By Alexandros Petersen with Katinka Barysch.
First published as a Centre for European Reform report on November 16, 2011.
Energy has come to symbolise the geopolitics of the 21st century, reflecting countries’ diminishing reliance on military and political power. Today, energy is an instrument of geopolitical competition, like nuclear weapons or large armies were during the Cold War. The means of international influence have become more diverse and sophisticated, but the goals remain much the same: national security, power projection, and control over resources and territory.
In different ways energy is fundamental to the rise of Russia and China as great powers. For Russia, possession of vast oil and gas resources fulfils a function similar to its nuclear weapons in the Soviet era. The post-1999 boom in world oil prices has underpinned Russia’s re-emergence as a great power. The combination of the country’s abundant energy reserves and fast-growing world demand for such resources has given Russia the opportunity to play a more influential role in global governance. When Kremlin officials speak of Russia being an ‘energy superpower’, they are really saying that it is back as a global, multi-dimensional power. Energy is seen not simply as an instrument of influence in itself, but as underpinning other forms of power: military, political, economic, technological, cultural and soft power.
Energy is no less vital to China, but from the opposite standpoint. China’s modernisation and rise as a superpower depends on securing reliable access to natural resources. Beijing has responded to this imperative by making the worldwide search for energy one of foreign policy priorities. Just as Russia will rely on energy exports for the foreseeable future, so China will remain a net importer of oil and other sources of energy, such as gas and nuclear fuel. Energy and geopolitics are as closely intertwined in China’s case as they are for Russia, except that for Beijing energy is not an instrument of geopolitical ambition, but a key driver of an ever more assertive foreign policy.
From an energy perspective, the relationship between Russia and China should be straightforward. Russia is the world’s biggest hydrocarbon producer. China is one of the world’s biggest and fastest growing energy markets. Moreover, the two are neighbours, which means that energy transport is relatively straightforward, without the need for either risky sea shipments or pipelines that transit several countries. A long-term strategic energy relationship between the two looks not only commercially viable but almost inevitable.
European policy-makers have in the past reacted with concern whenever Russian leaders alluded to the option of ‘turning to the east’ by redirecting oil and gas flows away from Europe and towards emerging markets in Asia, principally China. For the EU, which relies on Russia for a third of its oil imports and some 40 per cent of its gas imports, such a shift could pose a threat to energy security. The US is equally concerned about an energy link between Russia and China, but for different reasons: it fears that energy could be at the heart of a strategic rapprochement between Beijing and Moscow.
However, as this report shows, the energy relationship between Russia and China is a lot more complex than their respective positions as producer and consumer would imply. In fact, the bilateral energy relationship between the two countries is remarkably underdeveloped. Their main energy interaction is an indirect one, through competition in Central Asia.
Chapter two of this report sketches out the energy interests of Russia and China, which would naturally guide them towards a strong bilateral relationship. Russia is hoping for new markets for its energy since the outlook for gas demand in Europe – by far its most important export customer – is both sluggish and uncertain. China is looking for supplies of raw materials, in particular energy, to fuel its industrial development. Nevertheless, the Sino-Russian energy relationship remains woefully underdeveloped. Chapter two discusses the reasons why this relationship has not developed as expected, and why it is unlikely to do so in the foreseeable future.
Chapter three focuses on Central Asia where, China looks set to take over from Russia as the strongest outside player in national energy sectors. The opening of the Central Asia-China gas pipeline at the end of 2009 was only the latest and most vivid illustration of China’s growing influence in this energy rich and strategically important region. Although the main focus of the chapter is on the interaction between China and Russia, the interests and actions of the EU and the US in Central Asia are also briefly discussed.
Chapter four then looks at Turkmenistan in particular, as a case study in the new geopolitics of energy. Although Kazakhstan is an equally important energy player in Central Asia, its resources consist predominantly of crude oil while Turkmenistan could be on course to become one of the world’s leading suppliers of gas. Oil is a more ‘fungible’ commodity in the sense that it is sold on open global markets and therefore usually entails less direct commercial and political interaction between buyer and seller nations. Gas is mainly sold on the basis of long-term bilateral contracts and shipped through dedicated pipelines that often cross several countries. In short, the gas business is by its very nature more politicised, and therefore more attention here is paid to the development of Central Asia’s gas than its oil.
Turkmenistan is also interesting because it appears to be sliding from total dependence on the Russian market towards predominant dependence on China in a short period of time. Turkmenistan highlights the need for the West to pay more attention to the energy geopolitics of this region. However, Turkmenistan is one of the world’s least open countries, with no free press and very little public debate. It thus poses significant challenges as a subject of analysis.
Although Uzbekistan is estimated to have considerable gas resources it is not a sizeable exporter because it uses most of its gas to satisfy the fast growing demand of its 28 million population. Uzbekistan is therefore not included in the discussion. Nor are the smaller Central Asian republics, Kyrgyzstan and Tajikistan, which, although posing challenges of their own to regional stability, are not energy players. Instead, the report refers in some places to developments in Azerbaijan, which, although geographically not in Central Asia, is an integral part of the energy balance of the Caspian region. Azerbaijan is crucial for removing obstacles to trans-Caspian energy shipments, which is a precondition for the development of an energy relationship between Europe and Central Asia.
Chapter five draws together the different strands of the analysis and seeks to offer some conclusions and recommendations to Western policy-makers. The idea that countries such as Turkmenistan and Kazakhstan are pawns in a new ‘great game’ between Russia, China and the West is wide of the mark. Reduced Russian influence has given the former Soviet states of Central Asia more room for manoeuvre in formulating and consolidating their own independent energy strategies. The risk is that these countries may move from over-dependence on Russia to over-dependence on China. Such a development would run counter to Western interests. First, since China appears no more interested in promoting good governance and openness in Central Asia than Russia is, growing Chinese influence would do little to help the long-term development and stability of this strategically important region. Second, the EU would lose out in the competition for Central Asia energy resources. Since Central Asian gas is an important ingredient of the EU’s diversification strategy, this poses a bigger risk to its energy security than Russian promises to redirect energy sales towards Asia. The West, and the EU in particular, should use the window of opportunity that is being created by the weakening of Russia’s traditional regional hegemony to establish stronger relations with Central Asia. Energy must be at the heart of such attempts.
To continue reading, please see this report in PDF, available from CER.