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Energy Club Is Not An OPEC Clone

The great potential of energy supplying countries requires a coordinated price policy on both domestic and foreign markets. The SCO countries control 23% of the world's oil, 55% of natural gas and 35% of coal, Bushuyev said. At the same time, they waste the most energy and their energy efficiency is the lowest.
by Fakhriddin Nizamov
member of the RIA Novosti Expert Council
Moscow (RIA Novosti) Mar 28, 2007
The fight for control over energy resources has been gaining momentum over the recent years, becoming a dominating factor in international relations.

Players in this fight are both individual states and regional or international organizations, such as the Organization of the Petroleum Exporting Countries (OPEC), the International Energy Agency (IEA) and others that represent the interests of their member states.

Struggle for control over energy-rich regions sometimes goes in the open. One example is the attempts to "democratize" post-Soviet republics. Western geopolitical centers that impose managed crises on these countries are worried that reserves in the fields that supply oil to their markets are becoming exhausted.

Experts estimate that global energy demand will grow by 2.4% a year on average in the next several decades, while the output in the North Sea and Indonesia will fall due to exhaustion. Moreover, instability in the Middle East has shaken the fragile foundations of the world's energy resources. So key electricity consumers are beginning to eye post-Soviet countries seeking to diversify their hydrocarbon imports, as these countries can boast not only huge reserves, but also stable economic growth. In these circumstances, new independent states have an increasing influence on the global market.

But there is another factor that needs to be acknowledged. This growing influence is not brought about by any coordinated steps or thought out policies of commodities exporters related to transportation, transit, optimal price setting and energy security. The situation on energy markets has been favorable for them so far. It can push aside regional or inter-state disagreements for some time, but it does not help to resolve them.

The latest events related to gas supply from Russia to Belarus and from Uzbekistan to Kyrgyzstan and Tajikistan showed clearly that transition to market prices on gas is a painful process that requires meticulous preparations. Central Asia is a good example in this respect. Its security depends to a large extent on how it resolves the existing problems in the energy sector.

The need for common approaches has led to increasingly frequent calls for setting up a single energy market within the Shanghai Cooperation Organization (SCO). Some propose to call it the Asian Energy Strategy, others the Energy Club. Yet the essence does not change: it is time to ensure energy and, consequently, economic and political security of the SCO members by establishing a special body.

It will be difficult to achieve significant results without streamlining national energy strategies and legislations, said Vitaly Bushuyev, director of the Russian Energy Security Institute. Decisions made without thorough expert analysis are often left unimplemented because it is hard to find a balance between national interests and mutual concessions for the sake of integration. Moreover, SCO energy cooperation has already shown that its members' interests are not just different, but sometimes opposite.

Tajikistan and Kyrgyzstan, for example, are first of all interested in promoting hydropower generation in the region. Tajik experts estimate their country's hydropower potential at 550 billion kWh a year. But development of hydropower generation in these countries without considering water consumption in Uzbekistan and Kazakhstan would irrevocably damage the latter countries' agriculture.

Moreover, Kyrgyz experts believe that thermal power plants built near glacier areas will disturb the fragile ecological balance. Many present oil and gas production and transportation projects are carried out under bilateral agreements, which affects price setting and results in ongoing tensions between producers and consumers.

The great potential of energy supplying countries requires a coordinated price policy on both domestic and foreign markets. The SCO countries control 23% of the world's oil, 55% of natural gas and 35% of coal, Bushuyev said. At the same time, they waste the most energy and their energy efficiency is the lowest.

Given the dynamic growth of SCO economies and high energy prices, joint efforts seem a good way to tackle many problems. The idea to set up an energy club is gaining relevance because the global energy market requires coordinated and well-considered moves on the part of all interested countries, not just one or two players. Only then it will be possible to stand up to the market's whims.

OPEC's experience shows that such a body would assist in developing common tactics. Russian experts believe that interests of the energy club members should not be limited to energy production, transportation or consumption. They can be both geopolitical and concern investment. Central Asia and China, which has a huge workforce, could create many new jobs by attracting investment in the energy sector.

Many have rushed to describe the energy club as an OPEC analogue. But its format is unique. OPEC, for example, coordinates oil prices for 11 oil exporters, while the IEA unites mainly oil consumers. The energy club, however, will unite both producers (Russia, Kazakhstan, Uzbekistan) and consumers (China, Tajikistan, Kyrgyzstan).

Despite these differences, OPEC's experience and the IEA's policies can be used as models when establishing the new body. The energy club can become an expert site for offering recommendations that would take into account interests of all SCO member states. And it will also make it possible to go from discussions and analysis to implementation of real projects.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

Source: RIA Novosti

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