Uzma Shujaat.pdf - asce-ku.com.pk

Journal of European Studies 

THE GEOPOLITICAL AND ECONOMIC IMPORTANCE 

OF ENERGY RICH CENTRAL ASIA: POSSIBILITY 

OF AN EU-RUSSIA ALLIANCE ∗ 

Uzma Shujaat 

The scramble for oil and influence by the big powers in the 

Caspian Sea region has been linked to the Middle East in the 

1920s. But in today’s Central Asia there is an even larger and more 

complex quagmire of competing interests. There are the big 

powers such as Russia, the EU, the US; the neighbours such as 

Iran, Pakistan, Afghanistan and Turkey; the Central Asian states 

and the most powerful players of all, the oil companies, competing 

in what we call “The New Great Game”. 

The new great game resonates with the late 19 th century history 

when the British in India and Tsarist Russia fought an undeclared 

war of competition and influence to contain each other in Central 

Asia which Rudyard Kipling dubbed “The Great Game”. Today’s 

great game is also between expanding and contracting empires. As 

a weakened Russia attempts to keep a grip on what it still views as 

its frontiers in Central Asia and seeks to control the flow of 

Caspian oil through pipelines that traverse Russia, the USA is 

thrusting itself into the region on the back of oil pipelines which 

would bypass Russia. Iran, Turkey and Pakistan are building their 

own communication links with the region and want to be the 

preferred route for future pipelines heading east, west or south. The 

Central Asian states have their own rivalries, preferences and 

strategic imperatives. Looming above this is the fierce competition 

between American and Asian oil companies. 

∗ Paper presented at a Seminar on Europe’s Political and Economic Interests 

in Central Asia and Caucasus after 9/11 held by Area Study Centre for 

Europe, University of Karachi on August 21, 2007. 

164


The era of easy access to oil is over. The desire to rule the world 

now revolves around maximum economic gains. The 

comparatively cheap oil of the 1990s is truly a thing of the past. 

The truth is that oil, and increasingly natural gas, are the very 

lifeblood of the industrialised, modern economies of the world. 

They will continue to be such for the foreseeable future at least for 

a few more decades because the monumentally difficult and 

expensive move to new alternate sources of energy has not even 

begun in any meaningful way. 

The potential of energy resources in the Caspian sea region has 

attracted much attention since the demise of the Soviet Union. The 

European Union, the US, Russia and other developed nations 

consider the Caspian region a strong alternative to the Persian 

Gulf, and new reliance on its resources can reduce the perennial 

vulnerability of the West to price increases and threatened cutoffs. 

The Kremlin and the leadership of other oil and gas rich states 

foresaw the global energy developments. They have prepared and 

positioned themselves to capitalise economically and politically on 

those developments. The Kremlin has moved to reconsolidate 

Russian natural resource industries under its own control and to 

prevent attempts by the US to wrest away control of those 

industries at Russia’s expense. 

By a careful strategy of expanded acquisition of energy assets and 

markets and by the crafting of strategic cooperation agreements 

with other resource-rich states, the Kremlin through its gigantic 

Gazprom, Transneft and Rosneft oil and gas monopolies has been 

working intelligently since the past few years now to consolidate 

its grip on oil and gas exports to Europe, Asia and far beyond. 

The Kremlin’s energy strategy has been compared to the 

capitalistic economic strategy of ‘monopoly’ in that Russia has 

successfully positioned itself as the key global supplier of a most 

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sought after commodity, thus extending far and wide its economic 

and political influence. 

In today’s Great Game, Russia finds itself struggling to further 

shore up its influence through arms sales and energy contracts and 

shared language and culture as well as the Kremlin’s pledges of 

billions in fresh investment. The main motive of Moscow is that it 

wants to preserve its monopoly on distributing Central Asian gas 

and its major role in other energy sectors. 

Geostrategic situation 

The world we live in is still a realist/neo realist world dominated 

by states, national interests, geo-politics and power politics. The 

more globalised and lopsided it becomes under the sway of the 

dominant power (i.e. the US), the more the possibilities for 

conflicts and wars will be in the ascendant. The zones of conflict 

and conflicting regional micro-interests multiply, and with them 

the difficulties and contradictions of world politics grow 

inexorably. 

The collapse of the USSR opened up new peripheral corridors and 

regions for US hegemonic engagement, but this US engagement 

proved to be not entirely problem free. As US engagement policies 

are, at times, reactive rather than proactive, we now arrive at the 

second point that is the EU and its potential to become an 

independent political actor in world affairs. The development of a 

robust EU is not impossible. In the wake of the disappearance of 

the Soviet threat, European economic and political interests have 

gained more freedom of action in the 1990s and received an 

additional boost with Germany’s reunification. Now coming to our 

focal point there is a new type of geo-politics that the US and other 

Eurasian actors engage in. This new geo-political game is 

inextricably linked to oil and gas pipeline projects, connecting 

Asian and European zones. 

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But policies, domestic or foreign, cannot be reduced to economics 

or the energy factor alone. Foreign policy projection is a 

multidimensional strategic act, which is deeply political and 

diplomatic, and which has strong security, defence and preventive 

aspects. Oil and gas – two major strategic resources are coveted 

and contested by many actors. These two resources have strategic 

significance for every international and regional power, their 

security being of paramount importance for the well-being of their 

economies. The US, by any means available to it, including 

cooperation with Russia, wants to establish its political hegemony 

over Central Asia, precisely because of the strategic significance of 

the region’s energy resources. Washington, having won the cold 

war, also wants to control as much as possible, their production 

and safe transportation to western markets by eliminating possible 

European, Russian, Chinese and Middle Eastern competitors. The 

emergence of possible alternatives to the Middle Eastern energy 

resources, such as those in the Caspian Sea region, has opened up 

new policy avenues for the US. With the disintegration of the 

USSR, Central Asia, together with the Caucasus, the Black Sea 

and the Balkans, have assumed particular geo-strategic 

significance, either as oil and gas producing regions or as strategic 

transport routes. The roots of the new geo-political game since the 

collapse of the USSR lie precisely here. 

According to an analyst “US interests (in the Caspian region) are 

very straightforward. Removing the stranglehold of the Middle 

East over the world’s oil supplies through the exploitation of 

Caspian resources will have a positive effect on the global energy 

balance and bring long-term commercial benefits for the US, if US 

oil companies are directly involved.” 1 

As early as 1995 Prof. Stephen Blank of US Army War College 

pointed out that Central Asia’s independence would inevitably help 

1 Fino Hill, “Pipeline Politics, Russo-Turkish Computational Geo-politics in the 

Eastern Mediterranean”, The Cyprus Review, Vol. 8, No. 1, Spring, 1996, pp. 

83–100. 

167


reshape the Middle East’s boundaries, making Turkey, Iran and 

Afghanistan, the old northern tier, the heart of a new Middle East. 2 

Thus the Middle East, although still a key region for European and 

American interests has not been the sole focus of the West since 

the end of the cold war. There is indeed an energy “pipeline map” 

drafted by leading US and UK companies, such as Chevron, 

UNOCAL, Texaco, Exxon and Pennzoil tracing the oil and natural 

gas resources of the region that connects the Balkans to 

Afghanistan. 3 

It is in this respect that the Middle East although still of paramount 

strategic and global importance, can be seen in the context of a 

‘Greater Middle East’, which includes Central Asia, the Pakistan- 

Afghanistan zone, the Caspian and the Caucasus. In the event, 

however, US policy is forced to discipline and accommodate the 

interests of some important regional actors, while also facing 

competition from EU states. All five Caspian Sea littoral states – 

Russia, Iran, Azerbaijan, Turkmenistan and Kazakhstan are in 

fierce competition over the vast energy resources of the region and 

disagreements have arisen between them over the delimitation of 

the continental shelf and territorial waters since the break-up of the 

USSR. The year 2008 has brought new changes in the Central 

Asian states. They are entering a new era of cooperation, regional 

leaders are making official visits to the neighbourning states at a 

rate not seen since the fall of the Soviet Union. Several factors 

could be driving the new era of cooperation in Central Asia. The 

first is the change in the leadership in Turkmenistan making it a 

very reclusive state. The second is Kazakhstan’s emergence as the 

2 Professor Stephen Blank, Energy, Economics and Security in Central Asia: 

Russia and its Rivals, Strategic Studies Institute, Special Paper, US Army 

War College, NY, USA. 

3 Bulent Gokay, Oil, War and Global Hegemony, Keel University Press, 

University of Keel, February 28, 2002, pp. 3 & 4. 

168


regional economic powerhouse and the most important factor is the 

increasing interest of the international community in the region. 4 

Oil and gas: Geo-economic and geo-strategic aspects 

The widely accepted forecast is that the global demand for oil will 

increase at a steady rate from 76.6 million barrels per day (mbpd) 

in 2002 to 96 mbpd in 2010 and 115 mbpd in 2020. 5 

Over the past decade, however, for various economic and political 

reasons, Iran, Iraq, Kuwait and Saudi Arabia, have been actively 

searching for mechanisms to facilitate foreign investment in their 

upstream oil sector. They collectively possess over 53% of the 

world’s proven oil reserves, currently provide 23% of the world’s 

oil production and are expected to supply 31% of the global oil 

requirement by 2020. 

The vast oil and natural gas resources of the Caspian Sea basin are 

now being divided among the major multinationals. This is the fuel 

that is feeding renewed militarism, which has led to new wars of 

conquest by the US and its allies against local opponents, as well 

as more open rivalry between the US and major regional powers 

such as China and Russia. 

The Caspian sea basin has tremendous potential, offering the 

possibility of production increases from 1.6 million barrels a day 

(b/d) in 2001 to 5.0 million (b/d) in 2010. 

The key issues in Caspian energy development at the moment are: 

• to complete the second pillar of the East-West energy 

corridor by developing the South Caucasus natural gas 

pipeline, 

• to improve the investment climate throughout the region, 

4 Daily Times (Karachi), September 22, 2007. 

5 Richard K. Betts, “Concept of Comprehensive Security”, International Studies, 

China Institute of International Studies (Beijing), Vol. 4, July 2005, p.3. 

169


• to put in second place after the Middle East with its 700 

billion barrels, the Caspian Sea region, having an estimated 

200 billion barrels or more. 

Total production, currently at 1 million b/d, could reach 3.4 million 

b/d by the year 2010, assuming that the hydrocarbons can be 

transported to world markets. The bulk of this production potential 

will come from Azerbaijan and Kazakhstan, the two countries with 

more than 80% of the expected oil resources and where 85% of the 

foreign investments in the region are concentrating. 6 The new great 

game has started in Central Asia. The chief prize is energy 

supplies: China needs them, Russia wants to control the 

distribution. The Western Powers on the other hand wants to 

ensure they are not monopolised by Moscow or Beijing. Uzbek 

President Islam Karimov and Russian President Putin recently 

discussed extensively strategic energy politics in ex-Soviet Central 

Asia. The visit of Karimov was termed as a diplomatic triumph for 

Moscow, which is struggling with Western Powers and China for 

influence in its backyard. This underlies the special relationship 

between the two countries. 

In the contemporary world the energy sector is the most dynamic 

area of economic cooperation and projects related to strategic 

energy sectors are of immense importance. The Central Asian 

region is ripe in this respect, wooed by the US and the EU, powers 

keen to access the Central Asian states’ natural gas riches. From 

the beginning of 2008 there have been enhanced bilateral ties 

between the EU and the Central Asian states. In this connection 

Bulgarian President Georgi Parvanov visited Azerbaijan. During 

the meeting Azerbaijan’s participation in the European Union’s 

Nabucco gas pipeline was discussed. Azerbaijan is presently 

feeding Caspian crude oil into the Russian backed Burgas- 

Alexandronupolis pipeline project. The EU’s 3,300 km Nabucco 

pipeline is to transport gas from the Middle East and Central Asia 

6 Ibid. p.5. 

170


to energy hungry consumers in Europe, bypassing Russia in an 

attempt to reduce the bloc’s reliance on Moscow. The pipeline 

expected to be completed in 2013; will run from the Caspian Sea 

via Turkey and the Balkam states to Austria. 7 

The US, the European Union and even China are taking great pains 

to find common ground with these former Soviet states and are 

trying to gain an insight into the exclusionary mentality of the 

Central Asian peoples. Russia is in a comparatively better position, 

for it has almost 200 years of shared history with them, the Russian 

language is still used in the former Soviet states as a means of 

communication and over 10 million Russian speakers firmly rooted 

in Asia provide certain advantages to Moscow. 

EU-Russia alliance 

The EU led by Germany and France together with Russia and 

China have a distinct presence in the region and have strong 

competition over energy resources. If we see EU-Russia relations 

in retrospect, in the early 90s, Dutch Prime Minister Ruud Lubbers 

had launched the idea of a Europe-wide energy community, which 

would facilitate relations between the EU, the USSR and the 

countries of Central and Eastern Europe. 

The Lubbers scheme later evolved into an EU-led international 

agreement, aimed at regulating various programmes related to 

energy. It is noteworthy that the EU, under pressure from the US 

tends to avoid transit routes that are under Russian influence or 

pass through Russian territory. That was owing to US concerns 

that an energy axis may develop between French, German and 

Russian interests. EU companies are also in competition with the 

Russian giants Gazprom and Lukoil. 

Incidentally, only a few days before September 11, Bulent Gokay 

the US energy information administrator pinpointed Afghanistan’s 

7 Keesings Record of World Events, 2008, Vol.54, No.1, p. 8. 

171


strategic geographical position as a potential transit route for oil 

and natural gas exports from Central Asia to the Arabian Sea. 

Overall, the American geo-strategic imperatives in Europe and 

Asia as they had been elaborated during the first half of the 1990s, 

have not changed since September 11. If anything, September 11 

seems to have accelerated the pace, the unilateral rigour and the 

comprehensiveness of policies by which the US is pursuing its goal 

of the political mastery of Eurasia and its oil and gas producing 

regions. 

The new American hegemony is in fact not new at all. Rather, it is 

the result of a combination of largely ignored trends which 

predated September 11. 

Keeping this strategic situation in mind we can now focus on the 

EU’s cooperation objectives with the Central Asian countries that 

are based on the Partnership and Cooperation Agreements (PCAs) 

in force with Kazakhstan, Kyrgyzstan, Uzbekistan and 

Turkmenistan, and the Trade and Cooperation Agreement (TCA) 

with Tajikistan. 

Russia however, often views Europe’s engagement in Central Asia 

not as an innocuous matter, but as the encroachment of a selfinterested 

neighbour. Europe faces similar distrust in Moscow 

when it intervenes in Russia’s internal political debate. 

EU Trade Commissioner Peter Mandelson thus pointed out: 

“Russia should see greater engagement, and integration with the 

EU, and the global trading system, as serving its own interests, 

even where it creates some constraints on Russian actions. This 

includes trade in energy. Clear, transparent rules could create a 

stable and open environment for diversifying Russian trade and 

attracting investment. They could also ensure that trade and trade 

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disputes between the EU and Russia did not become heavily 

politicised”. 8 

The relationship between the EU and Russia is one of the biggest 

and most complicated challenges for European politics and foreign 

policy. It affects every significant European and Russian interest 

like energy, climate change, trade, security, Middle East, Iran, and 

the Balkans. 

For the Europeans, the nineties were a decade of reform, transition 

and rising prosperity. But for the Russians the 90’s can only have 

been a period of disorder and uncertainty. The Orange Revolution 

in Ukraine, a close neighbour of Russia, was seen as a positive 

development by the Europeans but looked very different to many 

Russians. Russia feels increasingly encircled by the West and 

wedged against a rising China. Another point of disagreement 

between mainstream Europe and Russia is that the latter believes 

that since energy is the key to economic and political strength, like 

all strategic sectors of the economy it should be run by the state or 

with its approval. Europeans are of the view that they will not be 

easily persuaded of an alternative view of economic strength based 

on the state as market guarantor and arbiter, instead of economic 

owner and actor. 

Emerging energy politics between the EU and Russia 

The prevailing geo-economic undercurrents reveal that in the next 

25 years the energy import dependency of the EU will continue to 

increase, while at the same time the supply of oil and gas in the 

international market will become more concentrated. There will be 

similar developments in the US and Asia. Competition for oil and 

gas will increase, with consequences for the political and economic 

relations between these regions. The dependency on a few netexporting 

countries and regions will continue to be considerable 

8 International Herald Tribune, March 4, 2005. 

173


over the next decades. The most important of these regions and 

countries are Russia, the Caspian Sea region and the Middle East. 

In an emerging multipolar world, the prime source of intractable 

conflict and a formidable political and diplomatic weapon in the 

hands of states and region such as Russia, Iran Central Asia, 

Turkey and EU will be energy sources and pipeline routes. As 

energy is not just a good but a need, Europe wants security of 

supply. Russia wants security of demand. Russia needs European 

upstream investment in its energy sector, while itself seeking to 

invest in downstream markets in Europe. For Europeans the key 

strategic challenge facing the EU nowadays is its dependence on 

Russian gas. 

In May 2006, both the EU and Russia agreed that there was a need 

to hold a real political and technical dialogue in order to tackle the 

truly important issues. It should help create a nondiscriminatory 

energy support agreement, including a fair regime for access to the 

Central Asian energy supply. 9 

The US has opened a pandora’s box in the Middle East, with direct 

negative repercussions for the reliability of the region’s energy 

resources. Russia and China have extended their influence deep 

into the Western Hemisphere, including Canada and Latin America 

and Russia’s energy monopoly over nearly all of Central Asia’s 

export system ensures the continuation of Kremlin’s influence in 

that region. The US–backed Baku-Tbilisi-Cejhan (BTC) pipeline 

will be unable to break Russia’s energy monopoly. Owing to US 

influence in the Middle East, the entire region has become 

unattractive with respect to energy security, thus pulling Russia 

toward the global centre of energy geopolitics. 

In the twentieth century, Europe-Russia relations went through 

many phases like the emergence of Soviet Communism and the 

9 International Herald Tribune, June 7, 2006. 

174


nuclear threat from the Soviet Union during the cold war. In the 

twenty first century the enduring goals are a long-term partnership, 

built around far-reaching economic integration embracing the 

European continent, including Russia. To achieve that sort of 

partnership will not be easy or straightforward. The EU’s 10 year 

partnership and co-operation agreement with Russia expired last 

year and efforts to renew it have run into serious problems. There 

are many hurdles but the main issue is that the EU is bigger now 

than it was in 1997. The new members are those who were closely 

allied with the Soviet Union, or in the case of the Baltic states were 

Soviet republics. This historical dimension has added deep 

tensions in EU-Russia relations. In 2007 Poland was blocking the 

EU’s search for consensus on a negotiating mandate with Russia. 

This year it has been Lithuania. 

In 2008, Russia wants a new partnership agreement with the EU to 

have a very different tone, as it felt that the last one’s language 

about Russia and the EU sharing common European values “was 

used as a stick”. Now Russia prefers the concept of shared 

interests. 

According to EU Trade Commissioner Peter Mandelson:“Since the 

disintegration of the Soviet Union, European attitudes to Russia 

have tended to swing between wild optimism and deep pessimism. 

We need to steer a steadier, more even course. We must not allow 

our shared misunderstandings to prevent us from finding a way to 

pursue our common interests in a stable, prosperous Eurasian 

community, bound by rules but, above all, united by values. That is 

what is in both our interests to pursue.” 

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