The Yakjilva Mine as a Showcase of China's Eurasian Resource Access Strategy

Samuel Schlichting, Jack Lindstrom

Amidst a lonely wilderness of rugged snow-clad mountains, on the "roof of the world", as the Pamirs are often called, something akin to an ideal test ground for China's comprehensive natural resource access strategy has emerged. In the Gorno-Badakhshan Autonomous Region (GBAO) of Tajikistan, where in the late 19th century the frontiers of Qing China, Tsarist Russia and British India met, Chinese economic expansion faces little resistance today. Nearby Afghanistan has produced security needs which are served by, inter alia, the only known land-based Chinese security presence abroad, a military outpost in the Wakhan Corridor at the Tajik-Afghan border1. This base, developed since about 2016, is ostensibly intended to protect Xinjiang from infiltration by Afghan-based militants. Less well known is the fact that this security installation emerged hand in hand with increasing Chinese economic activity in the region. Across the nearby Karakoram and Kulma pass routes, growing amounts of BRI trade is conducted2. China is revamping stretches of the Kulma pass route to better connect it to Dushanbe and other Central Asian destinations3. But most significantly, China started to exploit a high-altitude silver deposit, the Yakjilva mine, just a few years after the security facility emerged4. While the deals around Yakjilva are shrouded in opaqueness (a general characteristic of resource deals, but particularly pronounced in this case), some observable features of it can lead us to a deeper understanding of how China prefers to access natural resources in Eurasia.

The Yakjilva Deal The Yakjilva mine is located in a mountainous area at 4200 meters above sea level, a height that poses significant challenges to workers and equipment5. When debating the mine deal in parliament, the expected salary Tajik workers would receive (around 270 USD/month) drew criticism not least on the ground of health hazards connected to high altitude6. China is obviously not discouraged by geographical, environmental or social challenges such as these. Another factor is the absence of a domestic services market for mining operations. Yakjilva operates with a relatively high ratio of Tajik workers (100 vs. 70 Chinese employees7), yet the number of Chinese personnel is not insignificant either. Moreover, as far as is known, there are no domestic subcontractors for machinery, spare parts, energy supply and other critical services, which have to be provided by the Chinese side. Far from deterring Chinese engagement, this perfectly fits China's overall strategy: developing export markets for goods, services, and labor over the whole industry spectrum in order to mitigate domestic overcapacities8. A third point worth mentioning is the disequilibrium between the contracting counterparts. China is not only more powerful militarily, financially, technologically and diplomatically, but it is also in a creditor position vis-à-vis Tajikistan as a debtor. In particular, Tajikistan owes more than a quarter of its debt to China9. This gives preponderance to China in negotiations of the conditions of the Yakjilva mining project or any other similar resource deal. Finally, and as mentioned before, the mine is just one of several engagements in GBAO which started about the same time and reasonably close to each other to warrant a preliminary assumption

of interconnectedness: the mentioned highway project is important for Sino-Tajik connectivity in general, but also, more in particular, for the purpose of transporting ores extracted from the Yakjilva deposit to China for processing. Moreover, that the security installation mentioned above serves the purpose of protecting the mining operation, among other tasks, is more than pure surmise: while no official documents are publicly available that prove this connection, given the danger Chinese assets in Tajikistan are facing from the side of Afghan-based militants10, the conclusion is as self-evident as it could possibly be.

Generally speaking, Chinese resource companies go where the resources are that China needs. Insofar, they are no different from any other actor engaged in resource exploration and extraction. However, given that China is a latecomer in most resource markets11, it has to compete with entrenched stakeholders, either domestic players or overseas investors, often Western-based large multinationals or Russian state-connected corporations. Bound by long-term contracts and endowed with financial, reputational and diplomatic capital as those players are, it is no easy thing for China to move them out of their positions. For example, in 2003, when China sought to get a foothold in Kazakhstan's crude oil industry, an attempt to buy into the Agip KCO consortium which managed several significant Kazakh oil assets, was blocked by the consortium members despite the deal having been well underway12. Even today, as China's economic clout surpasses that of most competitors, contractual and structural inertia is not easily overcome. In this situation China was (and is) often forced to take assets that are less attractive to other major players due to various factors including security, environmental hazards, or low short-term profitability. To successfully develop such difficult assets, China has to do what it does best: comprehensive planning and implementation on many structural levels. Arguably, this is a strategy that is much more easily and naturally employed by a tightly organized party-state where major resource corporations are state-owned or at the very least closely connected to the government and where the remnants of the socialist planned economy in Five-Year Plans and strategic target setting continue to guide critical areas of the economy13. As the Yakjilva case shows, China is ready to exploit difficult assets when it is in a position to influence things structurally, i.e. on many levels, ranging from security to infrastructure to finance to diplomatic power. Designing structures means betting on the long perspective: every detail of the cooperative framework designed by China gives it a potential leverage and excludes a potential stumbling block that could be put in its way by competing stakeholders.

Determining whether the Yakjilva mine has to be treated as a standalone case or serves as example or even template for China's overall resource access strategy in Eurasia, first of all the following caveat is in place: Eurasia is a large and highly heterogeneous geographical area. Conditions met by China vary, obviously, in countries such as Tajikistan, Afghanistan, Iran, or Russia. Where the resource extraction industry is developed and in the hands of powerful domestic players, China does not usually act as an investor but rather as a buyer. This concerns Russia and Iran, for instance. Even in Kazakhstan, China's role as an investor is surprisingly modest. China has bought into the Kazakh oil industry since the late 1990s, but as the example cited above shows, it was met not with an overly warm welcome by the entrenched stakeholders. The Sino-Kazakh Comprehensive Strategic Partnership Declaration of 2016 only mentions hydrocarbon energy, grains, and uranium, and in all three kinds of resources, China predominantly acts as a buyer, even as China controls some stakes in oil fields such as Kumkol, Uzenskoye and Kashagan14.

China holds structural advantages in Eurasia, nonetheless the region of Central Asia holds a powerful incumbent, that of Russia. Russia has regarded Central Asia as its "near abroad" region since the collapse of the Soviet Union, as a result the instruments at play in Central Asia are primarily that of migration and political influence. Although China invests nearly $35.9 billion by 2025 cumulatively, Russia has only invested $20 billion, Moscow has made it clear that investment volume is not the metric which the government is most concerned with. Instead the labor migration serves as the keystone of the Russian relationship with Central Asia; nearly 8 million Central Asians work in Russia and remittances make up close to half of Tajikistan's GDP as well as a substantial slice of Kyrgyzstan's and Uzbekistan's GDPs. In fact, nearly every rural household of Tajikistan and Kyrgyzstan depends upon money sent home from Russia; something which does not change relative to Chinese investment. Investment may change the infrastructure, but it does not directly increase the regional income. What does provide such a support is the migrant workers in Russia. The battlefield is not a zero-sum game wherein Chinese economic investment displaces Russian political influence, it is instead a nation divided by powers which seek to utilize it; Russian security and institutions, such as the Collective Security Treaty Organization and the Eurasian Economic Union; as well as military basing, as in Tajikistan the 201st Military Base is established. The 201st serves as Russia's largest garrison outside its own borders and houses roughly 7,000 troops at such facilities in Dushanbe and Bokhtar. China by contrast provides capital and infrastructure, as well as the trade infrastructure within the region through the Belt and Road Initiative. Nonetheless the nations of Central Asia are not clearly either Chinese-won or Russian-retained, but rather sliced narrowly in varying sectors between the giant nations. China's outpost serves as the closest contention to Russia's garrison in the 201st, which is established in the Wakhan Corridor, however it is everything the Russian base is not; low-profile, remote, and modern, whereas the Russian base is large, central and dates back to Soviet infrastructure, the history therein is rich. And so the contention between Russia and China is a battle on different fronts in the same region, wherein Russia holds a more visual role, despite China providing it's own unique shadowy position. China in turn is building from scratch in the region while Russia simply maintains, however China is developing on multiple facets, economic and militarily, as opposed to Russia simply serving as a figurehead and historical power. Russia does not need to build a mine-adjacent security presence because it inherited the security architecture; China does, because it is the newcomer assembling every layer of leverage itself. However, things are different where conditions resemble that of the Yakjilva case.

Additionally, Russia and China hold a unique relationship within their buyer-investor balances. According to Eurasian Development Bank- China's alternative to the Russian-established Eurasian Economic Union, China's cumulative direct investment in Central Asia reached the aforementioned $35.9 billion, and as such surpassed Russia. Despite this, the actual split of buyers and investors is

remarkably close, as Kazakhstan and Uzbekistan alone account for nearly 60% of the regional total, coming out to $11.4 billion and $10.7 billion respectively, and Turkmenistan rests just behind at $9.5 billion. This is not merely due to equity stakes in extraction but rather due to the intense cost of pipelines and hydrocarbon financing, while Tajikistan and Kyrgyzstan only account for a tenth of the portfolio, with $2.2 billion and $2.1 billion respectively. Nonetheless it is these capital-poor markets that Chinese firms have vertically integrated the highest in from buyer to operating managers. Zijin Mining Group does not simply purchase concentrate from Kyrgyz and Tajik producers of gold but instead owns and operates the deposits outright, such as the Tadlybulak Levobrehenzy mine in Kyrgyzstan or the Zarafshon joint venture. Such ventures contribute to more than 3/4ths of the gold production from Tajikistan. As such China is playing a game of monopoly to conquer the economies of rare resources in capital poor nations because the pockets of China are much deeper than those in Tajikistan. Such a model is reflected toward other markets in Central Asia as well, largely. Zijin's $1.2 billion acquisition of Kazakhstan's Raygorodok gold mine as well as the influx of Chinese-backed copper smelting investment- which included a $7.5 billion commitment to Kazakhstan's copper sector in the first half of 2025 alone, indicate as much. The buyer-to-investor threshold is shifting so that China is able to not simply purchase but own outright the value of the Central Asian region and its critical minerals. China does not simply invest in weaker markets but instead is seeking to dominate the entire region so that it holds a relative monopoly, however it started with the easiest markets to acquire, and has moved its way up the chain since. The Yakjilva pattern only cements such a notion, given Chinese interest in the region and its expansion.

China is a significant investor in exploration, extraction and initial processing in Kyrgyzstan, Kazakhstan, Turkmenistan, Afghanistan, Mongolia, Pakistan, Uzbekistan. All of these belong (to varying degrees, obviously) to the category of difficult but promising markets with respect to security, lack of finance, imperfect infrastructural penetration underdeveloped domestic industries or absence of powerful domestic players. Moreover, all these countries either share a border with China or are in its close neighborhood. In the case of Uzbekistan, which does not share a border with China, China is engaged in the construction of a railroad that is planned to connect Uzbekistan to China via Kyrgyzstan15. This railroad, discussed since the late 1990s, has met innumerous obstacles and was only in recent years finally agreed upon. A major reason for China to be interested in this connectivity project was the potential it provided for resource extraction in the high-altitude mining regions of the Kyrgyz part of the Tianshan range, for example16. The connection of resource extraction and infrastructure is highly relevant for China's resource strategy in Eurasia, for Sino-Eurasian connectivity is almost exclusively land-based. While the US and Europe ship most of their resources on the oceans, Eurasian resource transport requires railroads and pipelines. Mongolian coal and copper deposits and Uzbek gold mines are or will be supported by railroads17, Kazakh crude and Turkmen natural gas are transported via Chinese-built pipelines. But China is not only interested in extracting mineral resources and shipping them to China for processing, which is still the predominant model18. Where local industries have achieved sufficient maturity to allow cooperation beyond mere extraction, China is keen to establish a foothold in emerging processing structures.19

China is also shifting way from mere export and processing, as it has conducted historically. Rather than merely attaining the resources and shipping them back to China, it has begun establishing smelters and facilities within the Central Asian nations. China Nonferrous Metal Industry's Foreign Engineering and Construction Company (NFC) committed to a $1.5 billion copper smelter not far from the Aktogai deposit in Abai Region which is designed to process 300,000 tonnes of copper annually. This is mirrored in China's other investments of refining externally, namely in Indonesia's nickel market, wherein the process is the same; a plot of resource-rich land is extracted from and Chinese smelting and refining plants are built nearby. The NFC smelter is tied directly to some of Kazakhstan's largest copper mines; and yet a $12.6 billion proposal from China's East Hope Group- one of the world's largest aluminum producers- has been offered to establish an entire aluminium integration complex in Kazakhstan's Kostanay and Aktobe regions; from extraction of bauxite to alumina refining to aluminum smelting, the project is estimated to produce 3 million tonnes of aluminum annually. Such an endeavor bolsters both the local economy and the Chinese monopoly on rare minerals, and the result is an eager pair of nations to establish an incredible amount of control of a resource-rich region. It is significant however that this is not merely a Chinese endeavor; Kazakh officials have explicitly reflected that raw-material export is a problem of resource-risk they desire to solve. The Kazakh vice minister noted that only a third of the country's alumina is converted domestically into aluminum with the rest exported unprocessed; leaving some 97% of Kazakh copper outside the country unprocessed or only minimally so. Deeper local processing therefore is in the best interests of both nations and combines Chinese industrial might and export strategy with Kazakh industrial policy and government compliance- not Chinese strongarming. As such the Yakjilva template provides a unique reading where Tajikistan with a thin domestic market and lacking value-added ambition from government, is a classic case of Chinese extraction-only policy. Ore is shipped out of the Kulma pass for processing and such is the end of the nation's relationship.

Kazakhstan, by contrast, has enough bargaining leverage and administrative capacity to negotiate its way up the value chain. The variation suggests the "template" is not fixed but scales with host-state capacity: China defaults to pure extraction where it can, and concedes local processing where it must. In short, export and processing is a two way street, one which benefits China either way.

China's structural approach which encompasses infrastructure, resources and security deals (or other facilitating measures on levels that are ostensibly disconnected from resources) is a strategy necessitated by both geographical constraints and path-dependency as a latecomer, and it is greatly facilitated by China's experience with multi-stakeholder central planning domestically and abroad. China's Eurasian resource access strategy is insofar unique as the conditions posed by Eurasia (a continental bloc in China's immediate neighborhood) are replicated nowhere else in the world. However, its general characteristics have to be expected to reemerge wherever the other ecosystemic factors apply (i.e. volatile security, lack of finance, lack of negotiating clout, absence of powerful entrenched stakeholders), because this is what China over the last three decades has learned to manage successfully.

Notes & References