Tensions rise in energy rich Central Asia
Analysts say to expect more energy deals - and potential trouble - in the quickly militarizing region.
NEW YORK (CNNMoney.com) -- It's got all the makings of an international geopolitical thriller: World powers move their armies into a violent, remote, and politically fragile region brimming with valuable oil and natural gas resources; except it's not fiction.
Central Asia is the scene of this powerplay. Europe is maneuvering to satisfy its energy needs while it cuts greenhouse gas emissions. China and India need the region's reserves to quench their booming economies' thirst for fuel. Meanwhile, the U.S. is challenging Russia's traditional control of the region's gas reserves - which are large - but not large enough for everyone.
Tense jockeying is underway - complete with corporate intrigue, diplomacy, and guns - as the United States, the European Union, Russia, China and India all vie for the right to build huge pipelines to get the oil and massive natural gas reserves out of the remote nations of Central Asia.
The latest twist in this power play came earlier this year, when Russia secured a long-term contract to buy a big chunk of natural gas from Tajikistan, which has one of the largest reserves in the world. But undaunted, other nations' plans for more pipelines - and military bases - proceed.
"The increasing Asian interest suggests the region is open for other deals," said Katherine Hardin, senior director of Russian and Caspian energy at Cambridge Energy Research Associates.
The amount of natural gas at stake is enormous. If Russian and Iranian reserves are taken into account, the region holds around half of the world's gas, according to Melanie Kenderdine, an associate director at Massachusetts Institute of Technology's Energy Initiative and a former aide in the administration of President Clinton.
The gas is going to thirsty but gas-starved regions. Europe and Asia hold just 11% of the worldwide reserves, said Kenderdine.
For the Europeans, the gas is essential if the continent is to meet its obligations to cut greenhouse gasses under the Kyoto treaty.
Europe will likely get the gas either way, but what it wants to avoid is too much dependence on Russia, which currently controls the only gas pipeline out of Central Asia. Russia has been known to cut off gas supplies when confronted with a political fight.
To bypass Russia, the Europeans are pushing for a a pipeline running west out out the region - under the Caspian Sea, across Turkey, and into Europe via the Black Sea. The Americans support this plan, largely as a means of reducing Russian influence over its allies in Europe.
Russia, meanwhile, needs the Central Asian gas to satisfy the contracts it has with Europe without having to develop its own remote gas fields, which would cost a lot more money. Russia wants the current lone gas line in the region, which runs north from Turkemenistan through Kazakhstan and into Russia, to remain the only option.
"Their goal is to buy everybody's else's gas cheap, sell it, and take the money," said Amy Myers Jaffe, a fellow in energy studies at the James A. Baker III Institute for Public Policy at Rice University.
Russia has lots of gas - the most in the world - but most is in Arctic or sub- Arctic areas that are expensive to drill, said Christopher Ruppel, an energy analyst at Execution, LLC, a broker and research firm for institutional investors like hedge and mutual funds.
It's so cold, Ruppel said special metals are needed to withstand the Arctic winters, while summertime turns the entire area into a giant bog. He said one town in a gas-rich northern region even had a Russian name that translated loosely as "The Godforsaken Place Where You Don't Ever Want To Go."
So Russia will likely remain fixated on Central Asia's energy for the foreseeable future.
The relatively new players in the energy game - China and India - want to get in on the action to help fuel their fast growing economies. While being cut off from Central Asia's energy would hardly be a death blow for either country, the opportunity in the region presents a chance to get cleaner burning natural gas and flex some of their newfound geopolitical muscle.
China wants at least one pipeline to run east out of the region through Kazakhstan, while India is considering bringing in gas via pipelines from Iran or Pakistan.
The U.S. is in a diplomatic bind, eager to isolate Iran and Russia but wary of upsetting its European allies.
"Maybe it's better for these countries to sell their gas to China," said Jaffe. "But the problem is, you upset some guy in the State Department whose job it is to get the gas to Europe. I'm not even sure the U.S. understands why we're there."
Although that may be the case, the U.S. is definitely there. Including Iraq and Turkey, the country has at least 11 military bases in the region, far more than anyone else, according to MIT's Kenderdine. In Central Asia itself, the U.S. has one base in Kyrgyzstan, while NATO maintains at least three others in the region.
While conspiracy theories abound, analysts say those bases are there mainly to support the wars in Iraq and Afghanistan - pipeline protection is a distant secondary goal.
But with the new U.S. bases, other countries are getting in on the act. Russia, a long time presence in the neighborhood, is proposing a new base in Tajikistan, while China is considering one in Uzbekistan and is rumored to want one in Iran, said Kenderdine.
While most analysts don't think a shooting war is going to break out over these resources, the potential for trouble is nerve racking.
"It looks a little dangerous," said Kenderdine. "The opportunity for an accident with military bases in that close proximity could be problematic."
In addition to the national military forces, Execution's Ruppel said Gazprom, the Russian gas monopoly, was recently granted the authority to maintain its own private military, no doubt a worrisome development for its competitors.
Countries are also using so-called "soft-power" to win gas contracts. The Russians are planning on modernizing the electric grid in Kazakhstan, while the Indians are using the popularity of Bollywood films and pitching themselves as the home of Buddhism to win favor with the locals, said Kenderdine while the U.S. builds roads, schools and other infrastructure projects in Afghanistan.
But so far Russia's longstanding influence and hard power in the region gave them the edge in securing the recent Turkmenistan deal.
"The Russians have the military power," said Ruppel. "We got played royally." 
