Silk Road Monthly: December 2024
Regional Actors Seek to Mitigate Geopolitical Risk Through Improved Dialogue
China-Central Asia Foreign Ministers Convene in Chengdu
On Dec. 1, Chinese Foreign Minister Wang Yi chaired the fifth China-Central Asia foreign ministers’ meeting in Chengdu. The meeting highlights Chinese relations and its heightened presence in Central Asia. Since Russia’s invasion of Ukraine in 2022, China has sought alternative trade routes outside of Russia to avoid European sanctions. Resultantly, around 80% of cargo from China heading to Europe passes through Kazakhstan.
Additionally, anti-Chinese sentiments throughout Central Asia are persistent, particularly in Kazakhstan and Kyrgyzstan, due to China’s growing influence in the region and the treatment of Central Asia’s Turkic kinship in Xinjiang. Chinese private security companies provide oversight for Chinese infrastructure projects and investments in the region, and will be present throughout the construction of the China-Kyrgyzstan-Uzbekistan railway. As Chinese engagement with Central Asia continues to expand, more meetings and dialogue platforms will persist.
Xinjiang Strengthens Regional Ties Amid U.S. Sanctions
China's Xinjiang region is enhancing ties with Pakistan and Central Asia to counter U.S. sanctions. The U.S. Uyghur Forced Labor Prevention Act, which bans imports linked to alleged forced labor in Xinjiang, has also been adopted through similar measures in Canada, the UK, and the EU. This sanctions regime has driven Beijing to deepen Xinjiang’s regional cooperation to mitigate economic and geopolitical pressures.
Khunjerab Port, Xinjiang's sole border crossing with Pakistan, recently transitioned to year-round operations. From April to October, the port saw over 11,000 vehicles and 40,900 tons of goods cross. Pakistan, a long-standing ally of Beijing, plays a pivotal role in China's regional strategy, particularly as it continues to develop the China-Pakistan Economic Corridor (CPEC). CPEC’s progress faces challenges, particularly terrorism. In October, a suicide bombing in Karachi killed two Chinese nationals, with the separatist Balochistan Liberation Army claiming responsibility. This has led to joint counterterrorism drills by Chinese private security companies and Pakistani forces.
Xinjiang's Chairman, Erkin Tuniyaz, recently led a meeting with officials from Kazakhstan’s Zhetysu region, where they signed agreements on cross-border tourism and discussed trade, infrastructure, security, and agriculture. Xinjiang’s Khorgos port also hosts a cross-border cooperation center that facilitates duty-free trade and business exchanges, allowing purchases up to $1,104 per day.
Trade between Xinjiang and Central Asia reached 283.67 billion yuan in 2023, a 50% increase over the previous year. Despite this growth, experts warn that trade may expand cautiously due to potential secondary sanctions from the West.
Trail Lithium Transport
On Dec. 5, China and Kazakhstan’s Department of Transportation Heads agreed to begin a trial transport voyage for lithium-ion batteries along the Trans-Caspian International Transport Route (TITR) in December. It is unclear why this trial shipment has begun, however, it is theorized the lithium could be supplied for BYD’s new factory in Jizzaq, Uzbekistan, which began production this past July.
Russia Divests Uranium Assets in Kazakhstan to Chinese Firms
Russia's state nuclear corporation, Rosatom, is divesting its stakes in significant Kazakh uranium deposits to Chinese entities. Uranium One Group, a Rosatom subsidiary, has sold its 49.979% stake in the Zarechnoye mine to Astana Mining Company Limited, ultimately controlled by China's State Nuclear Uranium Resources Development Company. Additionally, Uranium One is expected to relinquish its 30% stake in the Khorasan-U joint venture to China Uranium Development Company Limited, linked to China General Nuclear Power Corporation. Kazatomprom, Kazakhstan's state-controlled nuclear resources company, will maintain its existing stakes in these projects.
The Zarechnoye mine holds approximately 3,500 tons of uranium reserves, while the Khorasan-U deposit contains about 33,000 tons, with an expected operational lifespan until 2038. In 2023, Uranium One produced 4,831 tons of uranium in Kazakhstan. Kazatomprom remains the world's largest uranium producer, accounting for roughly 20% of global primary uranium production. After the sale, Rosatom will still control combined reserves of 255,000 tons of Kazatomprom deposits.
Diversifying Trade, Mitigating Risk
When managing the future of trade routes, it remains a fine balance between cost and risk mitigation. The development of the Middle Corridor, officially known as the Trans-Caspian International Transportation Route (TITR), has seen the volume of cargo transport increase 68% to 3.8 million tons from January to October 2024. The European Union’s Global Gateway and China’s Belt and Road Initiative have both invested in key projects to facilitate the development of the TITR.
With Russia’s continued war of aggression against Ukraine, shipments across Eurasia have been forced to bypass Russia due to European sanctions. Kazakhstan’s dry ports of Khorgos and Dostyk have both increased in capacity, port developments in Baku (Azerbaijan), Aktau and Kuryk (Kazakhstan) facilitate trans-Caspian shipments, and the long-awaited China-Kyrgyzstan-Uzbekistan railway is set to begin construction next year. This new railway will be the first east-west railway from China going outside of Russia and Kazakhstan. Seeing the impact of sanctions on Russia, this new railway further helps to diversify trade routes and mitigate future risks as global geopolitical tensions continue to rise.
China Invests $1.8 Billion in Kazakhstan's Wheat Processing Sector
China's Dalian Hesheng Holdings Group is set to invest up to $1.8 billion in an industrial park for deep wheat processing in Kazakhstan's Akmola region. The project will be implemented in multiple phases, with an initial investment of $500 million to $800 million, and up to an additional $1 billion for the second and third phases. Phase one will process 1 million tons of wheat annually, with plans to expand to 3 million tons per year. Construction is slated to begin in the second quarter of 2025, generating approximately 2,000 jobs.
The project includes a coal-fired thermal power plant and a coal chemical complex, capable of producing 150,000 to 400,000 tons of liquid ammonia annually for fertilizer production. Kazakhstan’s Prime Minister Olzhas Bektenov has highlighted the venture’s alignment with the nation’s goals to boost value-added goods in agriculture, especially as the country experiences record grain harvests.
Kazakhstan-China agricultural collaboration is growing rapidly. Earlier this year, CITIC Construction announced a $1 billion deep grain processing facility in Kazakhstan's Almaty region. Wheat, which constitutes 80% of Kazakhstan's grain production, has seen export volumes to China rise from 750,000 tons in 2019 to 3.5 million tons in 2023. This industrial park is expected to modernize Kazakhstan's agricultural sector and stimulate logistics and trade, reinforcing the country’s role as a net agricultural exporter.
China-Kyrgyzstan-Uzbekistan Railway Project Commences
On Dec. 27, Kyrgyz President Sadyr Japarov inaugurated the construction of the China-Kyrgyzstan-Uzbekistan railway in Tosh-Kutchu, Jalal-Abad. This 523 km line will connect Kashgar in China with the Uzbek rail system, passing through Torugart, Makmal, and Jalal-Abad in Kyrgyzstan, aiming to enhance regional connectivity and position Kyrgyzstan as a transit hub in Central Asia. The project, in discussion for decades, has now secured China's approval, with the Kyrgyz segment receiving an investment of 33.9 billion yuan (US$4.7 billion). Construction is expected to begin in July 2025 and conclude by 2031.
The route is projected to transport 15 million tons of cargo annually, adding an additional transit route through Central Asia, and the first through Kyrgyzstan. This will be the first direct rail link connecting Uzbekistan and Kyrgyzstan to China’s rail network, helping to further diversify China’s trade routes, lower transit times, and help connect southern Kyrgyzstan to the rest of the world. Currently, the majority of cargo passes through the Khorgos and Dostyk checkpoints on the China-Kazakhstan border before being able to divert south into Bishkek or Uzbekistan.
Concerns remain over the importance of the rail line, as some analysts argue that since the line will only traverse through the south of Kyrgyzstan, it poses minimal benefit for the Kyrgyz people as it fails to connect the north and south of the country. Others are concerned about the financial burden this project may put on Kyrgyzstan, in addition to the possible displacement of local communities, and project transparency. Reportedly, a railway connecting Balykchy to Makmal is currently under construction, a route that would connect Bishkek to southern Kyrgyzstan. However, there has been minimal reporting on this project, its progress, and when, or if, it will be completed.
Tianshan Shengli Tunnel Breakthrough
On Dec. 30, drilling of the Tianshan Shengli Tunnel, a 22.1 km expressway cutting through the Tianshan Mountains in Xinjiang, was completed. The tunnel, expected to be the world’s longest of its kind, will cut travel time between northern and southern Xinjiang from three hours to 20 minutes, improving connectivity of Xinjiang’s two largest cities, Urumqi and Korla. Construction began in April 2020 and finished 18 months ahead of schedule using advanced boring technology.
The project is expected to open to the public in October 2025 after road building, electrical engineering, and interior design work are completed. The project, part of a 56-km expressway, has been forced to tackle high altitudes of 1,000 meters and extreme temperatures well below zero degrees. Once operational, the tunnel will cut down transport time and help shorten supply chains and support Xinjiang’s connectivity to Central Asia.