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caspian region in the silk road economic belt (sreb): a chinese perspective

Caspian Region in the Silk Road Economic Belt (SREB): A Chinese Perspective

Author:

Sep 4, 2018

Stretching from the South China Sea across the Eurasian landmass, China’s Belt and Road Initiative (BRI) is probably the most ambitious development plan ever conceived in the world. BRI consists of two main components: an overland Silk Road Economic Belt (SREB) connecting China with Central Asia and beyond, and an ocean-based 21st Century Maritime Silk Road to China’s south. The SREB, which encompasses several resource-rich countries in Eurasia, could diversify China’s energy supply and transit as well as guarantee its energy security. The Caspian region, which contains significant oil and gas reserves and serves as one of the world's oldest production areas (Stegen & Kusznir, 2015), perfectly fits into Beijing’s vision of securing land-based energy supply route due to the fear that the U.S. would halt oil and LNG shipments through the Strait of Malacca in case of conflicts between China and U.S. allies in the Pacific. Since the collapse of the Soviet Union, China has significantly intensified its involvement in the Caspian region. The focus of relations between China and 5 Caspian states gradually shifted from political and security cooperation to energy and trade investments as China became the world’s largest energy consumer within less than two decades. However, as new sources of oil and gas in the Caspian basin were suddenly ‘accessible’ for external powers in 1990s, other major powers, such as EU, U.S. and Russia, and India, all launched their own initiatives to strengthen their influence in the region, starting a “New Great Game” along the ancient Silk Road. This report specifically looks into China’s investments in the Caspian region within the framework of SREB. It will first provide a retrospect of relations between China and the Caspian states is in need in order to better understand how the Caspian Region falls into China’s current overseas strategy. In general, most of China's energy and trade activities are in the East Caspian states, such as Kazakhstan and Turkmenistan. However, China is highly interested in making inroads into the South Caucasus region. I will then analyze the strategic importance of the Caspian region to China and the roles the Caspian region plays as a transportation hub, natural resource provider and the destination of Chinese goods and services. This section will be followed by an analysis of other countries’ initiatives in the Caspian region and how these strategies have evolved after the launching of China’s SERB. At last, I will provide an assessment of risks and challenges faced by SERB projects in the Caspian region, such as Caspian Sea legal status, political instability, overregulation, sovereign debt risks and Russia’s potential interference. This report is primarily based on academic papers of Chinese scholars and interviews with China’s Eurasian studies experts in order to provide an alternative perspective of SERB’s influence on Caspian region from China’s side.

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