Click here to download a PDF of this report The wide-open and sparsely populated steppes of Central Asia have made the region historically prone to being swallowed up by various empires, from the Persians to the Mongols. The latest such power to control the five Central Asian countries — Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan and Tajikistan — is Russia. Russia first took over the region as the Russian empire expanded in the 19th century, then continued controlling the five states as part of the Soviet Union until its dissolution. But even post-Soviet Central Asia has been subject to strong Russian influence. (click here to enlarge image) Due to Russia's inherently weak geographic position, with many strong and potential adversarial neighbors surrounding it, Moscow's geopolitical imperative is to establish buffer zones to insulate itself from other powers. Central Asia is one such buffer zone, placing thousands of miles of harsh terrain between the Russian core and traditionally powerful countries like Iran and China. In order to consolidate this buffer zone, Russia has inserted itself into virtually all levels of Central Asian affairs, including politics, economics and the military. This influence has made other interested outsiders, like China and the Europeans, hesitant to significantly challenge Moscow's hegemony in the region. (click here to enlarge image) A particularly strategic sphere in which Russia maintains influence in Central Asia is the energy sector. Nearly all of the natural gas and oil supplies from energy-rich Kazakhstan, Uzbekistan and Turkmenistan have been completely integrated into Russia's vast Soviet-era pipeline system, with Russia serving as the primary transit state bringing Central Asian energy resources to European markets. Russia has earned a pretty penny for these transshipments, charging the Europeans roughly three times what Moscow pays the Central Asian producers. And, with a few exceptions, Russia has made sure that these countries' energy supplies (and the corresponding transit revenues) have not gone anywhere else. (click here to enlarge image)

Other Players

While Russia's dominance in Central Asia's energy industry is unquestioned, recent months have seen a series of events, deals and disagreements that have opened the door to other players in the region. The first such event was in early January, when Russia cut off most of its natural gas shipments to Europe for nearly a month. The cutoff came during a painful recession and hurt Europe's industrial activity, exacerbating the downward trend in European natural gas imports from Russia. (Europe imported some 160 billion cubic meters [bcm] from Russia in 2008, but that number is set to fall to around 140 bcm for 2009.) Lower exports mean lower production, and one of the first places to feel the effects of the European cutoff was Central Asia (rather than Russia's strategic natural gas behemoth Gazprom). This was a factor in another event that took place in April, in which a pipeline carrying natural gas supplies from Turkmenistan to Russia suddenly burst. Although Moscow cited technical malfunctions, the real reason for the rupture was that the decreased demand from Europe left Russia unable to take supplies from Turkmenistan, and the increased pressure of the pipe caused the pipeline to break. In Moscow's eyes, a ruptured pipeline was the only solution to this problem (telling Turkmenistan that Russia did not need the gas would have triggered fines for breaking the import levels stipulated in the contract between the two countries). From Ashgabat's perspective, however, it lost its primary natural gas market (Russia takes more than 90 percent of Turkmenistan's natural gas exports). Because natural gas exports generate roughly 50 percent of Turkmenistan's gross domestic product, this represented not only a decrease in revenues but a threat to the state's survival. Angered by the pipeline break, Turkmenistan began examining its other export options. Europe had always been a target export market, and energy projects that bypass Russia and could use Turkmen natural gas, like the Nabucco pipeline, had been widely discussed for years. But these projects have issues ranging from the financial to the technological and would not make Europe a viable market for many years. There are, however, more realistic options for Turkmenistan closer to home. Ashgabat had already been exporting a small amount of natural gas to neighboring Iran, but immediately announced that these exports would expand and could increase threefold from the current 6 bcm annually. An expanded pipeline between the two countries is now set to come online in the middle of December, and is set to increase its flows gradually to 12-18 bcm. But the really lucrative alternative for Turkmenistan's natural gas is to the east, in the extraordinarily energy-hungry China. Beijing has searched around the world — including Central Asia — for energy resources to meet its growing demands. It is China — with its substantive economic and ethnic levers in the region — that has the greatest potential to challenge Russia for influence in Central Asia. (click here to enlarge image) Indeed, a pipeline is already under construction that would link Turkmenistan's natural gas supplies to the Central Asian infrastructure that would send natural gas all the way to China. Russia had delayed the pipeline's completion, but after the April pipeline burst Moscow allowed work on the pipeline to continue. It is now slated to come online Dec. 15 and carry 10 bcm of Turkmenistan's natural gas next year. The line is expected to carry its capacity — 30 bcm — a few years after it becomes operational. However, Beijing likely will not present a true challenge to Russia in the short- to medium-term. Russia is still the dominant force in Central Asia, with a near monopoly of military and intelligence assets in the region and a level of economic penetration that far outweighs that of any other external power. Even with the recent increase in competition from China and Iran regarding Central Asia's energy assets, Russia still holds the upper hand: Moscow owns nearly all of the energy infrastructure within Turkmenistan, which means the Kremlin ultimately gets to decide if and how much of Turkmenistan's natural gas supplies will go to Iran and China. And for now, this diversification of resources away from Russia is actually in Moscow's interest, because it takes the pressure off of Russia to import Turkmenistan's supplies when it simply cannot afford to take them.

Potential Complications

The new pipelines in Central Asia — particularly the Turkmenistan-China line — could pose problems for Russia. Because of its location, the Turkmenistan-China pipeline effectively creates two new transit states whose cooperation is necessary for the transport of supplies: Kazakhstan and Uzbekistan. These two countries will get a great deal of revenue from the transit fees — revenue that could be used to improve their geopolitical positions. Kazakhstan likely would not pose much of a problem in this regard, as it is tied to Russia politically and is set to strengthen its economic relationship with Moscow by joining Russia and Belarus in a comprehensive customs union Jan. 1, 2010. This does not mean Kazakhstan is completely dependent on Russia; it has several strategic ties with China that are likely to grow. The Kazakhstan-China oil pipeline recently came online, and earlier in 2009 Beijing agreed to lend Astana $10 billion to develop the Kazakh oil and natural gas industries. Uzbekistan, however, is a different story. Uzbekistan is the most independent of the Central Asian countries, being largely self-sufficient in food and energy and having a true core in the Fergana Valley. Uzbekistan is also the most populous country in the region, with about 28 million inhabitants, and is the only country to border every other Central Asian state — which also makes it the only country that can effectively project influence throughout the region. This has caused Russia to grow increasingly concerned that Uzbekistan — which Moscow sees as the rising star in the region — could become too powerful in regional affairs. The increased revenues associated with transiting natural gas supplies to China would likely only increase Tashkent's leverage. Uzbekistan's independent streak does have its limits, however, as Tashkent is still reliant on Moscow and the other Central Asian states for cooperating in processing its food and energy products. So while Tashkent could tenuously leverage itself as a regional power and critical transit state, it will also be careful not to incite Russia's wrath — a lesson other former Soviet states have learned well. Another potential complication will arise if and when Russia will need Turkmenistan's natural gas again. Once European demand gets back to its previous levels, Moscow likely will have to turn to Ashgabat for supplies. But without massive and rapid investment in Turkmenistan's natural gas output, Turkmenistan will not be able to fill the orders for Russia, China and Iran — which exceeded 70 bcm in 2008 — all at once. At best, it would be able to meet roughly half of this demand. The geography of Central Asia, the competition among its five countries for resources and the increasing competition among outside powers for Central Asian energy seem to indicate that a struggle over the region's energy resources is inevitable.