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Energy cooperation in SCO at a time of global energy changes
07.12.2017 14:16

Numerous studies of Russian and foreign experts tend to increasingly confirm our speculations (and, subsequently, conclusions) made at the beginning of the decade.

The world is on the brink of global energy changes, and serious qualitative shifts are emerging, unfolding and already happening in the development of the global energy industry. They are determined by a number of factors, the most important one being the transformation of the US from a leading hydrocarbon consumer into the biggest producer and, prospectively, a major exporter. Meanwhile, China is becoming the largest oil consumer due to fundamental changes in the energy sphere brought about by introduction of new technological solutions and a drastic technological improvement of all links of the energy chain, from exploration and production to end consumption. Yet another factor is the emerging energy surplus, and the increasing role of energy consumers, rather than producers, on the global energy market.

Consequently, the future of the global energy industry, like the future of the entire world economy, will to a large extent be determined by a number of trends: hitting the right balance between globalization and regionalization, change of technological patterns in fuel and energy production and consumption, end of the hydrocarbon era, development of the innovative carbonless power generation, etc.

Besides, recent events have once again demonstrated that geopolitical factors continue influencing the development of the energy industry. Their impact encourages emergence of the new architecture of the global economy, the beginning of return to the policy of balance of power and power games.

All this is shaping a new map of global energy. These new circumstances require new forms of interaction that would allow protecting the interests of all parties. At the same time, it is necessary to ensure that the world’s intellectual and financial resources are focused on resolving the pressing problems of the humankind – providing sufficient and affordable energy to all people on the planet and complying with the UN requirements of sustainable development and environmental efficiency of the energy sector.

The established format of the Shanghai Cooperation Organization offers all of its member states unique opportunities of economic, scientific and technical cooperation on the basis of the complementary nature of national economies. All the more so, as all SCO countries seek to modernise their economies and societies, develop high-tech industries and improve the population’s living standards. At the same time, these traits of the SCO as a special alliance of countries set quite rigid limits for their cooperation opportunities, including in the energy sphere.

Taken together, SCO countries are self-sufficient energy-wise. However, the situation in individual countries varies significantly: Iran, Kazakhstan and Russia have a definite energy surplus, while others have a shortage of some or other energy resources. This escalates the problem of their energy security. Besides, many SCO states are rich in various mineral and other natural resources, have substantial labor resources and have achieved an impressive headway in developing state-of-the-art technologies.

Objectively, this is a good foundation for potential international complementarity, especially in economics and energy. However, the potential of such cooperation is far from being used efficiently. Many areas of cooperation in the SCO are underdeveloped, even though they have proven effective in other regions of the world. This is first of all true about the format of multilateral relations. Notably, there is no multilateral energy dialog or energy summits. In fact, the only step in this direction has been the establishment of the SCO Energy Club.

Without going deep into the history of the Energy Club’s setup, I would like to point out that it took almost ten years to simpley create this structure, which is just an informal discussion platform. Besides, the SCO Energy Club does not provide for implementation of any concrete energy projects. Alongside the SCO Business Council and Forum, it acts as an advisory body and an auxiliary mechanism for organizing multilateral energy cooperation.

Therefore, it would be more correct to discuss energy cooperation between individual SCO countries rather than energy cooperation within the SCO. At first sight, it looks as if the situation with bilateral ties were better. Energy cooperation in some or other form exists in all SCO countries and is based both on bilateral inter-governmental agreements and various long-term contracts between economic entities of the member states. Yet, there is still a reservation: everything said is mostly true about relations of Russia and China with other SCO countries, because there is virtually no such cooperation between them, due to the lack of an objective foundation. This is why energy cooperation has not become a priority for the SCO.

This is proved by the Astana Declaration of the SCO member states adopted on June 9, 2017: energy cooperation is mentioned only at the very end of the document. “The member states noted the importance of continuing mutually beneficial diversified cooperation in the energy sphere, including in the use of renewable and alternative energy sources, and supported broader use of various economically efficient, clean kinds of energy and increasing its efficiency for the purpose of sustainable development.” This wording has already become traditional, being quoted from the SCO Development Strategy till 2025, adopted at the SCO summit in Ufa on July 10, 2015.

The reasons for this situation are to a large degree objective and hidden in the differences of both economic conditions, needs and interests of the SCO members, the differences of their laws, etc. And there is no common coordinated economic strategy of the SCO. The latter is due to the already noted differences in their economic interests and their unequal economic potential.

Given all this, I believe that energy cooperation between the SCO members in the next 5-7 years should continue developing first of all on a bilateral basis. As to specific areas, I see the highest prospects in the development of nuclear power generation, traditional, including hydrocarbon, power generation and its transport infrastructure, energy efficiency and energy-saving technology, new technology and materials for renewable power generation, energy storage technology, and creation of a common information and legal space in the energy sector.

Each of these segments implies both economic and innovative-technological cooperation, which further increases their importance for individual member states and for the SCO as a whole.