CENTRAL ASIAN GAS IN THE CHANGING GEOPOLITICAL CONTEXT

Igor TOMBERG


Igor Tomberg, D.Sc. (Econ.), Head of the Center for Energy and Transport Studies, Institute of Eastern Studies, Russian Academy of Sciences; Professor at MGIMO University (Moscow, Russian Federation)


Introduction

The 21st century has confronted mankind with hitherto unknown dangers: the planets natural resources, particularly energy supplies, have been depleting at a fast pace, which has stirred up fierce and mounting rivalry over hydrocarbons and other raw materials. In 2011, the growing instability in North Africa and the Middle East added fuel to the smoldering fire, increased the volatility of the energy markets, and cast doubts on continued and consistent fuel supplies from these and adjacent regions. Central Asia, in turn, is potentially threatened by the unwelcome developments around Afghanistan and Iran; ambitious investment projects (particularly in the energy sphere) are being jeopardized since investors are justifiably worried that a conflict with Iran might spread, in one form or another, to its Caspian neighbors.

Hydrocarbon Future for the Caspian

The threat of conflicts in the Middle East is raising the energy-related value of the Central Asian and Caspian states (Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan). Although they are not as rich in energy resources as the Middle Eastern countries, their transportation capabilities make them a welcome alternative.

Western companies assess the Caspians geological oil and gas reserves at 26 to 40 billion tonnes of standard fuel. These figures look quite credible, although they could be slightly overestimated. Russian experts cite 15 billion tonnes (about 2% of the worlds total) of proven oil reserves in the Caspian countries (Kazakhstan, Azerbaijan, Turkmenistan, and Uzbekistan). Given the present level of oil production in the region, the reserves will last for the next 65 years, while by 2015 the annual oil export of these countries could potentially reach 140-160 million tonnes.

The regions post-Soviet states figure prominently in the gas sphere; so far they remain a single regional market of natural gas despite the disintegration of the Soviet Union and the common economic space. The transportation system inherited from the Soviet Union makes it technically possible to move gas from country to country and keeps the market together.

These countries used their rich energy resources to join the international division of labor system as suppliers of energy. On the other hand, their energy sector still retains certain typically Soviet features: nothing has been done in the last 20 years to modernize either the pipelines, transportation, and transport infrastructure, or the housing sector. This means that production and consumption remain energy-intensive.

Their energy capabilities divide the five Central Asian states and Azerbaijan into two groups: Kazakhstan, Turkmenistan, and Azerbaijan with oil and gas reserves of world importance, on the one hand, and Kyrgyzstan and


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