The opening of the Turkmenistan-China gas pipeline in December 2009 has focused deserved attention on China’s growing presence in Central Asia, particularly in the energy field. But the larger story transcends China and is really about the growing connections between Central Asia and East Asian  countries in general, not just China.  In this context, South Korea’s reinvigorated moves to consummate energy and infrastructure contracts with Central Asian producers are particularly revealing.  Following President Lee Myung-Bak’s visit to Kazakhstan and Uzbekistan in 2009, there has been a series of acquisitions and search for assets by Korean companies.

BACKGROUND: South Korea’s renewed quest for assets in Central Asia is not confined to energy assets.  It clearly is searching for enhanced political influence.  Thus South Korea conducts an annual forum with all the Foreign Ministers of Central Asian governments aimed at improving bilateral ties with each of them and collective multilateral ties over a wide field of endeavor stretching form the government, to the corporate sector, to education.  These meetings and South Korea’s visible interest in investing in Central Asia have also been encouraged by Central Asian states, because such activities facilitate their common drive to diversify the sources of foreign interest and investment in their countries.  Just as the Turkmenistan-China pipeline weakens Russia’s monopolistic hold on gas export, so too does the turn to Seoul  (and Tokyo too for that matter) mitigate against any possibility of a Chinese or Russian dominance in key economic areas.

At the same time, these mutually reinforcing political and economic activities directly benefit South Korea, which must import virtually all of its energy from abroad. It has devised a new strategy to search for stable energy supplies.  Since South Korea cannot compete with the big players who are importing enormous amounts of oil and gas by virtue of their overall economic size and the size of their domestic demand, it must follow an alternative strategy.  South Korea is moving to the purchase of mining areas that are known producers of natural resources rather than to the exploration of new areas that may promise a high return but are also high-risk investments.  This low risk, low return strategy, if sufficiently diversified across a host of oil and gas fields, offers South Korea a better chance of stable, reliable supplies over time.  At present 78 Korean agencies are working in resource-rich states from Cameroon and Congo to Kyrgyzstan.  The Central Asian strategy is, in fact, part of a much broader, global strategy.  Like China and Japan, South Korea is clearly seeking to move away from excessive reliance upon Middle Eastern sources given the high risk in that area.  That strategy necessarily implies a renewed effort to diversify its assets in areas like Central Asia. Based on the estimated holdings of South Korea’s supply of strategic minerals, considerably from 2002, this strategy appears to be working.

South Korea’s strategy includes summits with heads of state, individualized approaches to states, enhanced collaboration with states through closer cooperation between interrelated businesses, and enhancement of industries with relative advantage, strengthening the legal and systemic foundation for expanded cooperation on infrastructure, and sharing South Korean experiences with Central Asian states to establish strategic partnerships with them.  This strategy dates back at least to 2004 if not earlier, but by today South Korea is able to pull off large deals, e.g. buying 2,600 tons of uranium from Uzbekistan for $400 million between 2010 and 2016, while the Korea Gas Corporation (Kogas) has signed a contract with Uzbekistan for joint exploration of oil and gas fields there.   It also has singed contracts for tungsten.  South Korea has also sealed analogous contracts with Kazakhstan for long-term supply of uranium and joint development of minerals like molybdenum. 

Seoul’s strategy also encompasses broader political and strategic vistas.  South Korea’s government has expanded its New Asia initiative to include Central Asia which is an attempt to boost relations, economic cooperation, and establish the “Asian caucus” to meet outstanding contemporary challenges.  By expanding this initiative to Central Asia, South Korea also pursues its overall expansion into Eurasia, particularly leading countries like Kazakhstan and Uzbekistan.  It also provides support for Central Asia’s ethnic Korean diaspora, which can only benefit from enhanced ties between their host governments and South Korea.  Thus in sum these initiatives not only provide for bilateral gains on a win-win basis of mutual benefit, they also greatly accelerate and deepen the processes by which Central and East Asia are being jointly integrated on the regional and global level as economic and political partners, and increasing thereby Asia’s collective weight in world affairs.

IMPLICATIONS: Since South Korea’s program of action is part of both a global South Korean endeavor, and a broader process of comprehensive East Asian interaction and integration with Central Asia, all these contacts and deals have significant strategic meaning for both parties.  South Korea’s economy and Asian role are strengthened while Central Asia’s connection to investors beyond Russia and China also grow stronger.  To be sure, not everyone is thrilled with these developments.  Russia’s press and government have hardly welcomed Turkmenistan’s deals with China, and Western firms and governments have started complaining to Turkmenistan’s government about being shut out of the competition for major contracts in the Turkmen energy business.  Such complaints are natural and essentially a cost of doing business, because for every winner of a major contract there are losers who failed to get that contract.

Even so, the broader strategic significance of these Asian and specifically South Korean contacts with Central Asian states is quite clear and it is a mutually beneficial one.  Turkmenistan only began to get Russia to pay what its gas was worth once it signed the contract with China for the pipeline that just opened.  Similarly, its investment connections and contracts with South Korea, Japan, and other states beyond

Russia and China help keep those two behemoths relatively honest in terms of the conditions attached to their dealings, contractual and otherwise with Turkmenistan.  The same principle applies with equal force to all the other governments of Central Asia, a fact that no doubt helps explain their receptivity to Korean and Japanese quests for access to their mineral and energy wealth.  Korean, Japanese, and Chinese investments are essential for their growth and full entry into the world economic order, these being ultimately prerequisites of their own stability and of the great powers’ abiding interest in their future and success. 

These states will hardly forego the benefits of connections to South Korea and Japan just because other investors are unhappy that they failed to get those contracts.  Likewise, as in the Chinese case, these contracts help bolster South Korea’s and Japan’s energy security while enhancing their claims to an expanded role in Asia’s international agenda beyond their own current standing and distant geographical status vis-à-vis Central Asia.

CONCLUSIONS: The growing East Asian projects in and with Central Asia come at the expense of Russia, which has steadily sought to monopolize Central Asia’s international relations and serve as an interlocutor between those governments and the world.  These projects highlight both Central Asia’s heightened ability to diversify its individual and collective foreign and foreign economic relations beyond Moscow and even Beijing.  But beyond that fact, the increased interaction between Central Asia and East Asian regimes points to the fact that Russia has failed to develop the economic means of magnifying its power beyond energy to increase its economic capability to meet the actual needs of these states in infrastructure, energy development, etc.  In the final analysis not only do these deals reflect the expanded ties between East Asia and Central Asia, they also suggest, even if only implicitly, that Russia is fast reaching, if it has not already reached, the limits of its capabilities to influence Central Asia, and what’s more, that Central Asia knows it.

AUTHOR’S BIO: Professor Stephen Blank, U.S. Army War College Carlisle Barracks, PA 17013. The views expressed here do not represent those of the US Army, Defense Department, or the U.S. Government.