Dialogue  October-December, 2004, Volume 6  No. 2

Politics of Oil and Natural Gas in Central Asia: Conflicts and Co-operation       

R.G. Gidadhubli

During the last over a decade the Central Asian republics of the former Soviet Union have undertaken the task of economic transition from socialist system to market economies. Being sovereign and independent states, the task of transition has been challenging and quite formidable. The leaders of the Central Asian States have tried to mobilize oil and natural gas resources in which they are endowed, as one of major sources for the development of their economies. But oil and natural gas resources of the Central States have become objects of international politics, which has attracted major players including Russia and the USA. An effort has been made in this paper to examine various issues concerned and how they have affected the Central Asia States.

Central Asia’s Oil Sector Before the Soviet Break-up.

At the time of the Soviet disintegration, the Central Asian States (CAS) played a rather marginal role in the oil-energy sector of the former Soviet Union. This is evident from the fact that in 1991 out of the total production of 10.3 million barrels per day, the share of the CAS was less than 7 percent. In the total estimated reserves of the USSR amounting to 57 billon barrels of oil, the CAS accounted for about 16 percent. Resources located in Western Siberia, Eastern Siberia, Volga-Ural regions in Russia and Azerbaijan played a major role by virtue of their dominant position with significant reserve potentialities of oil and gas. Moreover, the oil sector of the Soviet Union in general including that of the CAS suffered from various problems such as the

shortage of functioning production equipments, lack of modern technology etc. as result of which over 16, 000 oil wells were lying idle in the USSR as a whole. The position of natural gas was somewhat better although in 1991 output had slightly declined. The Soviet Union had already emerged as the foremost with regard to natural gas reserves in the world. The CAS had also been identified as the most promising areas of natural gas reserves in the former USSR. According to a report of the Congressional Research Service, in 1991 Turkmenistan and Uzbekistan in Central Asia (that is excluding Kazakhstan) had 2 giant oil fields and 14 giant natural gas fields among the large number of oil-gas fields in the former USSR.

Considering this situation, the oil industry of the Central Asian republics was politically less significant in the former Soviet Union although the natural gas sector started assuming some importance from the perspective of the Central planners. Notwithstanding this, even as the Soviet leaders started setting up joint ventures in the country in collaboration with some western oil firms under Gorbachev’s policy of perestroika mainly to acquire western modern technology and equipments for oil extraction and processing. Some oil and gas wells were also set up under such joint ventures. For instance, the Tengiz oil field in Kazakhstan was being developed and expanded with the collaboration of the Chevron oil company with estimated investment requirement of about $ 20 billion to develop the oil fields over the next 40 years. This joint venture was to deal with the problem of toxic hydrogen sulfide gas in the Tengiz oil field. This joint venture was also to be a test case for success as it was an object of intense contention between reformers and hard line communists on the question of sharing of revenue and juridical authority between Moscow and Kazakhstan. However, after the Soviet break up, the Chevron firm was to deal only with Kazakhstan.

Oil and Gas Resources of CAS - Post Soviet Period

It is important to note that oil and natural gas resources are not uniformly distributed over the five CAS. Among the CAS, Kazakhstan is well endowed with oil and natural gas resources. According to the Energy Information Administration of the USA, the total potential reserves of oil of Kazakhstan are estimated at about 92 billion barrels, out of which proved resources are about 18 billion barrels. In the case of Turkmenistan potential reserves of oil are 80 billion barrels of which proved resources are 2 billion barrels. These resources are located mainly in the Caspian Sea region. In comparison to these two states of Central Asia, Uzbekistan has only about 2 billion barrels of potential oil reserves. But Uzbekistan and Turkmenistan have abundant reserves of natural gas. Kyrgyz Republic and Tajikistan are relatively less endowed with oil-gas resources. During the last decade efforts have been made by all the Central Asian countries to explore hydrocarbon resources in their territories. Thus as per the Uzbek official sources, intensive efforts of exploration have indicated that out of 171 discovered fields, 73 fields possess hydrocarbon reserves and their total potential reserves of oil could be 5 billion tons. Exploratory work being carried out by Kazakhstan and Turkmenistan has indicated large reserves of oil and gas.

There seems to be some political angle with regards to the estimates of oil-gas resources of the CAS. This is evident from the fact that in the immediate aftermath of the Soviet break-up, some hype was created in the west about the huge hydrocarbon resources of the CAS. For instance, Turkmenistan was called the ‘Kuwait of the 21st Century’ by some western commentators. Similarly, there were speculations as to whether Central Asia could be an alternative to the Middle East for oil supplies to the world markets. In fact, this raises the question about the international significance, both politically and economically, of the hydrocarbon resources of the CAS. While there is no doubt about the vast hydrocarbon resource potentialities of the CAS, there has been some sober assessment about the hydrocarbon potentialities of the CAS from the global perspective. Considerable exploratory work has been carried out and is still going on which alone could determine the realistic position in the years to come. Notwithstanding this, according to some experts, oil and gas resources are certainly important sources for meeting the world energy needs in the years to come. More importantly, it is also opined that the oil and natural gas resources of the CAS may not be an alternative source to the Middle East, but certainly additional sources to those in other parts of the world.

Oil and natural gas have also played an important role in shaping intra-state political relations of the CAS. This is partly because in comparison to these three states, the other two Central Asian countries namely the Kyrgyz Republic and Tajikistan lack hydrocarbon resources but have abundant water resources being upstream countries for the two large rivers, namely Syr Darya and Amu Darya. While the Kyrgyz Republic and Tajikistan are critically dependent upon Kazakhstan and Uzbekistan to meet their domestic needs for oil and gas, the latter being down steam countries are dependent upon Kyrgyzstan and Tajikistan for water flowing into the rivers. Hence under ideal conditions there could be greater co-operation among these Central Asian countries for mutual benefit. But proper understanding is yet to emerge. In the past the domestic needs of Tajikistan and Kyrgyz Republic for oil and gas were met without any difficulty as they were part of the former Soviet Union. But during the last decade their dependency factor has been felt in the evolution of the interstate political relations of the CAS. Occasionally differences have arisen as for instance in 2002 when Uzbekistan temporarily stopped the supply of natural gas to the Kyrgyz republic. It appears the reason was that the Kyrgyz Republic was not able to release water into the rivers flowing downstream into the Uzbek republic. Similarly, there were other reasons such as the delays in the repayment on the part of the Kyrgyz republic due to which Uzbekistan and Kazakhstan occasionally decided to stop the supply of oil and gas. However, in such situations so far with the political intervention at the highest level of the presidents of the countries concerned, such issues were sorted out. But there is need for ensuring greater co-operation and durable understanding among the CAS on common issues such as energy and water resources for achieving the mutual benefit of the countries concerned.

How far have the oil-energy resources benefited economic development of the CAS? What is their political significance for the CAS? These are some of the questions that arise in understanding the political and economic significance of this sector for the CAS. So far as Turkmenistan is concerned oil and natural gas are crucial items for the development of its economy. They constitute the major share in hard currency earnings for the country. Hence the oil-energy sector occupies a predominant share in the GDP of Turkmenistan. In the case of Kazakhstan oil-energy sector does play an important part in the economy of this country. In 2002 oil exports constituted 13 percent of total export earnings of the country. According to some experts energy exports could be as high 60 percent of total exports if reforms are implemented. But there are other mineral resources such as ferrous, non-ferrous and precious minerals, and chemicals, which contribute for the development of many industrial sectors of Kazakhstan. Hence Kazak economy is relatively more diversified even as oil and gas contribute significantly for the generation of financial resources for the country. In the case of Uzbekistan natural gas has potentiality to be an important item of hard currency earnings in the future. Even at present Uzbekistan does supply gas to the Kyrgyz Republic. Being well connected by pipelines with industrial centers such as Ural and West Siberia of Russia and parts of Kazakhstan, Uzbek gas was being supplied to these states. Hence the proposal of the Russian president for the formation of an ‘Alliance of Gas Exporting Countries’, if materializes, will immensely benefit Uzbekistan both politically and economically in the long run. But Uzbekistan is also rich in precious minerals such as gold and non-ferrous minerals, which are also important for the economic development of the country. Notwithstanding these observations, oil and natural gas have great demand in the world energy market and hence they earn hard currency for the countries exporting them. Hence the CAS have benefited particularly during the last 5-6 years when international prices for oil and natural gas have increased. This seems to be evident from the fact that between 1999 and 2003 the GDP growth rates of Turkmenistan have been quite high ranging between 10-20 percent per annum. Similarly, in the case of Kazakhstan GDP growth rates have been fluctuating between 6 to 13 percent per annum during the last three to four years. It appears that export of oil and natural gas seems to have contributed significantly for achieving this reasonably good economic performance.

Conflict of Interests Among the CAS

There have been few political conflicts concerning the oil and other energy resources of the CAS, particularly with regard to the issue of the legal status of the Caspian Sea. The issue has remained quite complex. During the last decade, the five countries concerned namely Kazakhstan, Turkmenistan, Azerbaijan, Iran and Russia have not been able to come to any agreement to the solution of the problem of the division of the Caspian Sea. Hence mainly at bilateral levels some agreements have been reached. For instance, in July 1998 the presidents of Kazakhstan and Russia signed an agreement on the division of the bottom of the Caspian Sea on the principle of ‘modified middle line’. Subsequently, Russia and Azerbaijan reached a similar agreement. Turkmenistan and Azerbaijan signed a bilateral communiqué in March 1998 on the question of the division of the Caspian Sea on the ‘middle line principle’ and not on the ‘modified middle line’ principle. As a result of on-going efforts, in May 2003 Russia, Kazakhstan and Azerbaijan reached a trilateral agreement on some issues of the demarcation of the Caspian Sea. In July 2003 the 10th Round of Talks was held in Moscow at he level of the deputy foreign ministers during which, the foreign minister of Russia hoped that the talks would focus on narrowing down disagreements over the legal status of the Caspian. On 8th September 2003 at the Convention held in Asgabat, the five states agreed only on some technical issues such as the protection of biological reserves of the Caspian Sea. However, there were differences among these states on the substantive issue of the status of the Caspian Sea. Occasionally differences between Turkmenistan and Azerbaijan and Iran and Azerbaijan have led to serious conflicts. In this regard to discuss regional energy issues of the Caspian an international meeting will be held at the end of February 2004 in Turkey at Istambul in which major energy producers of the CAS, Russia, and other concerned countries such as the USA, UK, Turkey and several key international agencies including the World Bank, EBRD etc will be participating. It appears that issues relating to the legal status of the Caspian, feasibility studies of transporting oil-gas from the Caspian including that through Afghanistan will be discussed.

Mutual co-operation and collective effort seem to be lacking on the part of the CAS in developing their hydrocarbon energy resources. While it is understandable that each of the Central Asian countries tries to maximize economic gains from the resources located in its territory, there is competition among them to attract foreign investment and technology to explore and exploit oil and gas resources and also to export them to world markets. Lack of co-operation is evident from the fact that in July 2003 the Uzbekistan president Islam Karimov met the chief of Russia’s Gazprom chief Aleksei Miller and sought Russian help for laying pipelines for transporting its natural gas bypassing Turkmenistan. An agreement has been signed between Uzbekistan and Gazprom of Russia to export 10 billion cubic meters of gas by 2005 from the level of 5 billion cubic meters exported in 2002-2003. As a further step in that direction joint efforts are being made to explore and develop gas deposits in the Ust-Yust are of western Karakalpakstan. It may be observed in this context that both Uzbekistan and Turkmenistan are major producers and exporters of natural gas and hence there is competition between the two countries. Hence to maximize its own economic benefit Uzbekistan could have entered into this agreement with Gazprom of Russia.

Some efforts have been made during the last several years by the Central Asian leaders to bring about regional economic co-operation and even declarations are also made to that effect from time to time. But very often policies and declarations largely remain on paper. This could be partly because as opined by some analysts national policies of the CAS generally favor self sufficiency and import substitution at the expense of promoting regional trade and rationalization of energy use.

Oil Politics Between the CAS and Russia

Oil and gas have become important elements in the political and economic relations between the CAS and Russia. During the last decade due to certain policies pursued and actions taken by the CAS and Russia, some situations have arisen which have caused differences and conflicts in their relations. There is one problem that has arisen because being landlocked countries, the CAS are geographically at a disadvantage in transporting oil and natural gas to world markets. During the Soviet era pipelines were laid linking the oil-gas fields of the CAS with other republics of the USSR and also with ports for exporting to world markets. The CAS were not directly involved in deciding whether oil and gas produced in their republics was to meet the domestic needs of the country or to be exported. After the Soviet break-up the CAS are dependent upon the pipelines passing through Russia for exporting their energy products to world markets. The Russian policy makers in their own national interest would like to retain this situation so that the CAS would continue to be dependent upon Russia for export of oil and gas. But at the same time the policy makers of the CAS in their national interest have decided to create additional and or alternative routes for exporting oil and gas to western markets. As a result the concept of ‘Multiple Pipeline Policy’ has emerged which has received considerable support from the USA and many other western countries. But the Russian policy makers are not in favor of the Multiple Pipeline Policy of the CAS as it would reduce the importance of Russia for the CAS. For instance, on the Baku-Ceyhan Pipeline project there have been differences between Kazakhstan and Azerbaijan on the one hand and Russia on the other. The Baku-Ceyhan Pipeline from Baku in Azerbaijan passing through Georgia is to transport oil from the Caspian Sea to western markets from the Turkish port of Ceyhan. Pipelines are also to be laid from Kazakhstan through the bottom of the Caspian Sea linking the oil fields of Kazakhstan to Baku for export. This pipeline will bypass Russia completely. Presumably for this reason the Russian side has raised several objections. Firstly, some Russian scientists have observed that the pipelines passing through the Caspian Sea could be exposed to the potential threats from seismic tremors. Secondly, it is argued that the Baku-Ceyhan pipeline is not economically viable considering the cost involved. The mountainous terrain of Georgia through which the proposed pipeline is to pass through, will certainly be adding to the cost of the project. According to a report published on the 9th January 2004 in Moscow, Russia would not participate in the construction of the Baku-Ceyhan project as this was not considered to be economically viable. In this context it has been stated that even in the case of the Caspian Pipeline Consortium ( CPC) pipeline in which Russia has 24 percent stake, there was hardly any profit for the country. While the details of Russia’s calculations are not known, the basis of Russia’s calculation might be different from that of the USA, Azerbaijan and Turkey, which have initiated the Baku-Ceyhan project. Moreover, the investments in the infrastructure development yield returns over a long period. Apart from these finer calculations, more importantly there could be political interests on the part of the Central Asian countries as also on the part of Russia in taking different positions on this issue.

Between Kazakhstan and Russia there were some hiccups in their relations in matters relating to oil. For instance, in 2001 there were differences between the two countries over the delay in the inauguration of the Caspian Pipeline Consortium (CPC) project which is connecting Tengiz oil field with Novorussisk port passing through Russia. This project has been crucial for the export of oil from Kazakhstan and hence the Kazak prime minister Q. Toqaev stated in May 2001 that Russia was taking ‘negative attitude’ which caused this delay. It appears that there were some disputes between the two countries regarding customs duty. Even when this dispute was resolved, the Russian contention was that an agreement was to arrived at by all concerned possibly including foreign oil companies such as Chevron etc. on the ‘terms of the use of pipeline’. It appears that there were different views on issues such as the quantum of oil to be transported through the pipeline. There could be other reasons for such situations causing irritants in Kazakh-Russia relations. It appears that according to some Russian political groups the CPC would be a competitor for Russian oil exporters, while few even contended that Russian exporters should get preference over Kazakh counterparts in exporting oil through the CPC as the pipeline passes through the Russian territory. However, such arguments did not carry much weight with the policy makers in Russia and hence despite such views and arguments, the CPC was completed albeit with some delay and Kazakh oil has been exported to the western markets. On the other hand, there has been closer co-operation between Kazakhstan and Russia in the development of oil-gas industry of Kazakhstan and their exports to world markets.

Notwithstanding some differences, there has been growing co-operation between the CAS and Russia in the oil and energy sector, which has strengthened political relations between them. While Russia has strong geopolitical interest in Central Asia to keep these states under its sphere of influence, co-operation in oil and energy sector has been an added dimension in cementing such ties. It may be stated at the outset that Russia is not dependent upon the CAS for oil-energy resources for its domestic needs, since Russia possesses large reserves in its own territory. But by co-operating with the CAS in this sector, the Russian policy makers may be able to indirectly control oil-energy sector and in turn enhance its own influence in the world oil-energy market. This is evident from various policy measures and actions taken by Russia with the CAS during the last decade.

For instance, in March 2002 Russia’s president Vladimir Putin proposed to the presidents of Kazakhstan, Turkmenistan and Uzbekistan that together they could form an ‘alliance of gas producers’. As reported by Khabar TV on 1st March 2002, the Commonwealth of Independent States (CIS) possessed 40 percent of global resources of natural gas. Moreover, according to Russian experts Russia and the CAS have well developed transport system. Hence it is argued that these two factors taken together will give Russia and the CAS a clout to ‘influence not just the European economy but the world economy as well’. While such a gas alliance has not been formed as yet, but as and when such a proposal materializes it would certainly benefit Russia politically and the CAS economically. Secondly, during the last decade Russian policy makers have been making efforts to bring about agreements among the Caspian Sea States on the issue of sharing of the energy resources of this sea. Viktor Kalyuzhny the special representative of the president of Russia has been an active negotiator in these discussions and often defusing the conflicts that have arisen among the Caspian sea states as between Turkmenistan and Azerbaijan, between Azerbaijan and Iran and so on.

Thirdly, Russia seems to be following a two-pronged policy with regard to oil-energy resources of the CAS. As stated earlier, at the state-to-state level, the Russian government has been promoting its own national interest while extending cooperation with the CAS. At the same time Russia’s state owned and private oil and gas firms such as the Gazprom, Rosneft, Lukoil have been taking active role both in terms of investment and extending technical help in exploring and exploiting energy resources of the Central Asian countries. For instance, in February 2003 the Turkmen president S. Niyazov invited Gazprom to develop deposits in the Turkmen sector of the Caspian Sea and he discussed with the Gazprom chief Aleksei Miller the scope for long term co-operation between Russia and Turkmenistan. Subsequently, on the18th August 2003 the Turkmen deputy prime minister Yolly Gurbanmuradov signed an agreement with the Gazprom chief on the reconstruction and expansion of gas pipeline system connecting Turkmenistan oil-gas deposits with Russia. According to reports, Gazprom has entered into 25 year contract for gas deliveries with Turkmenistan. Similarly, Russia’s Gazeksport has agreed to deliver equipment and services as partial payment for Turkmen gas deliveries in 2004-2006. These facts indicate close co-operation developing between Turkmenistan and Russia in the energy sector both at the state level and private level. Russia has been following similar policy with other CAS. For instance, Russia’s Lukoil chief Vagit Alekperov and Kazakhstan state owned KazMunGaz signed a MOU in Astana on 10th February 2003 to create a joint venture to explore and develop an unspecified block in the Caspian Sea which is likely to contain recoverable reserves of up to 100 million tons of oil. Even as this project will be launched in 2004, during the last 8 years Lukoil has invested over $ 1.5 billion in the oil sector of Kazakhstan and total investment by this firm in future is expected to exceed $ 3 billion which has made this firm as the largest investor in Kazakhstan. On the 9th and 10th of January 2004 Russia’s president Vladimir Putin visited Kazakhstan during which policy decisions were taken to further strengthen political and economic co-operation between the two countries in which energy sector figured prominently. Also during President Putin’s stay in Astana on 9th January 2004, he and President Nazarbaev issued a joint statement on bilateral cooperation in the energy sector, as reported by the Interfax. This joint statement also focused on the joint development of Kazakhstan’s oil fields at the northern end of the Caspian Sea, the transport of Kazakh oil and gas to world markets, and cooperation in developing the electric-power industry.

Russia’s political and economic interest in Central Asia is partly dictated by its ‘Near Abroad’ policy. While in the first half of the 1990’s there was no active interest and involvement of Russia in the Central Asian countries for a variety of domestic and external factors, during the last several years and particularly under the leadership of Vladimir Putin, Russia has adopted a policy constructive engagement with the CAS. In this context oil and natural gas resources of the CAS have played an important role as already stated above. 

Political and Economic Interests of the USA and
Western Europe in the CAS

Western countries and particularly the USA have evinced keen interest in Central Asia after the Soviet disintegration. The availability of energy resources in the CAS has been an added element in the US policy towards Central Asia. This is evident from the US strong political and economic support and encouragement to the Multiple Pipeline Policy (MPP) being pursued by the CAS and Caucasian countries. In the US policy perspective, the MPP provides an additional opportunity to the CAS to reach out to the world energy market and earn hard currency for their economic development, which in turn, it was hoped, would help to enhance political stability and to support political independence of these newly independent countries. Moreover, according to some western analysts, the USA has specific political interest in the MPP and that is to restrict Russia’s monopoly position over the export routes of oil-gas resources of the CAS. Moreover, MPP would ultimately enable the USA to achieve its geopolitical interest and that of containing Russia ‘s sphere of influence over the Central Asian countries. Thus oil and energy resources of the CAS are an important component of the Great Game being played between Russia on the one hand and the USA on the other. The interest of the USA is evident from the policy statement issued in May 1998 by the USA and European Union on the ‘Caspian Energy’. In this policy statement the importance of oil-gas resources of the Caspian including those in the CAS has been recognized as also its contribution to the economic prosperity, energy security and stability in the region.

The European countries have also been active in promoting MPP of the CAS which is evident from the support to the Odessa-Brody pipeline project. In this project Ukraine and Poland are also major beneficiaries. Hence Poland and Ukraine have signed an accord on 16th January 2004 to set up a joint venture to construct a 556 Km pipeline, which will extend the Odessa-Brody pipeline which will link it to the port city of Polsk in Northern Poland. According to the deputy prime minister of Ukraine Andriy Klyuyev this extension project which will be completed by 2005 “…….has enormous significance for the government of Ukraine and will positively influence cooperation with the European Union”. He has stated that this project has the support of the European Commission. The European Commission Strategy paper 1999 which spelt out its program for Central Asia 2002-2004, elaborated common problems and shared challenges of Central Asia. In this strategy paper it is stated that one of the objectives of the European Commission is to support the CAS in making more sustainable use of natural resources of Central Asia, which naturally includes oil and natural gas resources. In fact, during the last decade the European Commission has given assistance of over $ 944 million to the five Central Asian countries for their economic development including development of oil-gas sector. Hence the European Commission has supported this Odessa-Brody pipeline project, which has been built with the intention of pumping Caspian oil to Europe. Considering the future prospects of exporting oil and gas to Europe through this Odessa-Brody pipeline, the CAS have evinced considerable interest in this project. In fact, Kazakhstan has given top priority to Odessa-Brody pipeline project. At the same time for Ukraine this pipeline is important since it will give an opportunity to earn big money through tariffs on the oil being exported through its territory. But since this pipeline bypasses Russia, efforts have been made by the oil-gas lobby in Russia by proposing to Ukraine and Poland to make this pipeline run in the ‘Reverse Mode’ that is allowing oil to flow from Brody to Odessa so that it can benefit Russia. According to some reports TNK-BP oil firms of Russia have offered $ 60-90 million annually for accepting this proposal. But it appears that there is a strong pro-western lobby, which is in favor of oil being exported through the port of Polsk in Northern Poland. From this account it is evident as to how international politics is being played by vested interests in matters concerning energy resources.

Both Turkmenistan and Kazakhstan while keeping close political and economic ties with the USA have tried to exercise their option with regard to promoting close relations with Iran and for exporting oil through that country. During the last decade Kazakhstan has supplied oil to northern ports of Iran over the Caspian Sea and in turn Iran exported equal quantity of oil through its southern ports in the Persian Gulf. Similarly Turkmenistan, which has territorial contiguity with Iran has been exporting oil and gas through Iran. With increasing scope for exports from their production, Turkmenistan seems to be interested in having a pipeline through Iran for increasing export capacity of its country, a proposal to that effect was made by the Turkmen president Sapramurad Niyazov to the Iranian Foreign Minister Kamal Kharrazi, who visited Ashgabat on the 15th January 2004. (Report of Turkmenistan.ru ). In turn Iranian foreign minister stated that Iran would like to increase the amount of oil transited from Turkmenistan, and also would like to double its annual trade turnover with Turkmenistan to $1 billion. For Kazakhstan pipeline through Iran will be cheaper and hence will support this proposal although the USA is not in favor of this pipeline project as it passes through Iran.

China-CAS Relations in Oil Sector

China is emerging as one of the important players in the CAS oil-gas market. This is partly because China’s energy needs are growing at an alarming rate of 10 million bbl/d over the next 10-15 years. Hence to meet its domestic demand for oil and natural gas China has been vigorously exploring alternative sources of supply and the Central Asian countries offer a good source. During the last decade the leaders of China and the CAS have made several exchange of visits at various levels including at high levels, which has created cordial political relations among them. Moreover, the creation of the Shanghai Cooperation Organization (SCO) in which China and several Central Asian countries are members besides Russia has further brought these countries closer politically and economically. This favorable situation has brought the CAS and China closer in the energy sector. In the opinion of the Turkmen president the CAS have to work out new strategies and approaches for meeting the needs of the 21st Century and in that ‘orientation towards China will become the main direction of transportation of oil and natural gas pipeline projects of both Turkmenistan and Kazakhstan. In turn China has shown interest in undertaking the pipeline projects from the Central Asian countries towards east linking centers in China. One such project is a pipeline from Aktyubinsk in Kazakhstan to Xingiang in eastern parts of China. Economic feasibility could be an important factor for such a project to materialize since this Aktyubinsk-Xingiang pipeline will be 2880 kilometers and estimated investment will be over 3.5 billion dollars. This will be perhaps the longest pipeline from Central Asia since CPC pipeline is about 1, 900 Kilometers, Kazakhstan-Turkmenistan-Iran pipeline about 1, 490 kilometers. However, according to some experts, the ambitious Chinese plan to build the longest pipeline in the world, from Western Kazakhstan to China, at a cost of $10 billion seems to have run into financing difficulties.

There is a political angle also in this regard. Russia has been forging close political and economic ties with China during the last decade. In the energy sector also Russia has proposed pipelines from its eastern regions of Siberia and the Far East to China to export oil and gas to the Chinese market and these proposals find positive reaction from the Chinese leaders. The Russian leaders have also shown keen interest in linking oil and natural gas fields of the Central Asian countries with the Russian pipelines to export oil and gas to China. Apart from economic gains from the tariffs earned for transporting oil and gas through their pipelines, Russia will get political leverage over the CAS in such proposals.

In lieu of conclusion it may be stated that during the Soviet era even though oil and natural gas sector of the Central Asian republics played a rather marginal role, this sector has assumed considerable importance for the newly independent states of Central Asia during the last over a decade. The CAS have made considerable efforts to explore and exploit oil and gas resources in their countries considering the growing importance of energy resources in the world market. Moreover, oil and gas are major sources of hard currency earnings for the CAS. At the same time oil and gas of the CAS have become objects of international politics. Russia has been trying to retain and increase its hold on the energy sector of the CAS not so much as to make economic gain but more to enhance its political influence in the Central Asian region. Hence to achieve this objective notwithstanding some differences, there have been wider co-operation between Russia and the CAS in the oil-gas sector. At the same time the USA has been investing in the oil sector of the CAS and offering technical assistance for the development of energy resources in these countries. Moreover, the USA has been actively supporting the Multiple Pipeline Policies of the CAS. These measures are partly intended to meet its own energy needs but mainly to contain Russia’s influence in the Central Asian region thus a New Great Game is being played. Moreover, China has been a relatively new entrant in the energy sector of the Central Asian region and it may assume more importance in the years to come considering its growing domestic demand for energy resources. In view of these complex political factors of great international significance, the Central Asian States can benefit economically from the availability of oil and natural gas resources in their countries if they can achieve their declared objective and sustain greater political co-operation among themselves.

References

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