Tuesday, 25 March 2014

CENTRAL'S ASIA'S STRATEGIC and ECONOMIC IMPORTANCE

Besides the ominous nuclear arms race, one of the major underlying struggles between East and West throughout the Cold War was the global competition for minerals and energy sources. The reason for this is because minerals and energy have civilian as well as military significance and both play a major role in the global balance of power and quest for spheres of influence that the Great Powers carved out for themselves. Even after the Cold War, the issue of limiting countries with the potential of acquiring nuclear weapons remained significant, with the US and Israel assuming the aggressive role of stopping Iran from pursuing nuclear ambitions. In essence, behind the campaign against Iran developing its nuclear program was the US resolve to force the Middle Eastern country into an integration model that would make it more dependent economically and thus politically on the West.

One of the myths propagated by the advocates of the free market system is that the end of the Cold War, coinciding with the advent of globalization and neoliberal policies, entailed the harmonious world economic economic integration. Therefore, there is no need for a global power struggle for minerals and energy and no need to carve out spheres of influence that are reminiscent of the Cold War. This is totally false, especially considering that 85% of energy in the world emanates from oil, natural gas and coal that represents security and stability for countries that have it and those that wish to acquire it.

When it comes to the ongoing struggle for strategic raw materials and energy, the US, China, Russia, northwest Europe and Japan, as well as regional energy producers, geopolitics plays a significant role behind the economics of energy.The Western conflict with Iran, which is at an intermediary stage toward amelioration in 2014, but also the Russian confrontation with the West over the Ukrainian-Crimea crisis are indicative that the end of the Cold has not meant the end of the struggle for trying to secure economic and strategic advantage.

In the early 21st century, we are experiencing a new global power struggle for spheres of influence, in many cases using energy sources as a catalyst. For example, the bloody civil war in Syria has not only the elements of the old East-West struggle for spheres of influence, but energy as a catalyst in its midst, directly involving Syria and indirectly Iran and Israel that has been trying to insert itself in the lucrative natural gas market, always with the assistance of the US. Because Russia has been Syria's patron, and because Russia links Syria to the US-EU struggle to dominate the energy market of Central Asia, there are similarities with the Cold War, although this is in essence an imperialist power struggle comparable to what took place in the late 19th century.

One area that the power struggle has been especially prominent in the last two decades in the domain of natural gas where the US has used its political, military and economic influence to secure resources and to undermine its rivals, especially Russia and Iran, which are the number one and number two natural gas producers in the world - global production is at 175 million cubic meters and Russia's share is at 45 million, while Iran's is at 27 million, thus an immense slice of the global share concentrated in just two countries.

Although the US share of production is currently at 6 million cu. m., it has the potential of overtaking Russia by 2017-18, largely because of deposits in a number of states, especially North Dakota. In addition, the US also has untapped oil potential that could make it even less dependent on the Middle East, and permit the price manipulation of natural gas and oil to undercut rivals like Russia and Iran whose political, economic and military power rests on energy production.

Lower energy prices would make the US much more competitive, while undercutting its rivals producing energy as well as those consuming it. Russia energy giant Gazprom, and the entire energy field that accounts for half of Russia's budgetary  revenues, has allowed President Putin to become an powerful "Tsarist-style" leader at home, while affording him foreign policy leverage with EU, China, former Soviet republics and the Balkans. The US challenge has meant a decline in gas prices, and falling revenues of more than a quarter from the highs of 2010-11. This has actually benefited recessionary EU that is Russia's largest customer. 

From the Clinton administration to the Ukrainian crisis, the US and its EU partners have been pursuing an encirclement policy toward Russia, a policy comparable to the encirclement policy that France, UK and Russia were pursuing toward the German Empire from 1890 to 1914, at least as far as the German nationalists were concerned. Central Asia's strategic importance has been at the center of a competition between Russia and the US for at least a decade before the Ukrainian-Crimean crisis of 2014. Besides the Moscow-Washington rivalry, other players include China, the EU, as well as  Iran, India and Pakistan, all trying to carve out their own policies that clash with other states. The US and EU can tilt the balance of power in Central Asia because of their combine military and economic influence, but it is unlikely that Russia and the other Asian players will roll over and play dead as the West expects.

While the US argues that it is merely interested in combating terrorism and promoting "freedom and democracy" in Central Asia, the primary goal is strategic, considering that the US has been supporting some of the most authoritarian regimes in the region; regimes that are among the most corrupt in the world. The problem of the US in the Central Asia republics is that they are Muslim and the people do not fail to notice the US backed Arab Spring movements to help install pro-neoliberal regimes, and at the same time it is willing to cooperate with authoritarian Asian governments for economic and geopolitical considerations.

Although the US denies there is a power struggle for energy sources, and that there is a race for spheres of influence in Central Asia where Russia and Iran feel encircled, the reality is that in the last two decades the US and the larger EU countries have used Western multinational corporations to corner the energy market for economic and geopolitical reasons. Championing the central Asian republics as their protector from Russia and to some extent China and Iran, the US has been using natural gas reserves development as a catalyst to carving out spheres of influence as part of a larger containment policy, while insisting that Russia is the one with imperialistic intentions toward its energy producing neighbors - Turkmenistan, Uzbekistan, and Kazakhstan. At the same time, the US has allied itself with energy-producer Azerbaijan to undercut the role of Iran.

Because the US and the West pay a higher price for natural gas than Russia, while trying to link gas pipelines from the Central Asian republics to Europe (bypassing Iran) and China. This strategy undermines Iran and Russia that have repeatedly argued the US and EU are  engaged in neo-imperial relationship with Asian energy producers with the ultimate goal of undercutting Russia and Iran economically and geopolitically.

Besides Russia and Iran, China views the US neo-imperialist strategy involving natural gas as a threat to its
vital interests. China did not vote with Russia at the UN Security Council when it came to the Crimea issue,
but China's abstention was hardly an endorsement of US foreign policy toward Russia. The Trans-Caspian Gas
Pipeline involving Azerbaijan and Kazakhstan was one in which the US and EU had an active hand,
especially in the South Caucasus Pipeline that would deliver gas through Turkey and onto to Europe.
Although the justification for the pipeline was to keep prices competitive, the real goal
was to undercut Russia and Iran, both of which objected to the pipeline for it would case irreparable
environmental damage to their respective countries and the entire region. In May 2007, Russia countered with the Central
Asian gas pipeline that would provide gas to Europe from Kazakhstan, Turkmenistan and Russia.

In the last ten years, Germany (RWE) and Austria have (Nabucco) become heavily involved in pipeline
construction projects in Central Asia with the Caspian Sea as the main source. Standing to benefit from
the construction of pipelines going West, Turkey side with the US and EU, partly for geo-strategic considerations,
given that it has been heavily involved in the Syrian rebel support against the Assad regime backed by Russia and
Iran. Turkey however, complained that it was left out in the Cypriot exploration for natural gas - where the US
backed Israeli and European companies - as well as impending Greek exploration for gas and oil in the
Aegean Sea.

The most glaring example that natural gas in the Near East and Central Asia became an obvious play of
spheres of influence was the proposed pipeline originating in Azerbaijan and going through Turkey,
onto Greece, Albania and winding up in Italy. This project has a curious history,
given that Russia was interested in a southbound pipeline that would supply the Balkans and heading
toward Europe through Greece. The US vehemently objected to the Russian pipeline on the grounds
that Balkan and EU dependence on gas would make it vulnerable to political blackmail and allow
Moscow the upper hand diplomatically. This is where the Central Asian gas supply plays a role,
although the region hardly competes with Russia that has immense known reserves. 

Obviously, in time of war, energy becomes very important and that is one reason for the politics of
natural gas. However, the game is more about political influence, containment strategy and carving out
spheres of influence between the Great Powers - Russia, US, China, Germany, UK and France.
The Ukrainian crisis is hardly worth an all out sanction confrontation that only slows down world economic
growth, but it does signal the international energy and markets competition in Central Asia will become much
tighter in the future with the possibility of a regional conflict erupting and possibly dragging the
Great Powers into it. This is not to say that the Great Powers are looking to start a war in Central Asia as
a means of stimulating economic growth and determining who emerges with the greatest leverage,
but all signs point toward that direction.

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