China and Azerbaijan – a new player in town?

For most states in Eurasia, it is a regular routine to express satisfaction with one’s bilateral relationships, welcoming the development of ties and expressing satisfaction that the partnership will only deepen in the future. Azerbaijan and China may not have a lot in common at first glance, but parsing their recent ties does suggest that we are seeing the development of China’s profile to the west of the Caspian.

Trade between the two has just hit $1 billion, according to Azerbaijan’s media. This may be chicken feed for China (in perspective, China’s trade with the US is $385 billion) but it is significant for Azerbaijan, with a total trade turnover in 2010 of $27 billion.

A full third of the trade is between Azerbaijan and Xinjiang in China’s west, heavily populated by Uighur Muslims (the news of the trade milestone came at the inaugural meeting of the Azerbaijan-Xinjiang intergovernmental commission on economic affairs). 

Vague ethnic links aside, most of the basis for trade probably comes from the energy sector. Azerbaijan’s oil and gas sector remains its biggest economic strength, and Xinjiang is western China’s energy hub – particularly for gas and oil coming from the Caspian region.

Recent discussion of free-trade zones does suggest that the two sides are trying to diversify their relations, although whether these will be implemented and how much economic impact they will have is debatable.

More broadly, the rise in trade reflects two things. Firstly, Beijing’s determination to increase investment in Xinjiang, which remains poorer and less developed than many other parts of China. Poverty and economic disenfranchisement were cited as key reasons behind riots among Xinjiang’s Uighur community back in 2009. Encouraging investment from majority-Muslim states may seem like a simple and efficient part of the solution to the Xinjiang issue.

Secondly, it reflects growing Chinese interest on the ‘far side’ of the Caspian, with all the energy, political and security ramifications that implies. This isn’t a novelty – China’s first stumble was back in 1999 when it sold multiple-launch rockets to Azerbaijan’s arch-rival Armenia, provoking anger in Baku. Although Beijing has avoided any subsequent such errors, it has certainly been building ties with Yerevan too. In 2009 it became Armenia’s second-largest trade partner and President Hu Jintao praised Armenia as a “trustworthy friend” during a meeting in May 2010.

As China’s profile in the Caucasus increases, building strong relationships with both Azerbaijan and Armenia will increasingly be a balancing act. In an echo of the 1999 incident, Baku has been pushing to acquire long-range Chinese missiles. This could create a diplomatic spat with Armenia. 

And although China certainly prioritises Azerbaijan out of the two, for its location and its energy resources, Chinese policy in distant areas is usually based on careful balance and non-interference. Indeed, its official policy on Nagorno-Karabakh has been studiously neutral: calling for support of Azerbaijan’s territorial integrity, but abstaining from a 2008 UN vote tabled by Azerbaijan which called for an immediate Armenian withdrawal from occupied Azerbaijani territories.

This is without mentioning the other geopolitical dynamics that would change if China began to assert itself on the western side of the Caspian – with Iran, Turkey, and particularly Russia. Reaching $1 billion in trade turnover with Azerbaijan isn’t a sign that ‘the Chinese are coming’, but it does indicate the shape of things to come. As time passes, China will increasingly become an alternative pole for Azerbaijan’s ‘multi-vector foreign policy’ to take account of.