Economic co-operation with China gains luster as Russian policies falter in Central Asia

ALMATY -- Chinese projects and large-scale investments in Central Asia are ushering out Moscow's influence, especially as the latter has no interest in developing the region, local observers say.

Russia's use of international organisations such as the Eurasian Economic Union (EEU), a regional economic bloc founded in 2015 comprising several former Soviet states and led by Russia, is mainly aimed at developing advantageous positions for Moscow, they say.

The EEU's Central Asian members have been suffering in recent years, Ayan Ryskulov, an entrepreneur from Bishkek, told Caravanserai.

"For example, in Kyrgyzstan, the once-flourishing poultry industry is now on the verge of collapse due to the import of cheap Russian products," he said. "Russia subsidises its poultry industry, but Kyrgyzstan does not."

On the other hand, China's imports of raw materials, as well as its development and energy projects in Central Asia, including construction of transportation infrastructure, are becoming one of the key factors for the economic sustainability of the countries in the region, Ryskulov said.

"Russia clearly doesn't like this, but it's an objective, natural trend that Moscow will have to reckon with," he said.

Understanding the value of Russia's 'promises'

Russia almost completely ruined relations with Kyrgyzstan when it was unable to meet its obligations in a strategic hydropower project in the south of the country, according to Ryskulov.

In the fall of 2012, Moscow signed an agreement to build the Kambar-Ata-1 hydroelectric station in Jalal-Abad Province and the Upper Naryn Cascade hydropower project.

By 2015, however, Russia stopped financing for the projects, freezing construction. In January 2016, the Kyrgyz government was forced to terminate the contract with Moscow.

"Kyrgyzstan was disappointed by the Kremlin's unexpected decision refusal to fund the projects," Ryskulov said. "This experience became a useful lesson for Bishkek, which learned the value of Russia's promises."

The project, worth $3 billion, could attract Chinese investors, say analysts.

In December 2015, then-Prime Minister Temir Sariyev said that the government "will think about attracting other investors and conduct additional negotiations", adding that there are "plenty" of potential investors.

Moscow is obstructing the efficient economic development of the region, said Yuri Poyta of Kyiv, head of the Asia-Pacific Section of the Centre for Army, Conversion and Disarmament Studies.

Virtually all Central Asian states are politically or economically dependent on Moscow as members of international organisations where the Kremlin sets the agenda, such as the EEU and the Collective Security Treaty Organisation (CSTO), he said.

"Russia uses its pressure levers without considering the interests of junior partners," he told Caravanserai. "In practice, the EEU proved to be a post-Soviet entity with an ineffective guiding premise that did not bring any economic benefits to the countries of Central Asia."

China eyes Central Asian energy

China's "One Belt, One Road" initiative, which includes profitable economic projects, is more promising for Central Asia than is the EEU, said Poyta.

Russia cannot offer the region a successful model of co-operation in the energy sector, and this hindrance comes at a time when the region direly needs investments and financial infusions, he said.

Objectively, China, as the second largest economy in the world, is today the main economic partner for the countries of the region, Poyta said. In contrast, Russia ranks 12th worldwide by GDP.

The hydropower industries of Kyrgyzstan and Tajikistan are attractive to China in the long term, after the water and energy relations between the countries of the region are settled, said Vladimir Paramonov of Tashkent, director of the Central Eurasia analytical project.

China as a whole has an interest in Central Asian energy, thanks to the region's geographical proximity and the region's location within the continent, he told Caravanserai.

"In addition, Kazakhstan and Uzbekistan have significant reserves of uranium ores -- raw materials for the production of nuclear fuel," he said. "This is a serious factor for China's long-term interest in the region, especially given Beijing's ambitious plans to develop its nuclear power industry."