Four Points of the Compass – Kazakhstan’s Energy Future

buneviciute_ruta GGleason feb 2014The recent announcement by Kazakh Oil and Gas Minister Uzakbai Karabalin that Kazakhstan’s oil and gas resources will adequately supply the country’s energy resources through the next half century is testimony to the country’s leading position in Eurasia and in the international energy market.

Kazakhstan’s economic dynamism is fueled by its energy resources but Kazakhstan has also clearly embarked on forward-looking policies. These successful energy policies out-distance Kazakhstan from many other energy-exporting powerhouses. Kazakhstan’s new Foreign Policy Concept (2014-2020) further directs Kazakhstan toward a pragmatic emphasis on the “green revolution” and on yet greater emphasis on technological innovation in science and industry. Energy-related connections in all four points of the compass will very likely be critical components in Kazakhstan’s energy future.

For all countries around the world, energy security has become a dominant aspect of national and foreign policies. The global energy security architecture is changing. A short time ago it was possible to speak of energy producers and energy consumers as the two defining actors in international energy relations. It was easy to think of the world as divided between countries that possessed ample supplies of oil and gas as opposed to those countries which were dependent upon the import of energy fuels. Third party countries physically located between suppliers and consumers often played a role as transit countries, vying for influence and benefit as a result of their geographical location.

These features still define the contemporary world but the dynamism of technological innovation is making subtle but very significant changes. Today the emergence of new energy technologies is one of the drives behind the transformation of energy markets. It is profoundly influencing established practices of energy production, transport, and consumption. Changes taking place are influencing energy security, energy efficiency and energy conservation.

These technological changes often call for close transnational cooperation. They raise important questions regarding the future of energy security practices and policies. Energy security often has been defined as the ability to obtain sources of energy fuels at reasonable costs and with confidence that the supplies will not be disrupted. Supporters of new and more pragmatic security policies insist the new definition of energy security must do more to take into account the common responsibility of all producers and consumers to find ways to use all forms of energy more efficiently, more effectively and more environmentally sustainable for future generations.

International politics has been and will continue to be an important factor in international energy policy. Kazakhstan is located amid major producers and consumers of oil, gas, nuclear energy and electrical power resources. These relationships have been exceptionally well managed in past years by Kazakhstan’s multi-vector policies.

The agility and insight used by Kazakhstan in the past will be just as important in the future. China, Europe, Russia, the Middle East and South Asia are physically located around Kazakhstan as one of the world’s major energy suppliers. With wise and forward-looking policies, Kazakhstan will play a crucial role in balancing markets, environmental and technological challenges.

Energy policies pursued by Kazakhstan’s neighbours will grow in importance. China’s energy policies are integral to China’s unique and deeply-rooted foreign policy tenets. China’s energy policy is comprehensive in the sense that it is closely connected to China’s policy assumptions, goals, and practices. China’s energy policy involves both “push and pull” factors, implying greater and continuing engagement in the world economy yet on a very carefully defined and balanced basis.

In contrast, Russia’s energy policy is substantially different. Russia’s vast natural resource endowment is the country’s most significant foreign policy advantage. Russia’s resurgence in economic and political matters during the past decade has been almost exclusively fueled by energy exports. Russia’s planners are aware of the country’s long-term vulnerability in a world in which excessive dependence upon a primary export commodity exporting strategy threatens to relegate a country to a second-rate status as a supplicant-supplier rather than as an innovator or beneficiary of technological progress. In yet another different contrast, the energy policies of the Caucasus countries and the Central Asian states – Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan – are the expression of newly emergent foreign policy agendas and bureaucracies. Principle and purpose compete with gain and influence in all the Caucasus and Central Asian countries in determining government policy.

Oil is truly a magnificent energy resource. In comparison with other forms of fuel, petroleum is exceptionally rich in caloric value and yet it is easily storable, transportable and usable for combustion in addition to its numerous other applications. Oil is the “black gold” that made possible the global mobility which has transformed our planet and led to the improvement of the quality of life in myriad ways.

Oil can be expected to continue to play a crucial role in the energy future. However, oil can also expected to be increasingly joined by commodities of critical value, such as, for instance, “clear gold.” Water is critical to life itself. The value of water is expected to rise as water becomes a subject of competition over its availability and cost. New technologies that bring down the costs of water isolation, production, treatment, transportation and reuse will make water more available to people around the globe. But these new technologies will not be without a high cost. Countries in the decades ahead are likely to impose comprehensive water pricing systems and tax systems. Only a generation ago, ordinary people rebuffed the idea of purchasing drinking water in bottles that often exceed the price, strangely, of alcoholic beverages. But that has changed. The public attitudes toward a global market in “clear gold” are likely to change as well.

For Central Asia countries – Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan – energy and water are closely linked. This linkage has both important intra-regional and inter-regional aspects. Energy commerce ties Central Asian producers with external transporters and consumers. Energy is also an important issue interconnecting various economic sectors within Central Asia. The hydroelectric power industry ties upstream states such as Kyrgyzstan and Tajikistan with downstream, power-rich but water-hungry states such as Uzbekistan and Turkmenistan. Inherently non-transparent and centralized fixed energy infrastructures such as oil and gas pipelines and electric grids obscure financial transactions and are susceptible to manipulation.

Kazakhstan’s ample energy resources provide a guarantee of economic stability through the next half century if Kazakhstan continues to steward its resources wisely, emphasizing pragmatic economic policies and practices, and encouraging technological adaptation and innovation. Kazakhstan is positioned to demonstrate even greater success and prosperity by making use of Kazakhstan’s leading position in Eurasia and in the international energy market.

Gregory Gleason and Ruta Buneviciute are professors at the George C. Marshall European Center for Security Studies. The views expressed here are those of the authors and do not represent the views of the Marshall Center, the U.S. Government, or the Lithuanian Government.