Cooperation on the regional level acquires a particular significance. Central Asia in general has a vast energy base which, however, is unevenly distributed throughout the region. The bulk of water and hydropower resources are concentrated in Kyrgyzstan and Tajikistan, while fossil fuel resources are mostly located in Kazakhstan, Turkmenistan and Uzbekistan. It allows to secure stable power supply to the domestic market on the one hand, and significant volumes of oil, natural gas and coal for export on the other hand.
But nowadays, energy industries of Central Asian countries has plunged into serious technological and economic difficulties. The wear and tear of machinery is extremely high.
Ineffective pricing and tariffs policies with regard to energy, a drop in solvent demand and failure to pay for energy supply by domestic and foreign consumers impede the capacity to invest in the maintenance and development of fuel, generation and transport facilities that form the basis of the power industry.
There are two strategic goals in the energy field which may contribute to the sustainability of Central Asian development in the future: self-sufficiency of the region in energy resources;
and development and diversification of pipeline network system, both inside and outside the region.
303 Bremmer I. and Hawes C. An Insatiable Thirst for Oil.
http://www.inthenationalinterest.com/Articles/October2004/October2004Bremmer.html
Equally energy efficiency and conservation policy are called to reduce energy intensity of Central Asian economies which exceeds several times that of leading industrial nations so far;
minimize fuel and energy losses in all branches of economy promoting realization of substantial potential for energy savings which, if tapped, would greatly contribute to economic recovery and release significant investment resources for further development of mining and generating capacity, pipelines and networks, as well as to the easing-up of regional and global environmental pressures.
To make these goals viable, Central Asian countries are to attract large-scale investment into the energy complex assisting in the exploration and development of new fuel resources, the modernisation and construction of new power plants, construction of new pipelines and electricity transmission lines and maintenance of existing ones, as well as the implementation of energy conservation projects. In addition, appropriate tax and fiscal and price policies, legal framework, market reforms, and training of experts are also to be essential.
The regionalisation of Central Asia’s energy markets has a bright future, if pursued properly, since the regional states are closely connected through existing regional energy network and trade in energy resources. Besides, there is still shortage of energy in some countries.
Therefore cooperation of Central Asian countries in the sphere of energy would imply establishment of regional energy market, coordination in pursuing intra-regional and interregional energy policy, so that to maintain intra-regional energy security and efficiency of regional energy exports. It would be unwise and wasteful to restrict trade in energy resources to Central Asia already because its power production potential and vast resources exceed the requirements of its economy and population.
The main obstacle to further increase in exports of fuel and energy from the region is a poorly diversified network of pipelines bringing oil, gas and electric power from Central Asia to world and regional energy markets. At present, energy exports from Central Asia are mostly to go through Russia. A number of energy projects are at different stages of development, with the support from foreign multinationals, as well as governments and financial institutions (summarized in Annex 4.4). Foreign investment in the Central Asian energy industries can only be welcomed. Obviously, as economic stabilization continues and investment laws get better, foreign investment may significantly increase.
Equally yet their realization will be largely dependent on how Central Asian states will manage to balance regional interests with the geopolitical and geoeconomic imperatives of the USA, Russia, the EU, Iran, China, Pakistan, Turkey. The USA driven by its universal
principles to push forward democratic values on the global level, are nevertheless trying to defend its geopolitical interests in the whole Eurasian continent, together with Russia, China and Iran. Russia has been showing very active engagement into regional economic and political processes in the last couple of years, striving for the restoration of its weakened positions in the past. China is concerned in both finding as much as possible diversified energy sources outside China for its rising economy, and pursuing active cooperation with major powers in the region (Russia, Iran, India) to strengthen its credibility and influence. Iran attempts to benefit from its advantageous geographical location by bringing forward economically viable energy and transport routes for Central Asian energy exports. The EU is gradually increasing its presence in the region enhanced by its future dependency of energy imports and security concerns over the potential global threats.
In general, there are probably a few main alternatives related to Central Asian energy developments in the future. The first one would imply that the launched hidden rivalry between the main players could continue. For Central Asia it gives little positive effects in terms of the necessity to solve its desperate energy infrastructure problems, the efficient use of resource and secure sustainable foreign exchange and investments into the regional economies. The second way would ideally suit for the regional interests, since it recommends not to consider Central Asia as a battle field, but regard it as a space to bring the main competitors together, since none of them currently has an advantage and potential to dominate there. It is better for them to share common experience, costs and technologies, with the region to see global energy supplies and prices more stable, as well as set up the pre-conditions for prosperous and sustainable development in the region. Finally there could be also some sort of the mix-up of the two previous scenarios, when some countries, such as the USA or China for example, could prefer closer cooperation with one countries, but again with the purpose to restrain a rising influence of the others.
Chapter V. INTEGRATION WITH THE WORLD ECONOMIC COMMUNITY