Balancing regionalism: Dr Aliya Tskhay on China’s Geo-Economic Strategies in Central Asia

Dr Aliya Tskhay is a Research Fellow at the School of Management and a MECACS Research Associate. Aliya also provides consultancy to businesses and organisations on Central Asia. Interview conducted on 9/11/2021 by Harry Stage, MECACS Blog Administrator Intern, 4^th year International Relations and Russian student.

Firstly, congratulations for publishing your paper. What were your motivations for taking up this research?

One reason why I ventured into this topic was that there’s so much scholarship going on about China, its global influence and the Belt and Road Initiative in Central Asia and globally. I was puzzled in the way many scholars are approaching it from one perspective. In my scholarship, I try to bring agency to Central Asia and understand what lies behind discourse about the BRI, cooperation, influence, the great game, great power politics etc. going from that I stumbled upon this geo-economic framework, which allowed me to manoeuvre more, and I thought, well, that’s an interesting perspective to look at this topic.

Could you expand on the geo-economic framework?

Geo-economics is defined as geo-strategic use of economic power. Therefore, the emphasis is given to the economic cooperation and the potential development of dependent relationships between states. Such regional powers as Russia, Germany, and China utilise geo-economic instruments to exert power over other states.

Do you think that the Chinese market is viewed as more valuable for Central Asian states as opposed to Europe or to Russian?

It’s not only about the Chinese market necessarily. I think it’s what is offered and to whom and at what time. What we see from the Chinese perspective is that they come in and offer a particular package, like an infrastructure project that they can structure along the BRI framework, also offering either a joint venture together with the Central Asian states or giving particular loans. You don’t see that being offered by the European counterparts because there are limitations to what European states can offer due to EU regulations, rules and norms. On the issue about how the loan structures are working or pricing points, the Central Asian states have a tender on potential infrastructure projects. Central Asian states usually must opt for a cheaper version, which doesn’t necessarily mean bad or worse off, but it also depends on what kind of relationship you can establish and the question of conditionalities.

The EU is the largest trading partner the region but most trade is in hydrocarbons. What are other trade options the EU states could pursue?

I think it’s an interesting question because that’s exactly what I bring up when I come to speak to European diplomats or officials: there needs to be more profound cooperation between the two regions as presently it’s still very heavily dependent on resources and resource exports. I think that to have a more profound investments in terms of European companies starting manufacturing or opening offices in Central Asia, and bringing in new projects, joint ventures or building infrastructure projects is challenging because of the labour market or particular types of taxation. Language or lack of understanding of the region itself may also be an issue. You need to bridge the gaps between the states, European businessmen and the business environment in Central Asia. China has been much better in understanding, so you must give it credit for that. Then you need to understand what the niche would be. Because what would be the profit for European countries, whereas in the case of China subsidises the Chinese companies in the BRI projects, so, in a way, it supports its own economy. You don’t really have anything like that in European Union’s case. If the EU would pay the European companies to come and work probably yes, but that hasn’t happened yet. One of the areas that can be explored more is in renewable energy because the European states have such an immense knowledge they can apply and utilize, but then again how much that could be explored is up for debate.

Is ‘balancing regionalism’ a genuine option for the Central Asian states or is it more a case of taking whatever investments are offered rather than decide what contract will go to each state?

Balancing regionalism helps us to understand how the Central Asian states are trying not to fall into dependent relationship with Russia, China or the EU in that sense and it’s very important because you have this very complex geopolitical structure around it. At the same time, the Central Asian states are trying to be friendly with all the big powers. In that sense you could see very diverse mappings of joint projects or ventures with Russia, China, Europe, South Asian or Southeast Asian countries or the United States. I don’t think it’s necessarily the case that if one did one project with Russia now one has to do another project with China. I think it comes naturally in terms of what their priorities are and what can be offered. Sometimes it’s also the case of who has the best offer in terms of technology, interest or conditions around it. It’s more about weaving balance throughout the economic cooperation.

You spoke about ‘binding and wedging’ and ‘carrots and sticks’. We see the examples of carrots with loans and investment in projects, but has China used the second option in Central Asia in the form of embargoes or sanctions, or does it try to keep a positive relationship with Central Asian states?

I think we will see the ‘sticks’ come more in the future the more intertwined the relationship becomes.  This is why I think the geoeconomic framework helps because you understand that it’s not necessarily a win-win discourse. These ‘sticks’ might come out on loan repayments. So far, the states have been very steadily repaying the loans. But at the same time, what happens especially now post pandemic with economic hardships throughout the region? Some of these states are now actually struggling to repay the debt. So, what’s going to happen then? How much China would allow restructuring of the loans? How much space will be allowed for negotiations? What will the enforcement mechanism be once the loans are not paid on time? This will be interesting to see.

A recommendation you mentioned would be strengthening the public dialogue between the government and China. What is the reason for not involving local populations in discussions and making them public in the first place? Is it high levels of corruption?

Yes, corruption and the way the deals are made are not necessarily disclosed. But the other question, and it’s I think it’s an open-ended question that I have is that how much would the public actually believe? Because the trust is so thin between the public and the governments. Whatever the government says, even truthfully, might not necessarily be perceived as truthful by the public. This is a problem that all Central Asian governments are facing because they haven’t been doing well in terms of building trust with its own public and population. Unless there is a process with transparency and accountability any kind of relationship or a corporation that is established would be treated with distrust. There’s no inclusivity, it feels as though leaders are enriching themselves and there’s no public benefit. The relationship should be more symbiotic in at least opening up the government and discussing how the projects are coming around. Another important point to keep in mind is the presence of anti-Chinese views among the general public in the region. This also complicates the relationship between regional states and China.

What does the new approach Beijing has taken to revitalise economic link with the Eurasian continent that you mention look like in practice?

It’s a steady approach that started with the export of hydrocarbons which was key from the beginning. It also began with micro level trade and free trade zones along the border, then moved into exploring investment opportunities. So, a step-by-step process became much larger and more significant economically. Whereas differently from Europe, Europe started investing big straight from the beginning in the 90s and launched energy oil and gas production in Central Asia or invested in railroad infrastructure and big projects straight away. But this investment came with a lot of conditionalities. Whereas China took a more practical and pragmatic approach to building a relationship.

Does that make the relationship more organic, that it started small and scaled up to big projects rather than top-heavy EU investment?

Yes, I think so. China’s foreign policy twenty or thirty years ago was very different from what it is now. The enormous economic growth that happened in China allowed it to behave differently and to invest more. It needs to expand and keep growing, and continuing that enormous economic growth is important. That’s why it is so important for China to reach out because it cannot contain the growth within itself anymore. It must venture out into other countries to support its own economy. Whereas Europe could invest more in Central Asia in 1990s as it was already an established economic actor.

Where is your research going next? Will you personally explore any of the potential research here as outlined in your conclusions?

I want to look further at the studies of the ‘carrots and the sticks’, alongside the binding and the wedging strategies that China uses and what kind of implications we can draw from there. Another thing that I’m interested in is geoeconomics of energy: how much can the energy sector can be utilized? How much can it meet with the projects that China is operating? At the same time, I’m looking forward to having more discussions about what the European Union can offer as globally there has been an infrastructure deal between EU and India. There has been some discussion about the United States being involved, so I wonder how much of those discussions can be implemented and what can come into fruition in Central Asia.

That ties in nicely with my last question. Do you think there will be any limits to China’s growth to become the uncontested regional hegemon? Or do you think this position it already occupies?

I think this depends on the willingness to contest China. From the US and European perspectives it seems, so far at least, that Central Asia is not an important region to focus on. A more important region for the European Union is the Eastern neighbourhood, Ukraine, Belarus to some extent the Caucasus. Central Asia is more of a secondary region. For United States Central Asia is also now a secondary region because of the pull-out from Afghanistan. The foreign policy strategies of other European states, also for the US, is in the Pacific. This related to China, but it’s also related to how China behaves in the Southeast Asia region. Once China gets more involved in Central Asia maybe that will flare interest, but we can only speculate how much. A new European Union’s strategy towards Central Asia provides a more pragmatic approach in comparison to the previous one. I would like to see more delivered on and actually worked out into concrete projects. So far it seems that it might have kind of an implication. But again, there’s more to see, I think.

For more information on the Belt & Road Initiative and the geoeconomics framework, Dr Tshkay’s full paper can be found here.