Over the past decade, Central Asia has emerged as a vital region in the global energy market as the world’s demographic and economic center has shifted decisively eastward. Western reliance on Middle Eastern oil has long dominated the global energy industry, yet the rapid development of Central Asia’s energy infrastructure has made it a region that finally looks ready to fulfill its potential in delivering the burgeoning energy needs of Eurasia.
Central Asia has long possessed large volumes of oil and natural gas, predominantly located in the five former Soviet republics situated to the east of the Caspian Sea: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. Historically, the persistence of Soviet influence over Central Asia’s energy sector led to the majority of Caspian oil and gas to flow north to Russia, and from there onward to the industrialized consumer countries of Western Europe. However, the picture has altered significantly since the turn of the century: access has been opened to new markets in the east, and Central Asia now plays a vital role in meeting the growing energy needs of China.
For decades, Central Asia’s energy infrastructure remained underdeveloped, with producers in the region struggling to transform their raw natural resources into output, while also having difficulty finding reliable methods of delivery. In general, the five states relied on more experienced international companies to provide export routes – often through aging pipelines to Russia – enabling secondary access to markets in the west. The Central Asian states sought to diversify their export destinations after the collapse of the Soviet Union, yet were often viewed as unreliable partners and risky investment opportunities by many Western corporations. Additionally, with the Caspian Sea being landlocked, the absence of a complex pipeline system to transport resources to Europe proved to be another sticking point. The result was a stagnation of the region’s energy industry as the West’s reliance on Middle Eastern oil continued, leaving vast resource-rich areas of Central Asia underexplored and large quantities of oil and gas untapped.
Recently however, the region has looked more likely to fulfill its resource potential, with an increasing number of oil and gas fields being exploited. This turnaround in fortunes has been driven largely by a shift in outlook, with a new focus on the new energy-hungry markets which surround Central Asia: China and its 1.4 billion people to the east; India and its 1.3 billion people to the south. The close geographical proximity of the world’s two fastest growing economies, along with the presence of a shared land border between three of the Central Asian producers and China, has led to the rapid development of the region’s energy market, while a surge in investment from the east has facilitated its reorientation, diversification, and revitalization.
In particular, this has been enabled by China’s drive for energy security, through which it has attempted to diversify its imports by developing closer relations with producing countries in the Middle East, Africa, and most recently in Central Asia. China has begun investing heavily in the downstream sector, building oil refineries and pipelines across the region to satisfy its domestic demand, whilst maintaining its commitment to a win-win approach based on mutual benefits.
Kazakhstan is the region’s leading oil producer and ninth-largest country in the world, and has become China’s major energy partner in Central Asia as the two countries share a 1,700 km land border. China controls approximately 20 percent of Kazakhstan’s oil production and has constructed one of the world’s longest oil pipelines, running 2,300 km from the Caspian Sea to Xinjiang province. The China National Petroleum Corporation (CNPC) owns a significant stake in the Kashagan oil field in the Caspian Sea, while Chinese companies own several key oil fields around the western city of Aktobe. In addition, Kazakhstan serves as key transit route for oil and gas from the smaller nations of Central Asia, assuring it a key role in the region’s future energy landscape.
Turkmenistan is the region’s main gas exporter, and exports its reserves directly to China through the Central Asia-China Gas Pipeline. Uzbekistan also supplies gas through the upgraded pipeline network and has attracted Chinese investment in recent years, typified by a $15 billion bilateral energy deal concluded in 2013. China has also financed two refineries in Kyrgyzstan, in the towns of Kara-Balta and Tomok. The refineries are supplied by CNPC-run oil fields in neighboring Kazakhstan, and produce 1.35 million tonnes of refined product annually.
This progress has evolved gradually over several years through a concerted attempt by China to develop the region’s resources, typified by the 2013 landmark visit of President Xi Jinping to Central Asia, which resulted in a raft of new bilateral energy deals worth tens of billions of dollars. If the current trend continues, the International Energy Agency has estimated that China may be importing up to 50 percent of the region’s oil and gas by 2020, signalling a decisive shift in Central Asia’s energy flow from the west to the east.
In addition to constituting a strategic attempt to achieve greater energy security, China’s resource sector investments in the region also have a political edge. The reduction in Russian influence in Central Asia following the collapse of the Soviet Union has created a void, which has been occupied by China as it has itself become more powerful. This has tipped the regional balance of power in an eastward direction, and has arguably played a key role in ensuring stability in the former Soviet republics. China has long professed the importance of development to security at the domestic level, and this policy can also be seen at an international level through China’s energy policy in the Caspian region. China has consistently supported the independence of Central Asia’s states through facilitating economic integration: it has provided considerable investment opportunities and served as a stabilizing force, through its creation of the Shanghai Cooperation Organization (SCO) and the signing of numerous bilateral economic agreements. China has also provided political support through the maintenance of friendly relations and frequent high-level state visits, providing legitimacy to regimes which many in the West have been reluctant to work with.
Overall, Central Asia’s energy market has decisively reoriented itself to the east. The former Soviet states have in recent years adopted a new, more individualistic approach free from tight Russian control, facilitated largely through Chinese investment. Energy policies have focused on the development of new transit routes in the form of large-scale pipeline projects, aiming to diversify the supply chain and open up the region to the rapidly growing markets of eastern Eurasia. The pattern of enhanced energy cooperation between Central Asia and China can be expected to be followed by closer resource sector links with India in the coming years, further signalling the altered flow of the region’s oil and gas.
Through its market-oriented but state-led search for energy security, Beijing has reinvigorated Central Asia’s energy market. This may be interpreted by some as part of an authoritarian attempt to assert regional hegemony through economic power, while gaining greater influence over the five former Soviet states through a strategy of assertive energy diplomacy; however, this is not necessarily the case. As the world’s major hubs of population and finance have shifted to the east, the global energy landscape must follow suit. Therefore, while China’s extensive investment in the region’s energy infrastructure will undoubtedly grant it greater influence, it has also been vital and necessary in allowing Central Asia to fulfill its long-held resource potential, placing it in a firm position to advance global energy security over the coming decades.
Michael Hart is a freelance writer in international politics, focusing primarily on civil conflict in Africa and the geopolitics of South-East Asia. He has written for online publications including Geopolitical Monitor and Eurasia Review, and runs a blog providing news and analysis of conflicts which are under-reported in the mainstream media.