Central Asia’s pipeline politics: a quest for energy independence

Central Asia’s pipeline politics: a quest for energy independence

Caught between superpowers Russia and China, can Central Asia’s “stans” exert their independence amid a changing energy landscape? 

Global energy is undergoing tectonic shifts.

Strong US oil and gas production has moved the locus of supply westward, while advanced efficiency and alternative energy have curbed demand across the developed world. The decades-old energy interdependency between Russia and Europe has soured. Moscow, rattled by a one-two punch of low oil prices and Western sanctions, now looks eastward for new customers and partnerships. China’s economy continues to be among the most energy hungry, despite its recent economic slowdown.   

Caught quite literally in the middle of it all is Central Asia.

The heart of the Asian continent has long been a hub of energy production and transportation. But even after the fall of the Soviet Union transformed the five Central Asian republics into independent states, Russia’s pipeline policies ensured the world’s largest nation continued to dominate the region’s energy market. In recent years, however, Russia’s firm grip loosened, and China’s growing energy needs prompted Beijing to look west toward “the stans” of Central Asia. Oil and gas pipelines now crisscross the region between China and Russia, both jockeying for geopolitical control.

Now at least one well-positioned producer is attempting to forge a new path that might help it excise itself from the superpowers that have long dictated how their energy is produced, transported, and sold. Turkmenistan, home to the world’s sixth largest natural gas reserves, announced last week it would finally begin construction on a $10 billion pipeline that would transport coveted gas resources to emerging markets in India and Pakistan. Meanwhile, the region’s other energy producing countries are also looking for new markets as a way to avoid dependence on any one single purchaser.  

“Central Asia’s move to China was a move towards diversification to begin with, away from Russia,” says Edward Chow, senior fellow in the energy and national security program at the Center for Strategic and International Studies. “That China’s role has developed to such an extent that the countries now need to rebalance, is rather natural.”

The Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline has been presented as insurance against a prolonged economic slowdown in China, and as a way for Turkmenistan to exert leverage over the world’s third largest energy market. Nevertheless, many experts have raised doubts over whether the project is feasible. A lack of resources, inflexible investment conditions, and an unstable transit route through Afghanistan continue to jeopardize its future. Instead of a realistic step towards diversification, the attempt to pivot away from China is an act of desperation by a country anxious to avoid economic domination by its neighbor, experts say.

“I’m very skeptical [about TAPI]; I don’t think it will be built,” says Dr. Luca Anceschi, lecturer in Central Asian studies at the University of Glasgow in Scotland. “But that doesn’t mean they don’t need it. The more they insist [on building TAPI], the more vital it has become.”

Turkmenistan’s golden statues

Of Turkmenistan’s three primary natural gas customers, two are already showing signs of waning or redirected demand. Since 2009, Russia’s state-owned gas giant Gazprom has steadily reduced its imports from Central Asia.  Iran, which imports a relatively small amount of Turkmen gas to begin with, will likely rely less on Central Asia as easing Western sanctions revive its domestic industry.  That leaves China – Turkmenistan’s No. 1 gas customer – which plans to import around 65 billion cubic meters (bcm) from Turkmenistan by 2020, according to statements by the China National Petroleum Company (CNPC).

By 2025, Turkmenistan could be entirely dependent on the Chinese market, says Dr. Anceschi. That’s a frightening prospect for a country whose economy and political system depend on natural gas revenue. Many Asian gas contracts are linked to the price of oil, so global gas prices are largely following oil’s downward spiral. Meanwhile, China’s economy looks shakier than ever before, casting some doubt on just how energy-hungry the world’s most populous nation will be in years to come.  



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