Central Asian Regional Economic Cooperation Program as Driver of Regional Energy Projects to Promote Energy Security in the Post-Soviet Central Asia

The resource-sharing mechanism, which ensured sufficiency and reliability of energy supplies within the Central Asian energy system (CAES) collapsed soon after the disintegration of the Soviet Union. Isolationist energy policies, both in terms of full self-reliance and self-control, without the establishment of self-sustaining independent energy systems, not only threatened security of energy supplies, but also, to a different extent, hampered the socio-economic development in Central Asia. In an attempt to mitigate the negative impact of the new energy policies, the Asian Development Bank (ADB) supported Central Asia Regional Economic Cooperation (CAREC) was introduced as one of the key programs to ensure sustainable access of the population and economies to energy. One of the top priority areas has been strengthening regional cooperative dynamics in the energy sector. Primarily focusing on regional cooperation CAREC attempts to solve the problem of uneven distribution and seasonal variation of energy production in the region, assuming that this would lead to better standards of life and economic growth. This article aims to analyze the extent of contribution of CAREC energy initiatives to improve energy security and promote energy–led economic growth in Central Asia through regional energy projects.


INTRODUCTION
The CAES was designed and built during the Soviet period, when political/administrative borders and sovereignty issue were not an obstacle to ensure parallel operation of the national energy sectors. Resource-sharing mechanism ensured stability and reliability of energy supplies to meet population and economic needs. However, over the last two decades, when there was no longer supranational executive body controlling national energy sectors and ensuring stability of energy supplies, the CAES has undergone a transformation forcing regional state actors to pursue policies that distance them from each other in the energy sector. Having experienced energy insecurity due to decreasing intra-Central Asian cooperation in the energy sector, regional state actors are in need of reinstating energy trade and coordinated operation of energy systems. Acknowledging the importance of regional energy cooperation and the above-mentioned attributes of a maximally secure CAES, several regional-level governance innovations were put in place to promote and strengthen it. International financial institutions, NGOs, private and state energy companies as well as research institutions have, to certain extents, successfully engaged in the development of the Central Asian energy sectors and provided security for the CAES through several regional energy programs and initiatives (governance innovations), particularly the ADB promoted the Central Asia Regional Economic Cooperation (CAREC) [1]. This article provides the analysis of the effectiveness of the CAREC regional-level energy governance mechanism promoted, which among a number of key functions, prioritizes improving energy security through regional cooperation in Central Asia, and identifies major obstacles towards promoting intra-Central Asian energy cooperation.

THE CENTRAL ASIAN REGIONAL ECONOMIC COOPERATION
The CAREC is probably the largest and the most effective regional initiative in terms of the number of practically implemented projects in the energy sector in Central Asia. The CAREC is a program of partnership among ten countries (Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Mongolia, Pakistan, People's Republic of China, Tajikistan, Turkmenistan and Uzbekistan) supported by six multilateral institutions (the ADB, the European Bank for Reconstruction and Development, the International Monetary Fund, the Islamic Development Bank, the United Nations Development Programme and the World Bank) [2].
The CAREC has indeed developed comprehensive conceptual tools to promote regional trade and improve the level of energy security through cooperative dynamics of the member states. However, the analysis shows that practically implemented regional-level energy projects are limited to technical assistance within the CAREC. In this sense, Central Asia is currently perceived more as a geographical territory composed of separate units within which the CAREC implements local and national energy projects.

THE CAREC ENERGY SECTOR DEVELOPMENT STRATEGY
CAREC's 1 'CAREC 2020 -Good Neighbors, Good Partners, and Good Prospects' [3] initiative perfectly lines up with the idea that the regional cooperation in the energy sector contributes to reliable, secure and stable supplies of the energy resources, which in turn is believed to lead to economic growth and development. While CAREC's overall input in transport, energy and trade facilitation amounted to US$ 29.4 billion for 176 projects [4], the energy sector received US$ 6.17 billion of the total investment package in 42 projects [5]. CAREC is the only actor/ governance mechanism in the region that has its own Strategy for Regional Cooperation in the Energy Sector in Central Asia. This Strategy was adopted to assist member states to improve "energy security through the balanced development of the region's energy infrastructure and institutions, and stronger  integration of the region's energy markets to make available adequate volumes of commercial energy to all in a reliable, affordable, financially sustainable, and environmentally sound manner; and economic growth through energy trade" [6]. Most importantly, the CAREC strategy claims to prioritize results-oriented and regional (2+X countries or institutions) projects [3].
Particularly in this sector, the CAREC aims to implement regional-level projects to improve energy security and energy-driven economic growth by ensuring stability and reliability of energy supplies through improved trade of energy resources. The regional cooperation that the CAREC has claimed to be actively promoting is supposed to be a powerful instrument to implement national projects that brings benefits to all participating states [7]. It is expected that energy trade can overcome the consequences of uneven distribution of energy resources and seasonal variation of electricity production in the region. Cooperation will open up new energy market opportunities for the Central Asian producers, which is in line with their dependency-diversification-oriented foreign energy policies. Transit revenue is another encouraging factor for greater regional cooperation.
What distinguishes the CAREC from most of the regional initiatives in Central Asia is the fact that it is very much practical-results oriented [8]. It also promotes mutually beneficial regional cooperation. Projects are implemented based on the following principles: (a) country ownership; (b) pragmatism and result orientation; and (c) 2+X principle, which is the development of strengthened partnership, focusing on projects with two and more actors. The CAREC encourages Central Asian governments and non-state institutions to successfully pull their resources through a public private partnership initiative [9].
The CAREC Program has successfully evolved from the initiative aimed at strength-ening institutional framework in between 1996 and 2001 into a results-oriented mechanism guided by energy strategy under the Comprehensive Action Plan in 2006. In the near future, the CAREC 2020 will facilitate economic growth and social prosperity through expansion of the energy trade and energy sector cooperation. Emphasis on energy cooperation is justified by the followings: a) energy-related infrastructure in the region is inadequate; the electricity grid is shared; energy and water resource management requires collaboration among countries.
The CAREC is the only actor/institutional mechanism in the region that has its own strategy for Regional Cooperation in the Energy Sector in Central Asia. This strategy is developed to assist member states to improve "energy security through the balanced development of the region's energy infrastructure and institutions, and stronger integration of the region's energy markets to make available adequate volumes of commercial energy to all in a reliable, affordable, financially sustainable, and environmentally sound manner; and economic growth through energy trade" [6]. An Energy Work Plan (EWP) for the period of 2013-2015 of the CAREC was specifically designed to take concrete steps along the way toward achieving these goals.

EWP entails six main elements: • Developing the Central Asia-South Asia
Energy Corridor within CASA-1000 electricity transmission line and Turkmenistan-Afghanistan-Pakistan-India pipeline projects. These projects are designed to bring Central Asian natural gas and hydroelectricity to energy thirsty South Asian neighbours. • Resolving regional energy dispatch and trade issues, which calls for the re-establishment of energy trade patterns between Uzbekistan and upstream Kyrgyzstan and Tajikistan, which was broken when Uzbekistan withdrew from the CAPS and cut gas supplies. • Managing energy-water linkages. The resource-sharing mechanism in the region closely tied up water supply for irrigation and hydro-power production sectors. The Rogun and Kambarata-1 HPPs are essential to improve energy security of Kyrgyzstan and Tajikistan, but the construction of giant dams can affect water balance in Central Asia. • Mobilizing funds to build energy facilities, assess countries' own resources and attract potential private investors. The CAREC member countries differ in their economic development. Not surprisingly, countries with the lowest level of energy security are also the ones with limited financial resources -Tajikistan, Kyrgyzstan, Afghanistan and Pakistan. This organization is assisting member states to attract investments within public private partnership initiatives. • Implementation of energy priority projects.
The CAREC prioritizes modernization of energy infrastructure connecting Central Asian countries and building new production and transportation facilities to increase states' export capacity and connect energy producing and consuming regions. • Capacity building and knowledge management [10]. While conceptually, the CAREC has developed a comprehensive instrument for promoting projects designed to contribute to energy security and energy-led economic growth through regional cooperation, so far it has implemented a few regional-level projects in the energy sector [11]. It does not necessarily mean that the CAREC does not prioritize regional-level energy projects. It may, however, imply that in addition to financial constraints and investment-related risks to improve energy trade patterns there are political and security risks that are far more difficult to overcome, such as: (a) risks associated with internal and region-al conflicts; (b) competing geopolitical interests of greater regional powers over the region's energy resources; (c) non-market regulations of energy supplies and payment risks associated with a "take or pay" trading arrangements; and (d) prevailing bilateral agreement over multilateral cooperation in the energy sector [6]. As a result, projects designed to promote regional energy cooperation are under shadowed by local energy projects both in terms of financing and contribution to improving energy security. Moreover, those energy corridors prioritized by the CAREC hardly withstand competing energy interests of major actors such as China or Russia.

CAREC: TECHNICAL ASSISTANCE IS NOT YET ENERGY COOPERATION
While the more powerful China uses economic and political leverage, through bilateral arrangements within the SCO framework, to secure energy flows to the Chinese market, less powerful Central Asian states sometimes count on multilateral institutions, such as CAREC, to address energy security challenges. However, despite the fact that international actors, such as Asian Development Bank, World Bank or United Nations Development Program have actively promoted integration initiatives in Central Asia during the past two decades and local governments stated their commitments, no effective governance mechanism has been developed so far [12]. The CAREC initiatives, to a limited extent, contribute to reshaping national energy policies around agreed but non-binding principles. Nevertheless, those few regional energy projects implemented by the program, which are all in the form of technical assistance, imply that the CAREC represents rather soft-law type governance regime.  One of the key shortages of the CAREC's regional energy strategy is that most of the completed projects are local in nature and those few regional projects do not go beyond technical assistance. Analysis of projects promoted within CAREC and separately by Asian Development Bank shows that in the last two decades, of over ninety-four projects only sixteen were regional. Most importantly, contrary to the proclaimed practical results oriented approach, almost all of these projects are framed as initiatives to establish a ground for the future practical implementation of projects, forums, and assessment studies, thus representing a soft-law type governance regime. The type of funding is technical assistance -i.e. examining potential sources of finance; critical studies of the enabling environment for private investment; formulating recommendations for the establishment of project development facilities if the need of such an entity is identified [13]. While those are the necessary preconditions for successful implementation of future regional projects, technical assistance in itself can hardly constitute a significant progress in promoting regional energy cooperation and be considered a driver of such cooperation.
The CAREC energy strategy pays particular attention to three elements. First, it is a capacity building and knowledge sharing initiative that allows identifying the most lucrative investment projects so to give them priority in implementation. The second element takes certain measures that will lead to a favourable policy environment in which investors are ensured that their money is secure and will have their investments returned with interest. And third, while focusing on economically sound initiatives, the strategy distinguishes those that require domestic investments (energy efficiency and clean energy) and those that can be realized through the cross-border investment measures (cross-border energy transmission, facilitation of access/transit to third-country energy markets, production for export, integration of energy markets, etc.) [6]. Tensions in the relationships among Central Asian countries over some major energy projects force regional state actors to pursue energy policies, which distance them from each other. As a result, the Central Asian countries' energy policies prioritize local-and country-level energy development projects. Since the CAREC usually responds to governments' request to assist in implementation of energy projects, which are usually local in nature, it is not surprising that local projects constitute the absolute majority of the CAREC initiatives [14].

COMPETING ENERGY CORRIDORS
Another challenge preventing the implementation of regional-level energy projects is the fact that the CAREC claims to promote cooperation with external customers, but the export capacity of the region does not allow it. It is argued that the integration of energy markets will solve the problem of uneven distribution of energy resources among the CAREC countries and address some problems in the energy sector through optimizing existing energy interrelationships. Greater regional cooperation and trading energy resources are indeed possible: Central Asian rich hydrocarbon producers are surrounded by countries thirsty for energy resources either due to rapidly growing energy intense economies (China, Europe, Turkey), inherited energy infrastructure and interdependent energy sectors (Russia) or simply because they lack energy resources to meet their basic energy needs (South Asian countries); and, there is also yet unexploited hydro-power potential of Kyrgyzstan and Tajikistan that can increase the level of renewable and clean energy sources in the overall energy balance in all CAREC member states.
The strategy implies that in the medium-to long-term perspective regional cooperation will be developed within five priority energy corridors to integrate energy markets: • Central Asia -East Asia: oil and gas exports from Kazakhstan and gas export from Turkmenistan and Uzbekistan to China; • Central Asia -South Asia: Central Asian countries exporting natural gas and electricity to mainly Afghanistan and Pakistan; • Intra-Central Asia Cooperation: gas, oil products and thermal electricity supply from downstream to upstream countries in exchange for hydroelectricity; • Central Asia -Russian Federation: oil and gas exports to Russia and imports of Russian oil products; and • Central Asia -European Union: supply of oil and gas from the Central Asian region [6]. Table 2. Regional Energy Corridors [13] The two regions with the highest need and potential for integration

Energy-Water Linkages X X
With the current pace of natural gas export capacity increase, Central Asian states would not be able to meet the external customers' expectations in all directions, existing and potential (45 billion m3 to Russia; 80 billion m3 to China; 20 billion m3 to Iran; 33 billion m3 to South Asia; and, approximately 30 billion m3 to Europe), in the near future because the current level of natural gas export capacity of Kazakhstan, Uzbekistan and Turkmenistan combined hardly exceed 65-70 billion m3 per year. It will even be challenging to keep up with gas export within existing several corridors, especially Chinese. So the regional energy trade within one corridor may negatively impact the availability of energy resources in other directions. To keep up with the Chinese demand, Turkmen authorities had to stop supplying natural gas to the Russian and European markets. As a result entire Turkmen gas is heading toward Chinese market [15]. While more powerful states use economic and political leverage to influence decision making and ensure energy flows toward their direction, less powerful countries are counting on multilateral institutions to secure energy supplies. However, alliances between multilateral donors with countries in need of such assistance seem not powerful enough to challenge major powers' interest in the region. In this competition, despite the fact that intra-Central Asian and Central Asia-South Asia partnerships require priority attention, cooperation in these directions is progressing extremely slowly. Most of the energy resources are consumed by or transited through Russia, which has inherited energy-transporting infrastructure, and China, which has connected its market with energy-producing Central Asian countries via newly built pipeline networks.
Three of the Central Asian states, namely Uzbekistan, Tajikistan and Turkmenistan export electricity to Afghanistan. Except for Turkmenistan, however, other Central Asian countries' attempt to increase electricity export to South Asian customers will come at the expense of domestic consumption. Uzbekistan and Tajikistan started exporting electricity in large quantity only because of the disintegration of the Central Asian Power System. When Uzbekistan left Central Asian Power System in 2009, stability of electricity trade within the region was compromised and power producers started searching for alternative markets [16]. While countries engaged in the mutually beneficial energy trade within the system, now producers mover electricity out to external markets. Unless domestic production and consumption balance is sustained export oriented policies can and will negatively affect the level of energy security in Central Asia. The balance, however, can be ensured by increasing power production capacity, which in the case of the Central Asian upstream states would be possible through the construction of large hydropower plants. The ADB, along with other multilateral institutions within the CAREC program, through several energy initiatives promotes the development of hydropower sector to boost electricity production and facilitate regional power trade. The success of those initiatives is quite limited so far.

CONCLUSION
The analysis shows that despite the fact that CAREC prioritizes strengthening regional cooperation as a means to promote energy-led socio-economic development; most of the projects are local in nature. Development of cooperation within the proposed five corridors is negatively affecting energy trade within Central Asia. Different perceptions of energy security by the energy sector governors are leading to policies that distance Central Asian states from each other, which turns to be a major obstacle for establishing a common energy market. Even though the name of the programs and institutions contain "Central Asia" it mainly represents a geographical scope within which various projects in the energy sector are implemented. Most of the initiatives' practical contribution, however, is limited to countryand local-level energy projects. Those projects limited in number that successfully engage representatives of several Central Asian states or deal with regional-level problems end up providing recommendations only. Assuming that regional level energy initiatives lead to socio-economic development in the region, we can conclude that so far CAREC contribution, designed to promote regional energy cooperation, is rather limited.