Russia has made two major compromises with China by giving Beijing the green light to build a railway in nearby Central Asia and accepting China’s suggestion of re-routing the Power of Siberia 2 gas pipeline to pass through Kazakhstan instead of Mongolia.
In the past few months, falling global energy prices have dented Russia’s export earnings. In December, oil prices fell to about US$70 per barrel, down 18% from this year’s peak of US$87 in April, due to lower demand in China and OPEC’s expectations to increase production.
Those lower prices come against the backdrop of G7 members, the European Union and Australia’s price cap of $60 per barrel on seaborne Russian oil, which have resulted in lower foreign currency inflows in Russia and thus a fall of the Russian currency, the ruble.
The ruble has declined by 17% to 108 per US dollar in 2024. The current valuation is down 34% since the beginning of the Ukraine war.
On December 27, Zheng Shanjie, Chinese President Xi Jinping’s Special Envoy and director of the National Development and Reform Commission, attended the launch ceremony of the China-Kyrgyzstan-Uzbekistan (CKU) railway project in Jalalabad, Kyrgyzstan.
The ceremony was attended by Kyrgyz President Sadyr Japarov while Xi and Uzbek President Shavkat Mirziyoyev sent congratulatory letters.
China’s Communist Party-run Global Times said the commencement of the long-anticipated connectivity project, which has been under planning for more than 20 years, will mark a new milestone in China-Central Asia cooperation. It said that once completed, the project could open a new Eurasian corridor connecting China, Central Asia and even Europe.
The project is scheduled to officially commence construction in July 2025, with a construction period of six years, according to China Railway.
The railway will start from Kashi in China’s Xinjiang, pass through Kyrgyzstan’s Torugart Pass and Jalalabad, and end in the eastern Uzbek city of Andijan. China and Uzbekistan will build the sections within their own territories while CKU Railway Co, a joint venture set up by the three governments, will build the Kyrgyz section.
The project was first proposed in the 1990s. China, Kyrgyzstan and Uzbekistan signed a memorandum of understanding for it in 1997 but there had not been any progress since.
“Why was the CKU railway delayed for 27 years? The core reason lied in Russia,” Li Shuyong, a Henan-based writer, said in an article. “During the Cold War, the entire Central Asia was the territory of the Soviet Union. After the Soviet Union collapsed, Russia still controlled Central Asia.”
Li said Russia had disagreed with the CKU railway project for many years as it wanted to monopolize the transportation of Central Asia’s natural resources, such as Kazakhstan’s oil and Uzbekistan’s cotton, to Europe. He said it’s not only a matter of transit fees but also Moscow’s controlling power in the region’s foreign trade.
“Once the CKU railway is opened, the entire Central Asian foreign trade will no longer be monopolized by Russia. China can also bypass Russia to reach Europe via Iran, Turkey and Greece,” he said. “But why does Russia now give it a green light?”
He said since the eruption of the Ukraine war, Russia has seen rising fiscal deficits and inflation and has sought to boost energy exports to China to compensate.
“Why should China import more Russian oil and gas? Russia has to share its benefits in Central Asia with China,” Li said. “This is why a 27-year obstacle related to the CKU railway is now removed.”
A Jiangxi-based columnist said Kyrgyzstan and Uzbekistan will build their railways in Russia‘s standard gauge (1,524 mm), instead of China’s one (1,435 mm), as they do not have enough money to change their existing systems.
He said China didn’t insist the two Central Asian nations adopt its standard as such a move could upset Russia.
Power of Siberia 2
Another Russian compromise with China, made by President Vladimir Putin, concerns the recent agreement to build the Power of Siberia 2 via Kazakhstan, instead of Mongolia, as per Beijing’s wish.
The project to build a gas pipeline project from Russia to China via Kazakhstan is underway, Russian Deputy Prime Minister Alexander Novak said in an interview with the Rossiya-24 TV channel on December 25.
“This is a project to build a gas pipeline infrastructure with capacity for 45 billion cubic meters (bcm) per year, 10 bcm of it for the gasification of the northeastern regions of Kazakhstan, and 35 bcm for export to China,” he said. “The feasibility study and negotiations are now underway.”
Novak’s latest comments confirmed that Moscow has given up its plan to build the Power of Siberia 2 via Mongolia.
Shi Jiangyue, a Shanxi-based writer and a military commentator for Asia Pacific Daily, said in an article that Mongolia will not only lose hundreds of millions of US dollars in transit fees due to the rerouting but also a chance to attract infrastructure investment and stronger diplomatic ties with Russia. Shi said Mongolia should blame itself for adopting a “third neighbor strategy” or “multi-pillared foreign policy.”
In July 2022, Mongolia’s Prime Minister Oyun-Erdene Luvsannamsrai said the feasibility study of the Power of Siberia 2, which aims to connect Siberian gas fields to China via Mongolia, had been completed and that construction would begin in 2024.
However, Beijing opposed this arrangement as it did not want its energy supply to pass through Mongolia, which it thinks has a tendency to lean politically toward the US.
In May this year, Dauren Abayev, Kazakhstan’s envoy to Russia, told Russia’s TASS news agency that Kazakhstan plans to transit about 35 bcm of Russian gas to China annually.
In fact, this route had once been considered several years ago, but Russia opted against it as the Russian section in a hilly area would have led to higher construction costs.
Yong Jian is a contributor to the Asia Times. He is a Chinese journalist who specializes in Chinese technology, economy and politics.
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Russia is fast becoming China’s Canada.
The winners here are Russia, China and central Asia and European import businesses . The only loser here is the US. They get diddly squat. Better China Asia connectivity is better Russian Asia connectivity. Because they are all connected.
Russia gets 17% more Rubles for its export during 2024 and 34% more since February 22, that’s a good thing not bad, Mr Yong.
Was this written by Americans? Or someone who does not understand the current Russian-Chinese relationship?
Anyone with basic diplomacy understanding will see what is going on here. It is not weakness by Russia rather than strengthen their ties with the east.
Strongly agree.
Good, I like railroads. A great way to travel.
So Putin has made a brother nation an enemy and Russia is now so weakened it has lost its influence in it’s old colonies. He won’t be known as Vlad the Great to what remains of the Russian people in 100yrs.
A blind man could see that it was American influence (and their $$$) that turned Ukraine hostile towards Russia. Same scenario as in Georgia, which now faces sanctions for being neutral in this conflict. For average russian consumer Putin is still a guy who returned Crimea (western people don’t get its historical significance to russians).
So the Russians didn’t get anything out of this? Come on man. Are your brain cells working? They get to sell gas to China and make it more dependent on Russia. Sure they have to give up a bit of influence on central Asia but what China wins, the US losses. You think the US wants China to have better connectivity with Europe or less? The only lose here is the US. Everyone gets what they want except the US.