KAZAKHSTAN: HU JINTAO'S PIPELINE DIPLOMACY SUCCESS

UNCLAS SECTION 01 OF 03 ASTANA 002168

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EAP/CM, EEB

E.O. 12958: N/A
TAGS: PGOV PREL ECON EPET SOCI CH RS TX KZ
SUBJECT: KAZAKHSTAN: HU JINTAO'S PIPELINE DIPLOMACY SUCCESS

REF: A. BEIJING 3326

B. ASTANA 2095

C. ASTANA 1775

D. ASTANA 1035

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1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: Prior to Chinese President Hu Jintao's December
12 visit to Kazakhstan, the media touted Kazakhstani and Chinese
positive expectations for the visit, as well as reports of a
demonstration in protest of a Chinese initiative to lease
Kazakhstani farmland. As expected, both leaders praised bilateral
relations and advocated expanded cooperation during the visit. On
December 12, Presidents Nazarbayev and Hu formally opened the
Kazakhstan-China pipeline, and then Hu and the presidents of
Kazakhstan, Uzbekistan, and Turkmenistan inaugurated the entire
Turkmenistan-China gas pipeline -- the first in the region to
completely bypass Russia -- on December 14 in Turkmenistan (ref A).
Chinese news media reported that Nazarbayev praised China's policies
in Xinjiang in the wake of July events, which, if accurately
reported, could be a subtle shift towards an official policy more
openly supportive of China's central government on Uighur issues
(ref B). Hu's highly celebrated visit indisputably underscored the
importance of Kazakhstani-Chinese relations, and the concerns many
Kazakhstanis feel about increasing Chinese activity in Kazakhstan's
economy. END SUMMARY.

GREAT EXPECTATIONS -- FOR HU'S VISIT...


3. (SBU) On December 10, on the eve of Chinese President Hu
Jintao's visit to Kazakhstan, Chinese Ambassador to Kazakhstan Cheng
Guoping told the press the visit would emphasize rapidly advancing
cooperation in the non-resource sector. He cited 10 ongoing
projects and 40 under development, specifically highlighting the
intensive implementation of an aluminum smelter in Pavlodar oblast.
Cheng Guoping also said China and Kazakhstan planned to sign
cooperation agreements on finance, wind power, the pharmaceutical
industry, agriculture, and cement production, and announced Hu's
plan to attend the commissioning ceremony for the first branch of
the Kazakhstan-China gas pipeline. (NOTE: Just before Hu's visit,
Kazakhstan's President Nazarbayev ratified an August 2007 bilateral
agreement on construction and operation of the Kazakhstan-China Gas
Pipeline. END NOTE.)

...BUT DEMONSTRATORS PROTEST AGAINST CHINESE LAND DEAL


4. (SBU) Despite the generally positive expectations for the visit,
a group of Kazakhstani intellectuals organized a December 11 protest
in front of the Chinese Consulate General in Almaty against the
allocation of one million hectares of land allegedly requested by
China for agricultural needs. The influence of China in Kazakhstan
arouses strong emotions, primarily of wariness and concern, among
Kazakhstani interlocutors (reftels). Because no officials from
the Consulate talked to the protesters or accepted their petition,
the group announced their plan to mail the original to the Chinese
Consulate, with a copy to the Kazakhstani Presidential
Administration. During the visit, Kazakhstan's Minister of
Agriculture Akylbek Kurishbayev said bilateral talks did not address
the question of China's leasing of land.

NAZARBAYEV AND HU PRAISE NEW STAGE OF RELATIONS


5. (SBU) During Hu's December 12 visit, as expected, both leaders
praised bilateral relations and advocated expanded cooperation.
President Nazarbayev extolled the role of China in strengthening
security and maintaining stability in the region and world.
Nazarbayev also thanked China for its loan to develop the
Kazakhstani economy during the crisis period. He praised the
"good-neighborly" and "trust-based" nature of bilateral relations,
noting the visit was Hu's fifth to Kazakhstan and the 18th meeting
between Hu and Nazarbayev in seven years. Finally, Nazarbayev said
the countries are "witnessing a new stage of implementing
strategically important joint economic projects." (NOTE: China's
economic clout in Kazakhstan is undeniably increasing rapidly. In
2008, bilateral trade turnover exceeded $17.5 billion, and China

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became the leading destination for Kazakhstani exports, absorbing
13.5% of Kazakhstan's total exports. China also became Kazakhstan's
second largest source of imports behind Russia, accounting for 24.3%
of Kazakhstan's total imports. END NOTE.)


6. (SBU) Chinese President Hu Jintao advanced five proposals to
further develop bilateral relations, including maintaining close
high-level contacts, expanding cooperation in the energy sector
through joint pilot projects an in non-raw materials sectors, and
stepping up implementation of projects using China's $10 billion
loan. Hu also urged strengthening cooperation in the financial
sector, as well as in the fields of humanities and culture.
Nazarbayev thanked China for providing an additional $3.5 billion to
Kazakhstan to create non-resource sector joint ventures. During
Hu's visit to Astana, Kazakhstan and China signed documents on
cooperation in the fuel and energy sector, including a loan
agreement on upgrading an Atyrau oil refinery, an agreement between
the Samruk-Kazyna national welfare fund and China Guangdong Nuclear
Power on the joint development of renewable energy resources, and a
memorandum of understanding on financing the second section of the
Kazakhstan-China gas pipeline.

NAZARBAYEV TO LEARN CHINESE?


7. (SBU) During the visit, Nazarbayev and Hu watched a cultural
performance of music and dances by students from Kazakhstan's
Eurasia University Confucius Institute. According to press
reports, Hu asked about the origins of the students and the
institute's activities, while Nazarbayev showed great interest in
learning the Chinese language, and even asked whether he could
become a student at Astana's Confucius Institute. Hu declared
China's willingness to expand cooperation with Kazakhstan in
science, technology, education, culture, sports and tourism, and
announced a decision to double the number of Kazakhstani students on
Chinese government scholarships to 200 per year.

PRESIDENTS TURN ON THE KAZAKHSTANI-CHINA GAS PIPELINE


8. (SBU) In the visit's main event, Presidents Nazarbayev and Hu
initiated the pumping of gas in the Kazakhstan-China pipeline, by
pushing a button in the KazMunaiGas (KMG) headquarters in Astana
(ref A). (NOTE: The Kazakhstan-China Gas Pipeline (KCGP) is part
of the $20 billion Central Asia Gas Pipeline (CAGP) project, which
will transport natural gas from Turkmenistan to China through
Uzbekistan and Kazakhstan. END NOTE.) The first section includes
two parallel pipelines totaling 1300 kilometers in length.
Kazakhstan plans to complete its part of the pipeline by June 2010.
The main contractors of the project are Kazakhstan's KazStroyService
and CPPE (China Petroleum Pipeline Engineering). KazMunaiGas
subsidiary, KazTransGas, and the Trans-Asia Gas Pipeline Company
Limited, with shareholders CNODC and PetroChina, established the
50-50 owned Asian Gas Pipeline Company in 2008 to implement and
oversee the project. The pipeline's initial capacity will be 4.5
billion cubic meters of gas per year, but total capacity is expected
to eventually reach 30 billion cubic meters. Experts predict gas
supplies to China will begin at 13 billion cubic meters and increase
to 30 billion cubic meters by the end of 2013. The pipeline will
reportedly satisfy a significant portion, perhaps up to a third, of
China's increasing demand for natural gas. The pipeline will extend
from China's western Xinjiang province to its large eastern cities,
including Shanghai.

FOUR PRESIDENTS INAUGURATE FIRST PIPELINE TO BYPASS RUSSIA


9. (SBU) On December 14, Kazakhstan's President Nazarbayev, along
with Chinese President Hu, President Islam Karimov of Uzbekistan,
and Turkmenistan's Gurbanguly Berdimuhamedov, attended an
inauguration ceremony and formally commenced gas shipments from
Turkmenistan to China via the 1,833-km pipeline (ref A). (NOTE:
The pipeline is the first major Central Asian gas route to
completely bypass Russia, breaking a stranglehold maintained since
the 19th century. END NOTE.)

NAZARBAYEV PRAISES CHINA'S HANDLING OF EVENTS IN XINJIANG?


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10. (SBU) Kazakhstani Uighurs did not protest Hu's visit.
According to China's official news outlet, Xinhua, Nazarbayev
declared that China and Kazakhstan have made concerted efforts in
the fight against the "three evil forces of terrorism, separatism,
and extremism," cracking down on drug trafficking and other
cross-border crimes. Xinhua also reported that Nazarbayev agreed
with China's handling of the July 5 incident in Urumuqi in northwest
China's Xinjiang Uyghur Autonomous Region, and said "China's efforts
were necessary to maintain stability in Xinjiang, and were good for
stability in Kazakhstan." Kazakhstani official sources and media,
significantly, did not report these alleged quotes from Nazarbayev.
Bolat Dzhaksygaliyev, a specialist in the Ministry of Foreign
Affairs' Asia and Africa Department, told PolOff that he personally
prepared Nazarbayev's talking points for Hu's visit, and denied that
such remarks were expected.


11. (SBU) COMMENT: If accurately reported, these statements would
have been the most explicit comments of support for China's handling
of the July and August events in the Xinjiang Uighur Autonomous
Region (XUAR),which had previously stirred up significant concern
in Kazakhstan's Uighur community. Kazakhstani political scientists
had previously told Emboffs that the central government has been
cooperating with the Chinese government, and certainly sympathizes
with the Chinese government's concern about Uighur aspirations for
more autonomy. However, the government has been careful to make
very vague statements in support of stability and maintaining
inter-ethnic harmony, without clearly praising or criticizing the
government's actions (ref B).


12. (SBU) COMMENT CONTINUED: The prominent media attention and
wide scope of the visit underscore the importance of
Kazakhstani-Chinese relations. Senior Kazakhstani officials,
businessmen, and politicians have expressed concern over China's
growing influence in the economy -- particularly Kazakhstan's
natural resources -- and have discussed potentially limiting Chinese
investments (refs C-D). Nonetheless, cash and political support
from China, without bothersome political conditionalities, continue
to flow, making this ambivalent relationship worthy of continued
close attention. END COMMENT.

HOAGLAND