It's no secret that the modern world is addicted to oil. Much conflict can be either directly or indirectly linked to the resources in oil-rich countries including those in the Persian Gulf. While the U.S. is no stranger to shuffling for position in oil-rich countries, the battle for positioning may slowly be shifting. Central Asia may be the new Persian Gulf with reserves in excess and with neighbors being China and Russia, the U.S. is the odd-man out in regards to preserving their place in oil exports in the region.
For the majority of the 19 years since the Soviet Union's break-up, China has been waiting in the wings as the fierce competition between Russia and America took center stage. Clearly both nations have sought influence in this resource-rich region since the fall of the Soviet Union. With the energy needs of its exploding economy perpetually increasing, China emerged from the wings to take part in the on-going performance between two giants and an exposed nation. China woke up to new opportunities in its western backyard. The West's recession spurred on China's hunt for energy supplies in its own backyard.
Since the global financial crisis left Russia and America struggling with their budgets, China has swooped in like a mouth-watering predator. By offering a helping hand to the financially strapped Central Asian countries, China positioned itself to be favored in future investment in their vast oil reserves.
Last November China's largest oil-and-gas provider, jointly with Kazakhstan's oil-and-gas firm, bought Mangistau Munai Gas, a big oil producer in Kazakhstan. In exchange, China lent the country $10 billion earlier last year.
With the U.S. so dependent on oil and China equaling that dependence the sovereignty between Central Asia becomes a critical factor for both trade deficits and continued dependence on this oil-rich country. At what cost does an oil addicted America go elsewhere? The catalyst for change does not seem to hinder on cost alone, as witnessed by the U.S. government's willingness to absorb over $4 trillion in debt.
Meanwhile, the former Soviet republic welcomes the competition as they emerge as one of the potential players in the region. While the resources are being pillaged the GDP continues to climb. A rising concern for the Kazakh government is the diversification of exports. Relying solely on the oil sector to lift the country out of poverty is as limited as the source itself. And with Russia, China, and the U.S. all vying for their resources the oil-rich country may not remain that way for long.
Kazakhstan's economy is larger than those of all the other Central Asian states combined, largely due to those coveted natural resources and a recent history of political stability. In the energy sector, the opening of the Caspian Pipeline Consortium in 2001, from western Kazakhstan's Tengiz oilfield to the Black Sea, substantially raised export capacity. In 2006, Kazakhstan completed the Atasu-Alashanku portion of an oil pipeline to China that is planned in future construction to extend from the country's Caspian coast eastward to the Chinese border.
The oil-rich Caspian nation has been intent on raising its weight in the strategic energy sector controlled by Western majors and raises fresh revenue through taxes and export duties. Kindled by its growing role as a leading regional energy supplier, Kazakhstan has long threatened to exert its influence in the sector. The latest policy included changes to the corporate tax code to favor domestic industry as a means to reduce the influence of foreign investment and foreign personnel.
Most Western energy majors, under current law, working in Kazakhstan under production-sharing agreements are not susceptible to changes in the country's tax legislation.
Elevating state influence in the oil sector has political connotations in a former Soviet country where ordinary citizens have long accused the government for selling out its natural resources to Western multinationals.
With Kazakhstan's grasp of power shaken by the economic crisis and a tide of public frustration, the government is keen to unveil its resolve to put vital industries under firm state control.
"For the first time the government has shown a very clear political will to review contracts, and look for new investors if the current ones do not implement our programs," said Kenzhegali Sagadiyev, a member of parliament.
For China, the new line forms part of a global effort to secure energy supplies for its rapidly growing economy. For Kazakhstan, it is a chance to reduce dependence on Russian and US demand.
While China may have bided its time before pursuing its interests in Central Asia, it seems it is invested in Kazakhstan for the long term. Within the next 10 years Kazakhstan may come to control Central Asia's political, economic and military spheres, thanks in large part to the modern world's addiction to their most prized asset.
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