The Central Asia-Caucasus Analyst

In recent days, energy diplomats on both the Azerbaijani and Turkish sides have revealed that an agreement in principle over the price that Turkey will pay for Shah Deniz gas from Azerbaijan has been reached. However, there are several ongoing sets of simultaneous negotiations over Shah Deniz, also taking place in the context of larger implicit bargaining games over other the Caspian Sea basin deposits of natural gas and indeed the geo-economics of their supply to Europe over the next several decades. These subtleties must be unpacked in order to understand the wide-ranging significance of even seemingly small agreements.

The opening of the Turkmenistan-China gas pipeline in December 2009 has focused deserved attention on China’s growing presence in Central Asia, particularly in the energy field. But the larger story transcends China and is really about the growing connections between Central Asia and East Asian  countries in general, not just China.  In this context, South Korea’s reinvigorated moves to consummate energy and infrastructure contracts with Central Asian producers are particularly revealing.  Following President Lee Myung-Bak’s visit to Kazakhstan and Uzbekistan in 2009, there has been a series of acquisitions and search for assets by Korean companies.

The January 14 meeting by east European leaders in Batumi, Georgia, marked an important step toward the realization of the southern energy corridor. Among them, Ukrainian and Azerbaijani participation is of utmost importance. Both countries demonstrate a certain degree of pragmatism in their relations with both Russia and the West, trying to reap the benefits of partnerships on both sides. Azerbaijan’s duality is shown by its agreement to sell 1 bcm of gas to Russia while still supporting the southern corridor. During the 2010 Presidential elections in Ukraine, Viktor Yanukovich spoke of mending Ukraine’s relations with Russia while simultaneously integrating with Europe.

The ongoing polemic between Uzbekistan and Tajikistan over the latter’s decision to construct the Rogun hydropower station has intensified, threatening to escalate amidst regional environmental challenges, widespread poverty, border disputes, and lack of inter-state cooperation, especially on water management issues. This context creates a potentially explosive environment in Central Asia that has witnessed a number of ethnic and resource-related conflicts in the past, primarily in the Fergana Valley, requiring effective intra and extra-regional policy responses to avoid water wars that are to some extent already under way across the region.