This week’s graphic highlights the energy and transport infrastructure that passes through Kazakhstan. For an insight into Kazakhstan’s role as a linchpin for trade, transport and more regarding China’s Belt and Road Initiative (BRI), see Benno Zogg’s recent CSS Analyses in Security Policy here.
This graphic maps current and proposed Russian gas pipeline projects in the country’s East, including the ‘Power of Siberia’ pipeline which traverses the Russian-Chinese border. For more on the Sino-Russia relationship, see Brian Carlson’s chapter for Strategic Trends 2018 here. For more CSS charts, maps and graphics on natural resources, click here.
The prospect of building the Nord Stream 2 pipeline between Russia and Germany is dividing the EU into two camps. By following geopolitical considerations, both sides are neglecting the concept of a liberalized natural gas market and are overlooking Europe’s favorable position in current international gas trade.
Nord Stream 2 has turned out to be a symbolic conflict about how to deal with Russian gas imports and infrastructure projects
The German government has lost diplomatic reputation and credibility by politically backing Nord Stream 2
The EU needs to make clear, in how far a market approach or in how far a geopolitical approach is structuring its natural gas policies in general
When sticking to its liberalized gas market model, the EU Commission will have to evaluate Nord Stream 2 under existing regulation, not based on an undefined foreign policy assessment
When Russia’s Gazprom and its five European partners (BASF, E.ON, Engie, OMV and Shell) signed a declaration to build two new pipelines through the Baltic Sea (‘Nord Stream 2’) in September 2015, this came as a real surprise for most observers. The project would increase existing capacity from 55 to 110 billion cubic meters (bcm) a year by 2019. Gazprom would act as the main shareholder with a stake of 50 percent in the Swiss-based pipeline company. Nord Stream 2 will follow a similar route along the seabed as the first pipeline project that started deliveries in 2011. The project is completely financed by its shareholders and does not receive financial support from public sources of the EU or a Member State. It is clear that from the Russian side, not only the aspect of defending and maybe even the possibility of enlarging market shares in Europe, but also the geopolitical motivation of circumventing Ukrainian territory and reducing payments for Ukrainian transit play an important role in the project. After the Black Sea pipeline project ‘South Stream’ to Bulgaria was cancelled in 2014 and considerations to involve Turkey in the transit business have been put on hold, the Baltic Sea seems to be Gazprom’s most reliable and secure route to retain a hold on its most important market: Europe.
Recent reports suggest that officials in the Sultanate of Oman and the Islamic Republic of Iran have given the go-ahead for the rumored 173-mile underwater gas pipeline connecting the two nations. As of March 2013, only an “understanding” had been reached. The new reports raise clear implications for the wider Gulf region, particularly Saudi Arabia.
For decades, and especially since the “Arab Spring” uprisings several years ago, Saudi Arabia has attempted to bind its smaller Gulf neighbors in a tight bloc to counter perceived Iranian aggression. On numerous occasions, Riyadh has provided military and economic support for its fellow Gulf Cooperation Council (GCC) states. The Saudis have also pushed for the establishment of a Gulf union comprising the Council’s six member states. The kingdom’s objective has been to further bind the GCC together in a united political and economic front vis-à-vis Iran.
Some of Russia’s pipelines have names that reflect more than just technical realities – such as the Druzhba (Friendship) pipeline system that brings oil to Central Europe. Yet, others are of a more prosaic kind, including the recently opened Eastern Siberia-Pacific Ocean Pipeline (ESPO). ESPO will bring the black gold from Eastern Russia to China and Russia’s Pacific Coast. Whether this new pipeline is the beginning of a new Russian-Chinese energy-friendship remains to be seen.
China’s growing appetite for gas and oil will be hard to saturate in the next decades. According to projections of the International Energy Agency, China’s demand for primary energy will nearly double from 1,765 million tons of oil equivalent (Mtoe) in 2007 to 2,539 Mtoe in 2020 and 3,451 Mtoe in 2035. The country will account for 30 percent of the increase in global primary energy demand for that period. Oil demand is expected to more than double while the demand for natural gas will more than triple.
Before that backdrop one would expect Russia, home to 5 percent of the world’s proven oil reserves and 24 percent of all proven gas resources, to be eager to enter this growing market; even more so, since the focus of Russia’s oil and gas production is moving eastwards. There are untapped hydrocarbon resources in Eastern Siberia and Russia’s Far East that are expected to cover falling production elsewhere. Furthermore, hooking up with China holds major potential for developing an economically backward region and would add another trump to Russia’s hand when bargaining with its European energy customers.
But that’s not how Russia seems to view the situation.