By Anton Evstratov
Russia’s energy policy in Central Asia is largely hampered by China’s actions, and especially Western economic sanctions, which result in Moscow’s lack of necessary resources.
The energy strategy of the Russian Federation has undergone significant changes in recent years. This was in some measure due to global causes associated with the introduction of new technologies, but for the most part this concerns the geopolitical conjuncture — an aggravated and generally not very successful struggle for energy dominance of Moscow in some regions and Western economic sanctions.
Recent trends have been expressed in several events held by the Russian side. One of those is the VII Russian International Energy Forum, which took place on June 25-28 in Moscow. The event concerned not only the traditional energy agenda of the Russian Federation – oil and gas, but also the introduction of advanced international experience and new technologies.
Significant topics were the use of recycled materials and solar and wind energy to meet the needs of remote communities. The main problems were recognized deficiencies in the digitization of the Russian energy industry, as well as the lack of adequate domestic equipment. Simultaneously, positive changes were noted in comparison with the crisis of 2015, which was expressed at the beginning of the investment program, providing for the financing of the industry at 1.5 trillion rubles.
At the same time geopolitical issues remain extremely important. In this context, the Russian energy policy in Central Asia as a region of priority political domination of Moscow, less and less economically secured, appears relevant. The countries of the region should be divided into 2 groups, by their height above sea level: conditionally upper (Tajikistan and Kyrgyzstan) and lower (Kazakhstan, Uzbekistan, Turkmenistan).
The former practically do not have fossil energy resources (oil and gas), and they are oriented towards the construction of hydroelectric power plants, meanwhile for the latte the situation is completely opposite.
As for exporters of oil and gas, initially, after the collapse of the USSR, the Russian Federation in every way sought to use its monopolistic position in the matter of transporting the resources of regional states to foreign markets. This situation made it possible to implement the three main vectors:
1) deriving economic benefits using transit levers,
2) exclusion from regional affairs of other great powers interested in the resources of the region,
3) the use of their energy levers to increase political influence.
Central Asian countries selling energy resources were forced to withdraw their products to Europe through Russian pipelines, and the Russian side was selling Central Asian gas at prices several times higher than those at which it purchased it. For example, the Turkmen gas cost to Russia $ 36 per 1000 cubic meters, while it is resold in Europe for $ 85.
However, in the 2000s. Moscow has largely lost its monopoly. The reason for this was the Chinese economic activity in Central Asia, expressed in the construction and financing by Beijing of pipelines to its territory. Western sanctions contributed to this, significantly reducing the Russian investment potential.
As a result, Turkmen gas has completely ceased to be sold in the Russian Federation since 2016, while Uzbek supplies have shrunk four times. If in 2008, the Russian Federation purchased 15 billion cubic meters from Uzbekistan, then in 2015 this figure was only 3.5 billion. Gas from these countries goes to China.
As for hydropower and Kyrgyzstan with Tajikistan, here Russia’s position is much stronger. In Soviet times, the entire electrical system in the region was controlled from Moscow. After the collapse of the USSR, Russia retained control over the power grids of the Central Asian countries and undertook to build and maintain the operation of hydroelectric power plants. Only in Kyrgyzstan, the Russian Federation should have built, according to contract signed in 2012, 4 large hydropower plants.
But after the introduction of sanctions, the agreement had to be canceled due to the lack of finance in Moscow. However, Russia now generally controls the energy sector of Kyrgyzstan. In 2014, virtually all the country’s gas industry was transferred to Gazprom, including the state-owned company Kyrgyz Gaz, which was experiencing financial difficulties.
Prior to this, the country’s parliament was forced to repeal a law prohibiting the protection of strategic facilities of the country from being sold to foreigners. As a result, Kyrgyz gas was subsidized by Gazprom, which also acted as intermediaries in resolving conflicts with the gas supplier to Kyrgyzstan – Uzbekistan.
From an economic point of view, such a deal is unprofitable for Russia, but it costs less than the construction of hydroelectric power plants, while ensuring a similar level of economic and political dominance of Moscow.
It is noteworthy that Russia can increase its influence in the energy sector of at least two Central Asian countries – the same Kyrgyzstan and Kazakhstan, and through the Eurasian Economic Union (EEU). However, now it is gas, oil, oil products and electricity, unlike many other products, are not subject to union regulation. If the common electricity market is planned to be created soon, then the oil and gas market is not earlier than 2025. Thus, Moscow between the integration and preservation of the favorable energy conjuncture in the form of energy conjuncture chooses the latter.
At the same time, the common energy market of the EAEU can not only strengthen the positions of the existing ones, but also attract new members to the organization. Tajikistan has repeatedly declared such an opportunity.
It is noteworthy that with the latter, the Russian Federation has an important, although controversial energy initiative – the Rogun hydropower plant, the construction contract of which the Tajik government signed with the Rusal company in 2004. It is capable of a 2-fold increase in electricity production in the country, but it is dangerous for the agriculture of neighboring Uzbekistan and even Turkmenistan, which hinders construction.
An important issue is the above-mentioned economic sanctions, which are imposed on the Russian Federation and prevent it from making large-scale investments, which, undoubtedly, the Rogun hydropower station requires.
Alone among all the Central Asian countries are relations with Russia in the energy sector of the Republic of Kazakhstan. Oil and petroleum products make up 75% of its exports, and 85% of this production goes to Europe through Russia.
The existing pipeline to China now is not a significant alternative to the European direction, therefore, the energy interaction of Astana with Moscow does not change. If 80 million tons of oil goes annually to Europe through the Russian Federation, only 11 million go to China, with a limit of 20 million.
The interaction of the two countries in the gas sphere is also going on without fundamental changes – Kazakh gas from the Karachaganak field is processed in the Russian Orenburg, and then returned in a processed form. At present, about 12 billion million cubic meters of Kazakh gas are supplied to the Russian Federation.
It makes sense to mention the cooperation of Russian companies with Kazakhstan partners in the Caspian Sea in the form of direct investments. So, between the Russian Lukoil and KazMunayGas there is a contract for the operation of the Zhenis field. In addition, the same Lukoil has already exploited the above-mentioned Karachaganak field, as well as Tengiz and Kumkol. In addition, the Russian side is involved in the work of the Trans-Caspian Pipeline Consortium. There is also a joint Russian-Kazakhstan event for the development of the Central Caspian field.
Thus, Kazakhstan is an exceptional case among Central Asian countries exporting hydrocarbons. Only with Astana have Moscow maintained smooth and mutually beneficial high-level relations, which puts it in an exceptional position as a kind of outpost of Russian influence among the “lower” states of the region. At the same time, Turkmenistan and Uzbekistan almost completely reoriented themselves to China.
Recently, Moscow has been attempting to return of these countries to its economic orbit. With some success, considering the change of power in Uzbekistan and the difficult economic situation of Turkmenistan, but the final resolution of this issue is a matter of the future.
At the same time, the outpost of Russian influence in the upper part of the region, that is unequivocally dependent on Moscow and in part of Eurasian Economic Union (EEU) is Kyrgyzstan.
At the same time, Tajikistan also needs Russian investments and literally “knocks” in the EEU, but now Russia lacks economic resources to resolve both issues. Meanwhile, the positive outcome of the problem could seriously increase the influence of Moscow in the whole of Central Asia, since would put Uzbekistan and Turkmenistan in direct dependence on it and may facilitate their “return” to its economic field.
It seems that with the emergence of new resources and the possible lifting of Western sanctions, the Russian Federation will move in this direction, because only in this way will it be able to get some guarantees of its preferential position in Central Asia compared with economically stronger China.
(The views expressed in this article belong only to the author and do not necessarily reflect the views of World Geostrategic Insights)
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