OREANDA-NEWS. February 07, 2007. China is setting up extensive railway linkages over two different routes to the oil-rich Central Asia. The connectivity it to Kyrgyzstan, Uzbekistan and Kazakhstan will enhance the competitiveness of Chinese oil companies bidding for energy assets in those countries. This is going to cause some amount of alarm in the US government and in Indian oil companies seeking oil assets in Central Asia, the Times of India reports.

The move also signals the determination of Chinese rulers to build land transportation facilities that would reduce its dependence on sea routes, which are closely monitored by US military ships. A rail link could ensure regular oil supplies to China from Central Asia in the event of a sea blockade and other forms of military action.

The plan involves building two rail routes connecting western China's Xinjiang province with Central Asia. A portion of one route linking Korgas on the China-Kazakhstan border with China's inland railways is expected to be completed within this year. It will be extended to west to join the Sary-Ozek railway of Kazakhstan to create the second cross-border rail link between the two countries. The project cost has been fixed at US$861 million, said officials attending a meeting on regional trade.

The rail project offering opportunities for cost reduction will put Chinese oil companies in a better position to compete for energy assets in Central Asia against bidders from different countries. Indian oil companies have been involved in tough bidding with their Chinese counterparts in Central Asia over the past two years and a lot more competition is expected in the coming years.

China has a rail link of 460 kms connecting Urumqi and Alataw Pass where it connects to Kazakhstan railways. Government sources said the new route will help reduce the burden on the land port of Alataw Pass, the largest land port in northwest China, which was forced to handle 60% more traffic in 2007 as compared to what it did in 2006 in view of expanding demand. China has also launched work on designing a second rail route that would start at Kashi (Kaxgar) in Xinjiang and pass through Kyrgyzstan to reach Uzbekistan. This route is expected to become operational in 2010 and will enable China to reach Europe by improving the connectivity between western China, Central Asia and the southern passageway of the new Euroasia continental bridge.