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Central Asia, Energy Security and Shanghai Cooperation Organization.

Byline: Khalid Rahman


Sources of energy have assumed special strategic significance in recent times, particularly for fast growing and emerging economies. Central Asia sits atop the world's major energy resources, and recent years have seen rapid developments in the exploitation and transportation of these resources to the outside world. At the same time, however, traditional and non-traditional security issues are growing in the region. Exploitation of Central Asian energy resources is taking place in a climate of vicious competition that threatens sustainable peace in the region. Apart from the well-established phenomenon of non-state actors, which poses serious challenges to regional security, non-traditional security issues include inter-ethnic and inter-faith tensions, climate change and the resultant water and environmental issues; and disputes over cross-border distribution of water, which provide a favorable atmosphere for non-state actors to further their agenda.

Concerted regional efforts are required to tackle these deeply interlinked security issues. The Shanghai Cooperation Organization has the elements to serve as an effective forum for such efforts, and needs to take proactive measures to fulfill its potential. - Eds.]


Access to uninterrupted supplies of energy is critical to the functioning of today's economies. Energy security thus occupies a paramount place among the national interests of every country, and sources of energy hold a special strategic significance, particularly for fast-growing and emerging economies.

The immense geostrategic, geopolitical and geo-economic importance of Central Asia is mainly derived from its enormous reserves of oil and gas. The region consists of five independent states, namely Kazakhstan, Turkmenistan, Uzbekistan, Kyrgyztan, and Tajikistan, which emerged after the dissolution of the Soviet Union in 1991. Kazakhstan alone holds proven oil reserves of around 30 billion barrels, along with 2.4 trillion cubic meters of natural gas. Turkmenistan's natural gas reserves, at 7.94 trillion cubic meters, are the fourth largest in the world. Uzbekistan is estimated to have over 1.8 trillion cubic meters of gas, and is one of the largest exporters of this resource. Kyrgyztan and Tajikistan, relatively smaller countries, are endowed with vast electricity generation potentials. These statistics do not take into account the rich resources present in the wider region, for example, in the Caspian Sea and across in Azerbaijan.

The importance of the energy resources of Central Asia can be gauged from the fact that this region, already an oil and gas exporter, is expected to contribute 2.4 million barrels per day to global oil supplies. In the words of one scholar, its energy reserves "will sooner or later make the region one of the world's largest oil export areas."

This paper briefly discusses the developments related to energy sector in Central Asia, the relevance of these developments with security of the region, the challenges posed by various factors, and importantly, the role of Shanghai Cooperation Organization, presently and in years to come, in this connection.

Recent Developments

Until recently, the landlocked countries of Central Asia were, by and large, dependent on Russian infrastructure for the sale of their oil and gas resources to the outside world. Over the years, this situation had strengthened the feeling among the Central Asian Republics (CARs) that they were being deprived of their rightful economic gains. However, the last few years have seen fast-paced developments in the exploitation of Central Asian energy resources and their transportation to the outside world.

In the post-independence period, Western oil and gas companies have been making heavy investments in the energy sector of the region. China has been catching up with them in recent years. This has created an atmosphere of intensified competition, and the host of new pipelines currently being planned or built to directly transport oil and gas from the region should be seen in connection with this phenomenon. The advent of the Kazakhstan-Xinjiang oil pipeline, through which China is expected to quadruple its oil imports from Kazakhstan (from 100,000 to 400,000 barrels per day) by end-2010, indicates China's leading position. The mega pipeline, which starts from Turkmenistan and reaches China via Uzbekistan and Kazakhstan, is expected to usher in a new era for both the region and regional cooperation. It is believed to spell the beginning of the end of Russian monopoly over gas exports from Turkmenistan. China has also helped in building infrastructure projects in Tajikistan and Kyrgyzstan in recent years.

During the visit of Russian President Dmitri Medvedev to China at the end of September 2010, the new Russia-China pipeline, connecting Siberia to northeastern China, was launched. This too is an indication of the weakening of Russia's hold over Central Asian oil and gas reserves owing to the above mentioned initiatives. Now, instead of simply pumping Central Asian oil and gas to the outside world, Russia is competing against the CARs for China's fast-growing energy market.

Apart from this eastward transportation of Central Asian oil and gas, hectic efforts are under way and mega-projects are being designed for their westward transportation. These are backed by the developed economies. Oil is being exported directly from Azerbaijan to the outside world through the famous Baku-Tbilisi-Cehan pipeline. The first big investment decision for the Nabucco Pipeline Project, which has been on the agenda of European countries since 2002, and for which an intergovernmental agreement was signed in 2009, is expected to be made by the end of 2010. The pipeline envisaged under this project will be used to supply gas from Turkmenistan and oil from Azerbaijan to Europe through Turkey.

The long-stalled Turkmenistan-Afghanistan-Pakistan - India (TAPI) pipeline project also received impetus recently with the signing of Gas Pipeline Framework Agreement between the four countries in December 2010.

While these developments are opening new avenues for cooperation, they are also endangered by the severe security threats to which the region is increasingly exposed. The stakes are perhaps highest for China, the second largest energy consumer in the world and the major infrastructure builder in Central Asia. Most of the threats are classified as "nontraditional security issues." However, while each and every threat needs to be addressed as a separate case and on its own merit, there are linkages between the traditional and nontraditional security threats which should be kept in view for a sustainable solution.

Energy Politics and the Regional Security Situation

With the oil and gas reserves of traditional Middle Eastern suppliers fast depleting, the developed world is looking to establish its control over new and emerging sources of energy and its supply. Developments in recent years point to the involvement of a number of global and regional players in Central Asia. While obtaining maximum control over the region's natural resources is common among their objectives, their stakes and motivations are diverse.

The Russians are keen to harness more and more oil and gas for onward export; to benefit from the transit of oil and gas; and, more importantly, to maintain their dominance over the region while keeping the Central Asian states as dependent as possible on their own capacity to exploit and make commercial use of the resources.

China's main interest lies in meeting the energy demands of its growing economy besides increasing its influence in the region for political and strategic reasons.

Although the United States is the world's top energy consumer and as such its demand exceeds that of any other country, it is not directly dependant on Central Asian energy resources: itself a leading oil producer, it meets the bulk of its needs with oil imports from Canada, Mexico, and Venezuela. However, the United States does seek a larger space in Central Asia for American corporations, which, after capturing the Middle East, are looking for new opportunities in the oil and gas sector. Most importantly, the containment of China and Russia-to safeguard key strategic interests-demands greater US influence in the region.

The European Union needs to establish its influence in the region in order to meet the energy demands of member countries, and to carve out a greater role for its corporate sector. For an uninterrupted flow of oil and gas supplies, it seeks minimization of Russian control over supplies from Central Asian countries.

Although India has been enjoying good relations with Central Asian countries since the Soviet era, having no direct access to these countries, it has not as yet benefitted from their energy sources. On the other hand, it too needs energy to meet its growing demand. It is therefore trying to establish as much influence as it can in Afghanistan to be in a position to manipulate the supply projects that traverse that country, as well as to keep an eye on neighboring Pakistan. Competition with China is another motivating factor for India's active involvement in the Central Asian energy sector.

Other significant players of the region also have their own interests. Pakistan, for instance, not only seeks to meet its own growing energy demand but also wants to benefit from the transit of Central Asian oil and gas resources to India, China, and, in the long term, to the rest of the world through sea transportation from its ports. Iran seeks to get the maximum benefit from the Caspian wealth, and wants its infrastructure to be utilized for the transit. Turkey too is eyeing a role in the transit of oil and gas between Central Asia and the EU for its own purposes, particularly the enhancement of EU dependence on its infrastructure; an undersea pipeline connecting the oil producing countries on both sides of the Caspian has already been proposed in this regard.

From the perspective of Central Asian countries, this interest of and competition among global and regional players offers a host of opportunities for bringing in investment in the development of natural resources and infrastructure. Their oil and gas wealth can be used to reduce their dependence on Russia, weaken Russian control over them, and build a diversified relationship with the outside world.

However, these opportunities are accompanied by challenges as well; in their struggle to gain maximum influence, the approach of the different regional and global players has not always been fair and peaceful. In fact, most pursue one or more of the following three approaches:

* Peaceful exploitation through direct physical presence and investment if the country's regime is friendly and cooperative;

* Use of coercive and pressure tactics to gain maximum control if the regime is not friendly enough, or there is competition from other players; and

* Creation of an unstable environment in and around the target country to create spaces for maneuvering.

The hard realities of instability in the Central Asian region can by no means be divorced from the broader regional security situation. Many observers believe that instability in the region is an intended outcome of the ongoing geopolitical confrontation that appears to be focused on Afghanistan: the challenges that the region and the CARs are facing have a direct relation with the situation in Afghanistan, and the campaign in Afghanistan has close linkages with regional and global energy politics.

In fact, the current instability in Afghanistan is considered, along with other factors, both a consequence of and a cause of fighting over the control of regional natural resources and their supply lines. Referring to US presence in Kyrgyzstan, Conn Hallinan notes in Foreign Policy in Focus: "While Manas is portrayed as a critical base in the ongoing campaign against the Taliban and al-Qaeda in Afghanistan, the war in Central Asia is less over 'terrorism' than it is over energy." US and NATO military presence in the CARs, which had existed prior to the war in Afghanistan in one form or another, has been significantly enhanced with the establishment of supply routes through these republics for NATO troops based in Afghanistan. This presence, and the increased influence it affords the United States, is a security concern for the CARs because it provides new targets in Central Asia for the "insurgents" and the allies of resistance groups in Afghanistan.

Such non-state elements have already shown that they are prepared to attack anywhere in the region where they perceive their enemy has a growing interest or an ally willing to collaborate, in any way. At the same time, the ongoing war in Afghanistan provides them an opportunity to gain as much strength as possible through practical combat experience, a thriving illegal arms trade, and the accumulation of financial resources from various means, including the drug trade.

This brings us to an important point of the discussion. The phenomenon of so-called non-state actors posing serious challenges to the regional security is well established. It is often pointed out that militancy pursued by non-state actors is the major threat to the stability of the Central Asian region, its economic development, and particularly the development of its energy resources. Two questions are very important in this regard: First, to what extent are these non-state actors really "free" from the backing of another state's machinery? And second, why is it that troubles involving non-state actors are cropping up at all the spots where China's economic stakes in particular are emergent? Some observers have started to point out that this phenomenon may in fact represent yet another means of "containment of China" by blocking, or at least impacting, its momentous economic growth.

This possibility needs to be considered keeping in view the huge programs China has planned for the fast development of its western territories, including Xinjiang.

It is also important to note that while neighboring countries may be at variance due to their differing priorities, the extra-regional countries that are involved in the campaign in Afghanistan also have conflicting interests which, on occasion, makes them adversaries despite being allies.

A closer look at the state of affairs is necessary to ascertain the linkages of so-called non-state actors as well as nontraditional security issues with the traditional security paradigm. Given their as yet weak and fragile institutions, the countries of Central Asia are certainly vulnerable to violent movements in this situation. Obviously, in such an unstable and fragile security environment, energy security cannot be guaranteed.

Stakes of Regional and Global Players in the Afghan Situation

Let us take a brief look at the stakes and concerns of some of the major regional and global players in the war in Afghanistan:

* The United States' concern, on the face of it, was to defeat, disrupt and dismantle al Qaeda. Now, however, its purported goal is a stable government in Afghanistan and it aims to develop Afghanistan's security and military forces. With the passage of time, al Qaeda seems to have receded from the focus of the United States. In the process of the campaign, however, the United States has established a large military base in Bagram.

It has now started negotiating with the Taliban to make an arrangement that allows it a respectful exit and assures a space for future maneuvering. Keeping an eye on Iran, providing more space to India and its other allies so as to restrain Chinese and Pakistani influence, and continuing to increase its influence in Central Asia are some of its aspirations.

* An important regional player, Iran feels that the long-term US presence in Afghanistan may serve as a base for its own destabilization: growth of militancy along ethnic and sectarian lines in Afghanistan and Pakistan may threaten its stability; volatility and drug trafficking in Afghanistan would affect the social order in Iran. Moreover, the United States will attempt to build oil and gas pipelines and distribution networks that bypass Iran while undermining its energy industry with sanctions.

In addition, Iranians, who sympathize with the Shi'a Hazara community in Afghanistan, have apprehensions about a Sunni- and Pashtun-led Taliban government, even if such an arrangement is negotiated for a sustainable peace in the current context.

* India regards Afghanistan as its extended neighborhood. While US presence lasts, it has an opportunity to increase its own presence and influence in Afghanistan and, from this position, in Central Asia. In view of its continued animosity with Pakistan, it would like to exploit the differences between the neighboring countries, just as it gained from fuelling friction between Iran and Pakistan in the 1990s. It would also like to extend the Afghan war front further into Pakistan, in which non-state actors can play an important role. Thus, India has been alleging that the presence of militant groups like Lashkar-i Tayyiba (LeT) may build in Pakistan and Afghanistan.

India fears that there might be a US deal with Pakistan subcontracting the Afghan policy to Pakistan's military, under which Pakistan would eliminate groups that threaten the United States but would ignore those that allegedly threaten India. Subsequently, any return of fundamentalist Islamists (mostly referred to as the Taliban) to power in Afghanistan might contribute to the radicalization of the Muslim youth in India and neighboring countries.

* Saudi Arabia's worries include the elimination of al Qaeda; the increased influence of Iran in Afghanistan and the region; and a possible future US reorientation towards Iran in Afghanistan and elsewhere as a result of convergence of interests in opposing Sunni militancy.

* Meanwhile, Russia is concerned that Islamic militants might gain a strategic victory and spread into Central Asia, the Caucasus, or the Russian Federation itself. It also fears that US/NATO presence in Afghanistan may become permanent and provide a rationale for bases in Central Asia. This would place the United States and NATO forces closer to Russia and to Central Asia's energy supplies, and attract some Central Asian states away from Russia. In addition, the United States might draw Central Asia away from dependence on Russia through pipelines, trade routes, and defense arrangements centered on US-dominated Afghanistan.

* China is concerned about stability in Pakistan as well as the broader region. Instability in Pakistan is a genuine threat to the mutual interests of the two countries. China is also perturbed by US/NATO presence in Afghanistan and Central Asia, which can be used to contain China, specifically by threatening Western China and energy supplies from Central Asia. Militancy among the ethnic Ughurs of Xinjiang is another concern linked with regional security.

* Turkey is concerned about expanding and strengthening its alliance with the United States, and maintaining stability and a favorable environment for Turkish business and diplomacy in the east, including the Caucasus, Iran, and Central Asia.

* As far as the CARs are concerned, their stakes in Afghanistan begin with the relationship with their own ethnic diasporas in the war-torn country, including Uzbeks and Tajiks. For Uzbekistan, the volatility of the Afghanistan situation threatens to strengthen the insurgent and militant activities of the Islamic Movement of Uzbekistan (IMU); similar and equally important threats loom for Tajikistan and Kyrgyzstan as well. Then, there is the issue of taking economic advantage. Within Afghanistan, owing to ethnic rivalries, the CARs would have little trust in a Pashtun-led Taliban government were it to replace the current setup. In the broader region, their general approach is, by and large, a balancing act between relations with Russia on the one hand and ties with the United States, on the other.

This wide divergence of interests and perspectives has created an atmosphere of continual interference by regional and extra-regional players, including countries that harbor longstanding rivalries with Pakistan, in the affairs of Afghanistan and Central Asia. The emergence of nontraditional security threats is also an outcome of this complex situation. The way out of this never-ending quagmire must therefore be sought in a broad-based, regional approach and a strategy for the entire region. This is necessary, not only to provide energy security to many countries, but also for overall stability in the long run.

Nontraditional Security Issues

It should not be inferred from the above discussion that Central Asia is free of local threats or security problems specific to the region. There are evident inter-ethnic tensions: in June 2010, hundreds of people were reportedly killed, and tens of thousands forced to flee their homes in deadly clashes between Uzbeks and Kyrgyz in Southern Kyrgyzstan. While calm prevails at present, it is feared that such clashes could erupt again at any time. Nor are such tensions limited to Kyrgyzstan. Although Kazakhstan has managed the inter-ethnic relations within its borders quite well so far, it is feared that the ethnic question will rise in the country sooner or later. Tajikistan and Uzbekistan are also vulnerable.

Among other nontraditional security issues are the challenges associated with climate change and the resultant water and environmental problems, which also raise issues of cross-border distribution of resources, particularly water. Although it is usually eclipsed by the region's hydrocarbon reserves, Central Asia's potential of hydro energy is quite vast. However, there are major obstacles in tapping this potential, which are rooted in the conflicting positions of the countries concerned on the sharing of transboundary sources of surface water. Thus, the massive potential of electricity generation, and export, of Tajikistan and Kyrgyzstan may not be utilized until the countries of the region develop an understanding on the sharing of the main rivers flowing between them.

A related and potent nontraditional challenge to the energy security of the region, which needs urgent attention and focus, is the fast depletion of the available water resources, as elsewhere in the world. This is partly attributed to the fast emerging environmental effects of the climate change phenomenon, which needs to be addressed globally. Tajikistan is said to suffer the most from these effects. Keeping in view the contemporary global politics, there is always the additional danger that issues like climate change may be used by the developed North to pressurize the developing Southern economies, as has been the case in many similar instances, including human rights.

All of these challenges directly or indirectly create a favorable atmosphere for non-state actors to flourish and further their agenda. Moreover, and importantly, the wide array of opinions and perspectives on these issues cast uncertainty over the entire process of energy resource exploitation.

Increased availability, use and trafficking of drugs pose another problem for the region: the United Nations Office of Drugs and Crime (UNODC) has emphasized that drug trafficking for opiate and injecting use and drug related diseases are a "principal concern for Central Asia." Central Asian countries need to take note of the drug issue, both as victims and as parts of the drug transit route. In particular, they must try to minimize the incentives for the involvement of their citizens in transborder criminal activities. Of course, the drug trafficking issue bears a direct relationship with the Afghanistan situation, but a focus on Afghanistan in this regard means a focus only on the supply side; the issue will remain unresolved and the threat unchallenged, if the demand remains constant or rather continues to increase in Western Europe and other countries, which is currently the case.

Role of the Shanghai Cooperation Organization

The situation calls for intensive regional efforts to tackle both traditional and nontraditional security issues, keeping in view their linkages and interdependence. Such efforts are best based on strong cooperation among states, particularly in a situation such as Central Asia's, where interests are deeply intertwined. A comprehensive strategy based on mutual trust, understanding, and cooperation is needed both among the Central Asian countries, and at the wider level, involving neighboring countries, to avoid internal and inter-state disharmony.

Presently, the countries of Central Asia are part of at least three such arrangements: the Commonwealth of Independent States (CIS), the Economic Cooperation Organization (ECO), and the Shanghai Cooperation Organization (SCO). Each forum has unique and important merits, as well as associated constraints and limitations. CIS, as a continuation of the Soviet legacy, cannot be expected to provide any new regional initiatives, particularly in the context of energy politics, especially when some of the key countries of the region are not part of it.

ECO, as the name suggests, is fundamentally an economic cooperation group. While its focus on economic fields has advantages, it also limits its scope. Operating in a climate where economic issues are very much connected with the overall regional security situation, it cannot be expected to be fully effective. Besides, it too does not include some of the big players of the region.

On the other hand, SCO appears to be well-positioned to serve as a platform for effective regional cooperation. All the important countries of the region are part of it, making it a balanced organization. It has a wide scope covering all security, economic, and cultural and social issues. So the organization can be used both to enhance energy cooperation, and to deal with the security issues hindering greater cooperation in energy and other fields. Importantly, the organization can provide individual countries of the region an interface for more effective relations with the major external powers, such as the United States, NATO, and the EU, who are important players in the geo-political and geo-economic situation of the region, and with whom bilateral dealings may not be the best or ideal strategy.

SCO started with a limited scope but, in the wake of rapid globalization and a number of regional and global developments in the political, economic, and security environment, the organization extended its purview, under the "Tashkent Declaration of Heads of Member States of SCO" of June 17, 2004, to multidimensional issues confronting the member countries at the regional level. The highlight of the Declaration was the organization's decision to include economic cooperation as an important component in its future program. A protocol for coordination between the foreign ministries of the member states was also signed, and a mechanism for closer coordination on foreign policy issues in the region outlined. It was decided that cooperation in the fields of culture and environment would be enhanced. An SCO Energy Forum was also proposed to be formed. SCO has accorded observer status to four countries, Pakistan, India, Mongolia, and Iran, and set guidelines for these countries to become full members.

However, progress in the areas of cooperation has been rather slow, even as the need for it has grown over the years. There are grounds to fear that after foreign forces leave Afghanistan, the war-torn country could become a battleground for regional countries, unless proper strategies are formulated to safeguard their respective interests in the long run. So the present time demands that SCO step forward to play an effective and proactive role.

In this regard, it must be noted that a major development from the platform of SCO has already emerged in the shape of a vision document on international relations. This document can serve as a basis for enhancing relations between countries in the region, and for encouraging countries to broaden their conceptions of national interests to include mutual interests. Moving in this direction should help create an environment where a fairer and more just global system prevails, which would also be very helpful in tackling the non-state actors. This is also an area that needs aggressive strategies from SCO.

Among other specific actions, it is proposed that the organization develop a strategy for optimal utilization of the natural wealth of the region. The proposed strategy would revolve around ensuring the long-term stability of the region by minimizing external influence and resolving disputes between the countries of the region; paying special attention to the non-traditional and emerging security challenges, such as water disputes between its member states, which are a longstanding source of regional tensions; resolving inter-ethnic rifts among CA countries; tackling drug and arms trafficking - the need is to pay attention on the demand side along with supply side and as far as the energy is concerned, a comprehensive approach and strategy from the platform of SCO will be more useful.


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Publication:Policy Perspectives
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Date:Dec 31, 2010
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