This article is authored by Anisree Suresh, associate – research & client management, CPPR.
In the 21st century, energy is an important tool that shapes geopolitics and controls the geoeconomics of countries. Central Asia has emerged in recent years as an alternate energy source for countries like China and India as their growing populations require uninterrupted access to energy for sustained economic growth. The increasing demand for natural gas is anticipated to stimulate the expansion of the Central Asian oil and gas market. The Shanghai Cooperation Organisation (SCO) member states collectively possess approximately 25% of the world’s oil reserves, over 50% of the world’s gas reserves, 35% of the world’s coal reserves, and roughly 50% of the world’s known uranium reserves. Oil and gas discoveries in countries such as Turkmenistan and Kazakhstan are creating lucrative growth opportunities for the Central Asian oil and gas market. Central Asian energy geopolitics involve key countries such as Russia, the United States, China, the European Union, Japan, India, Iran, and Turkey, and in the last few years China has been dominating the energy politics in the region with key players such as Gazprom dominating excavation and storage technologies.
China’s interest in the region comes from various aspects, such as its need to diversify its oil imports to ensure a stable supply, reduce dependence on the Middle East, and get over the geographical constraints posed by the Malacca Straits. Despite its geographical distance, over the years, China has strategically engaged with Central Asia and played a significant role in the region’s energy geopolitics while carefully manoeuvring Russia’s sentiments towards the region. Its cautious approach and step-by-step progress have led to the formation of cooperative organisations, such as the Shanghai Cooperation Organisation, and further expanded its role in Central Asian energy affairs.
The SCO mandate has broadened to encompass energy security, economic development, and other emerging non-traditional security challenges. The SCO Energy Club was established under SCO as a part of expanding priorities beyond addressing terrorism, separatism, and extremism. In 2013, the club was established with members including Russia, Afghanistan, Belarus, Kazakhstan, China, Mongolia, India, Tajikistan, Turkey, and Sri Lanka as a non-governmental consultative mechanism to discuss the energy strategy of the region. Its purpose is to enable discussions on energy-related issues among high-level officials, business representatives, and scientists from member countries. The club was intended to serve as a platform for energy producers, consumers, and transit nations to address shared concerns and challenges. Notably, non-member countries such as Mongolia, Belarus, Iran, Afghanistan, and Sri Lanka participated in the inaugural meeting in 2017, playing crucial roles in energy transportation to markets including China, Japan, Europe, Korea, and India.
The SCO’s expansion of its membership has led to a new great game centred around energy issues, with China and Russia emerging as key energy agenda-setters in the Central Asian region. Energy projects, particularly in the oil and gas sector, joint exploration of hydrocarbon reserves, and the shared use of water resources, were given priority by the SCO Energy Club when it was founded. Iran, Azerbaijan, and Turkmenistan possess significant fossil fuel reserves, making them attractive for energy markets. Moscow played a crucial role in establishing the SCO Energy Club to secure a market for these commodities. The SCO Energy Club, primarily run by Moscow, places a lot of emphasis on natural gas, a clean and highly sought-after fossil fuel. The club aims to create supply lines for the abundant natural gas reserves through pipelines that traverse countries both within and outside the SCO. The regional-Eurasian level of the SCO Energy Club aims to harmonise energy strategies and foster cooperation between hydrocarbon-producing countries and consumer countries within the region, contributing to the SCO’s development into a self-sufficient energy system in the near future.
The involvement of countries such as Mongolia, Belarus, Iran, Afghanistan, and Sri Lanka, which act as intermediaries in energy transport to major markets like China, Japan, Europe, Korea, and India, further enhances cooperation within the Energy Club. India, facing geopolitical complexities, looks to secure Liquefied Natural Gas (LNG) supplies via ship-based transportation since it lacks access to land-based and underwater pipelines from Central Asia, Iran, and Qatar. The participation of Organisation of Petroleum Exporting Countries (OPEC) members like Saudi Arabia and Iran in SCO activities, along with the recent resumption of their bilateral diplomatic relations, could potentially transform the SCO Energy Club into a global player, providing stability in the international oil market.
The global energy market is in flux, with production centres shifting westward and consumption expanding in the east, aligning with the SCO member states’ region. The SCO Energy Club is expected to play a role in stabilising the global energy supply chain, negotiating favourable energy prices, and supporting research for cleaner and more cost-effective energy alternatives for the countries in the region. However, in a rapidly changing global energy landscape, especially with the Russia-Ukraine war, the Energy Club faces the challenge of coordinating the energy strategies of its members and enhancing the energy security of SCO countries. The energy club also continues to face challenges, such as its nonbinding nature and relative youth. The Energy Club could serve as a valuable framework for fostering robust energy cooperation in the coming future, although it might be a counterweight to OPEC in being the energy agenda setter in the region. Although the energy mix is being changed to accommodate more renewables, as long as the fossil fuel industry continues to dominate the energy mix, the SCO Energy Club is likely to play a bigger role in the region.
Source: Hindustan Times