EEC Summit Focuses on Energy, Security and Free Trade

The results of the August 15-17 Eurasian Economic Community summit have potentially profound ramifications for the geopolitical contest in Central Asia involving the region's natural resources. The summiteers agreed to proceed with two projects – covering the creation of a customs union, as well as a common energy market – that could place Russia, the community's dominant member, in a virtually unassailable economic position in Central Asia.

The summit brought together the leaders of the six EEC member states – Russia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan – for discussions at the Russian Black Sea resort of Sochi. Armenian and Ukrainian leaders attended the gathering as observers. Kazakhstani President Nursultan Nazarbayev was among the EEC's most prominent boosters.
"I am always ready to discuss questions concerning integration within the EEC framework," Nazarbayev said in comments broadcast by Russia's state-controlled Channel One.

Media attention focused mostly on the plan to forge a customs union. Nazarbayev, speaking at an August 16 news conference, said, "By October-November, the customs union will consist of three nations" – Russia, Kazakhstan and Belarus. The other members would have the opportunity to join the free-trade zone at a later date. Outside of the multilateral framework, Nazarbayev held direct talks with Russian leader Vladimir Putin, during which the two signed agreements aimed at promoting Kazakhstani-Russian commerce, including one that streamlines tariffs for transporting Kazakhstani cargo via Russian rail routes.

Meanwhile, it is the EEC's energy intentions that would appear to have a greater, and more immediate potential impact on Central Asian geopolitics. Russia and the United States, and to an increasing degree China, have been locked in a bitter struggle for control of both Central Asia's energy resources and export routes. [For background see the Eurasia Insight archive]. Over the past year-and-a-half – since Kyrgyzstan's Tulip Revolution and Uzbekistan's Andijan events – Russia has seen its political influence in Central Asia rise dramatically at the expense of the United States. [For background see the Eurasia Insight archive]. This turn of events has brought Moscow substantial economic advantages, underscored by Kazakhstan's commitment in early April to significantly raise its oil exports via a Russian-controlled pipeline. [For background see the Eurasia Insight archive]

In an attempt to regain the geopolitical initiative, US planners unveiled a concept in late April to build up energy links between Central and South Asia. The main component of this plan was to turn Central Asia, with its vast hydro-power generating capacity, into a major supplier of electricity for markets in India, Pakistan and elsewhere. Implementation of the energy project would steer Central Asian states away from Moscow, Washington planners clearly hoped. [For background see the Eurasia Insight archive].

The EEC energy initiative seems specifically designed to frustrate the US effort to reorient Central Asia toward South Asia. Details concerning the EEC initiative were scarce, however, as it was discussed behind closed doors at the summit.

What is known is that Russia now seems intent on establishing control over the source of the region's electricity-generating capacity – water. The Sochi summiteers reportedly discussed a wide-ranging plan to manage the region's water resources, which have long been a matter of contention in Central Asia, given that Kyrgyzstan and Tajikistan possess the overwhelming share of water resources, and Kazakhstan and Uzbekistan are the primary consumers. Russia itself possesses almost one-quarter of the world's water resources. As part of the water-management strategy, Russia pressed for the creation of a Eurasian hydro-power consortium. Such an initiative, according to some experts, could be financed by the Eurasian Bank for Development, which was created by Russia and Kazakhstan in January. If the Eurasian hydro-power consortium takes shape as currently envisioned, it would effectively kill any chance of developing strong Central-South Asian links. Experts are now expected to work out details of the hydro-power consortium's structure and operations in time for the next EEC summit.

Realization of the hydro-power consortium would benefit Russia not only in Central Asia; it also could pave the way for Russia's economic expansion into Chinese, Indian and Pakistani markets. For Russia, the "control over the Central Asian water tap might prove as lucrative as the dividends from the monopoly on oil and gas," a commentary published by the Kommersant daily stated.

In addition, Russia used the occasion of the EEC summit to press Ukraine to return to Moscow's fold. Kyiv appeared headed in a Westerly direction following Viktor Yushchenko's stunning presidential election in late 2004. [For background see the Eurasia Insight archive]. But pro-Russian elements in Ukraine have reasserted themselves in recent months, highlighted by Viktor Yanukovych's rise to the premiership. On the sidelines of the Sochi summit, Russia moved to settle its dispute over natural gas prices with Ukraine. The two countries agreed on a natural gas prices through the start of 2007, Yanukovych told journalists on August 16.

A Russian-Ukrainian pricing dispute resulted in a cutoff in January that caused disruptions in Western Europe. [For background see the Eurasia Insight archive]. Russian Prime Minister Mikhail Fradkov said an agreement had been reached to pump 24.5 billion cubic meters of natural gas into Ukraine's gas storage facilities by the end of this year. "I reiterated that we are working on the basis of the agreements reached at the beginning of January," Fradkov said. However, Fradkov said that problems remain with prices for Central Asian gas and other issues. [For additional information see the Eurasia Insight archive].

Even if the projects adopted at the Sochi summit don't proceed as planned, Russian analysts believe it will be difficult to stop Moscow's geopolitical momentum in Central Asia. Existing trends are pushing Central Asian leaders to willingly return to Moscow's embrace, suggested political commentator Alexander Orlov. "To be blunt, during the time of independence [following the 1991 Soviet collapse] many countries found that it's not so easy to go it alone, and that it's worth remembering the past," Orlov wrote in a commentary published by the GazetaSNG website.