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Kazakhstan and International Energy Development (4/4)

The last article in this series distilled three central problems that have impeded the development and export of Caspian energy resources. From those three problems, three lessons were drawn. In turn, it was shown that those three lessons are directly analogous to the lessons from research on the effectiveness of international environmental institutions.

The last article in this series distilled three central problems that have impeded the development and export of Caspian energy resources. From those three problems, three lessons were drawn. In turn, it was shown that those three lessons are directly analogous to the lessons from research on the effectiveness of international environmental institutions.

To review:

The first problem is that the energy consortia cannot do it alone. The corresponding lesson is that they need help and know it. It is the energy analogue of the environmental lesson to en-hance the contractual environment.

The second problem is that unilateral coercion fails. The corresponding lesson is that states need more information and better evaluation of it. It is the energy analogue of the environ-mental lesson to increase governmental concern.

The third lesson is that intra-governmental politics do not always help. The corresponding les-son is that human resources must be better integrated into the policy process. It is the energy analogue of the environmental lesson to build national capacity.

1. Cooperative Energy Security as a Special Form of Multilateral and Transnational Cooperation

Let now see what are the instruments in the Caspian context for profiting from these lessons.

1.1. Enhancing the Contractual Environment. The Energy Charter Treaty (ECT) is an existing international agreement, signed by all interested North American, European and Eurasian countries, that has entered into force. This treaty's principal political goals are to trade Western capital and technology for energy from the former Soviet Union, diminish Europe's de-pendence on OPEC and encourage post-Soviet reform by promoting free trade and assuring ac-cess to resources. Its main legal objective is to guarantee non-discrimination and transparency in the application of international norms to industrial and commercial property.

Its chief economic aim is to establish conditions for a functioning energy market by mobilizing the private sector through established incentives between governments. The energy companies support it in particular because it promises them the stable business environment they need to proceed with productive economic activity. An ECT-based association for energy development would enhance the contractual environment.

1.2. Increasing Governmental Concern. The U.S. government and the international energy industry support the ECT because it provides a stable financial environment for business investment. Washington supports it because it offers a low-cost way (in terms of taxpayer dollars) to help former Soviet republics to rebuild their economies, and it gives Europe a source of natu-ral gas and oil other than North Africa and the Persian Gulf.

A coordinating network--let us call it a EurAsian Oil and Gas Association (EAOGA)--that is not a large bureaucratic organization and which does not have supranational authority, can never-theless provide a tool for implementing ECT principles among participants who wish to cooper-ate on the basis of ECT. It would help to link issues and distribute knowledge, which is what in-creasing governmental concern is all about.

In view of this, a new international financial institution, lean and mean, is worth considering. Such a "EAOGABank" would not be just another international development bank. In fact, it would not have to be a "bank" per se, nor would it have to have executive authority. Its focal task--a crucial one that no one currently performs--might be to track payments and financial arrangements for oil and gas development in the newly independent states. It could also enforce operational discipline upon banks in those countries, if it were given authority to grant an international certification or accreditation for oil and gas development.

1.3. Building National Capacity. The ECT invokes Western norms of international law and calls upon Russia and the other former Soviet republics, who have all signed it, to harmonize their energy investment and their tax systems with those norms. An association like the EAOGA could go still further through EAOGABank, promoting national systems of banking, finance, and legislation that dovetail with international requirements for investment in the energy sec-tor. Moreover, it could organize research on macroeconomic coordination among the newly independent states, particularly since a barter system has made a comeback in accounts settlements.

Yet payments issues are not ad hoc problems; they reflect recurrent structural disequilibria needing systematic attention. They are the tip of an iceberg of financial instability that threatens the viability of economic programs in the region, thus the living standard of the populations there, hence the social stability of the governments in themselves, thereby the political security of export routes and so ultimately the success of any energy development plans.

2. EAOGA and Kazakhstan

An idea like EAOGA is in the tradition of Kazakhstan's diplomacy, which has favored multilateral approaches where possible. But it is not enough simply to propose the idea. Indeed, it may be better for the idea to be promoted by more powerful international players. An association like EAOGA would have to include the consortia, the governments, and citizen participation. It could not be organized like a centralized bureaucratic institution. It would need strong political backing from the European Union, whose TACIS-sponsored "INOGATE" project already con-tributes technical expertise.

The energy consortia could probably persuade the United States to go along with the idea. An organization like EAOGA could happen either with or without Russia. Ideally, it might eventu-ally include all the countries that have signed the ECT, with special attention for now on those that hold the resources that are still in the ground. It would be something quite different from the CASCO proposed by Iran, especially because of its inspiration by the ECT and involvement of citizen groups to promote the development of civil society.

3. EAOGA and the World

By helping to integrate the international energy agenda with the international environmental agenda, an association like EAOGA could be put in a framework of "sustainable development." Presented in this manner, it could even find political and economic support among the United Nations and international financial institutions. EAOGA could be built from the bottom up on the basis of currently existing networks. It would not necessarily have any fixed structure. In keeping with the organizational insights of "complexity science," new structures would emerge as necessary and disappear as necessary, to accommodate the flows of information among the players.

EAOGA would provide what has been missing until now: an impartial arbiter who keeps everyone's attention focused on common problems, maintaining a broad perspective that sees energy development as only one aspect of broader questions of regularizing international relations and with an eye towards remembering that real cooperation cannot have a result worse than the present situation. All these things respond not only to the needs of Kazakhstan, but to those of the energy consortia, of states in the region and beyond, and the populations who live on the territory concerned.

Energy development is critical to economic growth in this region for the satisfaction of the needs of the ever-growing population. The concept of cooperative energy security provides a tool for integrating energy issues into the problem of sustainable development. As such, it need not be limited to this region of the world or even to this energy sector.

Copyright © Robert M. Cutler unless otherwise noted.
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This Web-based compilation: Copyright © Robert M. Cutler
URL:  http://www.robertcutler.org/blog/1999/10/kazakhstan_and_international_e_1.html
First published in FSU Oil & Gas Monitor, No. 54 (19 October 1999): 4–5.

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This page contains a single entry from the blog posted on October 19, 1999 4:38 PM.

The previous post in this blog was Kazakhstan and International Energy Development (3/4).

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