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Energy Cooperation: the Shangai Energy Club

[vc_row][vc_column width="1/1"][vc_column_text]world this weekExperts say that within the Shanghai Cooperation Organization (SCO) there exists a so called sub group “energy club” involving all the member states. The group’s establishment leads us back to the year July 2007, where nations wanted to create a union for all the energy manufacturing leaders. The objective was to “create a unified energy market for oil and gas exports, while promoting regional development through preferential energy agreements.”8. Russia & India Report, “Russia pushes for strengthening SCO’s energy club”, (http://in.rbth.com/russian_india_experts/2013/08/12/russia_pushes_for_strengthening_ scos_energy_club_28363.html) After seeking consultations from the experts in energy markets, especially in Northeast Asia, (where the energy consumption is heavy and that of oil will reach to almost 3.5 billion tonnes by 2030), leaders began to proceed with the idea of a new “international union”. 9 Energy Perspectives on Singapore and the Region, “Energy Security Cooperation in Asia: An ASEAN-SCO Energy Partnership?”, (http://www.silkroadstudies. org/new/docs/publications/2007/energy1_015.pdf?origin=publication_detail) Inspite of being supported heavily by the international organizations, Asian governments tend to withdraw their interest in this union. There has been increasing reluctance in governments support; many nations view this as a burden on their economy, leaving them no option but to “bail out”. Thus it is now up to the leading nations in the group whether they have to form a successful energy club and regain dominance in the oil market or tangle themselves within regional governments or “retain considerable influence over their respective energy sectors through policies, ownership, or investment”. 10 Energy Perspectives on Singapore and the Region, “Energy Security Cooperation in Asian, An ASEAN-SCO Energy Partnership?”, (http://www.silkroadstudies. org/new/docs/publications/2007/energy1_015.pdf?origin=publication_detail) The fact is lack of energy cooperation is not entirely a regional government’s issue. Additions to the lack of political will member nations in the SCO possess economic instability and internal rivalry. As a result many nations rely heavily on Middle East energy resources instead of focussing within the organizational approach. Many nations view this as a way to lure nations, making them rely on Middle East and in turn turning them into a “hostage”. Although few Asian nations and Russia have a lot of these resource (especially oil), they rarely use these resources; these resources are widely used for geopolitical leverages and lucrative outsourcing. Although Russia is also keen to invest in energy markets of China, Korea, and the rest of Northeast Asia, through small investments so far. In the SCO Summit of 2006, President Vladimir Putin called for formation of energy club in an effort to strengthen relations with China and the rest of the South and East Asia. 11 The Moscow Times, “Putin calls for Energy Club in Asia”, (http://www. themoscowtimes.com/news/article/putin-calls-for-energy-club-in-asia/204371.html) Before investing in Asia, Russia had invested previously in the energy markets of Europe (on which it became quite dependent). Since then it has began to find alternate markets for energy investments. Rapidly increasing population in China plays a key factor in our discussion. Economically speaking, it is simply the case of supply and demand, with growing population the limited resources out way the requirements of people and growing demands increases the prices. To balance the markets, more readily available resources are required, which can be transported from closer regions to areas far in order to balance the market. With collapsing economy, it is a risk one should willing to take. Russia’s interest in investing in the markets of China is of outmost important for Moscow, which in turn now plans to construct a pipeline to India. Talking on this “less known issue”, Director of the Center for Strategic Studies in Energy of the People’s Republic of China, Xia Yishan says, “’The project is beneficial for both India and China, as it would allow China to become an oil transit in addition to its ‘status’ of recipient of the Russian oil.” For Russia, the project’s additional benefit is providing oil to the SCO market.”12 12 Global Research, “$30 Billion Oil Pipeline to Be Built from Russia to India through Northwest China, (http://www.globalresearch.ca/30-billion-oil-pipeline-to-be-built-from- russia-to-india-through-northwest-china/5378160) Previous Actions The topic of Energy cooperation is not new here; it has been discussed within SCO in recent years. The introduction of an energy club was first proposed by the then Russian President Vladimir Putin in 2006, and has been in the debate since then. Events like these have been very essential for China-Russia relations. However these relations have been under criticism especially when both the countries talk on the working of SCO. As mentioned previously, Beijing views this as an important economic tool as its markets rely heavily on energy resources. Since Russia holds most of the geographical resource and Russia’s economy does not depend upon neighbouring nations, SCO is meagrely a security for Beijing. 13 InfoSCO, “SCO energy club: what should it be?”, (http://infosco.biz/ en/?newId=9616&domainId=sh) The weaker relationships among member nations pose a grave threat to the success of the energy club as lack of cooperation will compromise the stability of the markets in their respective countries. To have effective cooperation, unification of SCO member nations with respect to oil and gas companies (especially Russian agencies and European entities) is imminent.14 Russia & India Report, “Russia pushes for strengthening SCO’s energy club”, (http://in.rbth.com/russian_india_experts/2013/08/12/russia_pushes_for_strengthening_ scos_energy_club_28363.html) Although Moscow has expressed their interests in expanding their markets and investment in Asia and China, oil and gas exports are still done out of Europe. To have full economic cooperation, Russia has to become independent from the European markets and should start trading with China and the SCO member nations. Few years back (September 2013), the organization was planning to accept Iran as a member nation. Iran was also keen to stimulate SCO member nation’s interest in trade, development and other economic investment opportunities especially in the energy sector. 15 RT News, “Iran membership would give lots of advantages to SCO”, (http://on.rt. com/tuiyfy) This was seen as an ideal moment in the history of SCO but addition of Iran in the SCO brought severe inter SCO dynamics and inter governmental conflicts. 16 RT News, “Iran membership would give lots of advantages to SCO”, (http://on.rt. com/tuiyfy) Thus, Iran’s membership was rejected due to its controversial nuclear standoff but if it was not nuclear, SCO would have rejected in the name of economical hostility. In the same year, December, member nations of the SCO cam together to decide the possibility of inviting Middle East as a member nations in the SCO. To term this meetings experts named it as “gas politics”, since political decisions were taken keeping in mind the energy resource of the nation. Maintaining an observing status, Pakistan is now backed both by China and Russia for permanent membership. The addition of Pakistan may bring an end to this international energy crisis. Experts say Iran-Pakistan gas pipeline played a deciding factor in Pakistan’s approval for the membership. This is still a debatable issue as Washington is Seeing Eye to eye here and is influencing to pursue the TAPI (Turkmenistan – Afghanistan-Pakistan – India) pipeline. 17 InfoSCO, “SCO energy club: what should it be?”, (http://infosco.biz/ en/?newId=9616&domainId=sh) Recommended Solutions Discussing with respect to SCO, the most prominent solution is to create and effective and functional energy group. Before taking such a step, strong relations between China and Russia is to be made. Negotiations between the nations have to be done to ensure China’s urgent requirement of energy resources and Russia’s dominance in military and regional dominance. Both of the nations have to unite their markets followed by cooperation in their industries in order to have a complete cooperation. The steady relationship would also require new oil trade lines instead of the old lines stretching across to Europe. Hence trade should happen between the SCO member nations followed by the third world. Energy cooperation cannot sustain solely on economic growth. To have a strong energy club, cooperation between the military and political support is also required between the member nations. Religious and Cultural cooperation between the member nations should become the framework for business process between two nations. Issues such as prices liberalisation, standardization of common unified tax base and multiple suppliers in unrequited competitions should be avoided. These decisions should be rather politically governed. 18 InfoSCO, “SCO energy club: what should it be?”, (http://infosco.biz/ en/?newId=9616&domainId=sh) Another widely discussed topic is the “addition of a country on the basis of its natural resource, abundance of oil and natural gas”. Looking at this issue politically, the topic is quite benefitting for Afghanistan and Pakistan. However one should also know that for any country to become a part of SCO, the mandate clearly states that “any nation under the UN sanctions cannot be admitted”.19 China Daily, “SCO agrees deal to expand”, (http://www.chinadaily.com.cn/ cndy/2010-06/12/content_9968565.html) Coming back to the solution, creating new energy trade lines would help provide direct access to the SCO member states. One major concern that comes to our notice is the acceptability of this proposal by member nations. As mentioned in the case of Iran and Pakistan, adding energy producing nation would start an international situation involving energy giants like the United States. However accommodating new member would escalate political instability and economic reliability in the group. Lastly adding a widely accepted “solar energy usage” parameter will help dissolve the energy crisis. According to a research done by California Institute of Technology, there is abundance of solar energy on Earth if we learn the technique to save this valuable resource and learn the proper way of consuming it. 20 ABC News, “A Solution to the Global Energy Crisis?”, (http://abcnews.go.com/ Technology/DyeHard/story?id=3860102) This will in turn resolve the fossil fuel crisis and encourage citizens to practice sustainable energy practice. The main challenge here would be the cost needed to test and implement the proposed solution. Some technologies such as the Windmill and solar powered structures are comparatively need to be modified as per our requirement so that we can connect it to other sources of energy. International Stand China Armed with unparallel economic growth, China has proved its dominance not just in SCO but also on an international scale. 21 Jan Künzl, “Central Eurasia between the “Great Game” and emerging cooperation”, (http://www.cria-online.org/8_8.html) The decades brought close ties of the energy markets with Chinese political and economic power, oil and gas production should be stabilized first and energy consumption in the market area should be balanced. In regions such as the Xinjiang province, the tension between the ethnic majority and the Communist Party of China has resulted mass distrust in the area. This has posed a great threat to the energy cooperation because of its location as all the trade routes coming from the rich Caspian Sea passes through the region.22 Jan Künzl, “Central Eurasia between the “Great Game” and emerging cooperation”, (http://www.cria-online.org/8_8.html) Another concerned issue is the rise of United States Military involvement in Asia. Since 9/11 the United States has been maintaining close military presence in the region especially along the Chinese borders. This has resulted tension and fear in South East Asia. Reassurances must be made between the government and civilians.
About the Author Anant Mishra is a former Youth Representative to United Nations. He has served in numerous committees including United Nations General Assembly (UNGA) and United Nations Security Council (UNSC). He is an Associate Member of Institute of Defence Studies and Analysis, New Delhi.[/vc_column_text][/vc_column][/vc_row]

About Sanjay Trivedi

Sanjay Trivedi is honorary editor of Asia Times. He is senior Indian Journalist having vast experience of 25 years. He worked in Janmabhoomi, Vyapar, Divya Bhaskar etc. newspapers and TV9 Channel as well as www.news4education.com. He also served as Media Officer in Gujarat Technological University.

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