In the context of the transformation of the global energy order, the issue of increasing the role of the SCO Energy Club in managing energy processes at various levels is more acute than ever, writes Shamil Yenikeyeff, Professor, School of International Affairs, Faculty of World Economy and International Affairs, Higher School of Economics.
Today, the global energy order that emerged after the energy crisis of the 1970s is undergoing structural changes under the influence of energy transition policies, geopolitical conflicts, and the transformation of traditional economic relations; access to energy resources can be determined within the narrow framework of strategic and even military alliances.
These times of great upheaval present new challenges and opportunities for the Energy Club of the Shanghai Cooperation Organisation. The key challenge for SCO member states and associate partners is how to turn the organisation’s Energy Club into an effective institutional body for harmonising their energy strategies and strengthening energy security, given the rapidly changing global energy architecture.
Saudi Arabia’s recent decision to join the Shanghai Cooperation Organisation as a dialogue partner could enhance the role of the SCO Energy Club, initiated by Russia in 2006, as a new platform for promoting regional and international cooperation in energy, energy security and sustainable economic development.
Regional Eurasian (Russia, China, India, Iran, Pakistan and four states in Central Asia)
Subregional Central Asian (Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan)
Local (development of national energy models of the SCO member countries).
The participation of such key members of the Organisation of the Petroleum Exporting Countries (OPEC) as Saudi Arabia and Iran in the activities of the SCO and their recent decision to resume bilateral diplomatic relations may contribute to the transformation of the SCO Energy Club into a global player, which would provide an additional stabilising force in the international oil market. This is becoming especially important amid conditions when the G7 member countries are trying to change the market mechanisms of oil price formation in their favour through the establishment of artificial price ceilings for energy resources.
The regional-Eurasian level of the SCO Energy Club implies the harmonisation of energy strategies and the strengthening of cooperation between the countries producing hydrocarbons (Russia, Saudi Arabia, Iran, Kazakhstan, Uzbekistan), and consumer countries (China, India, Pakistan, Turkey, Mongolia, Tajikistan and Kyrgyzstan). In fact, according to a number of experts, the SCO Energy Club can contribute to the transformation of the SCO into a self-sufficient energy system. Plans to make Turkey a gas hub through which trade can be carried out by pipeline and liquefied natural gas, both with Europe and at the regional-Eurasian level, should also contribute to the further development of the SCO Energy Club.
The subregional Central Asian level of the SCO Energy Club is also of particular importance in the new geopolitical realities. In November 2022, the Presidents of Kazakhstan and the Russian Federation, Kassym-Jomart Tokayev and Vladimir Putin, discussed the creation of a “triple gas union” between Kazakhstan, Uzbekistan and Russia. Such an alliance would entail the coordination of gas relations between the three states and the synchronization of their strategies in foreign markets. The strength of this union is due to the traditional relations between Russia, Kazakhstan and Uzbekistan in the gas sector, which have their origins in the Soviet era. Over the past 30 years, Central Asian gas has been transported through a system of main gas pipelines to the territory of the Russian Federation, but today Kazakhstan and Uzbekistan are experiencing a shortage of natural gas for their own domestic consumption.
In this regard, the Russian side could cover the gas deficit in these two countries, given Gazprom’s prior in meeting the gas needs of Kazakhstan and Uzbekistan through gas swaps. At the same time, there is an opinion that the three states could transform the inherited Soviet gas infrastructure and even build a new network to integrate gas supplies from Russia for the internal needs of Kazakhstan, Uzbekistan and even China.
However, the weak points of the triple gas union are the absence of Turkmenistan, a key Central Asian gas producer, among its potential participants, as well as fears in Kazakhstan and Uzbekistan about the risks of secondary Western sanctions being imposed against them. It should be taken into account that the formal creation of a new union can be regarded by the G7 member countries as an attempt to circumvent the sanctions imposed against Russia. In this regard, it may be more appropriate for Kazakhstan, Uzbekistan and Russia to coordinate their strategies and positions in foreign markets within the framework of the SCO Energy Club, especially given the readiness of Turkmenistan to cooperate with the SCO in the economy, trade, and investment. Turkmenistan is the main supplier of Central Asian gas to China via the gas pipeline through Kazakhstan and Uzbekistan. In addition, the resource base of Turkmenistan is considered a source of gas for another strategic gas pipeline — Turkmenistan-Afghanistan-Pakistan-India (TAPI), the construction of which Russia may join.
The main task for the SCO Energy Club is its full institutionalisation. At the moment, this structure within the SCO is mainly of a consultative nature, acting as a kind of additional platform to discuss various energy issues by the Deputy Ministers of Energy of the SCO member states and associate members of this organisation. In November 2022, at a meeting of the Council of Heads of Government of the SCO Member States, Russian Prime Minister Mikhail Mishustin pointed to the need to make more active use of the SCO Energy Club “to deepen practical cooperation in the energy sector.”
As early as 12 years ago, Vitaly Bushuev, one of the leading Russian energy experts and Director General of the Energy Strategy Institute, proposed the following steps to transform the SCO Energy Club from a discussion and advisory platform into a full-fledged participant in the global energy order:
Harmonization of energy policies and coordination of the long-term energy development programmes of the SCO member and observer countries and their partners;
Development and implementation of collective energy security measures;
Development of the transport energy communications system;
Development of a common economic mechanism for the implementation of the energy policies of the member countries;
Coordination of the investment plans of member countries;
Development of coordinated activity in the global energy market.
Today, in the context of the transformation of the global energy order, the issue of increasing the role of the SCO Energy Club in managing energy processes at various levels is more acute than ever.