European Union Interference in Central Asia: What Does It Mean for Russia and China?

_ Ivaylo Gatev, lecturer in European Politics, School of International Studies, University of Nottingham. Nottingham,  2 July 2017.

The European Union (EU) has been active is Central Asia since the breakup of the Soviet Union twenty-five years ago. Despite its geographical remoteness, the EU has shown growing interest in the region and has launched several bilateral and multilateral initiatives designed to bring Central Asia in line with EU interests and thinking. The region occupies an important place in EU strategic thinking because of its location between China and Russia, and because of its position in the East-West energy trade and developing transport corridors. The following paragraphs will first outline what the EU wants to achieve in Central Asia and how it goes about achieving it, before formulating some lessons that Russia and China could draw from this activity. Because the EU is primarily an economic entity with, as yet, an underdeveloped foreign and security identity, its intervention in Central Asia has been mainly of an economic character. This economic intervention however has very important political consequences that this report will attempt to elucidate.

Drivers of EU Activity

The first objective of the EU is to export its laws, regulations and industrial standards to the countries of Central Asia. The EU promotes its laws and standards in the countries of the region by involving them in projects of reform. Broadly speaking, the direction of economic reform advocated by the EU is from (1) monopoly to competition, i.e. unbundling; (2) centralised planning to price liberalisation, i.e. deregulation; and (3) state property to private property, i.e. privatisation. This liberalising agenda is at the core of EU policy towards the countries of Eastern Europe and the former Soviet Union (Eikeland, 2011).

As one European Commission official explained, Brussels’ policy towards the countries of Central Asia should be understood as a continuation of its policy towards Eastern Europe. Designed to draw its eastern neighbours into its internal market, the policy promotes the wholesale transfer of EU laws and regulations in multiple sectors to target countries. Brussels’ ambitions for reform in Central Asia are more limited than in Eastern Europe or the South Caucasus. The EU does not aim for full ‘harmonisation’ in all areas as the Central Asian states are not candidates for EU membership. Its goal however is to achieve ‘approximation’, particularly in the transport and energy sectors.

The reason why Brussels wants to expand its legal, regulatory and technological base to the countries of Central Asia is because it seeks to capture markets there. Under the present conditions, the EU cannot hope to compete with other players, such as Russia and, increasingly, China, in the new ‘great game’ for access to the region’s energy and other resources. Nor does it want to work and share profits with national state-owned enterprises from the region. Rather, Brussels wants to persuade the countries of Central Asia to take their economies out of government control and organise it around public-private partnerships based on EU standards. While China and Russia operate through official government channels and in cooperation with national enterprises from the region, the EU insists on breaking up these enterprises, isolating government officials from economic activity, and bringing in EU-friendly businesses and organisations into the management of the Central Asian economies. In short, other actors like Russia and China are happy to play the ‘new great game’ in Central Asia. The EU, on the other hand, wants to change the rules of the game in its favour.

The second objective of EU activity in the region is to dismantle previously existing, e.g. Soviet, networks that bind the region to Russia. The EU is quite explicit and open about its desire to break Moscow’s purported energy and transport monopoly in Central Asia. Brussels has tried to do that by promoting geopolitically driven investment in energy and transport infrastructure out of the region that bypasses Russia. Here the EU has been spectacularly unsuccessful because this intention does not correspond to the interests of the Central Asian states themselves. While they do desire to overcome their landlocked predicament and gain access to global markets and supply chains, the Central Asian states do not want this to come at the expense of their ties with neighbouring countries such as Russia. That is why in recent years the EU has focused on promoting economic reform in the region designed to disrupt established relations between the Central Asian states and Russia.

To summarise, the aim of EU initiatives in Central Asia is to reorganise, as far as possible, the region away from its post-Soviet model of development and simultaneously fold it with the physical, regulatory and institutional networks centred on the EU.

Instruments of EU Activity

The EU seeks to achieve its objectives in Central Asia through a combination of bilateral and multilateral agreements concluded between the European Commission and individual states in the region. The EU has bilateral Memorandums of Understanding on cooperation in the field of energy and transport with Kazakhstan, Turkmenistan and Uzbekistan signed in 2006, 2008 and 2011 respectively. These agreements register the political intent of individual Central Asian states to adopt sections of EU law in areas specific to each state.

The Union’s differentiated approach to countries in the region is also complemented by a more holistic regional mechanism for energy cooperation with Central Asia. In addition to the sector-specific memorandums of understanding mentioned above, the EU has advanced several multilateral initiatives that cover the region as a whole. At present the EU runs four multilateral initiatives in Central Asia. The Interstate Oil and Gas Transport to Europe (INOGATE) initiative is the main instrument for energy sector reform in the region. It is complemented by the Central Asia Sustainable Energy Programme (CASEP) which supports sustainable energy projects and by the Investment Facility for Central Asia (IFCA) which promotes additional investments and key infrastructure in the field of energy.

Although the acronym INOGATE stands for 'Interstate Oil and Gas Transport to Europe', its outreach extends far beyond the European continent. In addition to the countries situated along the EU’s eastern border, the initiative covers the states in the South Caucasus as well as those in Central Asia. Nor is INOGATE limited to oil and gas only as it also includes electricity and renewables. The programme is funded by the EU and steered by the European Commission. One Commission official described it as a ‘development cooperation programme’ that seeks broad energy market convergence based on EU standards so as to facilitate connectivity of regional energy markets. INOGATE’s stated objective is to advance energy co-operation between the EU and its member states, on the one hand, and strategically important energy producer and transit states, on the other. To that end, INOGATE organises activities that facilitate the implementation of energy and energy-related projects. These activities include networking and promotional events at which EU officials provide introductions with donors, international financial institutions, and the private sector. They also include the rending of technical assistance through seminars and training sessions. Essentially, INOGATE acts as a consultancy striving to create the right conditions for projects to attract investment and succeed.

The assistance and support the EU provides through its INOGATE initiative ultimately serves its self-interest. Padgett notes that “in developing its relations with producer and transit countries, the EU attempts to persuade them to align their energy sectors with the internal European market” (Padgett, 2011). The Union is unambiguous about its intentions when it declares “achieving convergence of energy markets on the basis of the principles of the EU's internal energy market” as one of its priorities under INOGATE. Supporting partner countries in the identification of priority projects represents another way in which the EU uses the initiative to advance its commercial and geoeconomic interests. In the context of growing tensions with its main supplier, i.e. Moscow, the Union has been trying for some time to open up a new corridor of gas supplies from Central Asia. The INOGATE initiative has thus been a vehicle for cultivating a relationship with suppliers that excludes Russia.

If one of the aims of the INOGATE initiative has been to create a conduit for energy supplies to Europe that bypass Russia, then it has been spectacularly unsuccessful. As pointed out by one observer, the “two major projects upon which significant political prestige was wagered, Nabucco and the Trans-Caspian Pipeline, are unlikely to be realised anytime soon” (Johnson 2014). Sensing the futility of developing new energy corridors for which it has neither the budget nor the strategic resolve, in recent years the EU has focused on energy efficiency and renewables. Its technical assistance activities in the region currently consist in sharing of experience and best practice in areas such as sustainable energy and ‘the green economy’. In this sense, INOGATE is increasingly a development cooperation programme that concerns itself more with the optimisation of existing energy networks than with the development of new infrastructure connecting regional energy markets.

The Transport Corridor Europe-Caucasus-Asia (TRACECA) is the main instrument for transport sector reform in the region. TRACECA’s stated aim is to support the political and economic ‘independence’ of the Central Asian states by enhancing their capacity to access European and world markets through ‘alternative’ transport routes. The independence that TRACECA refers to here is independence from Russia, but also China, and the transport routes it is advocating are alternative to the existing corridors passing through Russia. As with INOGATE, the main objective of TRACECA is to reform the transport sectors of the Central Asian states in line with EU policies and standards and to contribute, as far as possible, to the development of railway and motorway systems between Central Asia and Europe that bypass Russia. The funding for these transport systems comes from multilateral financial institutions, such as the European Bank for Reconstruction and Development, the Asian Development Bank, and the World Bank.

Lessons for Russia and China

The EU approach to Central Asia is very problematic. Because the energy and transport market convergence promoted by initiatives such as INOGATE and TRACECA represents a one-way transfer of EU standards and policies to states in the region, the relationship between the two parties is fundamentally unequal. It represents European interference in the domestic affairs of sovereign Asian nations that carries overtones of neo-colonialism (Aris, 2011).

The reforms that the EU promotes in the region are not only unfair; they are also dangerous. For example, in its policy towards Central Asia the EU insists on involving private operators and civil society groups. This is dangerous for political authorities in the region who experienced a wave of debilitating ‘Colour Revolutions’ in the 2000s. EU has shown itself capable of creating oligarchic structures and vocal anti-government constituencies that it can mobilise in times of political crisis such as the one in Ukraine. EU-induced reforms thus represent a challenge to established relations in the Central Asian economies and have unwelcome repercussions for state and regime security in the region.

EU activity in Central Asia is a potential threat not only to state sovereignty and regime security but also to Russian and Chinese investment in the region. Russia and China should not support the EU in its efforts to liberalise the economies of the Central Asian states. Liberalisation goes against the interests of Russian and Chinese companies operating in the region. Unbundling and privatising national companies in Central Asia would lead to fragmentation and chaos. If the EU succeeds in promoting market reforms, this would mean for example that Russian and Chinese oil companies would have to deal with one set of companies responsible for the production of oil and a different set of companies in charge of its transportation to the Russian and Chinese border. Both sets of companies would be private and thus unaccountable to Central Asian governments. The EU also promotes NGOs and other civil society groups who raise environmental and labour issues in the context of Russian and Chinese investment in Central Asia and who put pressure on governments in the region to distance themselves from Russia and China. On the other hand, groups who raise the same issues in the context of EU and US investments are described as radical and as being government-sponsored.

For these reasons Russia and China should not support the EU in its attempt to expand its legal, regulatory and technological base in Central Asia. Nor should they support EU initiatives aimed at diversifying infrastructure away from Russia. The majority of states in the region are now members of the Eurasian Economic Union (EAEU) which has its own legal and regulatory base. When investing in Central Asia, China should work within the EAEU framework and conform to its legal and technical standards. As one Russian expert put it, China can provide the economic content to fill the institutional framework provided by the EAEU (Bordachev, 2016). The idea of China promoting its own standards developed by the National Development and Reform Commission in the document ‘Acton Plan for Harmonisation of Standards Along the Belt and Road (2015-2017)’ is interesting but should be closely coordinated with Russia and the Central Asian states themselves in the framework of the Shanghai Cooperation Organisation. The Eurasian Economic Union is flexible enough to accommodate Chinese standards. The promotion of EU standards on the other hand is not relevant to the needs of the Central Asian countries, seeks to create a favourable environment for European and American companies at the expense of other actors, and is motivated by the desire to sow tensions in the region. It should be remembered that the process of Europeanisation on the territory of the former Soviet Union is synonymous with the process of Westernisation in the sense that EU and US strategies there are essentially the same. Their objective is to fragment the region, exclude Russia and China, and prepare it for Western commercial exploitation.

Luckily, attempts by the EU to promote reform in the Central Asian energy and transport sector have so far made limited progress. That is mainly because countries in the region are interested in infrastructure modernisation and development rather than market reform. Central Asians have shown resistance to legal harmonisation and downright hostility towards privatisation, deregulation and unbundling. They have expressed some interest in areas of cooperation where the European Commission and EU-based industry have expertise. These concern above all energy efficiency on the supply side, for example, reducing gas flaring, decentralised production in the form of off-grid installations, and the development of non-hydrocarbon sources of energy. But for the resource rich and landlocked countries of Central Asia energy efficiency and the green economy are at best secondary concerns. Their plans are centred above all on the development of resource based and transport corridor economies which requires enormous capital investment in production and processing capacity, secure markets and the rapid deployment of infrastructure required to access these markets (Petelin, 2011). This is precisely what China and Russia have been able to provide.

Source: http://russiancouncil.ru/en/

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