Energy Politics in Central Eurasia

“Why is the electricity supply faltering in Central Asia?” asked Stacy Closson, Visiting Distinguished Lecturer, Patterson School of Diplomacy and International Commerce, University of Kentucky, and former Fellow, Woodrow Wilson Center at a 28 March 2012 Kennan Institute lecture. “Informal networks, and the resulting corruption, are most responsible for hampering Central Asian energy security.”

Energy is the most corrupt sector of the economy in Kyrgyzstan, according to Closson. She outlined several examples of corruption on a national scale, including private distributors that are managed by officials, the diversion of state resources for private sale, and bribes to law enforcement from energy companies. At the local level, corruption takes the form of favoritism shown to commercial and residential consumers, unmetered communities, and the existence of unofficial power lines.

There are consequences to such corruption. Closson recounted how Kyrgyzstan is subject to rolling blackouts and insufficient heating supplies for the winter, which contributes to the unrest in that country. Less obvious consequences to the corruption in the energy sector include a drag on economic growth and exacerbated environmental degradation. Closson contended that the informal networks in the energy sector are also diminishing regional security as relations between states of Central Asia deteriorate through increased mistrust and decreased state capacity resulting from crippling corruption. In such an atmosphere, foreign investors have shown little interest in the region. Local officials squander what international assistance is provided, and consequently many international financial organizations are leaving the region. If these informal networks are so pervasive and damaging to regional cooperation, Closson questioned, what can be done about them?

Closson contended that the answer to promoting regional prosperity lay in “regionalism,” the building of cooperative interregional relations within Central Asia: “Regionalism will be critical to enhancing the effectiveness of the individual state energy systems and economies, as well as the potential for export.” She suggested that through regionalism Central Asian states can finally find an effective replacement for the trade patterns that underpinned the region’s economies during the Soviet period. Regionalism would “re-territorialize” the region as a collection of economies based upon competitive cooperation, and would work against the present non-competitive arrangements between weak firms that function as a conduit for the corrupt acquisition of assets and profits through opaque structures.

“There is no one solution to overcome corrupt systems,” Closson observed. To better understand the present reality of Central Asian energy relations, we need to conceptualize their operation in terms of informal networks. These informal networks, which are shrouded in corruption, negatively impact regionalism in Central Asia and must be better understood and addressed if regional energy security is to be achieved.

“It’s very important that we focus on the issues of importance in terms of energy trade on a global level,” said Greg Gleason, Professor of Eurasian Security Studies, George C. Marshall European Center for Security Studies. Expressing his optimism about the future of energy security in Central Asia, he explained that decisions should be based upon an analysis of global trends as well as local realities.

Energy, according to Gleason, is not part of any modern-day “Great Game” in Central Asia—there is no Great Game. Instead, there is dynamism and competition in the energy markets. Rather than focus solely on oil and gas production and transit, analyses must also include comparisons of other forms of energy currently in use and that will increase in the future.

Russia’s role in the region is a perfect example for the need to understand the changing trends in global energy, according to Gleason. Russia is an energy superpower. In 2010, it was first in oil and gas production, first in gas export, first in uranium enrichment services, and second in oil exports. Russia also has a fixed and strategic distribution system for much of its energy exports—via pipelines—that often tie Russia’s energy trade to certain political objectives. Over time, Central Asian nations that relied on Russia’s pipeline networks for their energy exports have increasingly found it in their interests to explore alternative export routes.

Gleason stated that the evolution of energy markets is not limited to developments in oil and gas transport. Technology is changing the global energy market and energy production, thus changing relationships between countries and investments in energy. For example: The innovation of shale gas production in the United States has replaced the anticipated need to import liquid natural gas from Russia’s east coast. As a result, Russia must find new markets for this product.

Gleason predicted that there will be a substantial world market for nuclear energy, and that Kazakstan will be a major player. Kazakstan has emerged as the world’s largest producer of uranium ore for civilian energy production. But Kazakstan is also strongly pursuing a strategy of adding value to its natural resource exports, and is therefore exploring the use of laser technology to enrich uranium for reactor fuel. By embracing new technology, Kazakhstan and other countries could render Russian centrifuge uranium enrichment non-competitive. Gleason noted that at a recent summit of world leaders on nuclear issues, President Obama met individually with only four heads of state, including President Nazarbayev of Kazakhstan. That meeting was “a reflection of the importance of Kazakhstan in the international community,” said Gleason.

Gleason echoed Closson in contending that Central Asian nations could benefit a great deal from cooperation. “Regionalization—regional cooperation—is advantageous for all parties involved but is not something that is automatic.” He argued that real solutions to the region’s problems cannot come from government-directed programs, which are implemented with a top down philosophy. In order to be successful, Gleason concluded, an integrated Central Asian market must be developed by attracting a balance of producers and consumers to establish market-driven objectives.

By Thea Cooke
Blair Ruble, Director, Kennan Institute

The Kennan Institute speaker series is made possible through the generous support of the Title VIII Program of the U.S. Department of State.