The Natural Gas Conundrum: Transformation of the Central Asian Energy Security Complex after 1991

Václav Lídl The Natural Gas Conundrum Transformation of the Central Asian Energy Security Complex after 1991 KAROLINUM Václav Lídl | The Natural Gas Conundrum The study examines energy security in the Central Asia region, with an emphasis on the natural gas sector. The research presented in the book attempts to answer the question of whether the various state actors in Central Asia are more inclined towards a strategic or market-oriented approach to energy policy formulation. Answering this research question aimed at better understanding the approach of individual state actors towards large infrastructure projects such as the construction of the Central Asia-China Gas Pipeline. Based on the theoretical literature, a model was constructed to assess the natural gas sector in terms of energy policy formulation by individual state actors. This model was then applied to three case studies of key state actors within the Central Asian regional energy security complex. These are the case studies of Russia, China and Turkmenistan. natural gas conundrum_mont.indd 1natural gas conundrum_mont.indd 1 02.01.2023 11:3202.01.2023 11:32 The Natural Gas Conundrum Transformation of the Central Asian Energy Security Complex after 1991 Václav Lídl Reviewers: Mgr. Martin Jirušek, Ph.D., Masaryk University, Brno Dr. Marcin Kaczmarski, University of Glasgow Published by Charles University, Karolinum Press Prague 2022 Edited by Kristýna Kocourková Layout by Jan Šerých Typeset by DTP Karolinum Press First edition This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. © Charles University, 2022 © Václav Lídl, 2022 ISBN 978-80-246-5265-8 ISBN 978-80-246-5285-6 (pdf) https://doi.org/10.14712/9788024652856 This publication was published with the support of the Ministry of Education, Youth and Sports and the Czech Recovery Plan within the project Transformation for Universities at CU (reg. No. NPO_UK_MSMT-16602/2022). NextGenerationEU Funded by the European Union Charles University Karolinum Press www.karolinum.cz [email protected] Contents Acknowledgments 7 Note on Transliteration 8 1. Introduction 9 Research Topic 9 State of the Research 10 Energy security 11 Behavioral patterns of state actors in the formulation of energy policy 13 The energy security complex 16 Energy security in Central Asia 18 Research Design 20 Theoretical Framework 21 Strategic-oriented approach vs. market-oriented approach 22 Theoretical model for assessment of the natural gas sector in Central Asia 27 Construction of the Central Asian energy security complex 28 Methodology and Data 34 2. Russia’s Energy Policy in Central Asia 39 Energy Resources 39 State Actors in the Energy Sector 42 Energy Policy 47 Russia’s western energy markets 51 Russia’s eastern energy markets 53 Energy Policy in the Central Asian Energy Security Complex 56 The Central Asia–Center Gas Pipeline System 59 Russia’s dependence on Central Asian energy 60 Analysis of Indicators 64 3. China’s Energy Policy in Central Asia 68 Energy Resources 68 State Actors in the Energy Sector 73 Energy Policy 77 Energy Policy in the Central Asian Energy Security Complex 81 China’s activities in Kazakhstan 82 China’s activities in Turkmenistan 84 China’s activities in Uzbekistan, Tajikistan, and Kyrgyzstan 86 Analysis of Indicators 91 4. Turkmenistan’s Energy Policy in Central Asia 96 Energy Resources 96 State Actors in the Energy Sector 100 Energy Policy 104 Northern route 108 Eastern route 112 Southern route 116 Route through Iran 119 Western route 120 Turkmenistan’s Energy Policy in the Central Asian Energy Security Complex 124 Turkmenistan’s relationship with Gazprom 124 Turkmenistan’s relationship with the China National Petroleum Corporation 129 Analysis of Indicators 154 5. Conclusion 160 Findings of the Research 160 Discussion 167 Bibliography 170 List of Tables 190 7 Acknowledgments I would like to express my utmost gratitude to all those who assisted me with my work on this monograph. Primarily, I would like to thank my former supervisor, PhDr. Jan Šír, Ph.D., and my family. Moreover, I would like to extend an acknowledgment to my colleagues from the Faculty of Social Sciences of the Charles University, the Central Asia-Caucasus Institute in Washington, D.C., Johns Hopkins University, Masaryk University, George Washington University, Moscow State University, University College London, Shanghai Academy of Social Sciences, and many others. A special acknowledgment belongs to the Grant Agency of the Charles University, which helped me significantly in financing my work on this study. 8 Note on Transliteration The transfer of terms and names between different cultures is not only a linguistics issue. Knowledge of the extra-linguistic context is usually necessary. The transliteration of names in this book was very challenging, especially because of the multidisciplinary nature of the text and its wide territorial span. I worked chiefly with primary and secondary sources available in English and Russian, but I also tried to gather all possible datasets originating from different ideological and political directions. Therefore, this monograph works not only with English and Russian terms and concepts, but quite often uses terms from local Turkic and Iranian languages as well as the Chinese language. Standard ISO transliterations were used in all cases. 9 1. Introduction Research Topic The Central Asian region experienced an increasing engagement of many external state actors after the fall of the Soviet Empire, and even earlier, between 1989 and 1991. The main stimulus for this increased engagement was the unique opportunity for world powers to gain access to the region’s vast mineral wealth. The United States and Russia confirmed their roles as the two most important external actors in Central Asia following the events of September 11, 2001. Nevertheless, the United States lost a great deal of interest in the region after Barack Obama became president in 2009, and this process culminated in the termination of the mandate of the International Security Assistance Force (ISAF) in Afghanistan and the drawdown of troops at the end of 2014. After that, Russia and China became the principal great powers asserting their interests in Central Asia. The energy and economic interests of Russia and China in Central Asia significantly overlap. Russia’s political elite still perceives the region as the “South” of the former Russian Empire, or as Russia’s “Near Abroad.” For its part, China has begun to refer to Central Asia as the “Chinese Far West.” Russia has been attempting to bring the region back into its sphere of influence by means of “integration initiatives” such as the Eurasian Economic Union and the Collective Security Treaty Organization (CSTO). China, by contrast, favors an “open door policy” toward Central Asia. Its emphasis is on various transportation infrastructure projects known as the Belt and Road Initiative. The main topic of this monograph is energy security in Central Asia after 1991. It pays attention to the energy interdependence of the Central 16 The realist paradigm perceives energy policy as existing in a highly anarchical system of international relations that is primarily based on the distribution of power. Power is in this sense based on material factors and especially on the nature of the energy resources. Among others, Martin Jirušek, Tomáš Vlček and Filip Černoch rigorously deconstruct the states’ formulation of energy policy. Jirušek designed the models of the strategic-oriented and market-oriented energy policy that are applied and developed in this book.24 Market-oriented energy policy exists in opposition to the previously defined strategic orientation. The market-oriented model is based on the assumptions of neoclassical and neo-institutional economics and the liberal paradigm. According to Morris Adelman, this model assumes that market forces are the only thing capable of allocating energy resources effectively. It sees energy resources as no different than any other goods on the market. This approach is primarily founded on the concept of the “rational actor.” Geographical or geopolitical determinants are considered almost irrelevant.25 Lynne Chester even goes so far as to say that even to merely discuss energy security prevents the market from working properly.26 She understands energy security in the context of a negative self-fulfilling narrative. Erin Carter and Pietro Nivola explicitly argue that using energy resources as a tool of foreign policy is ineffective and hardly ever happens.27 In sum, the strategic-oriented and the market-oriented models of energy policy rely on opposing ideal theoretical paradigms. The reality on the ground is usually more complex and subtle, as is shown in this book. The energy security complex Barry Buzan, Ole Waever and Jaap de Wilde were the first to elaborate on the concept of the regional security complex in 2004 in their book 24 Martin Jirušek, Tomáš Vlček, Filip Černoch et al, Energy Security in Central and Eastern Europe and the Operations of Russian State-Owned Enterprises (Brno: Masaryk University Press, 2015). 25 Morris Adelman, The World Petroleum Market (Baltimore: Johns Hopkins University Press, 1973). 26 Lynne Chester, “Conceptualizing Energy Security and Making Explicit Its Polysemic Nature,” Energy Policy 38 (2012): 887–895. 27 Erin Carter and Pietro Nivola, “Making Sense of Energy Independence,” in: Energy Security: Economic, Politics, Strategies and Implication (Washington D.C., Brookings Institution Press: 2009), 105–116. 17 Regions and Powers: The Structure of International Security.28 They describe the regional security complex of the post-Soviet space, with the Russian Federation at its center. Back then, they claimed that Central Asia is either a sub-complex in the framework of a broad post-Soviet regional complex, or a nascent regional security complex of its own. Buzan et al. especially highlight the presence of other great powers in the region, primarily the United States and China.29 In my work, I consider Central Asia a fully-fledged regional security complex, especially when it comes to energy. Other authors have continued to develop the concept of the regional security complex and applied it to Central Asia. One of them is Ekaterina Klimenko, who regards Central Asia as a fully developed regional security complex of its own and not just a sub-complex of the post-Soviet space.30 Evgeny F. Troitskiy analyzed how the presence of Russia and the United States in Central Asia influenced the formation and establishment of the Central Asian regional security complex from 1990 to 2010. He claims that it was the Central Asian states’ interaction with these two great powers that resulted in the formation of this complex.31 Marek Musiol analyzed five securitized issues that are linked within its internal structure. These are: water and economic issues; issues of extremism, corruption, and degradation of state institutions; the “new great game” as it relates to geopolitics, oil, gas, and the transit of resources; drug trafficking; and finally, environmental and natural challenges. The geopolitics of oil and gas is the essence of the third issue, the “new great game,” and is of the utmost importance for this book.32 The concept of the regional energy security complex is less developed and less frequently applied than the concept of the regional security complex. In fact, it has only been studied in very few instances. Mikhail Zelensky studied the regional energy security complex of the Baltic Sea Region with a special focus on the impact of the Nord Stream Pipeline 1 on its security architecture. Zelensky’s study is quite similar to this one in that it examines the impact of a pipeline construction on the situation in 28 Barry Buzan and Ole Waever, Regions and Powers: The Structure of International Security (Cambridge: Cambridge University Press, 2004), 50–70. 29 Ibid: 397–436. 30 Ekaterina Klimenko, “Central Asia as a Regional Security Complex,” Central Asia and the Caucasus 12, no. 4 (2011): 7–20. 31 Evgeny F. Troitskiy, “Central Asian Regional Security Complex: The Impact of Russian and US Policies,” Global Society 29, no. 1 (2014): 2–22. 32 Marek Musiol, “Post-Soviet Central Asia as Unique Regional Security Complex,” The Polish Quarterly of International Affairs 24, no. 4 (2015): 59–68. 18 a regional energy security complex.33 For his part, Jack Sharples applied the concept of the regional energy security complex in his study of the bilateral energy trade relationship of Russia and Poland. As transit states of the complex, he added Belarus, Germany, and Ukraine.34 As can be seen from this review of the literature, the concept of the regional energy security complex is quite new and underused in academia in spite of its promising nature, which makes identification of additional closed systems suitable for research. Moreover, the concept appears never to have been consistently applied to the Central Asian region. Therefore, its application to Central Asia is a new step increasing knowledge of both regional energy security complexes in general and of the Central Asian region in particular. This book applies the aforementioned theoretical models to the real situation in Central Asia. Energy security in Central Asia Although my research into the Central Asian energy security complex is entirely original, several authors have previously covered energy security in Central Asia from other perspectives. Theoretical concepts of energy security, however, do not seem to play a central part in their studies. They use energy security, if at all, to explain and support various arguments about international economic or political relations between the individual states in the region. Marléne Laruelle35 and Sebastien Peyrouse36 focused their research on the rising economic and political influence of China and its impact on the energy security of particular states in Central Asia and the region in general. They claim that China’s attention, as directed to Central Asia since the beginning of the twenty-first century, will have significant impact on regional economic and political dynamics. Alexandros 33 Mikhail Zelensky, Changing the Energy Security Balance in the Baltic Sea Region: Building Regional Energy Security Complex and Community. Nord Stream Gas Pipeline Case Study (Tampere: University of Tampere, 2009). 34 Jack Sharples, “Russo-Polish Energy Security Relations: A Case of Threatening Dependency, Supply Guarantee, or Regional Energy Security Dynamics?” Political Perspectives 6, no. 1 (2012): 27–50. 35 Marléne Laruelle and Sebastiene Peyrouse, China as a Neighbor: Central Asian Perspectives and Strategies (Washington, D.C.: Central Asia-Caucasus Institute and Silk Road Studies Program, 2009). 36 Sebastiene Peyrouse, Economic Aspects of the Chinese-Central Asia Rapprochement (Washington: Central Asia-Caucasus Institute and Silk Road Studies Program, 2007), 46–69. 19 Petersen37 and James Coomarasamy38 identify China as the main rival of the United States and Russia in Eurasia, with Beijing gradually becoming the most active player in Central Eurasia. Petersen claims that China’s increasing involvement in Central Asia is a bid for dominance in all of Eurasia.39 All the authors mentioned believe that the impetus of China’s involvement in Central Asia can be traced back to the issue of energy security of China itself. This book intends to push the debate on the rising economic presence of China in Central Asia forward, and to broaden it to include the energy security of the most important energy player in Central Asia – Turkmenistan. The energy complex of Turkmenistan has been thoroughly analyzed by Anette Bohr.40 She focuses her attention on the connection between Turkmenistan’s gas sector and its internal politics. According to her, the gas sector is the backbone of Berdimuhamedow’s regime and the prime driver of Turkmenistan’s foreign policy. Luca Anceschi,41 among others, studied the formulation of foreign and energy policies of Central Asian states and how they overlap. He argues that when speaking of Turkmenistan, foreign, domestic, and energy policies are almost inseparable, and that energy security influences all of them more than anything else. Shamil Yenikeyeff42 and Marta Brill Olcott43 have also significantly contributed to the debate on the energy security of Turkmenistan and other Central Asian states. They regard the pursuit of the security of energy supplies and security of energy exports as the crucial factors determining the behavior of the Central Asian states, as well as of China and Russia. The academic discussion of the rising economic presence of China in Central Asia and the energy security of Turkmenistan is directly linked to a third issue, the geopolitics of transportation in Central Eurasia. This 37 Alexandros Petersen, The World Island: Eurasian Geopolitics and the Fate of the West (New York: Praeger, 2011), 10–36. 38 Jamie Coomarasamy, “China’s Westward Pivot: What It Means for Central Asia and Russia,” Mediterranean Quarterly 20, no. 9 (2014): 48–59. 39 Alexandros Petersen, “Narodnaya respublika prevrashaetsya v imperiyu,” Pro et Contra 1–2, no. 58 (2013): 10–36. 40 Annette Bohr, Turkmenistan: Power, Politics and Petro-Authoritarianism (London: Chatham House Russia and Eurasia Programme, 2016), 20–35. 41 Luca Anceschi, “Analyzing Turkmen Foreign Policy in the Berdymuhammedov Era,” China and Eurasia Forum Quarterly 6, no. 4 (2008): 35–48. 42 Shamil Yenikeyeff, “Energy Interests of the ‘Great Powers’ in Central Asia: Cooperation or Conflict?” International Spectator 46, no. 3 (2010): 61–78. 43 Olcott, Turkmenistan: Real Energy Giant, 62–72. 20 debate is especially influenced by the works of Frederick S. Starr44 and Alexandros Petersen.45 Their work is very strongly centered on the issue of energy security, and it incorporates various political and geographical factors. Both Starr and Petersen have always been attracted by the heartland-pivot theory of Halford John Mackinder46 and they understand the significance of energy infrastructure in Central Asia accordingly. Stephen Blank47 and Richard Pomfret48 similarly emphasize the importance of the opening of new energy corridors in Central Eurasia. They consider the renewed interest in Central Asian energy resources since the Soviet collapse as a game-changer in relation to the energy security of all Central Asian states as well as the adjacent great powers – China, Russia, India, Iran, and Turkey. As stated above, the three most important topics in the ongoing academic discussion of energy security in Central Asia are the rising economic presence of China in the region, the energy security of individual states in the region, and the geopolitics of transportation in Central Asia. This book aims to follow up on all three of these topics. The energy security of particular states of the region is the essence of this book, along with the rising influence of China in the Central Asian economies. The Chinese influence is strongly felt in the new energy infrastructure projects in the region. Moreover, as was mentioned at the beginning of this subchapter, the concept of energy security has so far only played a collateral or explanatory role in the literature. It almost never plays the central role. This book’s contribution lies in putting energy security into the central position as it relates to Central Asia. Research Design This book examines energy security in the context of the Central Asian regional energy security complex, or ESC, and in the context of the 44 Frederick S. Starr, “Looking West: China and Central Asia,” Testimony Before the US-China Economic and Security Review Commission, March 18, 2015. 45 Alexandros Petersen, Russia, China and the Geopolitics of Energy in Central Asia (London: Centre for European Reform, 2011), 89–108. 46 Halford John Mackinder, “The Geographical Pivot of History,” Geographical Journal 23, no.4, (1904): 421–437. 47 Stephen Blank, “Chinese Energy Policy in Central and South Asia,” Korean Journal of Defense Analysis 21, no. 4 (2009): 435–453. 48 Richard Pomfret, The Central Asian Economies Since Independence (Princeton: Princeton University Press, 2014). 21 construction of the Turkmenistan–China Gas Pipeline (TCGP). It seeks to answer one overarching research question that deals with the environment and the actors of the Central Asian ESC: what is the predominant approach to energy policy among the states that make up the regional energy security complex of Central Asia? States can display two major behavioral patterns within an ESC from the point of view of energy policy: market-oriented behavior, focused on maximization of profit, or strategic-oriented behavior, focused on maximization of the energy security of the state and other foreign policy and security goals. If the majority of the states in the Central Asian ESC display market-oriented behavior, that means that the construction of new infrastructure such as the TCGP is dictated by market competition and has limited political implications. If strategic-oriented behavior predominates, the construction of new infrastructure projects is dictated by the need to maximize energy security and hence has clear political implications. This book endeavors to interpret energy-related disputes between Russia and Turkmenistan, and China’s rising presence in Central Asia, in terms of those states’ approaches to their energy policies. Although at first glance it could seem that it is only logical that authoritarian regimes are naturally prone to favoring strategic-oriented control and management of their respective energy sectors, the academic literature and business practice show that that is actually not the case. This is especially true for China, which displays the strongest pro-market orientation. However, the energy policies of Russia, Turkmenistan, and China have not yet been rigorously studied, which is the reason this book focuses on the region they inhabit and their shared energy security complex. Theoretical Framework The previous chapters present the topic of this book’s research, its relevance to the most important academic debates about energy security in Central Asia, and the main question to be answered by the research. The following chapter presents the theoretical framework that underlies the research. It creates a theoretical model for analyzing the behavioral patterns of individual states with respect to their energy security. To begin, it describes the Central Asian regional energy security complex in terms of the postulates of the Copenhagen School of security studies and its followers. 22 Strategic-oriented approach vs. market-oriented approach In order to answer the research question about the orientation of the Central Asian ESC states’ energy policies, this book creates its own models for the study of the natural gas sector. One theoretical model exemplifies the strategic-oriented approach to energy policy, and is based on the assumptions and conclusions of the realist school of international relations. To begin, I present the principal features of the realist paradigm, then the strategic-oriented approach to the study of energy policy, and finally, a model for assessing the natural gas sector that I apply in my research. It must be acknowledged that this model expands upon the model used in research undertaken by Martin Jirušek in 2015.49 The realist school of international relations, which is the foundation of the strategic-oriented approach to the study of energy policy, is based on three core assumptions. First, anarchy is unequivocally the predominant condition of humanity. Order, justice, and morality are not the rule but rather the exception. Political power is the one decisive factor in every interaction within a system. Second, the most basic element in society is a group. Groups come into conflict with each other by virtue of their individual natures. Groups do not necessarily have to be the nation states that are predominant at present. In the past, for instance, the predominant groups were tribes and empires. Third, what predominantly motivates human beings are considerations of power and security.50 The realist paradigm further assumes that energy resources play an indispensable role in the formulation of the external policies of states and are unquestionably a source of international power. The more energy resources a state possesses, the stronger it is. Of course, a state must be capable of extracting and transporting those resources and there must exist a sufficient demand for them.51 The competition between states in this area reflects human nature, which is aggressive and selfish.52 Producer and transit states will try to harness their energy resources and infrastructure and gain more power, while consumers will seek to gain 49 Jirušek, et al., Energy Security in Central and Eastern Europe. 50 Robert G. Gilpin, “The Richness of the Tradition of Political Realism,” in: Neorealism and its Critics, ed. Robert O. Keohane (New York: Columbia University Press, 1986), 287–304. 51 Jeffrey W. Legro and Andrew Moravcsik, “Is Anybody Still Realist?” International Security 24, no. 2 (1999): 5–55. 52 John Agnew, Geopolitics: Re-visioning World Politics (London: Routledge, 2003), 69–75. 23 control over the sources of energy. States and state actors perceive interstate relations as a zero-sum game.53 There are two factors that influence international politics in the framework of neoclassical realism the most. These are the actual power of the state relative to other states, and the perception of the state’s relative power by its ruling elite. Leaders of states, and not states per se, are the principal actors in international relations. Therefore, a system is created by the leaders of individual states.54 According to Robert Gilpin, neoclassical realism distinguishes two basic types of international power: national power and state power. National power is often described as the military power of a state, but it is actually an aggregation of various material factors such as gross domestic product, the state’s share of world trade, and its number of inhabitants. State power is the ability of the state’s institutions to utilize national power to achieve its goals. In other words, a state with less national power may be able to project more state power by improving the functioning of its internal structure and organization. On the other hand, a state with substantial national power may project less state power to support its foreign policy aims if it has a less efficient internal structure.55 Understanding the difference between national and state power is of utmost importance. Harnessing the national power of energy resources in order to increase state power is far easier in those states, where state institutions directly control vital enterprises and firmly regulate the energy market. In fact, non-democratic states such as Russia and China effectively utilize their energy resources in their foreign policies, projecting their state power far beyond their national borders, according to Michael Wesley.56 To evaluate energy sources solely through the lens of market mechanisms is possible only once they lose their strategic importance. The basic assumptions of the realist paradigm are shown in Table 1. The realist paradigm and its implications undergird the strategic-oriented model of energy policy. Any application of this model to real-world phenomena assumes that the energy sector is a strategically sensitive area. States perceive international engagement in this area as crucial for 53 Kenneth N. Waltz, Theory of International Politics (New York: McGraw-Hill Higher Education, 1979), 38–60. 54 Ibid, 144–177. 55 Robert Gilpin, War and Change in World Politics (London: Cambridge University Press, 1983): 1–23. 56 Michael Wesley, Restless Continent: Wealth, Rivalry and Asia’s New Geopolitics (Sydney: Black, 2015): 210–232. 24 Table 1: Basic assumptions of the realist paradigm Power is the one decisive factor in every interaction within an anarchical international system. States are the principal units of social reality. Individual states are inevitably in conflict with one another because of their nature. Power and security are the predominant human motivations. Interstate relations are a zero-sum game. Military power is the most prominent material factor influencing the political pow er of a nation. Control and exploitation of natural resources are crucial to main tain a nation’s industry, and consequently, the strength of its military power. The realist paradigm is rooted in the logic of classical geopolitics. State involvement in the energy sector is crucial. Market forces are not seen as reliable in supporting the state’s power; thus, it is the state actors who aim to control resources and supply routes. Energy resources are both reasons for potential conflict and tools for resolving conflicts. The inner processes of states are important, especially the perceptions of the state’s representatives. There is an important difference between national and state power. Source: Scheme created for the purposes of this research their survival. It therefore follows that such a sensitive area cannot be left solely to the influence of market forces. As a result, state actors seek to dominate energy resources (directly or indirectly) through a form of “resource nationalism.”57 The strategic-oriented model of energy policy assumes that both producers and consumers desire to gain control over the sources of energy, which creates a significant potential for conflict.58 Some states, such as Russia, Iran, and Venezuela, sell their energy resources to preferred customers for significantly lower than market prices. In doing so, their goal is to strengthen their influence in target countries or to strengthen their own security, among other things. According to Carol Saivetz, the setting of the price of natural gas shipped from Russia to some post-Soviet countries in the first decade of the twenty-first century was a blatant example of this behavior.59 That is not to say 57 Jirušek, et al., Energy Security in Central and Eastern Europe. 58 Klare, The Race for What’s Left, 50–68. 59 Carol R. Saivetz, “The Ties That Bind? Russia’s Evolving Relations with Its Neighbors,” Communist and Post-Communist Studies 45, no. 3–4 (2012): 401–412. 25 that all exporters of energy resources prefer gaining geopolitical power over maximization of profit. However, Martin C. Spechler convincingly shows that the power of an individual state cannot be exclusively based on its economic power but must also rely on other geographical, political, and cultural factors.60 If we consider the energy sector in isolation, the last decades have shown that the majority of states exercise control of their national companies that are active in this strategic sector of the economy. Based on the evidence adduced by Anders Aslund in the case of China, Russia, and Turkmenistan, as well as other states of the Central Asian ESC, the state directly or indirectly controls all key energy enterprises.61 As of 2010, state-owned energy enterprises were estimated to own approximately 70 to 80 percent of the world’s natural gas reserves and to control 85 percent of the world’s petroleum reserves.62 Market-oriented energy policy is perceived in this book as a complete opposite of strategic-oriented policy. The reality is definitely more nuanced, but to create a workable and effective research framework, I had to make this generalization. In contrast to the strategic-oriented approach to the subject matter, Morris Adelman presumes that it is only the market forces who are able to allocate energy resources effectively; hence, it is quite ineffective to use them as tools of foreign policy.63 Of course, it must be emphasized that both the market-oriented approach and the strategic-oriented approach used in the study of energy policy are merely ideal models for the purposes of academic analysis. In a real-world situation, the two foundations for policymaking are usually mixed in various proportions. In essence, the two models represent the dichotomy between a state-guided and a market-guided energy policy.64 This dichotomy is summarized below in Table 2. 60 Martin C. Spechler, “Why Does China Have No Business in Central Asia?” China and Eurasia Forum Quarterly 7, no. 2 (2009): 569–84. 61 Anders Aslund, How Capitalism Was Built: The Transformation of Central and Eastern Europe, Russia, and Central Asia (New York: Cambridge University Press, 2007): 182–206. 62 Antonio Marquina, “Antonio Marquina on the Deceit of Globalization, Energy Security and Challenges to European Foreign Policy,” Theory Talks, January 13, 2009, http://www.theory -talks.org/2009/01/theory-talk-25.html. 63 Morris Adelman, The World Petroleum Market (Baltimore: Johns Hopkins University Press, 1973). 64 Jirušek, et. al, Energy Security in Central and Eastern Europe. 32 Table 6: Trade volumes between Kazakhstan, Russia, and China, 2012–2020 (mil. USD) 2012 2013 2014 2015 2016 2017 2018 2019 2020 RF import 6,747.2 5,875.3 6,388.5 4,547.5 3,509.2 4,515.0 5,162 5,602 4,899 RF export 17,110.5 17,971.8 13,807.7 10,529.3 9,129.8 11,473.0 12,392 14,065 13,300 CN import 16,484.4 14,373.7 9,799.4 5,480.1 4,214.9 5,777.9 6,272 7,823 9,004 CN export 7,497.7 8,364.5 7,357.2 5,087.8 3,665.7 4,692.2 5,384 6,537 6,346 Source: The International Trade Centre Table 7: Trade volumes between Turkmenistan, Russia, and China, 2008–2020 (mil. USD) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 RF import 100.1 45.0 148.0 142.6 183.8 139.4 90.9 71.3 331.2 83 155.0 151.4 320.3 export 809.0 999.0 717.5 1,116.0 1,211.0 1,430.0 1,138.0 843.9 570.6 343 288.8 543.0 650.0 CN import 28.4 38.5 1,045.0 4,693.0 8,673.0 8,893.0 9,516.0 7,828.0 5,563.0 5,933 8,119.0 8,686.0 6,071.0 export 801.9 915.7 525.1 784.1 1,699.0 1,138.0 954.3 815.5 338.5 361 316.7 431.0 444.7 Source: The International Trade Centre 33 Table 8: Trade volumes between Uzbekistan, Russia, and China, 2012–2019 (mil. USD) 2012 2013 2014 2015 2016 2017 2018 2019 RF import 1,390.8 1,256.9 0869.8 0575.8 0,761.0 1,010 1,636.6 2,067.2 RF export 2,324.7 2,803.9 3,113.6 2,221.9 1,965.0 2,620 3,382.7 3,974.2 CN import 1,091.8 1,938.0 1,597.9 1,267.1 1,607.0 1,400 2,120.9 1,767.4 CN export 1,783.3 2,613.4 2,678.2 2,228.8 2,007.5 2,721 3,539.4 5,052.0 Source: The International Trade Centre Table 9: Trade volumes between Tajikistan, Russia, and China, 2012–2020 (mil. USD) 2012 2013 2014 2015 2016 2017 2018 2019 2020 RF import 68.3 37.9 37.3 52.2 26.4 24.6 55.2 44.3 41.0 RF export 679.0 724.0 891.0 763.0 662.0 687.0 967.9 1,009.2 932.6 CN import 108.8 88.8 47.7 52.0 31.3 45.8 57.0 55.4 34.4 CN export 1,747.9 1,869.4 2,468.3 1,795.4 1,725.0 1,301.0 594.1 605.5 438.4 Source: The International Trade Centre Table 10: Trade volumes between Kyrgyzstan, Russia, and China, 2012–2020 (mil. USD) 2012 2013 2014 2015 2016 2017 2018 2019 2020 RF import 219.1 152.7 122.3 157.3 145.2 269.0 314.0 270.7 241.6 RF export 1,784.6 1,989.2 1,779.8 1,271.6 799.8 1,360.0 1,239.9 1,362.3 1,316.0 CN import 61.4 39.0 32.8 35.9 79.7 82.9 61.2 81.5 43.2 CN export 1,210.3 1,432 1,098.5 1,029.0 1,464.9 4,460.0 1,942.2 1,733.9 736.8 Source: The International Trade Centre 34 Methodology and Data This subchapter explains the methodological framework of this book step-by-step. First, I define my subject matter as the changing energy security of Central Asia after the dissolution of the Soviet Union in 1991. The choice of this broad topic was based on my previous academic work and areas of interest. The topic relates to the subject matter of the four most important academic debates about Central Asia: energy security in general, the formulation of energy policy, regional energy security complexes, and energy security in Central Asia. My analysis draws on the most relevant secondary academic literature in which all four of these debates were conducted. This monograph aspires to contribute to all four of the aforementioned debates. As for energy security, I examine regionalism in energy security as well as the politicization and weaponization of energy resources. The behavioral patterns of states and state actors in the formulation of energy policy are at the core of the research in this book. I have created models of strategic-oriented and market-oriented energy policy and applied them to the datasets I gathered. The concept of regional energy security complexes is quite new and is still rather underdeveloped in the literature. It seems never to have been applied to the Central Asian region before. Therefore, this book is a step forward that demonstrates both the possibilities and the limits of this type of research and analysis. Finally, the academic debate on energy security in Central Asia splits into three important subgroups. These are: China’s rising economic influence in the region, the energy security of particular Central Asian states, and the geopolitical significance of energy transport in Central Eurasia. This book follows up on all three of these issues. Its argument is novel in that it clearly focuses on the issue of energy security. As it contributes to all of the aforementioned academic debates about energy security in Central Asia, my research should be of interest to both academics and politicians. This book focuses on the interdependencies in Central Asia in the field of natural gas. This is because natural gas has significant geopolitical implications due to the technical complexity of transporting it. The availability of natural gas is a litmus test for a state’s energy independence and an indicator of complex interdependencies between states. From this point of view, Turkmenistan is the most important Central Asian player in natural gas, as measured by its abundant supplies of natural gas and its ability to export it to markets abroad. 35 Since 1991, the energy security of Turkmenistan has been significantly influenced by the construction of the Turkmenistan–China Gas Pipeline. An analysis of the impact of the pipeline on the energy security of particular states requires a regional approach. The energy security of an energy producer and exporter such as Turkmenistan critically depends on its customers and importers in the region. Therefore, this research works with the concept of the Central Asian regional energy security complex. It includes all five Central Asia states – Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan – in the complex, as well as the two most important great powers and energy importers in the neighbourhood – China and Russia. The regional energy security complex is best analyzed with regard to the interdependencies of these countries in the gas sector. This focus helps to facilitate and narrow down the scope of the research here presented. I have chosen to answer one overarching research question: “What is the predominant approach to energy policy among the states and state actors of the regional energy security complex of Central Asia?” Answering that question requires an examination of the basic behavioral patterns of the states that make up the Central Asian ESC. My research then builds upon the behavioral patterns and analyzes how they influence relations among the states of the ESC. The process of answering the research question first requires defining and constructing a model of the Central Asian energy security complex, as described in the section on the theoretical framework in Chapter One. The definition of the Central Asian ESC is based on concepts used in security studies. It is then necessary to determine the actual behavioral patterns of the states of the Central Asian ESC, which could be either market-oriented and focused on maximizing profits, or strategic-oriented and focused on maximizing the energy security of particular states of the ESC. I created a model of strategic-oriented behavior that I subsequently applied to the states and state actors involved in the Central Asian ESC. The creation of this model drew on the concepts used in security studies and the realist school of international relations. I applied it to three of the most important actors in the Central Asian ESC as regards trade in natural gas – Russia, China, and Turkmenistan. The Turkmenistan–China Gas Pipeline construction had the greatest impact on these three states as well. Hence, the core of this book consists of three case studies of energy security and energy policy formulation – of Turkmenistan, Russia, and China. My model assumes that market-oriented energy policy is the exact 36 opposite of strategic-oriented policy and assesses the natural gas sectors of the three states in that light. Therefore, if a state does not behave in conformity with a strategic-oriented policy, I assume it is behaving in conformity with a market-oriented policy. I attempt to answer the research question by applying the criteria of the model to assess the Central Asian ESC natural gas sector. The criteria are the following: the state perceives its energy resources to be strategically important; it perceives its energy sector as crucial to its economy; it perceives its state-owned energy actors as extensions of its state apparatus; it prefers to rely on bilateral relations rather than multilateral relationships; it perceives the energy sector as a tool for achieving the ends of the state; it perceives achieving energy security as a zero-sum game; it perceives energy dependence as undesirable; and it emphasizes strategic goals over economic logic. I looked for evidence of each of these criteria as I prepared the three case studies on Russia, China, and Turkmenistan and have summarized my approach in Table 11. It must be stressed that the data could lead to a conclusion that the actors of the ESC were predominantly behaving according to a strategic-oriented energy policy, but at the same time behave according to a market-oriented policy with regard to the construction of the TCGP. Moreover, some actors could be behaving in accordance with strategic-oriented policy and others in accordance with market-oriented policy. The fact that this book analyzes relatively understudied phenomena meant that it required heavy reliance on primary sources. I gathered most of my primary data during my field trips to Central Asia, Russia, and the United States between 2014 and 2020, as well as from various online databases. Among the primary data sources belong energy statistics and articles published by relevant international organizations, governmental organizations, and energy-related enterprises. Apart from enterprises directly involved in the energy sector, I worked with primary data produced by the governments and relevant ministries of certain states of the Central Asian ESC. These were the Russian Federation, the People’s Republic of China, Turkmenistan, Kazakhstan, and Uzbekistan.72 Additional primary data concerning the global and Central Asian energy sectors can be found in the publications of specialized international organizations and agencies, including the International Energy Agency, 72 A list of the most important primary sources I used can be found in the bibliography. 37 the World Energy Council, the United States Energy Security Council, and the US Energy Information Administration. Other key sources of primary data include various media outlets, both international and local. However, the data from those outlets must be analyzed critically and with utmost caution given the high degree of governmental control over the media in the states of the Central Asian ESC. The sources I used included newspaper articles, commentaries, and analyses published in the region’s leading media outlets.73 In addition, this monograph draws on a multitude of secondary academic sources, both for the construction of the methodological and theoretical framework of the research and for factual information. The main secondary sources are presented in the State of the Research section of Chapter One. I divided the secondary sources of data into four subgroups according to the issues to which they relate: energy security, 73 My most important media sources were: Neitralniy Turkmenistan, Turkmenistan.ru, Fergana.ru, Reuters, BBC, China Daily, People’s Daily, Xinhua News Agency, Lenta.ru, Vedomosti, RBC and TASS. Table 11: Operationalization of the model for the assessment of the Central Asian ESC natural gas sector Feature Feature present Feature not present Energy resources perceived as strategically important. met/mostly met not met Energy sector perceived as crucial for state’s economy. met/mostly met not met State-owned energy actors perceived as extension of state’s apparatus. met/mostly met not met Reliance on bilateral relations. met/mostly met not met Zero-sum approach. met/mostly met not met Energy considered to be a tool of the state. met/mostly met not met Dependence perceived as undesirable. met/mostly met not met Emphasis on strategic goals over economic logic. met/mostly met not met Strategic-oriented policy. if majority met = confirmed if majority not met = not confirmed, therefore marketoriented policy Source: Scheme created for the purposes of this research 38 behavioral patterns of states and state actors in the formulation of energy policy, the energy security complex, and energy security in Central Asia. I worked chiefly with primary and secondary resources in the English or Russian languages because of their ready availability and my familiarity with those languages. Nevertheless, I gathered data without regard to the ideological or political orientation of the sources.74 74 A list of the most important authors of the secondary literature and their works is presented in the first chapter of this book in the subchapter on the State of Research. 39 2. Russia’s Energy Policy in Central Asia The first of my three case studies focuses on Russia’s energy policy and its formulation with regard to the Central Asian ESC. This chapter is divided into four main parts: energy resources, energy actors, energy policy in general, and energy policy as regards the Central Asian ESC. The content of these subchapters is based on my evaluation of primary sources and secondary academic sources. The goal of this particular case study is to search for the features identified by the model as it relates to the natural gas sector, i.e. the perception that energy resources are strategically important; the perception that the energy sector is crucial for the state’s economy; the perception that state-owned energy actors are extensions of the state apparatus; reliance on bilateral relations rather than multilateral arrangements; the perception that the energy sector is a tool for achieving the state’s goals; zero-sum approach to energy policy; the perception that dependence on other states is undesirable; and an emphasis on strategic goals over economic logic. This research is a major stepping-stone in the process of answering the research question about the predominant type of energy policy among the states of the Central Asian ESC. The next step in this chapter is an assessment of the particular indicators gathered in the research. Energy Resources Russia’s oil and gas industries are among the oldest in the world. The first oil wells on Russian territory were drilled in the 1840s near Baku, now in Azerbaijan. In the second half of the nineteenth century, new oil fields were discovered, especially in the North Caucasus and Central Asia. By 40 1900, the Russian Empire was producing 40 percent of the world’s oil output.75 After the Second World War, hydrocarbon extraction extended into the Ural-Volga region. In 1985, Russia’s exports of crude oil provided 39 percent of all the hard currency income of the Soviet Union. In 1988, Soviet oil production reached its peak with 12.5 million barrels per day.76 However, after the breakup of the Soviet Union, oil production dropped by 50 percent from 1990 to 1995.77 At present, Russia’s overall petroleum resources are estimated at 80 billion barrels. This represents approximately five percent of the estimated global reserves.78 However, Russia’s production as a percentage of world output is much higher. As of now, it is approximately 10.9 million barrels per day, representing more than 13 percent of the world’s production.79 The estimated amount of natural gas reserves in Russia is 32.3 trillions of cubic meters (tcm), which represents 23.7 percent of global reserves. This makes Russia the world’s largest natural gas exporter and the second largest natural gas producer after the United States. The overall production in 2016 reached almost 579.4 billion cubic meters (bcm).80 The key extraction areas at present are the Volga region and the TimanPechora region in northern Russia. The most important natural gas fields in the Timan-Pechora region are Urengoy, Medvezhye, and Yamburg. Other promising extraction sites with mid-term prospects are at Zapolyarnoye, Yamal, and Sakhalin Island in the Russian Far East.81 The most important gas export pipelines are the Yamal–Europe Gas Pipeline, the Russia–Finland Gas Pipeline, the Soyuz Gas Pipeline, the Bratstvo Gas Pipeline, Blue Stream, and Nord Stream I. There are also new pipeline projects in various stages of implementation.82 It is expected that the production of hydrocarbons in Russia will gradually move eastwards and 75 Vagit Alekperov, Oil of Russia: Past, Present and Future (Minneapolis: East View Press, 2011), 1–159. 76 Hedvika Koďousková, Petra Kuchyňková and Anna Leshchenko, Energetická bezpečnost asijských zemí – Energy Security of Asian Countries (Brno: Masaryk University, 2012), 141–148. 77 “Crude Oil Production of the Russian Federation,” OECD Data, data.oecd.org/energy /crude-oil-production.htm. 78 “Worldwide Look at Reserves and Production,” Oil and gas Journal, December 1, 2014. 79 “Country Report on Russia,” Energy Information Agency, www.eia.gov/beta/international /analysis.cfmiso=RUS. 80 Ibid. 81 “Mestorzhdenia,” Gazprom, www.gazprom.ru/about/production/projects/deposits. 82 Russia 2014, (Washington: Energy Information Agency, 2014). 41 further north into the Arctic regions. Whether that would mean a shift of Russia’s export markets from Europe to Asia is still unclear.83 Russia’s economy and especially its hydrocarbon complex were heavily damaged by the breakup of the Soviet Union. Russia’s energy consumption fell by 14 percent in the first half of the 1990s and only began to rise again from 2000 to 2010. In 2016, natural gas constituted 52 percent of Russia’s energy consumption, petroleum constituted 23 percent, coal 10 percent, and renewables 15 percent.84 Hence, there was a significant amount of oil and gas available for export. Hydrocarbon revenues provided 50 percent of Russia’s federal government revenues and constituted 68 percent of the country’s total exports in 2013.85 The position of natural gas in the mix of the domestic energy consumption in Russia is being solidified by governmental subsidies. For instance, in 2016 the end-user cost of natural gas on Russia’s internal market was USD 112 per thousand cubic meters but on the European market it was approximately USD 550.86 Thus, it could be argued that the Russian government is buying the support of its citizens by subsidizing the price of natural gas. The result is that the ruling regime is even more dependent on its energy sector and on natural gas in particular for its energy security.87 This subchapter on the energy resources of the Russian Federation shows that its energy sector has been considered one of the key sectors of its economy ever since the late nineteenth century. The Soviet, and now the Russian state perceives the energy sector as one of the central elements supporting its power. The same goes for the Putin regime, which subsidizes energy in order to ensure political support. The Russian state is therefore vitally interested in controlling its energy sector. It considers energy a strategic asset that maintains popular support of the ruling regime.88 83 For more on the role of energy resources in state policies see: Philip Andrews-Speed, International Competition for Resources: The role of law, the state and markets (Dundee: Dundee University Press, 2008). 84 “BP Energy Outlook – Russia,” BP, www.bp.com/content/dam/bp/pdf/energy-economics. 85 “Country Report on Russia,” Energy Information Agency, www.eia.gov/beta/international /analysis.cfm?iso=RUS. 86 Russia 2014 (Washington: Energy Information Agency, 2014). 87 For more on foreign policy of Russia see: Dmitri Trenin, “Drivers of Russia’s foreign policy,” in: Kaadri Liik, Russia’s Pivot to Eurasia (London: European Council on Foreign Relations, 2014), 34–40. 88 For more on energy security of Russia and Asian countries see: Hedvika Koďousková, Petra Kuchyňková and Anna Leschenko, Energetická bezpečnost asijských zemí a Ruské federace (Brno: Masarykova Univerzita, 2012). 48 Boris Berezovsky.118 Russia regained its majority share in Gazprom and nationalized approximately half of the oil sector between 2003 and 2007. This move cemented Putin’s regime and assured it a financial base. The change in Russia’s attitude towards its energy policy after the accession of Vladimir Putin was evident already in the concepts of its foreign policy119 and national security policy120 published in the year 2000. Both of these documents stressed the pivotal importance of energy in Russia’s foreign policy and national security. The Russian energy strategy published in 2003 emphasized its importance even more.121 The 2003 energy strategy document starts out with a clear statement: “Russia possesses huge deposits of energy resources and a powerful fuel energy complex, which is the basis for the development of its economy and an instrument of foreign and domestic policy.”122 The strategy document outlined both western and eastern directions for Russia’s energy policy. However, it was clear that Europe would remain Russia’s primary energy customer for at least the next twenty years. The blueprint of Russia’s foreign policy123 was updated in 2008 and its energy strategy in 2009.124 The 2009 energy strategy outlined Russia’s plans for its energy policy up to 2030. It had to deal with a changed situation compared to 2003 because of the global financial crisis at that time. Another game changer were the disputes over supplies of natural gas between Russia and various countries from 2003 to 2009. The newly stated objective was to diversify the export markets for Russia’s energy resources and to maintain stable market conditions. In other words, to guarantee demand and reasonable prices – that is, energy security.125 Table 12 illustrates the development of Russia’s macroeconomic situation since the economic crisis of 2009. 118 Nick Paton Walsh, “Abramovich Sells His Last Big Stake in Russia to Kremlin,” The Guardian, September 29, 2005, www.theguardian.com/business/2005/sep/29/oilandpetrol.russia. 119 “Kontseptsiya vneshnei politiki Rossiiskoi Federatsii,” Russian Federation, July 11, 2000, www.ng.ru/world/2000-07-11/1_concept.html. 120 “Kontseptsiya natsionalnoi bezopasnosti Rossiiskoi Federatsii,” Russian Federation, January 14, 2000, nvo.ng.ru/concepts/2000-01-14/6_concept.html. 121 “Energeticheskaya strategiya Rossii na period do 2020 goda,” Institute for Energy Strategy, May 1, 2003, www.energystrategy.ru/projects/es-2020.htm. 122 Ibid. 123 Ibid. 124 “Kontseptsiya vneshnei politiki Rossiiskoi Federatsii,” Office of the President of the Russian Federation, July 15, 2008, kremlin.ru/acts/news/785. 125 “Energeticheskaya strategiya Rossii na period do 2030 goda,” Ministry of Energy of Russia, November 13, 2009, minenergo.gov.ru/node/1026. 49 The energy strategy was once again amended in 2014, with a prolonged timeframe up to 2035.126 That update even more openly emphasized the importance of energy policy as a tool for promoting Russia’s foreign policy interests: “As a responsible state, Russia considers its external energy policy not from the narrow point of view of an exporter, intent upon maximizing short-term revenues, but as a tool to solve both national and global problems.”127 Table 12: Basic socio-economic indicators – Russian Federation (2007–2020) Year GDP (trillion USD) GDP per capita (current USD) Inhabitants (thousands) 2007 1.300 9,101 142,805 2008 1.661 11,635 142,742 2009 1.223 8,563 142,785 2010 1.525 10,675 142,849 2011 2.032 14,212 142,961 2012 2.170 15,154 143,202 2013 2.231 15,544 143,507 2014 2.064 14,126 143,820 2015 1.366 9,329 144,097 2016 1.283 8,748 144,342 2017 1.579 10,751 144,497 2018 1.658 11,289 144,478 2019 1.700 11,584 144,406 2020 1.487 10,690 144,100 Source: The World Bank The instances when Russia has utilized its energy resources as an “energy weapon” show that its announced strategy is not a mere rhetoric but also actual political practice. There are several examples of such behavior: the halting of oil transit through Latvia in 2003; the reduction of natural gas supplies to Belarus during the winters of 2004 and 2006; Transneft’s blockade of transit of Kazakhstan’s oil to Lithuania via Russia in 2006; the cutoff of oil supplies to the whole Lithuania by Transneft 126 “Energeticheskaya strategiya Rossii na period do 2035 goda,” Ministry of Energy of Russia, October 4, 2015, minenergo.gov.ru/node/1913. 127 Ibid. 50 in 2006; the cutoff of gas supplies to Georgia in 2006; “gas wars” with Ukraine in 2006 and 2009; and the reduction of oil exports to the Czech Republic in 2008.128 The national security strategy of Russia published in 2009 identified the competition for energy resources as one of the principal causes of contemporary international conflicts.129 Russia’s energy resources are perceived by the country’s government as a tool for strengthening its international stature, but also as a possible source of conflict. Russia considers its energy sector to be a platform for strengthening its great-power status in the Arctic and in Central Asia. It is striving to lessen its dependence on the European Union as a customer and is making plans to divert one third of its energy exports to China.130 Russia adopted yet another new blueprint of its foreign policy in February 2013.131 According to this document, energy policy should aim at preserving Russia’s status as a crucial player in the trade and economic relations between Europe and the Asia-Pacific region. It noted that natural gas consumption between 2003 and 2013 remained the same in Europe, while it doubled in the Asia-Pacific region.132 The foreign policy concept stressed the shift of global power to the East. Moreover, it admits a need for integration of Russia and its Eastern Siberian regions into the Far East, and of Russia into the greater Asia-Pacific region. The Russian political elites perceive state-controlled energy enterprises such as Gazprom, Rosneft, and the independent successors to the former electrical utility, Unified Energy Systems (RAO UES), as tools of Russia’s foreign policy. In 2008, the twenty-five most senior government officials were also board members of leading energy companies.133 Vladimir Putin identified state control over Russia’s energy resources as the key to national power in what is alleged to be his Ph.D-level dissertation.134 Although it is doubtful that he is the real author of this text, 128 For more on weaponization of energy by Russia see: Mykhailo Gonchar, Energy Component in New Generation Warfare: Case of Russia’s Hybrid Aggression against Ukraine (Kyiv: Centre for Global Studies Strategy XXI, 2015). 129 “Strategiya nacionalnoy bezopasnosti Rossiiskoi Federatsii,” Ministry of Foreign Affairs of the Russian Federation, December 31, 2015, archive.mid.ru//bdomp/ns-osndoc.nsf. 130 For more on Russia’s energy policy see: Orban, Power, Energy. 131 “Kontseptsiya vneshnei politiki Rossiiskoi Federatsii,” Ministry of Foreign Affairs of the Russian Federation, February 12, 2013, archive.mid.ru//bdomp/ns-osndoc.nsf. 132 Ibid. 133 For more on Putin’s use of the energy weapons see: Bertil Nygren, “Putin’s Use of Natural Gas to Reintegrate the CIS Region,” Problems of Post-Communism 55, no. 4 (2008): 3–15. 134 Vladimir Putin, “Strategicheskoe planirovanie vosproizvodstva mineralno-syrevoi bazy regiona v usloviyakh formirovaniya rynochnykh otnoshenii” (PhD. Diss., Sankt Peterburg, 1997), 51 his choice of topic and how it is addressed is nonetheless important. His dissertation confirms that his worldview springs from the realist paradigm. He prioritizes national security and power over international cooperation and the building of international institutions. There is ample evidence that Putin’s regime has utilized differential energy pricing to obtain influence or legitimacy on many occasions, without regard to market logic or profitability. Domestic energy prices are much lower than world prices because the political elites need to appease the Russian population. The Kremlin has frequently utilized discount prices for energy resources as a “carrot” in Russia’s relations with its post-Soviet neighbors.135 It possesses two kinds of the so-called energy weapons: the tap weapon and the transit weapon. Using the tap weapon, Russia coerces its targeted customer to behave in a certain way by threatening that if it resists, Russia will cut off energy supplies. The transit weapon means that Russia will buy natural gas (for example) from its supplier only for the price Russia chooses to pay and then ship it onward; otherwise the supplier must pay a transit fee, again set by Russia. Russia deliberately avoids taking on obligations like renouncing price discrimination or allowing third-party access, which are considered basic fair-trade practices in the West.136 Russia’s western energy markets Another of Russia’s principal aims regarding its energy policy is to prevent the construction of a western-sponsored energy transit corridor to its south. As of now, it is mostly worried about the Southern Gas Corridor proposed by the European Union. This gas pipeline project was originally intended to have three elements: the Turkey–Greece–Italy Interconnector with a capacity of 10 bcm per annum, the Trans-Adriatic Gas Pipeline with a capacity of 10 bcm, and the Nabucco Gas Pipeline with a capacity of 31 bcm per annum. In 2012, however, the planned backbone of the project, the Nabucco Gas Pipeline, had to be scrapped due to a lack of guaranteed gas supplies from non-Russian sources and the growing financial costs.137 Moreover, at this time Russia began to www.dissercat.com/content/strategicheskoe-planirovanie-vosproizvodstva-mineralno-syrevoi -bazy-regiona-v-usloviyakh-for. 135 Nygren, “Putin’s Use of Natural Gas,” 3–15. 136 Ibid. 137 Ian Taylor, “Europe’s Plan for Alternative Pipeline Faces Big Problems,” The Guardian, January 7, 2009, www.theguardian.com/world/2009/jan/07/nabucco-pipeline-problems. 52 build the South Stream Gas Pipeline (later also discontinued), which was perceived as a rival project.138 The Shah Deniz Consortium, which exploits the central deposits in Azerbaijan, renewed the hopes for a Southern Gas Corridor in 2013.139 It proposed three new elements for the project, consisting of an expansion of the existing South Caucasus Gas Pipeline, and the completion of a Trans-Anatolian Gas Pipeline and the Trans-Adriatic Gas Pipeline. If completed, the Southern Gas Corridor will be 3,500 km long and cost USD 45 billion.140 The primary source for this pipeline system would be the gas from the Shah Deniz field. The proposed gas volumes to be transported were planned to be 16 bcm in 2019 and 31 bcm per year in 2026. The project would cover approximately 20 percent of Europe’s annual demand for natural gas.141 The principal driving force behind the renewed Southern Corridor project is Azerbaijan’s national energy concern, SOCAR, together with its Turkish counterpart Botas. Together, they control critical stakes in both pipeline projects, along with BP, which is the lead operator of the Shah Deniz gas field.142 Azerbaijan’s and Turkey’s officials believe they can secure additional supplies for the Southern Corridor from Iraq, Iran, and Turkmenistan. In 2014, SOCAR announced that it would be willing to assist Turkmenistan with the development of its gas and oil infrastructure.143 Moreover, in the same year Turkey and Turkmenistan signed a framework supply agreement focused on the delivery of Turkmenistan’s natural gas to Europe through Turkish territory.144 Two possible routes are being discussed. The parties could use the proposed Trans-Caspian Gas Pipeline, or they could ship Turkmen natural gas to Turkey through Iran. Russia’s plans for the South Stream Gas Pipeline across the Black Sea to Bulgaria and then north into Central Europe (thereby bypassing Ukraine) faced numerous obstacles due to its annexation of Crimea. South Stream was 138 “Gazoprovod Yuzhnyi potok budet vveden v stroi v dekabre 2015-go goda,” ITAR-TASS, April 24, 2010, echo.msk.ru/news/674485-echo.html. 139 “Azerbaijani President Approves the Agreement on TANAP Gas Pipeline,” Trend News Agency, January 18, 2013, en.trend.az/business/energy/2109759.html. 140 Ibid. 141 Julia Kusznir, “The Southern Gas Corridor: Initiated by the EU, Completed by Others? TANAP, TAP and the Redirection of the South Stream Pipeline,” Caucasus Analytical Digest, no. 69 (2015): 6–11. 142 “Trans-Anatolian Gas Pipeline Project,” TANAP, www.tanap.com/tanap-project/why-tanap. 143 “Ashgabat Declaration,” European Commission, May 1, 2015, ec.europa.eu/commission /2014-2019/sefcovic/announcements/ashgabat-declaration_en. 144 “Turkmen Gas for Europe,” Nebit-Gaz, July 29, 2016. 53 canceled in December 2014, and later proposals to revive it would redirect it from Bulgarian territory through Turkey.145 This change of stance means that some of Russia’s natural gas is now being delivered to the EU via the Turkstream, Trans-Anatolian and Trans-Adriatic natural gas pipelines. Russia’s eastern energy markets Russia is at present mostly focused on diversifying its energy exports to the Far East, having lost its monopsony over supplies from the Central Asian regional energy security complex. Its cooler relations with European customers due to the Ukraine crisis also contributed to this process. On the one hand, the EU’s ban on supplying oil and gas equipment to Russian entities and bank lending with a maturity exceeding 90 days strongly affected Russia’s energy industry. As a result, Western investment has drained away since mid-2014. On the other hand, China’s oil company, Sinopec, bought a 10 percent stake in the Russian SIBUR petrochemicals enterprise in December 2015. China’s Silk Road Fund acquired a 9.9 percent stake in the Yamal LNG project from Novatek in late 2015.146 The Chinese Bank for Development provided loans of USD 10 billion to Transneft and USD 15 billion to Rosneft in 2009.147 In order to reach Asian customers, Moscow has prioritized large-scale international projects aimed at the development of its East Siberian and Far Eastern oil and gas deposits. The Eastern Siberia–Pacific Ocean Oil Pipeline and the Russo-Chinese portion of the oil pipeline (from the Skovorodino refinery to China’s Heilongjiang province) are among such projects aimed at getting Siberian oil to Far Eastern markets.148 The situation regarding natural gas exports to the Far East is more complicated. Russia started planning exports of natural gas to China in the early 1990s. These plans were stalled because of the struggles between TNK-BP and Gazprom over the control of the East Siberian gas deposits, 145 “Moskva i Ankara zaklyuchili soglashenie po Turetskomu potoku,” Lenta.ru, October 10, 2016, lenta.ru/news/2016/10/10/potok. 146 “Moscow’s Need for China Will Not Be Reciprocal,” Oxford Analytical Daily Brief Service, June 24, 2016. 147 Jean-Marie Holtzinger, “The Russo-Chinese Strategic Partnership: Oil and Gas Dimensions,” Connections 9, no. 4 (2010): 69–82. 148 Sergei Luyzanin, Rossiya i Kitai: novyi kontekst otnosheniz (Moscow: MGIMO, 2015), 16–45. 54 especially the Kovykta gas field in the Irkutsk region.149 This dispute was resolved only in 2011. Russian regulators accused TNK-BP’s project in the Kovykta field of harming the environment. The accusations forced the company to bring Gazprom into the project in 2006. Five years later, TNK-BP decided to sell its stake in the field to Gazprom.150 In 2008 Gazprom acquired the Chayanda gas field in an auction conducted without competition after that field was added to Russia’s list of national strategic assets in 2007.151 As a result, Gazprom now controls most of Russia’s important natural gas assets in Eastern Siberia and the Far East: the Kovykta and Chayanda gas fields, the fields in Krasnoyarsk Krai and on the western coast of Kamchatka, and the Sakhalin II and Sakhalin III projects.152 Meanwhile, when the eastern route was stalemated, there appeared plans for the construction of a western route to China. The western route would include the Altai Gas Pipeline, which would stretch from the eastern Siberian gas deposits at Urengoy and Nadym to the western Chinese province of Xinjiang.153 Gazprom had long opposed the eastern alternative for gas exports to China until it acquired vital deposits in the eastern parts of Siberia. Therefore, it preferred the Altai pipeline, which would tap supplies from the deposits it controlled in western Siberia. Had the pipeline been built, it would probably have lessened the attractiveness of building the Turkmenistan–China Gas Pipeline. Fortunately, for Turkmenistan, the plans for the construction of the Altai pipeline have been shelved.154 Before the commissioning of the first line of the Turkmenistan–China Gas Pipeline in 2009, negotiations over pricing between Russia and China failed.155 At that time, China’s negotiators insisted on using European 149 Artyom Lukin, “Russia’s Eastward Drive: Pivoting to Asia or to China?” Russian Analytical Digest 169 (2015): 2–5. 150 Richard Fletcher, “Gazprom’s Kovykta Gas Field Victory Is a Lesson for BP Shareholders,” Telegraph, March 2, 2011, www.telegraph.co.uk/finance/comment/richardfletcher/8355832 /Gazproms-Kovykta-gas-field-victory-is-a-lesson-for-BP-shareholders.html. 151 “Russia Gazprom Secures Chayanda Gas Field,” Reuters, April 14, 2010, www.reuters.com /article/gazprom-chayanda-idUSL1434364120080414. 152 “Mestorozhdenia,” OAO Gazprom, www.gazprom.ru/about/production/projects/deposits. 153 “Proekt Sila Sibiri mogut otlozhit v polzu gazoprovoda Altai,” RIA Novosti, March 18, 2015, ria.ru/economy/20150318/1053274431.html. 154 For more on Russo-Chinese relations concerning Central Asian energy see: Thomas Eder, China-Russia Relations in Central Asia: Energy Policy, Beijing’s New Assertiveness and 21st Century Geopolitics (Vienna: Springer VS, 2014). 155 Niklas Swanstroem, “Sino-Russian Relations at the Start of the New Millenium in Central Asia and Beyond,” Journal of Contemporary China 23, no. 87 (2014): 1–12. 55 gas prices as the starting point of discussions. Gazprom was focused on receiving the same margin of profit as it did on its gas sales to Europe.156 However, Shanghai is more than 3,000 kilometers further from the extraction point in West Siberia than the European Union border. Hence, if Gazprom had its way, it would have meant a difference of approximately USD 50 per million cubic meters (mcm) compared to the price of gas in Europe due to transportation costs.157 The situation started to change around 2012 when Gazprom acquired new natural gas deposits and the shale gas revolution in the United States loomed as a threat.158 In September 2013, the negotiations between Gazprom and the China National Petroleum Corporation (CNPC) were still not concluded, because of concerns regarding the price of gas. However, things changed after Russia’s annexation of Crimea and the imposition of western economic sanctions. In May 2014, Russia and China agreed upon a pricing deal for supplying 38 bcm a year for 30 years.159 Also in May 2014, Xi Jinping and Putin signed a purchase and sale contract for gas supply via the eastern route – now known as the Power of Siberia Gas Pipeline.160 When complete, this pipeline will be 4,000 kilometers long and will stretch from Yakutia’s Chaganda gas field to Khabarovsk and the LNG terminal in Vladivostok. Its capacity of 61 bcm per year will be divided into three parts – 38 bcm for China’s consumption, 9 bcm for Russia’s domestic consumption, and 14 bcm for export as LNG to Japan and other Asian states.161 The construction of the Turkmenistan–China Gas Pipeline and Russia’s invasion of Crimea obviously significantly weakened Russia’s negotiating position vis-à-vis China in the case of the Power of Siberia pipeline.162 Those events narrowed Russia’s maneuvering room and ultimately compelled it to accept the deal with China.163 156 Linda Jakobson, Paul Holtom, Dean Knox and Jingchao Peng, “China’s Energy and Security Relations with Russia,” SIPRI Policy Paper, no. 29 (2011): 1–56. 157 James Henderson, The Pricing Debate over Russian Gas Exports to China (Oxford: Oxford Institute for Energy Studies, 2011), 37–45. 158 Edward L. Morse, “Welcome to the Revolution: Why Shale is the Next Shale,” Foreign Affairs 93, no. 3, May 2014, www.foreignaffairs.com/articles/2014-04-17/welcome-revolution. 159 “Sila Sibiri,” OAO Gazprom, www.gazprom.ru/about/production/projects/pipelines/built /ykv. 160 For more on natural gas geopolitics see: Amy Jaffe and David Victor, Natural Gas and Geopolitics: from 1970 to 2040 (New York: Cambridge University Press, 2006), 211–241. 161 Ibid. 162 Stephen Blank, “Does Russo-Chinese Partnership Threaten America’s Interests in Asia?” Orbis 60, no. 1 (2016): 112–127. 163 Felix K. Chang, “Friends in Need: Geopolitics of China-Russia Energy Relations,” Foreign 56 This subchapter focuses on Russia’s energy policy. Based on Russian strategy documents and actual practice, it demonstrates that Putin’s regime conceives of Russia’s oil and gas reserves as a tool of both internal and external policy. The importance of energy in Russia’s foreign policy is only increasing as a means of rewarding or punishing the behavior of other states. The Russian government shows a clear preference for bilateral relationships in the energy sector because it finds them easier to dominate than multilateral arrangements. It has also made clear attempts to control entire supply chains and markets regardless of commercial logic in its relations with European markets in the west and Asia-Pacific markets in the east. Energy Policy in the Central Asian Energy Security Complex Vladimir Putin returned to the presidency of Russia in 2012, less than a year before his Chinese counterpart Xi Jinping took office as China’s President in 2013. The two leaders’ foreign policies and energy strategies, and even their concepts of the Eurasian balance of power collide in the Energy Security Complex (ESC) of Central Asia. Putin introduced the idea of the Eurasian Economic Union soon after his election, which in his words can take the place of the Shanghai Cooperation Organization (SCO) in the Central Asian region.164 He also stressed Russia’s support for multipolarity in global affairs, not a bipolarity that would probably favor China and the United States. Xi Jinping replied to these challenges by proposing the Belt and Road Initiative in September 2013.165 At the time Russia annexed Crimea and the West imposed sanctions, China’s economy and political power were gaining momentum and Russia began to lose influence in Central Asia to China. Since that time, it seems that Russia has been more willing to respect China’s priorities and interests in Central Asia. This change of attitude may be only a Policy Research Institute, May 22, 2014, https://www.fpri.org/article/2014/05/friends-in-need -geopolitics-of-china-russia-energy-relations/. 164 Gilbert Rozman, “The Intersection of Russia’s Turn to the East and China’s March to the West,” Russian Analytical Digest no. 169 (2015): 6–8. 165 “One Belt, One Road,” Caixin Online, October 12, 2014, english.caixin.com/2014-12-10 /100761304.html. 57 temporary development if the Eurasian Economic Union becomes more successful.166 Russia’s policy towards Central Asia was splintered among several initiatives after 1991. The most important of them were the Commonwealth of Independent States, the Collective Security Treaty Organization, and the Shanghai Cooperation Organization.167 This changed in October 2011 when Vladimir Putin announced his vision of building the Eurasian Economic Union in the Russian newspaper Izvestiya. In the Izvestiya article, Putin emphasized the importance of Central Asia to Russia and its shared identity with the region, connected neither with the West nor with the East.168 Ukraine was the key to the creation and feasibility of the Eurasian Economic Union.169 Without Ukraine, it is quite likely that the organization’s fulcrum would lie more to the East than was planned in the beginning.170 According to Putin, the Eurasian Economic Union would be a bridge between two major zones of the world. In his conception, for the first time in three hundred years, the West would cease to be the only pole of attraction or source of values for Russia. In fact, Europe has become just one among several poles of Russia’s foreign policy.171 To Putin, the challenges posed by China and the Asia-Pacific region do not mean that Russia has to integrate itself more deeply with its neighbors, but that it has to integrate its regions more thoroughly with itself, especially those beyond the Urals. Otherwise, tension and even separatism could arise.172 The relationship between Central Asia and Russia is profoundly influenced by Easternizers,173 Eurasianists, and neo-Eurasianists, who perceive Central Asia and Russia as parts of a single politico-cultural unit – Eurasia. Eurasianism as a political ideology was created in the 1920s in Central and Western Europe by prominent Russian émigrés such 166 “Turkmeniya schitaet Rossiyu partnerom, no v ees vstupat ne budet,” RIA Novosti, July 14, 2014. 167 Z. A. Dadabayeva, Protsessy regionalizatsii v Tsentral’noi Azii: problemy i protivorechiya (Moscow: Institut ekonomiki RAN, 2014), 51–64. 168 Vladimir Putin, “Novyi integrnatsionnyi proekt dlya Evrazii – budushchee, kotoroe rozhdaetsya sevodnyia,” Izvestiia, October 3, 2011. 169 Ibid. 170 Fyodor Lukyanov, “Building Eurasia and Defining Russia,” in: Kaadri Liik, Russia’s Pivot to Eurasia (London: ECFR, 2014): 18–24. 171 Timofei Bordachev, “Eurasian Russia in the Twenty-First Century,” in: Kaadri Liik, Russia’s Pivot to Eurasia (London: ECFR, 2014), 25–31. 172 Ibid. 173 “Easternizers” were predecessors to the followers of Eurasianism. They focused more on China and India than Central Asia. Their main protagonist was Konstantin Leontiev. 64 ownership of its gas reserves, production facilities, and transportation infrastructure within Russia. All of this indicates greater concern for strategic issues than for economic logic. It confirms that Russia’s energy policy in the Central Asian ESC is strategic-oriented. Analysis of Indicators This chapter is a case study of Russia’s energy policy with regard to the Central Asian ESC. The goal of this particular case study is to search for indicators of a strategic-oriented energy policy – for elements of the model of this kind of policy. A strategic-oriented energy policy has eight elements: the perception that energy resources are strategically impor tant; the perception that the state’s energy sector is crucial to its economy; the perception that state-owned energy actors are extensions of the state apparatus; a reliance on bilateral relations with other countries; the perception that the energy sector is a tool for achieving the aims of state policy; a zero-sum approach to international relations; the perception that dependence on foreign entities is undesirable; and an emphasis on strategic goals over economic logic. The conclusion of this case study is that Russia’s energy policy in the ESC of Central Asia is predominantly strategic-oriented, based on the presence of the indicators as listed below. Perception that energy resources are strategically important Based on the data I gathered, Russia’s current political regime perceives energy resources as strategically important. There were many occasions under Putin when the desire to take control of energy resources or their distribution networks manifested itself. This has been evident in Russia since the Yukos affair in 2003, when Mikhail Khodorkovsky tried to sell parts of Yukos to US investors Chevron and ExxonMobil. Khodorkovsky failed and was arrested. His company was taken over by state-owned Gazprom. In the mind of the Russian leadership, Yukos had to remain under the control of the Russian state because of its strategic importance. 65 Perception that the energy sector is crucial to the state’s economy Today, Russia considers its energy sector to be the strategically important core of its economy and trade capacities. The analysis above shows that Russia has increasingly tried to gain and maintain control over its energy sector, especially since Vladimir Putin rose to power. Of course, the energy sector has been a crucial part of Russia’s economy since the end of the nineteenth century. Its internal importance lies not only in its support of the country’s economic growth but also in the ability of the Putin regime to win popular support by using subsidies to keep energy prices low. Perception that state-owned energy companies are extensions of the state apparatus It was shown that Putin’s regime both directly and indirectly dominates the entire energy sector of the Russian Federation. The regime has been able to increase its power by translating the national power of the energy sector into state power. It is clear that Russia perceives itself as an energy superpower. Based on the findings of the case study, it is also clear that Russia’s political elite consider the country’s state-owned energy companies to be tools of internal and external policy used by the state. The role of the energy sector as a tool of Russian foreign policy is cited in Putin’s foreign and security strategies. Reliance on bilateral relations Russia’s reliance on bilateral relations in energy policy is especially visible in its strictly negative reactions to any multilateral initiatives such as the European Energy Charter. Based on the accumulated data, Russia has a preference in its energy policy for long-term bilateral deals with foreign countries. This is because in bilateral relations, it is much easier for Russia to play the role of an energy superpower. The case study demonstrated this with several examples of cases where Russia utilized either the tap or the transit energy weapon in its relations with other states. 66 Zero-sum approach to policy The case study shows that Russia has repeatedly attempted to preserve its role as the dominant exporter of energy to European markets as well as its role as the dominant importer of energy from Central Asia. Russia has been relatively successful in the European market, but in Central Asia it is gradually being pushed out by China’s assertion of its energy interests. Because of its zero-sum approach to policy making, Russia’s political elite has been willing to let China encroach on Central Asia in order to preserve Russia’s position in the Western energy market. Perception that the energy sector is a tool for achieving the state’s goals Based on strategic and commercial practice, the case study demonstrates that Putin’s regime considers Russia’s energy sector to be a tool of its internal and external policy, in that Russia uses its energy supplies and infrastructure as a means of rewarding or punishing the behavior of other states. There is also clear evidence that Russia tries to control entire supply chains and markets regardless of commercial logic, as it has done with both its European markets in the West and its Asia-Pacific markets in the East. Perception that dependence on other countries is undesirable Russia has attempted to exploit the monopsony position it inherited from the Soviet Union with its Central Asian suppliers, contractually locking in supplies and taking ownership shares in producers and processing facilities. Thus, it has tried to create a system of dependence for the Central Asian states, with the aim of controlling the entire Central Asian energy market. It has attempted to block any alternative export routes out of Central Asia to preserve its position as a transit state. Russia’s energy policy in the Central Asian ESC displays a zero-sum approach to policy and attempts to eliminate competition from other suppliers and transit states. Furthermore, Russia has constructed new pipeline infrastructure to bypass other transit states like Ukraine in order to deepen Europe’s dependence on Russia for energy supplies. Finally, Russia has attempted to preserve Gazprom’s monopoly over Russian and Central 67 Asian gas exports by blocking foreign ownership of gas reserves, gas production facilities, and transport infrastructure in Russia. Here again, Russia emphasizes strategic goals over economic logic, which confirms that Russia’s energy policy in Central Asian ESC is strategic-oriented. Emphasis on strategic goals over economic logic Russia’s former economic and political clout in the Central Asian ESC has considerably diminished over the course of the past 25 years. At the beginning of the 1990s, Russia controlled the region’s entire transit infrastructure, and so it had enormous leverage over its newly independent neighbors. In that respect, it was crucial for Gazprom to gain control over the Central Asia–Center Gas Pipeline System. However, Russia was simply unable to blackmail all of its partners in Central Asia. The Central Asian regimes no longer consider cooperation with Russia to be the best policy option because of Russia’s poor economic performance and its increasingly authoritarian and imperialistic policies. In general, the aim of Russia’s energy policy in the Central Asian ESC has been to ensure its energy security by dominating the energy sector of Central Asia. Steps taken by Russia’s government show that its energy policy is not market-oriented and focused on the maximization of profit but instead it is strategic-oriented and focused on its national goals. It has used its energy potential as a tool of its foreign policy, as has been openly stated many times in Russia’s strategic foreign and national security policy documents. In the end, it must be stressed that the Kremlin’s principal goal is of a purely political nature – the preservation of Putin’s regime and its predominant position in Russia’s internal and external affairs. 68 3. China’s Energy Policy in Central Asia The second of my three case studies is devoted to China’s energy policy in the context of the Central Asian ESC. This chapter is divided into four parts: energy resources, energy actors, energy policy in general, and energy policy in the ESC of Central Asia. The conclusions of the subchapters are based on an evaluation of primary and secondary sources. The goal of this particular case study is to search for the elements of a strategic-oriented energy policy established in the model for the assessment of energy policy pertaining to the natural gas sector. These are: the perception that energy resources are strategically important; the perception that the energy sector is crucial for the state’s economy; the perception that state-owned energy actors are extensions of the state apparatus; reliance on bilateral relations; the perception that the energy sector is a tool for achieving the goals of the state; a zero-sum approach to policy making; the perception that dependence on other countries is undesirable; and an emphasis on strategic goals over economic logic. This case study is another stepping-stone in the process of answering the research question about the predominant approach to energy policy among the actors of the Central Asian ESC. The chapter concludes with a recap of the particular indicators for which evidence was found in the course of my research. Energy Resources China started its oil and gas industry almost from scratch not long after the Second World War. However, the country’s overall economic development and especially the advancement of its energy industry was 69 hampered by a United States embargo that lasted over the course of the 1950s, 1960s, and 1970s. Moreover, the Soviet support of the industry, which was very important in the 1950s, waned over the next decade because of the Sino-Soviet split and the resulting tensions. The situation began to improve somewhat in the 1970s. China was able to utilize the oil crises of 1973 and 1979 to boost its oil exports. Also, the change in the leadership of the Chinese Communist Party (CPC) represented by Deng Xiaoping’s assumption of power in 1978 led to the opening of China’s economy and partial economic liberalization. Since 1949, it has been an enormous problem for China to achieve energy self-sufficiency. After Deng Xiaoping’s liberalization of the economy, the goal of self-sufficiency in energy was slowly replaced by the goals of ensuring China’s energy security and diversifying its sources of energy supplies.199 Deng Xiaoping’s new economic policy was followed by rapid industrialization and a sharp rise in energy consumption. China was self-sufficient in energy until the late 1970s. Its first imports of hydrocarbons began in 1983 from Oman, and the domestic demand for oil had completely outpaced domestic production by 1996. This development was mainly due to a steep rise in the number of passenger cars on the roads in China.200 In 2013, China consumed 10.5 million barrels of oil per day, which made it the second biggest consumer of oil in the world after the United States. In the same year, the production of China’s oil industry covered only half of that demand.201 The remarkable economic growth that spurred the increased consumption of energy is shown in the Table 13. China possesses 5.4 tcm of domestic natural gas reserves that are accessible with contemporary technology and 4 tcm more in unconventional resources.202 China’s annual domestic production of natural gas was 138.4 bcm in 2016 and its consumption was a far greater 210.3 bcm.203 There has been a significant increase in the use of natural gas in China in heavy industry and in the production of electricity. Another reason for 199 Erica Strecker Downs, China’s Quest for Energy Security (Washington: RAND Corporation, 2003), 11–42. 200 Ibid. 201 “China Crude Oil Consumption by Year,” United States Energy Information Administration, www.eia.gov. 202 “China’s Potential Oil, Natural Gas Reserves Rise: Official Data,” Xinhua News Agency, June 14, 2016, www.chinadaily.com.cn/business/2016-06/14/content_25707842.htm. 203 “China’s 2015 Natural Gas Output Growth Slowest in at Least 10 Years,” Reuters, January 19, 2016, www.reuters.com/article/china-economy-output-gas-idUSL3N1532HZ. 70 Table 13: Basic socio-economic indicators – People’s Republic of China (2007–2020) Year GDP (trillion USD) GDP per capita (current USD) Inhabitants (billions) 2007 3.552 2,695 1.318 2008 4.598 3,471 1.325 2009 5.110 3,838 1.331 2010 6.101 4,561 1.338 2011 7.573 5,634 1.344 2012 8.561 6,338 1.351 2013 9.607 7,078 1.357 2014 10.482 7,684 1.364 2015 11.065 8,069 1.371 2016 11.199 8,123 1.379 2017 12.143 8,759 1.386 2018 13.608 9,771 1.393 2019 14.280 10,216 1.398 2020 14.720 10,500 1.402 Source: The World Bank the increased consumption of natural gas is the government’s desire to alleviate air pollution. Still, as of today, natural gas consumption makes up only around 8 percent of all the primary sources of energy consumed in China. China’s essential energy source is still coal, which made up 66 percent of the country’s energy consumption in 2014. The second most important source of energy was oil, which accounted for 19 percent of the overall energy consumption. Hydroelectric energy contributed 6 percent, natural gas 3 percent, and nuclear energy along with renewables 1 percent each.204 Nonetheless, the most important trend is the gradual increase of the share of natural gas in the Chinese energy mix, which has significant geoeconomic and geopolitical implications. The trends in the consumption of natural gas in five of the states that comprise the Central Asian ESC are compared in Table 14. 204 Xin Li, Natural Gas in China: Regional Analysis (Oxford: The Oxford Institute of Energy Studies, 2015), 4–15. 71 Table 14: Consumption of natural gas 2007–2019 (bcm) Year Russia Turkmenistan China Kazakhstan Uzbekistan 2007 422.0 21.3 73.0 9.0 45.9 2008 416.0 21.4 84.1 8.9 48.7 2009 389.6 19.7 92.6 8.3 39.9 2010 414.1 22.6 111.2 8.9 40.8 2011 424.6 23.5 137.1 10.0 47.6 2012 416.2 26.3 150.9 10.8 47.2 2013 413.5 22.9 171.9 11.2 49.8 2014 409.7 25.6 188.4 12.5 48.8 2015 402.8 29.4 194.8 12.9 50.2 2016 390.9 29.5 210.3 13.4 51.4 2017 431.1 25.3 240.4 15.9 43.1 2018 454.5 28.4 283.0 19.4 42.6 2019 444.3 31.5 307.3 17.9 43.4 Source: Statistical Report of World Energy China’s official five-year plans illustrate its government’s changing energy policy.205 The subchapter on energy in the sixth five-year plan, from 1980 to 1985, emphasized the necessity of energy conservation. It also stressed the need for the available resources to keep pace with consumption.206 The next five-year plan from 1985 to 1990, China’s seventh, focused on rewarding enterprises that were able to conserve energy. The seventh plan’s priorities were the construction and improvement of the infrastructure of the energy industry.207 The eighth five-year plan, from 1990 to 1995, continued to focus on saving energy. Policies aiming at reducing the level of energy consumption were directly connected to policies aiming at controlling population growth.208 The ninth five-year plan, from 1995 to 2000, began to redesign China’s energy mix. It called for an increase in the use of natural gas and 205 International Energy Agency, Developing China’s Natural Gas Market (Paris: IEA, 2002), 51–56. 206 “6th Five-Year Plan,” China Daily, www.chinadaily.com.cn/china/2012npc/2011-02/23 /content_14689649.htm. 207 “7th Five-Year Plan,” China Daily, www.chinadaily.com.cn/china/2012npc/2011-02/23 /content_14689653.htm. 208 “8th Five-Year Plan,” China Daily, www.chinadaily.com.cn/china/2012npc/2011-02/23 /content_14689657.htm. 72 the renewables and a decrease in coal consumption.209 This intention was impacted by the Asian economic crisis of 1997, which led to China becoming a net importer of oil. Moreover, the ninth plan introduced the “Go West” policy, which was focused on the development of the western regions of China and on improving its relations with the neighboring states to its west.210 The five-year plan assumed there would be large volumes of gas transiting China from west to east and supplies of electricity going from China in the opposite direction.211 The tenth fiveyear plan was published in 2000. It stressed even more the importance of protecting the environment and so ascribed a greater role to renewables and natural gas.212 The eleventh five-year plan, 2005–2010, stressed continued liberalization of both trade and energy markets.213 The twelfth five-year plan covered the period between 2010 and 2015. It focused on the development of China’s western regions. Moreover, it emphasized the importance of renewable sources of energy and of enlarging their share in the national energy mix.214 The thirteenth five-year plan period continued to stress environmental protection and focused on the western parts of the country.215 Environmental protection and energy security are the two most important tasks to more than just China’s energy policy. They also constitute critical overall priorities of China’s government.216 This subchapter on the energy resources of China shows that the country has significant domestic energy resources but is an energy importer because of the strength of its economy. The domestic energy sector, however, plays a crucial role because its contribution is fundamental to the national economy. China regards its energy output as a main instrument of maintaining the legitimacy of the CPC. The Chinese state is therefore interested in controlling its energy sector and considers it a strategic asset for maintaining popular support of the ruling regime. 209 “9th Five-Year Plan,” China Daily, www.chinadaily.com.cn/china/2012npc/2011-02/23 /content_14689661.htm. 210 Andrew Moody, “‘Go West Policy Is An Economic Milestone For Nation,” China Daily, September 12, 2011. 211 Hongyi Lai, “Western Development Program: Its Rationale, Implementation, and Prospects,” Modern China 28, no. 4 (2002): 432–466. 212 “10th Five-Year Plan,” China Daily, www.chinadaily.com.cn/china/2012npc/2011-02/23 /content_14689665.htm. 213 “11th Five-Year Plan,” China Daily, www.chinadaily.com.cn/china/2012npc/2011-02/23 /content_14689669.htm. 214 “12th Five-Year Plan,” State Council of the People’s Republic of China, http://english.gov.cn/. 215 “13th Five-Year Plan,” Xinhua News Agency, news.xinhuanet.com. 216 Shi Dan, “China’s Energy Policy and its Development,” in: Antonio Marquina, Energy Security: Visions from Asia and Europe (Madrid: Palgrave Macmillan, 2008), 135–46. 73 China’s attempt to enlarge the share of natural gas consumed in its energy mix should not be seen only from the narrow point of view of environmental protection but also as the perceived key to the regime’s military and economic power.217 State Actors in the Energy Sector The People’s Republic of China was created in 1949, and to this day it is ruled by the Communist Party of China (CPC). The supreme party organ is the National Congress of the CPC, which has been convened every five years since 1960. Between the sessions of the National Congress, the highest authorities in China are the Politburo, the Politburo’s Standing Committee, and the Central Military Commission.218 The authority of the state is officially vested in the National People’s Congress. It plays the role of a parliament and has the right to elect the president, premier and other officials. The president and vice-president wield the executive power in the state. The president appoints the members of the State Council of China, which is China’s central government.219 China’s current political system is plagued by turf wars attributable to a lack of a formal separation of powers in the structure of the government. This political reality has significant impact on the formulation of the country’s energy policy towards the neighboring states and regions. The political top brass does not usually decide upon day-to-day matters. It focuses only on strategy and in general waits to take action on initiatives originating at lower levels of government. If there is no clear consensus on a course of action below, the political elite are prone to postpone making a move, rather than to adopt an unpopular measure. This hesitancy makes the government’s decision-making process very slow. In the energy sector, it is the State Council, the Politburo’s Standing Committee, and the leadership of the People’s Liberation Army who make most of the decisions.220 State-controlled energy enterprises have 217 For more on China’s perception of Central Asia see: Marléne Laruelle and Sebastiene Peyrouse, China as a Neighbor: Central Asian Perspectives and Strategies (Washington: Central Asia-Caucasus Institute and Silk Road Studies Program, 2009). 218 “Full Text of Constitution of the Communist Party of China,” 16th National Congress of the Communist Party of China, 2002, www.china.org.cn/english/features/49109.htm#4. 219 “Constitution of the People’s Republic of China,” December 4, 1982, en.people.cn/constitution /constitution.html. 220 “National Energy Administration,” National Development and Reform Commission of the People’s Republic of China, en.ndrc.gov.cn/mfod/200812/t20081218_252224.html. 80 major oil company in Russia that favored cooperation with China’s oil and gas enterprises. Russia’s parliament prevented another transaction, the sale of Slavneft to China, in 2002. However, while Western and Russian governments are protecting their companies from China’s takeover bids, the situation is completely reversed in Central Asia.245 The modus operandi of China’s strategy is to tie itself to its partner and client states through a dense network of pipelines and other infrastructure, and the Central Asian governments are not trying to prevent it from doing so.246 China’s energy security strategy and the Belt and Road Initiative are associated with the terms “go-west strategy” and “string of pearls strategy.”247 The former term mainly refers to China’s increasingly assertive role in the Central Asian ESC. Moreover, the go-west strategy aims to increase the level of economic development in Xinjiang and Tibet and hence bring stability to these regions.248 This subchapter focuses on China’s energy policy. Based on strategic documents and commercial practice, the CPC considers China’s energy sector to be a tool of its internal and external policy. Furthermore, the energy sector’s role in external policy is growing as China pursues foreign investment through the “go-out strategy,” “oil diplomacy,” and the “string of pearls.”249 All of these strategies can be contextualized in the broader framework of China’s Belt and Road Initiative announced by President Xi Jinping in 2013.250 At the heart of that initiative is a desire to control the material resources that are the basis of China’s military and economic power. 251 China rewards or punishes certain behavior of other states. In addition, there is a clear preference for bilateral relations in the energy sector because like Russia, China finds it easier to dominate bilateral relationships. Furthermore, there are clear examples of attempts to control entire supply chains and markets without regard for commercial logic, as was the case with takeover attempts targeting the 245 Simon Osborne, “China’s Increasingly Powerful Role in Central Asia,” FinanceAsia, October 1, 2012. 246 Georgiy Voloshin, “Hidden Dragon: The Chinese Era in Central Asia,” Global Asia 9, no. 4 (2014): 86–102. 247 “China Builds Up Strategic Sea Lanes,” Washington Times, January 17, 2015, www.washington times.com/news/2005/jan/17/20050117-115550-1929r. 248 On the Xinjiang question see: Michael Clarke, Xinjiang and China’s Rise in Central Asia: A History (London: Routledge, 2011). 249 The “string of pearls” strategy focuses on strengthening China’s position in maritime trade and especially on securing its oil and LNG imports. 250 Caixin Online, “One Belt, One Road.” 251 Collins et al., China’s Energy Strategy, 81–114. 81 US company Unocal, the Canadian company Nexen, and the Russian company Slavneft.252 Energy Policy in the Central Asian Energy Security Complex Many authors, such as Alexander Cooley,253 Andrey Kazantsev,254 and Julia Kusznir255 have warned that Central Asia faces a new round in the “great game” for control of its natural resources. However, most of them perceived the West and Russia as the main contenders.256 They conspicuously ignored China, which is now only a step away from taking the region into its zone of influence.257 Besides its own energy security and economic cooperation with other states, China focuses its attention on stabilizing its borders, ensuring its national security, and securing a leadership role in the region for itself.258 China’s energy policy in the Central Asian energy security complex is mainly focused on three regional hydrocarbon exporters: Turkmenistan, Kazakhstan, and Uzbekistan.259 Those countries’ combined natural gas reserves are estimated at 27.8 tcm, which is 13.3 percent of the world total.260 Central Asia’s leaders need China’s investment to satisfy the growing demand of their developing economies. At the time of the 252 For more on China’s energy policy towards Russia see: Amy Jaffe, China’s Energy Hedging Strategy: Less than Meets the Eye for Russian Gas Pipelines (Washington: National Bureau of Asian Research, 2015). 253 Alexander Cooley, Great Games, Local Rulers: The New Great Power Contest in Central Asia (Oxford: Oxford University Press, 2012). 254 Andrey Kazantsev, Bolshaya igra s neizvestnymi pravilami: Mirovaya politika i Tsentralnaya Aziya (Moscow: Fond Naslediye Evrazii, 2008), 88–94. 255 Karen Smith Stegen and Julia Kusznir, “Outcomes and Strategies in the New Great Game: China and the Caspian States Emerge as Winners,” Journal of Eurasian Studies 6, no. 2 (2015): 91–106. 256 Lutz Kleveman, The New Great Game: Blood and Oil in Central Asia (New York: Groe Press, 2003), 144–165. 257 For more on China’s policies in Central Asia see: Sutter, “Durability of China’s Strategy,” 18–24. 258 For China’s position on Central Asia see: Jan Šír and Slavomír Horák, “China as an Emerging Superpower in Central Asia: The View from Ashkhabad,” China and Eurasia Forum Quarterly 6, no. 2 (2008): 75–88. 259 S. V. Zhukov, “Energeticheskiye interesy Kitaya v Srednei Azii,” Vostok. Afro-aziatskie obshchestva: istoriia i sovremennost 6 (2007): 1–8. 260 Onur Cobanli, “Central Asian Gas in Eurasian Power Game,” Energy Policy 68, issue C (2014): 348–370. 82 financial crisis of 2008, China concluded two loans-for-energy contracts with Turkmenistan amounting to USD 8 billion. These loans enabled Turkmenistan to free itself from having to borrow from private lenders and international financial institutions.261 In comparison to Western creditors, China did not demand any social or political preconditions for cooperation with its Central Asian partners.262 It later concluded similar deals with Kazakhstan in return for energy resources worth USD 13 billion. China’s increasing importance in the region can best be illustrated by the rise in mutual trade. In 2000, China’s overall trade with Central Asia was estimated at USD 1 billion. However, in 2010 this figure reached USD 30 billion. It was USD 52 billion in 2013.263 By the end of the 2010s, China had taken advantage of the global financial crisis and surpassed Russia as the region’s leading trading partner. China’s activities in Kazakhstan In Kazakhstan, China first focused on gaining a position in upstream activities and then moved into downstream activities. The CNPC now operates five oil field development projects in Kazakhstan: CNPC AktobeMunaiGas, North Buzachi, PetroKazakhstan, and the KAM and ADM projects. In the area of transport, China holds interests in the Kazakhstan–China Crude Oil Pipeline, the Northwest Crude Oil Pipeline, and the second phase of the Kazakhstan–China Gas Pipeline. In 1997, the CNPC acquired a 60.3 percent stake in AktobeMunaiGas and obtained a production license for the Zhanzhol, Kenkijak Oversalt, and Kenkijak Subsalt fields.264 It now owns an 85.42 percent share in AktobeMunaiGas.265 AktobeMunaiGas is the fourth largest oil enterprise in Kazakhstan.266 In 2005, the CNPC also acquired PetroKazakhstan, which then owned rights for exploitation of 16 oil fields and operated 261 For energy geopolitics in Central Asia see: Petersen, Russia, China and the Geopolitics of Energy, 89–108. 262 Evgeny Petelin, “China’s Energy Monologue in Central Asia,” Security Index 17, no. 4 (2011): 29–46. 263 Sebastien Peyrouse, Testimony before the U.S.-China Economic and Security Review Commission, March 18, 2015. 264 Ibid. 265 “CNPC in Kazakhstan,” CNPC, www.cnpc.com.cn/en/Kazakhstan/country_index.shtml. 266 Ibid. 83 Kazakhstan’s largest refinery in Shymkent.267 PetroKazakhstan is an integrated international energy company with upstream and downstream operations in both oil and gas. The company’s upstream assets are located in the South Turgai Basin and its downstream assets include the Shymkent refinery. Very conveniently for the CNPC, all the Kazakh oil fields mentioned lie along the route of its oil pipeline through Kazakhstan. The CNPC and Lukoil jointly operate the North Buzachi oil field, located in far western Kazakhstan. Each has a 50 percent stake in the project. The KAM Project mainly consists of the Konys and Bektas oil fields in the South Turgai Basin. In 1993, there were early plans for an oil pipeline from Kazakhstan to Xinjiang in China. China and Kazakhstan signed a memorandum of understanding on the construction of that pipeline in 1997.268 However, the initial plan was canceled because of the 1998 Asian financial crisis. The project returned to life in 2003 as a consequence of several setbacks of China’s energy diversification strategy. First, the US-led war in Iraq meant a loss of significant Chinese investments in that country. Second, internal developments in Russia connected with the Yukos affair spelled the end of the prospects of a Sino-Russian oil pipeline. Third, China was unsuccessful in its bid to buy a share of the vast Kashagan oil field in western Kazakhstan.269 Fourth, China experienced unprecedented electricity blackouts in the summer of 2003. The Kazakhstan–China Oil Pipeline was built in three stages. The pipeline from Aktobe region to Atyrau on the Caspian Sea was finished in 2003. Its flow was first directed to the west and then reversed into China after the completion of the entire pipeline. Next, in 2006 the pipeline from Atasu to Alashankou in China was commissioned. Finally, the first two sections of a third pipeline from Atasu to Aktobe region were commissioned in late 2009. At the same time, China built several other west-to-east pipelines. The first one was constructed in 2004 to supply gas and it connects the Tarim Basin in Xinjiang with Shanghai. It has a capacity of 17 bcm per year and transports mainly domestic Chinese resources. A second oil pipeline was commissioned in 2011. It connects 267 “Company History,” PetroKazakhstan, www.petrokazakhstan.kz/eng/pages/history.html. 268 “Brief Introduction to Relations Between China and Kazakhstan,” China Daily, 27 May 2005, www.chinadaily.com.cn/en/doc/2003-05/27/content_166588.htm. 269 Abdelghani Henni, “The Mystery of Kashagan,” Society of Petroleum Engineers, November 24, 2014, www.spe.org/news/article/the-mystery-of-the-kashagan. 84 to the Kazakhstan–China Oil Pipeline in the border city of Horgos.270 At present, there are three pipelines that export Kazakhstan’s oil to foreign customers. The first one is the old Soviet-built Atyrau–Samara Oil Pipeline leading to Samara in Russia. The second one is the Caspian Pipeline Consortium which since 2001 runs from Kazakhstan along the northern shores of the Caspian Sea to the Russian Black Sea Port of Novorossiysk. It is the only privately owned oil pipeline going through Russia’s territory. The third one, the Kazakhstan–China Oil Pipeline, has been in operation since 2006.271 China’s activities in Turkmenistan China first signaled its interest in the construction of a gas pipeline from Turkmenistan to Xinjiang in 1992. However, cooperation was stalled during the 1990s for three main reasons. Turkmenistan’s President Saparmurat Niyazov was not keen on cooperation with China in the 1990s. Although he later changed his mind, at that time he preferred dealing with Russia or constructing alternative routes to Iran, India, and Azerbaijan. Also, Russia still had considerable influence in all of Central Asia.272 In any event, the CNPC was at that time mainly focused on oil and not natural gas. This all changed in 2006 after Niyazov’s death and the ascension of Gurbanguly Berdimuhamedow to the presidency of Turkmenistan. The new power broker in Ashgabat was much more open towards China, which resulted in agreements for the construction of a gas pipeline from Turkmenistan to China and other agreements on leasing and production of gas in the Bagtyyarlyk fields on the right bank of the Amu Darya river.273 Turkmenistan agreed to supply 30 to 40 bcm per year to China in a deal lasting for 30 years.274 Many experts considered the Turkmeni270 “Kazakhstan-China Oil Pipeline,” KazMunaiGaz, www.kmg.kz/en/manufacturing/oil /kazakhstan_china. 271 Thrassy Marketos, “Eastern Caspian Sea Energy Geopolitics: A Litmus Test for the U.S.-Russia-China Struggle for the Geostrategic Control of Eurasia,” Caucasian Review of International Affairs 3, no. 1 (2009): 2–19. 272 Slavomír Horák, “Challenges from the East: China,” in Putin’s Grand Strategy: The Eurasian Union and Its Discontents, eds. S. Frederick Starr and Svante E. Cornell (Washington D.C.: Central Asia-Caucasus Institute, 2014), 166–179. 273 “Storony polny reshimosti...,” Turkmenistan.ru, July 18, 2007. 274 “CNPC in Turkmenistan,” CNPC, www.cnpc.com.cn/en/Turkmenistan/country_index.shtml. 85 stan–China Gas Pipeline to be nothing more than a “paper project” until 2008.275 However, the first segment of that pipeline was finished as early as December 2009. It was soon followed by the construction of two other pipeline segments. China simultaneously constructed two west-east gas pipelines on its own territory to transport gas further east.276 Hence, it is now possible to transport natural gas from Turkmenistan all the way to the Pacific coast of China. China also focused on gaining direct or indirect control of hydrocarbon deposits in Turkmenistan. The CNPC and Turkmengaz signed a technical agreement to extend their cooperation in gas exploration in the Bagtyyarlyk production sharing agreement (PSA) area in 2007.277 Three years later, Turkmenistan announced that a consortium consisting of the CNPC, LG International, Hyundai Engineering, Gulf Oil and Gas FZE, and Petrofac International had won a tender with a USD 10 billion bid to develop the South Yolotan natural gas field. As part of that deal, the CNPC signed a USD 3 billion contract in which it has the right to produce ten bcm per year and keep three bcm per year to fill its gas pipeline to China.278 Moreover, China’s Development Bank provided Turkmenistan with a USD 3 billion loan to develop the South Yolotan gas field and in 2013 lent another USD 4 billion for the completion of the first stage of that project. That same year, China signed an agreement to finance the second phase of the Galkynysh project for USD 4 billion.279 In all of China’s dealings with Turkmenistan, the exploration rights to the Galkynysh deposit were the most valuable prize. Of course, in its dealings with Turkmenistan, China does not focus only on natural gas but also on oil. For instance, the CNPC has operated the Gumdag oil field in western Turkmenistan since 2002.280 275 Michael Klare, Shrinking Planet: How Scarce Energy is Creating New World Order (Oxford: Oxford University Press, 2008), 120–142. 276 “West-East Gas Pipeline Project Begins Commercial Operation,” PetroChina, www.petrochina. com.cn/ptr/xwxx/201404/0163d5084c414ee89beb8bed60bb961c.shtml. 277 “Construction Commences on the No.1 Gas Processing Plant of Amu Darya Project,” CNPC, June 30, 2008, www.cnpc.com.cn/en/nr2008/201211/5bb0c4ae7f964968b04a68b08be4629a .shtml. 278 “Asian Companies Entrusted to Develop Super Gas Giant Turkmenistan,” Trend News Agency, January 5, 2010, en.trend.az/business/energy/1610569.html. 279 “China Asserts Clout in Central Asia with Huge Turkmen Gas Project,” Reuters, September 4, 2013, www.reuters.com/article/us-gas-turkmenistan-galkynysh-idUSBRE9830MN20130904. 280 “CNPC in Turkmenistan,” CNPC, www.cnpc.com.cn/en/Turkmenistan/country_index.shtml. 86 China’s activities in Uzbekistan, Tajikistan, and Kyrgyzstan China’s profile in Uzbekistan has stayed lower than in Kazakhstan and Turkmenistan (see Table 8). It focuses only on strategic infrastructure and the development of a few key hydrocarbon deposits. The CNPC signed an oil and gas exploration agreement with Uzbekneftegaz in June 2006 and created the Aral Sea project consortium in August 2006, which includes the CNPC, Uzbekneftegaz, Lukoil, Petronas, and South Korea’s KNOC.281 The consortium has signed a PSA with Uzbekistan. The CNPC also provides geophysical prospecting, well drilling, and logging services in Uzbekistan. Moreover, it is a significant petroleum equipment supplier for Uzbekistan.282 In June 2006, Uzbekneftegaz signed a five-year agreement with the China National Oil and Gas Exploration and Development Corporation for exploration work worth USD 208 million in five blocks in the Ustyurt, Bukhara-Khiva, and Fergana regions. Moreover, the CNPC announced that it would begin developing gas condensate fields in the Karakul block, located in the Bukhara-Khiva region of Uzbekistan, in May 2011.283 China also finances some critical investment projects in Uzbekistan through the Chinese Export-Import Bank. In exchange, it has obtained easy access to exports of Uzbekistan’s natural gas to China since 2012.284 In the area of energy, China also maintains relations with Kyrgyzstan and Tajikistan. However, those relationships do not have the intensity nor the importance of its relations with Kazakhstan, Turkmenistan, and Uzbekistan.285 That might change if Line D of the Turkmenistan–China Gas Pipeline is completed because it traverses the territory of those two states. China has invested in Kyrgyzstan’s and Tajikistan’s hydroelectric sectors, but it is also active in their other sectors such as industry and agriculture.286 China has also expanded the development assistance it provides to the two countries through the Chinese Export-Import Bank. The Export-Import Bank is aid-dependent Tajikistan’s most extensive 281 “CNPC in Uzbekistan,” CNPC, www.cnpc.com.cn/en/Uzbekistan/country_index.shtml. 282 Ibid. 283 “China’s CNPC to Develop Gas Condensate Fields in Uzbekistan,” Times of Central Asia, May 12, 2011. 284 Luzyanin, “Rossiya i Kitay.” 285 Luca Anceschi, “Integrating Domestic Politics and Foreign Policy Making: The Cases of Turkmenistan and Uzbekistan,” Central Asian Survey 29, no. 2 (2010): 143–158. 286 Sebastien Peyrouse, “The Hydroelectric Sector in Central Asia and the Growing Role of China,” China and Eurasia Forum Quarterly 5, no. 2 (2007): 131–148. 87 creditor, holding 41.3 percent of Tajikistan’s external debt in 2014.287 Because of its loans, China enjoys enormous influence on the internal politics of the two states. Their debts constitute a card that can be played in case they attempt to hinder the construction of Line D. The Belt and Road Initiative Almost all of China’s activities in Central Asia can now be subsumed under the banner of the Belt and Road Initiative (BRI).288 This project has two dimensions. The first one is the Maritime Silk Road, which is an attempt to increase China’s control over sea-based transport. The second one is an economic and security program, the New Silk Road project, which is intended to connect China over land with Central Asia and beyond.289 If necessary, it can substitute the existing sea-lanes in the event of a naval blockade against China.290 The Belt and Road Initiative mainly combines and relabels activities that were already being pursued by China after the fall of the Soviet Union. Moreover, it elevates transport initiatives to the level of geopolitical strategy.291 To implement the BRI project, China has created the Silk Road Fund with USD 40 billion in capital292 and the Asian Infrastructure Investment Bank with USD 100 billion.293 These two institutions were launched in June 2015. Their total resources are approximately equal to those of the Japan-backed Asian Development Bank, and they are only slightly less than the resources commanded by the US-backed World Bank. However, they are still two and a half times less than the resources controlled by the International Monetary Fund.294 287 “China Will Lend Tajikistan Grant of $32.2 Million,” Amonatbonk, May 20, 2015, www.amonatbonk.tj/en/about/press/novosti/121. 288 William T. Wilson, “China’s Huge One Belt, One Road Initiative Is Sweeping Central Asia,” National Interest, July 27, 2016. 289 Peter Frankopan, “The Silk Roads Rise Again,” New Statesman, October 22, 2015, 30–33. 290 Jamie Coomarasamy, “China’s Westward Pivot: What It Means for Central Asia and Russia,” Mediterranean Quarterly 20, no. 9 (2014): 48–60. 291 Justyna Szczudlik-Tatar, “China’s New Silk Road Diplomacy,” PISM Policy Paper 34, no. 82 (2012): 1–8. 292 “Fund History,” Silk Road Fund, www.silkroadfund.com.cn/enweb/23775/23767/index.html. 293 “Operational Policies,” Asian Infrastructure Investment Bank, euw.aiib.org/html/aboutus /Operational_Policies/Financing/?show=3. 294 For more on China’s New Silk Road projects see: Brugier, Camille, China’s Way: The New Silk Road (Brussels: European Institute on Security Studies, 2014). 88 China’s goal in this effort is the “de-dollarization” of international trade. To that end, it seeks to conclude agreements with its partners and conduct trade preferentially in yuan. For instance, Gazprom converted its export of oil to China entirely into yuan in June 2015.295 Russia is sympathetic to China’s attempts to decrease the role of the US dollar in international trade. However, the two great powers’ visions of the future world order clash. China favors a new bipolarity in international relations with two superpowers – the PRC and the United States – while Russia favors multipolarity and a return to a global balance among several great powers.296 The greatest prize of the Belt and Road Initiative is the facilitation of China’s trade with the European Union, which amounts to a billion euros a day.297 If China’s goods are transported to Europe via the maritime route, it takes 20 to 40 days. Transport via the inland New Silk Road can take only 11 days.298 However, the project represents a real test for China’s doctrine of the Five Principles of Peaceful Coexistence, which has significant support among the ruling circles in Beijing. These five principles are: mutual respect for territorial integrity and sovereignty, non-aggression, non-interference in internal affairs, equality and mutual benefit, and peaceful co-existence.299 China has traditionally focused on economic cooperation with Central Asia and let Russia manage the region’s security. This division of labor could soon change, however, as China becomes more willing to participate in military operations beyond its borders, for example in Africa.300 In fact, Russia’s military cooperation structure, the Collective Security Treaty Organization, proved utterly ineffective in the case of the 2010 crisis in Kyrgyzstan.301 Moreover, Russia has proved itself to be unable to control the geopolitics of the region because it could not block 295 Jack Farchy, “Gazprom Neft Sells Oil to China in Renminbi Rather than Dollars,” Financial Times, June 1, 2015, www.ft.com/content/8e88d464-0870-11e5-85de-00144feabdc0. 296 For more on China’s activities in Central and Easter Europe see: Rudolf Fürst and Filip Tesař eds., China’s Comeback in Former Eastern Europe: No Longer Comrades, Not Yet Strategic Partners (Prague: Institute of International Relations, 2013). 297 Alessandro Arduino, China’s One Belt, One Road: Has the European Union Missed the Train? (Singapore: Nanyang Technological University, 2016), 1–20. 298 Ibid. 299 “Backgrounder: Five Principles of Peaceful Coexistence,” Xinhua News Agency, news .xinhuanet.com/english/2005-04/08/content_2803638.htm. 300 “Is China Contributing to the United Nations’ Mission?” Centre for Strategic and International Studies, chinapower.csis.org/china-un-mission. 301 Lin, The New Silk Road, 13–19. 89 the deployment of US troops in the region after September 2001.302 In the course of the 2000s, China understood that Russia does not have the ability to stabilize Central Asia by itself, nor to prevent its penetration by other great powers.303 Therefore, it has come up with its own bid for regional hegemony in the form of the Belt and Road Initiative. It seems that the BRI project will play a critical role in Sino-Russian relations and will gradually overshadow the Shanghai Cooperation Organization, which has been the central platform for collaboration up to the present.304 The SCO member states approved its program of multilateral economic cooperation in 2003.305 The program assumed that by 2010, barriers to trade and investment would be significantly lower and that by 2020 goods, capital, and services would enjoy free movement between its members.306 But all of that has remained on paper only. The SCO has instead focused on security cooperation between its members and on preventing the spread of US influence in Central Asia. Even the proposed SCO development bank did not materialize. Any hopes for deeper economic integration amongst its members were dispersed at the Ufa summit in 2015 when it was agreed that India and Pakistan would join the organization.307 This enlargement of the organization will make any deeper economic integration impossible. It shows that Russia was only buying time and was not really prepared for economic integration in the framework of the SCO out of fear that China’s economy would overshadow its own. China began to support the idea of a land bridge to Europe that would bypass Russia soon after 1991. It paid the Asian Development Bank to lead the project despite Russia’s vociferous opposition. Coincidentally, the European Union announced a similar project, the Transport Corridor Europe–Caucasus–Asia (TRACECA) at that time. China perceived the 302 Horák, “Challenges from the East,” 166–179. 303 Martin Hála, “Evropa se rozpadá, Eurasie sílí,” Sinopsis.cz, https://sinopsis.cz/evropa-se -rozpada-eurasie-sili. 304 Stephen Aris, “The Shanghai Cooperation Organisation: ‘Tackling the Three Evils.’ A Regional Response to Non-traditional Security Challenges or an Anti-Western Bloc?” Europe-Asia Studies 61, no. 3 (2009): 457–482. 305 Alexander Frost, “The Collective Security Treaty Organization, the Shanghai Cooperation Organization, and Russia’s Strategic Goals in Central Asia,” China and Eurasia Forum Quarterly 7, no. 3 (2009): 83–102. 306 “About,” Shanghai Cooperation Organisation, en.sco-russia.ru/docs/about/faq.html. 307 “After BRICS, Putin Hosts Shanghai Cooperation Organization Summit in Ufa,” Radio Free Europe/Radio Liberty, July 10, 2015, www.rferl.org/a/russia-putin-shanghai-cooperation -organization-summit-brics-ufa/27120442.html. 96 4. Turkmenistan’s Energy Policy in Central Asia The third of the three case studies is devoted to Turkmenistan’s energy policy and its formulation in the context of the Central Asian ESC. Like the others, this chapter is divided into four parts: energy resources, energy actors, energy policy in general, and energy policy in the ESC of Central Asia. The content of the subchapters is based on an evaluation of primary and secondary sources of data. The goal of this particular case study is to search for elements of the strategic-oriented energy policy in the country’s natural gas policy. These elements are: the perception that energy resources are strategically important; the perception that the energy sector is crucial to the state’s economy; the perception that state-owned energy actors are extensions of the state apparatus; a reliance on bilateral relations rather than multilateral arrangements; the perception that the energy sector is a tool for achieving the state’s policy goals; a zero-sum approach to policy making; the perception that dependence on other countries for energy is undesirable; and an emphasis on strategic goals over economic logic. This analysis is a stepping stone in the process of answering the research question: what is the predominant orientation of energy policy among the states of the ESC of Central Asia. The chapter concludes with an analysis of the indicators found in the data. Energy Resources Turkmenistan’s predominant exports are natural gas, petroleum, and cotton. Together they make up more than half of the country’s GDP.318 Turkmenistan is the fourth largest producer of natural gas in the world 318 World Trade Organisation, Turkmenistan. 97 after Iran, Russia, and Qatar. Turkmenistan’s current proven reserves are 17.5 tcm, which is 9.4 percent of the world’s total reserves.319 It should be stressed that Turkmenistan’s proven natural gas reserves have significantly grown during the past two decades in comparison to other post-Soviet states. Ashgabat’s natural gas deposits were estimated at 2.3 tcm in 2002, but by the end of the decade they increased to 17.5 tcm. In the course of the same period, Russia’s proven natural gas reserves only rose from 29.8 tcm to 32.9 tcm.320 In 2012, Kazakhstan’s proven natural gas reserves were 1.3 tcm and Uzbekistan’s were 1.1 tcm.321 This unparalleled increase in the proven reserves of natural gas in Turkmenistan significantly strengthened the country’s economic and geopolitical standing and turned it into the second biggest energy exporter in the regional energy security complex of Central Asia after Russia.322 The development of the energy sector also manifested itself in the size of Turkmenistan’s economy as shown in Table 15. Table 15: Basic socio-economic indicators – Turkmenistan (2007–2018) Year GDP (billions USD) GDP per capita (current USD) Inhabitants (thousands) 2007 12.664 2,600 4,870 2008 19.272 3,904 4,935 2009 20.214 4,036 5,007 2010 22.583 4,439 5,087 2011 29.233 5,650 5,174 2012 35.164 6,675 5,267 2013 39.198 7,304 5,366 2014 43.524 7,962 5,466 2015 35.800 6,433 5,389 2016 36.180 6,389 5,662 2017 37.926 6,587 5,758 2018 40.761 6,967 5,851 Source: The World Bank 319 “BP Statistical Review of World Energy June 2016,” BP plc, www.bp.com, June 1, 2016. 320 James Dorian, “Central Asia: A Major Emerging Energy Player in the 21st Century,” Energy Policy 34, no. 5 (2006): 1–13. 321 Ibid. 322 Félix Arteaga, “Energy Security in Central Asia: Infrastructure and Risk,” Security and Defence 1 (2010): 12–23. 98 Turkmenistan’s largest proven reserves are located in the Galkynysh gas field, probably the second largest gas field in the world after the South Pars field in the Persian Gulf, which is shared by Iran and Qatar.323 The Galkynysh field includes other fields that were formerly regarded as separate from it. These are the Yolotan, Minara, Osman, and Yashlar fields.324 Other essential gas deposits in Turkmenistan are the Döwletabat-Donmez field, Korpedzhe field, Malay field, Samandepe field, and Shatlyk field. The production in the Döwletabat-Donmez field began in 1982. It is located on the border with Iran near the town of Seraghs. This is where pipelines I, II, and IV of the Central Asia–Center Gas Pipeline System originate. Its reserves are estimated at 1.6 tcm. The Korpedzhe gas deposit is located in southwestern Turkmenistan. It is the starting point of the Korpedzhe–Kurdkuy Gas Pipeline commissioned in 1997, which serves northern Iran. Its reserves were initially estimated to be 141.9 bcm. The Malay deposit is located on the left bank of the Amu Darya river. In 2009 it was connected to the Turkmenistan–China Gas Pipeline via a separate branch called the Malay–Bagtyyarlyk Line. The Samandepe deposit was discovered in 1964 with reserves that were initially estimated at 102 bcm. An on-site processing plant was built there in 2009. The Shatlyk deposit is located in the Amu Darya river basin. The field initiated production in 1973 when it was connected to the Central Asia–Center Gas Pipeline System. At present, it is also connected to the East–West Interconnector Gas Pipeline.325 There are many other important natural gas deposits in Turkmenistan, but they are all dwarfed by the Galkynysh gas field, which is Turkmenistan’s most important economic and geopolitical asset. Turkmenistan is one of the gas-producing countries that can export a substantial portion of their production because of relatively low domestic demand. However, domestic demand is rapidly increasing, from 4 bcm in 1992 to 29.5 bcm in 2016, in part because the government supplies the population of Turkmenistan with gas free of charge under specific quotas.326 This still leaves more than half of the country’s production 323 Muhammad Quazi, “Central Asia: Crossroads for Global Economic Stratagem,” Journal of Political Studies 22, no. 1 (2015): 289–301. 324 “Sverhgigantskoe gazovoe mestorozhdenie v Turkmenistane poluchilo nazvanie Galkynysh,” Turkmenistan.ru, November 20, 2011. 325 Martha Brill Olcott, “International Gas Trade in Central Asia: Turkmenistan, Iran, Russia and Afghanistan,” Geopolitics of Natural Gas Study, Working Paper No. 28, James A. Baker III Institute for Public Policy (2004), https://fsi-live.s3.us-west-1.amazonaws.com/s3fs-public /Turkmenistan_final.pdf. 326 “Accounting for Gas Consumption According to International Standards,” Nebit-Gaz, February 2, 2016. 99 available for export. In contrast, neighboring Uzbekistan consumes almost all of its production domestically. Turkmenistan’s state budget is highly dependent on the export of natural gas, cotton, and petrochemicals. Taxes represent only approximately one quarter of its government revenues.327 Turkmenistan’s ability to export natural gas is illustrated in Table 16. Table 16: Turkmenistan’s exports of natural gas, 2008–2019 (bcm) Year Russia China Iran 2008 39.10 0.00 6.50 2009 10.70 0.00 6.50 2010 9.68 3.55 6.50 2011 10.14 14.25 10.14 2012 9.86 21.29 9.05 2013 9.88 24.41 4.66 2014 9.05 25.49 6.55 2015 2.81 27.75 7.24 2016 0.00 34.20 6.70 2017 0.00 31.70 1.70 2018 0.00 33.30 1.90 2019 0.00 31.60 0.00 Source: Statistical Review of World Energy Turkmenistan’s gas production reached its Soviet-era maximum in 1989 with 81.4 bcm.328 Production quickly decreased during the 1990s because of the breakup of the Soviet Union, falling to 13.1 bcm in 1998. This trend somewhat improved after 2000 as production reached 66.1 bcm in 2008. However, production fell once again due to a crisis in the country’s relations with Russia, falling to 36.4 bcm. The situation soon improved thanks to the commissioning of the Turkmenistan–China Gas Pipeline. In 2015, Turkmenistan’s total production reached 69.6 bcm (see Table 4). Moreso than Russia, China stands out as the most promising market for Turkmenistan’s natural gas because it consumes imported gas directly rather than re-exporting it and because its consumption will 327 Annete Bohr, Turkmenistan: Power, Politics and Petro-Authoritarianism (London: Chatham House, 2016), 20–35. 328 “BP Statistical Review of World Energy June 2016,” BP plc, www.bp.com, June 1, 2016. 100 very likely grow in the shortto mid-term due to Chinese government policies that prioritize environmental protection. This subchapter on the energy resources of Turkmenistan shows that the energy sector is the backbone of the state’s economy. Turkmenistan became one of the most important energy exporters globally in the 2010s because of newly found natural gas deposits. Turkmenistan’s political elite understand how important the country’s energy sector is. Berdimuhammedow’s regime subsidizes domestic energy supplies because the political elite are interested in controlling the energy sector and consider it a strategic asset for maintaining popular support for the ruling regime. State Actors in the Energy Sector The key document that establishes the institutional framework for the development of Turkmenistan’s energy sector is the Law on Hydrocarbon Resources that was passed in August 2008.329 It primarily focuses on the powers and responsibilities of the State Agency for Management and Use of Hydrocarbon Resources, controlled by the President of Turkmenistan himself. The Agency is the principal institution for the management of Turkmenistan’s oil and gas resources. It has the power to issue licenses for exploration and development of deposits, oil and gas production and transportation, and to conclude agreements on production sharing. It has the last say in setting tariffs for transport through the country’s gas pipelines. It concludes agreements with foreign investors and sets rules for their operations in the country.330 The Agency was officially mentioned for the first time on March 12, 2007, when the legislation establishing it was published. It effectively replaced the Competent Body for the Use of Hydrocarbon Resources, also controlled by the President of Turkmenistan, which was disbanded before the Agency was created.331 The Agency derives revenue from royalties, bonuses, and income from PSAs and other contracts. It transfers 20 percent of its income to the state budget. The rest remains in the budget of the Agency for its operation. The government fully controls the Agency, and only the president, who appoints its director, can overrule 329 “Zakon Turkmenistana ob uglevodorodnykh resursakh,” Turkmenistan.ru, August 20, 2008. 330 “Gosudarstvennoe agentstvo po upravleniyu I ispolzovaniyu uglevodorodnykh resursov pri Prezidente Turkmenistana,” Nebit-gaz, www.oilgas.gov.tm. 331 “Ispolzovanie uglevodorodnykh resursov Turkmenistana budet kontrolirovat novyi organ,” Turkmenistan.ru, March 10, 2007. 101 its decisions.332 As of 2017, the Agency was led by President Berdimuhamedow’s son-in-law, Döwlet Atabaýew.333 These arrangements mean that Beridmuhamedow directly and personally controls Turkmenistan’s entire hydrocarbon sector and its enormous wealth. Berdimuhamedow thus holds the essential role in setting the energy policy and strategy for Turkmenistan. The Law on Hydrocarbon Resources defines the conditions for resolution of a dispute between the Agency and the holder of a license or contract. It provides that disputes should be settled through negotiation if possible, with the involvement of independent international experts as necessary. Only if negotiations fail may the parties avail themselves of dispute settlement procedures agreed upon in their contract. Finally, if a dispute cannot be settled within three months, it can be taken to an international arbitration body.334 This last option was incorporated into the law because many foreign enterprises such as the Argentinian company Bridas had had a terrible experience with their investments in Turkmenistan. These bad experiences significantly damaged Turkmenistan’s business reputation abroad and have since deterred foreign investment so much that its energy sector still suffers. Moreover, it enabled China to gain influence and resources in exchange for investments that can be perceived as disadvantageous to Turkmenistan because of the lack of competition from other significant foreign investors. There are also other state actors who influence the energy sector in Turkmenistan. Turkmenistan’s Ministry of Finance has competency in the area of tariffs. Turkmentransgas and Turkmengaz also must agree upon gas transportation tariffs. Moreover, tariffs have to be approved by the Agency. The Ministry of Finance established a stabilization fund in 2008 that has primary responsibility for balancing shortfalls in state revenues and planning long-term investment strategy.335 Turkmenistan’s Ministry of the Oil and Gas Industry and Mineral Resources sets Turkmenistan’s policy in the area of mineral resources and performs analysis and planning. It is also in charge of the state-owned enterprises in the hydrocarbon sector.336 332 Kate Watters, “The Private Pocket of the President (Berdymukhamedov): Oil, Gas and the Law,” Crude Accountability, October 2011. 333 Maksat Alikperov, “Turkmenskii gaz – semeinyi biznes. U G.Berdymukhamedova tozhe zavelsya khitryi zyat’ – Dovlet Atabaev,” Khronika Turkmenistana, February 4, 2010. 334 Ibid. 335 “Ministerstvo finansov Turkmenistana,” fineconomic.gov.tm. 336 “Ministerstvo nefti i gaza Turkmenistana,” www.oilgas.gov.tm. 102 The state-owned company Turkmengaz is the most significant enterprise in the country. Its activities center on extraction, production, and export of natural gas. It manages extraction in more than 30 large-scale deposits such as Döwletabat, Shatlyk, Malay, Kerpichli, Gazlydepe, Bagadzha, Garabil, Gurrukbil, and the most massive deposit, Galkynysh.337 Turkmenneft is also state-owned and focuses on the exploration and development of oil and gas fields in Turkmenistan.338 Its most important oil fields are Goturdepe, Nebitdag, South Gamyshlydzha, Korpedzhe, Akpatlavuk, Keymir, Eastern Keymir, and Eastern Cheleken.339 Turkmengeologiya is tasked with identifying, exploring, and prospecting new energy deposits.340 Turkmenneftegazstroi deals with the development of oil and gas fields, construction of oil and gas pipelines, and renovation of refining facilities. It took part in the renovation and modernization of refineries in Seydi and Turkmenbashi.341 The structure of Turkmenistan’s hydrocarbon industry complex as of 2017 very much resembled those of other energy exporting post-Soviet republics.342 The Law on Foreign Investments of 2008 authorized production sharing agreements between foreign investors and their counterparts in Turkmenistan. It also allowed for the establishment of enterprises wholly owned by foreign investors, branches of foreign legal entities, and for purchase of existing enterprises by foreign investors.343 However, the investment environment in Turkmenistan is plagued by corruption and barriers to foreign investors.344 Transparency International ranked Turkmenistan 154th out of 168 countries ranked in its Corruption Perception Index in 2015.345 In its 2016 Economic Freedom Index, the Heritage 337 “Gosudarstvennyi kontsern Turkmengaz,” www.oilgas.gov.tm/m/page/page/25. 338 “Turkmenistan narashchivaet eksportnyi potentsial uglevodorodnykh resursov,” Turkmenistan .ru, February 8, 2015. 339 “Gosudarstvennyi kontsern Turkmenneft,” www.oilgas.gov.tm/m/page/page/26. 340 “Gosudarstvennaya korporatsiya Turkmengeologiya,” www.oilgas.gov.tm/m/page/page/27. 341 “Gosudarstvennyi kontsern Turkmenneftegazstroi,” www.oilgas.gov.tm/m/page/page/28. 342 On Turkmenistan’s economy see: Jan Šír, “Turkmenistan: A Promised Land for Doing Business? Macroeconomic Reforms under Berdimukhammedow,” China and Eurasia Forum Quarterly 8, no. 3 (2010): 67–92. 343 “Zakonodatelstvo Turkmenistana ob inostrannykh investitsiyakh,” Ministerstvo ekonomicheskogo razvitiya Rossiiskoi Federatsii, www.ved.gov.ru/exportcountries/tm/about_tm /laws_ved_tm/invest_law_tm, March 18, 2008. 344 Gavin Hayman and Tom Mayne, “Energy-related Corruption and its Effects on Stability in Central Asia,” China and Eurasia Forum Quarterly 8, no. 2 (2010): 137–148. 345 “Corruption Perception Index,” Transparency International, www.transparency.org/country /#TKM. 103 Foundation ranked Turkmenistan near the bottom, number 174 of the 178 countries it ranked.346 The Turkmenistan government used different tools to discriminate against “disfavored enterprises” in the past, such as repeated tax audits, refusals to extend licenses, non-payment of debts, and forced renegotiations of contracts. There are several cases of friction between the government and the Italian company Eni, the Dutch company Larmag, and the Argentinian company Bridas.347 The majority of the hydrocarbon industry is controlled by the state. In 2009, as much as 59 percent of Turkmenistan’s oil and 94 percent of its gas was produced by state-owned entities.348 This shows how important the hydrocarbon sector, especially its gas segment, is for Berdimuhamedow’s regime in Turkmenistan. Moreover, it shows that the creation of profit does not necessarily have priority over the strategic goals of the regime. In other words, Berdimuhamedow considers the natural gas resources of Turkmenistan as too strategic an asset to leave their direction solely to market forces.349 In the oil sector, Turkmenistan has concluded four offshore PSAs with external partners and three onshore PSAs that were active as of 2016. The offshore PSAs are with the Russian company Itera, the Cypriot company Buried Hill, Malaysia’s Petronas Carigali, and Dragon Oil, which is wholly owned by Emirates National Oil Company.350 The CNPC, the Italian company ENI and the Austrian company Mitro International are partners in the three onshore PSAs. Compared to the CNPC, ENI and Mitro operate on proportionally smaller fields in western Turkmenistan. ENI is active at the Nebit Dag field351 and Mitro International at the Hazar field.352 In the production of natural gas, Turkmenistan’s leadership prefers to conclude service contracts with Asian or Arab operators. In the first 346 “2006 Index of Economic Freedom,” Heritage Foundation, www.heritage.org/index/ranking. 347 Watters, “The Private Pocket of the President.” 348 “Ekonomicheskaya strategiya Turkmenistana: opirayas na narod, vo imya naroda,” Turkmenistan.ru, April 24, 2010. 349 For more on political developments in Berdimuhamedow’s Turkmenistan see: Slavomír Horák and Jan Šír, Dismantling Totalitarianism? Turkmenistan under Berdimuhamedow (Washington: Central Asia-Caucasus Institute and Silk Road Studies Program, 2009). 350 “Status morskikh neftegazovykh kontraktov v Turkmenistane na dekabr 2015 goda,” Trend. az, December 24, 2015. 351 “Eni’s Activities in Turkmenistan,” Eni, www.eni.com/enipedia/en_IT/international-presence /asia-oceania/enis-activities-in-turkmenistan.page. 352 “Mitro International Limited,” Crude Accountability, crudeaccountability.org/campaigns /turkmenistan/whos-who-in-turkmenistan-petroleum-company-dossiers/mitro-international -limited-austriaturkmennebit-consortium-the-khazar-consortium. 104 phase of the development of Galkynysh, Turkmengaz signed contracts with Gulf Oil and Gas FZE and Petrofac International LLC, both from the United Arab Emirates, with the CNPC subsidiary Chuanqing Drilling Engineering Company, and with a consortium of LG International Corporation and Hyundai Engineering from South Korea. All these contracts were signed in 2009 and amounted to USD 10 billion.353 The contracts signaled that at that time, Turkmenistan was willing to entrust the oil and gas field development to less experienced enterprises rather than to allow Western or Russian involvement in its most important natural gas projects. This subchapter on the energy actors in Turkmenistan explains that Berdimuhamedow’s regime directly or indirectly controls almost the entirety of the country’s energy sector. The State Agency for the Management and Use of Hydrocarbon Resources under the President of Turkmenistan along with the Turkmengaz company are Berdimuhamedow’s key vehicles for controlling Turkmenistan’s energy sector. The state’s grip on the energy sector is strengthened by restrictions on foreign investments and the deliberate diversification of the foreign partners that are allowed into the energy sector. There were several cases of Turkmenistan’s authorities blocking Western companies’ activities, among the affected were the Italian company Eni, the Dutch company Larmag, and the Argentinian company Bridas. These findings confirm that Turkmenistan’s regime wants to transform as much of its national power into state power as possible, especially in the energy sector. The regime considers state-owned or state-dependent energy actors as practical extensions of the state apparatus. Energy Policy Saparmurat Niyazov’s death on December 21, 2006 was a crucial milestone in the political and economic development of the independent Turkmenistan.354 He had led the country since 1985, when he became the first secretary of the Communist Party of what was then the Turkmen Soviet Socialist Republic.355 The transition of power after Niyazov’s 353 Huseyn Hasanov, “Turkmenistan May Expand Galkynysh Gas Field Development,” Trend.az, November 27, 2015. 354 “Fradkov priletel v Ashkhabad pokhoronit Turkmenbashi,” Gazeta.ru, December 24, 2006. 355 Igor Yavlinskiy, “Prezident Trukmenii Saparmurat Niyazov: Ya pokinu post glavy gosudarstva eshe pri zhizni,” Izvestiya, December 21, 2006. 105 death was exceptionally quick and above all went very smoothly. The State Security Council, an extraconstitutional body dominated by representatives of the country’s power structures, appointed the Deputy Chairman of the government and the Minister of Health, Gurbanguly Berdimuhamedow, as Turkmenistan’s president.356 To the existing power brokers, a smooth transition seemed like the only way to secure their positions and maintain internal and external stability. Berdimuhamedow started to build up his power base immediately after his appointment.357 He got rid of the people that had elevated him to the post of president, especially the Head of the State Security Council, Akmurat Rejepow. Rejepow’s elimination was likely linked to the construction of the gas pipeline to China. In that regard, there are two plausible theories. The first theory speculates that Rejepow was the principal advocate for the Turkmenistan–China Gas Pipeline. Berdimuhamedow had to eliminate him to control the crucial bilateral relationship with China directly himself. The second theory is that the timing of Rejepow’s removal from power and imprisonment indicates that Berdimuhamedow must have promised Vladimir Putin that Turkmenistan would participate in the now mothballed Caspian Coastal Gas Pipeline project. He had to eliminate Rejepow to pursue this goal. It is challenging to verify or disprove these two claims. Nonetheless, their existence supports the idea that Berdimuhamedow’s rise to power was directly connected with rivalry and competition for control of Turkmenistan’s energy policy amongst the country’s ruling elite. In retrospect, it seems that Berdimuhamedow favored closer cooperation with China from the beginning. His rise to power probably played a decisive role in making the Turkmenistan–China Gas Pipeline a reality.358 The transfer of power from Niyazov to Berdimuhamedow was both legally and symbolically confirmed by the adoption of a new constitution in 2008. This document made Turkmenistan’s institutional structure more like that of the neighboring states while confirming the supremacy of the president’s power vertical.359 Berdimuhamedow proclaimed the “Era of New Renaissance” to succeed Niyazov’s socio-economic program, the “Golden Age of the Turkmen,” which Niyazov had presented in 2000.360 This “new era” was characterized by large-scale construction projects 356 “Opredelilsya kandidat na post prezidenta Turkmenii,” NTV, December 28, 2006. 357 “Berdimuhamedow, Gurbanguly,” Lenta.ru, September 18, 2016. 358 Based on semi-structured interviews with stakeholders. 359 “Konstitutsiya Turkmenistana,” September 26, 2008. 360 “Epokha novogo vozrozhdeniya v ramkakh zolotogo veka,” Turkmenistan.ru, August 8, 2008. 112 Russia to postpone implementation of high-cost projects in Siberia and the Arctic and to supply Turkmen gas to the European market instead. Moreover, it enabled Russia to strengthen its influence in other post-Soviet countries, most importantly in Ukraine.393 Nevertheless, Russia did not have any alternative plans when the global economic crisis unfolded in 2009. Overpricing was an irritant in Russia’s relationship with Turkmenistan and other natural gas importers. However, Russia’s position really started to unravel when China announced its project for the Turkmenistan–China Gas Pipeline. Russia tried to respond with proposals for a Caspian Coastal Gas Pipeline and a reconstruction of the Central Asia–Center Gas Pipeline System, but it was already too late. Moreover, Gazprom lost the tender to build the strategic East–West Interconnector in 2010. The deterioration of Russia’s bilateral relationship with Turkmenistan will have future consequences. Russia lost its control of cheap Turkmen gas, which it had continued to use for its domestic needs while sending its own gas onward to the European market.394 This development will require Russia to develop its eastern Siberian and Arctic deposits, which will be more technologically and financially demanding. Moreover, China not only squeezed Russia out of Turkmenistan but also gained critical leverage in any price negotiations with Russia itself. An example of this is the difficult negotiation process over the construction of the Power of Siberia Gas Pipeline. Finally, Russia’s loss of its pre-eminent position in Turkmenistan has geopolitical implications. Ashgabat officially proclaims its intention to diversify its ties with China, Iran, India, Pakistan, and the states along the Southern Energy Corridor. However, Turkmenistan’s officials almost never mention upgrading their relationship with Russia. Eastern route China plays the leading role in the eastern route out of Turkmenistan. It first proposed this option for Turkmenistan’s gas exports in the early 1990s. Niyazov approved the eastern route for Turkmenistan’s natural gas during his last visit to China in the spring of 2006. He and China’s then-leader, Hu Jintao, agreed that China would purchase Turkmenistan’s gas and construct the Turkmenistan–China Gas Pipeline, with a 393 Fredholm, “Natural Gas Trade.” 394 Aleksei Topalov, “Turkmenskii gaz oboidet Rossiyu,” Gazeta.ru, December 24, 2015. 113 commissioning planned for the end of 2009.395 Turkmenistan committed to supplying China with 30 bcm per year for 30 years.396 However, this agreement should not be perceived as something set in stone. Ashgabat had a similar agreement with Russia, but when cooperation with Moscow began to crumble, the agreement was largely forgotten. The same could happen to the agreement with China if bilateral cooperation with Beijing loses its charm for the power brokers in Ashgabat. The 2006 agreement counted on supplying China with 13 bcm per year from the fields on the right bank of the Amu Darya river under a PSA with the CNPC. Turkmenistan could have obtained 17 bcm annually from other deposits on the left bank of the Amu Darya river.397 Niyazov’s foreign policy reflected his unwillingness to allow foreign countries to conclude onshore contracts in Turkmenistan. The only exception to the rule was a production sharing agreement on the Bagtyyarlyk gas deposit with the CNPC which constituted the price for concluding the agreement with China regarding the construction of the Turkmenistan–China Gas Pipeline. The CNPC was the first company ever given the possibility of developing onshore deposits in Turkmenistan.398 This offer demonstrates to the CNPC just how important the Turkmen leadership considers an enhanced cooperation with China to be. If the country’s relationship with Russia continued to deteriorate and there was no option to ship natural gas to China, it would threaten the stability of the regime in Ashgabat. One of Berdimuhamedow’s first foreign visits was to Beijing in July 2007. He assured the Chinese side of his support for the 2006 agreement with Niyazov. Moreover, he announced the discovery of new gas deposits on the right bank of the Amu Darya. These newly found deposits increased the geopolitical weight of Turkmenistan and made it the country with the fourth-largest natural gas reserves in the world. Subsequent to Berdimuhamedow’s visit, the two countries agreed on increased technological and economic cooperation. China also offered Turkmenistan an interest-free loan for the purchase of Chinese-made drilling rigs used for the development of upstream activities in the gas fields.399 395 “Sotrudnichestvo po gazu s Tsentralnoi Aziei,” CNPC, www.cnpc.com.cn/ru/zytrqgdzt /zytrqgdzt_2.shtml. 396 “Kitai i Turkmenistan podpisali dva soglasheniya o sotrudnichestve v gazovoi sfere,” Turkmenistan.ru, July 17, 2007. 397 “Turkmen, Chinese Leaders Sign Accords, Issue Statement,” ITAR-TASS, August 29, 2008. 398 “CNPC in Turkmenistan,” CNPC, www.cnpc.com.cn/en/Turkmenistan/country_index.shtml. 399 “Storony polny reshimosti...,” Turkmenistan.ru, July 18, 2007. 114 The CNPC organized a ceremony celebrating the start of the construction of the Turkmenistan–China Gas Pipeline in the village of Bagtyyarlyk in Turkmenistan’s eastern Lepab region on August 29, 2007. The pipeline was commissioned in December 2009 and is 1,833 kilometers long.400 It starts at the Bagtyyarlyk field and runs for 188 kilometers to the border with Uzbekistan. It then traverses 530 kilometers of Uzbekistan and enters Kazakhstan near the town of Shymkent. It runs for another 1,115 kilometers on Kazakh territory until it reaches China’s border at Horgos. The natural gas then continues on to China’s megalopolises in the east. Line B of the pipeline was commissioned one year after Line A, in 2010. Line A and Line B have a combined capacity of 30 bcm per year.401 It was thus inevitable that another pipeline would have to be built in order to fulfill Turkmenistan’s agreement to ship 40 bcm annually to China.402 The cooperation between Turkmenistan and China was developing rapidly and well. Both sides agreed to a new framework agreement in 2012. The year 2020 was the endpoint of China’s then-current five-year plan and there was a great pressure to fulfill that target by then. A road map for further development of the Bagtyyarlyk and Galkynysh fields and to add a Line C to the Turkmenistan–China Gas Pipeline with a capacity of 25 bcm was agreed upon in 2013.403 Line C runs parallel to the two previous lines and was commissioned in June 2014.404 The parties agreed to construct Line D with another 25 bcm of capacity in September 2013. However, its path will be much different than that of the three previous lines. When completed, it will start at the Bagtyyarlyk field and then run 205 kilometers through Uzbekistan. Subsequently, it will traverse 415 kilometers of Tajikistan and 225 kilometers of Kyrgyzstan before reaching Kashgar on China’s border.405 The construction of some segments of Line D began in 2014, and it was still under construction as of late 2021.406 400 “Leaders Gather to Inaugurate Turkmenistan-China Gas Pipeline,” The Canadian Press, December 13, 2009. 401 “Sotrudnichestvo po gazu s Tsentralnoi Aziei,” CNPC, www.cnpc.com.cn/ru/zytrqgdzt /zytrqgdzt_2.shtml. 402 “Ashgabat, Beijing Stand for Ensuring the Security of Turkmenistan-China Gas Pipeline,” Tribune Business News, November 25, 2011. 403 “Turkmen Gas Exports to China to Hit 65 Bcm/Year by 2020,” Reuters, September 3, 2013. 404 “Flow Of Natural Gas from Central Asia,” CNPC, www.cnpc.com.cn/en/Flowofnaturalgas fromCentralAsia/FlowofnaturalgasfromCentralAsia2.shtml. 405 Jack Farchy, “China Seeking to Revive the Silk Road,” Financial Times, May 9, 2016. 406 “Chinese Natural Gas Deals in Central Asia Foreshadow Expanded Pipeline Project,” RWR 115 The construction of the first three lines of the Turkmenistan–China Gas Pipeline had a significant impact on the geoeconomic and ge political status quo in Central Asia. Russia was Turkmenistan’s primary trade partner before the crisis in their relations in 2009. China has taken over Russia’s position since then. In fact, China is becoming much more dominant as a trade partner with Turkmenistan than Russia ever was. Turkmenistan supplied Russia with 39.1 bcm in 2008 and sent Iran an additional 6.5 bcm. Exports to Iran have remained much the same up to the present. However, Russia obtained only 10.7 bcm from Turkmenistan in 2009. Turkmenistan’s supplies to China surpassed those to Russia in 2011, when it sent 14.25 bcm to China and only 10.14 bcm to Russia. In 2014, China obtained 25.9 bcm from Turkmenistan, while Russia only received 10 bcm. With the opening of Line C in 2015, China obtained 27.75 bcm and Russia 2.81 bcm. Turkmenistan stopped all gas exports to Russia in 2016. The result was that China entirely supplanted Russia as Turkmenistan’s dominant economic partner in less than eight years’ time. Nowadays, China does not limit its investments in Turkmenistan to the hydrocarbon sector. It has recently invested in transport and chemicals, telecommunications, construction, and light industry. This investment goes hand in hand with China’s Belt and Road Initiative, which focuses on connectivity and infrastructure development in the Central Asian region and beyond.407 It is also linked to the older “Go West” strategy that was aimed at the economic development of China’s western regions and adjacent Central Asian territories. China’s actions in the Central Asian ESC should be viewed as part of a broader strategic initiative that is not aimed only at generating profits. The price of natural gas imported from Central Asia is higher than of the gas extracted domestically in China, to say nothing about China’s reserves of coal.408 China has three chief strategic priorities in the Central Asian region. It wants to stabilize its western regions, including Tibet and Xinjiang, as well as the adjacent Central Asian states and keep them stable. The Line D project of the Turkmenistan–China Gas Pipeline should be seen primarily in this light. Next, China’s opening up to Central Asia is a means of economic diversification and it creates Advisory, January 23, 2021, https://www.rwradvisory.com/chinese-natural-gas-deals-in -central-asia-foreshadow-expanded-pipeline-project. 407 William T. Wilson, “China’s Huge ‘One Belt, One Road’ Initiative Is Sweeping Central Asia,” National Interest, July 27, 2016. 408 Andrew Moody, “Go West’ Policy is an Economic Milestone for Nation,” China Daily, September 12, 2011. 116 a bridgehead for links to the resources of the Middle East and the markets in Europe. Part of China’s elite believe that having more pipelines is the only thing that can provide China with greater energy security.409 This belief is justified when one considers the possibility that maritime routes might temporarily be cut off. Finally, China has gained significant leverage in its relationship with Russia by penetrating Central Asia. This leverage has already become visible during the negotiations over the construction of the Power of Siberia Gas Pipeline. Southern route Turkmenistan plays a leading role in the southern route at present. It is attempting to strengthen its geostrategic position through even more energy export diversification. Turkmenistan has understood the importance of Pakistan’s and India’s energy markets for its future hydrocarbon exports since the early 1990s. That is how the idea of the Turkmenistan–Afghanistan–Pakistan Gas Pipeline was conceived. This project is proceeding in tune with the interests of the United States in the region and was supported early on by the New Silk Road Act passed by the US Congress in 1999.410 The then-Secretary of State Hillary Clinton proposed a New Silk Road Initiative in 2011. This initiative’s goal was to connect Central Asia more closely with the Indian subcontinent through Afghanistan.411 The goal was to increase the prosperity of both regions and to decrease the influence of Russia and Iran in the Central Asian ESC.412 However, the US approach focused too much on stabilizing Afghanistan and lacked more precise and solicitous consideration of the Central Asian partners, whose benefit was considered more as a means to an end than an independent goal of the US regional policy. A pipeline to the Indian subcontinent has been in the making since the early 1990s. Niyazov concluded a memorandum of understanding for the construction of a gas pipeline to Pakistan with its Prime Minister, 409 Michael Schoenhals and Xiaolin Guo, Cadres and Discourse in the People’s Republic of China (Stockholm: ISDP, 2007). 410 “Silk Road Strategy Act of 1999,” Library of Congress, www.govtrack.us/congress/bills/106 /hr1152/summary. 411 Michael Clarke, “China’s Strategy in Greater Central Asia: Is Afghanistan the Missing Link?” Asian Affairs: An American Review 40, no. 1 (2013): 1–19. 412 “U.S. Support for the New Silk Road,” US Department of State, www.state.gov/p/sca/ci/af /newsilkroad. 117 Benazir Bhutto, in March 1995. The international consortium for the Turkmenistan–Afghanistan–Pakistan Gas Pipeline was created in 1997 with the US company Unocal at its head. The project was seriously delayed by the unstable situation in Afghanistan, the US embargo against the Taliban, and the events that followed the terrorist attacks in the United States on September 11, 2001.413 The pipeline project was resuscitated at a trilateral summit in Islamabad in 2002 as the TAP (Turkmenistan–Afghanistan–Pakistan) Gas Pipeline.414 India began to show interest in the project in 2005, and since then it has been referred to as the TAPI Gas Pipeline.415 In 2006, the Asian Development Bank initially estimated the cost of the TAPI project at USD 2.6 billion.416 However, it boosted its estimate to USD 7.6 billion in 2015. As of 2006, the price was estimated at USD 10 billion because of various delays.417 The projected capacity of the pipeline is 33 bcm per year. It should start at the Galkynysh field in southeast Turkmenistan and continue through Afghanistan along the road from Herat to Kandahar. Subsequently, it would continue through Baluchistan and Punjab in Pakistan before reaching the border with India at Fazilka.418 However, it remains to be seen how will this dynamic be influenced by Taliban’s seizure of power in Afghanistan in late 2021. The agreement regarding the construction of the TAPI pipeline was signed by the four participating countries in 2010 at the active urging of Turkmenistan. Its duration was set at 30 years.419 Moreover, Turkmenistan signed agreements with the two main potential purchasers, the Gas Authority of India, Ltd. (GAIL) and the State Gas Systems of Pakistan, in 2012.420 Those agreements contained a clause stating that if Pakistan 413 Fatima Quamar and Sumera Zafar, “New Great Game: Players, Interests, Strategies and Central Asia,” Research Journal of South Asia Studies 29, No. 2 (2014): 623–652. 414 “Niyazov i Karzai zayavili o gotovnosti svoikh stran reanimirovat proekt transafganskogo gazoprovoda,” Turkmenistan.ru, March 7, 2002. 415 “Indiiskii diplomat zayavil, chto ego strana khochet stat odnim iz samykh krupnykh pokupatelei turkmenskogo gaza,” Turkmenistan.ru, August 16, 2006. 416 “Niyazov i Karzai zayavili o gotovnosti svoikh stran renimirovat proekt transafganskogo gazoprovoda,” Turkmenistan.ru, March 7, 2002. 417 Manish Vaid, “TAPI Pipeline Progresses, but Future Uncertain,” Oil and Gas Journal, May 2, 2016. 418 “TAPI Gas Pipeline,” Asian Investment Bank, April 8, 2016, www.adb.org/news/infographics /tapi-gas-pipeline. 419 Oleg Lukin, “Novoe ruslo gazovoi reki,” Turkmenistan.ru, January 24, 2011. 420 Sanket Sudhir Kulkani, “The Elephant and the Tiger: Energy Security, Geopolitics, and National Strategy in China and India’s Cross-Border Pipelines,” Energy Research and Social Science 11 (2016): 16–19, https://doi.org/10.1016/j.erss.2015.09.010. 118 blocks gas supplies to India, Turkmenistan is obliged to do the same to Pakistan.421 In this way, the negotiators attempted to prevent the Indo-Pakistani conflict in Kashmir from interfering with the implementation of the pipeline project. Turkmenistan signed another agreement with the Afghan Gas Corporation in 2013.422 One year later, the participating countries agreed to create a consortium that would build and operate the pipeline. Turkmengaz was endorsed as the leader of the consortium, known as the TAPI Pipeline Co. Ltd., in August 2015. Turkmengaz, Afghan Gas Corporation, Pakistan’s Inter State Gas Systems, Ltd., and India’s GAIL took equal shares in the consortium.423 In October 2015, the consortium’s steering committee adopted a shareholders’ agreement setting forth the rights and obligations of the parties involved. Turkmengaz promised to contribute 85 percent of the pipeline’s costs. The rest of the costs were to be divided among the other three members.424 Turkmengaz’s promise to cover 85 percent of the pipeline’s costs directly contradicted Turkmenistan’s policy of selling gas at the state border, which had been in place since Niyazov’s time. Its willingness to take so much of the costs on itself shows how vital diversification of energy export markets is for the ruling regime in Ashgabat. Without TAPI, Turkmenistan’s dependence on China as its main export market will grow unchecked. Even though the TAPI Gas Pipeline is still a pipe dream for the most part, it is progressing in its own way. The parties have shown a great deal of negotiating skill, especially Turkmenistan, which was able to gain the position of the project’s leader. There are three positive implications for the parties. First, with this project Turkmenistan can reduce its growing dependence on China’s demand. At present, the relationship is still advantageous for both parties, but that can soon change. There is a possibility that China will either decrease its demand due to an economic downturn or try to use the Turkmenistan–China Gas Pipeline as leverage against Ashgabat. Second, all of the partner countries will gain benefits from the project despite its high costs. This is especially true for Pakistan and India with their increasing energy demand. Finally, the TAPI will create much-desired political ties between Central and South Asia. 421 Ibid. 422 “V Ashkhabade sostoyalos zasedanie turkmeno-pakistanskoi mezhpravitelstvennoi komissii,” Turkmenistan.ru, April 21, 2012. 423 “TAPI Shareholders Agreement Initialed,” Asian Investment Bank, October 26, 2015, www.adb.org/news/tapi-shareholders-agreement-initialed. 424 Ibid. 119 Route through Iran The question of Turkmenistan’s connection with the outside world through Iran is still open. In August 1994, Niyazov met with Iran’s President Akbar Hashemi Rafsanjani. They concluded an agreement for a gas pipeline from Turkmenistan to Iran that was meant to be built within seven years. However, both Russia and the United States opposed the deal at the time. Russia was against any possible diversification of Turkmenistan’s exports. The United States much preferred the Trans-Caspian Gas Pipeline. There were also significant personal conflicts between Niyazov and the Azeri President Heydar Aliyev. Nevertheless, in 1997 the Korpeje–Kordkuy Gas Pipeline to Iran was commissioned.425 That pipeline however did not represent a decisive step in diversifying Turkmenistan’s exports because of its low capacity and solely regional importance. Nonetheless, since that year Iran has become Turkmenistan’s second most important hydrocarbon export partner after Russia. Iran was Turkmenistan’s only alternative to the Russian-controlled northern route until 2009. The Korpeje–Kordkuy gas pipeline runs 200 kilometers from the Korpeje field to the Iranian town of Kordkuy.426 In 2010, the two countries opened a second gas pipeline, the Dowletabat–Sangbast Gas Pipeline, connecting the Dowletabat gas field in southern Turkmenistan with Sarakhs in Iran.427 The capacity of each is 12 bcm yearly.428 Even though the combined capacity of those two pipelines is 24 bcm per year, it usually goes partially unused. Iran imports only about 10 bcm a year from Turkmenistan. Iran has been Turkmenistan’s second largest gas export market since 2011 when it surpassed Russia.429 The two gas pipelines from Turkmenistan are important to Iran from a domestic point of view because they help supply some remote areas of the country that are closer to Turkmenistan’s gas deposits than to those of Iran. They also show the ambitions of Iran’s regional designs and policies and their limits. At present, there is little or no hope that Turkmenistan will be able to transport its natural 425 “Chernomyrdin v Ashkhabade i Dushanbe,” Nezavisimaya Gazeta, November 14, 1998, www .uni-potsdam.de/u/slavistik/zarchiv/0198wc/k002-13.htm. 426 “Saparmurat Niyazov Inaugurates Gas Compressor Station at Korpeje Natural Gas Field,” Tukrmenistan.ru, September 14, 2005. 427 “Torzhestvenno zapushchen novyi gazoprovod iz Turkmenistana v Iran,” Turkmenistan.ru, January 7, 2010. 428 Bruce Pannier, “Turkmen Gas Exports to Iran a Boon for Both Countries,” RFE/RL, January 6, 2010. 429 “BP Statistical Review of World Energy June 2016,” BP plc, www.bp.com, June 1, 2016. 120 gas further west by utilizing Iran’s natural gas grid, because Iran, which produces a considerable amount of gas itself, focuses in the first place on the export of its own resources.430 As yet, there are no signs that Iran would be willing to allow Turkmenistan to re-export Iranian gas through its territory to Europe. On the other hand, Iran has plans to supply India with its domestically produced gas. For that reason, it has been trying to slow down the TAPI Gas Pipeline project.431 Western route Finally, there is the critical issue of Turkmenistan’s connection to the west. During the Niyazov era, the relations between Azerbaijan and Turkmenistan were complex. Nevertheless, the Caspian Sea should not be perceived as a barrier but rather as a somewhat functional connection between Central Asia and the Caucasus. The problems with Azerbaijan were primarily caused by disputes over four significant oil and gas deposits in the Caspian claimed by both Turkmenistan and Azerbaijan.432 These disputes impeded both states from the development of their resources in the Caspian.433 The United States has vigorously promoted the project of the Trans-Caspian Gas Pipeline since the early 1990s. Washington hoped that it would bring more prosperity to the Caspian region, increase the diversity of sources of energy for Europe, and reduce the influence of Russia and Iran in the region.434 In 1998, the US and Turkish governments even proposed that they would partly finance and guarantee the construction.435 However, any prospects of a quick construction of the Trans-Caspian Pipeline were soon torpedoed by Azerbaijan, which found a sizeable offshore field in its own part of the Caspian in the year 2000. Azerbaijan demanded half of the capacity of the proposed pipeline and put Turkmenistan’s potential 430 “Prezident Turkmenistana posetit s vizitom Iran i primet uchastie v sammite glav gosudarstv – eksporterov gaza,” Turkmenistan.ru, November 22, 2015. 431 “TAPI Stuck as Iran, LNG Provide Better Options,” BMI Research, March 24, 2016. 432 Gawdat Bahgat, “Pipeline Diplomacy: The Geopolitics of the Caspian Sea Region,” International Studies Perspectives 3, no. 3 (2007): 310–327. 433 Horák and Šír, Dismantling Totalitarianism, 44–68. 434 Nuri Akyol, A Natural Gas Pipeline Crossing the Caspian Sea Basin – Which Factors Contribute to Its Advancement or Impediment? (Delft: Delft University of Technology, 2009), 39–74. 435 Stephen J. Blank, Turkmenistan and Central Asia after Niyazov (Washington: Strategic Studies Institute, 2007), 26–43. 121 profits from the operation in doubt.436 The Azeris’ demand forced Turkmenistan to negotiate a new gas deal with Russia in 2003. It motivated Turkmenistan to look for alternative export markets that would have a secure, adequate demand. Turkmenistan found such a reliable partner in China in 2006. However, the ice around the negotiations for a Trans-Caspian Gas Pipeline began to melt after Berdimuhamedow became president. He met with his Azeri counterpart Ilham Aliyev for the first time in the course of the CIS summit in Saint Petersburg in June 2007.437 They agreed to reopen Turkmenistan’s embassy in Baku, which had been closed since 2001 when the talks on the Trans-Caspian Gas Pipeline failed due to the personal antipathies between Ilham Aliyev’s father Heydar and Niyazov.438 At the same time, Berdimuhamedow restarted discussions about the Trans-Caspian Gas Pipeline and suggested connecting it with the planned East–West Interconnector in 2010.439 In 2011, the European Commission was tasked with leading the negotiations for a deal between Azerbaijan and Turkmenistan that would allow building the Trans-Caspian pipeline as part of the EU’s Southern Gas Corridor.440 That made it clear that the project has strategic value for the European Union, which is why it supported the project.441 In the same year, Azerbaijan substituted support for the Trans-Anatolian Natural Gas Pipeline (TANAP) for the ill-fated project of the Nabucco Gas Pipeline.442 TANAP will start at Azerbaijan’s Shah Deniz II field and pass through Turkey to Europe. Its proposed capacity is 16 bcm per year, and it was commissioned in 2018.443 In 2013, it was agreed that the Trans-Adriatic Pipeline would transport gas from TANAP further into Western Europe. There is an open-door policy for an additional link from Turkmenistan.444 436 Ibid. 437 “V Baku sostoyalis peregovory mezhdu Gurbanguly Berdymukhamedovym i Ilkhamom Alievym,” Turkmenistan.ru, May 20, 2008. 438 Ibid. 439 “Turkmeniya nachala stroit gazoprovod k Kaspiyu,” Turkmenistan.ru, May 31, 2010. 440 “Gas and Oil Supply Routes,” European Commission, ec.europa.eu/energy/en/topics /imports-and-secure-supplies/gas-and-oil-supply-routes. 441 “EU-Turkmenistan Relations – Factsheet,” European External Action Service, eeas.europa.eu /factsheets/news/eu-turkmenistan_factsheet_en.htm. 442 Kusznir, “The Southern Gas Corridor,” 41–45. 443 “Trans-Anatolian Gas Pipeline Project,” TANAP, www.tanap.com/tanap-project/why-tanap. 444 “V Ashkhabade sostoyalis peregovory prezidentov Turkmenistana i Turtsii,” Turkmenistan.ru, November 8, 2014. 128 want your gas.”463 However, Turkmenistan began to look vigorously for new export routes. Niyazov got his revenge in December 1999 after Gazprom’s production had started to decrease in the second half of the 1990s. It was then more than clear that Russia could not satisfy European demand without cooperation with Turkmenistan. Vyakhirev was afraid of the planned construction of the Trans-Caspian Gas Pipeline, so he came personally to Ashgabat, where he publicly apologized to Niyazov and Turkmenistan for his previous statements and behavior in a live broadcast. This episode did not help to improve the relationship between Turkmenistan and Russia. On the contrary, it made it almost unrepairable.464 The gas issue was so critical for Russia that Putin’s first foreign visit as president of Russia was to Turkmenistan and Uzbekistan in 2000. The issue was soon enmeshed in the internal politics of both countries. Niyazov harbored a growing fear for his life and the stability of his regime. He withdrew Turkmenistan from the visa-free regime with the other CIS states in 1999. However, the issue of Turkmens’ dual citizenship with Russia remained to be resolved. This issue was important primarily because many of the people accused of Niyazov’s attempted assassination in 2002 had dual Turkmenistan and Russian citizenships. Niyazov consented to the new gas deal with Russia in April 2003 in exchange for Russia’s effective abolition of dual citizenship. Relations between Russia and Turkmenistan significantly deteriorated under Putin. Vyakhirev and Chernomyrdin viewed Gazprom as their business and Turkmenistan as a competitor. However, Putin perceived and still perceives Gazprom as a tool of foreign policy and Central Asia as a region that should be under Russia’s firm control. Putin’s goal was to take all of Turkmenistan’s gas exports and prevent it from gaining direct access to European markets.465 Nevertheless, Russia continued to abuse its advantage over Turkmenistan. Turkmenistan tried its best to escape Russia’s stranglehold on its hydrocarbon resources, but after the frustration with the West and failed deals with Iran, it chose to embrace cooperation with China.466 463 S. Frederick Starr, “Uzbekistan and Turkmenistan: Staying Away,” in: Putin’s Grand Strategy: The Eurasian Union and Its Discontents, eds. S. Frederick Starr and Svante E. Cornell (Washington: Central Asia and Caucasus Institute – Silk Road Studies Program, 2014), 156–166. 464 Dmitrii Simakov, “Itera perestala byt razborchivoi nevestoi,” Vedomosti, March 1, 2012, www.vedomosti.ru/opinion/articles/2012/03/01/itera. 465 Zygar and Panyushkin, Gazprom, 121–148. 466 Kathleen J. Hancock, “Escaping Russia, Looking to China: Turkmenistan Pins Hopes on China’s Thirst for Natural Gas,” China and Eurasia Forum Quarterly 4, no. 3 (2006): 67–87. 129 No matter what Russia did after Chernomyrdin’s fateful, antagonistic decision to cut off imports from Turkmenistan in 1998, Niyazov needed a robust alternative to the natural gas export route to and through Russia. In just one decade, natural gas began to flow from Turkmenistan into China via the Turkmenistan–China Gas Pipeline. Turkmenistan’s exports to Russia had been gradually decreasing before that and in early 2016 ceased altogether. In the end, Russia’s high-handed approach to its post-Soviet neighbor did not pay off. The loss of Turkmenistan’s resources will have substantial consequences for Russia’s economy. Russia’s weak and corrupt handling of Turkmenistan’s natural gas exports to Ukraine contributed to antagonizing the Turkmen during the so-called “gas wars” between Russia and Ukraine from 2005 to 2010. Russia tried to use the natural resources of its neighbors in the post-Soviet space in a “divide and conquer” strategy. However, its pawns were no longer willing to play the game. The crisis of 1998 was very similar to the crisis of 2008. In both cases, Russia was reeling from an economic crisis and therefore unilaterally diminished its gas imports from Turkmenistan. The first crisis led Turkmenistan’s ruling elite to the conclusion that they needed to find an alternative to their irresponsible Russian intermediary. The second crisis convinced Turkmenistan’s elite that Russia was a terminally sick business partner and cemented in place the decision to switch their attention to China. Turkmenistan’s relationship with the China National Petroleum Corporation The planning of the construction of the first two lines of the Turkmenistan–China Gas Pipeline began in 1998. However, the plans were not translated into reality until eight years later, during Niyazov’s third state visit to China on April 3, 2006.467 Niyazov then signed an agreement with his Chinese counterpart, Hu Jintao, for China to purchase 30 billion cubic meters of natural gas per year for a period of 30 years.468 To all intents and purposes, Russia’s economic stranglehold on Central Asia was broken that day, at least on paper. It took three more years before the 467 “Turkmenistan, China Sign Cooperation Deals,” Turkmen TV Altyn Asyr, April 4, 2006. 468 “Turkmenistan Seen Cultivating Gas Markets under New Leadership,” Oil Daily, January 5, 2007. 130 first branch of the Turkmenistan–China Gas Pipeline was commissioned and the Niyazov–Hu agreement was fulfilled.469 The most important parts of the agreement were articles 2, 4, and 11. Article 2 stated that China would purchase 30 bcm of Turkmenistan’s natural gas annually at the border with Turkmenistan for over 30 years. It was to start from the date the pipeline was commissioned, which occurred in 2009. At the time, Turkmenistan was still very intent on preserving its traditional policy of selling its natural gas at its borders. Article 4 stated that Turkmenistan’s price of natural gas for China would be set at reasonable, fair levels, based on comparable international market prices. Moreover, the payment was to be made in US dollars. Finally, Article 11 specified that the responsibility for implementing the agreement would lie with the Ministry of the Oil and Gas Industry and Mineral Resources of Turkmenistan and the State Development and Reform Commission of the PRC. Any future negotiations would be handled by the Ministry of the Oil and Gas Industry and Mineral Resources for Turkmenistan and the CNPC for China.470 It could reasonably have been predicted that this agreement with China would have no more than the same precarious value as the 2003 agreement with Russia. However, in this case the key was that Moscow’s and Gazprom’s reputation with the Turkmenistan elite was as bad as possible, while China and the CNPC seemed more reliable to them. In other words, the key was not in the agreements, which were just an overall framework, but in the securitization of Turkmenistan’s energy supplies. At that time, Ashgabat’s elite considered Russia to be an unreliable and perhaps even dangerous trade partner, while China’s image was that of a reliable and trustworthy partner willing to pay a fair price and not interfere in Turkmenistan’s internal affairs. Since the beginning of the closer cooperation between China and Turkmenistan, it was clear that Beijing was not looking solely for profit but also for the stabilization of the Central Asian ESC, China’s western provinces, and China’s energy security as well. China’s policy experts assumed that importing energy resources from Central Asia would lessen China’s “Malacca dilemma” – its vulnerability to a naval blockade. The Malacca dilemma is a term coined by the then-President Hu Jintao to describe China’s dependence on the Malacca Straits between Singapore 469 For more on the energy geopolitics of Turkmenistan see: Slavomír Horák, “Turkmenistan’s Shifting Energy Geopolitics in 2009–2011,” Problems of Post-Communism, 59, no. 2 (2012): 18–30. 470 “Text of Turkmenistan–China Gas Pipeline Deal,” Neitralnyi Turkmenistan, April 4, 2006. 131 and Indonesia, where some 80% of China’s energy imports passed en route from the Middle East, Angola, and elsewhere. The Malacca dilemma could be solved by the “Go West” strategy of importing gas from Central Asia, which is the most accessible land area open to the spread of Beijing’s influence beyond its borders.471 China’s strategy was evident in its interactions with Turkmenistan from 2006 onward. Shortly after signing the 2006 agreement with China, Niyazov ordered his Deputy Minister for Oil and Gas Industry, Isanguly Nuryýew, to start preparatory work on the pipeline project.472 Zhang Jianhua, a high-ranking representative of the CNPC, arrived in Ashgabat at the head of a Chinese delegation in June 2006 to further discuss the recently signed agreements and prepare for the implementation of the pipeline project.473 At the beginning of 2008, Turkmenistan officially announced that it had earmarked 1300 bcm of natural gas for its new pipeline to China.474 Moreover, Nurýyew led a Turkmen delegation to China to discuss the exploration and development of gas deposits in eastern Turkmenistan in the May of 2008.475 The busy diplomatic traffic between China and Turkmenistan signaled that both parties were genuinely interested in making the project a reality. The only significant delay was caused by force majeure: the death of the pipeline’s most vocal proponent, Saparmurat Niyazov. After Niyazov’s death, Gurbanguly Berdimuhamedow ascended to the presidency as his successor. As part of his presidential election program in January 2007, he pledged to continue the export diversification policies of the late president: “The Great Leader Niyazov set goals connected with new Turkmen gas exports and ways into the world markets. To achieve those aims, the work on developing and broadening the frameworks of mutually beneficial cooperation with foreign partners in the oil and gas sector will continue.”476 He stated at the time that 471 Hongyi Lai, “China’s Western Development Program: Its Rationale, Implementation, and Prospects,” Modern China 28, no. 4 (2002): 432–466. 472 “Turkmen President Warns Top Officials Over Poor Management,” Turkmen TV First Channel, April 14, 2006. 473 “Chinese Delegation to Examine Gas Exports Potential of Turkmenistan,” Turkmen TV First Channel, June 14, 2006. 474 “Turkmenistan Details Gas Resources Earmarked for China Pipeline,” ITAR-TASS, January 16, 2008. 475 “Turkmen Experts to Visit China Shortly for Gas Talks,” Turkmen Foreign Ministry, Press Release, May 26, 2006. 476 “Fresh Start: Turkmenistan to Boost Energy Ties with Foreign Partners,” NEFTE Compass, January 10, 2007. 132 the most promising projects were the TCGP and the TAPI Gas Pipeline. On the other hand, as the election was being held in February 2007, Berdimuhamedow also attempted to assure Russia that Turkmenistan would continue to fulfill its oil and gas obligations. However, Russia launched a campaign to discredit the TCGP.477 Turkmenistan was then exporting 42 bcm per year to Russia via the Central Asia–Center Gas Pipeline System. It also had a gas contract with Iran. However, only half of the 12 bcm annual capacity of the pipeline to Iran was being used because of the two parties’ failure to agree on a price higher than USD 42 per thousand cubic meters. The price for gas exported to Russia at that time was USD 100 per thousand cubic meters.478 It did not remain so for long because of the looming global financial crisis. At this point, a critically important fact must be emphasized: Turkmenistan and China do not share a common border. This necessitated cooperation with other Central Asian states willing to participate in the TCGP project. China was able to bring both Uzbekistan and Kazakhstan to the negotiating table quickly because of an irresistible offer of investments, transit fees, and the opportunity to export their own natural gas to China.479 Russia was not able to respond to this package deal because of its unfortunate economic situation at that time. As for the West, it was unable to offer such a package of broad-based cooperation because of the Western countries’ different property and market structures. Central Asians just needed money to keep their energy industries running, and at the time China was the only state that was willing to provide such an array of financing and trade. China’s generous loan offers were part of its global “loans-for-oil” strategy. Its two state-run banks, the China Development Bank and the China Export-Import Bank, issue specially tailored loans to developing countries in need of cash. In return, China obtains long-term promises to supply oil and gas at stable prices. China had earlier provided similar loans not only to Central Asian states but also to Venezuela, Angola, and Russia. In Turkmenistan, the China Development Bank provided Turkmengaz with loans in 2010 amounting to USD 8.1 billion for the development of the South Yolotan gas field. Turkmengaz is repaying 477 “Turkmenistan Reassures Russia,” Oil Daily, February 14, 2007. 478 “Turkmenistan Seen Cultivating Gas Markets Under New Leadership,” Oil Daily, January 5, 2007. 479 Sebastien Peyrouse, “Discussing China: Sinophilia and Sinophobia in Central Asia,” Journal of Eurasian Studies 7, no. 1 (2015): 429–445. 133 these loans with supplies of natural gas to China. Ashgabat sought a loan almost immediately after the explosion on the Central Asia–Center Gas Pipeline System in late 2009.480 In the same manner, the Chinese Export-Import Bank provided a USD 5 billion loan to Kazakhstan’s government and the CNPC lent another USD 5 billion to Kazakhstan’s oil and gas producer KazMunayGaz.481 In this way, China is gaining control over the energy resources in Central Asia, and along with that, the security of its energy supplies. This is especially important because of the steeply rising consumption and imports of natural gas in China, as illustrated in Table 18. Table 18: China’s natural gas consumption, production, and import, 2007–2018 (bcm) Year Consumption Production Import 2007 70 69 3.9 2008 81 80 4.5 2009 89 85 7.5 2010 107 95 17.0 2011 131 101 31.4 2012 147 108 42.4 2013 168 118 53.0 2014 184 127 59.5 2015 192 132 61.6 2016 209 118 72.8 2017 240 128 92.0 2018 283 138 123.4 Source: The China National Petroleum Corporation Cooperation with Uzbekistan and Kazakhstan proved to be smooth and fast. Kazakhstan’s Prime Minister Karim Masimov organized a working visit to Turkmenistan in May 2007, where he discussed the pipeline’s 480 Charles J. Sullivan, “Pipeline Politics in the Post-Soviet Space: A View from Ashgabat,” The Journal of Energy and Development 34, no. 21 (2011): 121–128. 481 Dennis Shea, “The Development of Energy Resources in Central Asia,” Testimony before the House Foreign Affairs Subcommittee on Europe, Eurasia and Emerging Threats, 113th Congress 160, May 21, 2014. 134 specific route on Kazakhstan’s territory.482 Uzbekistan’s Foreign Minister Vladimir Norov visited Ashgabat on July 26, 2007. Norov announced Uzbekistan’s full support for the TCGP project and the part of it running through Uzbekistan’s territory.483 Berdimuhamedow met with both of his Central Asian partners in the TCGP in Ashgabat in 2007 – in May with Nursultan Nazarbayev and in October with Islam Karimov.484 The stars could not have lined up any better for China’s pipeline proposal. Uzbekistan’s Karimov was attempting to distance his country from Russia’s influence after he had been forced into closer cooperation with it by his bloody repression of a revolt in the city of Andijan in May 2005. Kazakhstan’s Nazarbayev was very content with cooperation with China after the commissioning of the Kazakhstan–China Oil Pipeline and welcomed another opportunity to strengthen his bilateral relationship with Kazakhstan’s eastern neighbor. Turkmenistan, however, became the most active and devoted proponent of the gas pipeline project as soon as it had assessed that further cooperation prospects with Russia were futile. Berdimuhamedow undertook a state visit to China on July 17–18, 2007. He subsequently called the Turkmenistan–China Gas Pipeline “the utmost priority” in the bilateral relationship.485 Later on, in August, he signed a decree endorsing the appointment of the members of the board responsible for implementing the bilateral agreement for the construction of the gas pipeline. The board was tasked with drafting an action plan by September 1, 2007, that would ensure that gas exports to China would start in 2009 as agreed in 2006.486 Berdimuhamedow also had to prepare his domestic audience for the switch in trading partners. He undertook a working visit to the Lebap region in eastern Turkmenistan on August 29, 2007. That was where he announced a comprehensive development program for the right side of the Amu Darya River. Above all, he took part in a ceremony launching the construction of the Turkmenistan–China Gas Pipeline 482 “Kazakhstan Ready to Assist in Construction of Turkmenistan-China Gas Pipeline,” Interfax, May 4, 2007. 483 “Uzbekistan Backs Turkmen-Chinese Gas Pipeline Project,” Turkmen TV Altyn Asyr, July 26, 2007. 484 “Turkmen Leader Meets Uzbek Minister to Discuss Cooperation,” Turkmen TV Altyn Asyr, December 11, 2007. 485 “Turkmenistan Set To Speed Up Implementation Of Gas Export Plans To China,” Turkmen TV Altyn Asyr, July 26, 2007. 486 “Berdimuhamedow Endorses Board To Handle Turkmenistan-China Gas Pipeline Construction Project,” Interfax, August 4, 2007. 135 in Bagtyyarlyk. On that occasion Berdimuhamedow solemnly provided the President of the CNPC, Jiang Jiemin, with the operating license to explore and extract natural gas in the area and with other documents needed to implement the project. The Turkmen leader stressed that it was the first time that his country had ever provided such a license to a foreign company.487 The Bagtyyarlyk area, which includes the Samandepe field of sulfur dioxide gas, became a contracted area for development under a production sharing agreement. This PSA violated the Niyazov-era policy of resource nationalism that allowed signing of major PSAs only for technologically challenging offshore projects.488 However, the Bagtyyarlyk PSA was the price that Turkmenistan had to pay for China’s involvement in the gas pipeline project. Berdimuhamedow did not forget to stress during the launch ceremony that the seven-thousand-kilometer-long pipeline would not only benefit China and Turkmenistan but also Uzbekistan and Kazakhstan.489 This was very important because those two states would not be able to implement a joint project of this scale without China’s impetus. For its part, Russia was not willing to let Central Asia go without a struggle. It tried to counter both China’s and the West’s initiatives in the Central Asian region. Russia wanted to import as much natural gas as possible from Central Asia and in that way to drain any future supply for diversification of the export routes out of the region. This was behind the May 2007 agreement to construct the Caspian Coastal Gas Pipeline between Russia, Turkmenistan, and Kazakhstan.490 However, after the inauguration of the TCGP in Turkmenistan, Russia’s media openly speculated that the Caspian Coastal Gas Pipeline project was doomed to fail. The presidents of Russia, Turkmenistan, and Kazakhstan set September 1, 2007, as the deadline for the signature of the necessary documents and the conclusion of the trilateral agreement for the construction of the pipeline. As it turned out, the documents were not ready in time, and the pipeline was actually never built. 487 Ibid. 488 Michael Fredholm, “The World of Central Asian Oil and Gas,” Asian Cultures and Modernity, no. 16 (2008): 89–97. 489 “Turkmen President Kicks Off China-Bound Gas Pipeline Construction,” Turkmen TV Altyn Asyr, August 29, 2007. 490 Stuart Elliot, “Turkmenistan, China Agree to Speed Up Gas Pipeline,” Platt’s Oilgram News, July 19, 2007. 136 Russia’s policy in Central Asia also called for the creation of an “OPEC of gas” with Iran. Russia was interested in a grand bargain that would direct Iran’s exports to the East and leave Russia in control of the European markets. It even considered allowing Iran to use the Turkmenistan–China Gas Pipeline to export Iran’s gas to China.491 Steven Martin, who was appointed by the US State Department to the newly established position of coordinator of the United States’ Eurasian energy diplomacy at the beginning of 2008, welcomed both the Kazakhstan–China Oil Pipeline and the Turkmenistan–China Gas Pipeline projects because they would loosen Russia’s grip on the economies of the Central Asian countries. On the other hand, he kept stressing that the priority of the United States was the Trans-Caspian Gas Pipeline.492 The result was that Russia was unable to prevent China’s “march to the west,” and the United States considered this development to be a lesser evil than Russia’s hegemony over the region. These attitudes paved the way for China’s economic expansion into the Central Asian ESC.493 Lines A and B of the Turkmenistan–China Gas Pipeline The implementation phase of the TCGP project followed without problems after the political and technical consultations held on February 22, 2008.494 President Berdimuhamedow authorized Turkmengaz to conclude a contract with the Russian joint-stock company Stroytransgaz for a turnkey construction of Turkmenistan’s portion of the first two lines of the gas pipeline – the Malay–Bagtyyarlyk Gas Pipeline with a length of 188 kilometers. Stroytransgaz was contracted to construct the pipeline’s gas treatment and dehydrating facilities and the gas metering units. Total construction costs were projected to be EUR 395 million.495 Turkmenistan’s portion of the pipeline commences in the area of the Malay gas field and continues to a gas metering unit in the area of the Bagtyýarlyk settlement on the border with Uzbekistan.496 The swift construction of 491 Vladimir Radyiuhin, “Russia-Iran Ties on the Upswing,” The Hindu, January 7, 2008. 492 “Caspian: US Steps Up Diplomacy,” Energy Compass, February 14, 2008. 493 For large infrastructure projects see: Benjamin Sovacool, The Governance of Energy Megaprojects: Politics, Hubris and Energy Security (London: Edward Elgar Pub, 2013). 494 “Construction of Gas Pipeline Between Turkmenistan, China Enters Active Stage,” Interfax, February 19, 2008. 495 “Russian Company to Lay 395-Euro Turkmen-China Pipeline,” Neitralnyi Turkmenistan, February 22, 2008. 496 “Malay-Bagtyyarlyk Gas Pipeline,” Stroytransgaz, www.stroytransgaz.ru/en/projects/oilgas _engineering/2612/?sphrase_id=33675. 137 the pipeline on Turkmenistan’s territory showed that it was the party that was the most eager to complete the pipeline project. As stated earlier, the support and consent of the transit states, Uzbekistan and Kazakhstan, was critical for the success of the TCGP. Building the TCGP was a more significant challenge for China than the Kazakhstan–China Oil Pipeline, which did not have to cross a third country. Uzbekistan and China signed an intergovernmental agreement for the construction of Uzbekistan’s portion of the pipeline in April 2007. On July 1, 2008, the construction began near the village of Sayet in the Dzhonodzhor district of Uzbekistan’s Bukhara region. Asia Trans Gas, a joint venture of Uzbekneftegaz and the CNPC, has operated the project for Uzbekistan since that time. In Uzbekistan, the project involved the construction of two branches of the main pipeline and cost USD 2 billion. The pipeline passes through three of Uzbekistan’s provinces: Bukhara, Navoi, and Kashkadarya. The China Petroleum Pipeline Bureau, China Petroleum Engineering Construction Corporation, and the Swiss company Zeromax GmbH built Uzbekistan’s portion of it. China’s enterprises built the section from Gazli to Kazakhstan and Zeromax built the section from the Turkmenistan border to Gazli.497 There were no plans to export Uzbekistan’s gas through the pipeline in 2008.498 However, in May 2009, the Deputy Head of Uzbekneftegaz, Shavkat Mazhitov, announced that contrary to previous intentions, 10 bcm of Uzbek gas per year would also be shipped through the TCGP to China.499 The decision to include Uzbekistan as a supplier has had paramount importance for China’s energy security because China reduced its dependence on Turkmenistan’s imports through the pipeline. Kazakhstan’s Mazhilis (its lower house of parliament) approved a law ratifying the construction and operation of the TCGP on November 25, 2009. However, many legislators voiced concerns about China gaining further influence over the country’s hydrocarbon sector. At that time, China controlled approximately 30 percent of Kazakhstan’s oil industry.500 The legislators’ concerns were also linked to the fact that the CNPC had acquired 50 percent of the Kazakh oil company MangistauMunaiGas in April 2009 and the China Investment Corporation had 497 “Uzbekistan to Test Uzbek Section of the Turkmenistan-China Gas Pipeline,” Trend News Agency, December 10, 2009. 498 “Uzbekistan-China Gas Pipeline Construction Gets Underway,” Interfax, July 1, 2008. 499 “Turkmenistan-China Gas Pipeline to Ship Uzbek Gas,” Interfax, May 14, 2009. 500 “New China Link Heightens Kazakh Concerns,” NEFTE Compass, November 25, 2009. 144 to supply China. The second project was the Uzbekistan–China Gas Pipeline, which runs from gas fields in Uzbekistan to the main TCGP. It has a capacity of 25 bcm yearly. The CNPC constructed this pipeline in collaboration with Uzbekneftegaz.532 The Uzbekneftegaz branch is more focused on exporting energy to China than the Hanan branch.533 Line C, the third branch of the TCGP, was finally commissioned on May 31, 2014. Its total length is 1,830 kilometers and its capacity is 25 bcm per year. The CNPC claimed that China would receive 10 bcm of natural gas from Turkmenistan, 10 bcm from Uzbekistan and 5 bcm from Kazakhstan through the new pipeline. Uzbekistan gradually increased its supplies to China from 6 bcm in 2013 to 10 bcm in 2015.534 The newly built pipeline starts in Gedaim on the border between Turkmenistan and Uzbekistan and enters China at Horgos. From there, it continues on as the third West–East Gas Pipeline.535 The construction of Line C decisively turned the energy initiatives in the ESC of Central Asia to China’s advantage. It shows that China can successfully negotiate complex energy deals with its Central Asian partners and that it can turn them into reality in a short period of time. This ability is something Russia has always been unable and unwilling to do. China also skillfully used the economic crisis of 2009, which hit Russia’s economy hard and more importantly, depressed European demand for hydrocarbon imports from the east. China created a system of dependence that makes the Central Asian hydrocarbon exporters tied to China’s market, and thereby strengthened its own energy security. The fact that this process was accompanied by a generous “loans for oil” policy on China’s side had two consequences. First, the hydrocarbon infrastructure was mainly constructed with China’s financial resources and thus confirmed Beijing’s indirect control of the region’s energy resources. Control of material resources is the essence of the realist paradigm, and of China’s energy strategy as well. Second, by providing the loans, China strengthened the dependence of Central Asian ESC on its largesse. The Central Asian state actors are now dependent on China not only as a monopsonist consumer of their hydrocarbon 532 “Central Asia-China Gas Pipeline Capacity 55 BCM Per Year by 2015,” Interfax, August 31, 2011. 533 “Trans-Asia Gas Begins Welding Spur of Central Asia-China Gas Pipeline,” Interfax, September 8, 2011. 534 “Third Branch of Central Asia-Centre Gas Pipeline,” 12news.uz, June 2, 2014. 535 “Line C of the Central Asia-China Gas Pipeline Becomes Operational,” CNPC, June 3, 2014, www.cnpc.com.cn/en/nr2014/201406/16f4f5d0b0414501afe67fedab39286a.shtml. 145 exports, but also as a critical financial lender. The situation may soon turn into political dependence as well. The route proposed for Line D of the Turkmenistan–China Gas Pipeline, from Turkmenistan through Tajikistan and Kyrgyzstan to China, validates the idea that the TCGP has significant geostrategic importance for China. If Line D is commissioned, all the Central Asian states’ economic interests will be tied up with those of China. Beijing would further cement its rising power over the ESC of Central Asia. The commissioning of Line D would represent the point where China would push Russia out of the region and assume total hegemony, which would be of an economic character at first but would soon move into the political sphere as well. China’s National Development and Reform Commission approved a pre-feasibility study for the fourth branch in June 2013.536 It planned to complete the construction of Lines A, B, C and D by the end of the Five-Year Plan period of 2016–2020, but that was not the case with Line D.537 The US-supported Central Asia-South Asia (CASA)-1000 project for transmission of electrical power can be considered a predecessor to the construction of Line D. The idea for this project emerged in 2005. The principal goal was to supply Kyrgyzstan’s and Tajikistan’s hydroelectric power to Afghanistan and Pakistan.538 The US wanted to stabilize the region by supporting a mutually beneficial economic project that would create positive regional partnerships. Plans for Line D had already appeared before Line A was commissioned in 2009. Kyrgyzstan’s President Kurmanbek Bakiyev attempted to include his country in the TCGP project during a meeting with Hu Jintao on August 15, 2007. He proposed that part of the pipeline should traverse Kyrgyzstan’s territory.539 Kyrgyzstan’s officials started to promote the possibility of building one of the branches of the TCGP through their territory in 2009. According to the Kyrgyz, building another branch of the pipeline from Turkmenistan through Uzbekistan and Kyrgyzstan to China would facilitate and improve bilateral relations between 536 “China And Tajikistan Plan Construction of Fourth Link of Central Asia-China Gas Pipeline During Year,” Albawaba, March 11, 2014. 537 “CNPC Trans-Asia Gas Pipeline Company Limited Signs Agreement with Tajiktransgaz on Establishing a Gas Pipeline Company,” Albawaba, March 11, 2014. 538 “Afghan Woes Risk Regional Energy Plan,” Oxford Research Daily Brief Service, October 19, 2015. 539 “Kyrgyzstan Wants China to Use Its Territory as Transit Point for Turkmen Gas,” Interfax, August 15, 2007. 146 Kyrgyzstan and Uzbekistan, which were not ideal because of border tensions and occasional ethnic clashes.540 China’s next president, Xi Jinping, undertook a state visit to Kyrgyzstan on September 11, 2013. On that occasion, Kyrgyzstan’s Minister of the Energy Industry, Osmonbek Artykbaev, and the Chairman of China’s State Committee for Development and Reforms, Xiu Shaoshi, signed a loan agreement to fund cooperation in the construction and operation of the Kyrgyzstan–China Gas Pipeline.541 The portion of Line D of the Turkmenistan–China Gas Pipeline on the territory of Kyrgyzstan would run 220 kilometers through the regions of Chon Alay and Alay and then continue on to Kashgar in China. Kyrgyzstan announced that China’s investment in building the pipeline would be very beneficial to Kyrgyzstan. However, no offtake of gas is being planned for Kyrgyzstan.542 On December 16, 2015, Kyrgyzstan and China signed an agreement for the construction of Kyrgyzstan’s section of the Turkmenistan–China Gas Pipeline Line D. China’s Prime Minister Li Keqiang and his Kyrgyz counterpart Temir Sariyev were both present. Kyrgyzstan’s section will be 215 kilometers long with an annual capacity of 30 bcm.543 The construction of Line D of the TCGP was not only supported by Kyrgyzstan but also by the other transit country, Tajikistan. The CNPC’s subsidiary Trans-Asia Gas Pipeline Company signed an agreement with Tajiktransgas544 for the creation of a joint venture that would manage construction and maintenance of Line D.545 Tajikistan would only be a transit state in this project and would be prohibited from importing Turkmenistan’s natural gas for its own use.546 China’s government signed intergovernmental agreements for this construction with its counterparts 540 “Construction of Turkmenistan-China Gas Pipeline Via Kyrgyzstan to Bring Tashkent and Bishkek Together,” Tribune Business News, May 4, 2012. 541 “Kyrgyzstan, China Sign Agreement on Construction of Central Asia-China Gas Pipeline Through Kyrgyzstan,” AKI Press News Agency, September 11, 2013. 542 “Kyrgyzstan to Benefit from Central Asia-China Gas Pipeline Project,” AKI Press News Agency, September 11, 2011. 543 “The Kyrgyz Government and CNPC Subsidiary Sign Agreement to Build the Kyrgyzstan Section of Line D of the Central Asia-China Gas Pipeline,” Albawaba, December 19, 2015. 544 The Government of Tajikistan created the Tajiktransgas joint-stock company in 2009. It is primarily responsible for the gas supply in Tajikistan. The government controls one hundred percent of its shares. 545 “China And Tajikistan Plan Construction.” 546 “OAO Tadzhiktransgaz,” Informatsionno-poznavatelnyi portal o Tadzhikistane, www.tajik-gateway.org/wp/?page_id=26489. 147 in Uzbekistan, Tajikistan, and Kyrgyzstan during Xi Jinping’s state visits to Central Asia’s capitals in September 2013.547 The ceremony marking the start of the construction of Line D in Tajikistan took place in the Rudaki district near Dushanbe on September 15, 2014. At the event, the President of Tajikistan, Emomali Rakhmon, said: “We are witnessing an event of enormous political, economic, historical importance – the ceremony of the start of the construction of the Tajik section of the Central Asia–China Trans-Asia Gas Pipeline.”548 Line D will be the shortest of the four lines of the pipeline system from Central Asia to China. It is approximately 1,000 kilometers shorter than its predecessors. The construction in Tajikistan was planned to continue for three years. The pipeline will travel under water in 24 places, and 76 tunnels will have to be carved out during its construction. The cost of Tajikistan’s portion of the project will be USD 3.2 billion according to 2014 estimates.549 Moreover, Tajikistan’s gas reserves may soon be the ultimate prize. There are some estimates that it possesses 1.14 tcm of natural gas reserves which would give Tajikistan the second-largest reserves of natural gas in Central Asia. The CNPC started to explore Tajikistan’s oil and gas deposits in 2013. The CNPC and Uzbekneftegaz agreed to give priority to the construction of Line D in 2014 along with the construction of a natural gas-consuming chemical plant. The CNPC stated that when fully functioning, the four lines of the TCGP together would transport 85 bcm of natural gas per year to China.550 Uzbekistan’s portion of Line D would be approximately 200 kilometers long and would connect existing pipeline infrastructure in Uzbekistan with Tajikistan. Its cost was estimated at USD 800 million.551 Its construction would be the second most expensive oil and gas project in Uzbekistan after Lukoil’s USD 2.6 billion natural gas processing plant at the Kadym gas field near Bukhara.552 There is 547 “CNPC Subsidiary Sign Agreement with Tajiktransgaz for Construction of D Branch of Central Asia-China Gas Pipeline,” AKI Press News Agency, March 11, 2014. 548 “Presidents of China, Tajikistan Inaugurate Start of Construction of Tajik Section of Central Asia-China Gas Pipeline,” AKI Press News Agency, September 15, 2014. 549 Ibid. 550 “Tashkent-Beijing Alliance Will Strengthen,” Oxford Research Daily Brief Service, September 24, 2014. 551 Demir Azizov, “Date of Construction of Uzbek Section of Gas Pipeline to China Announced,” Trend.az, February 12, 2015. 552 “Uzbekistan Economy: State Energy Companies Plan Infrastructure,” EIU Viewswire, April 10, 2015. 148 also an option to carry Line D through Afghanistan, but it has not materialized yet.553 In 2015, Uzbekistan postponed the construction of Line D on its territory to 2019. The reason for the postponement was of a technical nature, according to Uzbekistan’s officials.554 Moreover, Kyrgyzstan also suspended the construction of Line D on its territory in May 2016,555 but it says that as soon as China clarifies the costs of the project, work can continue.556 The construction of some segments of Line D started in 2014. Other parts of it were still under construction as of 2022. Under the agreement between the CNPC and Turkmengaz, Turkmenistan is obliged to send 65 bcm annually to China by late 2021.557 However, this obligation may be affected by a decrease in China’s demand for natural gas due to an economic slowdown and other factors. The increase in China’s demand averaged 16 percent between 2010 and 2013. However, it declined to 6 percent in 2014. This development was caused by high city-gate prices charged to the gas distributors in China and by environmental policies focused on cutting emissions from coalfired power stations rather than promoting a switch to natural gas as an alternative fuel. Another critical factor is price competition with LNG sold to China on spot and long-term contracts. The price of Central Asian gas is indexed to oil and includes high fixed transportation tariffs to and across China.558 This notwithstanding, it still seems at present that the construction of the TCGP is of strategic importance for China and it is not being constructed solely for its ability to create profits. If China’s demand for natural gas falters, it would significantly alter China’s policy towards Turkmenistan and especially its position on the construction of Line D. The plans for the Turkmenistan–China Gas Pipeline and its implementation have been decisive in shaping Turkmenistan’s natural gas infrastructure since 2006. The head of Turkmengaz, Ashirguli Begliyev, stated at the annual Oil and Gas of Turkmenistan Conference in 2015 553 “China Seeking to Build Gas Pipeline from Turkmenistan to China Through Tajikistan and Afghanistan,” Bakhtar News Agency, July 7, 2012. 554 “Uzbekistan Postpones Construction of Fourth Branch of Central Asia-China Gas Pipeline,” Trend News Agency, December 23, 2015. 555 “Construction Of Kyrgyzstan-China Gas Pipeline Postponed for Indefinite Period,” Kyrgyzstan News Agency, May 25, 2016. 556 Casey Michel, “Line D of the Central Asia-China Gas Pipeline Delayed,” Diplomat, June 1, 2016, https://thediplomat.com/2016/05/line-d-of-the-central-asia-china-gas-pipeline-delayed/. 557 “Turkmenistan Increases Gas Export to China,” Trend News Agency, May 8, 2015. 558 “The New Reality for Central Asian Gas,” Petroleum Economist, June 20, 2015. 149 that Turkmenistan would be able to produce 230 bcm per year by 2030 and export 180 bcm. He announced that work on the second and third stage of the Galkynysh gas field was underway and when finished, it would produce 93 bcm annually. According to Begliyev, Turkmengaz is developing more than 30 other gas fields throughout the country. Turkmenistan’s production of natural gas reached 66.8 bcm in 2016, of which 40.9 bcm was exported. Moreover, Begliyev is not only planning the export of natural gas but also a construction of several gas-consuming chemical plants with a total value of USD 30 billion. These projects include the production of synthetic liquid fuels, glycols, polymers, methanol, caustic soda, sodium sulfate, ammonium sulfate, iodine, urea-formaldehyde, and melamine-formaldehyde resins.559 Above all else, Ashgabat continuously emphasizes its intention to diversify its energy exports, as its officials did at the Oil and Gas of Turkmenistan Conference that took place in 2013 in Dubai.560 To have more room for maneuvering, Turkmenistan started the construction of the East–West Interconnector on May 31, 2010. The pipeline was commissioned on December 29, 2015 and runs from the Mary province in the east of Turkmenistan to the Balkan province in the west.561 The pipeline’s length is 773 kilometers and its capacity is 30 bcm per year. The construction costs were USD 2.5 billion.562 The primary purpose of the pipeline is strategic, to broaden Turkmenistan’s choice of gas customers. It can be used to support the country’s exports to China from its offshore deposits in the Caspian Sea or to divert gas from its eastern onshore deposits to the West. The CNPC has been active in Turkmenistan since 2002.563 Based on preliminary agreements between China and Turkmenistan, the natural gas for the TCGP was to be supplied from the Samandepe and Altyn Asyr gas deposits as well as from newly developed gas fields.564 The two deposits mentioned above are part of the PSA for the development of 559 “Turkmenistan Plans to Increase Gas Exports,” Trend News Agency, November 18, 2015. 560 “V Dubae proshla Mezhdunarodnaya konferentsiya Neft i gaz Turkmenistana – 2013,” Turkmenistan.ru, March 15, 2013. 561 “Turkmeniya nachala stroit gazoprovod k Kaspiyu,” Turkmenistan.ru, May 31, 2010. 562 “Major Events in Caspian Countries’ Oil and Gas Industry,” Trend News Agency, December 29, 2015. 563 “CNPC in Turkmenistan,” CNPC, www.cnpc.com.cn/en/Turkmenistan/country_index.shtml. 564 “Gurbanguly Berdymukhamedov i Khu Tszintao vmeste otkroyut gazoprovod Turkmenistan – Kitai,” Tukmenistan.ru, September 23, 2009. 150 the Bagtyyarlyk-Amu Darya Natural Gas Project.565 This project consists of two blocks, A and B, and is the CNPC’s largest gas cooperation project outside of China.566 The first phase of the project covers an area of 983 square kilometers. The integrated project includes exploration of new blocks, prospecting and exploration of new fields, rejuvenation and adjustment of mature fields, and construction of a processing plant and its supporting facilities.567 The CNPC Amu Darya River Company is the exploration and production operator and the processing contractor in the Bagtyyarlyk PSA contract area. It constructed Gas Processing Plants No. 1 and No. 2 in Block A and Block B respectively.568 The Gas Processing Plant No. 1 became operational on December 14, 2009 and started to supply natural gas to China. The CNPC Amu Darya began the construction of the Gas Processing Plant No. 2 on the right bank of the Amu Darya river in December 2011. It was commissioned on May 7, 2014.569 The ceremony was attended by President Berdimuhamedow and representatives of the CNPC, the contractor in the Bagtyyarlyk area. The two plants have a combined capacity for an output of 15 bcm per year.570 These successful projects boosted Turkmenistan’s export capabilities and confirmed China’s dominant position in the country’s upstream oil and gas industry. Turkmenistan and China hoped to increase gas exports even further by developing the sizeable Galkynysh gas field. In September 2013, they celebrated the commissioning of the first phase of that field in the presence of both of their presidents. The production capacity of this complex is 30 bcm annually.571 The CNPC launched the second phase of development in the Galkynysh gas field at the beginning of 2013. At present, the Galkynysh gas field and the nearby Yashlar gas field, are 565 “Work Continues on Schedule in Turkmenistan-China Gas Pipeline,” Trend News Agency, January 7, 2009. 566 “China Receives 330 Mln Cubic Meters of Gas from Turkmen Wells,” Interfax, February 24, 2010. 567 “Amu Darya Natural Gas Project Phase I,” CNPC, www.cnpc.com.cn/en/Project/Amu_ Darya_I.shtml. 568 “No. 2 Gas Processing Plant of Amu Darya Project Becomes Operational,” CNPC, www.cnpc .com.cn/en/No2GasProcessingPlantofAmu DaryaProject/Features.shtml. 569 “Turkmenistan Finds New Gas Field on Right Bank of The Amu Darya River,” Interfax, March 11, 2011. 570 “No. 2 Gas Processing Plant of Amu Darya Project Becomes Operational and the EPC Project on the Galkynysh Gas Field Starts,” CNPC, May 5, 2014, www.cnpc.com.cn/en /nr2014/201405/c491b93a6d3146ec94b5a2a26ab05dbc.shtml. 571 “Glavy Turkmenistana i KNR prinyali uchastie v tseremonii otkrytiya pervoi ocheredi gazovogo mestorozhdeniya Galkynysh,” Turkmenistan.ru, September 5, 2013. 151 estimated to hold 26.2 tcm of natural gas. The second phase of the project is expected to be completed in 2021. Its processing capacity will be around 30 bcm yearly.572 Both the first and second phases of the Galkynysh development are being paid for by loans from the China State Bank.573 In that way, China is seeking to gain at least indirect control over this critical gas deposit. Turkmengaz signed service contracts for the first phase of the development in the Galkynysh gas field worth a total of USD 9.7 billion in December 2009. The contractors are Gulf Oil and Gas FZE, Petrofac International LLC, the NPC Chuanging Drilling Engineering Company, and a consortium of LG International and Hyundai Engineering.574 Petrofac provided engineering, procurement, construction, and commissioning services for the gas processing plant and associated infrastructure at the Galkynysh gas field between 2010 and 2013. Its principal partner in that USD 3.4 billion project was Turkmengaz. Galkynysh was Petrofac’s largest project up to that date.575 Turkmengaz likely chose to employ less experienced operators from the Persian Gulf because it did not wish to give Western or Russian operators access to this strategic asset.576 It should be noted that neither China nor Turkmenistan was able to provide all the necessary equipment for the construction of the TCGP and other gas infrastructure. The metallic components were usually imported from the former Soviet Union. Between 2008 and 2009, the Russian United Metallurgical Company delivered 260,000 metric tons of pipes with a diameter of 1,067 mm for Line A and Line B. It was also tasked with furnishing supplies for Line C. It delivered 125,000 tons of 1,218 mm pipe.577 An additional 200,000 tons of 1,218 mm pipe for the Line C were supplied by the Chelyabinsk Tube Rolling Plant in 2013.578 Ukraine’s Sumy Frunze NPO has been providing processing heaters, 572 Maslenikov, “Diverzifikatsiya gazovogo eksporta Turkmenistana.” 573 “Will China Get All Turkmen Gas?” Trend News Agency, April 20, 2015, https://www .azernews.az/analysis/80656.html. 574 “China Implements Several Major Projects in Turkmenistan,” Tribune Business News, August 1, 2012. 575 “Galkynysh Gas Field Processing Facility, UAE,” Petrofac, www.petrofac.com/en-gb/regions /cis/projects/galkynysh-gas-field-processing-facility. 576 “CNPC and Turkmengaz Ink an Agreement on Boosting Natural Gas Shipments to China and a Gas Field EPC Contract,” CNPC, September 6, 2013, www.cnpc.com.cn/en /nr2013/201309/1b81b6a8106947d4a1c55b6699a9d03d.shtml. 577 “OMK to Supply Large-Diameter Pipe for Central Asia-China Gas Pipeline,” Interfax, January 30, 2013. 578 “ChelPipe to Supply 200.000 Tonnes of Pipe for Central Asia-China Gas Pipeline,” Interfax, February 7, 2013. 152 flare installations, air coolers, and other equipment for the Bagtyyarlyk gas and oil complex in Turkmenistan since 2013. Its principal partner in Turkmenistan is the Petro Gas LLP Corporation from the United Kingdom.579 The high technology for the pipeline was supplied mostly by Western enterprises. Rolls-Royce provided the gas turbine-driven pipeline compressors on all three lines of the TCGP.580 The Czech Republic’s Rimera Group supplied equipment for the construction of compressor stations on the first two lines of the pipeline. It signed a contract with the China Petroleum Engineering and Construction Corporation, a subsidiary of the CNPC.581 Honeywell supplied its Experion Process Knowledge System and Safety Manager technology to all three lines of the TCGP.582 The involvement of these Western companies shows that neither China nor Turkmenistan is in a position to implement such massive infrastructure projects without at least some technical cooperation with the West. This subchapter concludes that Turkmenistan’s energy policy in the Central Asian ESC is in no small degree linked to its other external and internal policies.583 That means that the boundaries between internal, external, and energy policies are blurry and difficult to distinguish.584 However, the raison d’être of Turkmenistan’s external policy is obvious, and the regime’s behavior is quite predictable when viewed from the realist point of view. The goal is the preservation of the regime, consolidation of its power, and the prosperity of its membership, as is the case in most if not all authoritarian regimes. The construction of the three lines of the Turkmenistan–China Gas Pipeline heralded tremendous success for Turkmenistan’s energy policy. The preliminary agreement was concluded with China in 2006, and in 579 “Ukraine Begins to Supply Equipment for Base Field of Turkmenistan-China Gas Pipeline,” Cihan News Agency, September 25, 2014, https://www.thefreelibrary.com/Ukraine +begins+to+supply+equipment+for+base+field+of+Turkmen-China...-a0383752814. 580 “Rolls-Royce to Supply Compressor Units for Central Asia-China Gas Pipeline,” Interfax, September 11, 2011. 581 “Rimera to Deliver Equipment Worth 5.27 USD for Turkmenistan-China Gas Pipeline,” AKI Press News Agency, March 11, 2014. 582 “Honeywell Automation, Safety Technology Selected for Third Phase of Central Asia-toChina Natural Gas Pipeline Project,” Honeywell, Press Release, May 5, 2014, https://www .honeywellprocess.com/en-US/news-and-events/Pages/pr-05012014-honeywell-automation -safety-technology-selected-for-third-phase.aspx 583 Jean Garrison, “Explaining the Central Asian Energy Game: Complex Interdependence and How Small States Influence Their Big Neighbors,” Asian Perspective 35 no. 3 (2011): 381–405. 584 Luca Anceschi, “Integrating Domestic Policies and Foreign Policy Making: The Cases of Turkmenistan and Uzbekistan,” Central Asian Survey 29, no. 2 (2010): 143–158. 153 only six years natural gas from Turkmenistan was flowing into Hong Kong.585 More than 140 bcm of natural gas in total were transported to China via Lines A, B, and C between late 2009 and March 2016.586 China is now Turkmenistan’s largest trading partner.587 It seems that the Beijing-Ashgabat axis is gradually developing from energy-based cooperation into a political partnership. Turkmengaz estimates that the share of natural gas in China’s energy mix will rise from 4 percent in 2015 to 11 percent by 2040. That should make Turkmenistan extremely important to China’s economy and its energy industry. Turkmengaz also estimates that rising gas demand in India and other states will significantly improve Turkmenistan’s standing in the world.588 On the other hand, in one decade Russia lost a beneficial energy partner that had been connected to and dependent on its energy infrastructure since the 1950s. The massive increase in Turkmenistan’s exports of natural gas is shown in Table 19. The slump in exports caused by the switch from Russia to China as key export partner in 2009–10 is clearly visible in Table 19. Russia tried to come up with a counteroffer to China’s in the form of the Caspian Coastal Gas Pipeline. However, that project failed for three principal reasons. First, Turkmenistan is still very sensitive about Russia’s neo-imperial ambitions because of its experience with the Soviet Union. Ashgabat was wary of Russia using its gas to play geostrategic games at the same time when representatives of Gazprom and the government in Moscow mocked their Central Asian suppliers. Second, Russia was not a reliable energy partner for Turkmenistan because of repeated clashes over pricing of energy exports. This problem was compounded by the global financial crisis when European demand significantly decreased. Third, Russia was simply unable to compete with China’s economic and financial might when Beijing decided to “march westward.” These issues explain Turkmenistan’s emphasis on strategic security over economic logic and confirm that its energy policy in the Central Asian ESC is mainly strategic-oriented. Turkmenistan’s strategic approach to its energy policy was exemplified by its enthusiastic embrace of the Turkmenistan–China Gas Pipeline. 585 “V 2012 godu turkmenskii prirodnyi gaz doidet do Gonkonga,” Turkmenistan.ru, May 26, 2011. 586 “Gas Supply Via Turkmenistan-China Pipeline Increases,” Azernews.az, April 23, 2016, https:// www.azernews.az/region/95630.html 587 “Turkmenistan Seeks Closer Energy, Transport Cooperation with China,” Turkmen TV Altyn Asyr, June 24, 2016. 588 “Posledovatelnyi rost znachimosti Turkmenistana na mezhdunarodnom gazovom rynke,” Turkmengaz, November 8, 2015, www.oilgas.gov.tm/compositions/24.