depend on the relationship between the Central Asian countries, which has been difficult after 1991, but is showing some progress. To make transportation across Eurasia attractive and reliable, the logistics needs several alternative routes (Schiek 2017: 18). Increased policy cooperation is necessary to complement the physical infrastructure to optimise connectivity and welfare gains of the BRI (World Bank 2019: 6; Rakhmetulina and Karipova 2019: 1625). Central Asian relationships, which have been complicated enough to preclude efficient border and trade procedures, will shape the chances for BRI success (Pieper 2020). BRI projects might offer additional incentives for reforming border procedures and more cooperation among Central Asian states, but not trigger this automatically, as targeted political efforts are still required (Schiek 2017: 22, 31).
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People at the Turpan Railway Station in front of a train departing to Kashgar, both the in the province of Xinjiang, China. Source: C. Na Songkhla / Shutterstock
3.3.4 PERCEPTIONS OF CHINA IN KAZAKHSTAN
China’s multidimensional power strategies combine economic and political means with efforts to buttress the image of the country abroad and are also applied in Central Asia (Dadabaev 2018: 17; Schiek 2017: 17; Dave 2018: 104-106). In Kazakhstan, positive governmental discourse contrasts with the noticeable mistrust among the population towards Chinese projects, complemented by Sinophobic tendencies (Dadabaev 2018: 17; Pieper 2020; Tian 2018: 31).
In autumn 2019, there were several protests against “Chinese expansion”, including fears of transfer of China’s old production capacities, of a possible loss of control for Kazakhstani stakeholders and influx of Chinese workers (Baytelova 2019; Masanov 2019; Piper 2020). The government then provided the list of the 55 projects, underlying that these are mutually beneficial, use state-of-the-art technologies und comply with Kazakhstani laws (Kazakh Invest 2019a). In 2016, the government took back plans to enable longer land leases for international actors after a big wave of anti-China protests (Pieper 2020). Some commentators consider this an expression of general mistrust towards the government and of discontent with socio-economic conditions rather than a critique of specific initiatives (Baytelova 2019; Seitov 2019). The fact that comprehensive information on projects with Chinese involvement was not available for a long time contributed to this (Masanov 2019; Nabiyeva 2019: 3-4).
Several analyses list the policies of the Chinese government against ethnic minorities (including Kazakhs) in the border province of Xinjiang as another reason of anti-Chinese sentiment (Piper 2020; Schmitz 2019). While the BRI is said to seek development for this and other border regions to stabilise them (see chapter 2.4.1), China has used heavy-handed responses, making Xinjiang “one of the most heavily policed regions in the world” (Zenz and Leibold 2019). In 2019, the Kazakhstani government ignored an open letter to Nursultan Nazarbayev by ethnic Kazakhs in Xinjiang asking for support (Pieper 2020). Some observers assume that dependence on Chinese partnership might be among the reasons for the attitude of the Kazakhstani government (Standish 2019; Putz 2020; Pron and Szwajnoch 2019; Schmitz 2019).
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A heroic wall mural in Taldykorgan, Kazakhstan. Source: Blueberry Nights / Unsplash
3.3.5 IN SUM
The BRI in Kazakhstan develops in a geopolitical context that is relatively favourable to it. The strategic interests of Kazakhstan and China are aligned to an enormous extent, while the partner countries have managed to strike a balance with Russia in a way that it does not interfere with their bilateral activities. No major conflict with other Central Asia states stands in the way either (e.g. natural gas transit from Turkmenistan is functional). At the same time, most of the joint Sino-Kazakhstani projects do not require active participation by other Central Asian states.28 Finally, the tension between the government representation and the perceptions among the population in Kazakhstan is not a substantial obstacle to the BRI cooperation (yet), even though experts suggest it might be (Pieper 2020). This is not changed even by the heavy-handed polices on the Chinese side towards minorities in Xinjiang, as the Kazakhstani government has been able to avoid implications on its relationship with China.
28 The BRI, however, includes various other engagements with Kyrgyzstan, Tajikistan, Uzbekistan and Turkmenistan, as well as interests in Afghanistan, apart from its cooperation with Kazakhstan (see Arminjonov el al. 2019; Hallgren and Ghiasy 2017: Uzbekistan).
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3.4 HOW DOES GEOPOLITICS INTERACT WITH DECARBONISATION IN SINO-KAZAKHSTANI PROJECTS?
What is the role of geopolitics in realising these decarbonisation potentials or further affirming business as usual? This chapter looks back on some of the geopolitical goals presented in chapters 2.4.1 and 3.2.4 in connection with the project portfolio discussed above. The geopolitical motivations of China with the BRI are the starting point due to the structure of the research question. In line with our definition of geopolitics, the section ponders whether Chinese efforts are guided by strategic or purely economic motives, based on the data on projects and the literature on Chinese geopolitical goals in Central Asia and globally.
As stated previously, the views on the motives of the BRI differ, with some emphasising the economic and others the geopolitical elements (Pieper 2020). This originates in the inherent multidimensionality of the initiative (Kohlenberg and Godehardt 2018: 2-3). Dissecting geopolitical from economic motives might appear a purely academic exercise. But to understand whether and to what extent geopolitics is a barrier to (or facilitator of) decarbonisation, it is important to at least attempt an approximation of how relevant geopolitical motives are vis-à-vis economic aspects. This ultimately has policy implications.
Trade and Road Energy People-to- Total by country industrial infrastructure connectivity people projects development
Commercial Strategic Commercial Strategic Commercial Strategic Commercial Strategic Commercial Strategic
Total by sector 135 126 6 45 25 23 102 28 2 29 Kazakhstan 70 32 3 11 10 10 57 4 0 7 Kyrgyzstan 12 34 0 11 1 4 9 8 2 11 Tajikistan 22 22 2 14 4 3 16 1 0 4 Uzbekistan 28 15 0 5 10 2 18 6 0 2 Turkmenistan 3 23 1 4 0 4 2 10 0 5
Table 3 Number of commercial vs. strategic Chinese projects in Central Asia Source: Aminjonov et al. 2019a, p. 4
In Kazakhstan, the motives are not always easy to discern. The fact that Chinese investment matches the Kazakhstani economic structure and its envisioned economic development avenues supports the assumption that the investment portfolio is shaped by economic opportunities to a significant extent (Aitzhanova 2019: 76), deepening political ties as a side effect. For Central Asia, the CADGAT researchers differentiate between commercial projects (“if the parties promoting it primarily pursue commercial goals”) and strategic projects (“if it fit one of the broader categories [of BRI priorities29], particularly strengthening connectivity”) (Aminjonov et al. 2019a: 2; see table 3). The CADGAT analysis (see table 3), similarly, indicates that commercial motives overweigh in the case of Kazakhstan. Pieper (2020) also emphasises that many actors form the BRI in Kazakhstan, stating that Chinese “business interests more often than not are those of Chinese companies engaging with counterparts in partner countries rather than expressions of a coherent Chinese state-led plan.”
29 These are identified by the authors as ‘(a) rail and road connectivity,(b) energy connectivity, (c) trade promotion and industrial development and (d) people-to-people projects.” (Aminjonov et al. 2019a: 2)
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Inspection of cars and cargo containers at the railway station in the Khorgos Immigration and Customs Control Zone, Kazakhstan. Source: Vladimir Tretyakov / Shutterstock
The strongest of the geopolitical aspects in the case study seems to be building continental transportation corridors. To the extent that low-carbon international transportation of goods is imaginable, geopolitical aspects of the BRI in Kazakhstan would not preclude decarbonisation of the country. Diversification of resource supply and resource security likely play a role, especially with regard to natural gas supply – increasing which has been an important bilateral endeavour over the past decade. For these selected elements of the geopolitical agenda, a closer look at decarbonisation implications follows.
3.4.1 SECURING LAND “LIFELINES”
Kazakhstan is a highly important corridor for securing resource supplies and for expanding economic relations with countries to which it connects China. The strong geopolitics of connectivity in this case and weak decarbonisation progress reinforce each other. But geopolitical imperatives and the Chinese push for new economic corridors are scarcely the reason for the emission intensity of Kazakhstani transport sector. It is rooted in national policies that receive ample national finance, as well (Aitzhanova 2019: 66).
It is hard to tell how geopolitics would interact with efforts to build up low-emission connectivity, because there is no precise information and no specific plans on how this could be implemented along the continental corridors that cross Kazakhstan. Whether the geopolitical agendas of the partners could be compatible with low-carbon connectivity remains an open question that, unfortunately, is not high on the agenda of freight transportation development. To the extent that viable low-emission options emerge, there seems to be no immediate geopolitical consideration to discard them. However, other barriers are high. Building high-carbon infrastructure today slows decarbonisation for years to come, and “energy- intensive freight and long-haul transportation” is among the sectors “hardest to decarbonise” (IRENA 2020: 6).
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Two workers waiting for a train at a phosphoric fertilizers plant in Taraz, an industrial city in Kazakhstan. Source: Alexey Rezvykh / Shutterstock
3.4.2 SECURING AND DIVERSIFYING SUPPLIES OF COMMODITIES
China has invested in several pipelines, as well as natural gas and oil extraction and refinement. However, the relative strategic significance of Kazakhstani fossil fuels for China’s supply security requires a differentiated view. China invested in the oil sector early after Kazakhstan’s independence and helped build up refining capacities within the strategic investments agreed between the two countries. The role of oil exports from Kazakhstan for China has decreased significantly. With a look at the oil trade numbers, rent seeking is an equally strong, possibly stronger motive here than geopolitical considerations of oil supply security (also supported by the classification of oil production and refinery projects as “commercial” or “commercial and strategic” in Aminjonov et al. 2019a).
Natural gas trade between the two countries has been developed rapidly and successfully, and seems to have a stronger strategic element. Kazakhstan ranged between the 8th and 12th most important supplier during 2013-2018 (Chatham House 2018). Furthermore, for China’s natural gas imports, Kazakhstan is an important transit country. As long as the Chinese economy produces demand for natural gas, this active trade will likely remain. The Kazakhstani fossil industry, rather, sees the competition between domestic and export use of natural gas as a reason for restricted availability and some decline in exports to China in the future (Kazenergy 2019: 84).
China invested majorly in fossil fuels in Kazakhstan, in particular natural gas, where securing and diversifying its own supply was an important motive. This certainly contributed to entrenching the importance of fossil fuel industries in Kazakhstan. However, the Kazakhstani economy depends on fossil production in many other ways, providing sufficient motivation to the development of the oil and gas industry. The well-established Kazakhstani oil sector has many investors and buyers besides China (Chatham House 2018; OEC n.d.). Moreover, Kazakhstan is likely to have more geopolitical incentives: Ramping up refining capacities serves internal demand in an effort to decrease dependence on Russian- refined hydrocarbons (Kazenergy 2019: 43). The development of natural gas is a national priority for domestic use and export (Kazakhstan 2014a).
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A view over Almaty, Kazakhstan's largest city. Source: Chingiz Tibei / Unsplash
With regard to metals, copper and chromium supply from Kazakhstan play an important role, and China is the largest importer of both. However, China’s potential aspiration to secure these supplies has a less straightforward relationship to decarbonisation in Kazakhstan or to China’s strategic investments.
The exports of the agricultural goods (mainly, cereals and oilseeds) to China from Kazakhstan have been growing. Kazakhstan was in the top 20 suppliers only once during 2014-2018 (Chatham House 2018). Given that China imports agricultural goods from almost all countries of the world, this is not a negligible position. Kazakhstan is furthermore aiming to expand its agricultural sector, and several bilateral projects are planned. Whether these investments are meant to strengthen food security and diversify supply or are motivated by economic gain, is difficult to say without more in-depth scrutiny.
3.4.3 EXPANDING TECHNOLOGICAL LEADERSHIP AND NEW OPPORTUNITIES FOR HEAVY INDUSTRIES
How the geopolitics of Chinese investment could influence the reduction of emissions of the Kazakhstani industry is highly uncertain, partly because there is no specific vision for a decarbonised industrial development in Kazakhstan to which one could compare the investment portfolio. Most importantly, it is not clear how much of the geopolitical calculus is behind industrial projects, beyond general benefits of deeper cooperation and creating interdependencies. Chinese industry investment goes along with the economic structure of Kazakhstan and its sector development goals. If this assessment is correct, Chinese investment might follow a domestic decarbonisation trend, if the government of Kazakhstan were to prioritise projects that reduce emission intensity of the economy. No immediate geopolitical reason with regard to BRI in Kazakhstan seems to contradict this possibility. It is likely to be a question of the availability of the needed technologies and economic rationality of such investments.
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A man working on metal pipes in Almaty, Kazakhstan. Source: Vladimir Tretyakov / Shutterstock
3.4.4 IN SUM
Given that investments from China are not the biggest source of FDI30 and Kazakhstan’s state policies mostly support high-emission options, the infrastructure choices do not seem to be motivated primarily by the push of the BRI. Economic ties with China currently support and possibly entrench business as usual in Kazakhstan, driven by national policies. If Kazakhstan would strongly push for low-emission development, there would still be investment opportunities for China (see chapter 3.2.3), and this would not automatically contradict expanding China’s influence in the region by means of economic cooperation.
It does not seem plausible that China’s specific geopolitical interests are a significant brake on decarbonisation in Kazakhstan. Primarily because in a hypothetical situation without Chinese investment, Kazakhstan would likely follow a high-emission trajectory that is supported by the fossil fuel abundance, industrial path dependencies and its own strategic interests on the international stage. Additionally, if Kazakhstan embarked on a pathway of decisive decarbonisation, the Sino-Kazakhstani partnership could potentially pursue the joint geopolitical agenda in a low-emission setting. If Kazakhstan could find a way to “landlinkedness” (Pieper 2020) and to becoming one of the 30 most developed economies through low- emission means, China could possibly be its partner in this endeavour (see entry points in chapter 3.2.3). It does not seem to enter in immediate contradictions with geopolitical goals of this relationship.
However, non-BRI related barriers to decarbonisation are high in Kazakhstan. Specifically, the options for low-emission connectivity are virtually absent from the political discourse in Kazakhstan and from the bilateral project portfolio as well are difficult to find globally (IRENA 2020: 6). Though the role of China in Kazakhstan’s fossil fuel dependence needs to be seen in a differentiated way, globally, China remains a major player on fossil fuel markets – as importer, shareholder and financier of fossil upstream infrastructure. That is, even though geopolitics does not emerge as a primary challenge for decarbonisation in this case, other economic and political barriers for emission reduction are evident.
30 Further research could produce a comparative portfolio analysis that would allow a robust assessment of whether other countries’ investments are “greener”.
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4 CONCLUSIONS
4.1 REFLECTING UPON THE FINDINGS: THE PUSH AND PULL OF DECARBONISATION GEOPOLITICS
How does this case study fit with the framework of geopolitics and decarbonisation this paper adopts? What does the interaction look like in our case? This survey started by inquiring into the geopolitical impacts on decarbonisation.
As the theoretical framework notes, the different dimensions of complex decarbonisation processes cut across societies and states’ relations to each other, including geopolitics. The case of the BRI illustrates that geopolitics is deeply embedded in the economic and political goals of countries. Specifically, it shows how emission-relevant policies in the BRI target countries and in China interact with geopolitical goals on both sides. This co-determination of decarbonisation and geopolitics influences infrastructure investment.
The case of Kazakhstan shows that both push and pull factors are important. While the research question and many analyses on the impacts of the BRI often suggest that China’s goals drive the process, the decarbonisation context on the recipient side is equally important. In our case study, the push factors, i.e. investments guided by the strategic goals of China, and pull factors, i.e. the national demand for investments in Kazakhstan, are fairly well balanced. The structure of China’s investments goes along with development priorities of the host government. The case study focusses on a relatively equal partnership, that according to some could exemplify how BRI cooperation may be mutually beneficial.
The balance of these push and pull factors as well as the significance of geopolitical motives along the BRI might be very different. This might depend on the relative power balance between China and its respective partners, on stakes of third parties and the degree of geopolitical contestation in a given region. With a stronger power misbalance towards China in a context where the strategic interests are less aligned or the national vision for economic development of the host country is more contested, China's goals might clash with decarbonisation aspirations more. In partner countries where China’s interests are intrinsically connected to high-carbon economic activities, for instance, because it is a major buyer of fossil fuels, this could tip the scale against ongoing climate ambition.
The assumptions that the BRI is likely to lock in high-carbon infrastructure and that its geopolitical ambitions would prevent its “greening” need to be contextualised. The high-carbon status quo of most economies constrains the possibilities to assess the influence of the BRI in comparison to other factors. A case study of Chinese investment portfolios in countries whose ambition is compatible with a “below two degrees world” such as Kenya or Ethiopia (Climate Action Tracker 2020) might make a good contrast. Still, such inquires would first have to assess whether sectoral development policies of these countries support their NDC goals, and what role Chinese investments play against this backdrop.
In the present case study, the geopolitics and the slow decarbonisation dynamics seem to reinforce each other. An accelerated pace of decarbonisation might go along with the geopolitical goals of the BRI in this specific context, though this assessment is of course rather speculative. The fact that geopolitics and decarbonisation dimensions are attuned towards slow decarbonisation progress is still bad news for climate policy. But there is a difference with regard to policy entry points, if the geopolitics of the BRI is not solely to blame. There are many levers in the decarbonisation processes in Kazakhstan and China. Furthermore, the situation raises the question of how geopolitical goals of involved actors can be integrated in a decarbonisation agenda, rather than seeing them as a steady factor precluding decarbonisation.
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People cycling and walking on top of the ancient city wall of Xi’an, the capital of the Shaanxi province, China. The city is referred to as the starting point of the historical Silk Road. Source: Camillo Corsetti Antonini / Unsplash
4.2 IMPLICATIONS FOR EUROPEAN CLIMATE DIPLOMACY
It is crucial to guide today’s investment flows towards building infrastructure and economic capacities that will allow achieving the goals of the Paris Agreement in the decades to come. The BRI is a major flow of finance targeted to countries whose infrastructure choices are highly relevant for this. Therefore, global climate politics must consider this particular investment flow among other major sources of financing and ask how it could serve a global decarbonisation agenda. The BRI is more than a credit line – it is a central instrument and agenda of Chinese economic diplomacy on the way to strengthening the country’s position as a global power. As it cannot be understood through an economic lens alone, one has to disentangle the nexus of economy and geopolitics. The BRI finance flows and the motives behind them, including the uncertainties and possible blind spots, need to be analysed in every specific country or regional context.
We can expect “greening” the BRI to be a paramount task due to the economic incentive structures for investment and given the geopolitical dynamics. For this comprehensive endeavour, our analysis results in three major takeaways for European climate diplomacy.
• Greening the BRI (“push”) and raising climate ambition in the BRI target countries (“pull”) are both essential to achieving low-emission development. To grasp the push and pull factors fully, and to act on them effectively, we need to understand their geopolitical dimension, in interaction with the economic rationale.
• Engaging with China and the BRI target countries will not only require cooperation on climate topics but a comprehensive, cross-cutting approach to international relations and diplomacy – both within an increasingly challenging geopolitical landscape. Protecting the global commons needs to be a compass, not an add-on for diplomacy in facing these geopolitical challenges.
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• An accelerated domestic transformation in the EU and its Member States is invaluable to providing a model for transformation and being an attractive low-emission economic partner. Realising “Green Deal Europe” as soon as possible can enable a holistic and credible climate diplomacy approach, demonstrating the benefits of and ways to deal with challenges of transformation. Most importantly, a low-carbon transformation in Europe has the power to influence the structure of economic, financial and geopolitical incentives for fostering climate-compatible economies beyond European borders. It does not necessarily amount to Europe striving to become a low-emission counterweight global power for China. Maybe a low-emission alternative or a pioneer is more suitable. By transforming its economy and international ties in a low-carbon way, Europe can demonstrate that low-emission development does not spell economic demise or a marginal position on international markets for emerging and developing economies; quite possibly, it even promises the opposite – a future-proof, more equitable prosperity.
4.2.1 PUSH FACTORS: OBSERVATIONS FOR THE EU-CHINA RELATIONSHIP
On the “push side”, ultimately, China must be able to envision a green BRI. This study highlights that the climate impacts of the “push” by Chinese actors in form of the BRI are important for achieving the goals of the Paris Agreement. The motives of the BRI are multidimensional. If making the BRI greener makes it less effective as an economic and geopolitical venture, this is likely to diminish the chances of greening it. The doubts as to the general possibility are, of course, in order. Yet, the options and barriers for a green BRI deserve our close attention – even more so in face of the realisation that it might yet be a far cry.
Europe and China cooperate on a wide array of topics that are relevant for this goal, with much knowledge available on each of them. The present research did not focus on the possibilities for Europe to engage with China on decarbonisation and did no in-depth assessment of this knowledge. Therefore, for the push factors, it offers some general observations based on the specific case of Chinese investments in Kazakhstan.
It is apparent that, to reach the goals of the Paris Agreement, China’s national decarbonisation is one element. China’s influence on global emissions goes far beyond its borders – through the resources it procures abroad, through trade flows it forms and through the infrastructure it helps build. Therefore, China becoming a decarbonised global power would also increase chances of Paris-compatible development elsewhere (as stated above, this is similarly true for the EU). While the options to influence this process externally might be limited, Europe needs to approach the search for entry points from both climate and geopolitical standpoints.
Searching for strategies to safeguard their interests as China further strengthens its position internationally, European countries should not lose sight of the tasks that can only be accomplished together with China. Geopolitical considerations should not overshadow the preservation of a safe climate and other global commons. Policy-makers will likely face trade-offs between these goals, and the mind-sets required to pursue them might be quite different. But these goals should be considered together as a balancing act and a co-evolving nexus, often influenced by the same decisions and policies.
Therefore, measures concerning e.g. industry policies, connectivity, innovation and market access should aim at an adequate balance of competitiveness and cooperation incentives for decarbonisation. The success of Europe, such as carbon border adjustments, should be judged by how well these protect European economic and political interests as well as the climate. A concrete step towards this might be analysing which actions of European actors in key policy fields treat China as a “cooperation partner”, “economic competitor” or “systemic rival”. Assessing whether these different approaches create synergies or trade-offs towards the overarching goals above could allow the coherence and effectiveness of these frames.
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At the same time, climate cooperation should keep track of the geopolitical context. The BRI is an instrument of a global power strategy, but not a set of government-defined projects with clear requirements. This might offer entry points for engagement if European actors single out the goals and efforts of the BRI that might go along with context-specific decarbonisation needs. To be able to design their climate cooperation strategies effectively, they should constantly seek to sharpen their understanding of the motives behind BRI investments in every constellation. This also includes avoiding hasty and generalised judgements. In some contexts, business opportunities will prevail over geopolitical drivers for Chinese investments, and vice versa, and the actor structure on both lending and receiving sides will make a difference. Every regional and many country portfolios of European (climate) cooperation might profit from a geopolitical analysis of China’s investment activities.
There are some specific areas of engagement:
• The EU and its Member States should continue to engage with China on green finance and investment standards. They should also use the cooperation platforms on the BRI and between the multilateral development banks such as the Multilateral Cooperation Center for Development Finance (MCDF). The call for a sustainable and green BRI has been getting louder and several cooperation modes have emerged, e.g. the Green BRI Center31 or the The Belt and Road Initiative International Green Develop ment Coalition (BRIGC)32. China reacted by announcing BRI improvements at the 2nd Belt and Road Forum.
• It is important to make sure that climate and sustainability aspects are in the forefront of connectivity cooperation, rather than just lip service, and the potential of a carbon lock-in is not underestimated. While the EU has launched its own connectivity strategy for Asia that stems from collaboration with ASEM (Holzer 2020: 189), it is worth continuing the search for coordination opportunities on connectivity (Islam, Rohde and Chawla 2019: 4-5). Though the EU-China Connectivity Platform failed to deliver “substantive results” (Geeraerts 2019: 4), it could gain political weight with additional efforts (Gehrke 2019: 6). In Central Asia, cooperation between EBRD and AIIB might provide a means to coordinate (Bossuyt and Bolgova 2020: 241).
• Finally, Europe will need to explore the incentives it can mobilise through other important fields of engagement such as trade and investment relations, incl. market access, to raise climate ambition. At least, the policy domains of cooperation with China of the EU and its Member States should not contradict climate goals.
31 The Center is maintained by the International Institute of Green Finance (IIGF) of the Central University of Finance and Economics (CUFE) in Beijing, China. 32 “The Coalition was launched during the 2nd Second Belt and Road Forum for International Cooperation which took place in Beijing from 25th to 27th April 2019. The Coalition is an open, inclusive and voluntary international network which brings together the environmental expertise of all partners to ensure that the Belt and Road brings long-term green and sustainable development to all concerned countries in support of the 2030 Agenda for Sustainable Development. The current set-up of The Coalition involves 134 partners including 26 Environmental Ministries of UN Member States.” (UNEP n.d.)
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4.2.2 PULL FACTORS: ENTRY POINTS FOR EUROPEAN DIPLOMACY TOWARDS BRI TARGET COUNTRIES
With regard to the “pull” factors, we need to understand what development visions the target economies of the BRI follow and how the decarbonisation imperative fits with this. Again, this will include geopolitical factors. Kazakhstan is largely pursuing a development model that builds on raw material extraction, heavy industries and carbon intensive transportation. Its economy-wide green policies and green investment are a silver lining but much work is needed to realise a green transformation. China is contributing to a carbon lock-in that is nationally driven. Kazakhstan needs to envision a low-emission pathway towards its overarching socio-economic development and international policy goals. Then it is likely to demand more green investment from China.
In order to influence the “pull” factors of the BRI investment (i.e. support and enable climate action in countries like Kazakhstan), European cooperation strategies in various domains need to be activated and aligned:
• Climate and energy cooperation, which already plays an important role in Europe’s international engagement, should be continued, intensified and further adjusted to correspond to overarching development goals of partner countries such as Kazakhstan. European countries import much more crude oil from the country than China does (Chatham House 2018; OEC n.d.). Energy relations should be adjusted to support to decreasing dependence on fossil fuels for exports and domestic use (Tänzler, Oberthür and Wright 2020). Among the options for Central Asia are: providing support not only to large-scale projects but also to middle- and small scale sustainable energy initiatives that often struggle for finance; promoting appropriate financing modes; and involving research and private sector actors to build up capacities (Schiek, Zabanova and Rudloff 2020: 3-5). Piloting climate-smart solutions in areas where low-emission options are not considered sufficiently – such as industry, heating systems or freight corridors – can help explore the specific barriers and demonstrate their feasibility and socio-economic local co-benefits. On the EU level, these avenues of cooperation can be reflected in regional cooperation strategies such as the EU Central Asia strategy (ibid: 1).
• Development cooperation should make sure it helps countries embark on future-proof development paths that are in line with the Paris Agreement and the SDGs. Ultimately, the partner countries need to be able to see specific ways to achieve their overall national development goals with low-emission means. In fact, development cooperation at large, rather than climate and energy cooperation alone, should help work on an economic “exit strategy” from the dependence on high-emission assets in the various sectors. Improving fossil revenue management, carbon shadow pricing for new investment planning, diversifying government revenue base or targeted investment of fossil revenues in building up skill-based branches of the economy can be parts of such a strategy (Ivleva et al. 2017: 43-45). Beyond resource (revenue) governance, this also includes broader economic and sectoral planning that is compatible with the goals of the Paris Agreement: For instance, cooperation on developing small and medium-sized enterprise, digitalisation, industry, and transportation infrastructure. These are some the sectors where the BRI invests. Clear and applicable decarbonisation options for the target countries might help re-direct these investments.
• Trade and investment cooperation with the BRI target countries should be aligned with climate goals and can be an important lever to introduce climate considerations in economic policy arenas, coming from significant European markets. For instance, incentivising trade with ecologic agricultural production could guide agriculture sector development in Kazakhstan towards more sustainability. For EU and Central Asia, this would touch on certification questions and origin rules for ecologic products, as the two regions already agreed on reducing tariffs (ibid: 5-6). In the investment domain, creating resilient finance systems also includes disclosure of climate-related risks, both through the impacts of climate change and of financial risks of disruptive decarbonisation. Financial cooperation is also part of China’s economic diplomacy (Aitzhanova 2019: 69-71), in which green finance might be promoted.
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People inside the Canton Tower in Guangzhou, China, one of the tallest freestanding structures in the world. Source: Lycheeart / Unsplash
• Science and education cooperation are another important element. For instance, support for scenario modelling in different sectors of economy and assessing economic impacts of low and high-carbon pathways can improve decision-making basis for investment priorities. Gathering data and developing methodological expertise can be helpful. Student and researcher exchange programmes can contribute significantly, as in many emerging economies few climate change specific or low-carbon economy and development curriculums are available. Training of professionals, including government staff, on the decarbonisation aspects of their work is also a promising avenue to improve decision- making on how to make development plans and investments climate-compatible.
• Peace and security cooperation, finally, should build resilience to the potential geopolitical impacts of future decarbonisation trends and to impacts of climate change. In Central Asia, transboundary cooperation is still challenging, including on issues connected to environmental and climate security such as water (Pohl et al. 2017: IV-V). The EU could try to harness the BRI push for connectivity for this to improve border management in the region (Schiek 2017: 31). As Europe also aims to achieve – possibly more sustainable – transcontinental connectivity, this highlights the need for “flow security” as “(a)ccess to trade routes remains dependent on an adequate political and security environment” (EC and HR/VP 2018: 4). Envisioning lower-carbon transcontinental corridors will equally require cooperation on border administration and other security issues as well as a caution not to exacerbate pre-existing tensions in the region. Furthermore, geopolitical concerns of connectivity should not take precedence over decarbonisation commitments in the EU’s external agenda. Such interlinkages are yet to be fully surfaced, as plans for low-emission connectivity are spelled out. Conflict and the geopolitical sensitivity and sustainability of security cooperation should remain guiding principles.
For all these areas, a better understanding of geopolitical motives behind infrastructure finance and sectoral development decisions in specific countries will improve the chances of decarbonisation efforts. As the case of Kazakhstan shows, BRI target countries might seek to use it as an opportunity to implement their national visions of their position in the world of the future. Climate cooperation needs to fit with these aspirations that, in turn, are likely to be adjusted in the course of a global sustainable transformation. As with China, the question of how the national visions of other countries relate to Europe’s own interests will be part of puzzling together effective climate diplomacy strategies to preserve the global commons amidst changing geopolitics.
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