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Last Updated: Monday, 20 August 2007, 15:39 GMT 16:39 UK
China's increasing hold over Kazakh oil
By Natalia Antelava
BBC News, Kazakhstan

gymnasium in Kyzlorda
Chinese money provided for Kyzlorda's new martial arts centre
Grunts and shouts echo through a spacious sunlit gymnasium as a dozen teenage boys fire their fists and perfect their kicks.

The brand new martial arts school is China's gift to the children of Kazakhstan's oil rich province of Kyzlorda, a place where Beijing has been flexing its energy muscle.

Outside the school, and as far as the eye can see, lies the monotonous landscape of the Central Asian steppe.

Colourless grass pokes out of the dry land, but just beneath the surface lies Kazakhstan's vast oil and gas reserves.

Just a year and a half ago, the oil and gas fields belonged to a Canadian company. But then, in a highly controversial takeover, China's state oil company CNPC became the main shareholder of PetroKazakhstan.

It was an important acquisition; the $4.2bn (2bn) deal became Beijing's largest purchase here. But China's shopping spree in Kazakhstan's energy sector is only just beginning.

From petrol stations to refineries and now even a 1,000km (620 mile) long pipeline, the first one ever to go to mainland China, the list of Beijing's acquisitions is growing by the day.

map
"Our relationship with Kazakhstan is a priority for us, and our foreign policy," says Wang Bing, a spokesperson for the Chinese embassy in the country's economic capital Almaty.

"We are co-operating on many levels, and of course energy is very important. The new pipeline, for example, is hugely significant for both China and Kazakhstan.

"It is the first oil pipeline into mainland China, and it's good for Kazakhstan too, as it has allowed Kazakhstan to diversify export routes," Wang Bing said.

Competing for Kazakh oil

Kazakhstan is about to become one of the world's top oil producers, and as the scramble for its resources intensifies, the country's president, Nursultan Nazarbayev, says the game is fair, and that Russia, China and the West are all welcome to invest.

"The United States, Russia and China are all interested in Kazakhstan, and we don't want to allow a conflict of interest here," Mr Nazarbayev told the BBC.

"That's why we chose a multi-vectoral foreign policy. The United States is investing in oil and gas, Russia is a hugely important neighbour and partner, and we share a 1,700km border with China, so that relationship is also very important. But we treat everyone equally," Mr Nazarbayev added.

Oil refinery
Kazakhstan is finding itself in demand for its rich fuel reserves
This policy has helped Kazakhstan's economy to grow faster than any other in the former Soviet Union.

The country's ability to turn to Beijing has also given President Nazarbayev a bargaining power when it comes to dealing with the West.

But as China looks for energy to drive its growing economy, it is also becoming more aggressive in securing reserves, and that threatens the gentle geopolitical balance that President Nazarbayev is keen to keep.

New Great Game

There are plenty of signs that the Chinese are already getting an upper hand in Central Asia.

Unlike Western oil firms, Chinese state oil companies do not have to operate on a commercial basis.

Many analysts believe China grossly overpaid for the PetroKazakhstan purchase, seeing the deal as a perfect example of Beijing's willingness to pay over the odds and stifle competition.

And, according to the energy consultant Robert Corzine, there is more bad news for the West.

CNPC building
CNPC recently become the main shareholder of PetroKazakhstan
"The Chinese tend to act very much like Western oil companies acted in the 1920s - that what was their oil, was their oil... and no one else could get hold of it," Mr Corzine said.

"I think that the concern of Western companies is not that the Chinese are trying to develop oil reserves outside their country - that's only natural. The problem is that this oil goes directly to China and not to the global market," Mr Corzine said.

Historically, Central Asia has always been the battleground of the Great Game, the struggle for resources and influence between the great powers.

The game now has a new, and an increasingly powerful player, and it has come to Central Asia with its own rules.

And that means fewer opportunities for the West at a time when it, too, is desperate for more access and resources.




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