Sino-Indian Competition for the Resources of Central Asia; Implications for Pakistan

SINO-INDIAN COMPETITION FOR THE RESOURCES OF CENTRAL ASIA; IMPLICATIONS FOR PAKISTAN

Quaid Ali

Department of Political Science

Hazara University Mansehra, Pakistan

2019

SINO-INDIAN COMPETITION FOR THE RESOURCES OF CENTRAL ASIA; IMPLICATIONS FOR PAKISTAN

Quaid Ali Roll No.34882

A thesis submitted to Hazara University in partial fulfillment of the requirements for the degree of

DOCTOR OF PHILOSOPHY IN POLITICAL SCIENCE

DEPARTMENT OF POLITICAL SCIENCE HAZARA UNIVERSITY MANSEHRA, PAKISTAN 2019

SINO-INDIAN COMPETITION FOR THE RESOURCES OF CENTRAL ASIA; IMPLICATIONS FOR PAKISTAN

QUAID ALI

SUPERVISORY COMMITTEE

Research Supervisor: Dr. Muhammad Ayaz Khan Department of Political Science

Co-supervisor: Dr. Abdur Rehman Department of Political Science

DEPARTMENT OF POLITICAL SCIENCE

HAZARA UNIVERSITY MANSEHRA, PAKISTAN

2019

Declaration of the Supervisor

It is hereby certified that the thesis entitled, “Sino-Indian Competition for the

Resources of Central Asia; Implications for Pakistan” the original work of Mr.

Quaid Ali and has not been presented and submitted previously for PhD.

Quaid Ali has done this research work under my supervision. He has fulfilled all the requirements and is qualified to submit the thesis for the degree of PhD in Political Science.

Dr. Muhammad Ayaz Khan

Author‘s Declaration

I Quaid Ali hereby state that my PhD thesis entitled, “Sino-Indian

Competition for the Resources of Central Asia; Implications for Pakistan” is my own work and has not been submitted previously by me for taking my degree from this University, Hazara University Mansehra or anywhere else in the county/world.

At any time if my statement is found to be incorrect even after my graduate the University has the right to with draw my PhD degree.

Name of the Student: Quaid Ali Date: 04-07-2019

Plagiarism Undertaking

I solemnly declare that the research work presented in the thesis entitled,

“Sino-Indian Competition for the Resources of Central Asia; Implications for

Pakistan” is solely my research work with no significant contribution from any other person. Small contribution/help whenever taken has been duly acknowledged and the complete thesis has been written by me.

I understand the zero tolerance policy of the HEC and the University,

Hazara University Mansehra, towards plagiarism. Therefore I as the author of the above titled thesis declare that if I am found guilty of any formal plagiarism in the above titled thesis even after award of PhD degree, the University reserves the rights to withdraw/revoke my PhD degree and that HEC and the

University has the right to publish my name on the HEC/University Website on which names of the students are placed who submitted plagiarized thesis.

Student/Author Signature:______

Name: Quaid Ali

Dedication

To my respected Parents, wife and my

family

Without whose love and prayers I could

not have become

What I am now.

iii

Acknowledgement

First of all I would like to express my sincere gratitude to my honorific supervisor Professor Dr. Muhammad Ayaz Khan, who started PhD program in the department of political science and enrolled me in the program. He accepted me as a PhD student without reluctance. Later on, he offered me so much advice, patiently supervising me, and always guided me in the right direction. He treated me like a brother and his family member. I have learned a lot from him, and without his help I could not have complete my dissertation.

Special thanks are also given to Professor Dr. Abdur Rehman who has taken serious interests in research activities, promoted research culture and has extended all help to the scholars of the department. His encouragement made me feel confident to fulfill my desire and to overcome every difficulty I encountered.

My friends Mr. Sajid Hussain, Anwar Ali, Zulfiqar Ali Shah, Ejaz Khan,

Asad Ullah and Hafiz Javed Ur Rehman encouraged me and provided me a lot of friendly help. I would also like to convey my whole hearted thanks to the faculty members of department of Political Science, Hazara University

Mansehra for providing me an ideal and friendly environment for research.

There are so many other friends who offered me so much kind help. I give my sincere thanks to all these people.

I owe this achievement to my mother, brothers, sisters and other family members; without whose prayer and cooperation, I would not be able to complete this difficult task. It would not be justice to ignore one person, my

elder brother, Haji Arsala Khan. He has played a vital role throughout my whole educational career. He was keen for the completion for this research work as such. He always motivated me and encouraged me in hardship situations.

I am very grateful of my wife. Her love and understanding encourage me to work hard and to pursue PhD studies. Her firm support and motivation was a source of encouragement for me. When I was writing this dissertation she might have suffered which was very difficult for her, merely to enable me to concentrate on my research.

Quaid Ali

Table of Contents

Page Dedication Iii Acknowledgment Iv Abbreviations Viii List of Tables Ix List of figures Ix Abstract X Introduction 1 Chapter 1 18 Sino India relations in historical perspective 18 1.1 The 1954 Agreement and the 1962 Border Conflict 19 1.2 The war of 1962 26 1.3 The Sino-Indian Cold War 27 1.4 Progress in the Sino-Indian Relations since 1976 29 1.5 Current Dynamics (2003-2016) 35 1.6 China-Pakistan-India triangle 47 Chapter 2 51 Economic potential of Central Asia 51 2.1 Importance of CARs 52 2.2 Economic potential of cars 57 2.3 Oil 59 2.4 Natural gas 67 2.5 Mineral and Strategic Resources 71 2.6 Hydropower Sector 74 2.7 Agro-Industry 76 2.8 Leather Industry 77 2.9 Silk and Textile Industry 77 2.10 Actual Production versus Capacity 79 Chapter 3 82 China’s relations with Central Asia 82 3.1 The break-up of the Soviet Union 82 3.2 Great power rivalry 83 3.3 The Roots of the Sino-Central Asia relationship 84 3.4 China‘s entry into Central Asia 86 3.5 China‘s goals in Central Asia 89 3.6 SCO as a tool with China 101 3.7 China‘s new strategy towards CARs 104 3.8 Military and Security Cooperation 107 3.9 New routs 108 3.10 Risks Associated With Doing Business in Central Asia 109 Chapter 4 112 India’s relations with Central Asia 112 4.1 History of India-CARs relations 113

4.2 Relations after Soviet Union‘s disintegration 116 4.3 India-CARs‘ areas of interest 116 4.4 India‘s Connect central Asia Policy 123 4.5 TAPI 126 4.6 BTC 128 4.7 North South Transport Corridor 128 4.8 Bilateral Relations with CARs 130 4.9 Patterns of trade between India and CARs 138 4.10 Challenges for India in CARs 143 4.11 India‘s response to the challenges 144 Chapter 5 147 A comparative analysis of struggle between China and India for the 147 riches of Central Asia 5.1 History of Great power‘s Struggle in Central Asia 149 5.2 China and India in New great game 151 5.3 Sino Indian competition 153 5.4 China factor in SCO 161 5.5 Iranian ports 163 5.6 Competing Strategic Objectives 166 5.7 China‘s dominance over India in CARs 172 5.8 Indian efforts for rapprochement 174 5.9 Obstacles to rapprochement 175 Chapter 6 177 Implications for Pakistan 177 6.1 Pakistan as a key player 177 6.2 Current Geopolitics 179 6.3 China‘s Energy and Trade Policy 181 6.4 Gwadar Port 183 6.5 CPEC 186 6.6 Iranian port of Chabahar 191 6.7 IPI 194 6.8 TAPI 199 6.9 Kashmir issue 203 6.10 SCO and Pakistan 206 Chapter 7 208 Conclusion 208 Recommendations 219 Bibliography 223

vii

Abbreviations

BTC Baku Tblisi Cehan

CARs Central Asian Republics

CNPC China National Petroleum Corporations

CPEC China Pakistan Economic Corridor

FDI Foreign Direct Investment

FTA Free Trade Agreement

GDP Gross Domestic Product

GNP Gross National Product

IPI Iran Pakistan India

KCO Kazakhstan North Caspian Operating Company

KMG Kaz Munai Gas

LAC Line of Actual Control

NSG Nuclear Supplier Group

ONGC Oil and Natural Gas Corporation

PLA People Liberation Army

SAARC South Asian Association for Regional Cooperation

SCO Shanghai Cooperation Organization

SWOT Strengths Weaknesses Opportunities Threats

TAPI Tajikistan Afghanistan Pakistan India

TALCO Tajik Aluminum Company

TCO Tengiz Chevr Oil

viii

List of Tables

S.No Title Page# 2.1 Main Potential of CARS 57 2.2 Central Asian Republics Oil Production at end of 2012 60 2.3 Central Asian Republics Proven Gas Reserves 68 3.1 China‘s trade with CARs 2012 106 3.2 Population and land area 139 3.3 Total exports of Central Asian Countries and India (billion 140 US$) 3.4 Total imports of Central Asian Countries and India (billion 141 US $) 3.5 Trade between Central Asia and India during 2013-2014 142

List of figures

S.No Title Page#

1.1 The Sino-Indian Disputed Border Area 20

6.1 Location of Gwadar port of Pakistan 184

6.2 IPI and TAPI 195

6.3 India China Disputed Territory 205

Abstract

The friendly relations between India and China started after 1949 but got strained very soon as a result of the border issues. The relations got normalized after 1980s. Though they are trying to maintain their cordial relations but still there is competition on economic and strategic level. One such issue is the hydrocarbon resources of Central Asia. CARs appear on the world map as a result of the disintegration of Soviet Union after 1990. There are abundant of natural resources in the land locked Central Asian countries. Numerous regional and world powers wants to have a share in the natural resources of the Central

Asian region. India and China are also in competition for the resources of this area. They are trying to find alternative routes for the transportation of these resources to their own countries. India has started to maintained friendly relations with the region but it has no direct links with the region. It has made investment in the Chabahar sea port of Iran and is also busy in the construction of INSTC to make its access easy to the region. China has also hugely invested in

Central Asia. China has maintained strategic and economic relations with

Central Asia. It is constructing pipeline and road networks for the transportation of the resources from Central Asia. Major objectives of the study are to analyze

Sino-Indian competition for the resources of Central Asia and to examine its implications for Pakistan. To achieve the mentioned objectives, descriptive, analytical and predictive methodology is adopted. The bulk of the study is attained through analysis of the books, research papers, documents and newspapers etc. The research concludes that India is lagging behind China in

Central Asia regarding the competition of the resources. The CPEC project in

Pakistan is a part of ―one belt one route‖ policy of China for the connection of various countries and regions for trade purposes. It would connect China to

Indian Ocean and then to the other parts of the world. It would be helpful in bringing economic and industrial development in Pakistan and would develop the region as whole. It is one of the important recommendations that Pakistan should make friendly relations with its neighbors and should resolve its issues with them in order to get the benefits of the above-mentioned competition and to avoid its lose.

Introduction

Since the end of the Cold war, complicated changes have been occurred in the world. Many professional have noticed that many developments will take place that will have a significant influence throughout this century. The common people are almost unaware of those developments. The re-emergence of Central Asia as an important region is one such development. The re- emergence of central Asia took place with the demise of Soviet Union.

The Central Asia consists of Kazakhstan, Turkmenistan, Uzbekistan,

Tajikistan and Kyrgyzstan. The total population of the region is about 64.7 million and it spread over an area of about four million square kilometers. The ancient Silk Road passing through this region played a central trade in Asian trade. Now once again it has a tendency to become meeting place or transport hub due to its adjoining boundaries with South Asia, China, Russia and West

Asia. This region is attracting the attention of extra regional and global powers due to its great political, economic and geo-strategic importance.

Central Asian countries are blessed with tremendous hydrocarbons resources and blessed with enormous gifts of nature. Central Asia has substantial share in the world energy markets. The unique political status of the region emerged as a result of the break-up of the former Soviet Union combined with the sizable energy reserves of the region, have thrown these states into the attention of Western media and policy debate. Increased awareness has stimulated greater private and public Western involvement in the development of the region.

This research work examines the current trade and business relationship between Central Asian states and China on one side and between Central Asia and India on the other side. Central Asian region is surrounded by a number of important regional powers. Since the 17th century, to the North, Russia has exercised increasingly significant control over the region. It colonized the area down to the Amu Darya River and during Soviet rule extended its occupation into Afghanistan. In the south, since its birth in 1947, Pakistan has had special interests in and close economic relations with Afghanistan.

India is an important country of the sub-continent. It is an important geo-political player in the Central Asian region. It is growing its economic relations with the region. In the West, Iran has both traditional and cultural ties with the countries of the region. Iran is becoming an important economic partner to some of the republics of the region. Further to the west, Turkey has economic and cultural relations with Central Asia. To the East, the growing economic power of China can be observed in the expanding investment and trade relations with Central Asian countries. China also has security and strategic interests in the region. More distantly, an important donor to all

Central Asian Republics is Japan. It has stressed the importance of regional cooperation. Finally, Europe, particularly United Kingdom and United States have played an important role, initially the former as a colonial power, then as sponsors of the anti-Soviet resistance in Afghanistan. The European countries have played the role of investors in Caspian energy resources and after 9/11 they played the role of military actors and key sponsors of the reconstruction of

Afghanistan.

Nearly all the Central Asian countries possessed significant amount of natural resources. The region is surrounded by the countries (China, India and

Pakistan) that are in need to get access to these natural resources. Currently,

there is intense demand for raw material in the modern world. The significant known mineral deposits of the region and undoubtedly even deposits that are awaiting only modern exploration and modern technology are increasingly in demand.

Now politically, the main question is whether any of the more powerful countries in the region will be able to dominate the region. The competition has already been started. Almost all of the regional powers appear for the time being more intent to ensure their position at the table in order to prevent any other power from achieving such dominance. China desires the resources of the region. It also fears that the spread of independence will serve as a powerful attraction to the people of its Xinjiang Province. India also needs the resources of Central Asia and remains concerned over the increased influence of Pakistan in the region.

India is very carefully watching the expansion of Chinese in Central

Asia. It is becoming apparent that Beijing is going to provide tough competition to New Delhi in both trade and energy sectors. As both the sides are striving to establish their authority on the same region, the existence of two economically powerful states could create new tensions in the region. It is possible that ultimately, China and India might come to terms with each other as their mutual containment strategies yield minimal returns. Indian policy makers and analysts are of the belief that the region is significant for India due to its strategic location and proximity. Tajikistan is located just at a distance of 20 kilometers away from Greater Kashmir. Therefore, one of the primary strategic priorities of India is to restore traditional linkages with its extended Central

Asian neighbours.

Sino-Indian competition in Central Asia would definitely have some implication on Pakistan due the tense relation of the later with India. China is

trying to establish close relations with Pakistan for ensuring regional stability, by resolving the Kashmir issue, and to curb terrorism. China needs the Gwadar port of Pakistan for the transportation of its finished goods to the world market and energy resources to China. India has still not engaged Pakistan to develop energy and economic ties. India‘s major concern is about the road and pipeline projects (TAPI) as it has no direct access to these resources rich Central Asian states.

Statement of the problem

The emergence of newly born Muslim states on the world map have changed world political scenario. The Central Asian region is rich in natural resources. It has been estimated that region contain 250 billion barrels of oil and large reservoirs of gas. In gas production, Turkmenistan ranked second and

Uzbekistan ranked third after Russia. Zinc, copper, lead and silver are the important non-ferrous metals of Central Asia. It has been revealed by a source that a mine in Uzbekistan is the largest gold mine in the world. Most of the countries of the world want to have a share in these natural resources. The fact in point is that the New Great Game in Central Asia enhances the importance of these republics as new international players in the politics of the region. The regional countries including two nuclear powers i.e. India and China, who have the experience of stained relations, are perceived to be in competition for these resources. The mutual bilateral and multilateral relations of China and India with Central Asia can also have political and economic implications on

Pakistan.

Significance of the study

Some of the important significance of the study which should be taken into account is mentioned hereunder in brief:

Pakistan enjoys a unique geostrategic position in the region. It shares borders with India, China, Afghanistan and Iran. Its southern border links it with the Indian Ocean. Central Asian Republics (CARS) are landlocked countries like Afghanistan. India is Pakistan‘s old rival. While China and India are also rivals. China and India have well equipped army, navy and Air force.

Both want their hegemony in the region. The CARs also joined the ECO after the melting down of USSR. Pakistan can use the forum of ECO to counterweight Indian designs. On the other side Pakistan has friendly relations with China. It can support Pakistan on the issue of Kashmir, Afghanistan and its missile programme. China wants peace in the region and peace cannot be achieved until the resolution of all the issues in the region.

As a result of the disintegration of USSR the CARs emerged as the independent states. All these states possess a large quantity of natural resources. These countries have rich resources of oil, gas, cotton, gold, tin, copper etc. Kyrgyzstan also exports electricity to China. It has the capacity to export more electricity to other countries in future. These republics are land locked and have no direct access to the sea. Pakistan can provide help to these countries to access the international market. China is importing energy i.e. natural gas from CARs to boost its industrial output. China can use the Gwadar port of Pakistan to export its industrial products to the world market. India has

strong competition with China in CARs for their riches. India has no direct access to these countries. Pakistan can provide land access to India through

Afghanistan for the purpose of trade.

Objectives of the study

1. To highlight the historical background of China‘s relations with India.

2. To examine the economic potential of Central Asian Republics.

3. To know about Sino-Indian competition for the resources of Central

Asia.

4. To see the impact of this competition on Pakistan.

Research questions

1. What is the historical background of China‘s relations with India?

2. What is the economic potential of the Central Asian Republics?

3. How Central Asia, China and India interact with each other on bilateral and multilateral basis for their mutual interests?

4. What are the implications of this competition on Pakistan?

Methodology of the study

The study was conducted by using mainly secondary sources. The relevant data was collected through different research techniques including historical and analytical methods. As a primary source, it was intended that the data would be collected by conducting interviews. Due to certain reasons, it was difficult to conduct interviews. However, different published relevant literature i.e. books, journals, newspapers and on-line sources were used to

collect correct information for this research work and to come up with suggestions for the solution of the problem and achieve the goals of the study.

Limitations of the study

This research is related to an energy potential map of CARs with special emphasis on oil and natural Gas resources. The competition of China and India for the natural resources of with special reference on its implication on Pakistan has been discussed. Those factors which are affecting the relations of Pakistan with CARs, analysis of U.S interests in Central Asia, interest of other countries in Central Asia and geography of Central Asia, China, India and Pakistan, regional conflicts and political instability are not extensively discussed.

Plan of work

This thesis has been divided into six chapters. The first chapter is, ‗Sino-

Indian relations in historical perspective‘. Part 1 discusses the relations of the two countries after their inception and their border disputes. Second part of the chapter analyses the progress in the relations between the two nations. Next part explains the economic, social and educational relations and security issues and last part focuses on the Pakistan‘s factor in Sino-Indian relations.

Chapter 2 is ‗Economic potentials of Central Asia‘. Part first of this

Chapter discusses the concept of ‗Great game‘, ‗New Great Game‘ and importance of the Central Asian countries. It also analyses the oil and gas potential of Central Asia. In the later part of the chapter, other natural resources like gold, silver, copper, aluminum and uranium has also been discussed.

Chapter 3 discusses China‘s relations with Central Asia. The chapter starts with the disintegration of the Soviet Union and history of the relations between China and Central Asia. The second part of the chapter explains the entry of China and its economic, strategic and political goals in the region. The last part of the chapter explains challenges faced by China in the Central Asian region.

Chapter forth is ‗India‘s relations with Central Asia‘. It begins with the ancient history of the relations between Central Asia and India. The second part of the chapter discusses the social, political, strategic and economic interests of

India in the region. Third part examines developments of routes by India to transport the energy resources from the region and pattern of trade between the two sides. The challenges faced by India in the region are analyzed in the last section of the chapter.

Chapter five is ―Comparative analysis of struggle between China and

India for the riches of Central Asia‖. It explains Sino-Indian strategic competition and rivalry in the region in more detail. It begins with the history of great power rivalry in ‗New Great Game‘ and establishes the history of conflict and friction between the two nations which has led to mistrust of their strategic intentions in the region. The competing objectives and encirclement perceptions of both the nations are analyzed in detail in the middle of the chapter. The last section of the chapter mentions China‘s dominance over India and rapprochement policy of India towards China.

Chapter 6 relates to the ‗Implications of Sino-Indian competition for

Pakistan‘. As Pakistan is the neighbouring country of China and India and it lies between the Central Asian region and India therefore, keeping in view the

Pak-India rivalry and Sino-Indian rivalry, this competition would have definitely affect Pakistan.

Conclusion is the last chapter of the thesis. A conclusion has been drawn from my in-depth analysis and broader investigations. Further, certain recommendations or discussions are mentioned in the last part, which are always significant part a research study.

Literature review

The book ―Crux of Asia: China, India, and the emerging Global Order‖ is written by Ashley J. Tellis. The book reveals that sustained economic growth of

China and India has increased their geo-political and military influence.

Despite their developmental similarities, China and India‘s bilateral strategic rivalry means that they have competing priorities on most major global issues.

Sino-Indian differences are considerable on issues relating to Asian security, regional stability in Southern Asia, and security in the maritime commons and space. The two rising powers generally agree on issues relating to the international economic system, energy security, and the environment. The

United States is the only global superpower and due to its ongoing shift to the

Asia-Pacific, it must manage a complex set of interaction with India and China, which are currently working at cross-purposes. Some of the topics covered by the book are also part of the thesis.

Another book titled ―Engaging Central Asia: The European Union‘s

New Strategy in The Heart of Eurasia‖ is written by Neil J. Melvin. The author of the book has presented the challenges faced by the European Union in

Central Asia. The author has given the situation of human rights in Central

Asia and relations of EU with these republics. The book does not cover the competition which is going on in the region between China and India. In my study I will give a complete picture of pipeline politics and its political economic and cultural implications on Pakistan. The rise of China and India as major world powers reveals that it would establish a new world order in the coming decades. As the two powers grow, they would ultimately change the current international system. It would have deep implications for themselves, for the region, and the world at large. Whether they agree on the changes to be made, especially when it comes to their relationships with the West, will influence the future character of the global system. A close examination of

China‘s and India‘s rise and the emergence of new international order reveal that China-India disagreements on numerous issues of both bilateral and global significance are severely simply.

―The Chinese Question in Central Asia: Domestic Order, Social Change, and the Chinese Factor‖ written by Marlene Laruelle and Sebastien Peyrouse in

Hurst, 2012 has also been studeid. Main purpose of the book is to go beyond a geopolitical analysis by articulating an external influential factor that is China, and changes in the domestic order in neighboring Central Asian region. The book analysed the contemporary transformations that are taking place within

the systems and societies of Central Asian Republics. China has become a subject of academic, public debate and expert knowledge. New cultural intermediaries, petty traders, migrants, lobby groups and diasporas, have also emerged. The rise of China to power has worked as a catalyst compound of the phobias and anxieties associated with the major social transformations that have occurred in Central Asia over the last twenty years. Sinophilia and

Sinophobia are now closely associated. The thesis also analyzed the involvement of China in Central Asia.

―Lost Cities of China, Central Asia, & India‖ is written by David Hatcher

Childress, published by adventures unlimited press Kempton USA in 1998. It is a historical book. It reveals the history of century of Central Asia and its relations with India, China and the other neigbouring countries. The thesis also lays tress on the mutual relations between India, China and Central Asia.

―China‘s new journey to the west: China‘s emergence in Central Asia and implications for U.S interests‖ is written by Bates Gill and Matthew

Oresman. It is a report of CSIS forwarded by Zbigniew in August 2003. After the disintegration of Soviet Union, CARS, the newly emerging states becomes increasingly important states on the global stage. China as a neighbouring state in deeply involved in stabilizing its political, strategic and economic relations with these republics. Most of these events are explained in Chapter third of the thesis.

―Situating the Uyghur between China and Central Asia‖ written by

Ildikó Bellér-Hann Ashgate and is published in 2007. This book offers a

distinctive picture of the cultural and social hybridism of the Uyghur. They are officially recognized minority and are mainly living in the Xinjiang Region of the China. Significant numbers of these people are also living in the Central

Asian states. A small touch has been given to the Uyghur region in the study.

―Xinjiang and China's Rise in Central Asia - A History‖, is written by

Michael E. Clarke and Francis Taylor & Francis, 08-Mar-2011 in London and

New York. The current conflict between indigenous Uyghur and Han Chinese shows that Xinjiang is a major troubled region for China. The Uyghur population is demanding increased autonomy, while policy of the Chinese government is to more firmly integrate the province within China. This book provides an account of how Beijing‘s evolving integrationist strategies in

Xinjiang have influenced its foreign policy in Central Asian region since the establishment of the People‘s Republic in 1949, and how this strategy of integration is related to China‘s concern for security and its quest of increased influence and power in Central Asian region. These issues are also discussed in the current study.

This book has traced the development of Xinjiang since the fall down of the Qing Empire in the early twentieth century to the present. It has been also argued in the book that there is a largely complementary relation between

Chinese‘s Xinjiang, Central Asia and grand strategy-derived interests. This type of interests forms and shapes Beijing‘s diplomacy in Central Asian region and its approach to the governance of Xinjiang region. Michael E. Clarke shows in his book that how China‘s interest and policies are of long-standing, although

pursued with heartiness in recent decades, and how domestic problems and strategies in Xinjiang have for a long time been closely bound up with wider international relations issues. The connection of Central Asia with China through Xinjiang has been widely discussed in this research work.

China and India in Central Asia: A new ―great game‖? by M. Laruelle,

Bayram Balc. Published by Palgrave Macmillan, 09-Nov-2010. 175 fifth avenue

New York. In Central Asia, the growing interests of China and India disrupt the traditional American-Russian "Great Game" at the in the old battle ground.

Though currently India is unable to equally compete with China in post-Soviet

Muslim countries of Central Asia, it has firmly established its position in

Afghanistan and has started to cast its eyes more noticeably toward the north to the oil rich shores of the Caspian Sea. In future, both the rising powers of Asia are looking to restart their competition on Afghan and Central Asian theatres not only on geopolitical, but also economic and political level. This book is related to the whole thesis. Most topics of the book are also discussed in current work.

―The China-Pakistan Axis: Asia‘s New Geopolitics‖ is written by

Andrew Small, New York: Oxford University Press, 2015. Andrew Small has insightfully and persuasively analyses recent developments in Sino-Pakistan relations in his book. According to Small around 2013 China significantly shifted its policy to manage its most important ties with Pakistan. Metastasis of

Islamic extremism in the region and deepening understanding of the implications that a possible nuclear war between India and Pakistan would

have on that spreading of extremism, China set aside its old policy of non- interference in the internal affairs of Pakistan. It started to urge the leaders of

Pakistan to put restrictions on extremist groups, not only those involved around Xinjiang region of China, but even inside Pakistan and Afghanistan.

Beijing recognized the declining utility of secret deals which it had worked out with extremist groups in the past years. Such deals were even not succesgul as well with the extremist leaders of new generation. This has been proved by more frequent attacks in Xinjiang region and on Chinese interests in Pakistan.

This book is closely related to chapter 5th and 6th of the thesis.

Ashley J. Tellis has written a book ―India's Emerging Nuclear Posture:

Between Recessed Deterrent and Ready Arsenal‖. In the book the writer stated that On May 11, 1998, India conducted a series of nuclear tests after a hiatus of more than two decades that signaled a critical shift in its strategic thinking.

Once contented to hold a nuclear posture consisting largely of "maintaining the option", i.e., neither building a nuclear arsenal nor surrendering its right to do so; New Delhi is now on the verge of adopting a stance that, while stopping short of building a ready arsenal, will take as its goal the creation of a

"minimum but credible deterrent," known as a "force-in-being." The book describes the forces--political, technological, strategic and ideational--that led to the remarkable policy shift and examines how India‘s force-in-being will be shaped, particularly in light of the threat that New Delhi is facing from its two most prominent adversaries, Pakistan and China. The book assesses in detail the infrastructural, material and procedural capabilities which are currently

possessed by India as well as those it is likely to attain in its efforts to meet the desires of its changing force-in-being. Finally, the volume concludes by evaluating the strategic impacts of New Delhi‘s posture both on the South

Asian region in particular and on the global non-proliferation regime in general. The book is related to the first chapter of the thesis.

Another book is written by Michael D. Swaine, Sara A. Daly, Peter W.

Greenwood (2000), ―Interpreting China's Grand Strategy: Past, Present, and

Future. In the book the author has wrote about the security problems of China and the influence of the leader in the country. Different social, domestic and political problems of the country and challenges and discussed in detailed in the book. The book lacks the implications of Sino-Indian competition in Central

Asia on Pakistan. It is related to the first and fifth chapter of this research work.

Asian Development Bank (2010) illustrates that the countries of central Asia are robustly developing its export and energy capabilities. Central Asian countries have plentiful resources of energy. The major problem is to exploit them and exports them. Oil and gas pipelines of Central Asia were mostly constructed before the breakdown of USSR, but these were built only for domestic use.

Only Kazakhstan has the network of pipelines to export its oil to other countries. Another reason is that oil can be transported anywhere in the world through pipelines, ships and trucks. Oil is a true global product. Gas can only be carried through pipeline network but has less value of export as compared to oil. The reports of the Asian development bank about the oil, gas, export and import of Central Asian states are also elaborately discussed in this work.

Hussain (2012) China is heavily dependent on oil from the Gulf in order to fuel its growing economy and production. Currently, the oil it imports passes through a very lengthy route. It twisting and dwindling up to the Strait of Malacca from where it reaches to the east coast of China and is elated overland to western China. The transportation of oil is very costly. Gwadar provides a cheaper and dumpier route. The development of the port is a cause of concern for numerous regional countries, particularly India. The port and a naval base at such a significant strategic location enhance the importance of

Pakistan. India is already trying to outpour its influence in the Arabian Sea and does not want any competitor. India is determined hard to increase its influence in Afghanistan and the rest of Central Asia, but once the port became operational, all these countries will be dependent on Pakistan and will no longer remain under Indian influence. The closer Pak-China‘s strategic company is already seen by India and the US as a threat to their interests in the region. America is increasing its inspiration in the Asia-Pacific region, particularly in the Strait of Malacca, and is authorizing India to stand against

China. The US has signed many defense and strategic contracts with the regional countries. This is seen by defense forecasters as an endeavor to contain

China and block its mobility in Central Asia and the Southeast Asian region.

Chapter 1

Sino-India Relations in Historical Perspective

India gained independence on August 15, 1947 from the British rule while on October 1, 1949, the People‘s Republic of China (PRC) declared its establishment. Relations between the two countries remained friendly from

1949 to 1957. The United States of America and the Soviet Union emerged as the two superpowers after World War II. The conflict between these two great powers greatly influenced the world politics. Cold war started between the two powers after the war (Leffler, Painter, 2005).

The Cold War spread to Asia by the early 1950s. China sided with the

Soviet Union and entered the socialist camp. The relations between China and the United States remained unfriendly. In 1948, due to Kashmir issue, there was a tussle between India and Pakistan while China was directly involved in the

Korean War (Jervis, 2001). The United States had started negotiation with

Pakistan for the establishment of military alliance. Under such conditions, neither India nor China was ready to open a second front. Resultantly, China was supported by India in the Korean War. Chinese representation in the

United Nations was also supported by India. Indian friendship was important for break out of China‘s isolation in the international community and its dependence on the USSR. The Chinese government believed that India might be its partner, as socialism was a struggle against imperialism. In order to form a united front against the western block, it was essential to win over as many countries as possible.

1.1 The 1954 Agreement and the 1962 Border Conflict:

There are some areas on the Sino-Indian border which are disputed. The main areas of territorial dispute between China and India are in the Himalayas on the Sino-Indian border, particularly, Sikkim, Arunachal Pradesh, and Aksai

Chin. Sikkim and Arunachal Pradesh are occupied by India but claimed by

China, while China has occupied the Aksai Chin area and it is claimed by India

(Maxwell, 1999).

An agreement on trade and communication between Tibet Region of

China and India was signed between the two countries in April, 1954. India waived its rights in Tibet which it had inherited from the British Empire and the sovereignty of China was recognized in Tibet under this agreement. There are five famous Principles for Peaceful Coexistence, which are written in the preamble of the agreement. These principles are also called ‗Panchsheela‘. It was one of the highlights of the friendly period. Another highlight of the friendship was the cooperation of the two governments in 1955 at the Bandung

Conference. However, this friendship was for a very short period of time.

Serious disagreement had started to surface between the two countries by the late 1950s. The main issue was the unresolved border issue which led to a brief war in October 1962 (Malik, 2012).

The border between China and India can generally be divided into three sectors. Such as the eastern, middle and western sector (See Map 1.1). The major dispute is basically on the eastern and western sector. The Aksai Chin plateau lies on the western sector. It is surrounded by Xinjiang, Tibet and

Ladakh (in Indian-administered Kashmir) from three sides. China claims that

Aksai Chin is part of Xinjiang while India claims that it is part of Ladakh. The dispute on the eastern sector is over the area between the pre-1914 British Outer

Line and the McMahon Line. The former North East Frontier Agency (NEFA) of the Indian state of Assam is now called Arunachal Pradesh. The dispute over middle sector is on various points on the border between Nepal and Indian- administered Kashmir. It means the Sino-Indian boundary clash is an inheritance of the British Raj (Liu, 1994).

Map 1.1

The Sino-Indian Disputed Border Area

Source: The Economist, Feb 8th, 2012

1.1.1 NEFA (North East Frontier Agency):

The situation in NEFA at the end of 1949 was same as the British had left it (Maxwell, 1970). The People‘s Republic of China was established in October

1949. A new dimension was added to the threat perception of India as Tibet was takeover by China in 1950. A more active forwarded policy was adopted by the Indian government in NEFA and it took a decision to make the

McMahon Line the final border of India in the northeast. It was expressed in the parliament on 20th November, 1950 by Nehru, the then Prime Minister of India that for the last three decades, Chinese maps has shown some territory of

NEFA as part of China but that was actually part of India. It was further explained by him that Mc Mahon Line was the boundary of India (Lamb, 1967).

In 1950, the Indian government set up twenty additional posts in NEFA.

The official of India entered Tawang (a Tibetan Monastery south of the

McMahon Line) in February 1951 and expelled the Tibetan administration from the area (Liu, 1994). In the unending Sino-Indian border discussions, the

Tawang district has now acquired an important position. By 1954, the eastern sector of Sino-Indian border had already been controlled by India, when negotiations were held between India and China with respect to Tibet

(Maxwell, 1970).

1.1.2 Aksai Chin:

The western part of Aksai Chin is uninhabited area and is unfit to live in.

It was an almost forgotten region for most of time in history except for some old trade routes that passed through it. In the late 19th century, the strategic value of this area was recognized by the British as a buffer zone. The British formulated three alternative boundary lines for Ladakh. These were the

Threlawney Saunders Line of 1873, Ardagh-Johnson Line proposed in 1897 and the Macartney-MacDonald Line proposed in 1899 (Hoffmann, 1990).

However, these were simply British ideas about possible boundary positions and were not established by any treaty. The western sector was not demarcated at time of partition of the Indian subcontinent in 1947 (Maxwell,

1999). India decided in 1953 to consider the Aksai Chin as the territory of India

(Hoffman, 1990). In 1954, a new official map was published by the Indian government. Most part of the Aksai Chin plateau was shown in the new map as

Indian territory and the McMahon Line was shown as a delimited boundary with China. A motor road was constructed by China in Aksai Chin from 1951 to

1957. At that time, the road was of immense importance for Chinese transportation to Tibet region. News was published in ‗People‘s Daily‘, a

Chinese newspaper, about the completion of the road in September 1957.

Embassy of India in Beijing noticed this news and informed New Delhi about it

(Hoffmann, 1990).

A protest was put forward by the Indian government that the road was constructed in the territory of India. The relations between China and India deteriorated due the exchange of protest notes between the two governments.

The revolt of Tibetan in 1959 and the Sino-India border conflict in Konka and

Longju passes increased the level of enmity in an already worsening relationship (Maxwell, 1999).

Strong action was demanded by the Indian parliament against a

Chinese-built road discovered by the Indian troops in Aksai Chin plateau.

Resultantly, a confrontational ‗Forward Policy‘ was launched by the Indian

Army in November 1961 in the disputed territories and border zones. Indian troops were ordered to patrol and position themselves strongly in order to cut off Chinese positions and force them to withdraw from the region claimed by

India (Smith, 2013). Hence the deep mistrust, Indian miscalculation, and wrong

Chinese assessments resulted in a brief but full-fledge Sino-Indian clash in 1962

(Maxwell, 1970).

1.1.3 Tibet:

Tibet holds a decisive position as far as Sino-Indian border issue is concerned. Tibet declared its independence in 1913 when the Chinese forces were expelled by the Tibet government at Lhasa after the fall of the Qing dynasty in China in 1912. However, the newly founded Republic of China did not accept this independence.

A tripartite conference was arranged by China, Tibet and British India at

Simla from 1913 to 1914, to decide the status of Tibet. The British government tried to divide Tibet during the conference. A Tibet-Assam border was proposed by Henry McMahon, the then Foreign Secretary of British India. He wanted to move forward the British line of control without informing and inviting the representative of China (Maxwell 1970). Later on, this line later became famous as the McMahon Line and in the Sino-Indian border dispute; it is a source of great controversy. The British pressurized the Tibetan representatives to sign. However, all the decisions of the Simla convention were not repudiated by the representative of the Chinese government. The British

left India in 1947, but some military posts had been already established by them at the south of the McMahon Line. A more active forward policy was pursued by the government of India in the north-east after independence (Maxwell,

1970). When the People‘s Republic of China was established in October 1949 and it takeover Tibet in 1950, the Indian threat perceptions were increased (Liu,

1994).

Prior to the acquisition of Tibet by China, India and China were distant neighbors separated from each other by Himalayas Mountains and Tibet. In

Mid-1950, Tibet was recognized by India as part of China. However, after Tibet was occupied by China, they became neighbors sharing a 4000 kilometer border. The frontiers were still disputed which lead to a 1962 border war and clashes in 1967 and 1987 (Malik, 2011).

The Chinese government was worried about the presence of bases of

Tibetan resistance fighters along the border between India and Tibet. In 1948, it also discovered that some foreign intelligence services are also present in the border zone. Hence, China thought that India and the United States were planning to detach Tibet from China. Mistrust was created in China against the intentions of India. At several main defensive points near the border, posts were erected by China for the purpose of preventing imperialist and reactionaries from other countries so that they might not dispatch special agents and spies into Tibet (Smith, 2013).

Tibetans were not happy over the harsh policies of China. Resultantly, there was a mass uprising in Tibet in 1959. The PLA aggressively suppressed

the uprising. It led to the migration of about 80,000 of Tibetans as refugees to neighbouring India including the Tibetan leader, Dalai Lama. A summit meeting was held by China and India to discuss the border issue in April 1960.

However, the issue remained unresolved. Zhou Enlai, the Premier of China, proposed a ‗package‘ approach but it was declined by India. According the

‗package‘ approach, India would recognize Chinese claims in western sector in exchange of Chinese acceptance of India‘s claims in the eastern sector (Liu,

1994).

It has been recognized by New Delhi that Tibet Autonomous Region is part of the China. Nowadays, the main issue revolves around the fact that the

Tibetan government-in-exile and the 14th Dalai Lama have been hosted by

India. Dalai Lama has been time and again accused by China that he is carrying out separatist activities from Indian territory. There are still some groups in

India whose attitude is sympathetic towards the Tibet exile government. China made a demand from India to take strong actions for stopping anti-China political activities. The government of India claimed that it would oppose any such attempt and action which would try to split China and bring about independence of Tibet (Maxwell, 1999).

Measures have been taken by the Indian government to make sure that the Tibet issue does not affect Sino-Indian relations. A series of riots, demonstrations and protests broke out in Tibet in March 2008. It was followed by anti-Beijing protests in India. Chinese embassy was stormed by the activists and attempts were made to make disturbances in Olympic torch relay in India.

India provides help for a smooth passage of the Olympic torch (Malone,

Mukherjee, 2010). A message was sent to Dalai Lama by Pranab Mukherjee,

Foreign Minister of India to preach religion but to refrain from those political activities which could have negative impacts on Sino-Indian relations (The

Economic Times, 2008).

In the west, Aksai Chin is a disputed territory under Chinese control.

China needs Aksai Chin for the connection of Xinjiang and Tibet. Nehru was put under severe political pressure due to these disputes. Hence policies towards Beijing were hardened by him. It further increased the mistrust between China and India (Singh, 2012).

1.2 The war of 1962:

Reviewing the continuous worsening condition on the border and the latest Indian military developments, it was decided by the leaders of China to fight a limited war against India. It was termed as ‗war of self-defence counterattack‘ by the Chinese. The Chinese troops started massive attacks along the whole border on October 12, 1962. In both western and eastern sectors,

Indian troops were overwhelmed by the better prepared Chinese troops.

Nevertheless, Chinese aim was to punish India with a decisive beat and not to capture the area that had been claimed by China. On November 21, 1962, a unilateral ceasefire was declared by the Chinese troops after a significant advance. They withdrew to the point where the government of China considers the border with India should be. India was not ready to agree to Chinese point of withdrawal (Liu, 1994).

Indian army moved back quickly to the position after the war where they were deployed before the war. In fact, the status quo of the boundary line was not changed by the war. Chinese control over the Aksai Chin and Indian control over the south of McMahon Line remain unchanged. The line of ceasefire has in fact been considered as the ‗de facto‘ boundary between them. In

December 1962, a conference was convened in Colombo by the Prime Minister of Sri-Lanka, Bandaranaike, for the purpose of bringing China and India back to negotiation. Six countries attended the conference (Sri Lanka, Ghana, Egypt,

Myanmar, Cambodia and Indonesia). Some proposals were put forward by the

‗Colombo Conference‘ but there was disagreement over the implementation of the proposals. Finally, the Conference was unsuccessful to bring the two states back to negotiation (Deepak, 2005).

1.3 The Sino-Indian Cold War:

After 1962, the bilateral relations of China and India were frozen. Strong nationalist sentiments were raised by the war in India. On a large scale, the defeat of India was regarded as a national embarrassment. The psychological impacts of the war on India cannot be underestimated. The war of 1962 had also long-term effects on the security policies of India. India believed that its insufficient defence preparation led to the defeat of 1962 war. Hence it decided to develop its indigenous conventional military potential. The Chinese government believed that it was forced by India to fight in self-defence. The border conflict 1962 increased Chinese sense of fear and insecurity of encirclement by the superpowers. In 1960, military assistance was offered by

the Soviet Union to India. It also shared its views with India that USSR understood India feelings regarding the Sino-Indian border dispute (Maxwell,

1970).

An agreement was signed by the Soviet Union in 1962 to provide military equipments to India (Kaul, 1979). Military support was also offered by the United States to India during the war. Hence, China perceived India as its enemy allied with both the Soviet Union and the United States to encircle China

(Liu, 1994). As a reaction, Beijing turned towards Islamabad. Trade and air agreements were signed by Pakistan and China in 1963. A border agreement regarding Pakistan-controlled Kashmir was also signed between the two countries. Pakistan was openly supported by China during Indo-Pak War in

1965. India was termed as aggressor by China (Deepak, 2005).

India and China not only associated themselves with the adversaries of each other and undermined each other strategically, but also provides assistance to those internal forces that were hostile to one another. The policy of rapprochement was adopted by India with Taiwan after 1962; though Taiwan‘s independence was never accepted by India (Deepak, 2005). New Delhi permitted Dalai Lama to establish his exiled government in North India.

Tibetan independence movement was actively supported by some Indian politicians. Chinese government on its part, offered support to Mizos and

Nagas, the insurgent groups in Northeast India as well as the Naxalbari movement in the northern part of West Bengal (Ranganathan & Khanna, 2000).

Its first nuclear test was conducted by China in 1964 at Lop Nor. Ten years

later; India also conducted a successful nuclear test at Pokhran. The war between India and Pakistan in 1965 was a litmus test of the Pak-US ties as well as the Sino-Pak relationships (Malone, Mukherjee, 2010).

Diplomatic crisis broke out in June 1967 thus further spoiled Sino-Indian relations (Zhang, 2004). On 13 June, 1967, two Indian diplomats were expelled by on the charges of espionage from Beijing. Their diplomatic status was withdrawn and public trial was opened against them. As a reaction, two

Chinese diplomats were deported by India and they were deprived of their diplomatic status. The personnel of the Chinese embassy were assaulted in front of the embassy by some Indian demonstrators on June 16, 1967.

Resultantly, the Chinese Red Guards in Beijing siege the Indian embassy. This event led to the encirclement of Chinese embassy in New Delhi. These diplomatic crises came to an end when the embassy of the other side was released from encirclement by two governments (Ribao, Bao, 1968).

In 1972, in the Northeast, its administrative control was enhanced by

India. The NEFA became the centrally administered Union Territory of

Arunachal Pradesh. Furthermore, through a constitutional amendment in 1974,

Sikkim was made a State of India. Indian actions in the Sikkim and NEFA were strongly protested by China (Zhang and Li (2013).

1.4 Progress in the Sino-Indian Relations since 1976:

Both India and China experienced a number of internal changes in the middle of the 1970s. An opportunity was provided for the new leadership of both states to re-examine their strategies towards each other (Liu, 1994). Deng

Xiaoping became the new paramount leader of China, after the death of Mao.

An independent foreign policy was re-adopted by the new leader. He gave great importance to develop good ties with all countries in the world based on the Five Principles of Peaceful Coexistence, including the Soviet Union and the

United States. He also laid great stress on importance of the developing countries as a force of world peace. The South-South cooperation would be promoted through a friendly Sino-Indian relationship (Xiaoping, 1994).

Indira Gandhi, the Prime Minister of India was facing a political challenge to her power. In order to bring the situation under control emergency was imposed by her in 1975. However, the actions taken by her created political crisis and the opposition parties united against her government. In the general elections of 1977, for the first time in Indian history after independence, the

Janata Party got victory and forms a non-Congress government in the Centre.

Morarji Desai became the new Prime Minister of India. A new term ―beneficial bilateralism‖ was coined by the new government with regard to the neighbours of India (Ganguly, 1994). The policy of Mr. Gandhi to improve relations with

China was continued by the Janata Government. Visit was paid to China by

Atal Bihari Vajpayee, the Foreign Minister of India in February 1979. A new trade agreement was signed between the two countries during Vajpayee‘s visit.

Vajpayee received satisfactory assurances from Huang Hua, his Chinese counterpart; for stopping support to Mizo and Naga insurgents in the northeast of India (Deshingkar, 1979).

The ‗package deal‘ was again presented by Deng Xiaoping to the Indian minister regarding the border dispute. He expressed that the areas under India control has large amount of natural resources, while the areas under China‘s control was economically not useful. For the same reason, India advised to find out an ample solution based on the principle of give-and-take (Ranganathan &

Khanna 2000). It was made clear by Deng that the delay in the resolution of the border dispute should not interrupt the improvement of the relations in other sectors.

Moreover, the government of China agreed that it would reopen the two

Hindu holy places in Manasarovar, Kailash and Tibet for the pilgrims of India.

Unluckily, the visit of Vajpayee to China was dwarfed by China‘s military attack on Vietnam. Their relationship suffered a little setback due to China-

Vietnam conflict. This situation was an embarrassment for India because Deng

Xiaoping expressed remarks that the Chinese government was intervening ‗to teach Vietnam a lesson‘. Naturally it reminded India of the humiliation in 1962 war. The public opinion of India strongly reacted. Vajpayee limited his visit and hurriedly came back to his country. However, the decision of Indian foreign minister to visit China was courageous. The Soviet Union was unhappy over the Indian action to improve ties with China. Some of the members within the Janata party were also not in favour of this visit (Gandhi, 1983).

In January 1980, Mrs. Gandhi captured the reins of government. It was made quite clear by her that it was in the interest of India to improve ties with

China. India invited Huang Hua, the Foreign Minister of China in 1981. The

visit led to the establishment of an annual dialogue on border dispute at the

Vice-Ministers‘ level. It was decided that the dialogue would be held alternatively in New Delhi and Beijing. Thus the formal border negotiations between China and India were opened. Eight rounds of border talks in New

Delhi and Beijing were held alternately from 1981 to 1987. Nevertheless, official-level rounds failed to achieve any breakthrough on the boundary question. During this period, official and unofficial visits markedly increased

(Zhang, 2004).

Statehood was granted to Arunachal Pradesh by India in December 1986.

Formerly this area was known as NEFA. In the same year, the border tensions heated up once again in the eastern sector due to the Sumdorong Chu valley dispute. This period was marked by tensions. Armies were deployed by both the countries on the border region. However, it was realized by both the governments that a new Sino-Indian war would be destructive and some actions were taken to ease the tensions (Liu, 1994).

In December 1988, the Prime Minister of India, Rajiv Gandhi, visited

China. Since the 1950s, this was the first visit of an Indian Prime Minister to

Beijing. The two countries agreed during the visit to hold annual diplomatic consultations of foreign ministers. They also agreed to establish a joint ministerial committee on economic and scientific cooperation and a joint working group particularly on the border issue (Ranganathan & Khanna, 2000).

A channel of regular high-level exchange between China and India was set up after the visit of Rajiv Gandhi. China and India agreed to decrease troops

along the LAC of the Sino-Indian border region and signed two confidence- building agreements in 1993 and 1996 respectively. Bilateral exchanges in defense, trade, education, culture, information, environment and broadcasting sectors increased progressively. During 1988 to 1998, increasing institutional links were not only established at the military level but also within the journalistic, scientific and political communities (Deepak, 2005).

However, greater progress in bilateral relations and on the border issue was not easy due to a deep mistrust over a very long period of time (Mansingh,

2005). Thus, though bilateral exchanges were helpful in steady progress of the

Sino-Indian relations, the events that unfolded in 1998 confirmed that a period of ten years was short to remove the deep rooted misunderstanding and mistrust between China and India (Deepak, 2005).

The year 1998 was a turning point in the political system of India. In

March 1998, Bharatiya Janata Party (BJP) which is the Hindu nationalist party came to power. A coalition government was formed by it with the support of 14 political parties. Atal Behari Vajpayee became the Prime Minister of India. It was consistently stressed by the BJP that to safeguard national security, India required nuclear weapons. Five nuclear tests conducted by India on May 11 and 13, 1998, brought international attention and concern to the South Asian region (Khalid, I. & Bano, Z. 2015).

‗Xinhua News Agency‘ reported that initial response of China to the tests was restrained and it simply expressed concern over it. However,

Vajpayee also wrote a letter to Clinton, the president of the United States in

which he linked China‘s threat in defence of nuclearization of India. The letter was published by the ‗New York Times‘ on May 13, 1998. Thus beaten by

Indian actions, Beijing reacted strongly and angrily to the second series of nuclear tests of May 13th and criticized Indian nuclear explosions (Deepak,

2005). Ten days before the explosions, George Fernandes, the Defence Minister of had expressed during an interview that China was ‗potential threat number one‘ (Malone, Mukherjee, 2010). This immediately damaged the bilateral relations. ―Chinese threat‖ in this context was a deliberate attempt to justify

Indian nuclear tests. The bilateral relations recovered rather quickly this time

(Li, 2009).

Kargil conflict erupted between India and Pakistan in 1999. The conflict was a new test for the relationship between China and India. The conflict intensified into a full-scale war in June. Jaswant Sing, Foreign Minister of India visited China at this critical moment and received the assurance from leaders of

China that Beijing would not support Pakistan (Garver, 2004). He also assured the leaders of China that India has no threat perceptions from China. This visit proved to be a turning point in Sino-Indian relations. The dialogue process was resumed after the visit. The President of India K. R. Narayanan visited China in

2000 (the year of 50th anniversary of diplomatic relations of the two countries).

It showed a gradual revival of diplomatic relations between India and China

(Arif, 2000).

In January 2002, Chinese Premier Zhu Rongji visited India with a focus on economic issues. Vajpayee assured him during a meeting that India did not

considered China as a threat for India. It showed the willingness of India to cooperate with China. Chinese stance on Kashmir issue was also reiterated by

Zhu that India and Pakistan could resolve their disputes peacefully through dialogue and consultation. Furthermore, a five-point proposal on the full development of bilateral relations presented by Zhu was: to maintain high-level exchanges between the two states and exchanges in all fields, to strengthen mutually beneficial cooperation in trade and economy, to promote exchange and cooperation in science and technology, to push forward regional economic cooperation, and to properly handle those issues existing between the two nations (Cherion, 2002).

1.5 Current Dynamics (2003-2016):

In this section the period of the overall development (2003-2012) of the

Sino-Indian relations will be reviewed. This section will analyze the remaining part of this chapter. First of all the general settings of the period will be discussed and then seven major issue-areas, including economic relations, cultural and educational issues, multilateral cooperation, energy relations, presence of naval forces in Indian Ocean, military and security issues, and

China-Pakistan-India triangle will be examined. These issue-areas will provide a general picture of the relations in this period.

1.5.1 General Settings:

Sino-Indian relations continue to develop and diversify in a steady manner in the 21st century after the temporary setback of 1998 due to Indian nuclear explosions. Started with the visit of Vajpayee to China in 2003, there

were high-level exchanges and regular summit-level meetings. It is important to first look at the global settings for a better understanding of the relations between India and China in this period.

The Prime Minister of India, Vajpayee, paid a six-day official visit to

China from June 22-27, 2003. The ‗Declaration on Principles for Relations and

Comprehensive Cooperation‘ was signed by the Chinese Premier Wen Jiabao and Vajpayee on 23 June 2003. Although the declaration was only a framework document, it still signified how far the two countries had progressed from the mutual suspicion of 1998. In the start of the Declaration both the countries clearly stated that ―the common interests of the two sides outweigh their differences,‖ and that they would ―fully utilize the substantial potential and opportunities for deepening mutually beneficial cooperation.‖ The Declaration was the first public acknowledgment to find out ultimate solutions for border disputes based on political considerations. The two sides settle for the establishment of Special Representatives‘ Meeting to discover a plan for a boundary settlement (Arif, 2013)

BJP lost office after the Indian general elections of 2004. Congress Party won the elections and Manmohan Singh became the head of the government.

The policy line of the previous government was continued by the new party for seeking stable and mutually cooperative ties with China. After one year, in

April 2005, Premier of China, Wen Jiabao paid a visit to India. A Joint Statement and numerous other bilateral agreements on economic, cultural and border issues were signed by the two governments. Sikkim was officially recognized

by China as part of India in 2005. It also seemed that China acquiesced to

Indian bid for a permanent seat in the Security Council of the United Nations.

However, this understanding was negated in mid-2008 when China subsequently refused to explicitly endorse Indian bid at a meeting of the foreign ministers of Russia, China, Brazil, and India (Malone, Mukherjee, 2010).

Another progress was on the question of energy. New Delhi and Beijing agreed for cooperation in energy security and conservation sectors as they were facing the challenge of the growing energy needs for their fast growing economies. The two countries also intended to take steps for promoting mutual awareness and deepening the friendship between the two nations (Arif, 2013).

However, problems continue to worsen the relationship, particularly where the border is concerned. In 2007 Chinese government declined to grant a visa to an official from the Indian state of Arunachal Pradesh. China claims this region as its own territory in the eastern sector. Beijing put forward the grounds the he was a citizen of China. The official was member of a group of 107 officers who were visiting China for a study tour. The entire visit was cancelled by the

Indian government in retaliation (Malone, Mukherjee).

1.5.2 Economic Relations:

Trade and economic relationship is an important part of Sino-India bilateral relations. These ties have continuously expanded and deepened over the past twenty years. They have enormous opportunities to further expand the bilateral trade. The ‗Most Favored Nation Agreement‘ was signed between the two countries in 1984. The bilateral trade volume of India and China in the year

2000 was US$2.92 billion, US$ 20 billion by 2008 and in 2011 this reached

US$73.9 billion. China became the largest goods trading partner of India in

2008, replacing the US (Arif, 2013).

In its trade relations with China, the trade deficit has remained a major problem for India. The trade deficit of India had risen to about US$27 billion by

2011. India is very concerned with the fast-increasing trade deficit. Indian exports are largely made up of iron ore, cotton and other raw materials. China mainly exports finished goods and machinery to India (India Today, January

29, 2012).

For India, the main challenge is to diversify its export basket to China.

The Chinese government is acknowledging Indian concerns over trade deficit and is making efforts to improve market access in China for Indian products.

Furthermore, India is worried that a large quantity of cheap Chinese goods could harm domestic industry. About 149 anti-dumping cases were initiated by

India against China in December 2012. It was more than 50 % of all cases filed by India against foreign countries (The Hindu, April 15, 2012).

Mutual investment of both the countries is still limited despite strong potential for development. By October 2011, in China, India‘s FDI reached

US$432,98 million while China‘s FDI in India was US$298,75 million. There is still lot of restrictions on Chinese investments in India. These restrictions are either due to safeguard of Indian market or considerations of security reasons.

Free Trade Agreement (FTA) is a method for boosting trade dynamics among different countries. However, keeping in view the current status of China-India

trade, FTA would probably give more benefit to China than India. Therefore,

India hesitates to sign FTA with China (Virmani, 2006).

It is evident from the fast growing travel links between China and India that economic relations between both countries would grow further in future.

The first direct flight between China and India started from Beijing to New

Delhi in March 2002. A MoU was signed between the two neighbours in 2005, which provides for major liberalization of air links between them. Since then, flights as well as trade between the two countries have increased to a large extent. Eight direct air links had been started between different cities of India and China by 2011.

Both India and China are net importers of crude oil. They are in quest of diversifying their energy supply through natural gas. This growing energy demand of both the countries has the potential to cast them in direct competition for hydrocarbon resources from Central Asia. The Chinese and

Indian producers are already in competition in export markets for goods such as textiles, garments, leather goods and light machinery (Malone, Mukherjee,

2010).

1.5.3 Exchanges and Cooperation in Culture and Education:

In 2006 a Joint Declaration was signed between China and India. Both the countries tried to revitalize the cultural relations and nurture people-to- people contacts. Since then, many programs related to education and cultural exchanges and cooperation have been started, making it a focal point in the relations.

The year 2007 was the ―India-China Year of Friendship through

Tourism‖. In 2005, both the countries agreed to construct Indian-style Buddhist temple in Chinese Henan Province at Luoyang for the purpose of reinforcing traditional cultural links. In May 2010, during her visit to China, the Indian

President Pratibha Devisingh Patil inaugurated the temple. In February 2007, at

Nalanda in Bihar, the Xuanzhang memorial hall was also inaugurated. A sum of about US$1 million was contributed by China for Indian effort to build a modern international Nalanda University.

In 2005, it was announced by the two sides to start regular youth exchange activities. Furthermore, in 2010, the two sides decided to encourage greater exchanges between the civil society organizations, media, think-tanks, scholars, artists and cultural personalities. For the year 2010-2012, MoU on

Media Exchanges and Programme of Cultural Exchanges was signed between the Governments of the two countries. A public diplomacy campaign was launched by the Embassy of India in Beijing. The main purpose of this activity was to directly reach out to young, middle-class Chinese by opening an account on the popular Sina Weibo microblog. It has more than a hundred million users.

In 2011, the Indian Central Board of Secondary Education (CBSE) introduced ―Chinese‖ as a foreign language in the curriculum of schools in

India. It further strengthened the relations in the field of education between the two countries. Chinese language training materials and training for Chinese language teachers was also offered by China to India. Both the countries

decided to establish the India-China Outstanding College Students Exchange

Programme. They also decided to focus on an agreement on mutual recognition of degrees and diplomas of each other universities.

1.5.4 Multilateral Cooperation:

Currently, SCO and SAARC are the key regional frameworks in which both India and China are engaged. Yet in these regional organizations, cooperation between China and India is not rosy. The main reasons behind this unfriendly behavior of the two countries are geopolitical considerations, security concerns, entanglement and disputes over the border.

India-Pakistan relations and the dominating behavior of India in South

Asia have hijacked the process of SAARC since its inception in 1985. India would not be ready to see any regional organization being used to counterbalance it. In the Dhaka Summit of 2005, India agreed to provide observer status to China in the SAARC but on the condition that Japan also joined as an observer. International interest in SAARC is increasing with growth of geographical weight of the subcontinent. Currently, SAARC has nine observers, but it still avoiding admitting new members.

1.5.5 Energy Relations:

China and India have emerged as two super energy consumers as their economies are continuously growing. Inadequate resources of energy in India and China have resulted in an intense competition for gas and oil fields. Since

US has dominated the current international energy security framework, both

China and India are trying to acquire overseas energy assets for their energy security. They apprehended that global energy markets and open access can be restricted and influenced by American-led efforts. In the quest for overseas energy assets Chinese companies have performed better than India. However, the rivalry between China‘s and Indian companies would be harmful for both, regardless of who eventually win the bid. One of such a case occurred in

Angola in October 2004. India bid US$600 million for a 50% stake in Shell‘s

Angola oil field Block with a pledge of including US$200 million for supporting ongoing project of Angola on railway construction. China outbid Indian bid with a US$2 billion offer (Singh, 2010).

The two countries agreed in 2005 to cooperate in energy savings and energy security, through active group efforts in the survey and exploration of gas and oil and resources in third world countries. Since their groups efforts in the energy field are encouraging. In December 2005, for the first time, oil companies of both the countries teamed up to purchase 37% of Petro-Canada‘s stake at a cost of US$573 million in Syria. They also jointly acquired 50% of the shares of an oil field in Colombia in August 2006 (Kumaraswamy, 2008). Mani

Shankar Aiyar, Petroleum Minister of India visited China in January 2006. He led an Indian natural gas delegation with him and signed five MoUs. Most of the MoUs dealt with information sharing and cooperation between companies

(China Daily, January 13, 2006).

1.5.6 Military and Security Issues:

Chinese incursions or intrusions have been occasionally highlighted by

Indian media reports that agitated bilateral ties. In August and in September

2009, the publicity of media on incursions of China reached a peak. However, the incursions were minimized by the government of India. Deepak Kapoor, the Indian Army Chief expressed that the number of such incidents had not increased as compared to the previous year (Indian Express, September 19,

2009). The incursions were also denied by Chinese Foreign Ministry spokeswoman Jiang Yu.

India has expressed special concerns over nuclear and missile- technology assistance of China to Pakistan. A nuclear arms race could be fueled on the subcontinent due to the current or future tensions between Pakistan and

India (Malone, Mukherjee, 2010).

George Fernandes, Defense Minister of India visited Beijing in 2003 and helped ease the tensions after the nuclear tests of India in 1998. His visit to

China was followed by a return visit of Defense Minister of China, Cao

Gangchuan in March 2004. In 2006, MoU on defense cooperation was signed between China and India during Indian Defense Minister Pranab Mukherjee‘s visit to China that formalized the regular and institutional contacts between the armed forces and defense officials and experts.

In November 2007, the first Annual Defence Dialogue between China and India was held in Beijing. The first joint training exercise ―Hand-in-Hand‖ on land was conducted by Indian and Chinese armies in Kunming province of

China in the same year. The joint exercises were also conducted in Belgaum,

India in 2008. However, in 2009 bilateral relations were strained and in 2010 military exchanges were suspended by India with China when China refused to grant permission to a senior Indian Army Commander on an official trip to

China. The military exchanges soon resumed as the relations normalized (The

Economic Times, June 20, 2012).

In December 2011, in the Annual Defence Dialogue, both the countries agreed to boost defense exchanges and communications for mutual trust and better understanding. As a major confidence-building measure between the armies of the two sides, the third ―Hand-in-Hand‖ military exercise was conducted in 2013 (The Times of India, September 5, 2012).

China has made significant progress to modernize its military since the

1990s. The military expenditure of China in 2011 was approximately

US$129,272 billion (923 billion yuan). It was the second-largest military expenditure in the world. Its military spending has remained stable at about

2%, as a share of GDP, from 2001 to 2010. Though China persistently lays stress on the peaceful intent of its military build-up, yet, the high military expenditure is a matter of concern for India.

India has also increased its military expenditure. The China factor also contributes to Indian military build-up. The main reason of India‘s high military spending is the prolonged border dispute and India‘s perception for

China as a rival for regional power. In 2011, India became the largest importer of the weapons in the world and Indian military spending was ranked seventh

in the world. India‘s share of military expenditure in GDP ranged from 2.3 to 3 in the period 2001-2010. It is higher than that of China.

In general, along the LAC the infrastructure of China is much better than

Indian infrastructure. China has connected all the passes and military posts on the LAC with highways, logistic depots and military installations by developing road, rail and air connectivity in Tibet and Xinjiang. The Indian government had ignored the development of the northeast region for a long period of time. Only recently, India has started to strengthen infrastructure and military capability in the border region with China, particularly, the states of

Jammu and Kashmir, Arunachal Pradesh, Himachal Pradesh, Sikkim and

Uttarakhand (The Hindu, December 14, 2011) .

By 2011, India took several steps for security in the territory along the

LAC. It raised two mountain divisions of the Army and deployed four squadrons of its frontline Su-30 MKI fighters. It also activated numerous new and old airfields and constructed new roads to enable the rapid movement of troops and equipment in the region. The government is giving maximum priority towards completion of its massive road network projects along the

Indo-China border region (The Hindu, March 7, 2011).

1.5.7 Indian Ocean Naval Presence:

In the current years, in the context of military issues between China and

India, the Indian Ocean has attained significant importance. Indian core interest in the region is to maintain stability in the Indian Ocean. India is very concerned about naval interference in the Indian Ocean. It rejects the view

point that an outside power is necessary as ―a sea-balancer‖ in the region. India opposed the entry of the US and Russia into the Indian Ocean after the British withdrawal. Currently, Chinese activities in the Indian Ocean are matter of concern for India.

The overseas interests of China have been expanding. Resultantly, the dependence of China has been increasing on the Indian Ocean for safe maritime routes. Hence, it is also in the interests of China to strengthen cooperation with the littoral states of Indian Ocean. Economic activities of China in Pakistan,

Myanmar and Sri Lanka could probably be misinterpreted by India as activities for military purposes due to historical distrust. China involved its naval vessels in anti-piracy escort missions in 2008 which increased Chinese naval presence in the region. It increased India‘s fears that China was setting up military bases in the Indian Ocean.

There is a suspected ―string of Pearls‖ strategy of China. This term was used for the first time in an internal US Department of Defense report having title ―Energy Futures in Asia,‖. Later on, it became famous in the international geo-political discussions (The Washington Times, January 17, 2005). However, the ―string of pearls‖ strategy has been denied by China. The doubtful string of pearls stands for a chain of Chinese commercial activities than military means of advancement in the Indian Ocean. However, based on the assumption that

China is building a ‗string of pearls‘ along important SLOC in the Indian

Ocean, some analysts of India began to talk of a potential ―necklace of diamonds‖ strategy as Indian reaction. They suggest that India should

strengthen its strategic cooperation with countries in the east of the Indian

Ocean such as Myanmar, Indonesia, Singapore and Vietnam.

According to the above analysis, China is not only containing Indian on the sea but also on land. However, the apprehensions over setting up of military bases by China in the Indian Ocean are exaggerated. China has not yet attained the capability to maintain an overseas military base. The policy of

China not to seek for building any oversea military base has remained unchanged. However, in the Indian Ocean, Chinese navy will be more active in future to ensure the safe voyage of its ships. Still now, China has not intended to challenge Indian domination on the Indian Ocean.

1.6 China-Pakistan-India triangle:

In the Sino-Indian relations, China-Pakistan-India triangle has been one of the major issues. The friendly ties between China and Pakistan developed in a special historical context, in which adversarial relationship of China with

India was one of the most significant factors. China is the closest friend and strategic ally of Pakistan. India believed that China has reached a strategic understanding with Pakistan founded on their convergent interests against

India (Miller, 2007). In the short, run the distrust in the triangle could not be easily removed. The dominant force in this area is competition.

Besides the close military relations between China and Pakistan, economic cooperation has become another key area in their relationship over the past several years. In 2006 both the countries signed a comprehensive free trade agreement. They have given unprecedented market access to each other.

Chinese enterprises had signed contracts with Pakistan amounting to a total of

19.87 billion dollars by the end of 2010. Chinese direct investment in Pakistan was 1.36 billion dollars in the same year, while Pakistan investment in China was 57.38 million dollars. Although Pakistan is the ―non-NATO ally‖ of the

United States in its War against Terror, Pakistan deems China a more reliable partner than the US. China is an ―all-weather‖ friend for whereas the United

States is a friend only in ―good-weather.‖ China is no longer simply a regional power that has to gratify the interests of Pakistan alone but also looks its ally through the angle of its own global interests (Khokhar, 2011). China deals the relationship in a more careful manner and is unlikely to give more chances to the US in Pakistan (New York Times, October 6, 2011).

The steadfast support of China for Pakistan has been a source of tensions in the Sino-Indian relations. China is increasingly taking interest in Kashmir issue. Pak-China relationship is source of friction in Sino-India relations.

Pakistan is the arch rival of India. China believes that Pakistan provides it with geographic and geo-political advantages in both Central and South Asia. Five critical benefits are provided to China by its alliance Pakistan. First, it provides

China with diplomatic support regarding Tibet, Taiwan and Xinjiang on the world level. Second, it is a counterweight to Indian hegemony in South Asia and to check India from focalizing exclusively on China. Third, opportunities are provided by Pakistan to China to meet its growing energy needs to act as a gateway to the Muslim world and easy access to the resource-rich Central

Asian nations of Central Asia. Fourth, it provides China an access to the Indian

Ocean through a transport corridor connected to Xinjiang province in the west.

Finally, the alliance helps the long-term strategy of China to keep the United

States preponderance in the region at length (Dwivedi, 2013).

Over the past years, the relationship between India and Pakistan has undergone twists and turns. In 2011, Pakistan agreed to grant the most-favored nation (MFN) status to India. It also agreed to relax visa restrictions, to discuss trade and the Kashmir issue at the same time. In South Asia the dynamic of mutual suspicion and rivalry could be altered by expanding economic engagement between Pakistan and India. It would be an encouraging step towards regional cooperation. Recently, once again, tensions amplified between

India and Pakistan due to the instability in the Indian held Kashmir. The confrontation between India and Pakistan put China in the position to choose

Pakistan between the two neighbouring states. It would serve the interest of

China. Yet, traditionally, India believes that the Sino-India and India-Pakistan relationships are separate issues. Pak-China relationship is viewed by India as support for enemy of India. It still remains to be seen whether New Delhi could accept China‘s assistance to Pakistan and how and to what extent the relations between India and Pakistan can be improved. It is expected that a better Sino-

Indian relationship could neutralize the Pakistani factor in the triangle.

Chapter 2

Economic potential of Central Asia

Natural resources are assuming huge significance in international affairs of today‘s multi-polar world. In this regard Central Asia is one of the important burgeoning regions. As represented by the ancient silk route, since the ancient times, this region is the heart of Asian continent and a crossroad of traders and invaders. Central Asia consists of five republics, namely Kazakhstan,

Uzbekistan, Turkmenistan, Kyrgyzstan and Tajikistan.

Around Central Asia, there are numerous important powerful nations.

The major countries surrounding the Central Asian region are Russia, China,

Iran, Afghanistan, almost a weak state. The second order neighborhood includes Pakistan and India which has historic contacts with the region, and always been the direction of movement for Central Asian tribes. Turkey was source of ancient migrant group the land of forefathers of the Central Asians.

As a region, Central Asia not only links Asia and Europe but also provides the shortest transit route from Asia to Europe. The geographical factors have tremendously influenced the whole region. In the arena of international relations, Central Asian region has now attained great political, economic and strategic significance. The region is enriched with huge amount of natural resources such as crude oil, natural gas, gold, copper, aluminium and iron. New interests and competitions have been started among external powers due to the growing demand of oil and gas resources of the region. The Central

Asian region is also a strong consumer market.

More than 40% of the area of Central Asia consists of deserts. The deserts are not merely large, vacant areas of sand. The temperatures of the day and night and that of winter and summer are always extreme (ADB, 2010).

2.1 Importance of CARs

The Central Asian Republics covers a vast geographical area. Due to its geopolitical and strategic importance the region has always been a source of attraction for neighboring countries as well as external powers (Duarte 2013:

30-31). The economies of Central Asian states mainly dependents on the export of energy resources like oil, gas and coal. It has been estimated that 65 years of oil reserves are there in Kazakhstan and it holds an estimated 308 years of coal reserves. Similarly, it has been projected that Turkmenistan holds 223 years of natural gas reserves. Tajikistan and Kyrgyzstan possessed substantial capacity of hydro-electricity generation (OECD 2011: 4).

Tajikistan has the potential to generate 527 billion KWH of hydro- electricity. In the production of electric power Tajikistan is second after Russia among the former Soviet States (Prasad and Mullen 2013). Excluding Russia and Iran, proven oil and gas reserves across the whole Caspian region are estimated at 190 billion barrels of oil. The possible estimates of its proven gas reserves are about 196 trillion cubic feet. Over the past decade the growth of the region has increased due to its richness in both human and natural resources.

(OECD 2011: 4).

Kazakhstan and Uzbekistan are the two significant states of Central

Asia. These states are regarded as ‗treasure house‘ of natural resources. They

possessed huge potential of hydroelectric power, hydrocarbon resources, crop production and minerals resources. West and the United States are in need of oil and gas. Central Asian countries offer oil and gas resources in abundance. A sense of urgency has been developed in regional and extra regional player to seek these resources.

There is a complex and uncertain energy situation around the Caspian

Sea and in Central Asia. Different sources are showing different estimates. It is estimated that 12–15 billion tons of oil and 11–12 trillion m3 of gas has been by the Caspian Sea. It is projected that Central Asia holds 3 trillion m3 of natural gas and 2 billion tons of oil. In Central Asian countries, the internal economic situation remains fragile. Their economies are largely dependent on the export of oil, gas and coal. Since the disintegration of the USSR, they are assisted by the other countries to exploit their energy resources. Thus, the influence of

Russia has been weakening in the region.

The oil firms of the United States are dominating the region. With the investment of about US$30 billion, it has controlled about 75 % of new oil fields.

About 30–40 % of foreign investments in Azerbaijan and Kazakhstan have been made by the United States. Energy companies of France, UK, Turkey, Iran,

Japan, China and India are also present in Central Asia. The competition between the external powers is providing benefit to the Central Asian countries. Close ties have been maintained by these republics with Russia, as they continue to export much of their gas and oil through Russia. They are attempting to re-examine their cooperation with the oil companies of the West

for some technical and financial reasons. The US administration made a request for $113.7 million in budget for fiscal year 2015 which was less than the previous year (Nichol, 2014).

2.1.1 Great Game

The Central Asian region has been the centre of fierce contention and conspiracies among the great powers for centuries. During the nineteenth century, the British government apprehended that another European power might possibly take advantage of the political decay of Islamic Asia. France started to take the advantage and was followed by Russia (Duarte 2013: 30). It was feared that Russia sought to progress forward along the caravan routes of the early vanquishers, intimidating to set up a new world monarchy. As a result, deep concerns were expressed by Britain on the outcomes of the stable advance of the Russian Empire in the direction of South Asia. In the last decades of the nineteenth century, it was a common perception of the

Europeans, that the coming inevitable major battle would be the last combat between Russia and Britain. Thus, Central Asia was at the center of confrontation between British Empire and Tsarist Russia, which was commonly known as the ‗Great Game‘.

Both of these imperial powers fought each other to take the control of

Afghanistan. This country could be used as a strategic base to invade each other

(Abbas 2012: 3). Open war was never declared by Russia and Britain against each other. Instead, the conflict occurred secretly and silently in remote places of Central Asia. Apparently, it was fought in three phases. The first phase

started from late eighteenth century was ended in 1907 with the signing of

Anglo-Russian agreement. In this phase the Russian Empire expanded in the

Caucasus and Central Asia region. The second phase subsequently started in

1907 and ended in 1917. It ended with the convention on the same ways used in the preceding phase as turning for assistance to secret agents who attempted to skillfully influence local population and tribes. In the end, the last phase of the

Great Game occurred after the Russian revolution of 1917 to grant freedom to the whole Asia region through the armed revolt from imperialist domination.

The main objectives of the two rivals were security and power. This game persists until the World War-II. After the Second World War, United States and

Soviet Russia emerged as the two main powers on the world stage, this led to the so called ‗cold war‘. So many strong battles and conflicts occurred in different Asian regions and the Middle East during the Cold war. The current

Central Asian Republics were part of Soviet Russia (Duarte, 2013).

2.1.2 New great game

After the independence of CARs as result of the melting down of Soviet

Russia in 1991, Central Asia once again became a battle ground between regional and extra regional powers, frequently known as the ‗New Great Game‘

(Duarte 2013: 31). Even in the era of New Great Game the level of internationalization of the region remained at peak. Currently, the United

States of America and its allies are using this region as a vital supply hub for its war efforts to check terrorism in Afghanistan. Moscow desires to exercise its geo-political influence for maintaining its legacy in the Central Asia. China is

also viewing the region as an energy reservoir and wants to make affiliation with CARs for stabilizing and developing the restless Xinjiang region (Cooley,

2012).

The term ‗New Great Game‘ was used for the first time in 1990s by

Ahmed Rashid, a Pakistani Journalist. According to him, energy resource potential of the region became geo-political interest in the international relations. Once again, Central Asia became central place for a new geo-political game. The regional player in the game includes Armenia, Azerbaijan, Georgia,

Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan along with big power like Russia and the US. Some other emerging power were also showing their interest to take part in this game like China, India, Iran, Turkey and Pakistan (Abbas 2012: 3). Nevertheless, the New Great Game does not mean any sort of actual control on a specific part of territory in Central Asian region. In real sense it is the politics of energy and resources. Each and every participant in the game wants to get benefit from oil and gas pipelines, trade routes, petroleum associations, treaties, agreements and contracts (Edwards,

2003).

In 2010, the presidents of Uzbekistan and Kazakhstan were invited by

South Korea for a visit. Similarly, Central Asia plus Japan framework was created by Japan created in 2010, for the purpose of facilitating dialogue between countries of the countries and Japan. Sun Zhuangzhi expressed that for the defense of its interests in Central Asia, the pressure on China has been raising; as other states are struggling to increase their influence in CARs.

China‘s dependence on the energy supplies of Central Asia is continuously increasing due to the increase in the volume of trade with the region.

Resultantly, it is becoming a matter of crucial strategic importance for China to maintain its influence in the region. It is estimated that about 4 percent (270-360 trillion cubic feet) gas reserves of the world are there in Central Asia. While its oil reserves are estimated at 2.7 percent (13-15 billion barrels)

Table 2.1

Main Potential of CARs

1 Kazakhstan Hydrocarbons

2 Uzbekistan Minerals

3 Tajikistan hydro-electricity

4 Turkmenistan Natural gas

5 Kyrgyzstan Miscellaneous

Source: Arvind Gupta, IDSA Policy Brief, October 14, 2013

2.2 Economic potential of cars

The Central Asian Republics are blessed with large amount of natural resources but unfortunately these republics are landlocked. The attention of the regional and extra-regional powers along with the big powers like Russia,

United States and China has been attracted by the enormous natural resources and energy resources of the Central Asian region. Kazakhstan is one of the countries in the Central Asian region which has the highest GDP per capita in the region. The economy of Kazakhstan substituted to positive growth from a negative growth and retained the positive growth since 1998 (Agrawal, 2008).

This country has relatively small population and having the largest geographical area in the Central Asian region. The country has vast resources of oil and uranium. Its agriculture sector is also very strong.

The Caspian Sea region of Central Asia is the home of vast hydrocarbon fields. It contains approximately 4 % of the world‘s natural gas reserves. It is also projected the nearly 3% of the world oil reserves are in this region. These resources are found in all of the five countries of Central Asia. Huge reserves of uranium are also found in the region. At the end of 2012, there were about 1.3 trillion cubic meters (tcm) of gas reserves in Kazakhstan. Turkmenistan has the highest gas reserves in Central Asia which are estimated at 17.5 trillion cubic meters. The oil reserves capacity of this country is about 0.6 thousand million barrel. Nevertheless, its oil reserves are much more than the estimated amount.

The oil reserves capacity of Uzbekistan is estimated at 0.6 thousand million barrel. The country also possessed 1.1 trillion cubic meters of gas reserves

(Dudley 2013).

2.3 Oil

At the end of 2012, Kazakhstan had 30.0 thousand million barrel oil reserves. More than half of the industrial output of the country has consisted of oil, since the early 2000s. There are a large number of other industries in

Kazakhstan which are dependent on the oil industry. Kazakhstan was among the top twenty oil producer countries of the world in 2008. Most of its oil deposits are situated in the Caspian Sea area (ADB 2010).

In 1899, in Kazakhstan‘s Atyrau province, the first oil well was found.

Formally, since 1911, Kazakhstan is producing oil. In the former U.S.S.R, it was considered as second largest country after Russia in oil production. The capacity of a country to export oil is measured in terms of its production growth. Kazakhstan could not improve its oil production till its independence though it is producing oil since 1911. With the assistance of international oil companies Kazakhstan significantly boost its oil production after in gained independence. Kashagan, Karachaganak, Aktobe, Uzen, Mangistau, Giant

Tengiz are the biggest oil fields in Kazakhstan. These are onshore oil fields and are situated in western part of Kazakhstan. In 2010, the new ministry of oil and

Gas emerged new Technologies for the mining of petroleum in collaboration with ministry of industry. KMG is a national oil and Gas Company of

Kazakhstan. It was established in 2002. It is playing a significant role in the development of oil and Gas sector. The president of Kaz Munay Gaz‘s oil company has elaborated that main hurdle in the Kazakhstan‘s oil export is the

Russian control over the pipeline network. Limited export infrastructure is the second problem with Kazakhstan‘s oil export. Geological surveys reports have shown that Kazakhstan‘s large amount of oil and Gas reserves remains undeveloped to explore due to lack of modern technology and equipment.

Political and economic and factors are also hurdles in the exploration process.

In 2009, after showing best performance in production, 139.5 million barrels of oil, Karachaganak field venture was also joined by Kaz Munai Gas in official capacity in 2012 (Heller, et al. 2014).

The Kazakh government is striving to revise the agreements with foreign energy organizations to handle the budgetary crisis for the development of third phase of Karachaganak. Mr. Sauat Mynbayev, oil and Gas minister of

Kazakhstan expressed that if any agreement was not finalized then the project would stop further progress. The knowledge and expertise of BG group 29.25% shares, Eni. 29.25%, Chevron 18%, LUKOIL 13.5% and Kaz Munai Gas 10% are utilized by the Karachaganak field venture. The production of Karachaganak field was 139.5 million barrel of oil at the end of 2012 (KPO Sustainibility report, 2014).

Table 2.2

Central Asian Republics Oil Production at end of 2012

Country At end 2002 At end 2007 At end 2011 At end 2012 Thousand Thousand Thousand Thousand barrels barrels barrels Daily barrels Daily Daily Daily Kazakhstan 1021 1453 1758 1728 Turkmenistan 183 199 217 222 Uzbekistan 153 104 77 68 Total 1357 1756 2052 2018 Source: BP Statistical Review of World Energy June 2013

In 2012, the production of crude oil of Kazakhstan was 1.606 million billion barrel per day. In the same year, the country ranked at 18 on the global level. The total export of crude oil of Kazakhstan were 1.406 million billion barrel per day in 2012 and the country stood at 12 on the world ranking. In

2013, the CIA world face book has estimated that on 1st January 2013 proved crude oil reserves of Kazakhstan were 30 billion bbl. As compared to the other countries it ranked 11 on the world level. The oil reserves of Kazakhstan are approximately 30 billion barrels and are estimated to reach 100-110 billion

barrels by 2015. At present, the twelfth largest oil producer country in the world is Kazakhstan. The present annual production of 100 million tons (1.7 million barrels per day) would cross 150 million tons per year in the near future

(Butler N., 2013).

Currently, the international oil companies that are operating in oil and gas sector of Kazakhstan are China National Petroleum Corporation, Petro

China, Chevron, CNPC, Shell, ExxonMobil, Total, Lukoil, Eni, ConocoPhillips.

Chevron Oil Company has made huge investment in Kazakhstan and is operating for the last four decades in the country. There are very few export routes in Kazakhstan as compared to its oil and Gas reserves and production.

Tengiz, Uritau and Zhanazhol gas fields have not even access to the adequate capacity export pipelines. In 1979, Supergiant Tengiz field was discovered. It is a significant oil source and extensive source of gas production. A joint venture of Chevron Tengizchevroil (TCO) consortium and Tengizneftegaz production association started production in 1993 (Johnston, D. 2001).

Tengiz oil reservoir is situated in North-western region of Kazakhstan. It is the sixth largest oil reservoir in the world. The length of Tengiz field is 21 km and its width is 19km. All of the transit of Tengiz oil field is conducted through

Atyrau. Atyrau is located in the North of Tengiz. It is approximately 350 km away from Tengiz. For the purposes of production, from Tengiz oil field, there is an agreement of joint venture for about 40 years in which Chevron has 50% of shares, Kazakhstan Petroleum has 20%, Exxon Mobil 25% and LUKOIL has

5% production shares. It is working under the umbrella of Tengizchevroil

Consortium. In 2001, with an investment of US $2.7 billion a pipeline having a length of 1505 km was constructed to export oil from Tengiz oil field to the

Russian port Novorossiysk on the Black sea having maximum capacity of 1.5 million barrels of oil per day. The Tengiz oil field‘s oil contains 17 percent of sulfur. A fine of US $ 609 million was imposed on TCO for the mismanagement of sulfur as environmental violations in 2007. The production of oil by TCO was started from 285,000 barrels per day which at end of 2013 has increased up to approximately 5,00,000 barrels of oil a day the after the major development of the work at Tengiz field (Yessenova, 2012).

Kashagan is situated in the Northern Caspian Sea region. This oil field was discovered in 2000. It is Kazakhstan‘s off shore oil field. The estimated oil reserves of this field are nearly 13 billion barrels. During the last 30 years, it is the largest oil field of the world discovery. Huge investment of about US $ 116 billion was made for this expensive energy project of the world. In 2013,

Kashagan oil field started the commercial production of oil. Due to territorial differences, shallow water and high quantity of hydrogen sulfide, this oil field project has become the most challenging project in the world. The major oil companies working under Kazakhstan Caspian shelf for the exploration of oil from this field are Royal Dutch shell, Eni, Total, BP Statoil, BG group and

Mobil. Eni started operation in the Kashagan oil field project in 2001 but it was renamed as Agip KCO (Agip Kazakhstan North Caspian Operating Company

NV) (Johnston, 2001).

Oil industry is the fastest-growing industrial sector in Kazakhstan. It has become the economic leader of Central Asia due to the growth of its oil industry after years of foreign investment. The gross domestic product of

Kazakhstan is greater than those of the combined GDP of its four neighbors.

The most encouraging factor is the development of the middle class of the country, which shows the wide spread of its hydrocarbon wealth. The total production of oil Kazakhstan is approximately 1.4 million barrels per day. In the year 2007, it was listed among the top 20 oil producing countries of the world (ADB 2010).

In 2007, the Kazakhstan‘s parliament passed a law which empowered the Government to revoke the contract of those foreign oil companies who are found violating the national interests of the country. Kazakhstan‘s state owned company KazMunayGas and Agip KCO transferred into North Caspian

Operating Company BV (NCOC) with a joint project under NCPSA (North

Caspian Purchase and Sales Areement). Conocophillips and Exxonmobil oil companies started production of oil in 2013 with the help of government of

Kazakhstan. It was estimated that the production of the oil from Kashagan oil field in 2014 would be 8 million tones (Johnston, 2001).

Kazakhstan exports its oil to the Black Sea through Russia, to the

Mediterranean through Azerbaijan and Turkey, to Batumi through rail and to

China through a pipeline. Kazakhstan is trying to reduce its dependency on the oil routes of Russia for the export of oil. It is building pipelines for the export of oil to China. The Trans Caspian tankers and rail transportation is also utilizing

by it. Iran and Kazakhstan are cooperating for the transport of oil by shipment via Persian Gulf through the Iranian port of Neka. The pipelines system of

Kazakhstan is 3400 miles in length which runs under Kaztransoil and Kaz

Munay Gaz. The export capacity of the extensive rail network of Kazakhstan is

340,000 billion barrels per day. This largest rail network is used by

Tengizchevroil for transportation. The internal KCTS (Kazakhstan Caspian

Transportation System) of Kazakhstan is being developed for the purpose of export of oil to international markets. Aktau, Kuryk and Bautino ports are being developed by Kazakhstan for the large cargoes consignment. In order to expand and modernize oil and gas pipeline systems, Gazprom Company has shown its interests to purchase the shares of Kaz-Munay-Gaz and Kaz-Trans-

Gaz which are Kazakhstan‘s state owned companies (Yermekkaliyeva, 2013).

One of the important countries of the Central Asian states is

Turkmenistan. The domestic oil pipeline network of Turkmenistan is very small in capacity. The state own oil company of Turkmenistan is Turkmenneft and its state own gas company is Turkmengaz. Foreign investment is being attracted by Turkmenistan with the collaboration of ‗Turkmennebit state oil company‘

(GK) with ‗production sharing agreements‘ for the upstream of oil sector. The government has signed these ‗production sharing agreements‘ with Dragon oil of United Arab Emirates, Petronas of Malaysia and Burren energy of Italy.

Other oil companies which are engaged in Turkmenistan are ConocoPhillips of

USA, Chevron of USA, Lukoil of Russia, Zarit consortium of Russia, British

Petroleum (BP) of UK, Wintershall of Germany, Mitro International of Austria,

Maersk oil of Denmark, ONGC of India, and Buried Hill energy of Cyprus. The foreign direct investment in the hydrocarbon sector of Turkmenistan has tremendously increased with the involvement of these foreign oil companies

(PWC, 2012-2013).

Turkmenistan and Uzbekistan have substantial oil industries. Each country ranked within the top 50 oil producing countries of the world in 2006.

After independence, though Turkmenistan was the only country in Central

Asian region to show sound oil production growth, yet after 2004, its production showed gradual decrease. The country is still self-sufficient in oil

(ADB 2010).

The major energy source of Turkmenistan is not oil but gas. It oil production is very low and is also of poor quality. Turkmenneft with the association of Turkmennebitgazurlask has started a program for the gas and oil industry of Turkmenistan to plan the future prospects for 2030. In Uzbekistan, there are three oil refineries which are situated in Bukhara, Fergana and Alty

Arik. The production capacity of these refineries is about 224,000 billion barrels per day but due to low oil production these refineries are working below their capacity (Levine, 1996).

Statistics of the CIA world fact book has shown that Uzbekistan has 594 million barrels of proved oil reserves and ranking at 48 on the world level. In

2012, Uzbekistan‘s oil production was 102,600 bbl/day and country ranked at

49 as compared to the other countries of the world. On 1st January 2013, it was estimated that it possessed 1.841 trillion cubic meter of gas as far as reserves of

natural gas of the country are concerned and its position was 20th on the on the global ranking. The estimated natural gas production was approximately 62.9 billion cubic meters and country stood at 14th position as compared to the rest of the world (Khusanjanova, 2011).

Uzbekistan, demographically the biggest Central Asian state has ―rich resources of hydrocarbon. Apart from the recent oil discovery in the Angren at

Karakhtay as well as gas its total hydrocarbon reserves are approximately equal to that of Kuwait‖. The oil reserves of Uzbekistan are substantially smaller. It is estimated at about 0.6 thousand million barrels. On first January 2013 its oil reserves were 600 million bbl and stood at 46th position as compared to other oil producing countries. While on the same date its oil production was 244,100 bbl per day and was ranked at 36 on the world level. Its export of crude oil was estimated at 67,000 bbl per day ranking 44. It has now been realized by the government of Uzbekistan that the energy sector is of vital importance to boost the national economy. In 2005, for the collection of revenue, taxes were increased by the government on gas and oil from 18.5% to 64% and 12.3% to

32% respectively. The foreign investors were discouraged by this attempt of the government. In 1998, NKHK Uzbeneftegaz was established. It consisted of eight firms for the performance of various works like construction work, extraction, crude oil refinery, distribution of oil products, pipeline operation, equipment, Trade and services. Uzbekneftegaz tried in 2007 to increase the export volume of gas to13 billion cubic meters. It was estimated that till the end of 2014 the export of the gas would be 16 billion cubic meters. The newly

developed gas field is situated in Ustyurt plateau. Gazprom has invested in this field. This will raise the potential of natural gas export to 17 billion cubic meters per year (Khusanjanova, 2011).

The proved oil reserves of the five Central Asian countries are 1.8% of the world according to estimation issued by BP world energy 2013. At the end of 2012, the share of CARs in the total global oil production was 2.4 percent. In

2013, the proved Gas reserves of Central Asia were 10.6 percent of the world and its share was 4.2 percent in the total gas production of the world (Abbasi,

2013).

2.4 Natural gas

Proved natural gas reserves of Kazakhstan were 2.407 trillion cubic meters on 1st January 2013 having 14th position in world. The production of natural gas was approximately 20.2 Billion cubic meters and ranked at 31 as compared to other countries of the world. In 2011, export of natural Gas was estimated at about 9.7 billion cubic meters and was on 25th position on the world level (Foster, 2010).

Much of the natural gas produced in Kazakhstan is consumed domestically. Gas is imported by southern Kazakhstan from Uzbekistan due to the irregular and uneven system of energy infrastructure. Amangeldy gas field which is situated in southern Kazakhstan began its production in the year 2003.

If this field is further developed, Kazakhstan will stop to import gas from

Uzbekistan (Javaid, Rashid, 2015).

Kazakhstan‘s proved natural gas reserves were 45.7 Trillion cubic feet and were 0.7 percent of the proved natural gas reserves of the world.

Kazakhstan‘s natural gas production was 19.7 billion cubic meters and was about 0.6 percent of total gas production of the world. The natural gas reserves of Kazakhstan are measured nearly 100 trillion cubic feet. These reserves are mainly situated in the Caspian area. About all the gas reserves are in associated fields (oil and gas), such as the Tengiz fields and Caspian‘s Karachaganak. The largest reserves of the country are found in this field (ADB 2010).

Table 2.3

Central Asian Republics Proven Gas Reserves

Country At end 2002 At end 2011 At end 2012 Trillion Cubic Trillion Cubic Trillion Cubic meters meters meters Kazakhstan 1.3 1.3 1.3 Turkmenistan 2.3 17.5 17.5 Uzbekistan 1.2 1.1 1.1 Total 4.8 19.9 19.9 Source: BP Statistical Review of World Energy June 2013

Turkmenistan is one the important Central Asian countries having huge proved hydrocarbon reserves. Its natural gas reserves are estimated at about

17.5 trillion cubic meters. As far as the natural gas reserves are concerned, it ranked at 4th position after Russia, Iran and Qatar. According to the CIA world fact book statistics, though the country was at 4th position as compared to the rest of the world as far as natural gas reserves are concerned but, due to insufficient pipeline infrastructure, it exports of natural gas was estimated at

about 41.1 billion cubic meters ranked on 10th position on world level. The main obstacle for the export of gas in the world market is the landlocked nature of the country (Abbasi, 2013).

The 100 trillion cubic feet proven gas reserves of Turkmenistan are located in the Amu Darya basin. Roughly half of these deposits are found in the giant Dauletabad-Donmez field. The other large deposits are located in the

Murgab basin, of which the largest reserves are in Yashlar. It has also been reported that new deposits are discovered in the Lebansky, Maryinsky and

Deashoguzsky areas of the country. Since the second half of 1998, the gas production of Turkmenistan has steadily increased. Currently, almost all the energy needs of the country are fulfilled by natural gas. About 80% of energy exports are consists of oil and gas (ADB 2010).

In 2012, the leading exporter of gas in Central Asian and Caspian region was Turkmenistan. The export of gas was approximately 1.5 trillion cubic feet in the same year. The amount of the gas which was exported was 5.2% to

China, 24% to Russia, 22% to Iran and 2% to other countries. A ten year developmental plan was started by the government of Turkmenistan in 1993 for exploration of hydrocarbon resources and to become the second Kuwait. The plan did not succeeded as result of the limitations for foreign companies as regard to ownership shares (Javaid, Rashid, 2015).

In 2008, the natural gas reserves of Turkmenistan were estimated at 9 trillion cubic meters. At that time it was the fifth largest country in the world as natural gas reserves are concerned. The oil reserves of this country are

estimated at 500 million barrels. The major exports of Turkmenistan are natural gas, oil, and electricity. These commodities are exported to Ukraine and the

Russian Federation (ADB 2010).

Turkmenistan mainly uses the Russian pipelines infrastructure for exports of its gas and oil. It is also connected with Iran through two small pipelines which are being used for barter trade. As mentioned above, South

Caspian basin is the home of oil and gas fields. These fields remained underdeveloped due to the disputed nature of this region (Talwani et al, (1998).

On the west part of Kazakhstan, Garashyzlyk onshore is situated. Half of the production of this area exported. Among the former Soviet states,

Turkmenistan is regarded as the second largest country as far as the export of the gas is considered. In the southeast region of Kazakhstan the operational natural gas fields are situated. In 1990s, Turkmenistan exported mostly it natural gas to Ukraine. The production of gas was reduced and its exports discontinued in 1994 due to gas debt issue. Now natural gas production is again recovering. Turkmenistan wants to transport its natural gas in various directions. It wants to export its gas to Russia, Ukraine, European Union, far west, Iran, china, Pakistan, India. Another 2020 oil and Gas industry developmental plan has been developed by the government of Turkmenistan. It has been estimated that the production of the gas would be 240 billion cubic meters by 2020. Turkmenistan had also planned to increase the export of its natural gas exports, from 30% to 50% up to 2015. Gazpom, CNPC and Lukoil are the main companies which have made heavy investments in the oil and gas

sector of Uzbekistan. Uzbekistan has 1.1 Trillion cubic meters of natural gas reserves with a production of 56.9 billion cubic meters and its share in the world gas production is 1.7% (Kakhkharov, 2008).

It has been roughly estimated the natural gas reserves of Uzbekistan about 65 trillion cubic feet. About two-thirds of proven reserves are found in nine large deposits, eight of which are under development. The largest reserves are found Ustyurt region which in the northwest of the country. Gas is used for the production of electricity production. A large portion of the gas is consumed domestically. Turkmenistan and Uzbekistan fulfill almost all the energy needs through gas. Kazakhstan relies on coal power. This country is the biggest exporter of oil in the region. Uzbekistan is the 17th largest producer of natural gas in the world, ninth largest producer of gold and sixth largest producer of cotton. Abundant natural resources of the country are yet to be developed

(ADB 2010).

2.5 Mineral and Strategic Resources

Kazakhstan has the second largest phosphorus reserves, second largest reserves of copper ore, 31.8 billion tons of proven coal reserves. The potential iron ore reserves of the country are 15.4 billion tones and proven reserves are

9.1 billion tones, plus trillions of dollars‘ worth Rare Earth Metal (REM).

Furthermore, Kazakhstan is the second largest chromium producer in the world. It provided 94.6% of total chromium production of the former USSR

(Effendi). The country is the eighth largest producer of iron and produces

16,662 million tons of iron, fourth largest producer of molybdenum and lead. It

possessed large deposits of uranium and produced 56% of the total output of the former USSR (Effendi, 1995). Moreover, Uzbekistan has rich deposits of gold, copper and coal. The labour market of Uzbek republic has rich quantity of good quality labour which is both more disciplined and cheaper than what available in the Sub-continent and South-West Asia (Khan, 1996).

In the whole Central Asia there are surplus energy resources for export.

Uranium is not only found in Kazakhstan but also in Uzbekistan but it is a minor product with major implications for environment. Scores of minerals are found in the mines and are significantly contributing to the GDP of these republics (ADB 2010).

Uzbekistan possessed not large but sufficient amount of hydrocarbon reserves. Third largest deposits of uranium in the world are found in

Uzbekistan. Huge amount of uranium ore is also possessed by Tajikistan. The country also has its enrichment potential. On the other hand Kazakhstan has the very large deposits of uranium and its share in the former USSR‘s output was 56% (Effendi, 1995).

The quantity of highly enriched uranium in Kazakhstan is between 10,

590-10,940 kilograms. In light of the NSG wavier, this uranium is greater significance. The advanced countries would be able to help the allies in their civil nuclear program. For example their civilian nuclear cooperation would allow them to procure uranium for their civilian nuclear program. In the long run, it could potentially help them to diversify the energy base of their countries (Aubakirov, et al. 1983).

Central Asia region is blessed with variety and large number of A to Z natural resources. A few of the minerals which are found in the region in significant quantity are zinc, uranium, tungsten, titanium, silver, salt, mercury, manganese, chromium, copper, bismuth, bauxite and arsenic. Furthermore, the countries of Central Asian region have the largest deposits of chromium, gold, and uranium of the world (ADB, 2010).

Kazakhstan was famous area about twenty years ago where the Soviet prisoners were kept, nuclear tests were carried out and gulag camps were located. This country possessed the fourth largest nuclear arsenal of the world having about 1,000 nuclear warheads and 40 TU-95 heavy bombers, which have been voluntarily rescinded by the country (Stobdan, 2008).

Vast deposits of natural gas, large deposits of aluminum, silver, copper, gold, and uranium are found in the Kyzylkum. One of the largest open pit mines in the world is the Muruntau gold mine of Uzbekistan (Kempe et al,

2016). It is several kilometers wide and more than 300 meters deep. Throughout history, gold is such a mineral which has enjoyed a universal value or appeal in the whole world. It is a precious metal famous for its beauty. It is as an agent minimizing the loss or risk in troubled markets. The leading export of both the

Republic of Kyrgyzstan and Uzbekistan is gold. It is also mined in Tajikistan and Kazakh Republic. In southern and middle of Tien Shan gold belt in the

Republic of Kyrgyzstan and Uzbekistan, largest gold deposits of the region are found. In the Makmal gold mining complex, the Sary-Dzhasskiy, Soltan-Sary, and Terek-Sayskiy gold mines other major deposits are found. The open pit

Muruntau gold mine in the Central Kyzylkum region of Uzbekistan holds one of the largest deposits of gold in the world (Kempe et al, 2016). Other important gold deposits are situated in the nearby goldfields of Amantaytau, in

Samarkand and the Zarmitan field. In 2006, the Uzbek republic ranked among the top 10 gold producers in the world (ADB 2010).

2.6 Hydropower Sector

Kyrgyzstan and Tajikistan are two mountainous countries of the Central

Asia. These countries fulfill almost all their energy needs from hydro-power.

More than four-fifths of the electrical energy requirements of Kyrgyzstan are fulfilled by Hydroelectricity. Toktogul Reservoir provides taps water facility which is Soviet-built. This reservoir regulates the Naryn River for hydropower and irrigation purposes. Two hydropower stations are in progress on Naryn and a series of hydropower stations are in progress on the Sary Djaz River.

Some other power stations are in the stage of planning. The country is also planning to make hydro-electricity a suitable and permanent source of revenue by constructing electrical transmission lines for the export of electricity to other countries (ADB 2010).

Kyrgyz republic is not blessed rich hydrocarbon deposits unlike the other Central Asian countries. The country possessed rich hydropower potential which is estimated at 142 billion kWh per year of which only 10% has been exploited. The country is facing some challenges. The energy quagmire in the country leads to political instability and frequent civil unrest. It has been planned by the government of Kyrgyzstan for building energy projects to meet

the power shortages. Tajikistan is the third-largest hydroelectricity producer of the world. It used only 40% of the electricity which it produced. About 90 % of hydroelectric potentials of Tajikistan are yet to be developed. The country has huge potential to produce large amount of aluminum (Stobdon, 2015).

Tajikistan has enormous untouched hydro-electric potential. Each square kilometer of the country has up to 2 million kilo watt hours of hydel resources.

This is very huge capability for hydro-electricity generation. In this regard, it is noteworthy that in the summer season there is surplus production of electricity in Central Asia while much of South Asian region there is chronic shortage of power (RIS DP#94, 2005).

Tajikistan is the second largest country in the Central Asian region after

Russia, as far as the production of hydroelectricity is concerned. According to official records, its hydro-electricity potential is approximately 40,000 Mega

Watts, which is about 4% of the hydroelectric potential of the world. According to the official report of ―Tajikistan‘s National Strategy for Energy Sector

Development 2006-2015‖, the government would make its full attempts to reach the production of 35 billion Kilo watt hours in 2015. Nevertheless, despite the huge potential, the production of the country is only 17 billion kilo watt hours annually and it imports energy from Uzbek republic. Russia, China and

Iran have already made huge investment in Tajikistan. Assistance has also been provided by India for the Varzob-I Hydro-Power Station (Kothari, 2014).

2.7 Agro-Industry

The territory of Kazakhstan is almost equal to that of India. However, the total population of Kazakhstan is only 15 million. It is among the five largest grain exporters of the world (Bruinsma, 2012). In 2012, the grain production of the country was more than 26 million tones. Vast cultivable area of the country is lying infertile and is not being utilized to useful purposes. The

Chu valley in Kyrgyzstan and the Vakhsh River valley in southern Tajikistan offer good prospect for the cultivation of pulses. It can probably produce two crops in a year. Large quantities of pulses are grown in Kyrgyzstan‘s Chu

Valley including kidney beans or rajma (Stobdon, 2015).

In the Soviet period, the production of cotton was at its peak and it continues to be at high level after that. Since independence, wheat production is rapidly increasing in the countries of the region, with the objective of food self- sufficiency (Bruinsma, 2012). Mainly due to the changes in population and changes in river flows fisheries have dramatically declined since the 1980s

(Thorpe, Anrooy, 2009).

Currently, the combined population of the Central Asia countries is about 60 million. Sizeable demand is already there, especially for motor vehicles and electrical goods. The economies of the region were badly affected by the disintegration of the Soviet Union. Now under the planned economy these republics are making attempts to return to levels of economic development. The countries of Central Asia have not sufficient industrial capacity for meeting domestic demand for consumer goods. Textile industry

other small-scale industries are under-developed as compared to their former capacity. These republics sometimes imports more than 70 percent of consumer goods from other countries (Schwoob, 2001).

Tajikistan exports about 20% of its cotton. Nearly 75% of the irrigated land in used for the cultivation of the cotton. It supports approximately 75% of households of the farmers. It means that it is the major source of income for

75% of poor families. Tajikistan has significantly reduced the amount of mineral fertilizers for crops since independence. It has also stopped using toxic chemicals in agriculture (ADB 2010).

2.8 Leather Industry

The entire Central Asian region is a large producer of raw animal skins and semi processed wet blue skins. In Kokand, Urgench and Khodjaabad areas of Uzbekistan there are dynamic domestic leather production facilities.

Kazakhstan has a large number of cattle and sheep. In Petropavlovsk, the

Siriopet tannery produces leather products, about 170 tonnes of leather and semi-finished leather. Chromium is applied to the animals‘ skin to convert it into leather. Tajikistan exports approximately 90 per cent of raw skins to

Turkey and China (Kerven, et al, 1996).

2.9 Silk and Textile Industry

In Central Asia region, the sericulture is as old as in India. It was introduced in the region in the fourth century A.D. sericulture, cotton and textile industry has been associated to traditions, culture, and economies of

Central Asia and India for thousands of years (Strickman, Porkka, 2008). In the

ancient times it was through the towns of Central Asia that silk goods and raw silk was exported and traded to Persia and India from China. Some other commodities were also traded through the Central Asian region like spices, amber, glass and tea. In the last few decades, the total area used for the cultivation of mulberry has decreased and the sericulture industry had also declined (Rahaman et al, 2013).

All the countries of Central Asia including South Kazakhstan produce high quality of cotton. In this region, labour, electricity and industrial lands are very cheap. Resultantly, the textile industry can be a highly profitable sector for foreign companies. Once again, sericulture is developing as a main source of economy following the collapse of Soviet Union. It could increase employment opportunities for the rural population. It could also be helpful to prevent migration of the people to the cities. In the world market, Uzbekistan is the third largest country in the world after China and India to produce silk. The

Uzbek republic produces about 20,200 tons of cocoons annually. More than 300 tons of fresh cocoons are also produced annually by Tajikistan (Stobdan, 2015).

The countries of the Central Asian region are divided on political and ethnic lines. This is a new factor for competition between the new and old competitors. Various competitors will play the game in the form of energy oil and gas pipelines from Central Asia to other countries. These pipelines are still under discussion between CARs and the outside world. However, attempts are being made by each of the competitor to defend its own preferred route.

Kazakhstan and Turkmenistan along with Azerbaijan are all landlocked

countries and for the same reason, they depend on the neighboring states for the export of its gas and oil (Pop, 2010).

The oil and natural gas of the Central Asian region would be exported to

Europe and other countries through Russia in the past. In order to keep a check on the sale of the natural resources of the region to European markets, Russian government wants to maintain the status quo (Edward, 2010). On the other hand, Iran is in favour of changing this trend. Iran wants to use its own territory for the export of the resources of the Central Asian countries through

Persian Gulf to the whole world (Fatima, Zafar, 2014).

China is also a strong competitor in Central Asia. It also wants its control on the energy resources of the region for the support of its own economy.

Starting from the Caspian Sea, building pipelines of about 3,000km has been proposed by China which will also pass through Kazakhstan. China wants to connect these republics through pipelines (Joseph, Cheng, 2011).

The United States of America does not have any direct access to the oil and natural gas fields of Central Asian. US intended to transport the resources of the region to the open market without the control of Russia, China or Iran.

Turkey lies on the outskirts of this game. It enjoyed a strategic location in the region. Turkey wants to become a transit route for the energy resources of

Central Asia to Europe and Asia (Duarte, 2013).

2.10 Actual Production versus Capacity

At the end of 2012, the production of natural gas of the countries of

Central Asia was 141 billion cubic meters. Only Turkmenistan produces 64.4

billion cubic meters of gas during this period. It has been concluded that the whole Central Asian region is producing 2.4% oil of the world while the proven capacity of the region is 4%. As far as the production of gas of the region is concerned, it is 4.2% and the production capacity of gas is nearly 10%. Oil, gas and electricity production of Central Asian region is not equal to its potential capability (Javaid, Rashid, 2015). Many experts are of the belief that even potential capacity of both oil and gas of CARs is not truly measured as a result of territorial differences and variations in climatic conditions. The region could have more potential capacity than proven earlier (Javaid, Rashid, 2015).

The region is facing the overwhelming impediments for the exploitation of hydrocarbons and electricity production. These obstacles are various in natures. Firstly the Central Asian region is landlocked. It is not easy for energy exploration companies expose these resources to the world energy markets.

Many investors are not ready to invest in energy sector due to its accessibility factor.

Secondly, for the oil companies of the west, EU and USA, the constant control and influence of Russia over the majority of oil fields and routes of pipelines of Central Asia is a big question mark. However, to cope with their own energy needs, China and India both have made huge investments in

Central Asia‘s hydrocarbons sector. The presence of NATO forces in the region has various implications for regional players like China, Russia, Afghanistan,

Iran, India, Pakistan and Turkey. The key interests of United States in the

region are for energy, Security, and Democratization of Central Asian states

(Omelicheva (2015).

Thirdly, the main obstacle for oil companies to invest and under- development of hydrocarbons and low electricity production are territorial disputes among the Central Asian republics, water disputes among the states, unfriendly and non-cooperative environment for investment, unnecessary intervention of the government, inability of the government to frame sufficient rules and regulation for investment, corruption at court and government level, insufficient rights for protection of the property, lack of infrastructure facilities for exports purposes, outdated power transmission lines and equipments, monopoly of the government to control oil, lack of motivation for private partnerships etc (Kassenova (2011) .

Chapter 3

China’s relations with Central Asia

It is widely accepted that since the collapse of Soviet Union, relationships between China and the Central Asian countries have improved steadily. In the history, there were military tensions along the border between

China and its neighboring countries. Now under the umbrella of Shanghai

Cooperation Organization, trade and political cooperation among China and

Central Asia has increased (Adnan, 2015). The Central Asian region has the potential to become a major source of energy supply to rapidly growing economy of China. It would be important to study the roots of the Sino-Central

Asian relation, which are still important and visible today and it would also be helpful in understanding the current condition and possible development of the relations between China and Central Asia (Umarov, Pashkun, 2006).

3.1 The break-up of the Soviet Union:

A new situation was created for China in 1991 at the emergence of five independent republics as result of the dissolution of the Soviet Union

(Lauritzen, 2011). The first repose of China to unfold the situation was amazingly careful. It was the first response of China when it described the developments in Central Asia, as their ―internal affairs‖. It was confirmed by the officials in Beijing that they would respect the choice made by the people of these states (Kim, 2005).

The sovereignty of Central Asian states on the diplomatic stage was recognized by China in December 1991. Separate official documents were signed by China in January 1992 for the establishment of diplomatic relations

with CARs. Presidents of three Central Asian countries, Kazakhstan,

Kyrgyzstan and Uzbekistan paid visits to China in the same year (Joseph,

Cheng, 2011). Tajikistan‘s president also visited China in 1993. Relations between China and Central Asia strengthened deeply as a result of these visits

(Joseph, Cheng, 2011).

In 1994, four principles were proposed by Li Peng as ground rules for promoting relations between them, during his visit to four Central Asian republics. These included: promoting peaceful coexistence, economic prosperity, non-interference in their internal affairs, and respecting territorial integrity and sovereignty of each other. The Chinese government was also successful to promote its one China policy. It was also expressed by the Central

Asian states that the sole legal government of China is the government of the

People‘s Republic of China, and Taiwan is an inalienable part of China. The

Central Asia governments expressed that they would be against any attempt which would create ―two Chinas‖, or ―one China, one Taiwan‖. The Central

Asian states also reiterated that they will not try to form any type of ties with

Taiwan at the government level (Stobdan, 2015).

3.2 Great power rivalry:

The swift entry of China in Central Asian region has get an appearance of respectability and an image of trustworthy partner in the region. The latest

Silk Road Economic Belt scheme of China has planned funds of about $40 billion to promote infrastructure, industrial and financial co-operation (Indeo,

2016). In order to strengthen their ancient relationships with China, the

countries of Central Asia have swiftly pledged to support the ‗Silk Route Belt‘ idea of the former. Gen. Liu Yazhou of the PLA has expressed that Central Asia was a large piece of cake given to the people of China by the heavens (Stobdan,

2015).

3.3 The Roots of the Sino-Central Asia relationship:

The ties between Central Asia and China are very old. It dates back to ancient period, when the Great Silk Route passing through the Central Asian region was linking west with China (Waugh, n.d). Central Asia is located at the crossroads of trade routes. Chinese rulers have repeatedly tried to conquer this strategically important region during the last two millennia. In the past, China‘s control over Central Asia has been about 425 years and the present rule of

China over Xinjiang is the fifth episode (Kemenade, 1998).

The first such endeavor was made during the Han dynasty (221 B.C.-

A.D. 220). In 60 BC, military missions were launched against the Huns, and as a result, a viceroy of China was installed in Xinjiang. At that time, Xinjiang was part of Central Asia and until then mostly free of China‘s influence. The establishment of silk trade with the Eastern Roman Empire was the main task of the Chinese. Nevertheless, starting in AD 140, Chinese rule over the Xinjiang was destroyed by Kushans, Huns, Mongol and Turkic tribes. The Chinese were unable to re-establish their control over Central Asia for a long period

(Microsoft® Encarta® Encyclopedia, 2000).

The Tang emperors during the Tang dynasty (618-906) (Goucher, 1998) did make another attempt to subjugate Central Asia. The rulers of China

wanted to conquer all of Central Asian region in an ambitious plan.

Nonetheless, in 751, at the battle on the Talas River, the Arabic tribes crushed the Chinese troops in one of the most important turning points in the history of the world. The domination of Chinese almost completely shrunken and its strong cultural relationships with the region were broken after this historic combat. Buddhist kingdoms permanently disappeared and Islam spread across the whole Central Asian region (Umarov, Pashkun, 2006).

This was only in the middle of eighteen century that next endeavor was made to re-establish Chinese influence in the region. A new military expedition to the Central Asian region was dispatched in 1755-59 by Emperor Qian Long.

Resultantly, Qian Long was successful in the establishment of indirect rule. He appointed a governor-general in Kuldja (Yining) and vice-governors in Tihua

(Urumqi) and Kashgar/Yarkand. The main objective of this indirect rule was to guarantee Manchu influence in the region without including the area in the provincial structure of China. In order to fade the power of Kazakh and Mongol nomads, Uighur peasants were encouraged to inhabit in the Ili Valley north of the Tian Shan mountains (Dorneich, 2008).

In the first half of the nineteenth century a new period started in the history of Central Asia, known as ―Great Game‖. Central Asia became a ground of competition for big powers of that time, especially Great Britain and Russia.

China was also struggling to preserve a bit of influence in the region (Ansaree,

2014). In Central Asia, Manchu authority started to decline. In the game, the independence seeking Uighurs and the expansion from tsarist Russia were

particularly dangerous. Russia was successful to strengthen its position in

Central Asia. Khanates of Khiva and Kokand and the emirate of Bukhara were conquered by Russia in the middle of the nineteenth century. About 440,000 square kilometres of land was annexed by the tsarist thus pushing the border of the Russian empire 250 to 600 kilometres eastward. In 1865, British India and the Ottoman Empire helped Yakub Beg to become the ruler of Kashgaria, a newly proclaimed state. Yakub Beg was defeated by Chinese two years later and his kingdom was also destroyed by them (Thomas, Allsen, 2001).

Except Eastern Turkistan and Afghanistan, direct rule was established by Russians over almost all of Central Asia throughout the next several decades. After the formation of the Soviet Union as a result of the October

Revolution in Russia, Central Asia became an integral part of the Communist state having Marxist-Leninist ideology. In the long run, Russia did not united

Turkestan and strong nationalist movements were also not allowed to grow

(Umarov, Pashkun, 2006).

3.4 China’s entry into Central Asia:

Direct relations between China and CARs were extremely limited during the lifetime of Soviet Union, as official interactions were channeled almost totally through Moscow. In 1991, in Chinese foreign policy circles, there was a significant lack of regional expertise. China was apprehensive about the creation of a security vacuum and instability in Central Asia as a result of the collapse of Soviet Union that would have an adverse effect on Xinjiang province of neighboring China (Swanstrom, 2011). China swiftly established

relationships with the newly born states, but for many years this region was neither an economic nor a diplomatic priority. Initially China‘s key objectives were to democratize borders and to secure support for its policies in Xinjiang province. In order to attain these objectives including demilitarization, in April

1996, the Shanghai Five Forum was established by China. Its other members were Russia, Kazakhstan, Kyrgyzstan and Tajikistan. At the governmental level this approach was successful, but many ordinary Central Asians viewed border deals with suspicion (Marat, 2008).

China started to take note of economic opportunities in Central Asia in the mid-1990s. It signed the first of many deals in September 1997 with

Kazakhstan for the development of oil and gas fields and construction of pipelines. There were approximately 1,000 Chinese enterprises in Central Asia by 2005. Between 2000 and 2010, Chinese trade with the five Central Asian states increased 30-fold (Cooley, 2012).

China wanted economic relationships between Xinjiang and Central

Asia to ensure stability in both sides. Consequently it would be another way ensuring China‘s quest for a ―peaceful rise‖ to great power status. It has been actively started numerous vital infrastructure projects such as, roads and pipelines to link CARs with Xinjiang, since the early 2000s (ICG, 2012).

China has become an important player on the Central Asian landscape since 2000s. Until then, the region had been mainly divided between the United

States and Russia. Today, the future of Central Asia lies in its ability to avoid the destabilizations and to contribute to the economic prosperity of Asia–Pacific

with the help of China. In less than two decades, China has been able to make a huge and multiform entry in Central Asia. On the bilateral diplomacy level it has managed to prove itself a loyal friend and has been able to turn the

Shanghai Cooperation Organization (SCO) into a structure valued by its members (Joseph, Cheng, 2011). Beijing has also become an important player in infrastructure and hydrocarbon sector as well as trade (Peyrouse, 2009).

3.5 China’s goals in Central Asia:

The overall engagement of China with CARs can be divided into four major and coinciding categories. First, the strategic importance of CARs and its possible implications on global events is recognized by China. Second, China is well aware of the fact that an important role can be played by CARs in future economic development of China, as the region has the potential to supply huge energy resources (Higashi, 2009). Third, China has political and security interest in the region. It wants to make sure the individual states of Central Asia grow in a way that does not become a threat for China, such as by establishing radical governments in these states. Lastly, China recognizes that bilateral relations as well as multilateral approach to cooperation in achieving their common objectives (Kim, 2005). Nevertheless, it is possible that the priorities of

China might change in Central Asia with the growth of the Chinese economic, political, and military strength (Kim, 2005).

3.5.1 Economic Relations:

In its trade with the Central Asian countries, one of the most important products for China is the energy sources and other raw materials. In 2003, for

instance, about 80% of the exports of Kazakhstan to China contained raw materials in which 58% were sources of energy and 24% were ferrous and non- ferrous metals.

The volume of trade between CARs and China is growing swiftly. It increased up to US$ 27 billion in 2004. It was 1.5 times more than the trade in the year 2000. The bilateral trade volume in 2005 was 4% higher than that for the same period in 2004. Trade volume first nine months of 2005 was equal to the previous year's figures. In 2006, China–Central Asian trade increased to

US$13 billion according to Chinese figures and US$10 billion according to

Central Asian figures. In 2007, as compared to US $21 billion for Russia it reached to $18 billion. Thus the trade gap between China and Russia dropping to the advantage of the China. The economic presence of China in neighboring countries such as Kyrgyzstan and Kazakhstan is already higher than Russian‘s if we take into account the shuttle trade (Raballand, Andresy, 2007).

In Sino–Central Asian trade relations, the trade is carried out mostly between China and Kazakhstan. Kazakhstan rose to become the second largest trading partner of China in the region after Russia. Of the total trade,

Kazakhstan has 70%, Uzbekistan and Tajikistan each have 9%, Kyrgyzstan 7% and Turkmenistan only 2% of share in trade with China. It is estimated that about 75% of China‘s exports to Kyrgyzstan are re-exported to other countries

Central Asia. After gold extraction, the re-exportation of Chinese goods to other

Central Asian states has become the second largest economic activity of

Kyrgyzstan (peyrouse, 2009).

The leaders of China openly expressed their intention to pay about

US$1.5 billion, the full expenditure to build a highway from China to Central

Asia, through Kyrgyzstan (RFE/RL, 2004). The total trade of China with the

Central Asia countries reached to US$ 46 billion in 2012 (Gupta, 2013).

The land locked Central Asian Republics are looking to build connectivity to the world markets. They are making efforts for the revival of the ancient Silk Route. The most dominant aspect of CARs is their connectivity with Russia. Currently, the countries of this region have started discussions with the outside world new connectivity. The Kazakh-China gas pipeline reflects new connections of the region with China. In order to facilitate the connectivity of the Central Asian region with the rest of the world, the building of new infrastructure is being in progress (Yenikeyeff, 2008).

Bilateral as well as multi-lateral ties have been established with Central

Asian states by China. Primary objective of China has been to make use of huge mineral resources of Central Asia for its economic development; to supply export manufactured goods to Central Asian countries and to defend itself against the menace of ―separatism, extremism and terrorism‖ originating out of

Central Asian region. Various kinds of connectivity have been built by China with Central Asia. With the passage of time, the dependence of Central Asian states on China has been rising (Joseph, Cheng, 2011).

It is the bad luck of the CARs that they are land-locked having no direct access to the sea. Resultantly, they cannot transport their oil and gas to the outside world. Nevertheless, there are four routes for the transport of oil and

gas from Central Asian region, such as, Northern route, East route, Western route and Southern route. For the transport of its hydrocarbon resources, the land locked Central Asian countries are working in cooperation with the outside world (Jacob, 2005).

Russia is favoring and has occupied the Northern route. This route runs from Kazakhstan‘s Baku and Tengiz field to the Russian seaport Novorossiysk in the black sea (Yenikeyeff, 2008). However, due to the monopolistic and dominant policies of Russia over the main transport network of the Central

Asian states, the latter are searching alternative routes with the help of extra- regional powers. The Eastern route is linked with two oil fields of Caspian Sea in Kazakhstan. This route is proposed and supported by China. On 1st August

2012, China Central Asia Gas Pipeline Project was launched. Both the countries have invested in Kazakhstan-China oil pipeline which is 3200 km in length.

There is possibility to bring oil through Eastern route from Kazakhstan to South

Asia as China has a border with South Asia (Singh, Kaur, 2014).

The Western route is supported by the United States to use Caspian Sea for the transport of oil to Europe (Fatima, Zafar, 2014). The Southern route is the proposed route through either Pakistan or Iran (Taraporevala et al. 2014).

Investment has also been made by Turkmenistan and Uzbekistan to join gas pipeline (Gupta, 2014).

For the first time, in 1996, China has proposed the construction of

Kazakhstan-China pipeline. This project was opposed by both Russia and the

United States. Kazakh government was encouraged by Moscow to exclusively

use Russian pipelines. It was proposed by Washington that the surplus oil from

Tengiz should be sent to Europe by sea across the Caspian Sea (Fatima, Zafar,

2014).

Nevertheless, in September 2004, China continued with the construction of the pipeline. On December 15, 2005, the President of Kazakhstan, Nursultan

Nazarbayev approved the initiation of filling about 1,000 km of the pipeline

(Oil, Gas & Energy Law Intelligence, 2006). Atasu, in central Kazakhstan and

Alashankou, in Xinjiang is connected through this pipeline. The pipeline had carried about 200,000 barrels a day in 2006 to the Dushanzi refinery in China. It was even claimed by Zhou Jiping, the then Chinese Vice-President of Petro-

Kazakhstan, that the pipeline was the ―new Silk Road‖ (Pala, 2006).

Since Kazakhstan-China oil pipeline has been discussed, the performance of the pipeline is less than its maximum capacity; even though oil production of Kazakhstan has increased twofold since the late 90s. Certainly, about 10 million tons of oil has been transported through the pipeline. It has been estimated that it would transport twofold of this capacity (Duarte, 2014).

There has been a progressive increase in economic cooperation between

China and the five Central Asian countries. From 2005 to 2010, the trade volume between two sides has increased by 40% per year. In 2010, it reached to

US $18–20 billion, and this growth is showing no signs to stop. China can enhance its energy security and can generate revenue for the stimulation of its economic development through economic cooperation with CARs (Schwoob,

2011).

Central Asia imports about 92 percent of finished products from China.

There is abundance of the raw material in the Central Asian Countries. These raw materials are imported by China and the finished goods are exported to these five Central Asian Republics such as Kazakhstan, Uzbekistan,

Kyrgyzstan, Tajikistan and Turkmenistan (Wu, Chen, 2004).

The whole Central Asian region is a large producer of partially processed wet blue skins and raw skin of animals. Uzbekistan is the home of domestic leather production industries. These factories are located in

Khodjaabad, Kokand and Urgench. Approximately 90% of the raw skins from

Central Asia are exported to China. In the same way, Kyrgyzstan exported 90% of cattle skin, sheep, and lamb hide to China (Stobdan, 2015).

3.5.2 China’s Political Interests:

China discovered its new Central Asian neighboring states at the time of declaration of their independence in 1991. They were extremely gratified to settle good neighborly relationships with a state about which they were totally unaware. In Central Asia the interests of China have been planned in different phases. From 1991 to 1995, the main concern of China was the demilitarization of the borders, signing treaties of demarcation and stopping the growth of

Uighur separatism. From 1996 to early 2000s, the major aim of China was to create a platform for mutual discussion, and to elaborate a framework for collective security (Joseph, Cheng, 2011).

Indeed, political tensions decreased as a result of economic cooperation; therefore, vigorous attempts were made by China to establish itself on the

markets of Central Asia in the first half of the 2000s. Lastly, since 2005, it has been hoped by China to establish ways to promote the Chinese language and to train the elites of Central Asian according to the Chinese model but these hops are still timid (Peyrouse, 2009).

Chinese scholars are well aware of the fact that China has the potential to do more in the region. They have pointed out that engagement in the region would need to be in line with broader geo-strategic interests of China. A certain affinity is seen by China between the authoritarian regimes of Central Asia and its own; it tries to defend them, at least, with similar expression in public

(Xizheng, Lin, 2009). It has also been warned by the scholars of China that

Western values might destabilize those countries of the world to which these values are not suited. Central Asia is viewed by China as a ground for competition among big powers like the United States and Russia (Swantrom,

2011).

The Arab Spring and the colour revolutions in Central Asia and in

Eastern Europe are claimed by some Chinese scholars to be part of US- engineered strategy to democratize these regions and destabilize China. They are of the view that their problems could not be solves through democratization. Instead, they believed that these governments need to develop more reasonable and non-Western techniques to remain in power

(Zhiping, 2010).

In two decades, after the dissolution of Soviet Union, the influence of

China in Central Asian has evolved yet its main interests in the region have not

changed. The Central Asian region is of significance importance China due to its proximity with the Xinjiang region of China. Any type of destabilization in

Central Asia, Afghanistan or Pakistan could have a direct effect on the northwest region of China (Peyrouse, 2009).

3.5.3 China’s investment policy:

The countries of Central Asia provide new markets for the products of

China. Thus the investment card has been played by Beijing. China is concentrating to build roads and railway lines, to improve electrical grids, to improve hydroelectricity resources, to exploit precious mineral resources, and to develop trade relations with CARs (Swantrom, 2011).

Among the investors in Central Asia, China is the only investors that attach importance to invest in the banking sector. This sector is often neglected by other countries. In CARs, this sector permits to pursue large-scale projects.

Almost all the Central Asian states have weak banking systems except

Kazakhstan. Chinese Industrial and Commercial Bank and the Bank of China have opened branches in Kazakh state. The Development Bank of China and the Kazyna Development Fund has agreed for the creation of a Sino–Kazakh development fund in 2006, for the purpose of investment in collective infrastructure projects worth US$5 billion (Hell, J. S. et al 2000)

In order to gain advantageous access to the Stock Exchange of Hong

Kong, Kazyna is also looking forward to send representatives to Beijing, Hong

Kong and Urumqi. In 2009, a loan of about US$10 billion was extended by

China to Kazakhstan some weeks before the summit meeting of SCO in

Ekaterinburg. Half of the money is to be paid by China for the purchase of the

MangistauMunayGas by the China National Petroleum Corporation (CNPC) and for the construction of the Beineu–Bozoi–Akbulak gas pipeline. The other half of the amount would be a loan Paid to the Development Bank of

Kazakhstan by the Export–Import Bank of China (Peyrouse, 2009).

It is the firm belief of Beijing that stability in CARs will be strengthened through economic growth in Central Asia. Beijing gives priority to Cross- border trade with CARs. The Central Asian countries are encouraged by the

Chinese officials to take advantage of China‘s ―Go West‖ policy which is intended to develop the western provinces (Xiufang, Li, 2007).

As it is asserted by some specialists that economic growth produce political stability close economic relations with CARs allows China not to worry about the potential spread of political instability in its western provinces (China

Daily, 2011). Chinese experts are of the view that the problem of political instability will be resolved if financial and economic cooperation among China,

Central Asia and Russia will be boosted. Its next solution is strengthening of the mechanisms of SCO (Guang, 2012).

SCO has been used by China on primary basis to promote its economic interests by putting them in a multilateral framework. China has made generous investment and provides assistance for development particularly to

Kazakhstan and Tajikistan. China offered development loans package of a US

$900 million in 2004 to SCO members. Out of the total amount, US $600 million was received by Tajikistan and the remaining $300 million was received by

Kyrgyzstan (Joseph, Cheng, 2011). In the resource-rich Central Asian countries,

SCO is used by China for securing its dominance in the energy sector.

Investment is China‘s major source for influence in the Central Asian region; therefore, Beijing tries to participate in any economic program which is proposed by the local governments (Kassenova, 2009).

CNPC is regarded as the most flourishing foreign investor in the hydrocarbon sector of Turkmenistan. China has nonstop access to major fields of gas in Turkmenistan. In 2009, Central Asia-China gas pipeline was started. It carries gas from Turkmenistan and other Central Asian states to Shanghai and

Hong Kong. On initial stages, the cost of this project was US $ 8 billion which rose to US $ 10 billion (Javaid, Rashid, 2015).

Significant investment has been made by China in building highways, pipelines, railways and electricity grids for socio-economic development of its friendly Central Asian regimes. Similarly, China is also seeking support for its one China policy from these states. However, Chinese experts are aware of the repercussions caused by this economic investment in the region. Beijing is in dire need to change the perception that Central Asia is used as a ‗resource pit‘ by China (Lifan, 2012).

3.5.4 Energy cooperation with the region:

China desires to expand its energy cooperation with the regimes of

Caspian Sea and Central Asia. This cooperation is part of new geo-political and strategic approach of China to this region. China is considering itself as a neighbor and an advantaged partner of the Central Asian states. Lan Peng

desires for greater cooperation in energy sector between China and CARs. He argued that risks are associated with all the other countries of the world that could supply gas and oil to China in different ways. The Middle East has 61% of world oil reserves and 41% of natural gas reserves, but there is political instability in this region (Baffes et al (2015).

There are other drawbacks while doing trade with Africa like long distance between China and Africa, threat of terrorism and social instability. In geo-political terms, Latin America is very much close the United States. On the other hand, Central Asia is geopolitically too much close to China and the latter has advantages in the region. Economic development in the western part of

China will be boosted as a result of close cooperation with Central Asian region

(Cabestan, 2011).

Natural gas resources of China was about 56 trillion cubic meters and its consumption was 80.7 billion m3. It depends on external sources for 5.8 % of supply (Higashi, 2009). Supply of the natural gas from outside sources was projected between 30 and 40 billion m3 by 2010. It is estimated that supply from external sources will increase to 80–90 billion m3 in 2010. Imports of natural gas from Central Asia is helping China to decrease dependence on LNG, which is more exposed to the threats of piracy and terrorism; as, it must be imported by sea (Cabestan, 2011).

Construction of energy infrastructure from Central Asian region has been prioritized by Beijing. For example, an oil pipeline has been constructed from Western Kazakhstan to China. Another important project is gas pipelines

from Turkmenistan to China after passing through Uzbekistan and Kazakhstan

(Duarte, 2014).

In December 2009, a gas pipeline from Turkmenistan to Xinjiang has started operations. The gas pipeline cover a distance of 188 km in

Turkmenistan, for 530 km it passes through Uzbekistan, and runs for 1,300 km in Kazakhstan before linking to the Chinese grid, stretching 8,000 km all the distance towards the east of the country. This pipeline project is a big step to ensure the energy security of China. The project would be beneficial for both sides, China as well as Central Asia. Within the SCO, a model has been provided by the project for multilateral cooperation and helped to appropriately resolve the disagreements among the regional countries. The relations between Turkmenistan, Uzbekistan and Kazakhstan are not cordial

(Javaid, Rashid, 2015). This project has got universal support, as technical assistance has been offered by Russia and the United States. It provides a good example of gentle rise of China (Swantrom, 2011).

The general strategy of China is to link all the acquired fields with the huge Sino–Kazakh pipeline. Despite the challenges faced by the region, China has been successful to convince Uzbekistan, Turkmenistan and Kazakhstan to build a common pipeline to sell jointly gas to China. In Turkmenistan, the

CNPC is the first foreign gas company to attain the privilege to pursue onshore activities for the extraction of the gas on production-sharing basis agreement

(Sir, Horak, 2008).

Beijing has also interests in the hydro-electricity sector in Central Asia.

The region is seen by China as a probable cheap source of electricity. It could fulfill the energy requirements of the Xinjiang province. An important role has been played by Sino–Central Asian projects in local economic development. In

Kazakhstan, on the Khorgos River, Chinese companies are constructing the

Dostyk hydro-electric station. It is a tributary of the River Ili. Ili serves as a border between the two states. The Moinak hydro-electric station is also being constructed by China on the Charyn River. It is situated about 200 km away from the ex-capital Almaty. Since the independence of Kazakhstan, the Moinak hydro-electric station proved to be the first ‗turnkey‘ project for a new station.

Currently, Beijing and Astana are discussing the construction of an electrical coal power station near the Ekibastuz city on the Irtysh River (Kuzin, Lapteva,

2014).

In Kyrgyzstan, on Xinjiang border, the construction of numerous hydroelectric stations in the Tian-Shan mountains has been negotiated. Currently, discussions are underway for the construction of three stations on three cross- border rivers, which will be financed by China. These rivers run towards China from the glaciers of Kyrgyzstan (Peyrouse, 2007).

Currently, China is gradually increasing its presence in mineral industry of the region. Central Asia region has huge reserves of gold, copper, uranium, zinc, tungsten, iron and molybdenum. The gold of Kazakhstan and Kyrgyzstan has attracted China very much. A contract for joint venture has been signed between metallurgic complex Kazakhaltyn Mining and China National Gold

Group Association in 2005, for exploitation of gold deposits of Kazakhstan.

(Safirova, June 2016).

China followed the Russian footprints in May 2008 by involving in the development of the Tursunzade aluminum smelter. Aluminum industry is the main industry of Tajikistan. Chinese National Corporation for Heavy

Machinery has signed an agreement with the Tajik Aluminium Company

(TALCO) for the construction of two factories in the Yavan district. It will supply raw aluminum to TALCO for further refinement (Pomfret, 2009).

In order to complete the construction of numerous nuclear power plants,

China needs uranium of Central Asia. To import nuclear fuel, numerous deals have been negotiated with Kazakhstan by China, particularly that between

Kazatomprom and the China Guangdong Nuclear Power Holding. The strategic cooperation treaty of 2005 promotes to strengthen the relations in the atomic energy sector between the two states and declares to unify more sectors of the industrial cycle to produce enriched uranium. Therefore, Kazatomprom would be the only foreign uranium supplier to the nuclear market of China.

Thus, the authorities in Astana are swollen with pride of receiving a certain strategic recognition (Peyrouse, 2009).

3.6 SCO as a tool with China:

The Shanghai Cooperation Organization is one of the tools at the disposal of China not only for bringing stability in the region, but also increasing its own influence. It is an intergovernmental security organization composed of China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and

Uzbekistan, India and Pakistan. It is obvious that SCO is motivated by China

(Joseph, Cheng, 2011).

The ‗Shanghai Five‘ was created by China in 1996. It was converted into

SCO in 2001 which includes both China and Russia (Marat, 2008). Perhaps

Russia has only been accepted the creation of this multilateral organization in order to monitor the expansion of China into the region. With the passage of time SCO has certainly acquired a more independent role in the region. This has added to influence of China in the region and resultantly the trust of Russia in the SCO has become diminished (Swantrom, 2015.

China is the main contestant in the region. Since the collapse of Soviet

Union, it has been waiting to fully enter into the Central Asian region with multiple objectives. While using the SCO as a multilateral vehicle, China has been trying to pursue its interest to promote multiple engagements of economic, security and cultural links. In fact, Russia‘s monopoly over the energy exports of Central Asia has been rapidly challenged by China (Indeo,

2016). Transport of oil, gas, uranium and other minerals to different town of

China has been facilitated in the recent years through huge development of infrastructure which includes building of pipelines, roads, and railways

(Stobdan, 2015).

The SCO continued to be a forum for discussing trade and security related issues during 2000s. The security issues include counter-narcotics and counter-terrorism (Swantrom, 2011). In SCO Russia and China were the key players. As time passed it became clear that the growing economic

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predominance of China was increasingly changing significantly and at the moment is attaining critical political influence (Cooley, 2011).

In order to counter terrorism and drug trafficking, China wants to utilize the SCO for strengthening security cooperation with Central Asia. Thus, it will enable China to guarantee the security of supplies of energy, and ensure the safety of citizens of China working in Central Asian countries (Doyon, 2011).

There are certain principles which are followed by China in its dealings with Central Asia: To completely respect the path of development which the

Central Asian states have selected for themselves. To back the political systems and the endeavor these republics are making for their political systems. For resolving disputes with the countries of Central Asia the method of dialogue will be used (Zhiping, 2010).

Strategic approach has been followed by China towards Central Asia. A grant and aid of about US$ 10 billion has been offered by China to SCO members. It has directly focused on cooperation in trade, energy and infrastructure. Central Asia has been linked with the western regions of China.

Starting from 2001, a number of anti-terror military exercises have been carried out by China and Russia within the framework of SCO (Gupta, 2013). China has a privileged place in Central Asian region as a constituent member of SCO and it must be prepared to assert it. It could not be ready to let other player like

United States and Russia to dominate such a strategically important region

(Bassan, 2011).

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3.7 China’s new strategy towards CARs:

Western areas of China more or less completely depend on the continuous trade and contact with CARs. That trade in turn is dependent on people-to-people interactions being as cooperative and friendly as possible.

Economic development of the western border area is the main pillar of the strategy to calm down the separatists movements and to stabilize the western border. The trade of Xinjiang with CARs is about 83% of its total trade while

80% of total trade of China with Central Asia is through Xinjiang

(Tukmadiyeva, 2013).

Attempts are being made by China for building political and economic links with Central Asian region. Now China is the main source of foreign investment for Central Asia and its major trading partner. This country is playing a pivotal role in the SCO. Chinese analysts have certain concerns about the influence of China in Central Asia. It is the Central region which is ready for struggle among major powers for resources (Doyon, 2011).

China is attempting to prove itself as a ‗good neighbor‘ for Central Asian

States. Since 2009, several trips have been made by Hu Jintao to Central Asia. In

November 2010, Wen Jiabao visited Kazakhstan for an SCO meeting. It has been expressed by Sun Zhuangzhi that China no longer focuses only on traditional border security in its security affairs with its neighbors. Beijing requires the protection of its energy supplies, in addition to its more than

US$10 billion of investment in CARs (Paramonov et al, 2010). The internal stability of China will be at stake if there will be instability in neighboring

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countries. In 1994, 1996, and 2002 agreement were signed by China to end differences with Tajikistan, Kyrgyzstan and Kazakhstan to ensure security of the borders in the northwest (Joseph, Cheng, 2011).

The greatest outstanding security concern of China is Xinjiang and the war against the ―three evils‖ of separatism, extremism and terrorism. It is the desire of China that the countries of Central Asia must take an active part in its clash against the separatist movements of Uyghur. Apart from China, Uyghur are largely inhabited in Central Asia. Many separatist groups have their bases in CARs. China is also worried about the instability in Kyrgyzstan and Fergana

Valley. It shares a border of 1,000 km with Kyrgyzstan. Fergana Valley spreads across Uzbekistan, Tajikistan and Kyrgyzstan (Doyon, 2011).

In the Central Asian states, the number of sectors in which China is involved is still comparatively very limited. The major commodities which are imported by China from Central Asia are Energy resources (oil and natural gas) and raw materials such as cotton, uranium, iron ore, copper, and other non- ferrous metals. China wants to broaden its investment in Central Asia in the fields of transport, electricity and telecommunications. It has been suggested by

Li Xin that loans could be offered by China for oil (Joseph, Cheng, 2011).

According to Ling Ji, supporting the economies of CARs is in the interest of both China as well as CARs. China should make investment in infrastructure, energy, and other fields. This could be helpful in improving social stability. Declining growth as well as extremism, separatism, and terrorism has undermined the social stability since the dissolution of Soviet

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Union. Currently, China has invested more than US$10 billion in Central Asia

(Schwoob, 2011).

Table 3.1

China’s trade with CARs 2012

China as the Exporter and Importer

Country Trade Export Import Trade Export Import value value value Value value Value US$ 1000 US$ 1000 US$ 1000 % % % Kazakhstan 25,676,790 11,001,670 14,675,120 2.9 15.0 -4.7

Kyrgyzstan 5,162,470 5,073,510 88,960 3.7 4.0 -9.4

Tajikistan 1,856,700 1,747,870 10,883 -10.3 -12.5 50.7

Turkmenistan 10,372,710 1,699,330 8,673,380 89.4 116.7 84.8

Uzbekistan 2,874,680 1,783,050 1,091,630 32.7 31.2 35.2

Source: Ministry of Commerce of the People‘s Republic of China, Department of European Affairs.

3.8 Military and Security Cooperation:

The fight against terrorism and regional security are included the list of

SCO cooperative goals. Annual ―peace missions‖ are staged by organization. It also designs military exercises to help in the elimination of the ‗three evils‘

(extremism, separatism and terrorism), to promote regional security and to deepen cooperation (SIPRI, 2006).

The military assistance of China with the Central Asia Republics mainly focuses on joint-training exercises which are either held bilaterally or multilaterally. In 2002, the first bilateral exercises were held between China and

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Kyrgyzstan. China took part in more than twenty multilateral and bilateral exercises with other SCO members from 2002 to 2010. In eastern Kazakhstan, in

August 2003, the first multilateral exercises were held. Except Uzbekistan, personnel from all of the member countries participated in these exercises.

Since then, almost every year these exercises have been conducted but have not significantly expanded. A terrorist attack is typically simulated by them and involves taking back residential areas and combating large-scale uprising, or, more seldom, state collapse (Peyrouse, 2010).

Aid provided by China to other countries of Central Asia is generally not large but sufficient in amount. Beijing provided precision equipment and uniforms to Turkmen army in 2007 and a loan of US$3 million was also offered for military needs to it. An agreement was signed between China and

Kyrgyzstan in 2002. Under the agreement China provided vehicles, communications equipment and uniforms to Bishkek amounting US $1.2 million (Laruelle, Peyrouse, 2009).

Military equipments were delivered to the border services of Kyrgyzstan in August 2008, amounting to about US $700,000. China gave US $15 million in military aid to Tajikistan between 1993 and 2008. Uzbekistan was the first country in the Central Asian region to get sniper rifles from China in 2000. In

2009, an agreement worth US$3.7 million was signed between the two countries to equip border crossings of Uzbekistan with mobile scanning systems for which financial grant would be provided by China (Peyrouse, 2010).

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In 2002, the Regional Anti-Terrorist Structure (RATS) was formed. It is based in Tashkent. The main objective of RATS is to assist in the coordination in combating terrorism, separatism, and extremism. It acts as a centre which share information. It also provides help in the joint anti-terrorist drills of SCO and drafting legal documents of anti-terrorism. The main achievement of RATS is development of files of related information of alleged terrorists, separatists and extremists and their channels and funding sources. All member countries of

SCO are tempted to share secret information with it on suspected people and groups (Bailes, 2007).

3.9 New routs:

Primarily, it requires to be realized that various transit and transport systems have already been facilitated by CARs and China for overcoming their inter-regional trade problems. Its old rail link with Kazakhstan has been reactivated by China since 1992. Under latest ―Silk Road Economic Belt‖ project of China, numerous major road, railway, and pipeline projects are being launched passing through Xinjiang and then entering Kyrgyzstan, Uzbekistan,

Turkmenistan, and Iran. Xinjiang Uygur Autonomous Region (XUAR) is developed as the hub for any kind of transport. In Xinjiang, the number of

Class A ports is 16 and Class B ports are 11 linking with eight different countries (Stobdan, 2015).

In December 2014, a grand railway project connecting Kazakhstan,

Turkmenistan and Iran was inaugurated (FNA, 2014). Turkmenistan–

Afghanistan–Tajikistan section will be covered by the second project. Currently,

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planes are in progress for the construction of a 250-mile railroad which will link

Afghanistan to Turkmenistan through Tajikistan. If these projects are completed they would have huge impacts for the region. The would pave the way for connecting the Persian Gulf region, Caspian Sea, Central Asia, Western

China and the northern areas of India (Stobdan, 2015).

3.10 Risks Associated With Doing Business in Central Asia

China is interested to maintain the status quo in Central Asia both for economic and security purposes. These republics seem reliable due to the permanence of the presidents of the region, but each regime of Central Asia lack generosity of spirit and are inundated in corruption and socio-economic problems. It has been complained by the Chinese that the intensity of corruption is far more in CARs than what they have experienced in other countries where they work. Corruption is an awfully serious dilemma. While dealing with these governments, serious problems are faced by China. The ruling elites are criticized domestically who at the same time get financial and political benefit by their relation with bureaucrats of China and thus the investment of China is at risk due to these administrators (ICG, 2013).

Similar problems are faced by China in Kyrgyzstan. It seems those

Chinese migrants as competitors who are hardworking, entrepreneurial and who have the ability to work and live in tough environment. There are apprehensions that the Chinese could take up a share of the already limited labour market and some important sectors of the national economy could be controlled by them. About 7,000 to 10,000 Chinese are working in Tajikistan.

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Their presence has generated concern in that country. Although some unease has been expressed by the local population, the issue has not created so negative perception as in Kyrgyzstan and Kazakhstan (ICG, 2013).

Beijing has tried to solve the problem on diplomatic level in situations where there were apprehensions that the security of its people was in danger and effective response was not there from the host country. For instance, in

August 2011, after the attack on a Chinese-owned gold mine, on three Chinese workers in Kyrgyzstan‘s Naryn region, concerns were raised publically by the

Chinese embassy about poor protection of the rights of the investors. (Pomfret,

June 2009).

In the national security and economic development of China, the Central

Asian region has a central position. The biggest long-term security Chinese apprehension in the region is internal disorder within these governments and its effects. In addition, major worries for China are the withdrawal of the

NATO/US troops from Afghanistan in future. The main reason is the proximity of Afghanistan with China and the threat of increase in activities of terrorists in the region (Khalid et al, 2016).

Cooperation with Russia may be enhanced by China and it may put more security resources in SCO. In June 2012 a declaration was signed in

Beijing at the SCO summit. That declaration may be part of the desire to China for strengthening the security role of the organization in the region in response to the uncertainties and complexities which are facing by the countries of

Central Asia (ICG, 2013).

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China is worried about Afghanistan having the potential of a base for the

Xinjiang‘s separatists. This situation has led China to think about engagement with Taliban, which is not only a terrorist group but also a political force. There are also worries about extremist Islamic groups flowing into Central Asian region. It would be a major problem for Kabul, and even Xinjiang if US troops withdraw without a victory from Afghanistan. Toward its strategy in

Afghanistan, Pakistan is playing a key role. The interests of Pakistan can be equated with the interests of China in Afghanistan (Huasheng, 2012).

Beyond holding talks between members, unwillingness or inability has been shown by SCO to play its role in times of crisis. The mechanism for security cooperation can be worked out and the organization can go ahead of

―idle talk‖ if legal hurdles within the organization are removed. The SCO needs to set up groups or societies to help member countries to settle their domestic issues, particularly where there is involvement of external powers (Doyon,

2011).

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Chapter 4

India’s relations with Central Asia

Central Asia is a landlocked region strategically located between Europe and Asia. The Central Asian region offers extensive potential for investment, trade and growth. The region is richly gifted with the resources such as crude oil, natural gas, gold, copper, aluminum, iron and cotton. New rivalries have been generated among the external powers due to their growing demands for the hydrocarbon resources of the region. A disorganized struggle has been started between Russia and other external powers such as United States, China and India. The struggle resulted in a Great Game competition (Fatima, Zafar,

2014).

India desires to expand its involvement in the region for its huge energy requirements and also to secure a stable extended neighborhood in

Afghanistan. Hence, India has two fold interests in Central Asia. Primarily, the region is a reliable source of oil and natural gas for India. Secondly, it wants to focus on its strategic interests in the region. For India, trade and economic ties are points of interests in the landlocked Central Asian states (Maurya, 2015).

Economic relationships are the key to any bilateral, trilateral and multilateral collaboration in this era of globalization. In the backdrop of globalization, both

India and the Central Asian republics shares common perceptions about the necessity to have friendly relations and especially mutually advantageous economic ties (Kothari, 2014).

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4.1 History of India-CARs relations:

India has been about three thousand years old connections with Central

Asia. The backbone of the relationships was trade. In the olden silk route period, India enjoyed good trade relations with the region. Covering the distance of about 7000 miles, the Silk Route connected China with Central Asia, the Roman Empire and India. It was not a single road, but was a web of roads linking Europe with Asia (Karluk, Karaman, 2014).

The Silk route had three branches, southern, northern and central which connected China to Central Asia, Black Sea, Afghanistan, Persia, Mediterranean

Sea and India though the ranges of Hindukush. The route also had a branch that connected Central Asia to India. The road not only encouraged commercial transaction but also served as a channel for the exchange of cultures. It was this famous route through which Buddhism travelled from India to China. Thus, the route is historically and culturally important for India (Sarma, 2010).

Central Asia was famous for its raw silk, dry fruits, horses and camels in

18th century. Important trading centers in the east-west trade were Khotan,

Tibet, Kashmir, Bukhara and Badakhshan. The trade between these trade centers was carried through the ―Silk Route‖ (Alfred, Andrea, 2014). In the bilateral trade between India and Central Asia, Kashmir was an important transit market due to its geographical closeness to the Central Asian region and connection with the Silk Routes system, in 19th century. Kokand-Kashghar-

Yarkand-Leh-Srinagar route was regarded as safer route. The other routes

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included the Bombay-Batum sea route and Punjab-Afghanistan-Central Asia land route (Kaur, 2011).

The connection of Central Asia and India through ―Silk Route‖ and the invasions from the region in different periods unleashed the movement of goods, people and culture from Central Asia to India. Brilliant impressions of this communication could be seen in classical Indian literature, poetry and the

Islamic Sufi poetry. However, its relations with Central Asia became feeble around the mid-nineteenth century when the Indian sub-continent became part of the British Empire. Even though, the relations were revitalized after independence, the intensity of these relations remained low (Sharma, 2008).

Indian traders who conducted their business with Central Asia used to send their income back to India in the form of rubbles and gold coins. The import of the Gold currency of Russia was started to India in final years of 19th century. The same gold was sold for making ornaments. As a result of the

British prohibition on such trading, in 1920, this trade dropped to the lowest point. The British feared that Russian rubbles could be used in anti-British agitation in India. In former Soviet Russia, state take-over private trade after

Bolshevik Revolution. Restrictions were also imposed by the British on exports from India. The India-Central Asia trade relations were adversely affected by these actions (Kumar, 1983).

However, as stated above, these relations were revived after the independence of India. Nevertheless, currently its economic presence in Central

Asian region is far below its potential. The volume of Indian trade with five

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Central Asia republics is very low. State controlled foreign trade policy was inherited by the economies of the Central Asian republics which were subordinated to central planning (Kornoi, 1992).

Before the independence of the Central Asian republics, India‘s ties with

Central Asia were sketched by the understanding developed between India and

USSR especially in the background of 1962 China- India border conflict (Arif,

2013). As Central Asia was the integral part of USSR, therefore, it enjoyed very little or no autonomy to develop relationships with the other countries. When

Pakistan, US and China came close to each other, a ‗Friendship Treaty‘ was signed by India in 1971 with Soviet Union (Hanif, 2013). The vision of broader engagement with the Central Asian Republics was lacking as India was more concerned with the USSR. Hence, during Soviet years, Indian relationships with the region were only confined to cultural exchanges (Maurya, 2015).

Central Asia was not a source of attraction to the private companies of

Indian. Since the major powers like USA and China have started to take interest in the region in the later part of 1990s, things started changing. India has also shown its interest in the region. This resulted in the rise of ―New Great Game‖ with Russia, China, India and the USA over security and energy interests. The region is already politically unstable (Mishra, 2014). India is also a party in this great game competition. In view of its ever growing energy requirements, rising economy and security needs, it took sharp interest in Central Asian region (Pratibha, Devendra, 2012).

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4.2 Relations after Soviet Union’s disintegration:

The strategic tilt of India toward the former USSR had provided the base for the cordial relations of India with the Soviet Central Asian Republics. Active interaction of India with the CARs started after the dissolution of the USSR. The breakdown of the USSR and rise of China as a great regional power demanded

India to change its decade‘s old anti-Western approaches to foreign policy.

Since then, a major shift can be witnessed in the foreign policy of India. It changed its policy from idealism to realism and expediency. To achieve power and prosperity for India, the Indian leaders embark on emphasizing practical ways (Mohan, 2006).

The modifications in the Indian strategy regarding Central Asian Stated have to be considered in larger political and ideological contexts. Thus the issues of weapon proliferation, drug trafficking, national security and commercial interests become vital for discussion. These issues are considered as major problems by the New Delhi because of the absence sound policy towards

Central Asia even to date (Maurya, 2015). The Central Asian Republics are comprised of at least 62 million people. There are security and economic compulsions due to which they have drawn worldwide attention (Fatima,

Zafar, 2014).

4.3 India-CARs’ areas of interest:

As far as India is concerned; there are two major reasons for improvement of its relations with Central Asia. The first reason is the energy requirements of India in order to provide nourishment to its economic growth.

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The second is the security reason, i.e. the threat from radical Islamic activists

(Sharma, 2008). Moreover, the relations of India are affecting with USA, China,

Pakistan and other powers due to the geo-political location of Central Asia

(Maurya, 2015).

With the passage of time the energy demands of India is increasing. In order to decrease dependence on Middle East, she is making attempts to find out alternative sources of energy. To keep economic engine of India in motion, secured and continuous supply of energy is essential (Sharma, 2008). The importance of energy for the development of economy was expressed by the

Indian President Dr. A.P.J Abdul Kalam when he said that his government will give full importance to synchronize diplomatic activity with his country‘s need for energy to fuel development needs for the country (Kiesow, Norling, 2007).

Central Asia got importance for India because of the energy and security needs of the latter. This has been extensively conceived as national security. To reduce dependence on West Asian resources, attempts are made to search alternative sources for the supply of energy. For the same purpose, state owned

Oil and Natural Gas Cooperation (ONGC) of India has been seeking to invest in

Kazakhstan over the last ten years. In Kazakh owned areas of the Caspian Sea,

ONGC has acquired significant share in the Kurmangazy and Alibekmola oilfields (CSIS, 2007).

In Central Asia an important potential area for India could be the mining sector, as the region is rich in mineral resources such as gold, silver, uranium and copper. India is a net importer and has great domestic demand for these

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commodities (Bano, Sohail, 2014). The demand of electricity is very high in

India. There is a huge gap between the demand and supply of electricity. For the electrical and construction companies of India, the untapped hydro-electric potential of the region may prove to be a profitable area of investment.

Uzbekistan is considered as one of the largest cotton producers in the world.

Textile sectors and cotton production are also important areas for Indian investment (Maurya, 2015).

4.3.1 Economic engagement:

India moved to establish broader economic cooperation for strengthening economic relations with CARs. India had made commitment for cross regional energy infrastructure, new flight connections with the countries of Central Asia and the development of Information Technology, banking and pharmaceutical industries in the region (Campbell, 2013). In addition, New

Delhi has the capability to help the Central Asian states in various fields such as science and technology, education, soft power and cottage industries. On the other hand, the energy rich Central Asian Republics could address India‗s increasing need for energy (Campbell, 2013).

On July 2-3, 2012 SM Krishna, Minister of External Affairs paid a two- day visit to Tajikistan. In Dushanbe, extensive discussions were held between

Krishna and his counterpart Hamrokhom Zarifi about bilateral cooperation on numerous issues. The issue which came under discussion included energy, terrorism and communication for the purpose of further strengthening bilateral relations. The visit of Krishna needs to be analyzed in the context of growing

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interest of India to cultivate stronger relations with Central Asia through its

‗Connect Central Asia‘ policy and his new mantra of the four Cs, namely

‗Community, Consular, connectivity and Commerce‘ (Roy, 2006).

The total exports of India to Central Asian region are approximately $900 million per annum which is less than 2 percent of its entire exports at international level. The entire Indian imports from Central Asia are only 1.5 percent of its total imports from the other countries. The trade between India and Central Asia is limited to traditional items. The major items being exported to Central Asia from India are tea, pharmaceutical, leather goods, readymade garments, jute manufactures, machine tools, cotton yarn, cosmetics, machinery, plastic products, rice, chemicals and electronic goods (Agrawal, Sangita, 2013).

India imports mostly fruits and nuts, raw cotton, iron and steel from Central

Asian states. Zink is also imported by India from Uzbekistan and Kazakhstan.

Huge amount of hydrocarbon reserves and other natural resources make

Central Asia attractive for India to forge mutually beneficial and cooperative ties (Kothari, 2014).

An impressive presence has also registered by the industrialists of India in steel and construction sector in the region. Substantial hydropower potential has been possessed by Tajikistan and Kyrgyzstan. India is constructing small and medium sized hydro-electric plants in these two countries.

Pharmaceuticals are the second largest components of export basket of India to

Central Asian region approximately 28.14 per cent of total export or worth

$151.41 million. This market is represented by various Indian industries. Some

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small scale pharmaceutical companies of India have damaged the reputation of their country, as, driven by a short-term profit motive are supplying drugs of low quality (Stobdan, 2015).

4.3.2 Socio-Politico ties:

India had strong ties with the former USSR. After the collapse of Soviet

Union, it felt the need to develop relations with new Central Asian Republics keeping in view the new realities. There are air links between Tashkent and

New Delhi. At universities in India a large number of students from the Central

Asian countries had been hosted. A large number of Indian students had also been sent to different universities in Central Asia (Adnan, Fatima, 2015).

Initially, its Central Asian neighbors were overlooked by India because it was anxious to manage its relationship with Russia. The main indicator of this lack of attention was the visit of Islam Karimov, the President of Uzbekistan, to

India in late 1991. It was his first visit to any foreign country outside the

Commonwealth of Independent States (Pomfret, 2010). In February 1992, the

President of Kazakhstan, Nursultan Nazarbayev also visited India. He was followed by President Askar Akayev in March 1992. While the Prime Minister of India paid his first visit to Uzbekistan in May 1993. The Presidents of Central

Asian states had glorified the secular political model of India. They nullify fundamentalism, and shown their deep aspirations for stronger relationships with India (Adnan, Fatima, 2015).

Indian government was slow to make the most of on these advantages. It was only in 2000s the serious efforts were started for re-engagement with

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countries in the region. These efforts gain energy by the middle of the decade.

However, by this time, New Delhi found itself in competition with Beijing.

China had entered early in the region to get access to the energy resources, to combat the challenge of religious extremism and terrorism (Maurya, 2015).

Both China and India are deeply involved in Central Asian region. The

Russian distinctive influence has also been continued to be strong by virtue of its historical legacy in the area. Efforts had been made by India for the rectification of its past missteps as it entered the Central Asian region as a late comer. It is time for India to compensate its lost opportunities. In Central Asia,

India needs to have a more comprehensive strategy to obtain maximum benefit

(Asghar, 2005).

India has not only focused on the development of its ties with

Kazakhstan, Uzbekistan and Tajikistan, but has also developed its relationships with Kyrgyzstan and Turkmenistan (Singh, Kaur, 2014). From a realistic point of view, the energy demands of India are estimated to rise at high speed in the coming decades. The vast oil and gas reserves of Kazakhstan, the gas resources of Turkmenistan and the hydro-electricity energy potential of Kyrgyzstan and

Tajikistan are the vital and easily accessible sources of energy for India (The

Hindu, 2008).

In 2004, Adilbek R. Zhaksybekov, Kazakhstan‘s Minister of Industry and

Commerce said that the volume of trade between the two states is

―insignificant‖. It was added by him that his country was attempting to encourage the investment from India in electronics, telecommunications and

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biotechnology sectors. Hence, the Indian investors would not have to raise their own funds if they agreed to invest in the country (PTI, 2004).

During the past few years, with an objective to build long term cooperation, India has increased its engagement with CARs. As a member of

Shanghai Cooperation Organization, desire has been expressed by India for playing more meaningful and expanded role in the SCO. The high level visits from both sides—Kazakh President‘s visit to India and Indian President‘s visit to Tajikistan in 2009, Indian Prime Minister‘s visit to Kazakhstan in 2011 and

Uzbek President‘s visit to India in May 2011, all reflects growing political relations between India and the Central Asian Republics (Kothari, 2014).

4.3.3 Cooperation in energy sector:

The energy requirements of India are rising at an extremely high speed.

Resultantly, the Indian government decline to miss any opportunity to import gas and oil from any country. The Caspian basin is perceived by the India as a vital source of hydrocarbons resources. The state owned ONGC is purchasing

8.42% share of Conoco Phillips‘ holdings. The ONGC was also planning for the purchase of shares in Azeri fields near the Caspian (Blank, 2013).

At present, to fulfill its growing energy requirements, India imports about three quarters of oil consumption from other countries. A large amount of this oil is imported from the Middle East. Looking at its rising energy needs,

India will have to search for alternative sources and decrease its dependence on the oil of the Middle East. Central Asia is viewed by India as long term partner in natural resources and energy trade. Excluding Iran and Russia, proven and

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possible oil reserves across the whole Caspian region are estimated at 190 billion barrels of oil. It is estimated that the proven gas reserves of the region are up to 196 trillion cubic feet (Singh, 1995).

In the steel and construction sector in Central Asia, industrialists of India have registered a remarkable presence. In Tajikistan and Kyrgyzstan, India is building small and medium sized hydroelectric plants. These two states have considerable hydropower potential (Kundu, Nivedita, 2012). Assistance has also been provided by India for the Varzob-I Hydro-Power Station. Great oppertuniteis are there in the hydroelectric sector of Tajikistan for India‘s government and private companies (Roy, 2006).

At the celebration of ‗Twenty Years of Friendship and Cooperation between CARs and India‘ on July 10, 2012, a round table conference was organized by the Institute for Defence Studies and Analyses (IDSA). The topic of the conference was ‗India's Engagement with Central Asia: Exploring Future

Directions‘. Speaking at the round table, joint Secretary Eurasia Division Mr

Ajay Bisaria said that India was changing its policy towards CARs with the intention to achieve its strategic objectives (Bisaria, 2012).

4.4 India’s Connect Central Asia Policy:

E. Ahmed, the Indian Minister of State for External Affairs for the first time disclosed ―The Connect Central Asia Policy‖ (Roy, 2013) on the event of

First India-Central Asia dialogue organized in Bishkek, Kyrgyzstan on 12-13

June in 2012. The basic aim of the event was to strengthen Indian relations and interests in its extended neighborhood states of the region. He expressed that

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India was looking closely at the Central Asian region through the framework of its ―Connect Central Asia policy‖. The policy is based on proactive political, economic and people-to-people engagement with CARs, both in individual and collective sphere. The main objective of the policy is to increase Indian engagement with the region both on bilateral and multilateral basis, which remained meager for the last twenty years (Sarma, 2010). Along with Indian quest to diversify its energy imports, chances were also offers for CARs to meet their need for diversifying energy export routes and hydropower (Roy, 2013).

India after having a winning experience from its Look East Policy has now started to formulate strategies for exploiting the energy resources of

Central Asia. It would be helpful to give boost to its economy. For more than a decade, a valuable place has been given by India in its foreign policy to Central

Asia; though India is facing difficulties in the region such as the presence of big powers in the area, limited trade and limited markets‘ size. The ‗Connect

Central Asia Policy‘ is clearly part of its energy policy to exploit the natural resources in the Central Asian region (Singh, Kuar, 2014).

The CCAP is also aimed at forming partnership with the region for a long term in natural resources and energy (Das, 2012). Excluding this, some the primary soft power initiatives in the region are: a) to set up civil hospitals and clinics to guarantee modern health care system in CARs in the medical field. b)

To contribute to higher education like setting up a Central Asian University in

Bishkek to convey modern education in areas like Management, IT, languages and Philosophy, c) working on Central Asian e-networking having its hub in

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India, d) encouraging sector of construction. f) To reactivate INSTC route for promoting land connectivity (Taraporevala et al. 2014).

The intentions of Indian ‗Connect-Central Asia‘ policy are to reconnect

India with the Central Asian region. This connection would be helpful in finding new markets for fast growing industrial and service sectors of India

(Stobdan, 2014). However, for the realization of these objectives, no land- linking arrangements, feasible and easy transport passage, and essential transit services points have been found so far. In this connection, the instability in

Afghanistan and the hostile relations of India with Pakistan are the main impediment. It is improbable for India to get rid of these hurdles in the near future. The Iranian route is considered as a viable transit option by the Indian government to access CARs. On April 18, 1995, India, Turkmenistan and Iran signed a trilateral MOU on transit trade. It was planned the Indian goods would move through sea to the Bandar Abbas port of Iran and then by road to

Sarakhs on the border of Iran and Turkmenistan (Abbas, 2012).

For the first time, a 295 km railway network was inaugurated by Iran in

May 1996 called Mashad–Sarakhs–Tajan railroad linking Central Asian countries to the Persian Gulf. Financial contribution to this trilateral railway project was also made by India. However, for unspecified reasons, the route is not preferably being used by the trader of India even today. With In order to access the Central Asian states India has recently invested a large amount to develop the Chabahar Port of Iranian. It has also upgraded the Chabahar–

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Zaranj road and constructed the Zaranj–Delaram highway in western

Afghanistan (Stobdan, 2015).

India wants to take active part in regional cooperation and security arrangements of Central Asia through its ‗connect Central Asia Policy‘. In

India, NDA (National Democratic Alliance) led by BJP (Bharatiya Janata Party) won a landslide victory in May 2014 in the parliamentary election and formed government at the Centre. In the changed setup, it is predicted that New Delhi would be able to attain the objectives of its ‗Connect Central Asia‘ policy

(Kothri, 2014).

4.5 TAPI:

The Turkmenistan-Afghanistan-Pakistan-India gas pipeline (TAPI) is an important logistical network at the regional level (Doyon, 2011). Debates had been made on TAPI project for about two decades but until now its construction has not been started. It has been predicted that energy security in

South Asia would be significantly enhanced with this gas pipeline. It would be an important source of revenue for the government of Afghanistan. In addition it will also be helpful to achieve regional integration. Natural gas will be transported through TAPI from Turkmenistan to the Indian city of Fazilka, through Afghanistan (Sodhi, 2016). There are some hurdles to the construction of TAPI. Indian apprehensions are there regarding the security of the project after the withdrawal of U.S. troops from Afghanistan and its fear about

Pakistan‘s ability to guarantee the safety of pipeline. The Asian Development

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Bank could loss its interest to support the project due to the above mentioned factors (Duarte, 2014).

A significant gas pipeline project, Turkmenistan-Afghanistan-Pakistan

(TAP) was sketched in 2002 and sponsored by Asian Development Bank. Later, it was extended to include India and was named as (TAPI). Its total distance was estimated about 1,700 km. India agreed to accept the invitation in the TAPI in May 2006 and formally in April 2008 it became its full-fledged member

(Sachdeva, 2007). The estimated cost of its construction is US $7.6 billion (BBC

New, 2010). A total of 30 billion cubic meters of gas is expected to be transported through the pipeline. It is hoped that India and Pakistan would got the supply of gas from Turkmenistan‘s Dauletabad gas fields through

Afghanistan to Pakistan and India. Afghanistan would get a share of 5 billion m3 of the gas and the remaining would go to Pakistan and India (Sharma, 2008).

The TAPI gas pipeline is an old project. It was first carefully weighed in

1995. The political instability in Afghanistan and the operation against the terrorists groups in northwest of Pakistan. The TAPI project is supported by the

United States for strategic reasons. It can block the gas exports of Iran, boost income of Afghanistan through transit fees, and assist India, Pakistan and

Afghanistan to settle their energy problems and stabilize their political relations

(Cabestan, 2010).

With the signing of gas sale and pricing agreements, (TAPI) pipeline took concrete shape in May 2012. However, to finance the building and management of the pipeline, a consortium of companies is yet to be found. The

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enmity between India and Pakistan and insecure environments and difficult landscape of Afghanistan and Pakistan, are hurdles in the way to give practical shape to the project (Kothari, 2014).

4.6 BTC:

India wants to expand its pipeline options in Central Asia through Baku-

Tbilisi-Ceyhan route. A discussion has taken place between India, Turkey and

Israel for a new plan to use a new route for the transportation of gas and oil to

India. According to the plan, the pipeline network would bypass the Suez

Canal and transport oil and gas to India through the 1,768 km Baku-Tbilisi-

Ceyhan pipeline. The oil and gas will be shipped through pipelines and supertankers from the Caspian Sea to Ceyhan. It would be transferred from

Ceyhan to Israel through supertankers. Then it would be routed through the

254 km Ashkelon-Eilat pipeline to Eilat port and after then to India through the

Red Sea (Billmeier et al. 2004).

The plan was examined in November 2008 during the visit of Racip

Tayyip Erdogan, Turkish Prime Minister to India. This route would be comparatively beneficial for India. Larger ships can be handled by the Israeli ports than can be moved through the Suez Canal. With the extra advantage of lower tariffs; this route is less crowded and it would avoid the territory of

Pakistan (Ramachandran, 2008).

4.7 North South Transport Corridor:

Another major initiative of India along with Russia and Iran in the region in the 1990s was building a new trade corridor, the International North

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South Transport Corridor (INSTC). Afterward, the project was also joined by

Bulgaria, Belarus, Ukraine, Armenia, Azerbaijan, Kyrgyzstan, Kazakhstan,

Tajikistan, Turkey, Syria and Oman (Shinde, Kazani, 2014). The chief transportation project promise to accomplish in this scheme by India is to develop of a port complex at Chabahar on the coast of Iran, which is connected to Afghanistan through a road. The above mentioned port is nearer to India than the Iranian sea port at Bandar Abbas. India is also making arrangements for the construction of a 900-km railway line through which the Chabahar port will be connected with Hajigak region of Afghanistan (Khan, 2013).

In Afghanistan a consortium of seven Indian companies led by the Steel

Authority of India has won a deal of $10.3bn for mining three iron ore blocks.

India has completed the construction of a 218 km road link from Delaram to

Zaranj on the Iran-Afghan border. The road would help to connect all major cities in Afghanistan and Central Asian republics (Khan, 2012). These infrastructure projects started by India expose the attempts made by New Delhi to facilitate energy, commercial and trade relations with Central Asia to avoid the short routes through China or Pakistan due to political reasons (Sachdeva,

2007).

Despite the aspirations, the INSTC has not yield the required results in the last ten years. One of the major causes behind this has been the low volume of India‘s trade with Russia which was believed to provide major traffic.

Nevertheless, it is probable that in the coming years New Delhi is again going to give a big push to this corridor. India desires to play an active role in

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Afghanistan. Hence it has committed to provide about $2 billion for its reconstruction. India fully understands the fact that for regional stability, peaceful and stable Afghanistan is crucial. ―Strategic partnership‖ has also been signed by India with Afghanistan in 2011 to upgrade the relationship (Javaid,

Javaid, 2016).

New Delhi can easily access to the Central Asian region by using the territory of Pakistan and Afghanistan. But India is not ready to use the direct overland access through Pakistan to Afghanistan. Indian trade goods headed for Afghanistan has to be sent by sea through the ports of Iran or may be transferred indirectly under the supervision of Pakistan (Sachdeva, 2007).

4.8 Bilateral Relations with CARs:

4.8.1 India-Tajikistan:

Although Kyrgyzstan and Tajikistan are not rich with hydrocarbon resources, they have enormous potential to generate hydro-electric power.

Particular, Tajikistan has vast unexploited hydro-electric potential. Tajikistan‘ hydroelectric power is of great attraction to energy-hungry India. The country is the third largest producer of hydroelectric power, after the U.S. and Russia.

Each square kilometer of the country territory has hydro-electricity potential of up to 2 million K.W hours (Sharma, 2008).

The trade volume of India with Tajikistan was at $10.7 million in 2004-05 and $32.56 million in 2009- 2010. Now the total turnover of trade had increased to $57 million between the two countries, with aid amounting to $20-25 million.

The Indian companies have invested $17 million in a hydroelectric project.

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They have also invested $5 million to build a five-star hotel in Dushanbe. In order to promote wider cooperation with Tajikistan, President of India,

Pratibha Patil visited Dushanbe in September 2009. She announced plans to invest $16 million for the construction of a cement plant and $12 million for the development of gas fields in the south. India trade with Central Asian states is negligible as compared to the overall international trade of India. The major obstacle for New Delhi to access the region for increasing economic cooperation is lack of connectivity. Its total trade with CARs is around US $200 million.

Between the two sides, the volume of investment and trade has been much below the actual potential (Kothari, 2014).

Tajikistan provided overseas military facility to India in 2006 at Ayni Air

Base. Indian Air Force deployed a fleet of MiG 29 fighter-bombers at the Base.

The base is located at a distance of about 7 miles from Dushanbe (Adnan,

Fatima, 2015). The defense planners of India believed that the base would help to provide a longer strategic reach to India in Central Asian region. However, uncertainty over the continued presence of Indian forces at the Ayni base is increasing. The main reason behind this is unfulfilled Indian pledge to provide a $500,000 grant-in-aid and to help in different infrastructure development projects. Therefore, in 2007, Tajik government sent a notification to India for the withdrawal of its 150-200 military staff stationed at Ayni base. In January 2008,

Talks were held between Tajik Defence Minister Colonel Kairullaev Sherlai and his Indian counterpart A. K. Anthony in New Delhi. Consequently, an installment of $100,000 was released by India which temporarily delayed the

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ejection of Indian forces. India had got back the disused air base under the agreement with Tajikistan. India, Tajikistan and Russia, were to operate the air base by rotation (Bedi, 2011). The final outcome is still undecided due to increasing Russian anger over Indian tilt towards the United States, the opposition of Pakistan and China over the Indian military presence in

Tajikistan, and the United States is not openly supporting India (Indo-Asian

News Service, April20, 2006).

Vice President of India visited Tajikistan on April 2013. During his visit he signed agreements to increase bilateral cooperation in IT, energy, trade, commerce, education, mining, agriculture and health. There are also plans to cooperate with Tajikistan in establishing Central Asia e-network and an IT centre of excellence (Economic Times, April 13, 2013). Large reserves of uranium ore are found in Tajikistan. The country also possesses the potential for its enrichment. Thus, India is keen to use uranium of Tajikistan in order to continue its civilian nuclear program (Maurya, 2015).

India and Tajikistan have agreed to connect their countries through air links. To begin with, both the countries would launch four flights each. The other significant area of the ―Connect Central Asia‖ policy is economic relations of India with Central Asian region (Bisaria, 2012). Along with Kazakhstan,

Tajikistan has also showed its intentions of supporting India by in order to get a permanent seat in United Nation‘s Security Council (Adnan, Fatima, 2015).

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4.8.2 India-Kazakhstan:

Kazakhstan is of prime importance in energy security policy formulation of India. It has the largest reserves proven oil in the region and having three of the richest hydrocarbon fields of the world. The international branch of the

India‘s state-owned ONGC Videsh has begun to invest in oilfields in Central

Asian region in recent years (Maurya, 2015). In the Alibekmola oilfield, a 15 per cent stake has been picked up by ONGC and is equipped for investing approximately US $1.5 billion in the Caspian Sea‘s Kurmangazy oil field. Both of these fields are situated in Kazakhstan. Large reserves of highly enriched uranium (between10,590-10,940kgs) are also found in Kazakhstan. This uranium is of vital importance for civilian nuclear program of India. In the long run it has potential in diversifying the energy base of the country (Sharma,

2008).

Kazakhstan has been conceived at the top on diplomatic priority of India for nuclear trade. Under the civil nuclear cooperation agreement, for the supply of uranium to India, an MOU has been signed between the Nuclear Power

Corporation of India Limited and the National Company KazAtomProm. An agreement for India with Kazakhstan would be attractive both in terms of fuel supply and a possible joint project in setting up medium and small nuclear reactors. In fact, at the Vienna meeting in 2009, Kazakhstan was among the leading states supporting India during talks at the Nuclear Suppliers Group

(NSG) and International Atomic Energy Agency (Stobdan, 2015).

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In January 2009, Dr. Kairat Umarov, the ambassador of Kazakhstan in

New Delhi, called for a revival of the old Silk Route, as India and Kazakhstan issued a joint declaration of strategic partnership. He expressed that the route carried progressive ideas along with the goods. It was a bridge between civilizations. He envisioned SAARC working together with the Union of

Central Asian States. He further added that that the boundary between South

Asia and Central Asia has ―blurred,‖ with the entry of Afghanistan in SAARC.

It has created an opportunity for the integration of the region (Bhatia, 2009).

A significant boost in the relationships between the two countries occurred after January 2009 when President Nazarbayev visited India as an honored guest during the celebrations of Indian Republic Day. At present, in

Kazakhstan, about 280 Kazakh-Indian joint ventures operate (Campbell, 2013).

In Central Asian region, India is the largest trading partner of Kazakhstan.

More than half of total Indian trade with Central Asian region accounts for

Kazakhstan. Now both the countries are trying to develop agreements in the field of energy sector, oilfields, and supply of uranium to power stations of

India and on joint ventures in the field of information technology (BBC

Monitoring, January 24, 2009).

A three-year inter-governmental cooperation program in science and technology was signed between the two governments in September 2009. The program stipulated implementation of mutual scientific projects in petro- chemistry; renewable energy resources, nanotechnology, biotechnology, IT and space research (BBC Monitoring, January 24, 2009).

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4.8.3 India-Uzbekistan:

In summit meetings in 1991 and 1993, India and Uzbekistan signed agreements for the cooperation in the various fields like science, technology, economic, social and cultural. In addition, India and Uzbekistan also signed a treaty in 1993 on the Principles of Inter-State Cooperation. Prime Minister of

India also announced to create an ‗India Chair‘ at the University of World

Economy and Diplomacy in Tashkent. At the time of the visit of President

Karimov in 1994, the exchange of instruments of ratification of the Uzbek-Indo

Treaty was made and on the opening of an Indian Cultural Centre in Tashkent, an agreement was signed (Joshi, 2010).

During these years, three credit lines of $10 million each were offered by

India to Uzbekistan for project exports, joint ventures and the purchase of capital goods from India. Both countries have concerns over the rise of terrorist threats. A bilateral working group on international terrorism was set up by

Tashkent and New Delhi in 2003. They agreed to conduct joint military exercises and to share intelligence (Ibrokhim, Mavlonov, 2006).

The relations between India and Uzbekistan progressed in 2005 and 2006 as result of the visits of Prime Minister Manmohan Singh and President

Karimov to Tashkent and New Delhi respectively. In 2005, twelve bilateral agreements were signed between the two countries. Out of these twelve agreements, four were related with cooperation in education, sports, and support of private and small entrepreneurship. The other eight agreements

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dealt with cooperation in the field of culture, economics, defense, educational institutes of Uzbekistan and India (Taraporevala, 2014).

One of the important areas of discussion for India and Uzbekistan is

Afghanistan. As Afghanistan could play an important role to provide a link for transportation between India and Uzbekistan; recognizing this fact, both the countries agreed for cooperation in the reconstruction of the Afghanistan. The agreement of military cooperation aimed at joint military exercises and opportunities for the training of officers of Uzbekistan. Currently, India is planning to import uranium from Uzbekistan as well (Singh, Kaur, 2014).

In the sector of defense industry, the two governments decided to begin assistance between Hindustan Aeronautics Limited, the Indian company, and the Tashkent aviation plant in the modernization of Ilyushin aircraft. India particularly welcomed the unconditional support offered by the President of

Uzbekistan for permanent membership of India in Security Council of United

Nations (Marketa, Smydkeova, 2013).

India is making efforts to optimally utilize the energy resources of

Central Asia. Uzbek President, Karimov has assured the Indian government that along with its cooperation with numerous other countries, Uzbekistan is ready to allot geographical territory to the companies of India for exploration of oil, gas and other hydrocarbons resources (BBC Worldwide Monitoring, 2006).

4.8.4 Kyrgyzstan-India:

In 1994, India opened its embassy in Bishkek. Prior to this, in 1993

Kyrgyzstan opened its resident mission in New Delhi. India has worked

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toward cooperation with Kyrgyzstan in the fields of agricultural processing, technical training and medical research. Bilateral trade between Kyrgyzstan and India is around $15 million (Micha‘el, Tanchum, 2013).

It has been planned by India to set up an Indian-Central Asia University in Kyrgyzstan as a part of its ―Connect Central Asia‖ policy. India wants to deploy its soft power to secure support in all Central Asian Republics through information technology, networking with young politicians, culture and academic circles (Bisaria, 2012).

4.8.5 India-Turkmenistan:

Until January 1994, India did not establish its embassy in Ashgabat.

High-level visits have also been few. In September 1995, a Bilateral Investment

Promotion and Protection Agreement were signed between the two countries.

The Chambers of Commerce and Industry in both countries concluded an agreement in September 1996 for the development of economic, commercial, and financial assistance.

President of Turkmenistan, Gurbanguly Berdimuhamedov signed a resolution in January 2008 that aimed at boosting the bilateral Turkmen-India relationship. After this resolution, Turkmen membership of a joint Turkmen-

Indian Commission on partnership in trade, economy, science and technology was approved. A Memorandum of Understanding was signed during the visit of Hamid Ansari, Indian Vice-President to Turkmenistan in April 2008. The purpose of the MOU was to facilitate links between Turkmen and Indian companies in oil and gas fields (BBC Monitoring, January 14, 2008).

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4.9 Patterns of trade between India and CARs:

Over the past decade, the volume of trade has increased manifold between India and Central Asia, though Indian direct access to the Central

Asian region has been disturbed by its hostile political relationship with

Pakistan. However, the average of exports of Central Asia to India is only about

1% of Central Asia‘s total exports. For any of the five countries, it did not exceed 2 per cent.

Imports from India by Central Asian states also remain small. As a matter of fact, India is not in the list of main trading partners in any of the five

Central Asian Republics. For India, good trade relationships with CARs are of high strategic importance. These five republics are sandwiched between major powers like Russia, Europe and China, and possessed huge amounts of hydrocarbon resources (Kothari, 2014).

India could fulfill its energy requirement from these energy resources and could maintain its developing economic growth. For the high rate of its growing economy, India is dire need to make good trade relations with a large number of developing countries (Agrawal, Sangita, 2013).

Since its engagement with Central Asian countries, foreign trade of India has increased dramatically. Imports of India increased 20 times in value between 1992 and 2011, and its exports increased 16 times (Agrawal, Sangita,

2013).

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Table 3.2

Population and land area

Country Population Land Area (sq km) Population density

Kazakistan 16558676 2699700 6.13 Kyrghyzstan 5514600 191800 28.75 Tajikistan 6976958 139960 49.85 Turkmanistan 5105301 469930 10.86 Uzbekistan 29341200 425400 68.97 India 1241491960 2973190 417.56 Source:world bank (2012)

Despite the increase in the levels of trade over the last decade between the two sides, the share of CARs‘ trade with India remains very low as compared to their trade with the rest of the world. The key exports of CARs to

India are jewellery (mostly semi-processed silver) and precious stones. The other goods that are imported by India from CARs are oils, mineral, chemicals, iron and steel, machineries, copper goods, plastic goods, leather and wool. The popular commodities that are purchased by Central Asian countries from India include coffee, tea, spices, equipments of electricity, mechanical and pharmaceutical products. Along with vehicles, mineral oils and ceramic products, almost every Central Asian country purchase processed meat products, clothing and garments from India (Agrawal, Sangita, 2013).

Of the five countries of Central Asia, India holds the most trade dealings with Kazakhstan. This country has the largest economy in Central Asian region.

After 2005, exports of Kazakhstan to India rose sharply. Kazakhstan‘s total export to India stood at US$166 million in 2011-12. Uzbekistan stands second in

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the list which amounts over US$60 million. For most parts of the last decade,

the other Central Asian nations have exported goods valued at less than US$20

million (Agrawal, Sangita, 2013).

Table 3.3

Total exports of Central Asian Countries and India (billion US$)

Year Kazakhstan Kyrgyzstan Tajikistan Turkmenistan Uzbekistan India

2000 9.88 0.50 0.77 2.51 2.18 42.63 2001 9.09 0.48 0.65 2.56 2.09 43.32 2002 9.67 0.49 0.74 2.82 1.55 50.52 2003 12.93 0.58 0.80 3.45 2.02 61.13 2004 19.94 0.7 0.91 3.53 2.74 75.39 2005 27.69 0.63 0.91 4.95 3.61 98.21 2006 38.01 0.80 1.40 5.64 5.25 120.55 2007 46.98 1.13 1.47 6.30 6.29 153.78 2008 71.17 1.62 1.44 10.14 7.48 177.70 2009 43.19 0.90 1.01 3.08 4.77 165.19 2010 57.24 1.05 1.19 3.23 5.55 222.93 2011 80.19 1.14 1.00 7.59 5.59 307.11

Source: IMF (2013)

India has shown its interest to cooperate with CARs in mining, IT,

Agriculture, hydro-power and pharmaceutical sectors so as to harmonize the

energy sector that requires attention. It is probable that India‘s diverse

cooperation would build up its profile in CARs. Hence, would enable India to

achieve important benefits in energy sector. India maintained very good trade

relations with Kazakhstan. Their trade stood at $ 436.25 million in 2011-12 and $

887.84 million in 2013-14. The total trade of India with Central Asian region was

$ 687.67 million in 2011-12 and less than $ 800 million in 2012-13. In 2013-14, it

was more than $1200 million. Similarly, between 2001-02 and 2013-14, it has

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grown more than ten times which is presenting the remarkable change in their

trade relationships (Foshko, 2012).

Certainly, Indian overall trade with the Central Asian region remains

low, but there is increasing tendency in the export of various commodities. For

example, from 2008 to 2013, the trade of Indian pharmaceuticals shows

significant increase and now it constitute primary export of India to the Central

Asian region. As whole, the exports of India to the region are increasing as

compared to its imports (Taraporevala et al 2014).

Table 3.4

Total imports of Central Asian Countries and India (billion US $)

Year Kazakhstan Kyrgyzstan Tajikistan Turkmenistan Uzbekistan India 2000 5.05 0.55 0.67 1.79 2.07 50.34 2001 6.48 0.47 0.69 2.21 2.29 50.14 2002 6.58 0.59 0.72 2.13 2.08 58.91 2003 8.41 0.72 0.88 2.51 2.48 74.08 2004 12.64 0.94 1.19 2.68 3.16 99.84 2005 17.47 1.11 1.33 2.61 3.57 139.89 2006 23.70 1.71 1.73 2.53 4.48 176.67 2007 32.60 2.42 2.54 3.36 7.02 235.03 2008 37.80 4.07 3.25 5.46 10.11 281.47 2009 28.36 8.22 2.51 6.54 9.04 257.67 2010 24.02 7.23 2.66 5.64 9.26 350.78 2011 21.42 9.08 4.77 7.68 10.75 465.13 Source: IMF (2013)

At present, in international trade of India, Central Asia does not possess

a prominent position. As mentioned earlier, to Central Asia the entire Indian

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exports are less than 2 percent of its total exports and is about US$900 million per annum. Similarly, on average basis, the imports account only 1.5 percent of the total Indian imports. The trade is limited only to fixed commodities. The value of imports of Kazakhstan from India has been constantly rising from

US$50 million in 2000-01 to about US$250 million in 2011-12. Central Asia has been attractive for the other countries of the world to make mutually beneficial relation with the region due its extensive reserves of hydrocarbons and other resources (Pratibha, 2012).

There are remarkable potential in IT, banking, constructions and food processing sectors for Indian investment and expertise in the region. India‘s trade with Tajikistan has also shown increase. It stood at US$10.7 million in

2004-05 and US$32.56 million in 2009- 2010 (Roy, 2006). To boost economic cooperation with the Central Asian region, lack of connectivity still remains a main hurdle for India.

Table 3.5

Trade between Central Asia and India during 2013-2014

Country Export Import Total 1 Kazakhstan 261.51 656.33 917.842. 2 Kyrghyzstan 34.54 0.64 35.18 3 Tajikistan 54.27 0.86 55.13 4 Turkmenistan 73.62 14.10 87.72 5 Uzbekistan 114.07 31.50 145.57 Total 538.02 703.42 1241.44

Source; Department of Commerce: Export Import Data Bank Version 7.2 http:/ / www.commerce.nic.in/ eidb/ ergnq.asp updated on 03/ 03/ 2015

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4.9.1 Popularity of Indian Tea:

India is the second largest tea producer in the world with production of

1205.40 million kg in 2013-14 and in the same year, India exported over 200 million kilogram of tea to the outside world. From India, the import of tea by the Commonwealth of Independent States (CIS) alone was 51.58 million kilogram. Out of total export of India to Central Asia, tea constituted $52.63 million or 9.78 per cent during the year 2013-2014. Out of this $50.28 million worth tea was imported only by Kazakhstan. For the consumption of Indian tea, Kazakhstan is ranked fifth in the world. The people of Kazakhstan are among the top tea drinkers in the world at an average rate of five to six cup of tea per day (Stobdan, 2015).

The Central Asian markets have been flooded by Western products and

Chinese finished goods. The Chinese manufactured products are cheap but having low-quality. Different items are exported by India to Central Asia. A great degree of demand and potential is there in Central Asia for Indian IT, banking, services, construction, Indian expertise on small and medium-scale

Industries and food processing. Indian tea in particular and pharmaceuticals have gained a strong foothold in the market of Central Asia (Maurya, 2015).

4.10 Challenges for India in CARs:

In the current century, Central Asia is going to become an important region. Hence, India is taking geographical, economic, political and strategic interests in the area. At the same time, to reduce the threat of terrorism, extremism and fundamentalism in CARs including Afghanistan for Peace and

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stability in the region are the most essential aspects in determining Indian security. On the other hand, the presence of external global powers in the region is posturing challenges to the engagement of India with the region. In these circumstances, India would need a hard approach to strengthen relations with Central Asian countries (Roy, 2002).

No doubt, India has good historical, cultural and economic ties with

Central Asian countries but has not attempted to develop its relationships in early years. The region has been ignored by India in the early decade since independence of CARs. There are some causes behind the lukewarm attitude of

India towards CARs as it is facing the following challenges: a) Lack of direct route connectivity:

Since the partition of Indian subcontinent, India has been lacking direct land route links with Central Asia. Thus, it created great trouble for India to develop direct trade relations with the region. India has to look for alternative to connect with Central Asian countries. Network of roads plays an important role in the development of trade and transport of oil and gas between the countries

(Foshko, 2012). Pakistan possessed the ability to stop India by cutting its access to the region. It has already been demonstrated in 1999, in the Kargil conflict between India and Pakistan (Sharma, 2008). b) India‘s relations with neighboring countries:

Some of the neighboring countries of India are politically instable. The encirclement of India by China through Pakistan, Sri Lanka, Bangladesh and

Nepal poses troubles for its defense. India has to make efforts to make presence

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in the region but unfriendly relations with neighboring countries made it an isolated land. Such conditions are the main hurdles in way of big projects like

TAPI pipeline as India perceived that its energy security would endangered by its western neighbor Pakistan. Additionally, the current political situation of

Afghanistan is also not favorable to the project (Jacob, 2005). The TAPI will pass through South Afghanistan, which is largely occupied by Taliban and

Baluchistan province of Pakistan where there is potential of security problems

(Sharma, 2008).

4.11 India’s response to the challenges:

A Joint Working Groups (JWG) on terrorism has been established by

India with Tajikistan and Kazakhstan in order to address the security challenges. Shanghai Corporation Organization (SCO) has also been joined by

India. It is one of the most important regional organizations. Counter-terrorism lists prominently on the agenda of SCO. However, it is uncertain that to what extent and how effectively India could utilize the SCO platform. The main reason behind this uncertainty is the influential and dominant position of China in the organization and its tilt towards Pakistan which is also SCO‘s member.

Furthermore, the attempts of China by projecting its power in the region through the performance of joint military exercises with countries of Central

Asia under the banner of SCO, has been thoroughly noticed by India (Sharma,

2008).

India is keen to secure reliable energy goods and to develop strong trade links with Central Asia. The involvement of the private sector in the market of

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the region is required by India for its economic engagement with Central Asia.

So far, the Central Asian market is not considered as attractive market by

Indian private enterprises. Hence, India would require a two-fold strategy for addressing this problem. First of all, the government of India must facilitate the

Indian private sector to interact with the Central Asian market forces. Secondly, a more attractive investment environment must be created by the Central Asian countries for the private sector of India.

In order to improve energy cooperation and India‘s connectivity with the region, a proactive role must be played by both bilaterally and by using the mechanism of regional cooperation. Thus India must develop cordial relations with both Pakistan and China. In addition, it must cooperate with Russia,

United States, Iran and Turkey (Roy, 2002).

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Chapter 5

A comparative analysis of struggle between China and India for the riches of Central Asia

The concurrent rise of India and China and their apparent competition has the possibility to have serious repercussions on the geo-politics of the region. This competition requires the attention of regional players. Generally it is agreed that China and India are chief actors in the Asian region. On relative power trajectories, they are moving upward simultaneously (Ryan, 2012). Both of these nations have rapidly-expanding economies which are supporting their rising defence budgets and nuclear weapon capabilities. A huge manpower is also available with both the countries. Both of them considered themselves as legitimate emerging great powers. Resultantly, they are in constant competition for influence in South Asia, India Ocean and Central Asia (Malone, Mukherjee,

2010).

Political, economic and diplomatic relations exists between China and

India but the two nations having rapidly growing economies and global ambitions cannot co-exist peacefully with each other. Where ever the spheres of influence will overlap, there will be competition, as in the cases of Myanmar,

Nepal and Central Asia. Standard realists are of the opinion that China will not allow India to emerge as a power outside South Asia. Partnerships and alliances were built by China with the countries in the periphery of India. Those countries include Sri Lanka, Nepal, Bangladesh, Myanmar, Pakistan and

Afghanistan. This act on part of the Chinese government along with the presence of Chinese forces in the Indian Ocean region was viewed by the

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Indian policy makers as the strategic encirclement. The Indian government is still cautious about the China‘s foreign policy in the region and specially about countering its naval influence (Malone, Mukherjee, 2010).

As far as the capabilities of these states are concerned, both of them possesses nuclear weapons and their economies are growing at a rapidly speed.

They have large reservoirs of manpower and their military budgets are expanding with the passage of time. It is obviously seems that they are contesting for influencing the Persian Gulf, Indian Ocean, Africa, South Asian and Central Asia (Malone, Mukherjee, 2010).

The Central Asian Republics emerged on the world map as a result of disintegration of former USSR after 1990. These unfortunate republics are landlocked. They have huge taped and untapped resources of natural gas, oil, coal, uranium, gold etc. There is a severe competition for the resources of these republics among different states. The key players which are competing for these resources in these republics are Russia, US, the European states and emerging powers India and China. These players are politically as well as economically involved in the energy sector of the region (Singh, Kaur, 2014).

The main purpose of this chapter is to analyze the competition between the two emerging powers of South Asia, China and India for the natural resources of Central Asia. China-India ‗New Great Game‘ denotes the geopolitical struggle between these two states for influence, power, and hegemony in the region. Predominately, it refers to the their struggle to

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transport oil, natural gas, uranium etc to their own countries against the other as they can from Central Asia (Scott, 2008).

5.1 History of Great power’s Struggle in Central Asia:

Rapid changes have been occurring in Central Asia after the world has started to take more notice of this region which has abundance of natural resources. Flow of people, shipment of products and large scale infrastructure across the region has already been triggered by the expansion of trade and flow of capital to the region. This phenomenon can rightly be compared to the waves of transformation that occurred in South East Asia and Europe in the past.

Consequently, over energy stakes, the rivalries of great powers in the Central

Asian region have also increased. The key players in the region have shown their responses in numerous ways to get benefit from strategic and energy resources of the region (Stobdan, 2015).

The term ―The Great Game,‖ was coined by Arthur Connally in 1835. It referred to the clash between Tsarist Russia and British Empire for supremacy in Central Asia and Afghanistan in the 19th century. The ―New Great Game‖ which is being played today is referred to the ―Great Game‖ of the 19th

Century when there was competition for influence against each other between

Tsarist Russia and the British Empire and they were in a state of undeclared war in Afghanistan and Central Asia (Rashid, 2009).

The colony of India was known as ―jewel in the crown‖ by the British

Empire. The expansion of Russian influence in Turkestan (Central Asia) was seen as a direct threat to its India colony by the British Empire. Imperial Russia

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also apprehended that British are working against the Russian interests by joining hands with the Turkestan‘s Muslim tribes. For the control of

Afghanistan there was a proxy war between the two powers. In order to invade either Turkestan or colonial India, Afghanistan could be used as a strategic base

(Kleveman, 2003).

The actual battle was fought through communication links, according to

Ahmed Rashid. Across Central Asia, railway tracks were built by the Russians to their borders with China, Persia and Afghanistan. Across India, railway lines were built by the British to their border with Afghanistan (Rashid, 2009). When the Soviet Union and United Kingdom became Allies in the World War II, ―The

Great Game‖ faced its natural death.

In modern times, the phrase ―New Great Game‖ is used to describe current geopolitics in Central Asia. It is also used to explain the competition between numerous regional and extra-regional players for profit, power, hegemony and influence in Central Asia (Matthew, 2003). Each country is trying to get a share in the natural resources of the Central Asian Republics.

The biggest untapped fossil fuel reserves of the world lie under the Caspian

Sea. It is estimated that the amount of oil range from 50 to 110 billion barrels while the amount of natural gas range from 170 to 463 trillion cubic feet in the region (Matthew, 2003). Azerbaijan and Kazakhstan alone, according to

Kleveman, could be sitting on more than 130 billion barrels of oil, more than three times the United State‘s own reserves (Kleveman, 2003).

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In the context of the New Great Game, the Sino Indian competition includes; the disputes, competition for access to resources, the development of strategic military alliances and the use of strategic relationships with other countries to restrain the rise of the opposing nation. The containment of India in the region is one of the prominent policies of China. The initial focus of Sino-

Indian competition is centered on Central Asia. India is an emerging power. It is apprehended by China that India is a strong competitor for China in the whole region including the Central Asian region where both the emerging powers have clash of interests (Scott, 2013).

5.2 China and India in New great game:

It can be seen that in Central Asia, there is a competition among different countries for influence and for the resources of the said region. The competition between China and India started in 1990s when China National Petroleum

Corporation acquired the Uzen oil field in Kazakhstan against India. Similarly, the foundation of a new organization was laid down by China in 1996, which was initially named as ‗Shanghai Five‘. The initial members of the organization were China, Russia, Kazakhstan, Tajikistan and Kyrgyzstan. It was formed for economic, social and military-related discussions. The organization was renamed in 2001 as Shanghai Cooperation Organization and Uzbekistan was also included as its member (Kaushiki, 2013).

In July 2015, it was decided by the member states to enlarge the organization in order to include Pakistan and India. It might be a move by

Russia and China with the intention to counter American influence in South

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and Central Asia. The well-established bilateral disputes of India and Pakistan may be a burden on the forum. The entry of these states could further complicate India-China relationships and the respective spheres of influence of both the countries (Yu, 2011).

India has already recognized the growing significance of the Shanghai

Cooperation Organization in the affairs of the region. Now India wants to counter the influence of China in Central Asian region. For the same purpose,

India has announced a new policy in June 2012, ‗Connect Central Asia‘ policy.

Indian Minister of State for External Affairs while announcing ‗Connect Central

Asia‘ policy stressed that most of the member countries of Shanghai

Cooperation Organisation were India‘s neighbours, or they belong to its extended neighbourhood. They share a strong historical and cultural legacy of centuries with India binding them together. This new Indian policy has also some underlying elements which are related to its interest to get access to

Central Asian natural resources. India is facing some complications in accessing the resources of Central Asian states due to lack of borders with these states.

Pakistan is also not cooperating with India to facilitate the transit of oil, gas and the movement of trade goods from CARs to India. It is one of the main reasons that New Delhi has developed relations with Tehran to use Iranian territory to transit trade goods from Central Asia through the Iranian port of Chabahar

(Kaushiki, 2013).

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5.3 Sino Indian competition:

In the energy sector in Central Asia, there is a strong competition among great powers of the world like Russia, United States and China, which is the emerging power. These countries are politically as well as economically involved in the region. The energy sector of India and China is dependent on crude oil. Both of these countries are importers of crude oil. They are trying to expand their energy supply and use natural gas as alternative of oil. The diversification of the energy supply has the potential to throw them in direct contest for energy resources from Central Asia (Malone, Mukherjee. 2010).

In the energy sector, China is one of the main competitors for India in the Central Asian region. Indian companies are being outbidding by the

Chinese companies. China won $5 Billion oil deal from India in 2013. Thus

India is facing intense competition with China (Saikia, 2013).

Perception also plays an important role in the relationships of the states and their engagements. In the national debates of India, China is a more loaded subject than India is for China. It has been observed that China does not feel any serious threat from India. The military expansions and economic success of

China created tremendous insecurity and uneasiness in India (Malone,

Mukherjee, 2010).

It is believed that China and India are comparative economic powerhouses, theoretically. It is believed that they have the capacity of setting new Asian economic order. Nevertheless, the new Asian economic order has already been shaped mostly by China. The regional countries like Pakistan,

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Central Asian Republics, Vietnam, Japan etc, which India wanted to influence, are in fact already integrated with China (Stobdan, 2015).

India is increasingly important competitor for the gas and oil reserves in

Central Asian. It is estimated that as the population of China ages and its population growth slows then within a decade, there will be a more rapid increase in the energy demand of India than that of China. Looking to the geographical location of India, it can be observed that it is in a better position than China to get natural gas and oil from the Persian Gulf. India also wants to diversify its hydrocarbon imports. It includes supplies of oil and gas, which would be originated from Central Asia (Duarte, 2014).

The first ever official dialogue between China and India on Central Asia was held in August 2013. In the meeting they discussed particular issues like energy security, regional security and counterterrorism, development partnerships, Shanghai Cooperation Organisation, (SCO) and people-to-people contacts with the regional countries. Now a desire has been expressed by India to play a more meaningful and expanded role in the Shanghai Cooperation

Organisation (SCO). It has also signed the memorandum in 2016 for full membership in the organization (The Express Tribune, 2016, Jun 26).

Vice President of India, during his visit to Tajikistan in April, 2013 signed agreements to develop bilateral cooperation in energy, education, commerce, trade, agriculture, health and mining. They also agreed to work together to set up a Central Asia e-network and IT centre of excellence in

Tajikistan (The Economic Times, April 13, 2013). Nevertheless, as compared to

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the economic engagement of China, the present level of actual bilateral collaboration of India with Tajikistan is very small (The Hindu, April 16, 2013).

In mining uranium, IT, and telecommunications industries in Tajikistan, large amount of money has been invested by China. A large area of land rich in minerals has also been leased at low cost from Tajik government by China. As compared to India, China is far more ahead in trade and investment with the other states of Central Asia.

It has been witnessed in the last ten years that there is modest and steady rise in engagement of India with the Central Asian countries. The revival of the relationship is motivated mainly by two reasons. India wants to secure and diversify its energy security base. As a result, a severe competition started between India and China, in which India is lagging behind China. Second,

India wants to keep a check on the growth of fundamental Islamist groups, which could be a threat for India especially in the Indian held Kashmir could have the potential to destabilize the security of India (Sharma, 2008).

India‘s engagement with Central Asia has two other concerns also. The first reason is related to control drug trafficking. Drug trafficking finances the weapon proliferation activities and those terror groups for which the Central

Asian Republics proved as a suitable breeding grounds. The second reason was to provide a much needed boost to the commercial potential of India in the

Central Asian region. If India became successful to attain this objective, it could become a powerful instrument to counter the attempts of Pakistan to stop

Indian access to the region through its geostrategic location. Moreover, Indian

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presence in the region could be an alternative to the Chinese dominance in the

Central Asian region which has cast its shadow over the future of Russia, the traditional hegemon (Bhatty, 2008).

India is interested for playing a chief role in Central Asia. India is failing to compete with its contenders, particularly with China, despite the necessity for New Delhi. America is supporting the expanded role of India in CARs even then India is failing to keep pace with China. The military, economic and political room available to India is immensely enlarged by the US presence in the region. Actually, the presence of Washington allows New Delhi to play, or at least aim to a greater role in Central Asia than it could accomplish on its own. United States also wants New Delhi to play an active role in Afghanistan and CARs as its military leave Afghanistan (Blank, 2013). Thus, the American and Indian interest converges in Central Asia and Afghanistan. They are both reluctant to see the above mentioned region fall under the direct Chinese or

Russian influence. In 1990‘s, when China‘s influence increases and that of

Russia‘s weakened, it was a matter of great concern for India. This has a negative impact on the Indian threat perceptions. Since 1990, after the growing

American presence in the region, this threat perception stabilized (Pant, 2013).

The growing cherished desire of New Delhi for energy has bring it into clash with Beijing, clearly shown by the harsh competition between the two countries, over the bidding of Petro-Kazakh. However, presently China commands a clear edge over India. Furthermore, if India wants to pursue its aims of alternative trade routes and pipelines then it has to be careful not to

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annoy China despite its eagerness to balance China‘s influence in the region

(Sharma, 2008).

On the 60th Republic Day celebrations of India in 2009, Nazarbayev was invited by India as a Chief Guest. Kazakhstan promised in 2013, that it will provide 8.4 per cent stake to ONGC in the Kashagan project but later on the agreement was signed with the Chinese CNPC. This agreement was a disappointment and huge setback for India. It weakens India‘s passion to flourish closer relations with Central Asian Republics (Stobdan, 2015).

The strategic approach of India is to promote strong relations with all of the Central Asian republics for its energy and security objectives. In order to give practical shape to its objectives, India must be ready for challenges and competitions which would be faced by it from regional powers, like Russia and

China on security and energy related matters respectively. As compared to other major players, India managed to secure only a negligible foothold in the region so far. Even the business presence of India in the Central Asian region is nominal. At present, India is not amongst the main dominant powers in the region despite the fact that numerous high sounding announcements have been made and broadcasted. The most important thing to be noted here is the presence of key players of the region like Russia and China. The most important point here is the ability of China to restrain India to play its role in the Central Asian region in future, after the withdrawal of US troops from

Afghanistan (Blank, 2015).

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China got entry into energy market of Central Asia in 1997. China‘s

National Petroleum Corporation (CNPC) acquired a 60.3% stake in

Kazakhstan‘s Aktobe Munai Gas. It got access to an exploration block and three oilfields in Kazakhstan. While India acquired a 25% stake (smaller than China) in a single oil bloc, Satpayev, for the very first time in 2011. China‘s CNPC was bidding against major established oil corporations. CNPC cleanly outbid every competitor. The Kazakh government was short of money, so cash along with bonus was paid by the company to the strapped Kazakh government. It also conducted feasibility studies on a pipeline from Kazakhstan to Xinjiang, offering an alternative route to the Kazakhs which were non-Russian. The path to a fast and remarkable range of acquisitions and partnership for China was made easy due to this development (Pant, 2013).

To build energy security in Central Asia, two pronged strategy was followed by China. Initially, energy assets, oil companies and oil blocks, both were acquired by it. Secondly, for involvement in the industry and energy infrastructure of the region, China used its technological expertise, therefore; it resulted in the creation of mutual interdependence between the two sides. India was unable to compete with china in both the cases. It is worth mentioning that

Xi Jinping, the new Chinese premier, undertook a tour of Central Asian republics immediately after assuming office. He signed mega energy agreements and promised large investments in the region. The presence of

India in the region is much less as compared to China. China is the largest trading partner of four of the five Central Asian states (Pant, 2013).

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China got considerable influence in the region due to its considerable economic development and long land border with the Central Asian states. The diplomatic relations between China and CARs developed in 1992. Since then, the overall trade of China with these states has increased over a many-fold

(Xinhua, 2013).

The major source of foreign investment and the most famous economic player in the region is now China. Resultantly, China has been enabled to dominate the Central Asian region against India in terms of building transport and infrastructure networks, acquisition of energy, investment and trade. The overall trade volume of India with the five Central Asian states was estimated at $500 million in 2012 (Roy, 2012). While the overall trade volume of China with the five Central Asian republics amounted to approximately $46 billion during the same year (China Daily, September 8, 2013).

In the sphere of energy, China has regularly beat India when it comes to secure energy acquisitions. India lost out in June 2013 when its transaction to buy a major stake in the huge Kashagan oilfield from a US company was blocked by Astana. Instead, it was purchased by the Government of

Kazakhstan and then handed over to China. From Turkmenistan, China is already receiving 40 bcm of natural gas on annual basis. If the China‘s pipelines from Kazakhstan and Uzbekistan are added to it, the figure projected to rise much higher. It is apprehended in New Delhi that if India would try transport natural gas through TAPI from Central Asia, China would resist its attempts.

The inability of India to compete with China in Central Asia is also visible in

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the revival of Silk route policy of China. It is a transport networks which will help China to have an easy access to Central Asia.

5.3.1 Defense sector:

India is also making attempts to strengthen its cooperation with the

Central Asian countries in the defense sector. Agreements have been signed by the Indian government for sharing of intelligence, exchange and training of military personnel; with Uzbekistan particularly; renovation of military hardware and purchase of Illyushin-78 aircrafts. India could establish a niche market in small arm in Central Asia. This region remains a relatively untapped market for the indigenous defense industry of India (Blank, 2003).

India is playing a larger role in Afghanistan, it is focusing predominantly on building physical infrastructure and human capital, to improve security, and to provide help in agricultural and other important economic sectors of the country. Nevertheless, it cannot keep pace with China. The difficulties of India in Central Asia also confirm that, India is seen by China as a hindrance in its own way and continues to hamper the efforts of Indian government enhance its presence in Central Asian region (Blank, 2013).

In Central Asia, Confucius Centers, Universities, and even secondary schools are being speedily established by China. While the proposal to set up an Indian University in Central Asia was approved only in 2011, but unfortunately the project was not materialized. Cultural Centres and Indian

Chairs have been set up by the Indian Council of Cultural Relations (ICCR) in the region. Nevertheless, the practices such as to propagate Indian dance,

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cuisine, music etc in the region have long become outdated for resulting in obtaining considerable benefits and promoting Indian interest in CARs

(Stobdan, 2015).

5.3.2 Consumer goods:

For the Indian consumer goods, a huge untapped market is offered by

Central Asia. As Central Asia is not an industrialized region, therefore, the consumers in the region have only two choices. There are two types of consumer goods available in the market. One of it is the products imported from the West, which have high prices. The second is the Chinese products which have low quality but their prices are lower as compared to the Western products. The Central Asian markets have been flooded by the cheap Chinese products (Sharma, 2008). Here again, India having no direct rail and road access to the Central Asian markets cannot keep pace with China.

5.4 China factor in SCO:

India, for quite some time has been seeking support from the member countries of Shanghai SCO. It is seeking to play a leading role in the organization. In fact, India wanted to become a permanent member of this organization. Finally, after a long struggle, it became successful to achieve the permanent membership (The Express Tribune, 2016, June 26).

In 2001 at Shanghai, the SCO was founded in a meeting among the presidents of Russia, China, Kazakhstan, Uzbekistan, Tajikistan and

Kyrgyzstan. At Astana summit in 2005, India, Pakistan and Iran were included in the organization as observer states. In the grouping, the role of India remains

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insignificant, though the moratorium on new membership was lifted by the

Tashkent Summit in 2010. The membership of India in the organization was supported by Russia. New Delhi‘s participation in the Collective Security

Treaty Organisation was also assured by Russia (Kothari, 2014).

Salman Khurshid, Indian minister of external affairs paid a visit to

Kyrgyzstan. The meeting of Shanghai Co-operation Organisation was attended by him in September 2013. He also visited Uzbekistan where he met Abdul

Aziz Kamilov, foreign minister of Uzbekistan. At the forum of SCO, Salman

Khurshid communicated Indian aspirations to get the status of full member of the six-nation organization. It was also made clear by him that India is interested to expand cooperation with SCO related to security issues, particularly with the Regional Anti-Terrorism Structure of SCO (Pant, 2013).

As mentioned above, it has been confirmed that India is facing many difficulties in the Central Asian region. Unlike Moscow, Beijing continues to hinder India‘s efforts to boost its presence in CARs. China and Pakistan could probably succeed to put hindrance in New Delhi‘s ability to negotiate agreements for the supply of energy and to show successful financial and military power in the Central Asian region (Rahmon, 2013). Yet, for advance of its interests in Central Asia, certainly India cannot depend on Russia. Despite the increase in India‘s power and economic development, so far, India has been outpaced by China in respect of energy acquisitions, trade, infrastructure networks and the building of a long-distance transportation in Central Asian region (Blank, 20130).

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5.5 Iranian ports:

India has been working on a more feasible arrangement to develop an alternative trade corridor through Iran. In St. Petersburg, an agreement was signed by India, Russia and Iran on 12 September 2000, for the construction of an International North South Transport Corridor. The NSTC will help India to transport its Indian goods from India to the sea port of Bandar Abbas in Iran and then through road and rail linkages and the Caspian Sea to the Central

Asian region. Thus, NSTC will enable India to bypass Pakistan and access

Central Asia (Sharma, 2008).

Potential trade of India through Iran is approximately two to three times the current actual trade with the Central Asian region. It would be useful for

India to develop a route for trade trough Iran as this route would have positive opportunities. The new trade route could lead to increase trade two to three fold between Central Asia and India (Agrawal, Sangita, 2013).

India intended to broadly integrate its economy with Central Asia through the cooperation of multilateral institutions. Indian foreign policy is obviously directed to promote this trend for the achievement of these objectives. Nonetheless, to be more realistic, the advantage which China is enjoying in the region cannot be enjoyed by India. These leverages are inherent in regional proximities (Stobdan, 2015).

A comprehensive approach to strengthen its engagement in the energy sector of the region would be beneficial for India. Central Asia will definitely remain a favorable alternative for India as it not only imports three quarters of

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its oil from abroad also fulfill more than half of its coal and gas requirements from imports (Campbell, 2013).

Iran has two important sea ports. One of the ports is Chabahar port, which is located in the Gulf of Oman and the other is Bandar Abbas port situated near the Strait of Hormuz. These ports have the potential which is likely to be used trade purposes with Central Asia by using the territory of

Afghanistan. In May 2013, for the development of Chabahar port, India has already allocated $ 100 million. India is playing an active role in the policy outlines to promote INSTC trade route. New Delhi is engaged with Iran in ongoing conversation to complete under-construction portion of this route. This rout will help to trade goods with the Central Asian republics in a shorter period of time (Singh, Kuar, 2014).

In India-Central Asia relations, Iran is an unspoken but important factor which provides alternative access to Central Asia. Nevertheless, for about the last ten years, India-Iran relationship has not progressed well. This relationship has been marred by mutual suspicion. The International North- South

Transport Corridor (INSTC) would pass through Iran and would connect

Chabahar with Central Asia. It is still underdeveloped. Huge investment is required for its development. India has also been very slow to realize the potential of the strategically important Iran‘s Chabahar Port. The top priority of

Indian foreign policy must be INSTC and Chabahar port. India will have to make sizeable investments in Iran for the development of the Chabahar Port and INSTC to provide effective and short access to Central Asia (Gupta, 2013).

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India is very keen to prevent the efforts of Pakistan to convert Gwadar sea port into a regional hub for international trade. Resultantly, it has started cooperation with the regional countries generously. Hence it is investing a large sum of money to construct roads that would connect Chabahar port with

Afghanistan and Central Asian countries. In the development of the infrastructure of Iran‘s Chabahar port, the fast growing investment of India could create tough competition for Pakistan‘s Gwadar Sea port (Times of India,

2003, May 21).

The construction of Gwadar port by Pakistan in the Arabian Sea has been closely watching by India. Indian agents were arrested on 2 July 2004, by

Pakistani police in Karachi who were providing sensitive and strategic information to the spy agency of India. That information also includes the map of Gwadar Port. Madhavendra Singh, Indian Naval Chief Admiral in an interview with the Janes Defense weekly, stated that India was closely observing the activities of Chinese on the coast of Makran, alongside which

Gwadar port is located. Deep concerns were also expressed by him about the close interaction of the Chinese navy with Pakistan and other neighbouring countries. According to him, Indian shipping routes in the Gulf could be seriously endangered by these activities (Defence News, 2004, June 7).

In free trade zone in Chabahar, it has been proposed by India to invest

US$100 million. The Chinese have also shown their interest in Chabahar. A credit of Euro 60 million to Iran has been announced by China to upgrade the

Port. The importance of Chabahar Port is that it will help to facilitate a transit

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route to Afghanistan which is a land-locked country. India can directly access to Afghanistan through Pakistan. But Pakistan and India are two rival states since their inception. Despite direct road links, neither Pakistan allow transit facility from India to Afghanistan nor India is ready to get it. Therefore, the

Chabahar Port could become an important connection point linking Central

Asian and Afghanistan to India (Gupta, 2013).

5.6 Competing Strategic Objectives:

The contemporary relationship between China and India is very complex. It is shaped by a history of mistrust and tension. China and India unevenly perceived each other. The official policy of China is to disparage, if not ignore, the economic development, regional ambitions and rise of India as regional power; whereas, China is a central point in the strategic policy of

India. However, in contrast to the public perception of China, both the nations

(China and India) have developed strategies to deal with the each other and to make certain that they are ready to compete with the other for dominance and power in South and Central Asia (Singh, 2012).

5.6.1 China’s strategic view:

It is important to note that the strategic objectives of China are neither militaristic nor expansionist in its engagement with the Central Asian republics.

Rather, Chinese policies are focused to secure stable hydrocarbon resources like gas, oil and coal etc. It also wants to develop the infrastructure and its commercial interests in the region (Akbar, 2015).

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In relation to India the Chinese strategy would seem to be consisted of six elements:

1) For its political and military aims and designs China needs to generate a

larger amount of resources than India through a continued high growth

rate of economy.

2) The Chinese government needs to reduce a conventional arms race with

India, while taking into account that a significant nuclear threat is

possessed by China.

3) Beijing needs to restrain New Delhi‘s rise by either to deny it access to or

at least to marginalize its influence in international and regional

organisations such as the Asian Development Bank and APEC.

4) The military strength of Pakistan remains a vital factor in strategic

calculations of India. In order to maintain a two front threat to India,

China needs to continue its help to Pakistani military to ensure its

strength.

5) The boundary dispute between China and India could not be resolved

unless Beijing maintains its strategy of inactiveness. By continuing this

policy, it would be in a better position to keep India under constant

pressure till the regional balance of power swings in favour of China.

Then automatically, China would be able to pressurize India directly and

resolve the disputes in such a way to give all the benefit to China.

6) Lastly, Beijing needs to carry on strengthening its military, trade,

economic and develop relations with the countries of South and Central

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Asia in order to enlarge its strategic dominance and contain the influence

of India (Goshal, 2015).

5.6.2 India’s strategic view:

The current policy approach of India to respond towards China is focused on being as clever as possible, and if evaluated its policy would be seem to be made up of four major elements.

1) India is rapidly focusing to improve its bilateral relations with China by

cooperating in fighting terrorism and by signing trade agreements. It is

trying to avoid picking political, rhetorical, or military fights with China.

These efforts are evident by the visit of Modi, the Prime Minister of India

in May 2015 to Beijing. A joint statement was signed by Modi and Li

Keqiang, Chinese Premier. The joint statement focused on trade and

financial cooperation and guidelines on political talks (Sha, 2015).

2) The second element of Indian strategy is revival of its relations with the

nations of Central Asia. This policy is a materialization of Indian

changing strategic view of the world and a better realization of its

position in the changing global economic environment. The ―Connect

Central Asia‖ policy and ―Look East‖ policy of India are fundamental to

this plan. The main aim of ―Look East‖ policy of India is the

revitalization of its relationships with the countries of East and Southeast

Asia, such as Japan, Singapore and Vietnam. The aim of ―Connect

Central Asia‖ policy of India is the revival and upgrading of its relations

with the nations of Central Asian (Carras, 2013).

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3) Third element of Indian strategic view is to balance the rise of China.

Indian strategies like that of Indonesia, Taiwan, Japan, Vietnam,

Mongolia and Australia is perusing it on diverse lines. It is adopting a

balance of power strategy. The aim of this strategy is to strengthen its

relationships with the United States as well as some other regional

countries. However, India has chosen not to consume formal strategic

security agreements with a large number of other countries.

4) The main focus of India is to ensure that it has enough national power to

defend itself from China via the continued modernization of its

conventional military weapons and forces and to maintain its nuclear

deterrence.

5.6.3 Encirclement of India:

The strategic alliance of China with Pakistan and its mounting relationships with other neighbours of India have increased tensions between

India and China. The actual reason behind the tension is strategic threat perceptions of India. The actions of China are perceived as a deliberate strategy of encirclement by India (Sikri, 2009).

The key regions which are believed by India to be strategically encircled by China are along the western and northern borders of India. For China,

Pakistan has the capability to pressurize India to keep the one million-strong

Army of India alert and preoccupied in Kashmir and to its west. Due to the tussle between India and Pakistan over the Kashmir issue about 300,000 to

400,000 Indian troops have been deployed by India in this region for the last

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two decades. These actions will ensure China that the Indian Army would not have the capacity to engage on two fronts and to interfere in Tibet or in the wider Southeast, Central Asia or East Asia regions (Cheema, 2015).

Pak-China observers determine that Pakistani stance against India also satisfies strategic objective of China of supporting other nations of South Asia as a counterweight to India (Goshal, 2010). Pakistan is a very good example to the other nations of South Asia and Central Asia. These nations can also get economic and military assistance from China. They can also enjoy the diplomatic protective umbrella of China, protect their internal and external sovereignty from the domineering policies of big powers and counter the attempts of Indian to influence or dominate their decision-making (Malik,

2011).

Pakistan is developing its Gwadar deep-sea port with the help of China.

China‘s activities in the Indian Ocean are also expanding. All of these are a cause of deep concerns for the policy makers of India. The Indian policy makers have the perceptions that China is implementing a policy of maritime encirclement of India (Malone, Mukherjee, 2010). A critical strategic node has also been provided by Pakistan for China get access to the Arabian Sea, Indian

Ocean and Persian Gulf, especially through Gwadar, the Chinese-funded deep- water sea port in western Pakistan, which became operational on 13 November

2016 (PTV News).

Pakistan granted approval in April 2015 to operate the Gwadar port for the next forty years as part of the development of the ―China-Pakistan

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Economic Corridor‖ to China. It has been claimed by China that Gwadar port has been developed as a trading point only. Contrary to this, it has been concluded by the analysts that the facilities in the port could provide infrastructure for strategic naval support to China‘s Navy in the Indian Ocean.

China could effectively become a two-ocean maritime power with such better access to the Indian Ocean and Persian Gulf. This, in turn, would have a potential impact on the free movement of US maritime forces in the Gulf region. Moreover, India would also see it as further indication of the ambitions of China to enclose India and challenge its influence in the Indian Ocean

(Rakisits, 2015).

5.6.4 India’s perceived counter-encirclement of China:

India‘s ―Connect Central Asia‖ policy is the final leg of its counter- encirclement strategy. In Central Asian region, the interests of India are related to its concerns regarding Sino-Pakistan encirclement, access to the oil and gas resources and the potential threats from Islamic activist groups in Kashmir.

India is a latecomer in the Central Asian region. As compared to China, its presence in the region is considered as being a negligible by most analysts

(Marlene et al, 2010).

Nonetheless, to engage in Central Asia, increasing attempts are being made by India. It has focused on Tajikistan, particularly to improve the bilateral relations. India has developed military ties with Tajikistan in 2003, resulting in an undeclared Indian military presence at Farkhor airbase. This was followed by an unconcealed military presence in 2007 at the Ainy airbase. The

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deployment of the Indian troops aimed at providing a reaction force to support the interests of India in Afghanistan and Tajikistan. It has been speculated by some experts that the deployment of troops is an indication of Indian aspirations to establish in Central Asia, a better capability for geopolitical purposes intended at the encirclement of Pakistan to pressurize the later on the issue of Kashmir. However, it is expected that Indian military presence in

Central Asian region will further boost the militarization of this region with the potential also to rouse the big powers into military competition (Kaushiki,

2013).

5.7 China’s dominance over India in CARs:

India failed to project any significant economic or military power to develop an extended role in the Central Asian region despite the decade-long opportunity provided by the United States‘ presence in the region. There is no meaningful security cooperation between India and Tajikistan although the two countries share security concerns about Islamist militancy. Unlike the Russian military and Chinese PLA, the Indian armed forces did not participated in counter-terrorism military exercises in Tajikistan in June 2012 (Tanchum, 2013).

India‘s poor management has left it without a vigorous strategic policy in Central Asia. It is a region which is vital for energy, trade and security needs of India. The lack of direction in its policy raises suspicions about the capability of India to maintain strategic partnership throughout the region. It is also uncertain whether its strategic planning is in line with its world power ambitions. In view of the fact that Indian forces has lost its use of Ayni airbase

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in Tajikistan, if New Delhi is to overturn the uninspiring performance of its

―Connect Central Asia Policy‖, it must counterbalance its strategic impede in

Tajikistan. The Ayni airbase was the only foreign airbase of India. It had been the key to the strategic footprint of India in Central Asia generally and in

Tajikistan particularly. Its loss was a serious strategic setback for India. It was announce by Tajikistan in December 2010, that in future, Russia was the only country which is under consideration in Tajikistan to use the Ayni airbase. In fact, Russia and Tajikistan are now discussing the terms of an arrangement of their future military collaboration (Kothari, 2014).

Despite the decade-long opportunity provided by the United States‘ regional presence for New Delhi to develop an expanded role in Central Asia,

India does not project any significant military or economic power in the region.

And although India and Tajikistan share security concerns about Islamist militancy, there is no meaningful security cooperation between the two countries. The Indian armed forces have not participated in counter-terrorism military exercises in Tajikistan like the Chinese PLA and Russian military did in

June 2012. India has to work hard on this front (Tanchum, 2013).

The space that links India with Central Asia is inundated by severe problems and it is not easy to overcome them, so, India is at a disadvantageous position. Hence, India will face difficulties in case of its large-scale economic engagement with the region (Stobdan, 2015). As compared to China, India‘s trade with Central Asia is recorded very low hardly about $750 million in 2012 and that of China was about $46 billion (Foshko, 2012).

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5.8 Indian efforts for rapprochement:

Recently, in Central Asia, there have been indications of a more cooperative approach and a policy of rapprochement between China and India.

In August 2013, in Beijing, senior officials of the Ministry of Foreign Affairs of

India met with their Chinese counterparts in discuss a number of issues which were related to Central Asia. These issues included regional security, SCO, counter-terrorism, building partnerships, energy security and people-to-people contacts with the regional countries (Reeves, 2014). As already mentioned earlier in this chapter, they were the first ever official bilateral negotiations held between the two neighbouring countries on the Central Asian region. These dialogues open the opportunity of further cooperation between China and

India (Hindustan Times, 2013, August 14).

Afterward, a Chinese delegation visited India for discussing matter related to Afghanistan which also included the implications of withdrawal of

NATO forces in future. In the region, Beijing and New Delhi clearly have some shared interests, particularly where security issues are concerned. The August discussions have clarified a number of areas of potential matching between the two nations. One area which was put forward for discussion was the Indian capability in service sectors, including banking and IT, with the major investment in the infrastructure of Central Asia (Reeves, 2014). However, despite the opposing public statements, the engagement of New Delhi in the region will continue to be portrayed by competition with Beijing. Chinese

Premier Xi paid a visit to Central Asia in September 2013. He signed various

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contracts with the Central Asian states amounting almost $100 billion (The

China Post, 9/10/2013). The visit of Chinese Premier and the contracts he signed increased the suspicions of India that China will damage the contract negotiations of the former for energy supplies (Blank, 2013).

5.9 Obstacles to rapprochement:

Despite the present grandiosity of a rise in Sino-Indian cooperation, it is evident that there is an intense lack of trust and longstanding tendency of competition between China and India. The situation during the ―Great Game‖ is reflecting in this current lack of trust, which is being repeated in the ―New

Great Game‖. It is a serious hurdle to the normalization of Sino-Indian relationships (Reeves, 2014).

Two major obstacles are facing by India to achieve its cherished desire to play a chief role in Central Asian region. One of the obstacles is the sufficient resources and the second is the lack of transportation corridors. The first obstacle is economic and the second is largely political. India has to tackle its historically problematic ties with China and Pakistan to seek overland route to

Central Asian region. To Central Asia, transportation corridors of India would have to pass either through Pakistan to Tajikistan and beyond through

Afghanistan or through the western areas of Xinjiang region of China into

Kyrgyzstan or Tajikistan. As far as economic obstructions are concerned, some of them are related to the handling and supply of transport. Most of the economic obstacles are integrally linked with the success of Indian development program, the availability of resources in the shape of private

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investment and official economic aid, prices of the goods and the attractiveness of products. In these areas China offers though competition to India. Chinese could adopt a strategy of potential threat for New Delhi on the disputed border in northeast of India, as Beijing has done since 2008, accompanied by an increasing assistance and reliance on Pakistan (Reeves, 2014).

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Chapter 6

Implications for Pakistan

Five Central Asian republics got independence in December 1991 as a result of the collapse of the USSR. This unexpected and involuntary created a belt of states having majority of Muslim population to the west and north of

Pakistan, India and china. India and china are the most populous states of the region (Kettani, 2010). Both of these countries were looking to the huge potential of trade relations with this newly reachable and large consumer market. They were also trying to create energy partnerships with the gas- and oil-rich region (Adnan, Fatima, 2015). This resulted in a type of competition between these two countries of the region. Pakistan is the neigbouring country of China and India. This competition has serious implication for Pakistan.

6.1 Pakistan as a key player:

The economic priority of Pakistan in Central Asia is to open up communication for bilateral trade in finished goods and raw material. Pakistan can get considerable benefit for its industries by getting regular supply of surplus electricity from the Kyrgyzstan. It can also get regular supply of oil and gas from Turkmenistan, Tajikistan, Uzbekistan and Kazakhstan. Pakistan wants to make relations with the Central Asian republics in various fields like banking, manufacturing, insurance, import export, joint venture and stock markets (Anwar, 1997).

The Central Asian states are land-locked. They are in dire need to get access to the outside world. Pakistan may be fruitful for this purpose to be one

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of the best options due to its unique geographic location. It is situated at the intersection of Middle East and South Asia, with a considerable outlet to the

Arabian Sea (Bano, Sohail, 2014).

Pakistan is certainly the closest ally of China. Pakistan has tried its best to maintain durable and friendly relationship with China. The decades old relationship has also witnessed some ups and downs. Besides Pakistan, there will be few other states that would be successful to maintain friendly relations with Beijing for such a long period of time. In the Cold War era, it was apprehended by China that it has been encircled by enemies (Scobell et al,

2014). Soviet Union and Mongolia, the ally of the former, were located towards its north and west. India was located towards the south and was tilted towards the Soviet Union. After the Sino-Indian border war of 1962, China viewed India as a hostile nation (Arif, 2013).

Indian designs to play role of a hegemonic leader, border related disputes with the neighbors and ethnic issues worried India‘s allies. Pakistan was compelled by these circumstances to become a close friend of China. The relationship between China and Pakistan proved to be a beneficial for both the countries. Pakistan was lucky to discover an ―all-weather friend‖ (Ashley,

Fravel, 2012) which was its neighbor. To keep check on India, China found a client, Pakistan. Hence it helps China to secure its border in the south. Pakistan could also be used as a bridge by China for its interaction with the Muslim countries and the United States (Beckley, 2012). For example, Pakistan played the role of a key player in rapprochement of China and America. Pakistan

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facilitated the secret visit of Henry Kissinger to China in 1971. This first visit made possible President Richard M. Nixon‘s historic visit to China in 1972

(Nathan et al, 2012).

China wants to continue its policy which it had adopted after 1990. It had three main security interests in which it wants to cooperate with Pakistan:

(1) To ensure the internal security of China by suppressing the radical Islamic groups of Pakistan and Uighurs in Xinjiang.

(2) To maintain durable security relations with Pakistan in order to counterweight India.

(3) To diversify trade routes of China through Pakistan and to expand economic opportunities (Jehanzeb, (n.d).

6.2 Current Geopolitics

In Asia, China has turned to be a worthy friend for Pakistan. One of its reasons is the relationships between China and India. This is especially because relations between Beijing and New Delhi have not been cordial. Ties between

New Delhi and China have improved to some extent but some major problems persist in some areas. There is considerable mutual distrust between the two countries and border issues are still unresolved. China seems Pakistan as a useful counterweight to India (Pant, 2012).

India is one of the states in South Asian region that compares with China in terms of population, economic potential, military power and size. Since

Japan appears to be weakened by economic depression, an increasing population, and Russia faces economic and political problems, India appears to

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be the only long-term rival of China in Asia (Gilboy, Heginbotham, 2012).

According to a report of United Nations Department of Economic and Social

Affairs, by approximately 2030, India will be one of the most populous countries of the world (UNDWSA, 2005). It is main reason that China is cautiously watching the capabilities and intentions of New Delhi (Dumbaugh,

Easton, 2011).

At the cost of its ties with India, China has given central position to

Pakistan in its strategic policy. The mistrust between India and Pakistan has further deepened by these policies of China (Siddique, 2014). A significant ally has been provided to Beijing by Sino-Pakistan alliance in its policy to contain

New Delhi. On the other hand this alliance was beneficial for Pakistan. These benefits include military cooperation, diplomatic support and nuclear capability. Pakistan has been consistently supported by diplomatically on international forums. Moral support has also been provided to Pakistan by

China on several occasions (Malik, 2012).

Sino-Pakistan alliance has been viewed by Pakistan as an enduring friendship. It has helped Islamabad to constrain New Delhi regardless of the shifting to geo-strategic and geo-political landscapes. The strategic goals of

Pakistan and China in South Asia are fulfilled by the alliance. China is in favour of well-armed and powerful military of Pakistan. It will help to pressurize

India. Nonetheless, China‘s blatant conventional support and secret nuclear help to Pakistan will further increase India‘s mistrust on the intentions of China in the region (Malik, 2012).

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6.3 China’s Energy and Trade Policy:

In the past few years the demand of China for energy has substantially grown. Total energy consumption of China was half that of USA. Its demands exceed that of US in 2000 and become the largest energy consumer of the world.

On one hand this calculations shows the speed of the economic growth of

China and on the other hand it shows the China is the most populous country of the world. China is becoming dependent on import of natural gas and oil from foreign countries even though it is developing sources of energy at domestic level, such as nuclear energy and renewable energy (Khalid et al,

2016).

China is in need of energy resources because of its large population and rapid industrialization. Until 2007 the GDP of China had grown to 11.4% and it is estimated that it would be 6.6% by 2020. In 1993, China‘s dependence on oil was 6.3%, it increased in 2000 to 30% and jumped in 2004 to 46%. The proven oil reserves of China amount to 2.3% of the world share, which are 16 billion barrels. The natural gas reserves of China are 0.8% of the total global share amounting to 41 trillion cubic feet (Hu & Cheng, 2008).

Since 1993, there is stagnation in the oil production of China and its use of hydrocarbon has increased twice and in the past twenty years. It is also projected that the use of hydrocarbon will be doubled in the next ten years.

About 85% of that natural gas and oil will pass through the Strait of Malacca,

Indian Ocean, South China Sea and through the ports of Pacific Ocean

(Buszynski, 2012). Hu Jintao, the Chinese president called it ―Malacca

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Dilemma‖. It is actually the fear that the dependence of China on narrow sea lanes of communication for the import of oil can be exploited by its enemies (Ji,

2007).

To resolve this dilemma, China is adopting different strategies. She wants to make sure its presence in the Indian Ocean and to develop energy corridors and overland trade routes in Central and South Asia. The over land trade routes policy of China is named as ―String of Pearls‖ strategy by the US analysts (Bedford, 2009). One of the key actors to these plans is Pakistan. To construct a sea port at Gwadar, China agreed to provide one fifth of the total cost for its first phase in 2001. It is a remote fishing village. It is located approximately 400 km away from the Strait of Hormuz and 72 km towards the

South from the Iranian border (Anwar, 2011).

One of the China‘s plans is to link Xinjiang to Gwadar with oil pipeline and railways. The construction of a railway track between Havellian has been planned by Pakistan (a city of Pakistan which is close to Islamabad) to Xinjiang in China. The railway track would be somewhat parallel to the already constructed Karakoram highway (Abid, Ashfaq, 2015). For the feasibility study of construction of the rail link, a $1.2 million contract was awarded to an international consortium in 2006. Pakistani government presented plans for a

3,300 km oil pipeline between Gwadar and Kashgar. Thickness of this pipeline would be 30 inches and it would be capable to handle 12 million tons of oil annually. $ 4.5-5 billion is the total estimated cost of the pipeline (Andrew

Scobell et al, 2014).

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Pakistan is viewed by China as an important state. It can play an influential role to determine the fate of its war ridden neighbor Afghanistan.

Geo-strategically, it is located on the crossroads of South Asia and Central Asia.

The relations between Islamabad and Beijing remained cordial for more than fifty years. While talking about their relationships, the leaders of Pakistan and

China often called it ―all-weather friendship‖ (Small, 2015).

6.4 Gwadar Port:

Gwadar is located in Balochistan Province of Pakistan. It is situated near the Arabian Sea. It was a small fishing town. In 18th century Gwadar was gifted by the Khan of Kalat to the Sultan of Oman. For about 200 year it remained the part of Oman. In September 1958, the government of Pakistan bought it back at a sum £3 million from the Sultanate of Oman (Anwar, 2011). A technical and economic study was carried out on the construction of Gwadar Port in 1993.

The study suggested that Gwadar has a significant geo-strategic position. For regional and international trade it may become vital point (Khetran (2015).

The construction of Gwadar port was completed in 2005. In March 2007 it was formally inaugurated. The total cost was $248 million, out of which

Pakistan provided $50 million and $198 million was provided by China

(Yousaf, 2012). Resultantly, China got access for its navy to project its power in

Persian Gulf and Arabian Sea. With the completion of three berths and a 600- meter long ramp in March 2008, Gwadar began handling cargo traffic. It had to capacity to accommodate several ships. Pakistan viewed this port to generate

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huge revenues when it will be used by China, Afghanistan, Central Asian states and Russia (Pakistan Newswire, March 16, 2008).

Location of Gwadar port of Pakistan

Source: www.googleearth.com

For the upgrading the existing railway line in Balochistan and building to new rail links, a blueprint was prepared by Islamabad in 2007. The rail link would connect Gwadar port to Afghanistan, Russia and Central Asian on one line. Second line will connect the port with Iran, Turkey, and Europe. An agreement has been signed among China, Kyrgyzstan, Kazakhstan and

Pakistan on traffic and transit. It was also decided the China would assist

Pakistan to upgrade the Karakuram Highway to international standard. It was also assured by Pakistan that she can be used by Western China and Central

Asian Republics as a transit hub (BBC Monitoring, October 31, 2007).

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The geostrategic location of Pakistan has offered access to landlocked

Central Asian through Gwadar port. This port along with Karachi provides the shortest course to the Arabian Sea. Pakistan is trying to pose itself as a transportation corridor. It would serve as an outlet for energy of Central Asia to be delivered into the South Asian markets. This would increase the influence of

Pakistan over Central Asia (Maurya, 2015).

It is the dire need of Tajikistan to get access to the outside world. It can easily access to the world through Gwadar and Karachi. The importation of electricity from Tajikistan can resolve the energy shortfall in Pakistan (Pakistan

News Wire, 2009, July 3).

Gwadar port of Pakistan is located near the Gulf of Oman very close to

Persian Gulf. It is situated about 75 km to the East of Iran. It is about 460 km away from Karachi. Gwadar is very close to the Strait of Hormuz. About 13 million bb/d of oil trade is carried out this Strait per day. Gwadar is situated strategically between oil rich Middle East and oil rich and landlocked CARs.

Pakistan is a natural energy and trade route for Central Asia (Javaid, Rashid,

2015). From Persian Gulf about 40% of the global oil trade is carried per day.

Pakistan is facing severe shortage of energy currently. Domestically the energy crisis cannot be resolved. The resolution of the problems will need cooperation at regional level like ECO. Iran, Pakistan and Central Asian republics are members of this organization (Javaid, Rashid, 2015).

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6.4.1 Importance of Gwadar for Pakistan

Karakorum Highway, Turkham and Chaman will link the Central Asian

Republics with Gwadar Port. This route will prove beneficial for the Central

Asian Republics as well as for Pakistan. Dependency of Pakistan will be reduced on Middle East generally and on Saudi Arabia particularly if the proposed route is established (Iqbal, 2014).

The Central Asian states can access Gwadar port by road as well as by rail. At Tirmiz and Kuchka, Central Asia have two nearest railheads. The goods could be transported from Central Asia to Heart and through Kandahar and

Quetta for Gwadar or Karachi port (Adnan, Fatima, 2015).

The Port is a step to fulfill the ambition of Pakistan to become an Energy and Trade hub for China. Now it will help to transport Persian Gulf oil from

Gwadar overland to China through Pakistan (Ahmad, 2010).

The rail and road networks which will pass through Pakistan and

Gwadar Port will link China and Central Asia to the Arabian Sea. It will be a great opportunity for Pakistan. It will bring economic prosperity for Pakistan. It will become an economic, energy and trade hub in the region (Javaid, Rashid,

2015). It will be an out let for China and Central Asia (Adnan, Fatima (2015).

6.5 CPEC:

Central Asia acquired immense importance at regional international level as a result of American led war against terrorism. The role which Beijing is playing in this region is a sign of relief for Islamabad. Along the ancient Silk

Road, the Chinese government is busy in developing an economic belt with

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Central Asia. The development of China Pakistan Economic Corridor (CPEC) is in progress from Gwadar to Kashgar through Khujerab pass. It is 2700 km long rail and road linkage which will pass through the whole length of Pakistan.

This economic corridor would not only connect China to the port of Gwadar but also assist as the energy and trade corridor for Central Asian Republics

(Gilani, 2016).

On April 20, 2015, Xi Jinping, the Chinese President paid a visit to

Pakistan (The Express Tribune, 2015, April 22). After the visit of Hu Jintao's to

Pakistan in 2006, this was the second visit of a Chinese leader in 21st Century to

Pakistan. A total of 51 agreements having worth of $46 billion were signed during his visit between the two countries. An important agreement signed during his visit was to develop China Pakistan Economic Corridor (The News,

April 21, 2015). The $46 billion investment which is intended to be given to

Pakistan by China is remarkable. This amount surpasses all foreign direct investment received by Pakistan in the past several years. It also exceeds the amount received by Pakistan as US aid since 9/11 (Ali, 2015).

6.5.1 Implications of CPEC:

The planned China Pakistan Economic Corridor has the potential to be a boon for the economic development of Pakistan. Due to severe energy crises,

Pakistan‘s energy sector is performing below its potential. As a result, it has witnessed a sharp fall in FDI in recent years (Ahmed, 2014). The proposed gas and oil pipelines across Pakistan from Gwadar and Iran to Kashgar would also be helpful in reducing the energy crises in Pakistan. Pakistan is located at the

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crossroads of huge consuming and supplying markets of the Middle East,

China and Central Asia. It is expected that by generating huge transit revenues, the proposed corridor could rewrite the economic revival of Pakistan (Shabir,

2013).The corridor can transform Pakistan into a trade hub of the region and energy transit corridor. China will also provide economic assistance to Pakistan for infrastructure development. All these factors would have a huge impact on the agriculture, industrial, overall economic development and economic growth of Pakistan (Ranjan, 2015).

6.5.2 Benefits of CPEC:

Following are some of the benefits of the China Pakistan Economic

Corridor: a) Surmounting Energy crises:

Economy is the backbone of any county and energy is called as life line of the economy. It is an important instrument for economic and social development of a country. There are severe crises of energy in Pakistan due to industrial demand and population growth. WAPDA has so far unsuccessful to tackle the problem (Kiani, 2015, April, 26). With the help of CPEC, the country will be able to get rid of the crises of energy. The existing industries will revive as a result of the availability of energy. For example, full production textile can add 2% the GDP growth of Pakistan (Akram, 2015).

Energy zones are one of the four major areas which will be covered by the CPEC framework. As a first priority, a project totaling 10400 MW in the energy sector has been included which is proposed to be completed by 2018.

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Under a policy of investment for independent power production (IPP), Chinese firms will invest $35 to $37bn in the foreign direct investment (Kiani, April, 20,

2015).

These projects would generate 16400 megawatts of electricity and would be based on coal, solar, wind and hydropower generation. These projects will be located in Azad Kashmir and in all provinces of Pakistan. In the Thar Desert,

10 projects of 6,600 megawatts would be set up by China. It would transform this underdeveloped and remote area into energy capital of Pakistan and would also open economic opportunities (Kiani, 2015, April, 20). b) Infrastructure development:

Development of Infrastructure which includes the development of ports, highways and roads, is one of the important areas of China Pakistan Economic

Corridor. The project will basically help to connect Pakistan to all sub regions in

Asia. Step by step, Asia, Europe and Africa could also be connected through this project. It has the capacity to create a sound business environment within the region and all the related countries by removing all trade and investment barriers (Husain, 2015).

Pakistan could become a develop country after the complementation of this Project, by enlarging markets for prepared goods. The adjacent areas to the corridor would be beneficiaries in particular. They would become attractive for small and medium projects, services industries, manufacturing and agriculture.

Employment opportunities will expand economic growth will increase extensively (Kiani, 2015). Free economic and industrial zones will be created at

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the adjacent areas of CPEC. To link all the four provinces, Azad Jammu and

Kashmir, Gilgit-Baltistan and FATA, a fresh economic zone working group would be created soon in order spread out fruits of the initiative throughout the whole country (Kiani, 2015). c) Economic Development:

Pakistan will be able to build a strong and stable economy with the help of CPEC. A significant opportunity will be created for Pakistan for the advancement of its economic interest and revival of its industry. The psychological barriers to the flow of foreign investment from other countries will also be overcome. In Pakistan, it is indispensible to encourage foreign direct investment (Kiani, 2015). War phobia cannot be defeated without economic development. It is the economic development through which peace and prosperity can be achieved (Kiani, 2015, June 3). d) Removal of poverty:

The project of CPEC is a game changer. It will remove the misery and poverty of millions of Pakistanis. It will lift millions of Pakistanis out of poverty and misery. The project encompasses the development of industrial park projects, textile garment, erection of nuclear reactors, construction of dams, development of roads and railway line. These developments would be only helpful in generation of employment opportunities for the people but will also be fruitful to take ownership of these projects. The quality of life of people will improve as a result of vocational and technical training institutes, well

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equipped hospitals, water supply and distribution in undeveloped areas (Hali,

2015). e) Peace and prosperity in Provinces:

China Pakistan Economic Corridor is project of billion dollars. It is not only the name of roads, railways and seaport but a mega project which will bring peace and prosperity in Pakistan. The CPEC would prove beneficial for the country in general and for Balochistan in particular. It will reduce unemployment and bring prosperity in the whole country. Gwadar port has already started its functions. As its functioning will boost and reach its full swing, it will bring economic opportunities, economic revolution in the country

(The Daily Dawn, 2015, July 31).

6.6 Iranian port of Chabahar:

The port of Chabahar is situated in Sistan and Balochistan province of

Iran located towards the south-eastern border of the country. This port can play an important role to promote regional trade with the regional countries like the

Central Asian countries, Afghanistan and Pakistan. Its location has a strategic importance due to immediate access to the international waters. In addition, it will facilitate the process of cargo transit to the regional countries if it is connected to the rail network of the country. This port is located in the Gulf of

Oman. It will play a primary role in success of North-South transit corridor.

Iran has planned to monopolise and channel trade from Kazakhstan,

Kyrgyzstan and Tajikistan with the assistance of India, for the East through

Chabahar port (CACA, 2003). An opportunity has been created due to the

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willingness of India to invest in Chabahar port. In the near future, it will turn the port into a commercial centre (Balooch, 2009).

Like China, India is one of the emerging economies of Asia. It aims to capture the market of Central Asian and to get faster the imports of energy imports through the port of Chabahar, which is a shorter route (Naserian,

Rouzbahani, 2009). Furthermore, it can dominate the region by increasing its military presence over the region (Norwegian Ministry of Defence, 2008). India has technically and financially contributed to the completion to the port infrastructure under different deals between Iran and India since 2002 (CACA,

2003).

India signed an agreement with Iran in 2015 to invest $85 million in the development of Iranian Sea of port of Chabahar. In February, 2016, the Indian

Cabinet approved the provision of US$150 million credit to Iran to construct new jetties and berths at the port (Hughes, 2016). It is a few miles away from the Pakistani port of Gwadar. India intends to access to the landlocked Central

Asian countries through Afghanistan. Chabahar will help India to easily access

Afghanistan and Central Asia. This port will be a station for the goods coming from Gulf countries, CARs and Afghanistan. The North-South corridor will link

India to Central Asia through Chabahar. It is a road that will stretch to Central

Asia through Iran and Afghanistan (Bhutta, 2015).

The Gwadar port has already become functional (Daily Express 2016,

November 13). However, there is no need for its conflict with Chabahar ports.

Iran has a pledge in the China Pakistan Economic Corridor. Iran has proposed

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to link the Iran– Pakistan gas pipeline with China. It has been described as a

―common interest‖ between the three countries. Iran has also proposed construct power plant on its border to provide electricity to Pakistan (The Daily

Mashriq, 2016, September 23).

Indian has no direct access to the land locked republic of the Central

Asian region. India has been involved in Chabahar in order to allow India access to the landlocked region, so Iran is seen by India as the best option

(Khan, 2016). If Pakistan extends transit facilities to India, then Indian interest in the Iranian port of Chabahar may decline. Currently, India has been actively engaged in Central Asian states to peruse deals for energy. In CPEC, India can be easily accommodated through the eastern route in the province of Punjab. It can easily reach to Gwadar port through coastal highway. During his visit to

Pakistan, Iran‘s national security council‘s chairman Alaoddin has said that

Gwadar port and Chabahar port should be given the status of sister ports (ARY

News, 2017, January 27).

The Indian involvement in Chabahar port would create a win-win situation for India. India wants to boost its energy security, its influence in

Indian Ocean and access to Central Asia and Afghanistan. With the help of this port India will be able to achieve its objectives. Thus, it will enable India to increase its influence in the whole region. In addition, India will, moreover, attain these advantages while bypassing Pakistan altogether. Pakistan will definitely be a looser as its influence in Afghanistan and the Indian Ocean will

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decrease. If the Central Asian states and Afghanistan opt of Chabahar instead of Gwadar, it will also be a death blow for the economic security of Pakistan.

6.7 IPI:

Pakistan and Iran are exchanging views on Iran-Pakistan Gas Pipeline project (IPI) since 1994. A preliminary agreement was signed regarding the pipeline in 1995 between Iran and Pakistan. Later on, in February 1999 a preliminary agreement was also signed by Iran with India; to extend the pipeline India. The project was expressed as Iran-Pakistan-India Gas Pipeline

(IPI). It was described as peace and prosperity gas pipeline by many experts.

Several meetings have been held between Iran, Pakistan and India and they have agreed on price and other issues related to the project (Munir et al, 2013).

However, when Iran and Pakistan met at Ankara in March 2010 to sign the final agreement, India did not sign the agreement. It is assumed that India did not sign the agreement in Ankara because of two reasons. Primarily it was under US pressure not to sign the agreement and secondly due to its distrust on

Pakistan (Richard Rousseau, 2011). Hence the Iran-Pakistan-India (IPI) Pipeline finally becomes Iran-Pakistan pipeline (IP). Moreover, the cost of pipeline which was primarily estimated in 1995 at $ 4 billion is now calculated to be approximately $ 7.6 billion (Wirsing , 2008).

Iran expressed its interest in April 2008 that the People‘s Republic of

China could join the project. Bangladesh was also invited by Iran in August

2010 to join the project (Kabir, 2010). A nuclear deal was signed by India with

US in 2008, and withdrew from the IPI on the pretext of security issues and

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over pricing next year (Haider, 2010). Nonetheless, Iran and Pakistan were invited in March 2010 by India for a meeting in Tehran which was planned to be held in May 2010. The United Stated requested Pakistan January 2010 to give up the project. In return, the US would assist Pakistan in the construction of natural gas terminal and to import electricity from Tajikistan through Wakhan

Corridor of Afghanistan (Farshadgohar, 2013).

On March 11, 2013, the Presidents of both Iran and Pakistan launched officially, to lay the work on Pakistani section of the project. Iran and Pakistan have rejected the pressure of USA. They are committed to complete this project.

It has been settled the Iranian company Tadbir will build the pipeline at a cost of Rs.190 million per km. Inside Pakistan, per day, the company will lay 2 km pipeline. The construction of pipeline in the Iranian territory has already been completed. From Pak-Iran border (Gabd) to Nawabshah in Pakistan, the construction of 781 km of gas pipeline having a diameter 42 inches can be

th completed within a span of fifteen months (IPRI Conference, 18 April 2013).

st It was reported on 1 May 2012, that the foreign minister of Pakistan had proclaimed that Islamabad will not submit to American pressure as the pipeline project was in line with the national interest of the country. It has been agreed between Iran and Pakistan that the Sale and Purchase of the gas will be for the import of 750 million cubic feet per day. The agreement also provided for the increase in the amount of natural gas to one billion cubic feet per day. It was expected that Iran would supply gas for about 25 years from Pars gas fields of

Iran in the Persian Gulf. The supply of the gas would be made to transmission

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and distribution network of Sui Southern Gas Company in Pakistan. The total cost to lay down Pakistani section of the pipeline project of 781 km was US$ 1.5 billion. Iran agreed to provide US $ 500 million as loan to Pakistan (Munir et al,

2013).

IPI and TAPI

Source: TAPI and IPI: Pipelines for Good,

http://outlookafghanistan.net/topics.php?post_id=2209, 16 Oct 2011

Iran-Pakistan gas pipeline is a viable and excellent option for Pakistan commercial and economic (Munir et al. 2013). Nevertheless, if this project is examined under the existing politico-strategic and security environment of

Pakistan, there are numerous apprehensions which are equally significant.

With the help of this project, the country will be able to save annual cost of oil imports amounting US$ 2.3 billion. In addition, the project would also generate

4000 MW of power for the country (Khan, 2013).

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In recent years, the consumption of energy has rapidly increased in

South Asia due to its population and economic growth. The major issue which the countries of South Asia are facing is to keep up with the rising demands of energy. As compared to the consumption of energy in 2006, consumption of energy in 2010, in countries of South Asia has doubled.

Natural gas is the largest source of energy in Pakistan. Its demand and import is growing rapidly with the passage of time. At present, 49 percent of the energy needs of Pakistan are fulfilled through natural gas supplies. Proven natural gas reserves of Pakistan are 26.9 trillion cubic feet according to an oil and gas journal of January 1, 2005. To support its increasing consumption,

Pakistan is looking to increase its gas production by importing gas through pipelines from Turkmenistan and Iran (Natural Gas, 2006). It is seen that the contract for the construction of this pipeline could be sign by China. Chinese firms are part of that consortium which has been awarded the contract for financial consultancy for the pipeline project (Shahid, 2011).

6.7.1 Implications of IPI for Pakistan:

There are several benefits that IP Gas Pipeline may bring for Pakistan.

The detail of some of these benefits is as under.

1. With the help of this project, Pakistan will attain the ability fill the gap between its energy demand and supply. It will overcome the energy crisis of

Pakistan (Abbas, 2012). Along with minimizing the shortage of natural gas, it will also fulfil electricity shortage of 5000 to 6000 MW.

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2. Total cost of Iran-Pakistan gas pipeline would be cost approximately $3 billion to Pakistan. On the other hand, the imports of the oil would reduce by

$5.3 billion. Thus it would help to save an amount of $2.3 billion.

3. The indigenous declining gas reserves of Pakistan would be preserved with the help of this project. By 2020, these reserves are expected to diminish.

4. Pakistan was pressurized by US not to sign the project. But it had to face more severe consequences if Pakistan would not start the gas project with Iran.

5. The import of gas from Iran will help to replace the costly furnace oil. It is being used in Pakistan as fuel in power houses. It will help to save one billion dollars per year. In the agreement, there is a clause that if some other state agreed to provide gas to Pakistan at lower price than Iran will also decrease the prices of the gas for her.

6. Job opportunities will be provided to the people of Sindh and Balochistan with the help of this project.

7. If the Pipeline is extended to a third country, either India or China, it would help Pakistan to earn transit fee (Escobar, 2011).

8. Key beneficiary from the IP would be the Power sector as the supply of gas to power sector has been decreasing.

9. This project will help Pakistan to start new avenues for cooperation with

Iran. A proposal has also been presented for the building of an electricity transmission network next to gas pipeline. It will be helpful to connect electricity grid of Iran with that of Pakistan. Iran has also proposed to construct

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a power plant near its border area in order to supply electricity to Pakistan.

(The Daily Mashriq, 2016, September 23).

10. The capacity of Iran-Pakistan pipeline to supply gas is up to 40-55 billion cubic metres per annum (Abbas, 2012). If it is extended further to India, which was the previous partner, will address the critical energy situation in India. The pipeline could be help to flourish peaceful relation between India and Pakistan.

11. After fulfilling the needs of power sector, the excess gas of 350 mcfd may be available for fertilizers and captive power units in textiles and chemicals.

Natural gas has already been committed by the government to the fertilizer plants in the country on Sui Northern Gas Pipelines network. Some amount of the surplus gas may be diverted to FFBL urea plant. Currently, the plant is operating at 50 percent capacity.

12. The IP project will help to solve the problem of sectarianism in Pakistan and

Iran. It will bring harmony in Pak-Iran relations.

6.8 TAPI:

Turkmenistan, Afghanistan, Pakistan, and India (TAPI) gas project is also known as Trans Afghanistan Pakistan and India gas pipeline project. It is a

1680 km-long proposed gas pipeline project expected to be funded and develop by Asian Development Bank. $ 7.6 billion is the total estimated cost of the project. The transportation of the natural Gas to India and Pakistan would be carried out through Afghanistan from Turkmenistan. 8% revenue of this pipeline would be received by Afghanistan. It is intended that the TAPI project would transport 30 billion cubic meters (bcm) of gas from natural gas from

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Turkmenistan to India and Pakistan (BBC News South Asia, December 11,

2010).

In 1995, an Initial MOU was signed between the governments of

Turkmenistan and Pakistan. In 2002, a new deal was signed among them

(Abbas, 2012). The last report of feasibility was submitted by ADB in 2005. This project was strongly backed by USA for the reason that the pipeline will export the energy of Central Asian Republics‘ independent of the Russian pipeline routes. An agreement for the framework of TAPI has been signed by all the member countries in the project in 2008. The total length of the proposed gas pipeline will be 1735 kilometers. From Turkmenistan the pipeline enter into

Herat and then to the Kandahar province of Afghanistan. From Kandahar it will run to Quetta and Multan (Pakistan). From Multan it will run to Indian

(Fazilka). Russian Gazprom was also interested to finance the project with certain conditions. First condition was to award the construction project to it without international bidding. The second condition was that the procurement rules must relax for it (Rana, 2011). So far, the GSPA (Gas Sales and Purchase

Agreement) has not been signed by Afghanistan because, currently, instead of

5.11 billion cubic meters, they want to buy 1.5 billion cubic meters of gas

(Javaid, Rashid, 2015).

However, there are numerous reasons due to which construction of the pipeline has been delayed. It includes previous commitment of Turkmenistan to provide gas to Russia and difficulties in engaging with the government in

Turkmenistan. Association of security risk with a pipeline that will run through

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the dangerous territory of Afghanistan is also a hindrance in the way of the project. So, there are suspicions as to whether international companies will be prepared to finance TAPI, despite the publicity around the project (The

Economic Times, 2012, October 16). As a result, practical accomplishment of the project is still at a premature stage (ICGR, 2011). Moreover, after the visit of Xi

Jinping, Chinese Premier in September 2013 to Turkmenistan, there is rumors that the TAPI project may be derailed altogether (StratRisks, September 8,

2013).

TAPI

Source: http://www.brussellstribunal.org/Meyer/Pakistan0609.htm

6.8.1 Importance of TAPI:

TAPI is an important project for Pakistan and this should be implemented parallel to the IP project as:-

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It will be helpful to provide job opportunities to the people during construction and operation and it will create the environment in the concerned region for developing industrial capacities.

TAPI project has huge potential for regional cooperation. It has the potential in the long-term to create a joint economic ring in the region. A security ring will be created through the economic profits.

Reasonable economic opportunities would be provided by TAPI to

Afghanistan, Pakistan and India after its completion. They will be able to get affordable and steady supply of gas. Furthermore, for the landlocked

Turkmenistan new markets will be opened as it can increase the quantity of its exports to the east where the demand of energy is high. There is an immense possibility of TAPI success to connect the region, as Turkmenistan has stopped the supply of gas to Iran (The Daily Dawn, 2016, January, 4). The implementation of such a win-win project will be helpful for solving the regional problems.

There are possibilities that Pakistan would discover possibilities to extend TAPI and IP to other countries of the region as well. Due to key geo- strategic location of Pakistan, it can become an Energy Corridor in the region if these pipelines are also joined by India, China and Bangladesh. If TAPI and IP are extended to India, China and Bangladesh, it will provide an opportunity to

Pakistan to receive transit fee. In turn it will be helpful for the economic uplift of Pakistan. China can support the pipeline project technically and

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economically, though it might be a big challenge. Nonetheless, China is capable to meet those challenges (IPRI Conference 2013).

The most important benefit of the TAPI project is that it will contribute to the rapprochement of Pakistan and India. The level of interdependence between Pakistan and India will rise. The energy security of Pakistan and India will be enhanced with the help of this project. The project will be a mean to reduce the greenhouse gas emissions in South Asia due to increase in the consumption of natural gas (Anwar, 2011).

6.9 Kashmir issue:

The Kashmir issue emerged on the world scene in 1947, after the British withdrawal from the Indian sub-continent (Cheema, 2015). Before the partition of the sub-continent, the ruler of Kashmir had been given an option to decide the future of Kashmir while acceding to either India or Pakistan. The Maharaja of Kashmir opted for accession to India thus signing the instrument of accession to Indian Union. This decision was contested by the government of

Pakistan on the ground that majority of state‘s population was Muslim. The matter was referred to the United Nations after war broke out between India and Pakistan on Kashmir in 1948. The Kashmir issue is not only the bone of contention between India and Pakistan; it is also associated with the peace and stability of South Asia (Mangrio, 2012).

Pakistan is the member of two Muslim organizations i.e. ECO and OIC.

Pakistan, Iran, Turkey, Afghanistan and Central Asian Republics are the member of ECO. OIC contains all the Muslim countries of the world. Pakistan

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in particular, hopes to build on an Islamic solidarity by thrashing up religious sentiments and using these to decrease Indian influence in Central Asian

Republics. Pakistan has raised the Kashmir issue on international forum though with limited success, to portray the case of the oppression and coercion used against the Muslims by the ‗Hindu-dominated‘ Indian army (Sharma, 2008).

In China-India relationship, the future of Pakistan remains a key factor, and in Indo-Pak relationships, the future of Kashmir remains critical issue.

Therefore any progress on part of Beijing either inadvertently or intentionally that is beneficial for Pakistan related to the Kashmir would be an issue of concern for New Delhi. For example, recently, a decision was taken by China for issuance of separate visas to inhabitants of Indian-held Kashmir. This resulted in a minor diplomatic stand-off between Beijing and New Delhi

(Lhamo, 2013). Though, such kinds of acts are contrary to the Beijing‘s policy since the 1990s (Malone and Rohan, 2010).

The geopolitical interests of Pakistan and China in their relations with each other are at some extent the same. They are pursuing a balance of power strategy, trying to use each other to tackle India with a potential two-front war

(Cohen, 2011). The Chinese and Indian governments declared a postcolonial brotherhood at the time of their emergence in 1949 and 1948, respectively. After the acquisition of Tibet by China in 1950, both the countries shared a 2500 miles undemarcated border suddenly. The maps of borders of China and India do not match to this day. Consequently, there exists approximately 400,000 square miles of disputed area between India and China. The disputed territory is

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located in two regions. One is the Aksai Chin Plateau, which is controlled by

China but claimed by India and the second is Arunachal Pradesh, which is an

Indian state and is called ―South Tibet‖ by China (Hamhimheaki, 2004).

India China Disputed Territory

Souce: New York Times

Tensions have been resurfaced between China and India in recent years.

It was declared by the Chinese ambassador to India in 2006, that the whole state of Arunachal Pradesh is the territory of China, and they are claiming this whole area (Smith, 2009). This move created unrest in the governmental circles. These negative apprehensions would strengthen an already cordial alliance between

Pakistan and China (Small, 2010). As a result India tries to improve its relationships with the United States of America, Australia, Vietnam and Japan; which in turn push Pakistan closer to China (Yuan, 2011). The Indian government has apprehended that the China International Institute of Strategic

Studies has advocated splitting the Indian state into thirty independent states

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with the help of Pakistan. For this purpose Pakistan and China are supporting

Kashmiri, Tamil and other separatist groups in India for their own independent nation-states (BBC, August 12, 2009). China funneled economic and military aid to Pakistan in both the 1965 and 1971 India-Pakistan wars and condemned

Indian aggression (Scobell et al, 2014).

China-India competition for the transport of Central Asian goods through the Indian Ocean will push China and Pakistan together. Chinese observers have concerns about the dominant position of India across the most important oil routes of China. The naval and maritime affairs publications of

China closely observe the developments of Indian navy. In the Indian Ocean, the stage is set for rivalry between China and India (Holslag, 2010). The mutual relations between New Delhi and China are based on emotions and suspicion.

China could be a key player in case of any conflict between India and Pakistan

(Scobell et al, 2014).

The fate of Kashmir is still undecided. There is a tension on the line of control between India and Pakistan. Gilgit-Baltistan is considered as part of

Kashmir by India. The road, rail and pipeline network under the CPEC is planned to be pass through Kashmir as well as Gilgit-Baltistan. It is the reason that India has concerns over the passage of road and rail network between

Xinjiang and Gwadar through Kashmir. China will resist any force which will interrupt the safe passage of goods from Gwadar to China through CPEC.

Pakistan will be supported by China in case of any decision taken by the United

Nations against the interest of Pakistan regarding Kashmir in future.

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6.10 SCO and Pakistan:

It is evident that Shanghai Cooperation Organization is more than a paper tiger. China and Russia have supported Pakistan to become its member.

They supported Pakistan‘s membership so that Islamabad could play a positive role to help in curbing terrorism. Pakistan‘s membership will help to secure energy interest in Central Asia. No doubt, China‘s position is also linked to boost regional connectivity by promoting Pakistan-China Economic Corridor project (Stobdan, 2015).

Russia was also successful to drag India into the SCO. Its membership in the organization will help India to further its existing relations with the Central

Asian Republics. India will also be able to find new energy routes other than

Afghanistan and Pakistan. By joining the SCO, we can hope that India and

Pakistan would be able to find a reasonable solution for the already propose projects like TAPI, IPI, CASA and other project (Stobdan, 2015).

Russia, as a member of SCO, has not only tilted towards China but it has also brought some changes in its foreign policy towards Pakistan, though the interactions may be limited at present. Joint exercises have also been carried out between the armed forces of both the countries in the year 2017. It has also shown its interest in the CPEC project in Pakistan. It has been clarified by

President Putin that its ties with India will not be impeded due to its proposed arms supply to Pakistan (Times of India, New Delhi; 2014, December 31).

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Chapter 7

Conclusion

When India and China entered into a new era after 1948, there was a brief period of cooperative relationship between them in the start. They were caught up in the politics of the Cold War very soon. The border between China and India was left un-demarcated by the British. This led to the Sino-Indian border dispute and the tensions finally resulted into a limited war in 1962.

The relations remained tense up till 1976 when ambassadorial-level relations were restored. Between the mid-1970s and the mid-1980s, the relationship between the two sides improved at a very slow speed. The relations fully normalized after the Indian Prime Minister‘s visit to China in

1988. In the 1980s and 1990s, the two countries strategically planned to make the economic development their main theme. The old plans of threats and rivalry were gradually replaced by plans of economic development. However, the boundary issue remained unsettled. It is the most lingering issue between the two countries. The nuclear explosions of Indian in 1998 led to a new setback in their relationship. However, this time, they soon began the process of restoration and strengthening cooperation in regional international affairs.

A road map was provided for the development of bilateral ties by documents which were signed between the two countries in 2003 and 2005. The

China-Pakistan-India triangle would remain a source of friction between their relations unless India and Pakistan manage to resolve their issues and rivalry in the region. India and China is working together to enhance mutual trust and to

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maintain peace and tranquility in border region through CBMs. The security dilemma is persistent. Both seek to maintain a military balance and are carefully watching each other. In the Indian Ocean, China is currently supporting Pakistan to construct Gwader Port and would possibly be able to challenge Indian domination.

Two factors are dominant in India-China relationship. Since 1948, their relations are oscillating between competition and cooperation. Sometimes one side is stronger, and sometimes they are equal in power and influence.

This study has clearly shown a reasonable picture of energy potential of the countries of Central Asia. In the Central Asian region, Kazakhstan,

Turkmenistan and Uzbekistan are the main countries having abundant and significant amount of oil and gas resources. However, other natural resources are in large amount in all the Central Asian states. In the field of coal,

Kazakhstan is considered as the world leader. It has been reported that one of the famous goldmines in the world is in Kyrgyzstan (Kumtor). Deposits of gold, antimony, boron, lead and Zinc in Tajikistan occupied an important place in its mineral reserves. The silver deposit of Tajikistan is one of the largest deposits of the world. The largest deposits of gold are found in Uzbekistan. It is the world leader in production and export of gold and Uranium. At the end of

2012, the proven oil reserves of CARs were 31.2 thousand million barrels, while its oil production was 1357 thousand barrels per day. Currently, Kazakhstan was leading country in production of oil CARs with 1728 thousand barrels of oil per day. At the end of 2012, the proven gas reserves of CARs were at 19.9

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Trillion cubic meters. In the same year, Turkmenistan was leader with proven reserves in the whole region.

The oil and gas production and export capacity of CARs is much more than that of the actual production and export. There are various possible solutions to explore energy resources and increase their exports. To increase investment in energy sector of the region and to increase the capacity building cooperation both at bilateral and multilateral level like SCO is very necessary.

In addition, peace, stability, good governance, incentives for investors, resolution of the territorial and water disputes among the countries of Central

Asia, to provide infrastructure facilities like rail, road and pipelines will help to increase the exploration and export of the resources of Central Asia.

Close ties have been developed between China and CARs since the collapse of the USSR. These ties were not only economic but also covers political and security issues. The flow of oil, gas, precious metals, and other natural resources started from the region to China. Investment was started by

China in the region by building pipelines, power lines and rail and road networks linking the Central Asian region to Xinjiang, its north-western province. Cheap consumer goods, which are transported from the province, have flooded the market of Central Asia. These regimes and the elites of the region receive often a large amount funding from China. Beijing also provides discreet diplomatic support to these republics if Moscow becomes much demanding. If the long-term stability of the region is questioned by the international community at any time, Beijing expresses its warm solidarity with

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the region. The visibility and influence of China is growing rapidly in the region. In the Central Asian states, China is already a dominant economic force and within the next few years could overshadow the United States and Russia becoming the pre-eminent external power in the region.

The internal primary concern of China is the security and development of the Xinjiang Autonomous Region. This province shares a border of about

2,800 km with Tajikistan, Kyrgyzstan and Kazakhstan. It appears that the central point of its strategy is to create close relations between Central Asia and

Xinjiang, aiming at strengthening both political stability and economic development. It is hoped the resultantly, Xinjiang and CARs would be shielded from any negative effects of the withdrawal of NATO forces from Afghanistan.

The relationship has also some negative aspects. The Chinese engagement in

Central Asia is contributing to its negative image. Nationalist sentiments and suspicions about China are already high in the region. Various allegations are growing against the Chinese. For example, as put forward by the Central

Asians, Chinese mines are badly effecting the environment, working conditions in Chinese plants is not good, and Chinese businessmen offered bribers to officials to squeeze out competitors. Whether it deserves it or not, China is becoming as the new economic imperialist in the Central Asian region.

China is attempting to take political, economic and security voyage in the region, often through SCO, which, though, in times of unrest remained unsuccessful. The other main external players in the region have attained limited success either due to their own interests or their financial capability.

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The pace of the NATO troop‘s withdrawal from Afghanistan is a cause of concern for Chinese policy makers. Moscow claims that it has privileged interests in the Central Asian region but it is short of the financial resources which China has on its disposal. In the near future, it is highly probable that

Beijing would have to play a larger role in the region.

China has not yet made a clear strategy for the stability in both Central

Asia and Afghanistan, though support is provided by them to the leaders of

Central Asian publically and confidence is articulated in their political capability. Any type of military intervention has been explicitly ruled out by

China in its troubled Central Asia neighborhood, even in a time of severe disorder. Nevertheless, its leadership might be forced to make difficult decisions in the near future. It would certainly require using at least more active economic and diplomatic engagement to tackle the issues that threaten its regional stability and economic interests.

China has started taking bilateral and multilateral steps for engagement with the CARs as a key competitor with huge economic interests in the region.

The non-interference policy of Beijing put restriction on its actual engagement, but China is aware about the fact this policy will not protect the interest of

China in Central Asian region. Obviously, energy cooperation between Central

Asia and China is growing very quickly. Rather than directly within the framework of SCO, the energy cooperation is one of the foundations of a cooperative relationship constituted on the sidelines of the organization. The government of China and the Chinese experts are aware that the regional

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security climate might change due to departure of NATO from Afghanistan. It would have key implications for the interests of China in the region.

Traditionally, great importance has been attached by India to its relations with CARs. Its ties with the Central Asian region are about three thousand year old. The old Silk Road was used as a link for trade between India and Central Asia. Central Asian republic emerged on the world map after the breakdown of Soviet Union. Attempts were started by India for the revival of its relationships with the newly independent states. India launched its ‗Connect

Central Asia Policy‘ in 2012 to get advantage from the natural resources of the region. Over the past sixteen years, the Indian government has increased its engagement with CARs, both on bilateral and collective spheres, in order to build a long term partnership. New Delhi and the CARs share common concerns on drug–trafficking, extremism and terrorism. Within the framework of its ―Connect Central Asia‖ policy, it has been planned by India to further strengthen its security and strategic cooperation with all the Central Asian states with a special focus on military training, joint research and terrorism and close consultation on the situation of Afghanistan.

Unluckily, regardless of close historical & cultural ties, the relations have not developed to the desired level. The major restriction faced by India is the lack of direct land or sea route to the land locked Central Asian region. India has been deprived to form beneficial relations with Central Asia due to instability in Afghanistan and a highly volatile Pak-India relation. Several alternative routes have been planned and discussed intended to transport

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energy and other natural resources from CARs to India like BTC, TAPI and

NSTC. If materialized, the TAPI project would be a game changer. However, the concerned countries are still unable to give a concrete shape to the TAPI project even though some positive developments have been taken; like the signing of the agreement by the concerned governments.

The economy of India is strongly dependent upon the economy of

Central Asia which is rich with natural resources. There exist a huge potential to enhance investment and trade relations between the two sides. If there would be no hurdles and obstacles of insecurity and instability in the shortest trade route through Afghanistan and Pakistan the trade between Central Asia and India could be ten times as high as it is at the present. The attempts on part of CARs and India to remove these obstacles and to develop alternative trade routes would be in their best interest. To discover other areas for bilateral economic relations is also the need of the day. With the implementation of right policies, there is probability of increase in trade and investment relations between India and CARs to manifold.

The political, economic and geographical significance of CARs for India is beyond any doubt. In the Central Asian market, the economic engagement of

India would need the contribution of Indian private sector. Trade would increase about more than tenfold if it could be carried out through the shortest route through Pakistan and Afghanistan. However, looking at security problems and political relations of India with its neighbors, this route may not be utilized in the near future. The trade between India and Central Asia could

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increase about two to three fold in case the trade route through Iran is developed. Central Asia is a strategically located region and is rich in hydrocarbon resources. Trade relations should be encouraged by India with

Central Asia through bilateral and regional trade agreements. Currently the volume of trade between Central Asian states and India is very low. It is expected to increase, if the proposed trade route through Iran becomes operational, as the distance would become short significantly.

If we observe the overall relations between India and China, we can find that there is competition as well as cooperation. From both the sides, along with competition, signs of cooperation have also been shown by respective governments. However, if we look at the areas where there are actual issues, different pictures have been revealed by different issue-areas. As far as Central

Asia is concerned, the forces of competition are stronger.

Cooperation has been the major trend between the two South Asian giants in the fields of culture and education. The competition mindset to keep their traditional sphere of influence has also been displayed by both the countries in the Central Asian region. Competition is the initial driver on issues which are related to energy. Based on history of mistrust and current competition, it can be concluded that in the coming decade, the rise of China and India will be accompanied with tension and suspicion. The Sino-Indian competition exists in the ―New Great Game‖ and it could play the role of a catalyst for conflict between these two major emerging powers. While neither

China nor India, nor would certainly any of the affected country want the

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―New Great Game‖ to lead to war. There is an expected risk that if left unchecked, misunderstandings and miscalculations could see the ‗Game‘ get out of control. It would likely have profound consequences certainly for regional and global stability.

The research work examines the ongoing competition and rivalry between China and India for the resources of Central Asia. It argues that like the ―Great Game‖, in the ―New Great Game‖, the Sino-India competition includes competition for access to resources, the development of military alliances and the use of strategic relationships with other powers to restrain the rise of the opposing nation. The research concludes that the long-term social and economic development of both China and India is obviously dependent on a favorable security environment.

In Sino-Indian engagement in Central Asia, there are numerous possibilities. A cooperative partnership between China and India could be developed in future. That partnership would be beneficial for Asia and to the world as a whole. An anti US/ Western block could eventually form by the

SCO member countries, it will greatly shift the global balance of power. If there would be a competition between the two rising powers, it might be more of a friendly nature or it might be tense. In addition to these two possibilities, it can be observed that China is actively pursuing an encirclement policy of India and the later has begun to respond in the same manner, though not as efficiently.

The simultaneous rise of China and India could be a major challenge to regional and global stability. A more sophisticated diplomacy would be required to

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handle it. Whatever view one takes, it is clear that the geopolitical landscape of

South Asia and Central Asia has already started to undergo a considerable and irreversible shift.

There is a constant struggle between India and China to capture the market of raw materials energy resources in Central Asian States. China gave assistance to Pakistan in different fields including the Kashmir issue against

India since long. During the struggle for the resources of CARs, India and

Pakistan singed TAPI project to import gas from Tajikistan. The project could not materialize due to certain reasons. India also signed IPI project to import gas from Iran through Pakistan in 2010 which also failed to meet its ends. It is expected that TAPI would be helpful in improving relationships between India and Pakistan in order to get these two rival countries away from initiating the war. In order to link the Central Asian Republics with the Arabian Sea, Iran and

India are developing a road and rail network. India is providing assistance to

Iran for the development of Chabahar Port to help the landlocked Central

Asian States to get access to the outside world. If Chabahar port of Iran became fully operational, it would have adverse effect on Pakistan. To have an access to

Central Asia, some of the countries of the world might use Chabahar instead of

Gwadar port of Pakistan. Pakistan should also cooperate with Iran to get energy resources from Iran as well as from Central Asian Republics. China has made huge investment in the Gwadar port of Pakistan. It is likely to face tough competition from Iranian Port of Chabahar. Nevertheless, Iran has also showed its interest to invest in Gwadar Port of Pakistan. Recently China is developing a

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huge project in Pakistan, CPEC. It is a network of roads which will link Gwadar to China. It is not only a web of roads but will also contain pipeline projects, electricity projects and the development of industrial zones. Whether it is TAPI,

IPI, energy and trade corridors or Gwadar; all will be beneficial for Pakistan.

This transferring of macro-level trade would decrease the historical tensions and rivalries between India and Pakistan and between India and China. This would also reduce the turmoil and disruption between Pakistan and

Afghanistan which are linked with each other in terms of historical past events, ethnicity, geographically and security affairs.

The port of Chabahar of Iran is being developed by India and it can be a possible secure route for the landlocked Central Asian Republics to reach the

Indian Ocean. Gwadar deep sea port has also been developed by Pakistan which can serve CARs to access the outside world. Central Asia now has two options, Chabahar and Gwadar. If peace and stability is maintained in the region, Gwadar port of Pakistan can become a real trade and energy corridor for Central Asia and the rest of the region. If CARs wants to access the Middle

East and Africa, the shortest route is through Pakistan; if India wants to access

Central Asia the shortest route is through Pakistan; If Iran and Afghanistan wants to access India the shortest route is Pakistan; if China wants to trade with

Middle Eastern countries the shortest route is through Pakistan. Thus the dreams of Pakistan can become true to serve as economic corridor for the region. Be it TAPI or IP, Pakistan wins both ways but both the pipelines create a whole new dimension in the highly complex game being played around energy

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supplies. It has the potential to bring a major change in global power shifting. It is going to play a significant role in shifting political, economic and military power towards South Asian region. In the near future the Asian region would become a world leader.

Recommendations

On the basis of the above analysis, the following recommendations are recommended:

Sino-India cordial relationship is very important for balance of power in the region. The US-Indian alliance is dangerous for both China and Pakistan.

Only Pak-China economic, strategic and cultural relationship can save the region from US aggression. China should try to take steps for the development of the Uyghur population in the Xinxiang region. As India is in competition with China, therefore, Uyghur population can be used by India against the Pak-

China friendship. The CPEC project will be helpful to connect the Central Asian region will the whole world. Xinxiang will be a hub point of this project. Any attack of the Uyghur people can create doubts in the minds of the Central Asian rulers. Special attention should be given by the Chinese government to the

Uyghur people.

There are large amount of natural resources in the Central Asian countries. Oil, gas, coal, gold and uranium are the important natural resources of the Central Asian region. The countries can earn a large sum of money by exporting these commodities. Unfortunately, this region is landlocked and has no direct access to the sea. China and Pakistan have the opportunity to provide

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them access to the sea. This would not only help these countries to develop their economies but would also help China and Pakistan to earn a large sum of transit fee.

The Chinese working in the Central Asian republics are not liked by the local people. They blamed the Chinese that their attitude with the local people is not good. Sometimes they perceives the presence of the Chinese workers as the occupation of their resources. Steps should be taken to remove the negative perception of the local people and the Chinese government should also review its policy in Central Asia.

The religion of the Central Asian people is Islam. Both India and China is in constant struggle get a large share of the natural resources of the region.

Having borders with the Central Asian states, Chan‘s position is dominant. But

China should not interfere in the religious affairs of the local people. It could have negative repercussions on the relations of not only China and CARs but also China and Pakistan.

SCO is a good plan to eliminate the threat of extremism, terrorism and separatism. The Central Asian region is industrially underdeveloped. Large amounts have been invested by countries in different sectors. Industrialization should be given priority in the region. It has been shown by history that industrialization has removed crimes from the society. Jobs opportunities are provided to the people through industrialization. It could remove the threat of terrorism, separatism and extremism. Unemployed people try to adopt illegal

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means to earn money. If employment opportunities would be provided to the people then no one would join terrorist groups.

Peace in the region, particularly Pakistan and its neighboring countries is not possible without peace in Afghanistan. Unless there is peace in

Afghanistan, it would be impossible to give practical shape to some most important projects like TAPI. China, India and Pakistan should make joint efforts in order to bring peace in Afghanistan

The mega projects like the Gwadar port and CPEC would bring foreign investment and industrialization to Pakistan which intern would boost the overall development of the country. The foreign investors would be reluctant to invest in Pakistan if there would be threat of terrorism in the country. The government of Pakistan should defeat terrorist in the country in general and in the tribal areas in particular. The ongoing military operation (Raddul Fasaad) should be extended to the nook and corner of the country for this purpose. It is an important step to restore peace and stability in the region.

The CPEC is a very useful project. It is regarded as the game changer in the region. This project would not be useful only for Pakistan and China but would also boost the economies of CARs, India and the other regional countries. The construction of CPEC would be useless without peace in the region. Particularly, India could not get benefit of CPEC if its relation with its neighbours, Pakistan and China would not be friendly. The main hurdle in the cordial relations between India and Pakistan is the Kashmir issue. This issue should be resolved on priority basis.

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India is in constant competition with China for the energy resources of

Central Asia. India is searching for the alternative trade routes with the Central

Asian countries. INSTC is an important step taken by India in this regard.

Pakistan should resolve its issues with India. It should make friendly relations with India in order to get the benefits of Indian sponsored Chabahar and

INSTC.

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