China snapping up resources in Central Asia

MANGISTAUMUNAIGAZ is a name to conjure with, but the sale last week of Kazakhstan's fourth-largest oil company probably did not rock your world.

The Central Asian firm controls reserves of about half a billion barrels of crude and output of 113,000 barrels daily -- big, but not huge.

It might have raised an eyebrow, however, had you known that the successful joint purchaser was China National Petroleum Corporation (CNPC) and that the competing investors were Oil and Natural Gas Corporation, of India, and Gazprom Neft, the oil unit of the Russian gas giant.

In the West we wring our hands over the collapse of capitalism, but in Central Asia they are fighting over the spoils. The economy of Kazakhstan was badly beaten by the credit crunch and its banking system came close to collapse.

This month, President Nursultan Nazarbayev of Kazakhstan went cap in hand to Beijing and came back with a $US10 billion loan. Half of the money will be used to diversify the Kazakh economy, but the other half will bolster the energy sector and enable the $US3.3 billion ($4.6 billion) acquisition of MangistauMunaiGaz, to be shared equally between CNPC and KazMunaiGas, the state-controlled energy company.

In return for propping up the Kazakh Government's investment, the Chinese company get half of the oil. The Chinese loan will also help to build a pipeline to take gas from the Caspian region to the south of Kazakhstan, a strategic move that brings gas closer to the Chinese border.

This is the moment that China has been waiting for -- global financial mayhem, commodity price weakness, governments in disarray and a war chest of $US2trillion in foreign currency reserves.

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