The bevy of energy deals that Russian President Vladimir Putin recently signed with the leaders of the Central Asian states of Kazakhstan, Turkmenistan and Uzbekistan marks a major step toward the Kremlin's stated objective of creating a natural gas cartel. The deals simultaneously can help Moscow realize several other geopolitical goals wrecking Western pipeline plans for the region, as well as increasing the dependency of Central Asian states on Russia.
The most significant deal made during Putin's just-concluded Central Asian swing was a commitment to expand the so-called Prikaspiisky pipeline, which, when completed, will enable Russia to engross Turkmenistan's gas exports, upwards of 90 billion cubic meters (bcm) per year. [For background see the Eurasia Insight archive]. Separate deals with Kazakhstan and Uzbekistan will modernize Central Asia's energy infrastructure and allow Russia to continue to act as the chief funneler for the region's energy exports for the foreseeable future.
These deals provide Russia with the heft needed to act on its desire, in collaboration with Iran, to form a gas cartel. Such a cartel would not only serve as a vehicle for expanding revenues, but also as an instrument for diplomatic extortion. Iranian and Russian calls for a gas cartel go back to 2001-02. But it is only now that Russian leaders can realistically contemplate what they deceptively call "coordination among producers."
Dizzy with success from recent energy exploits, the Kremlin now appears to be interested in trying to decouple the EU from the US energy strategy in the Caspian Basin. A May 16 commentary broadcast on Russia's Channel One, the country's main state-controlled station, said the United States "is extremely interested in the absence of energy security for Europe, because Europe is its key competition." The commentary aired as EU officials prepared for the May 17 opening of a two-day energy summit with their Russian counterparts in the Volga River city of Samara.
Having achieved a dominant position in global gas markets, Moscow now is likely to turn its attention to gaining a sizeable, if not controlling interest in the liquefied natural gas market, which constitutes an energy alternative to the reserves in Central Asia and Russia proper. Over the nearer term, Putin's May energy coup will alleviate Russia's own gas shortages, likely enabling it to maintain its dominance over the European Union's gas market.
The secret of the Kremlin's energy-policy success to date has been its ability to cajole or coerce Central Asians into accepting payment at far below world market prices in return for the use of Russian pipelines for exports. The oil and gas thus acquired not only keeps Central Asia in a state of neo-colonial dependence upon Moscow; it allows the Kremlin to prop up the country's own wasteful, inefficient energy economy. Although Russia has begun raising domestic prices because of a prospective gas shortage that became visible in 2006, thanks to the recent deals, the Kremlin will be able to sustain its inefficient model at least through 2012. At the same time, Russia, through its pricing machinations, is retarding the natural course of economic and political development in Central Asia.
Ominously for Western energy interests in the region, the Prikaspiisky pact indicates that Turkmenistan is moving away from its neutral position. Analysts in Moscow are now convinced that Russia has cornered Turkmenistan's gas market, believing that the Central Asian state's reserves are insufficient to cover Ashgabat's myriad export promises to other countries, including China, India and Pakistan. Of course, the new Turkmen boss, Gurbanguly Berdymukhammedov, continues to speak about pursuing other opportunities, including the US-backed trans-Caspian pipeline, in an attempt to exude confidence that Turkmenistan will be able to tap into vast new energy reserves down the road. Russian planners clearly think Berdymukhammedov is bluffing, and that Turkmenistan has no viable economic alternative to dependence on Russia.
As a consequence of the Prikaspiisky pact, China, which has a deal in place to import up to 30 bcm of gas annually from Turkmenistan starting in 2009, is in danger of being left holding the bag if there is not enough gas after exports through Russian pipelines. [For background see the Eurasia Insight archive]. From the Western viewpoint, this situation could result in two undesirable scenarios. First, China's dependence upon Russia for gas could grow; or secondly, and far more likely, Beijing would feel compelled to take aggressive action, and pay top dollar, to lock up supplies from other sources, including politically disreputable states. Either alternative would do little to enhance US-Chinese relations.
Conventional wisdom holds that it's not possible to get something without giving something in return, and Russia's recent energy deals were not an exception to this rule. In this case, Kazakhstan made out fairly well, certainly the best among the states involved outside of Russia. For one, Kazakhstani President Nursultan Nazarbayev secured Russian consent to a significant price increase for Kazakhstani gas shipments that are re-exported to the EU. Nazarbayev also received a Russian commitment to expand the Caspian Pipeline Consortium pipeline, which is a major avenue for Kazakhstani oil exports. [For background see the Eurasia Insight archive]. The CPC deal marked only a partial victory for Nazarbayev, however. Since Russia holds only a 24 percent stake in CPC, it is reluctant to see it capture a larger share of the region's oil traffic. Russia would rather see routes fully controlled by state-owned Transneft gain the business. Though reluctant, Putin evidently realized he had to offer some incentives to Nazarbayev, as Kazakhstan is the only Central Asian state currently possessing both the means and the political dexterity to say
Stephen Blank is a professor at the US Army War College. The views expressed this article do not in any way represent the views of the US Army, Defense Department or the US Government.