Xi Vows to Boost Central Asia Security Ties as War Weakens Putin

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(Bloomberg) -- President Xi Jinping said China is ready to help Central Asian nations bolster their security and defense capabilities as he wrapped a summit of the region’s leaders, underscoring Beijing’s efforts to deepen its influence there as an expansionist Russia raises fresh security issues.

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China can help the region improve its “law enforcement, security, and defense capability construction,” Xi said during a keynote speech at the inaugural in-person China-Central Asia Summit, according to a report published by the official Xinhua News Agency. He also said China would provide 26 billion yuan ($3.7 billion) in financing support and “free assistance” to the countries.

The event assembled the leaders of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan for two days in the Chinese city of Xi’an, where they discussed ways to deepen ties on everything from defense to finance, trade and energy.

The summit came as President Joe Biden joined the other leaders of the Group of Seven nations in Japan this week to discuss, among other things, measures to counter perceived Chinese threats to global economic security. The simultaneous meetings symbolized an increasingly multipolar world, as China tries to challenge the US-led system.

While Russia and China are united in that mission to counter Washington, Xi’s decision to assemble five former Soviet states without President Vladimir Putin demonstrated Beijing’s increasingly senior position in their “no limits” relationship.

Since Russia began its invasion of Ukraine, the Kremlin has become reliant on China to provide both economic cover from Western sanctions and much-needed diplomatic support. Russian Prime Minister Mikhail Mishustin will next week lead a delegation to a Shanghai business forum that has also invited sanctioned tycoons, exemplifying how China can shelter Moscow from Western economic sanctions.

At the summit, Xi also stressed that Central Asia has the “conditions and capabilities” to become a Eurasian hub, adding that their “sovereignty, security, independence and territorial integrity” must be “safeguarded.”

That emphasis on their “sovereignty” came weeks after Lu Shaye, the Chinese ambassador to France, sparked a firestorm when he questioned the independence of ex-Soviet states during a TV interview. The controversy at the time sent China into damage control mode, spurring the Chinese embassy in Paris to explicitly reaffirm its respect for their ability to govern themselves.

Russia’s invasion of Ukraine in February last year also deepened a tussle for influence in the resource-rich Central Asian states, which were already on a trajectory of economic realignment toward China.

Last year, Kyrgyzstan, Uzbekistan and Turkmenistan each did more trade with China than with either Russia or the G-7 bloc, according to the International Monetary Fund. Chinese imports from the region are mostly commodities, including cotton, oil, natural gas and copper, according to official trade data.

China made some inroads on other economic ties during this week’s summit. On Thursday, Kazakhstan and Uzbekistan vowed to ensure the stable supply of gas to China. The two countries combined accounted for about 6.4% of China’s gas imports in 2021, but Uzbekistan last year began reducing Chinese export volumes so it could keep more fuel for its growing domestic petrochemical industry.

The world’s second-largest economy also sought to deepen its relationship with Kazakhstan. China National Petroleum Corp. and Kazakhstan’s KazMunayGas National Co. agreed this week to explore the expansion of the Central Asia-China pipeline — the development of which Xi highlighted in his keynote speech as well.

Kyrgyzstan, meanwhile, agreed to expand its financial relationship with China. The nations said in a joint statement that there was “a lot of potential” in setting up bank-to-bank transaction accounts, collaborating on payments systems and conducting settlements in local currencies.

China buys almost nothing from Kyrgyzstan, but exports have jumped since early 2021. About half of that trade is just in shoes and clothing, according to Chinese government data. More trade settled in the two local currencies would mean either that Chinese exporters build up a stock of the Kyrgyz som, or importers there will have to gain access to yuan deposits.

The Kyrgyzstan announcement comes as more countries — including Brazil and Saudi Arabia — look to settle more of their trade with China in local currencies as they try to reduce their reliance on the US dollar or overcome other financial obstacles.

While China’s strict controls on cross-border capital flows remain a major hurdle to efforts to lift the yuan’s global status, US sanctions on Russia and other countries are helping promote the currency as an alternative for international transactions.

--With assistance from Jing Li.

(Updates throughout.)

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