However, the oil and gas industry is in a state of rapid and painful transformation. The model of demand, supply and trade are changing rapidly. New technologies are opening up unconventional resources, shifting the geography of production and change the dependence on imports. The energy balance for large consumers was affected by external shocks such as the nuclear disaster in Fukushima in 2011. Policy on climate change and renewable energy, along with the remnants of geopolitical tensions that continued to affect security of supply and prices of raw materials. In addition, the issue of ownership of raw materials, rises in the form of resource nationalism and the pressures of national oil companies (NOCS), increasingly becoming a determining factor in investment decisions, especially in projects that combine high cost and high risk.

This article attempts to briefly outline the main consequences of the volatility of the oil and gas industry for the energy geopolitics of Central Asia. She wonders, is it possible that in the presence of stocks with potentially more long-term use, the discourse about the New Great Game, characterizing the view of realists about the region in the first two decades of its independence, lost its relevance.

How did you start the game

Since the collapse of the Soviet Union in 1991, the energy potential of Central Asia was an integral component of geopolitical discourse, both inside and outside the region. Despite the fact that the West's attention was initially focused on preventing potential leakage of weapons-enriched uranium in poorly protected areas in Kazakhstan, at this early stage were decorated commercial relationships with Western international oil companies (IOCs), often with significant diplomatic support.

Soviet energy complex was built to provide supplies to large population areas, and export routes were located within the territory of Russia and through it, with limited inter-regional infrastructure, which would allow to establish joint use of local resources. After the collapse of the ruble zone in 1993 and, accordingly, the deprivation of any possibilities of recovery are really common post-Soviet economic space, the governments of Central Asia decided that the most obvious route to political and economic sovereignty (as well as the enrichment of the elites) is via the maximization of income from oil and gas through investment and export diversification.

In the same way the West has considered the development of the energy sector and with it a more diversified export portfolio as the promotion of regional security, ensuring a smoother transition to a market economy, and opposition to Russian revanchism.

The overestimation of proved reserves in the region (now infamous U.S. state Department report to Congress in 1997 suggested that the Caspian basin may contain as much as 200 billion barrels of oil) have provided additional impetus to the construction of additional export pipelines bypassing Russia and Iran. From the point of view of Russia, new pipelines, particularly the pipelines that do not cross Russian territory, weaken its political and economic influence in the region and pose a potential threat to its monopoly position in the sector of the European gas market. Moreover, the Russian strategists have suggested that long-term investment projects in the energy sector of the Caspian basin are security risks: for Western MNCs often need NATO. These were the parameters of the discourse about the New Great game.

At the request of friends

Fundamental weaknesses in the design of this version of Eurasian energy geopolitics were twofold. First, Central Asian States quickly turned from consumers established external geopolitical game in its agents.

The leaders of Kazakhstan, Turkmenistan and Uzbekistan, all to a greater or lesser extent, sought to balance national sovereignty, the interests of Western capital and peace Russian "rights" in the region. Nevertheless, President Islam Karimov was perhaps the first Central Asian leader who actively sought to influence the wider geostrategic environment using the geography and resources of Uzbekistan in the national interest. After the terrorist attacks on 9 September 2001, Karimov exploited the status of Uzbekistan as a country on the line of the "front", for strengthening relations in the security sphere with the United States, which, though subsequently worsened, served as a demonstration that the geopolitical relations can, to some extent, depend on regional actors themselves.

In the energy context, Kazakhstan and Turkmenistan have sought to balance the preservation of commercial relations with Russia, selectively approaching the access to Western capital and technical knowledge, to gradually diversify entry points into the world oil market and to establish gas trading in Europe, South Asia, China and Iran. In particular, in Kazakhstan, the government sought to actively use the proximity of its resource base to a number of markets through a gradual tightening of the conditions for OLS since 2003, participating in such strategic export projects as the Baku-Tbilisi-Ceyhan (BTC) oil pipeline and Kazakhstan-China. For Turkmenistan, the maximization of the potential of gas exports has become a leitmotif of foreign policy, forming relationships with Iran, Afghanistan (including the Taliban of pre-2001) and, most importantly, with China, through the preferential granting of concessions for extraction and delivery of large volumes of Turkmen gas through the gas complex of the Central Asia-China.

The second design flaw, at least in the energy sector was the fact that the external geopolitical influence has not included the provision of direct or informal control of local management, and especially getting any kind of territorial hegemony, which was assumed in the concept of the Great game theorist and the founder of the Halford Mackinder. Historically, given the existing control of Moscow over the region and significant proximity of Russia to Kazakhstan, Central Asia is perceived in Russia as a potential channel of transit security threats such as illegal migration, drug trafficking and Islamic terrorism, and a potential source of external threats to internal security. For the US, Europe and China, Central Asia itself is largely not important. No one will provide meaningful security guarantees or waste significant resources on the formation (or facilitate the coordinated management of) internal geopolitics of the region. Thus, the importance of Central Asia was not in the inner essence of the region, but rather in how it relates to external interests, the main of which is energy security.

Overall, energy geopolitics in the post-Soviet period was centered on two precepts: first, the maximization of the sovereignty and independence of action of Central Asian States, the efforts of local and Western players, and secondly, the different perceptions of security and threats in the region, may affect foreign interests.

Oil and gas revolution

Today's revolution in the global oil and gas industry is likely to have adverse implications for energy geopolitics in Central Asia. Through the use of technology and investment in shale oil, deepwater and subsalt sediments, the global resource base is now slowly accumulating renewable reserves. In the period between 1980 and 2011 was significantly larger accumulated reserves (1771 billion bbls) than produced (795 billion barrels). At the same time changing the structure of consumption. OECD countries (Organisation for economic co-operation and development) does not currently demonstrate the growth of oil consumption, thanks to the combination of several factors: the policy on climate change, changes in the transport market and the development of alternative fuels from sectors of the agribusiness, such as ethanol and biodiesel. The demand for oil in the transport sector (over half of consumption) in the US and the EU are projected to fall by 30% between 2009 and 2035, i.e. from 17 million barrels per day (MBD) to 11.5 million barrels per day, while demand in Asia is projected to increase from 7.5 MBD to 13.5 million barrels per day. Stability in oil prices is an important indicator in the world market and affects all consumers, but security of supply is the most important for China and East Asia.

The natural gas market is becoming more global due to growing supplies of liquefied natural gas (LNG), a growing network of inter-regional pipelines and pricing, combining spot and long term supply contracts. Given the state of flux in the global energy market, the application of the "Golden age of gas" could still be premature. However, the combination of several factors indicates a strong fundamental Foundation global primary demand, podkreplyalisj gradual expansion of exports.

Such factors include: the plans in the government and industrial circles to consider the gas as a relatively clean fuel for the transition to renewable energy; rapid expansion of unconventional gas production in North America, along with a lot of potential flexibility of supply due to progress in the field of drilling technologies; a more diversified global distribution of reserves of shale, tight gas and coal bed methane; the predicted change in the policy of Germany and Japan moving away from nuclear power towards gas, as well as a serious study of the possibilities of conversion of mechanisms of transportation of gas.

Currently on the world market there is an excess of gas prices at Henry Hub (the benchmark price for US gas contracts) are at the lower limits. Russia's share in the European market is under pressure from Qatari gas (originally developed for saturated US market) sold at spot prices lower than the prices traditional contribution by Gazprom in its long-term contracts. Long-term contracts to supply significant volumes of gas from Central Asia to Europe suddenly in the end of the queue.

The game is over?

Consumers in East Asia are of increasing importance in global security of oil supplies. In the case of China, which is pursuing a tough course on urbanization and the economy focused on consumption, in terms of a constraining political environment, the security of oil supplies is one component in maintaining domestic progress. Reducing the dependency of the West from middle Eastern oil is a long-term strategic dilemma for China, which still relied on the US in security issues in the region. Central Asia is a microcosm of the broader picture. Despite the activities of the Shanghai cooperation organization, China agreed in General with the privileged and entrenched relations of Russia with the governments of Central Asia in the field of security and information gathering. At the same time, China, according to the expert Bobo Lo, "continues to worry about the business."

Critical and broader geopolitical question is, will China have sufficient power capacity to take some global responsibility for ensuring the security of production and shipping routes. Given that the potential risks of disruption of energy supplies from Central Asia is much lower than in the middle East and mainly depend on factors such as non-performance of contracts or expropriation, China will likely retain its focus on ensuring the stability of bilateral political and commercial relations than will build up a comprehensive presence in the security sphere in Central Asia. Energy geopolitics for China will be essentially energy policy.

On the one hand, the West its work in Central Asia has performed. The States of the region have been fairly stable sovereignty. Were commissioned and are in the final stages of the construction of new pipelines connecting the East and West. The MNC contracts for exploration and production continue to occur, although often there are stressful moments, creating operational risk. Despite the imminent introduction of the Kashagan oil field in Kazakhstan, and also hidden gas potential in Turkmenistan for export to a number of regional markets, the region has a relatively low value for the West in terms of its contribution to the global balance of supply, in particular, on the natural gas market. In addition, there is very limited demand for the speeding up of changes in domestic politics in Central Asia, although activities to promote democracy and initiatives for improvement in governance will continue. High geostrategic importance of Central Asia to the West would be more that the region can play a security threat, either locally or in Afghanistan, directly affects Western security concerns, in particular through transnational Islamist terrorism or drug trafficking flows, can turn, as in Latin America, in quasi-political narco-guerrilla activity.

In the global scheme, the probability of both threats, the intelligence agencies is classified in the category of "low probability — medium impact" and does not require significant resources.

The attention of the West on energy issues will focus on the stability of contracts, and not the development of other ambitious plans.

Although Russia's influence in Central Asia is preserved, in particular by means of "soft power" of language and culture, informal business ties and in the security sphere, its political and economic influence is stagnating. Becomes less likely that the question of succession of power in Central Asia will be dictated from Moscow, but most likely, the issue will be resolved, perhaps, and "dirty" method, within the region. Russia did not intervene in the problems of Kyrgyzstan, by and large, not engaged in Uzbek-Tajik friction and did not affect the change of power in Turkmenistan in 2006. Residual Russian influence in the form of "interference factor" or "the third superfluous" also decreased and, at the same time, its strategic energy interests in the global market moved to the mid-level "length" of supply, as evidenced by the rapid reduction of gas purchases by Gazprom from Turkmenistan. From a practical point of view, energy geopolitics will become local — provision volumes to regional consumption within Russia, as well as ensuring maximum transit fees for the transit of oil, and at the same time striving to maintain the share of Russia in the European gas market.

What about countries of Central Asia in their capacity as producers and transit countries? After initially naive period in their work with foreign investors, Kazakhstan, Uzbekistan and Turkmenistan all sought to use their resource wealth to assertions of national sovereignty and broaden its room for maneuver with more powerful external actors. This lever in negotiations has weakened as development projects and processing resources began to grow, and global market change. In particular, the transition towards globalization of the gas market and the growing potential for use of alternative energy sources in other parts of the world does not justify efforts to secure supplies from Central Asia to regional markets to the detriment of other projects.

Main card-producing countries lies in their geographical proximity to China, a key growth market for global energy consumption.

Given these factors, the geopolitics of energy in Central Asia, the value of the external competition for resources in the region will decrease and will become more important the ability of governments in the region to implement and adhere to the terms of certain commercial agreements. In this sense, in the medium term this means "end game". For Central Asian energy geopolitics to a greater extent will be local energy policy.

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The program for the study of Central Asia (Central Asia Program) at the School of international relations named Elliott of George Washington University is an independent project aimed at the development of scientific and analytical work for the study of contemporary Central Asia. The program also provides a platform for discussion and aimed to involve colleagues from USA, Europe, Russia, Asia and Central Asia to work together, promoting different forms of interaction and joint projects.

The program is routinely translate from and to Russian language for some of the last works of Western researchers on Central Asia.

Source: GEOPOLITICS

Tags: assessment , forecasts , oil