Russia and the geopolitics of energy in Central Asia

Abstract

Energy security is key in ensuring good economic functioning. In Asia, several countries make their energy resources the main source of income for exports, including Russia and Middle Eastern countries. China, on the other hand, has been increasingly dependent on oil imports, which in 2015 accounted for 64% of domestic demand supply, while the country's oil production tends to increase in the next two decades, according to IEA projection. Hence, diversification of sources has become the basis of China's investment policy in foreign energy sectors. There is also the objective of reducing dependence on coal by expanding the use of natural gas in the composition of its energy matrix, which corresponded to only 6% of the total in 2015. To this end, it is necessary to consolidate the pipeline network in the country, especially the West-to-East corridor, whose extension promises to connect to an international system that would extend beyond the western border of the country. At regional level, foreign direct investment (FDI) in neighboring countries has the primary function of expanding access to new markets and/or favouring access to production inputs. Thus, in the energy market, while Russia aims to expand exports of oil and natural gas to China's large industrial centers, China perceives Russia (and countries like Kazakhstan and Turkmenistan) as important sources of hydrocarbons. China's proposal for regional cooperation in Asia is anchored in the project named New Silk Road, which advocates the installation of robust international oil and gas pipeline systems and efficient railways for the flow of commodities and goods, which would cross all the territory of Eurasia towards an ambitious Beijing-Berlin connection. For the Chinese leadership, it is fitting that the inauguration of the grandiose project is the year 2049, when the centenary of the Chinese Revolution will be celebrated. If the project as a whole is still questioned because of its ambition and technical challenges, what is certain is the way China has been expanding its presence in countries west of its territory, while leading infrastructure projects in Kazakhstan, Turkmenistan and Pakistan, for example. Verified that Central Asia is a key region for the New Silk Road project, and that China has already presented its short and long-term strategies for the region, the purpose of this project is to look into the perspective of Russia - a leading global player in the energy sector and a traditional regional power - about the possibilities that are still open for energy integration in the central region of Asia. Russia exports large volumes to all the countries that make up the European Union, but China is the nation that buys most of Russian exported oil (17.2% of the total) and shows interest in the consolidation of a Sino-Russian pipeline system, thus representing opportunities for Russia to increase its revenues from exports of energy resources. At the same time, Kazakhstan and Turkmenistan, rich in oil and natural gas, respectively, also emerge as a secure destination for investments aimed at expanding infrastructure in pipelines that would connect China to energy sources. Here, it should be noted that Central Asia is historically a region of Russian geopolitical influence and, economically, has been relevant destination for Russia's FDI, whose intention is also to enjoy a modern and efficient infrastructure for the transportation of cargo and energy. In the context of China's clear intention to extend its influence in the energy sector of Central Asian countries, this project aims to understand Russia's energy perspective, considering its energy security and the country's trade strategy in relation to China and with the countries of Central Asia. (AU)