When leaders of Russia, China, Kazakhstan, Turkmenistan, Uzbekistan and Kyrgyzstan met in the dusty Kyrgyz capital Bishkek, mid-August, a new energy cartel was born.
Boasting at least a fifth of the global known energy resources, the decision of the Shanghai Cooperation Organization (SCO) to form the “energy club” was received with a mix of interest, alarm and anxiety in the major western capitals. In private conversations with his correspondent in London and then in Brussels earlier this week, analysts increasingly pointed at the parallels between the just announced “energy club” and the earlier “initiative to form an informal gas cartel.”
Ironically the world’s leading oil producer Russia is not a member of OPEC. However, Moscow is not at all ready to lag behind in the ongoing energy wars. The Great Game of the 21st century, with the Central Asian energy resources acting as the pivotal point, seems to be getting impetus, they all agreed.
Concerns are now being expressed that a gas analogue of OPEC may appear in the East. There are reasons to believe this is true. The SCO’s oil resources may not be very significant: even with Iran, which has observer status within the organization, they do not exceed 20 percent of the world’s total. The situation with gas is though different: the gas reserves of Russia, the Central Asian states, and Iran make up more than 50 percent of the world’s proven gas reserves. Iran’s proposal to determine gas prices and principal transportation routes together with Russia is only adding oil to the flame.
The SCO leaders at their Bishkek meeting agreed in principle to establish an “Energy Club.” Though they did not spell out in detail, specifically what the club will do or when exactly it will be formally launched, the SCO leaders underlined the need to create a “unified energy market,” sending alarm waves all around. The objective behind the initiative was reportedly to bring energy resources from member countries rich in oil and natural gas to those that need such resources to promote their development. It also provides for exporting gas and oil to other world markets.
The declaration stressed the importance of energy resources as “the basis for continued economic growth and security.”
Russian President Vladimir Putin had lobbied hard for such an agreement ahead of the summit, saying that greater energy cooperation would be “a powerful impetus to regional projects in the interests of all SCO member states.”
“I am convinced that energy dialogue, integration of our national energy concepts, and the creation of an energy club will set out the priorities for further cooperation,” Putin stressed.
Although Iran is still enjoys only an observer’s status within the SCO, the Iranian President Ahmadinejad, seizing on the SCO’s “energy club” agreement, openly and formally pledged Tehran’s help in organizing a meeting of SCO oil and gas ministers.
Energy deficient Pakistan and India also attended the moot, with Pakistan represented by Foreign Minister Khurshid Kasuri and India by Oil and Gas Minister Murli Deora.
With the initiative, many saw Russia as trying to gain back the initiative it lost in the 90’s while the USSR was disintegrating. In the 1990s, while Moscow was taking it lying down, western energy companies had few rivals entering the region and signing big development contracts under their own terms and conditions. Strong US government backing and the then unhindered clout that Washington enjoyed, paved the way for the global energy majors to enter the space almost unrestricted. A weak Russia, shattered by the collapse of the Soviet Union looked on impotently as American officials and oilmen strutted around its former backyard.
The scenario is much more complex today. Caspian reserves are proving to be more expensive to develop. Central Asian energy exporters, led by Kazakhstan, have grown richer — and more assertive — in dealing with these global majors. Competition has multiplied, with China also scurrying to secure energy supplies from the Caspian belt.
In the meantime, Russia, Kazakhstan and Turkmenistan have also agreed to renovate and expand the region’s Soviet-era gas pipelines. If the plan goes ahead, despite the overt and covert opposition, it would allow Russia to keep its grip on gas exports to Europe. Many see this as an ominous development. This may also undermine the much discussed and the politically important Nabucco — the US and EU backed — project for a pipeline from the region to Europe, including a stretch under the Caspian Sea, circumventing Russia.
On the other hand, Beijing has also announced pipeline plans, with Turkmen and Kazakh support, to bring gas to China, so as to meet at least part of its growing needs.
Almost simultaneously, Kazakhstan, earlier the week also threatened to revoke the concession granted to the Italian Eni for its Kashagan offshore oil field, among the few largest global developments of recent years. Authorities cited environmental concerns, an argument which helped many recall the recent episode in Moscow — Shell relationship on Sakhalin energy development project.
The energy resources of Central Asia are a major prize in the global jigsaw as the race to dominate those continues unabated. And indeed who can know it better than Moscow — now all set to use all at its disposal to regain the lost glory and the global clout. With the urge to dominate the world on imperial lines prevailing in Washington, how could one blame Moscow alone for these developments? The Energy Club, another tool in the ongoing saga, thus seems to have been delivered now. And it may still be some years before the very influence of this rather exclusive club is unveiled to the world.
