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The Great Game on a razor's edge
By M K Bhadrakumar
Congress held a special hearing titled "The Shanghai Cooperation Organization:
Is it Undermining US Interests in Central Asia?"
Moscow seems to anticipate that another US bid for observer status with the SCO
is looming - and that unlike in 2005, Beijing may not oppose it this time.
Curiously, at the end of December, Russia formalized a mechanism for regular
political dialogue with the Mercosur grouping of Latin American countries,
which has a
definite slant (comparable to the SCO's) against US economic hegemony in the
Western Hemisphere.
Speaking on the occasion in Brasilia, Russian Foreign Minister Sergei Lavrov
said, "We have, by and large, been watching with the most sincere sympathy the
integration processes in South America. We consider that the strengthening and
elevation of the level of integration within the region works objectively in
favor of the creation of a more stable and more fair world order in which all
problems will be tackled multilaterally. I am certain that the partnership
between Russia and Mercosur will be instrumental in attaining this goal."
The US estimation is basically that behind the facade of unity, China, Russia
and the other SCO members and observer countries harbor serious differences of
opinion. While "discord" may be too strong a word, to quote a US strategic
analyst, "It is quite possible that differences will grow behind the facade of
[SCO] unity. Washington must be alert to exploit any openings to gain
geopolitical advantage. While the political, ideological and military
dimensions of the New Great Game in Central Asia continue to heat up, it should
be clear to all players that plenty of time remains in the contest. The SCO now
appears to have momentum on its side, but such an advantage can dissipate
quickly."
Thus the US would tell China that Russia was needlessly dragging it into an
anti-American bloc, and that there was nothing irreconcilable involving US and
Chinese interests in Central Asia. US strategic analysts have been arguing that
both the United States and China are interested in the stability of the region;
both are against the ascendancy of extremist forces in the region; both are
interested in Central Asia's transition to market economies and in the region's
globalization; both have stakes in the rapid development of Central Asia's
hydrocarbon sector and in the diversified and efficient flow of the region's
energy to the world market.
There are signs that the US is also using the oil-price issue as a wedge to
divide Russia and China. The US has also been campaigning in the capitals of
SCO member countries (and observer countries) that Russia is aspiring to
transform the SCO into a club of energy producers and to be its dominant
partner, and that if the Russian stratagem is allowed to proceed unchecked,
that will be detrimental to the interests of Central Asian energy producers -
and even of China and India. These are interesting straws in the wind.
The recent five-nation energy summit of major Asian consuming countries (China,
Japan, South Korea, India and the US) hosted by China is partly at least an
expression of Beijing's commonality of interests with Washington in leading an
energy dialogue of consuming countries vis-a-vis Russia. Conceivably, Beijing
may be harboring grievances that Moscow is keeping Chinese companies out of
investment opportunities in Russia's strategic oil and gas fields in Russia's
Siberia and the Far East, and even in the Russian pipelines leading to the
Chinese market.
China may also be displeased with Gazprom's insistent attempts to get in on the
Sakhalin energy projects. ExxonMobil is under pressure for a proposed gas
pipeline from Sakhalin-1 to China. Russia's gas monopoly seems to want to
discount any competition for its own plans for a gas pipeline to China through
the Altai highlands near the Russian-Kazakh-Mongolian border. Its preference
seems to be to buy all gas from Sakhalin-1 so that it remains the sole exporter
of gas to China. China is also keenly watching the holdup in Sakhalin-2, being
the highest-profile foreign-investment project in Russia's energy sector to
date.
Important investment decisions are pending in 2007 with regard to Sakhalin-1,
Sakhalin-2, Sakhalin-3, the Shtokman gas fields and the vast Russian energy
reserves in the Far East on the whole. How the Kremlin makes these decisions
will have a significant bearing on Chinese thinking and, indirectly, that can
cast shadows on the geopolitics of Central Asia.
Besides, the ground reality is that according to recent studies, Russia will
need to import 79 billion cubic meters (bcm) annually from Central Asia's
gas-producing countries (Kazakhstan, Turkmenistan and Uzbekistan) to meet its
domestic needs and to fulfill its export commitments. How this plays out in
Russia's overall political and economic ties with Central Asian countries will
have a significant impact on the regional milieu.
It is obvious that Gazprom views Central Asia as a priority area. A major
development in 2006 in Central Asia's energy sector was the agreement between
Gazprom and Uzbekneftgaz to undertake a geological survey of Uzbekistan.
Gazprom is committing $260 million in the coming three years alone for the
exploration of the Ustyurtki oil and gas deposits in Uzbekistan. Again, Russia
and Kazakhstan entered an agreement in October to set up a gas joint venture at
the Orenburg gas refinery in Russia - the first time Kazakhstan was making a
major investment in the Russian economy.
The joint venture is expected to process 30.6bcm gas in 2012, including 15bcm
from Kazakhstan's Karachaganak gas field (which has an estimated 1 trillion
cubic meters of reserves), which Russia and Kazakhstan are pledged to develop
jointly.
Niyazov's secret
The struggle over control of oil and gas and their transportation routes is
bound to intensify in 2007. It will remain central to the geopolitics of
Central Asia. In turn, pipeline politics in the Caspian can be expected to
produce strange bedfellows.
Already, geopolitical circumstances in the Caspian Basin have led to a sharp
deterioration in Russia-Azerbaijan relations. Again, despite all the wooing of
Kazakhstan by Washington, the indefinite postponement of the Odessa-Brody
pipeline project last week has stemmed from Kazakhstan having to be mindful of
Russian sensitivities.
Least of all, Iran remains the wild card in the pack. Depending on which way
the Iran nuclear issue develops in 2007, Iran can impact on the energy map of
China, Central Asia, the Caspian, the Caucasus, Russia and Europe - and,
conceivably, the United States itself.
But an entirely new ball game opens up with the sudden demise of Turkmen
president Saparmurat Niyazov on December 21. It calls attention to the
fragility of the Central Asian calculus. The political uncertainties centered
on Niyazov's successor come at an extremely tricky time when Russia, China and
the US are virtually preparing to besiege Ashgabat with offers and
counter-offers for gaining access to Turkmenistan's gas reserves.
Will Niyazov's successor follow his policy of "positive neutrality"? Russia
strives to retain its strategic leverage as the monopolist transporter and
re-exporter of Turkmen gas. The European Union, supported by the US, on the
other hand, is attempting to resist the Russian leverage by opening direct
access to Turkmen gas.
In 2006, the US and Turkey revived the 10-year-old idea of a trans-Caspian gas
pipeline project (as part of the so-called East-West Energy Corridor) to supply
Turkmen gas to Europe via Turkey. Turkmenistan's gas output may well approach
80bcm annually at present. The trans-Caspian pipeline envisages an annual draw
of 16bcm from the Turkmen output in the first stage, to be expanded to 32bcm in
the second stage. In the US geostrategy, the project is vital for reducing
Europe's heavy dependence on Russian energy supplies. Niyazov had prevaricated
in the light of Moscow's opposition. But what will be the outlook of Niyazov's
successor?
Russia, on the contrary, will insist on the fulfillment of its April 2003
framework agreement with Turkmenistan, which provides for a 25-year contract on
gas supplies to Russia, with Ashgabat pledging to supply 100bcm per year of gas
from 2010 onward (a total of 2 trillion cubic meters cumulatively over the
25-year period). Moscow now seeks to tap even more deeply into Turkmenistan's
gas reserves for meeting Russia's domestic needs and for re-export to Europe as
"Russian gas".
Meanwhile, Turkmenistan also stands committed to supply 8-10bcm of gas to
Iran's northern region, apart from occasionally voicing interest in the
Turkmenistan-Afghanistan-Pakistan pipeline project. China, on its part, entered
an agreement with Niyazov in April for purchase of 30bcm of Turkmen gas
annually from 2009 onward for a 30-year period, and jointly to explore and
develop Turkmen gas deposits on the right bank of Amu Darya River.
Besides challenging Russia's monopoly control of Turkmen gas hitherto, China
has also undercut the Russian practice of buying cheap Turkmen gas, by agreeing
that China will pay a price "set at reasonable levels, and on a fair basis,
pegged on comparable international market price". At the same time, China's
deal also threatens the West, which will be a strategic loser if Turkmenistan
decides to send its gas eastward instead of Europe.
The European Union's 3,400-kilometer Nabucco gas pipeline from eastern Turkey
to Austria and central Europe at an estimated cost of $5.8 billion, to be
commissioned in 2010, will be a net sufferer in that case, as it is predicated
on the expectation that Turkmenistan can be a key supplier country.
Niyazov was always an enigmatic figure on the Central Asian political
chessboard. But the biggest puzzle he has left behind was no doubt his chance
remark shortly before his death in a conversation with visiting German Foreign
Minister Frank-Walter Steinmeier in Ashgabat that Turkmenistan recently
discovered a super-giant gas field, South Iolotansk, with proven reserves of 7
trillion cubic meters of gas.
Like Corporal Hatfield in his sentry post in Manas Air Base in Kyrgyzstan,
Niyazov didn't probably realize what a maelstrom he was creating. If South
Iolotansk indeed holds such untold treasures, the impact on the energy map of
Russia, Europe and China will be dramatic. And certainly, the center of gravity
of the Great Game will overnight shift eastward to the home of the fabled
Ahalteke race horse - away from the SCO and all that. Central Asia, then, may
never be the same again.
M K Bhadrakumar served as a career diplomat in the Indian Foreign Service
for more than 29 years, with postings including ambassador to Uzbekistan
(1995-98) and to Turkey (1998-2001).
