EurasiaNet Business & Economics - Russia Urges Formation of Central Asian Energy Club

BUSINESS & ECONOMICS

RUSSIA URGES FORMATION OF CENTRAL ASIAN ENERGY CLUB
Sergei Blagov 11/07/07

Russia wants to use the Shanghai Cooperation Organization as a mechanism to regulate Central Asian energy exports. It remains to be seen whether China, the other power in the SCO, shares Russia’s energy vision.

At a meeting of SCO prime ministers, held November 2 in the Uzbek capital Tashkent, Russian Premier Viktor Zubkov reiterated Moscow’s desire to forge a Central Asian energy "club" within the SCO, which comprises Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. The SCO energy club could be set up as soon as 2008, Russian Deputy Industry and Energy Minister Ivan Materov announced in Tashkent. However, he insisted that the club would not amount to a sort of mini-OPEC within the SCO.

Political and economic analysts in Moscow believe the Kremlin is keen to establish an energy club as a means to prevent a possible clash with China over Central Asia’s energy resources. In recent years, Chinese companies have moved aggressively to enhance their positions in Central Asia. [For background see the Eurasia Insight archive].

"An unhurried struggle for spheres of interests is starting between the region’s largest centers of influence, Russia and China, within the framework [of the SCO]," political analyst Igor Cherkashenko said in comments distributed by the Rosbalt news agency. "It’s vital that these relations develop on mutually beneficial terms, and not grow into fierce rivalry, which would be detrimental for both."

"The United States would certainly try to make mischief between our countries" in the event that Moscow and Beijing began jostling over Central Asian energy exports, Cherkashenko added.

China has remained non-committal on the energy club idea, even as Chinese and Russian leaders act to foster an image of a strong bilateral relationship. During a November 5-6 visit to Moscow, Chinese Prime Minister Wen Jiabao signed a communiqué with his Russian counterpart, Zubkov, envisioning broader "strategic and political cooperation," according to the Xinhua news agency. At a November 5 meeting with Wen, Putin hailed what he described as "substantial" cooperation between the two nations. Wen, in response, noted positive developments in bilateral energy cooperation, but he did not elaborate.

Behind the façade of cooperation, Russia and China are waging a spirited, though not yet adversarial competition in Central Asia over access to natural resources. In May, Russia appeared to lock up much of Central Asia’s natural gas, when Russian, Kazakhstani and Turkmen leaders announced the expansion of the Prikaspiisky Pipeline. [For background see the Eurasia Insight archive].

Since then, however, the project, which would funnel the bulk of Kazakhstan’s and Turkmenistan’s natural gas to Russia via a pipeline network skirting the Caspian Sea, has stalled. [For background see the Eurasia Insight archive].

At a bilateral meeting with Russia’s Zubkov in Tashkent on November 2, Kazakhstani Prime Minister Karim Masimov pledged to finalize negotiations on the Prikaspiisky pipeline in the near future. The talks could be completed at a meeting of the Kazakhstani-Russian intergovernmental commission later in November, Masimov said. Incidentally, Zubkov refrained from comments on the Prikaspiisky pipeline.

Lingering uncertainty over the Prikaspiisky route has given China an opening, especially in Turkmenistan. During a brief visit to Ashgabat, Wen, the Chinese prime minister, called for efforts "to step up bilateral trade cooperation to a new level." Berdymukhamedov, in turn, expressed interest in "working closely" with China on a natural gas pipeline project, Xinhua reported. [For background see the Eurasia Insight archive].

Moscow remains cautious about Kazakhstan’s commitment to the Prikaspiisky route, given Astana’s continuing commitment to the diversification of its energy partnerships. Notably, in December 2005, Kazakhstani President Nursultan Nazarbayev inaugurated Atasu-Alashankou pipeline to ship oil to China. The $800 million Atasu-Alashankou route still needs Russian crude from Western Siberian, transported via the Omsk-Pavlodar-Shymkent pipeline, to reach its full annual capacity of 20 million tons by 2010.

Meanwhile, Kazakhstan’s Transportation Ministry has floated plan to build a new railway link between the Caspian port of Aktau and China. Such a link could pave the way for a significant increase in Chinese exports across the Caspian to Baku and beyond. On November 2, Russian Transportation Minister Igor Levitin described the project as "premature," arguing that Russia currently possesses sufficient capacity to handle Chinese freight to Europe via Belarus.

Editor�s Note: Sergei Blagov is a Moscow-based specialist in CIS political affairs.

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