Chinese Investments Kazakhstan

Clear as Oil: Transparency of Chinese Projects in Kazakhstan

Emissions from the «Sin Yuan Steel» steel plant. Photo by Raul Uporov

“Special treatment” of Chinese investment projects in Kazakhstan may lead to lower environmental standards and practices to appease foreign investors. 

Author: Sergey Solyanik, Consultant, Crude Accountability

Kazakhstan is China’s key partner in Central Asia. During their almost 30 years of cooperation, the two countries have come a long way from cross-border trade to large, joint projects. China ranks fourth in foreign direct investment in the Kazakh economy, mainly in oil and gas production.

Kazakhstan’s participation in China’s Belt and Road Initiative has entered a new stage in the development of bilateral relations. Since 2016, the country has been implementing 55 joint Kazakh-Chinese projects, about which there is little publicly available information. This information vacuum has generated rumors and speculation in the country.

Chinese business operations in Kazakhstan have long been the focus of public attention because of their numerous environmental violations and their negative impact on people and the environment. A vivid example is the pollution of the Aktobe region by CNPC-Aktobemunaigaz’s oil and gas production. The company is a subsidiary of China National Petroleum Corporation, CNPC.

The new program has caused particular public concern over the apparent transfer of environmentally polluting production facilities from China to Kazakhstan. This was one of the reasons for the spring 2016 land protests in Kazakhstan and for anti-Chinese protests against the 55 projects held in September 2019. Following the protests and in response to public demands for disclosure, in which Crude Accountability was involved, the list of 55 projects was finally published in the fall of 2019. Half of the Chinese investments are in oil and gas.

However, transparency regarding Chinese projects has not changed dramatically over the past two years. Using the coronavirus pandemic as an excuse, government agencies and Kazakh-Chinese companies have drastically limited possibilities for public environmental monitoring of polluters’ activities. Public hearings about projects are now held online and have become even more of a formality than they were before.

This summer, Crude Accountability traveled with local journalists to southern Kazakhstan to conduct environmental monitoring of 4 Kazakh-Chinese joint ventures within the 55 projects program. During the trip, not a single company agreed to meet with us, citing concerns about the pandemic. Nevertheless, we found some interesting details about the Belt and Road projects in the country.

The Shymkent oil refinery of the PetroKazakhstan Company (a subsidiary of CNPC) has been modernized and must comply with the highest environmental standards. Crude Accountability’s survey of local residents near the refinery showed that despite the modernization and after an increase in the volume of oil refining, emissions from the refinery have risen sharply. Residents informed us that community members send messages and complaints to local social network platforms about the suffocating night-time odors in the city. In just two days in July, there were 289 messages about this issue on the Critics city-wide portal. 

Шымкентский нефтеперерабатывающий завод. Фотограф Рауль Упоров.

Environmental authorities turned a blind eye to the complaints since their monitoring calculations are made during the day. The authorities have no complaints against the refinery, which on paper, appears to be doing well with emissions. In reality, residents of Shymkent are suffering from odors at night. Similar complaints come from inhabitants of neighboring villages near the refinery. 

Another serious problem for the villagers is the drying up of local wells, which is most likely the result of continuous pumping of groundwater by the oil refinery for its needs. Residents of the city and surrounding villages noted the absence of any operational environmental information or dialogue with the refinery’s management.

Another large production unit in Shymkent is the impending Sin Yuan Steel Mill, which is located in the Ontustik industrial zone. The plant will remelt scrap metal non-stop year-round. The city’s environmental department has yet to verify the mill’s operations and emissions levels. In the industrial zone itself, there are about 90 different industries, including three scrap metal melting plants. 

The local population complains about night-time odors and emissions from the zone. It is difficult for government environmental experts to determine which plant is polluting since there are no automatic air quality monitoring stations there, just as there are none near the oil refinery. The only environmental data comes from the polluting enterprises themselves. 

It is impossible to show up unexpectedly to the plant to conduct a spot-check because advance permission is necessary, which tips off the polluters ahead of time. When environmentalists arrive on the scene, there are no apparent violations. However, during an external inspection, we made on a weekend evening at the Sin Yuan Steel plant, we recorded intense emissions from the plant. 

Our team also visited the Gezhouba Shieli cement plant, which is located in the countryside in the Kyzylorda region. This is the only cement plant in the 55 projects program. Cement manufacture causes irreparable damage to human health and the environment. The relocation of this cement manufacturing plant from China to Kazakhstan illustrates how China uses the Belt and Road Initiative to export surplus and polluting production.

After the launch of the Shieli Cement Plant, complaints about its activities came from local residents of the Tonkeris village, who complained of smoke, dust, and an unpleasant odor from the plant. A local activist, Almaz, said that the plant was originally built in violation of the country’s legislation. As soon as the plant was operational, many of the village’s children developed skin and respiratory diseases, which had not been the case prior to the construction of the plant. The plant’s management is now saying that the local residents are sick because of the coronavirus and local authorities are putting pressure on those who complain. Almaz and other village residents are filing a lawsuit with the local district court demanding the suspension of the plant’s operations for numerous violations. This is a rare case in which Kazakhstani citizens themselves are organized and competently defending their environmental rights.

The fourth project for review was the Zhanatas wind farm, which is located near the town of Zhanatas in the Dzhambul region. This wind-power station has a capacity of 100 MW and was built with financing from international development banks. The project is the largest wind farm in Central Asia. In general, the wind farm makes a positive impression and is a good example of China’s “green investments” facilitating the development of alternative energy in Kazakhstan. The only known problem with the project at the moment is the lack of compensation to local farmers for the seizure of their land for the installation of wind turbines. The lack of compensation is a violation of the policies of the development banks involved in this project.

The special treatment of Chinese investments that we witnessed on our trip–violating environmental norms, excessive emissions, failure to pay compensation for seized land–not only undermines the legitimacy of Kazakhstan’s national environmental legislation and the international conventions to which it has signed on but also results in unfair economic competition favoring Chinese companies over others, including Kazakhstani firms. Lowering Kazakhstan’s environmental standards to benefit the economic interests of China is unacceptable.