Central Asian Energy

Courtesy of Stratfor (subscription required and recommended), a terrific two-part analysis of Uzbekistan withdrew from Central Asia’s Unified Power System, a synchronized electric grid linking Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan. The move is part of a series of disputes between Central Asia’s five countries. The region’s geography and distribution of resources is likely to make these disputes intensify and the increasing competition among outside powers for Central Asian energy seem to indicate that a struggle over the region’s energy resources is inevitable.

As the first article notes:

Uzbekistan on Dec. 1 withdrew from the Unified Power System (UPS) of Central Asia, the synchronized electric grid of Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan. Tashkent had threatened to leave the power grid for months, often citing “conflicts between member countries” over the allocation and consumption of electricity. Specifically, Uzbekistan had been having frequent problems with neighboring Tajikistan, which Tashkent accused of illegally siphoning off electricity. Uzbekistan’s withdrawal will limit the electricity available for Tajikistan to import, and Dushanbe has already threatened to cut off water flows to Uzbekistan if the decision is not reversed quickly.

Such energy-related disputes occur frequently in Central Asia. Indeed, the other country in the region – Turkmenistan – withdrew from the UPS back in 2003. The reason for these tensions and temporary cutoffs goes beyond energy politics and is rooted in the region’s geography and resource distribution. These factors explain why these disagreements and cutoffs among the five Central Asian countries likely will continue to intensify.

Map: Central Asian countries and capitals


Central Asia encompasses a vast territory in the middle of the Eurasian landmass, totaling more than 1.5 million square miles. The terrain is composed primarily of treeless steppes and sprawling deserts in the larger states of Kazakhstan, Uzbekistan and Turkmenistan, and the smaller states of Kyrgyzstan and Tajikistan are almost entirely mountainous. The entire region is landlocked and has no navigable rivers.

Because of these harsh geographic features, much of the land in Central Asia is not suitable for agriculture and it is therefore sparsely populated, with a total population of around 60 million people (an average of about five people per square mile). This also means that — with the exception of key natural resources — Central Asia is endemically impoverished and will always have massive infrastructure demands. The Central Asian states can therefore only be remotely functional if they can tap the capital supplies of a larger state outside the region. Without outside assistance, they will continue struggling to maintain the capital necessary to maintain existing infrastructure, and developing new infrastructure will pose an even greater challenge.

Map: Central Asian demography

The one area in Central Asia that is relatively flat, fertile and economically productive is the Fergana Valley, which stretches across eastern Uzbekistan and the western portions of Kyrgyzstan and Tajikistan. Due to the region’s arid climate, however, this area requires intense irrigation to be productive. The Fergana Valley is where the core of the population — and by extension, political power — is concentrated. The mind-boggling borders between the countries in this area are a product of Soviet leader Josef Stalin’s fear that a regional power could gain control over the Fergana Valley and threaten Soviet rule. Thus, Fergana is home to various ethnic groups that are intermeshed with one another, making it the region’s center of conflict.

Fergana Valley

Resource Distribution and Flow

Central Asia is known for its wealth of natural resources, particularly in oil and natural gas. But these resources are not distributed evenly throughout the region. Kazakhstan holds most of the oil, ranking 11th in the world with around 30 billion barrels of reserves. Kazakhstan is consequently the richest and most prized country in Central Asia, attracting more foreign investment into its energy industry than any other former Soviet state (including Russia) and earning billions in energy exports. Uzbekistan and Turkmenistan have only marginal oil supplies but both are extremely rich in natural gas, ranking in the top 20 in the world in terms of production and reserves. Both are integrated into the Soviet-era infrastructure which transports their supplies throughout the region and to Russia and beyond, earning them generous revenues as well, with natural gas exports making up more than $4 billion, or 15 percent, of Uzbekistan’s gross domestic product, and almost $12 billion, or 65 percent, of Turkmenistan’s gross domestic product.

Central Asia Rivers Resources

The smaller Central Asian states of Kyrgyzstan and Tajikistan have virtually no natural gas or oil to speak of, and both countries extremely poor. The resource they do have, however, is water. The region’s two largest rivers — the Amu Darya and Syr Darya — originate in the two countries’ mountain glaciers and are the source for their numerous hydroelectric plants. Not only do Kyrgyzstan and Tajikistan produce most of their electricity for domestic consumption — around 95 percent of their electricity generation — through these hydroelectric plants, they also control much of the water supplies that flow to the other three Central Asian countries downstream.

Chart - Central Asian Resources

Due to this uneven distribution of resources, the Central Asian states — particularly Uzbekistan, Kyrgyzstan and Tajikistan, which form the region’s core in the Fergana Valley — must rely on each other to fulfill their energy and water needs. Uzbekistan supplies virtually all of Kyrgyzstan’s and Tajikistan’s natural gas, while the two upstream countries allow water to flow downstream to Uzbekistan.

This dependent relationship has bred much disagreement among the Central Asian countries, particularly because there are not enough resources to meet the region’s consumption levels, leading to pricing disputes and in many cases, a hoarding of resources. For instance, Uzbekistan temporarily cut off natural gas supplies to Tajikistan in September over the latter’s inability to pay the $19 million debt of accrued natural gas bills.

While natural gas exports travel via pipeline in a single direction from Uzbekistan to Kyrgyzstan and Tajikistan (and to a lesser extent to Kazakhstan), electricity production and exports in the region are more complicated and diffuse. All of the countries produce a certain amount of their own electricity, but the countries’ production levels vary to the point where one country can export electricity in one year and import supplies the next.

Given these circumstances, electricity flows have gone a number of different ways among the countries, depending on the situation. For example, to get natural gas supplies flowing again after the most recent Uzbekistan cutoff, Tajikistan agreed to repay a portion of those fees and supply Uzbekistan with electricity through the UPS in return for a break on its natural gas bill. But Kyrgyzstan and Tajikistan frequently ration electricity because they cannot produce enough, and they typically need to import some electricity from the bigger Central Asian countries. This situation has made blackouts common in the two small Central Asian states — especially in winter, when heating and electricity needs are greater.

Regional Challenges

For many years, Kyrgyzstan and Tajikistan have declared their intention to construct more hydroelectric plants. This would generate more electricity for domestic energy consumption and wean each country from its dependence on Uzbekistan’s natural gas. But there have been many impediments to such construction, not least of which is a chronic lack of funding for such projects.

Another complication is that the other Central Asian countries — particularly Uzbekistan — oppose the construction of new hydroelectric plants in Kyrgyzstan and Tajikistan. If new plants were built, even more of the region’s water supplies would be diverted for use in these plants, meaning that fresh water supplies that are crucial for agriculture would be diminished. Around 90 percent of the water from the two rivers is used to cultivate important crops like cotton and meet the population’s water needs. Uzbekistan has on multiple occasions threatened retaliatory measures against Bishkek and Dushanbe if they build more plants.

Furthermore, Kyrgyzstan and Tajikistan’s existing hydroelectric plants, reservoirs and transport canals are ailing from years of underinvestment in the Soviet-era infrastructure. The efficiency of water use in the region is extremely low; approximately 70 percent of the water used for irrigation is wasted or used unproductively (due to soil leaching and leaky canals like the Karakum, for example). The problem has gotten so severe that the Aral Sea, the body of water which the two rivers drain into, is shrinking at an alarming rate. The Aral Sea is widely regarded as one of the worst modern ecological disasters; between the 1960s and 2007, it shrank to 10 percent of its original size. By some estimates, the body of water could dry up completely within a decade.

Though the Central Asian countries meet frequently to discuss their resource management problems, both bilaterally and at summits, they remain unable to deal with these issues or come to any sort of compromise or resolution. Without outside intervention, it is likely that the region’s resource development and distribution will continue to be mired by the same deadlock, disagreement and decay that has constrained it since the fall of the Soviet Union.

There is currently only one country outside Central Asia that has the ability and resources to fundamentally change how these disputes play out and which countries will stand to gain and which will lose. Any decisive movements pertaining to this flow of resources are ultimately linked to the involvement of the undisputed regional power: Russia. However, Moscow’s influence in the region is beginning to be challenged by other external players.

As the second article notes, Russia has maintained firm control over Central Asia, including the energy sector. However, a recent series of events has created opportunities for other outside powers, like China and Iran, to tap into the region’s energy resources. Russia likely will keep control over Central Asian energy for some time to come, but complications could arise:

“…The wide-open and sparsely populated steppes of Central Asia have made the region historically prone to being swallowed up by various empires, from the Persians to the Mongols. The latest such power to control the five Central Asian countries — Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan and Tajikistan — is Russia. Russia first took over the region as the Russian empire expanded in the 19th century, then continued controlling the five states as part of the Soviet Union until its dissolution. But even post-Soviet Central Asia has been subject to strong Russian influence.

Map: Central Asian countries and capitals

Due to Russia’s inherently weak geographic position, with many strong and potential adversarial neighbors surrounding it, Moscow’s geopolitical imperative is to establish buffer zones to insulate itself from other powers. Central Asia is one such buffer zone, placing thousands of miles of harsh terrain between the Russian core and traditionally powerful countries like Iran and China. In order to consolidate this buffer zone, Russia has inserted itself into virtually all levels of Central Asian affairs, including politics, economics and the military. This influence has made other interested outsiders, like China and the Europeans, hesitant to significantly challenge Moscow’s hegemony in the region.

Central Asia Rivers Resources

A particularly strategic sphere in which Russia maintains influence in Central Asia is the energy sector. Nearly all of the natural gas and oil supplies from energy-rich Kazakhstan, Uzbekistan and Turkmenistan have been completely integrated into Russia’s vast Soviet-era pipeline system, with Russia serving as the primary transit state bringing Central Asian energy resources to European markets. Russia has earned a pretty penny for these transshipments, charging the Europeans roughly three times what Moscow pays the Central Asian producers. And, with a few exceptions, Russia has made sure that these countries’ energy supplies (and the corresponding transit revenues) have not gone anywhere else.

Chart - Central Asian Energy Exports to Russia

Other Players

While Russia’s dominance in Central Asia’s energy industry is unquestioned, recent months have seen a series of events, deals and disagreements that have opened the door to other players in the region.

The first such event was in early January, when Russia cut off most of its natural gas shipments to Europe for nearly a month. The cutoff came during a painful recession and hurt Europe’s industrial activity, exacerbating the downward trend in European natural gas imports from Russia. (Europe imported some 160 billion cubic meters [bcm] from Russia in 2008, but that number is set to fall to around 140 bcm for 2009.) Lower exports mean lower production, and one of the first places to feel the effects of the European cutoff was Central Asia (rather than Russia’s strategic natural gas behemoth Gazprom).

This was a factor in another event that took place in April, in which a pipeline carrying natural gas supplies from Turkmenistan to Russia suddenly burst. Although Moscow cited technical malfunctions, the real reason for the rupture was that the decreased demand from Europe left Russia unable to take supplies from Turkmenistan, and the increased pressure of the pipe caused the pipeline to break. In Moscow’s eyes, a ruptured pipeline was the only solution to this problem (telling Turkmenistan that Russia did not need the gas would have triggered fines for breaking the import levels stipulated in the contract between the two countries). From Ashgabat’s perspective, however, it lost its primary natural gas market (Russia takes more than 90 percent of Turkmenistan’s natural gas exports). Because natural gas exports generate roughly 50 percent of Turkmenistan’s gross domestic product, this represented not only a decrease in revenues but a threat to the state’s survival.

Angered by the pipeline break, Turkmenistan began examining its other export options. Europe had always been a target export market, and energy projects that bypass Russia and could use Turkmen natural gas, like the Nabucco pipeline, had been widely discussed for years. But these projects have issues ranging from the financial to the technological and would not make Europe a viable market for many years.

There are, however, more realistic options for Turkmenistan closer to home. Ashgabat had already been exporting a small amount of natural gas to neighboring Iran, but immediately announced that these exports would expand and could increase threefold from the current 6 bcm annually. An expanded pipeline between the two countries is now set to come online in the middle of December, and is set to increase its flows gradually to 12-18 bcm.

But the really lucrative alternative for Turkmenistan’s natural gas is to the east, in the extraordinarily energy-hungry China. Beijing has searched around the world — including Central Asia — for energy resources to meet its growing demands. It is China — with its substantive economic and ethnic levers in the region — that has the greatest potential to challenge Russia for influence in Central Asia.

Map - Pipeline from Turkmenistan to China

Indeed, a pipeline is already under construction that would link Turkmenistan’s natural gas supplies to the Central Asian infrastructure that would send natural gas all the way to China. Russia had delayed the pipeline’s completion, but after the April pipeline burst Moscow allowed work on the pipeline to continue. It is now slated to come online Dec. 15 and carry 10 bcm of Turkmenistan’s natural gas next year. The line is expected to carry its capacity — 30 bcm — a few years after it becomes operational.

However, Beijing likely will not present a true challenge to Russia in the short- to medium-term. Russia is still the dominant force in Central Asia, with a near monopoly of military and intelligence assets in the region and a level of economic penetration that far outweighs that of any other external power. Even with the recent increase in competition from China and Iran regarding Central Asia’s energy assets, Russia still holds the upper hand: Moscow owns nearly all of the energy infrastructure within Turkmenistan, which means the Kremlin ultimately gets to decide if and how much of Turkmenistan’s natural gas supplies will go to Iran and China. And for now, this diversification of resources away from Russia is actually in Moscow’s interest, because it takes the pressure off of Russia to import Turkmenistan’s supplies when it simply cannot afford to take them.

Map - Central Asia - Kazakh pipelines

Potential Complications

The new pipelines in Central Asia — particularly the Turkmenistan-China line — could pose problems for Russia. Because of its location, the Turkmenistan-China pipeline effectively creates two new transit states whose cooperation is necessary for the transport of supplies: Kazakhstan and Uzbekistan. These two countries will get a great deal of revenue from the transit fees — revenue that could be used to improve their geopolitical positions. Kazakhstan likely would not pose much of a problem in this regard, as it is tied to Russia politically and is set to strengthen its economic relationship with Moscow by joining Russia and Belarus in a comprehensive customs union Jan. 1, 2010. This does not mean Kazakhstan is completely dependent on Russia; it has several strategic ties with China that are likely to grow. The Kazakhstan-China oil pipeline recently came online, and earlier in 2009 Beijing agreed to lend Astana $10 billion to develop the Kazakh oil and natural gas industries.

Uzbekistan, however, is a different story. Uzbekistan is the most independent of the Central Asian countries, being largely self-sufficient in food and energy and having a true core in the Fergana Valley. Uzbekistan is also the most populous country in the region, with about 28 million inhabitants, and is the only country to border every other Central Asian state — which also makes it the only country that can effectively project influence throughout the region. This has caused Russia to grow increasingly concerned that Uzbekistan — which Moscow sees as the rising star in the region — could become too powerful in regional affairs. The increased revenues associated with transiting natural gas supplies to China would likely only increase Tashkent’s leverage. Uzbekistan’s independent streak does have its limits, however, as Tashkent is still reliant on Moscow and the other Central Asian states for cooperating in processing its food and energy products. So while Tashkent could tenuously leverage itself as a regional power and critical transit state, it will also be careful not to incite Russia’s wrath — a lesson other former Soviet states have learned well.

Another potential complication will arise if and when Russia will need Turkmenistan’s natural gas again. Once European demand gets back to its previous levels, Moscow likely will have to turn to Ashgabat for supplies. But without massive and rapid investment in Turkmenistan’s natural gas output, Turkmenistan will not be able to fill the orders for Russia, China and Iran — which exceeded 70 bcm in 2008 — all at once. At best, it would be able to meet roughly half of this demand.

The geography of Central Asia, the competition among its five countries for resources and the increasing competition among outside powers for Central Asian energy seem to indicate that a struggle over the region’s energy resources is inevitable.

This entry was posted on Saturday, December 5th, 2009 at 6:24 am and is filed under Azerbaijan, China, Kazakhstan, Kyrgyzstan, Russia, Turkmenistan, Uzbekistan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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