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 ASTANA 00002168 001.2 OF 003 ¶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 ASTANA 00002168 002.2 OF 003 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? ASTANA 00002168 003.2 OF 003 ¶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