CHAPTER 3: Oil and gas geopolitics

Transcription

1 CHAPTER 3: Oil and gas geopolitics

2 3.1 The US oil geopolitical strategy: how to slow down Chinese oil supplies? China became since the beginning of the 2000s the American main economic concurrent. Chinese demography, its high rates of economic growth during many years, regular increasing fossil energy consumption make that China is attentively observed by the American analysts. The Chinese economic growth closely depends on its oil consumption. China was self-sufficient in oil until the early 1990s. However its impressive economic growth is fueling a boom in energy consumption in general and in transportation needs in particular, the local economic growth quickly required massive oil imports. The USA understood that in order to slow down the Chinese economic growth it was necessary to limit the access of China to oil. That was one of the main motivations of the neo-con stream between the years 2000 and In the same time, Chinese reality is exposed through these statistics: China s oil consumption would more than double in the medium-term, from 7.7 million barrels per day (mb/d) in 2008 to 16.3 mb/d in Concurrently IEA (2009) projects that China s domestic oil production will fall from 3.8 mb/d in 2008 to 3.2 mb/d in As a result, the country s net import needs would sky-rocket, from 3.9 mb/d in 2008 to 13.1 mb/d, making China the world s largest net importer of crude oil by 2030, slightly ahead of the United States (13.5 mb/d in 2008, 12.7 mb/d in 2030). (6) It is difficult to quantify estimates but a trend remains: China s oil imports will increase. It is obvious that the world is highly interconnected, that the alliances of today and tomorrow are made and demolished according to the interests of each country; for this purpose, we insist in this edition of Global Energy on the fact that two main trends are put ahead in the contemporary oil sector: diversification and security. China is fully implied in these two arguments because since its oil national production does not enable it any more to be self-sufficient, China insists on diversifying its new strategic partnerships with many countries (in Africa, in South America, in the Persian Gulf, in Central Asia) and trying to secure its supplies rather by privileging terrestrial routes more than maritime routes. Seemingly, China has succeeded in the process which consists in convincing various oil partners. If ever China had to interrupt or to stop its collaboration with a partner, it will always have the possibility to compensate its losses in supplies with another partner able to compensate these losses if necessary. The Chinese strategy currently seems to work. The trade relations with Iran and several Arab countries of the Persian Gulf, the new Sino-Russian trade relations as well as the big projects carried out in Central Asia and South-East Asia aggravate the public decision makers of Washington. The crisis has slowed down the Chinese economic growth which was characterized by a deceleration of oil demand growth. This economic trend will probably be momentary. All these combined elements made that the American positioning on the international oil market is not insignificant because the USA, besides producing a lot, buys a lot.

3 Figure 90. Chinese energy consumption Source: berc.berkeley.edu/energy-access-developing-parts-china/ Conscious of the US oil geopolitical approach, China tries to secure its oil supplies by reducing the distances of deliveries. Consequently, China collaborates narrowly with countries like Kazakhstan or Myanmar. In addition, the Sino-Russian alliance generated an effect of shock wave among the international community. The signing in May 2014 of the giant 400 billion US dollar-gas contract is a strong signal sent to the international community, and more particularly to the USA and the European Union. This strong signal is reinforced by the oil agreements concluded between Moscow and Beijing. China has become the first Russian oil purchaser, particularly via deposits exploited in Siberia. As for instance, all of Vankor's output of 440,000 barrels per day of crude is already shipped east, via the East Siberia-Pacific Ocean pipeline, which includes a spur feeding China's northeast. (7) The geographical proximity between the two countries facilitates the trade relations; it is also a geographical environment in which the USA does not have any diplomatic influence. In conclusion, the impact of the American diplomacy on Chinese access to oil is probably limited insofar as Beijing had for a long time anticipated its strategy of diversification of partnerships. Moreover, China has directed itself for several years towards a new energy policy focused on renewable energies. With more than 80 billion dollars US invested in this business activity in 2014, China clearly positions like a major actor of this rapidly-evolving sector and also tries to reduce its dependence to fossil energies.

4 3.2 The US oil geopolitical strategy: how to weaken the Russian economy? The USA is the main oil consumer in the world. Oil consumption depends on various factors which are essentially demographic and economic. Indeed, the more a country is populated and the more it will tend to consume, the economic health of the country will influence oil consumption (and globally energy consumption), the fact that a country is an oil producer or not will influence the statistics, etc. The producing countries usually tend to strongly consume their natural resources at low price while the importers will avoid too overbuy and overconsume in order to not depend on a too important energy invoice. In brief, in spite of geopolitical factors, financial and/or natural disasters, the balance of supply and demand in oil sector is always difficult to be negotiated and to be found. Consequently, this assertion partly explains the volatility of oil prices since the 2000s. The USA is the largest world oil consumer. In 2011, its daily oil consumption was equal to nearly 19 million barrels per day (mbd), far in front of China, the second worldranked oil consumer with 9.8 million mbd in Russia belongs to the world top 3 oil producers and consumed 3.2 million mbd in 2011 while India and its global population which exceeds 1 billion inhabitants and needs increasing oil demand in order to satisfy its domestic economic growth consumed 3.3 million mbd the same year. Among the major European industrialized countries, Germany and France, which are the European major oil importers, respectively consumed 2.4 million mbd and 1.8 million mbd in A contrario, Saudi Arabia (29 million inhabitants in 2013) belongs to the producing countries which massively consume their natural resources with 2.8 million barrels consumed per day in These statistics aim at showing that the USA presents an extraordinary oil consumption compared to the other major world oil consumers. The USA has a national population of almost 320 million inhabitants but joined together India and China count nearly 2.5 billion inhabitants and consumed only 13.1 million bpd in 2011 It is to say the strategic importance that oil epitomizes to the eyes of the US political decision makers and the oil lobbies, the automobile sector and other branches of industry which closely depend on oil consumption. Figure 91. US crude oil production between 1988 and 2014 Source: 25-years-ago/

5 The US strategic and contemporary oil policy is very similar to what occurred at the end of the Cold War during the years of Bush s governance ( ) under the influence of the neo-con ideological stream. To be brief, two countries are currently aimed by Washington: Russia and China. Firstly, Russia faces a serious internal economic crisis added to the international economic sanctions related to the Ukrainian conflict. Lower oil prices and capital flight have led to a sharp depreciation of the Ruble, which has lost 40% of its value since January The country s stock market, or Russian Trading System (RTS) index, also dropped by 40% ( ). (8) The international oil market recently faced a higher bid of the international supply which, combined with a stabilization of the global demand made fall oil prices. With more than 10 million mbd, oil represents a considerable source of revenue for Moscow. This sudden increase in the international supply is partially the consequence of the US initiative which largely increased its own national production. The current US production is equivalent to the Russian one. This strategy resembles to the one used in 1986 when Soviet oil had been completely drowned on the international market with an oil overproduction initiated by the USA and its allies of the OPEC to make oil prices fall. The effects of this American policy had quickly consequences on the Soviet economy; three years later, the world assisted to the fall of Berlin Wall and the end of USSR. The contemporary situation needs to be relativized from the Russian side; in the 1980s, the Soviet economy was then extremely precarious, which is not the case in Russia faces economic difficulties but it is extremely probable that with the increase of raw material prices, of the ores, in brief, of the Russian main resources, the Russian economic health will be able to feel better in a close future. We think that the American strategy which consists in increasing oil offer to maintain low prices will not be able to last long. This strategy was a success during a time but it is obvious that the major world producers will probably find it very beneficial in the future to sell oil with better prices. In August 2015, the Chinese government proceeded to a strong devaluation of the yuan which immediately caused heavy falls on the international stock markets. It would not be surprising that this kind of decision may generate consequences on a new rise in terms of oil prices, maybe as from 2017, despite they are still falling.

6 3.3 The Great Middle East energy big game: the new American strategic positioning The Middle East is and will remain a neuralgic area for oil and gas interests. Energy diplomacy remains important as several countries of the area face serious internal conflicts (Iraq, Syria). Political and diplomatic alliances between several local and other countries may generate a new energy deal, in particular in the oil market. These new alliances may also generate a rebalancing of international politics and diplomacy. The phenomenon isn t new. The USA lost part of its diplomatic influence in the Middle East after the terrorist attacks of 9/ and the subsequent wars in Afghanistan and in Iraq, which were mostly rejected by most of the Middle Eastern countries. In 2015, Washington couldn t consider the Iraq and Afghanistan military campaigns as either diplomatic or military successes. The USA will continue to enjoy more influence in the region than any other outside power, but its influence will be reduced from what it once was. This reflects the growing impact of an array of internal and external forces, the inherent limits of U.S. power, and the results of U.S. policy choices. ( ) the United States will increasingly be challenged by the foreign policies of other outsiders. (..) China will resist pressuring Iran and will seek to guarantee the availability of energy supplies. Russia, too, will resist calls to sanction Iran and will look for opportunities to demonstrate its independence from the USA. Both China and Russia (as well as many European states) will distance themselves from U.S. efforts to promote political reform in nondemocratic states in the Middle East. (9) The Chinese and Russians have increased their diplomatic and trading ties to the area; for this purpose, the USA needs to find a new positioning in the Middle East. A major diplomatic revolution quite plausibly in the making: a possible diplomatic dialogue between Iran and the USA which reached a main deal on nuclear matters in July The two countries are still officially without any diplomatic ties since 1979, but President Obama wishes to make change the situation with Iran as well as with several countries indexed in the Axis of evil, or the Outposts of tyranny stated by the neo-con administration of his predecessor, past President George W. Bush. Iran is part of this Axis of evil, as well as North Korea, due to the Iranian nuclear program development (civil and military). The recent American diplomacy shows that Washington seems to be ready to negotiate with its past enemies. It is indeed the case with Cuba, country with which President Obama is restoring true diplomatic relations. America and Iran are due to start talks regarding the Iranian nuclear program, it is hoped this will lead to an opening of dialogue, as with Cuba. The outcome will either be a prolonged policy of mistrust or a true co-operation between America and one of the most important world oil and gas producers. Global Energy had put forward that a rapprochement between the USA and Iran would be much more likely than a new conflict, which would have disastrous consequences on the already precarious socio-political balance in the Middle East. Diplomatic relations between Washington and Tehran are officially non-existent since 1979, and yet regular official and semi-official contacts between these two countries exist, with meetings generally taking place either in Switzerland or in the United Arab Emirates. The current Iranian President is much more open to dialogue and is more moderated that his predecessor. Given Iran s reliance on the exploitation of its natural resources, the economic sanctions currently equate 1.2 million barrels produced per day in forgone exports. It is consequently in

7 Iran s interest to soften its relations with the USA and to see the economic sanctions gradually lifted. Figure 92. Iranian crude oil exports Source: It is the USA s interest to forge a true strategic partnership. Considering the instability which plagues the Middle East, Iran currently represents one of the rare options which could lead to socio-political stability in this area, notwithstanding that Iran has the capacity to become a true regional power thanks to its vast natural resource reserves. The country does not suffer from major internal strife comparable to that in Iraq and Afghanistan. Iran s strategic position can be explained due to its direct access to the Caspian Sea, its borders with Iraq, Afghanistan and Pakistan, none of which are stable countries. In 2014, Iran held the world's fourth-largest proven crude oil reserves (160 billion barrels) and the world's secondlargest natural gas reserves (1,200 trillion cubic feet). Iran holds almost 10% of the world's crude oil reserves and 13% of OPEC reserves. About 70% of Iran's crude oil reserves are located onshore, with the remainder mostly located offshore in the Persian Gulf. Iran also holds proved reserves in the Caspian Sea, although exploration has been at a standstill. Iran produced 3.4 million barrels per day (mbd) of petroleum and other liquids in 2014, of which 2.8 million mbd was crude oil and the remainder was condensate and natural gas plant liquids. Iran's crude oil production fell dramatically from nearly 3.7 million mbd in 2011 to 2.7 million mbd in 2013 because of sanctions. (10) Unlike Iran, where an internal socio-political destabilization seems improbable, nobody knows how the Syrian and the Iraqi situations will evolve and if the influence of religious movements will spread in Turkey or the countries of the Arabic peninsula. Iran maintains excellent trade relations with China and especially Russia, country with which Tehran signed a 20 billion US dollars oil contract in 2014 (oil sales and other partnerships in the agriculture, food sectors, etc.), in order to bypass the sanctions which strangle the country s economy. In other words, negotiations currently being held with Iran regarding its nuclear program may be an opening opportunity for the American energy diplomacy in the Middle East in line with a strategic new positioning with Iran. An Iranian deal with the USA would target Russia and China; Washington s position is clear: it aims at reducing the influence of Moscow and Beijing in the Middle East.

8 3.4 Oil and gas geopolitics in the Great Middle East: civil wars and threats Since Global Energy s first publications in , the issues have evolved and remain unfavourable for the international community. A focus on oil and gas markets casts doubts on whether the Middle East is an area which includes the Eastern Mediterranean coasts, the Arabic peninsula as well as Iran and even Afghanistan. This vast unstable area plays a crucial role in the international oil and gas markets but the question remains of safeguarding supply and production. Several situations (civil wars, permanent terrorist threats, etc.) are particularly alarming, whereas others seem less concerning on the long run. In the previous editions of Global Energy, several articles were focused on the permanent socio-political instability in the Middle East. These had analyzed several regional situations such as in Iran, Iraq or the Arabic peninsula. Since then, in addition to the Iraqi situation has not favourably evolved, a new crisis has emerged in Syria, which is currently in the middle of a complex civil war. The Syrian problem appeared when several Arab countries revolted and thus created a climate of internal socio-political instability. In 2011, Libya, Egypt, Bahrain and then Syria faced national movements of revolts. Four years later, none of these situations have been resolved: Syria and Libya are struck in civil conflicts; Egypt, Bahrain or Tunisia are regularly plagued by localized agitation (riots, increasing influence of religious movements, terrorist attacks, etc.). Regarding the Middle East, the Syrian situation poses an obvious problem: its geographical proximity with large producing countries (Iran, Iraq, Saudi Arabia and the other monarchies of the Persian Gulf). Moreover, Syria shares common borders with Turkey, a buffer state between the European Union and the Middle East and also a strategic crossroad of oil and gas pipeline routes (which is also the case for Syria). In terms of statistics, according to the OPEC, oil-rich countries in the Middle East that boast the world s largest hydrocarbon deposits account for almost 54 percent of proved oil reserves and 40 percent of proved natural gas reserves. The region is an uncontested leader in oil production. The Middle East produces almost 33.1 percent of the global total, together with the North African Arab countries (Algeria, Egypt, Libya, and Sudan and South Sudan); this approximates 40 percent (37.7%). (11) Syria is not itself a large oil or gas producer. Internal conflict has caused its production capability to strongly decline from 180,000 barrels per day (mdb) in 2012 to 97,000 mdb in As global production is equivalent to 89 million mdb, Syrian production does not have much impact on the international market; however the international community is worried by the governing authorities which produce Syrian oil. The Syrian Ministry of oil currently produces 17,000 mdb while 80,000 mdb are produced and controlled by the Islamic State. Islamic State also controls some local oil production in Iraq. Although Libya is not part of the Great Middle East, the Libyan civil war has had an important impact on oil prices. In early 2011, the price of crude oil rose by 62 percent in a single month, rocketing from 75 US dollars to 120 US dollars per barrel as protests and revolts shook an arc of Arab countries.

9 The price of crude jumped six percent on a single day, February 21, in response to sudden and dramatic unrest in Libya. This strong price reaction occurred even though Libya only accounts for about two percent of annual world oil production. (12) Figure 93. Syrian oil and gas fields Source: russiancouncil.ru/en/inner/?id_4=2747#top-content The Syrian conflict has not yet had the same impact as the Libyan conflict on the international markets; however, we should not underestimate the secondary consequences of this war and the foreseeable effects of destabilization on the area. In addition to the sharp fall in local oil production, much local infrastructure has been destroyed. OPEC member states, of which Syria is not included, are subject to more or less strictly applied oil production quotas, OPEC currently produces between 31 and 33 mbd. In addition, damage and destructions related to conflicts such as the one in Iraq, added to economic sanctions imposed on Iran, thefts on pipelines, etc. account for over 1.5 million of lost barrels per day in the Middle East. The wars in Syria and Iraq have no resolution in sight. Political power and control of parts of the local economy are under the control of entities hostile to the official local regimes. A long period of instability is predicted to cripple the Middle East; it should be hoped that the Syrian and Iraqi conflicts can be contained and not spread into Turkey, Iran or Saudi Arabia; as such eventualities would generate disastrous repercussions on the oil and gas markets and on the global economy.

10 3.5 Oil and gas geopolitics in Central Asia: five arguments of Caspian regional strategic power Figure 94. Sedimentary basins and oil and gas fields in Europe and CIS countries Source: Central Asia and the Caspian area are crossroads of geopolitical and geostrategic interests. This article will aim at outlining the five most attractive aspects of Central Asian energy power. The first one concerns the meeting of oil and gas demand as oil and gas geopolitics represent such an important part of international diplomacy. When several countries have disagreements, energy threats are usually levelled by one of the countries involved. The current economic sanctions levelled by the European Union (EU) on Russia have accentuated strategic partnerships between Central Asian and European countries, in order to diversify Europe s oil and gas suppliers. The natural resources in the Caspian area are very coveted. Besides being abundant, these resources are of strategic importance to the EU, the USA and India due to its geographical proximity. A second aspect of Central Asian regards the Russian energy superpower: Russia shares borders with the EU (along with the Baltic States, Poland and Finland), Kazakhstan and China. It covers a surface amounting to 17 million square kilometers and contains vast oil and gas fields (onshore and offshore). Russian natural resources are considerable, although most of them are located in areas, which are difficult to access. Russia is one of the world s top 3 oil producers; it is essentially due to its gas reserves that Moscow may appear intimidating to some of its partners (more than 1,700 trillion cubic feet of gas). Its energy

11 potential enables gives it strategic power over other countries in the sense that it can withhold supply in periods of diplomatic tensions, as it had been the case with Ukraine, Belarus or Georgia. In addition, some of Russia s most valuable assets are the Central Asian pipeline networks built during the Soviet period which deliver energy to Western Europe. All the Central Asian pipeline routes, except the one built since the independence in the early 1990s. The Central Asian republics therefore depend on the pipeline routes, which cannot bypass Russia. The third aspect is the regards meeting Chinese energy requirements. The country seeks to secure energy supplies by shortening delivery delays and distances. If Chinese oil consumption is slowing down, gas consumption would not follow this trend. Indeed, China will most probably need to increase its gas imports. Gas at present accounts for only around 3 per cent of China s total primary energy mix, but Beijing aims at increasing the use of gas to 250 billion cubic meters (bcm) in 2015, which would be roughly 8 per cent of its energy mix. This would require China to import over 100 bcm that year. Since China is concerned about the safety of sea lanes, it will want to import a good portion through pipelines rather than in the shape of Liquefied Natural Gas shipments. (13) A fourth point relates to Europe seeking to diminish its dependence on Russian energy In the EU case, several countries strongly depend on Russian supplies and the abundance of oil and gas fields in the Central Asian region strongly interests the EU. The most problematic issue remains on how to transfer these natural resources to Europe without passing through Russia. This important strategic consideration was behind the design and construction of Baku Tbilisi - Ceyhan (BTC) and Baku Tbilisi - Erzurum (BTE) pipelines: this created a pipeline network, which does not cross Russia. This has had the obvious consequence of diminishing Russian influence by limiting dependence on Russian gas supplies. Considering EU member states relations with the Central Asian republics, the situation has become more complicated in the Caspian Sea. These waters are currently shared between five countries: Russia, Kazakhstan, Azerbaijan, Turkmenistan and Iran. Projects to create direct connections between Kazakhstan and Azerbaijan exist (projects including pipelines and maritime freight) but these projects are difficult to implement. For European countries, the only way to get access to Kazakh oil is to pass through a direct connection between Baku (Azerbaijan) and Kuryk (Kazakhstan), so that this oil can then be transferred towards Europe via the BTC pipeline. According to Ernst & Young, the Kazakhstan Caspian Transportation System includes the construction of the Yeskene - Kuryk pipeline and Transcaspian System (Kuryk - Baku). The latter will consist of oil tankers, oil terminals on the shores of Kazakhstan and Azerbaijan and infrastructure that connect Tengiz and Kashagan oil from tankers with the Baku Tbilisi - Ceyhan pipeline. The Yeskene - Kuryk part of this project has a cost of 1.5 billion US dollars, with the total value of the project at 3 billion US dollars. The initial capacity of the project is 23 million tons per annum, which could be increased up to 56 million tons per annum. (14) Considering the situation in the Caspian area, the Kuryk - Baku connection is currently the only way to transfer oil and gas from the Eastern side of the Caspian Sea to Baku. Alternate routes would require passing through Russia or Iran. Iran will become an interesting option the day Tehran restores official and peaceful relations with

12 Washington. This may become a reality in the months to come as Washington and Teheran may start entering conclusive discussions regarding the Iranian nuclear program. A final credible alternative exists with a maritime connection between Turkmenbashi harbor in Turkmenistan and Baku in Azerbaijan. The problem remains that the two countries face tensions regarding maritime boarder disputes in the Caspian Sea. In other words, such a project is feasible, were it not for the current political wedge. Figure 95. Planned Kazakhstan Caspian transportation system Source: aspx The fifth point of the attractiveness of Central Asian energy power relates to the potential partnerships in response to the Sino-Russian energy deals. The Sino-Russian 400 billion US dollars deal of 2014 was a clear message to the international community as it demonstrated that Russia diversifies its partnerships, partly in an effort to reduce its commercial energy dependence on Europe. The Chinese perspective is that this deal secures energy supply in the long run whilst mitigating external factors such as wars, maritime piracy, etc. which can cause delays or even threat energy supplies. Considering the substantial agreements between Moscow and Beijing, it would be in Ashgabat, Astana and Baku s (Caucasus) interest to secure further energy deals with the West, in order to counterbalance the Russian and Chinese influences on their national economy.

13 3.6 Oil and gas geopolitics in Central Asia: energy wealth and political disputes Central Asia is a crossroad of geopolitical and geostrategic interests. This has been the case since the independence of the Central Asian republics in the early 1990s, which had been previously Soviet republics, at which point major international oil and gas consumers were already attracted by this region due to the abundance of raw materials. This area is known mainly for its offshore Caspian oil and gas reserves, however there are also abundant onshore reserves in Kazakhstan (oil, gas) or in Uzbekistan (gas) and the national economies of the Central Asian republics therefore largely depend on raw material exports. This is particularly true for Turkmenistan but less so for Kazakhstan, which strives to diversify into other branches of industry, a policy that aims at reaching the ambitious requirements of Kazakhstan 2050 program set by President Nazarbayev. Kazakhstan is the richest country in Central Asia thanks to its abundant natural resources and is now turning its focus on renewable energies. Ambitious solar farm projects are underway, mostly in the Southern part of the country, which has high yearly rates of sun exposure. Several arguments need to be developed in order to understand the true Central Asian energy stakes. In 2012, the Caspian Sea accounted for 3.4% of the world s oil production, but since 2006 Azerbaijan and Kazakhstan have led expansion projects in the development of natural gas production in the area, enabling in 2011 all coastal countries to extract a total of 2.5 trillion cubic feet of natural gas, up from 1.25 trillion cubic feet in Despite the fall in oil prices, Central Asia and the Caspian area remain coveted due to their considerable oil and gas resources. According to an estimate by the Energy International Agency, in 2013 the Caspian area represented an oil potential of 48 billion barrels while gas reserves were estimated at 293 trillions of cubic meters. It is estimated that 20 billion barrels remained undiscovered. In spite of abundant reserves and their future commercial possibilities, the exploitation of the Caspian Sea fossil energy is not currently optimal due to tensions between different coastal countries which do not agree on the distribution of the Caspian territorial waters. It is the case between Azerbaijan and Turkmenistan, which regularly dispute the Caspian water distribution, an ongoing issue nearly since the independence of both countries. Diplomatic tensions between Baku and Ashgabat officially began in 1997 when the former Turkmen President Niyazov accused Azerbaijan of illegally exploiting the Azeri and Chirag oilfields, and threatened to sue the oil companies involved ( ). (15) Since past President Niyazov s death in 2006, the new Turkmen President seems to be working towards closer relations between Ashgabat and Baku; in May 2008, the two presidents discussed prospects for developing Azerbaijani- Turkmen relations, marked a key turning point. Ahead of the Turkmen president s visit, Azerbaijan repaid 44.8 million US dollars in debt, owed to Turkmenistan since the early 1990s for gas supplies. (16) As exposed above, Caspian countries heavily rely on oil and gas exploitation. A brief overview of Azerbaijan, Kazakhstan and Turkmenistan s oil and gas productions:

14 - Kazakhstan holds the second largest oil and gas reserves after Russia among the former Soviet republics. In 2014, its national oil production was 1.7 million barrels per day (mbd), the national proved oil reserves are equivalent to 30 billion barrels. In 2013, Kazakhstan exported 1.4 mbd of crude oil and condensate. Regarding national gas reserves, Kazakhstan holds 85 trillion cubic feet (tcf) of proved gas reserves. In 2012, Kazakh gas production reached 1.6 tcf. - Azerbaijani fossil energies account for more than 95% of national energy consumption (gas 65%, oil 30%), the country s economy is heavily reliant on its oil and gas exports. In 2013, Azerbaijan s oil production was equal to 881,000 barrels per day and exported 738,000 barrels per day. The country is thought to hold 35 tcf of gas, in 2013 it produced over 605 billion cubic feet of gas. - In 2013, Turkmenistan produced an average of 260,000 barrels per day and in 2012 produced over 2.5 tcf of dry gas. Turkmenistan is supposed to hold the sixth largest gas reserves and in 2013 announced the commercial production of the Galkynysh gas field, which is said to be the second largest field in the world. Galkynysh will is projected to produce 2 tcf of gas per annum. (17) Figure 96. Caspian region oil and gas infrastructure Source: oilprice.com/latest-energy-news/world-news/caspian-sea-set-to-become-a-major-hub-for-natural-gas-production.html

15 3.7 Geopolitics of oil and gas pipelines: successes and failures The energy situation of China has faced a series of challenges: the sustainable provision is confronted with great pressure; the dependence on export energy is increasing; the consuming frame is not proper and the efficiency remains low; the pollution and damage to the environment is severe; there is no energy crisis management and security warning system; China Energy Threat Theory is gaining support and China s diplomacy is facing new issues; international energy competition is far more aggressive and the negotiation system depends largely on political elements; the construction of overseas pipeline lacks investment. (18) This assertion does not only relate to China; major producers of fossil energies and consumers alike face this stark reality. Global competition is increasingly severe and aggressive. To negotiate a strategic partnership in the energy sector means anticipating future events to try and ensure adequate supply satisfy the domestic demand and so each country is developing its own oil and gas policy. The most ambitious oil and gas pipeline constructions projects are either severe diplomatic and economic successes or failures. The Chinese situation is not eulogistically portrayed, however China is very active in terms of energy agreement and in organizing onshore energy routes. Pipeline diplomacy is a major Chinese concern; this option is clearly favoured over maritime transport as oil and gas pipelines make it possible to transport energy in a more direct, fast and secure way. Despite the massive financial investments required for pipeline projects, the financial factor isn t always the decisive consideration in for such projects. Diplomacy is the principal factor, as was the case with the Baku Tbilisi Ceyhan (BTC) oil pipeline. This is a perfect example of diplomatic and geopolitical realization. The pipeline crosses three countries: Azerbaijan, Georgia and Turkey. Azerbaijan and Georgia share common borders with Russia, Armenia shares borders with Turkey and Azerbaijan; Azerbaijan is wedged between Russia and Iran. The project cost nearly 4 billion US dollars but more importantly, even before its completion, the pipeline was having an effect on the world's petroleum politics. South Caucasus, previously viewed as Russia's backyard, is now a region of great strategic significance. The USA and other Western nations (including the European Union (EU) and Japan) have become much more involved in the affairs of Azerbaijan, Georgia and Turkey through large volumes of oil flow. This involvement can be interpreted as a means of counterbalancing the Russian and Iranian economic and military dominance in the region. The project also constitutes an important leg of the East West energy corridor, emphasizing Turkey s growing geopolitical importance. The pipeline gives Georgia further independence from Russian influence. The pipeline was initially owned and operated by a consortium of eleven Western companies of the USA, UK, Azerbaijan, Turkey, France, Japan and Norway. The BTC pipeline can therefore be seen as a true geopolitical and diplomatic Western success.

16 Figure 97. The BTC route Source: fr.wikipedia.org/wiki/oléoduc_bakou-tbilissi-ceyhan International diplomacy can also generate important delays and even pipeline project cancellations. This assertion can currently be observed with the South Stream project, which is the equivalent of the Black Sea of the Nord Stream gas pipeline in the Baltic Sea. As well as the Nord Stream pipeline, this project initially aimed at facilitating Russian gas supply to the EU member states without having to cross Belarus or Ukraine. The idea was to create a direct connection between Russia and the EU thanks to new Northern and Southern routes. The project was dropped by the Russians in December 2014, following numerous issues with Bulgaria and the EU such as the 2014 Crimean Crisis and the sanctions which were subsequently imposed to Russia. Although Russia announced in December 2014 that the South Stream project was over, a couple of weeks later, in February 2015, President Putin declared the project was not going too scrapped altogether. EU Russian diplomacy will be the key element in deciding the outcome of the South Stream project. EU member states need Russian gas and Russia needs European clients; despite the current diplomatic and economic tensions between Brussels and Moscow, energy deals will remain substantial. The South Stream project was, for a time, opposed to Nabucco gas pipeline project, which was supposed to supply Eastern Europe and Central Europe. The aim of the Nabucco pipeline is to diversify the natural gas suppliers and delivery routes for Europe, thus reducing European dependence on Russian energy. The original project was backed by several EU member states and by the United States, and was seen as a rival to the South Stream pipeline project. The main supplier was expected to be Iraq, with potential supplies from Azerbaijan, Turkmenistan, and Egypt. (19) This ambitious project was jointly supported by the USA and the EU, but faced several obstacles. Supposed to cost over 11 billion US dollars, Russia and Iran criticized Nabucco pipeline project. Iran's Foreign Minister Manouchehr Mottaki has stated "speaking about the Nabucco pipeline without Iran's participation would amount to nothing but a pipeline void of gas". Russian Prime Minister Vladimir Putin (in 2010) has made similar remarks. The deputy chairman of the Russia's State Duma Energy Committee Ivan Grachev has questioned the viability of the Nabucco project and sees it as an attempt to put pressure on Russia. (20) Once again, the Nabucco project illustrates that international diplomacy remains a ping-pong strategy game. Two opposite sides defend their interests: the countries fully involved in the project and those concerned by the stalled project. Considering the importance of the projected financials and gas volumes involved, it was clear that Russia

17 and Iran would disapprove Nabucco pipeline project. Russia and Iran know that the EU member states will require increasing gas supplies; the EU is thus looking for several alternative gas supplies to reduce its dependence on Russian gas, whilst Russia conversely wishes to maintain its key position as the principal gas supplier for Europe. Pipeline diplomacy is a chess game, which includes attacks, counterattacks and a long negotiation processes. Figure 98. Nabucco gas pipeline projected route Source: en.wikipedia.org/wiki/nabucco_pipeline

18 3.8 Geopolitics of oil and gas pipeline routes: project genesis and motivations The construction of a pipeline is always an ambitious project, as it requires taking into account: distance, topography of the ground (offshore, mountain, desert, etc.), climatic rigor following the regions, etc. These are natural factors but it is necessary to complement this list with human factors, which have an effect on geopolitical factors. Finance, politics, diplomacy, law are human factors. The evolution of a country s borders can generate political and diplomatic tensions between the new official state entities lately created. It was the case in several regions of ex-ussr (Azerbaijan, Armenia, Central Asia, etc.) or ex-yugoslavia (Serbia, Croatia, Bosnia-Herzegovina, etc.). The political, economic and social balance becomes even more complex with resurging nationalisms, which tend to oppose and limit commercial exchanges between neighboring countries. One of the most recent examples is the creation and subsequent independence of South Sudan, which clearly wished to be dissociated from Khartoum; the territory will probably remain disputed by North Sudan, given the abundance of natural resources (oil, gas). It is hard to envisage peaceful and prosperous state relations between Khartoum and Juba, as long as North Sudan will continue to contest the state recognized borders between the North and the South. Figure 99. Sudan s oil fields Source: standcanada.org/2013/10/ Should an oil or gas pipeline project be feasible depending on natural factors, it then requires the participation of a multitude of actors such as politicians, banks, energy corporations in order to be completed. Should these actors be inclined to kick-start such a

19 project, it has the potential of a true commercial success, or may be delayed and even cancelled after years of hard negotiation. Two major trends symbolize contemporary oil and gas geopolitics: security and diversification. Oil and gas consumers wish to develop their strategic partnerships with their suppliers whilst aiming at reducing their dependence on major producers by diversifying their networks of energy suppliers. A pipeline project may be envisaged for the following reasons: - Increasing energy volume deliveries, as is it the case for European gas requirements. According to the European Commission, in 2005, EU gas demand was roughly 500 billion cubic meters; by 2030, European gas is expected to exceed 800 billion cubic meters. Consequently, the EU member states are looking for new pipeline projects. - Reducing existing pipeline distances to reduce transfer costs. - Diversifying energy suppliers to secure energy supply, a major contemporary trend. Producers and consumers are seeking to diversify their strategic partnerships. Dependence is risky; tensions might appear with the main partner (producer or consumer). This is apparent when observing the EU and Russia, as it was the case between 2005 and 2009 with gas tensions between Russia and Ukraine or Belarus. As a result, the Nord Stream gas pipeline was built in the Baltic Sea between Russia and Germany, despite EU restrictions on Gazprom, however only 22.5 billion cubic meters of its capacity is currently used instead of an annual capacity of 55 billion cubic meters (the annual capacity is planned to be doubled by 2019). (21) Through the Nord Stream pipeline, Germany and its neighbours reduce their dependence on Russian gas pipeline passing through Belarus and Ukraine. Figure 100. European gas pipeline networks and projects Source: en.wikipedia.org/wiki/nord_stream - Strengthening commercial relations with a strategic partner: pipeline construction may increase commercial ties between two countries. The Power of Siberian pipeline has been projected to increase gas deliveries from Russia to China. Despite the European

20 economic sanctions imposed by the EU to Russia, Moscow has increased its commercial relations with China. - Crossing/bypassing strategic allies/opponents: pipeline routes are defined by geopolitical factors, especially when they need to cross several countries. Should the countries involved be strategic partners in terms of business and diplomacy, a pipeline project will have more chances to succeed. Sometimes, a pipeline route may generate tensions in a region, as was the case with the Baku Tbilisi Ceyhan and Baku Tbilisi Erzurum oil and gas pipelines. These pipelines cross Azerbaijan, Georgia and Turkey while avoiding Iran, Russia and Armenia. These pipelines aim to safeguard oil and gas deliveries from the Caspian Sea and to reduce energy imports from the Russian pipeline networks. Figure 101. Baku Tbilisi Ceyhan pipeline route Source: Figure 102. Participants of the BTC project Source :

21 3.9 Pipeline routes for giant gas deal between China and Russia Oil and gas geopolitics are either the consequences or generate consequences in terms of international diplomacy. The world can be divided in two categories of oil and gas actors: producers and consumers. Amongst these two categories, it is also possible to distinguish the major producers and consumers, as well as the countries, which have little influence on these international energy markets. The world order was leading to a significant gas deal agreed between two world giants: China and Russia. Thanks to their geographic proximity (both countries share 3,645 kilometres of common borders), it is a clear advantage for both countries to deal with one another to ensure a vast energy supply to meet Chinese domestic energy consumption requirements. On the international chessboard, Russia s position is delicate. Despite it is a permanent member of the United Nations Security Council (UNSC), Russia, due to its position in the Ukrainian conflict, is the subject of economic sanctions imposed by the European Union (EU) and which were extended at the end of January Moreover, its domestic economic situation is weak. Russia practices ping-pong diplomacy, this can be seen with the EU sanctions and Russia retaliating by increasing its energy partnerships with China. During the FIFA scandal, the USA asked its own justice department to investigate the conditions of the 2018 football World Cup had been attributed to Russia a couple of days later, Russia announced it doubted that American astronauts had been on the Moon (theory of Moon hoax), etc. In comparison to Russia s position on the international chessboard, China is also a permanent member of the UNSC vetoing powers and its global diplomatic influence and power is evident. China has diversified strategic partners, particularly with regards to its energy suppliers as this offers China a level of security. Large deals were concluded with Central Asian states, including Iran, countries of the Arabic Peninsula or even in South America and Africa. China needs large energy imports and the best way to satisfy its domestic demand relies on diversifying its strategic international partners. Russia and China share several common causes, which aim at intensifying global trade including energy. The fall of oil price was a blow to Russia; however oil prices are gradually increasing again. European economic sanctions imposed to Russia incited Moscow to find new strategic partners, however the EU remains a major client. According to Gazprom Export, in 2014, the company supplied billion cubic meters of gas to European countries. Western European countries accounted for approximately 80% of the company s exports from Russia, while Central European states took 20%. (22) This statement includes countries like Switzerland, Serbia or Turkey, which are not EU members. In comparison with 2013, gas supply fell by 15 billion cubic meters. Europe gets about 30% of its gas supplies from Russia.

22 Figure 103. Pipeline connections between Russia and China Source: peakoil.com/publicpolicy/tech-talk-china-russia-and-east-siberian-natural-gas China wishes to secure its energy supplies, the best routes consists in onshore deliveries. The geographic proximity between China and several huge Russian gas fields incited Moscow and Beijing to discuss gas delivery opportunities. A giant agreement was concluded in May 2014 for a 30-year contract related to gas deliveries amounting 400 billion US dollars. The deal will involve developing natural gas fields in Russia and building pipelines from Russia to China. The cost of building the infrastructure alone is expected to top 70 billion US dollars. (23) Between 2018 and 2047, Russia will provide 38 billion cubic meters of gas to China. This will be pumped from the Gazprom run fields of Kovytkin and Chayandin in Eastern Siberia, thanks to the Power of Siberia, a planned 3200-kilometer pipeline. The Power of Siberia pipeline construction was launched in September Formally known as the Yakutia Khabarovsk Vladivostok pipeline, the Power of Siberia will be connected to China via the Russian city of Vladivostok. The construction of this connection will start in 2015 and the pipeline will be operational by Gas will be delivered in Beijing Tianjin - Hebei metropolitan area in the north of China and the Yangtze River Delta in the east. The deliveries, which may take a few years to reach full capacity, will provide China with more than one-fifth of its present-day annual consumption ( ). (24) Figure 104. Power of Siberia pipeline future route Source:

23 3.10 Energy relations between Russia and China: two giants in the middle of gigantic deals Russia and China share politico-economic positions, which should incentivize them to collaborate on several energy fronts, particularly in the oil and gas sectors. It isn t in the interest of Moscow and Beijing to continue distrusting one another as it will put large energy trade agreements in jeopardy. The border position of both countries should be a real advantage to facilitate trade. In 2015, the balance of trade between both countries did not cease increasing and would probably continue doing so over the next following years as both countries have a clear objective: growing energy exports on the Russian side to increase revenues while ensuring the growing Chinese energy demand is met. The main idea of these trade relations is to ensure security and stability. In an international environment shaken by several regional conflicts, notably in the Middle East, Russia and China face reciprocal needs, which can only strategically bring them closer. If one of Russia s main partners is the European Union, through its member states, relations have soured due to the tensions in Ukraine, which opposed Kiev to the Eastern part of the country, including Crimea openly supported by Moscow. As a result, economic sanctions were imposed to Russia, worsening an already delicate internal context with the devaluation of the Ruble and the fall in oil prices. For Moscow, it seems obvious to safeguard revenues by diversifying its strategic partnerships; Beijing currently represents the best in light of this situation. From the Chinese perspective, securing energy supplies is a priority. China is the largest fossil fuel consumer; the economic growth of the country is strongly linked to its energy consumption of which oil is very important. China favours onshore supply routes; these reduce the delays and are safer than shipping routes, which are vulnerable to piracy such as in the Malacca Strait. China has already developed a policy of diversification of strategic partners, but most of them are geographically distant (Africa, South America, Middle East) with a relatively long delivery timeframe. Considering the Russian and the Chinese positions, it appears logical for these two giants to reach large energy deals. Two colossal contracts, concluded in 2014, concern Russian and Chinese companies: the first is related to gas deliveries and the second one concerns the building of a gas pipeline. The contract of gas supply, which links Gazprom and CNPC, is estimated at 400 billion US dollars. It spans a period of 30 years and will start delivering gas in Through this contract, Russia will sell an annual volume of 38 billion cubic meters of gas to its Chinese partner. These relations will be able to intensify the links between the two neighbors. China faces many public health issues and wishes to reduce greenhouse gas emissions by decreasing its coal dependence, which accounts for 70 % of national energy consumption. This would need to be compensated by increased gas imports to

24 as well as a stronger emphasis on nuclear power generation. China is currently being supplied by the South via Burma and in the East by Turkmenistan, however these supplies routes are not sufficient to meet Beijing s energy requirements. Siberian energy reserves (especially the deposits of Chayanda and Kovytka) epitomize the advantage of trade links with China, given the vast gas deposits available and the geographical proximity, which allows for reasonable transport delays. The Siberian gas pipeline, which will be constructed in order to supply China will span 4,000 kilometers and will cost an estimated 21 billion US dollars. Trade between Russia and China is only predicted to increase. These two huge agreements are probably the beginning of a new Sino-Russian economic and commercial diplomatic revival. Other agreements had been already concluded in 2013 in the oil industry between Rosneft and CNPC. China and Russia have a mutual need of each other. As current yearly trade is close to 90 billion US dollars, it will undoubtedly exceed the symbolic100 billion US dollars threshold in the years to come. Figure 105. Siberian pipeline networks Source: March 2015

25 3.11 American-Iranian diplomacy: real nuclear ground or semi official oil stakes? Diplomatic relations between the USA and Iran seem finally to be improving. In July 2015, Iran and the Western partners have reached a major accord on nuclear matters. It is expected to see rapid changes in the bi- and multi-lateral relationships. They follow a favourable evolution; in 1979, both countries had cut diplomatic ties. For over a decade, the nuclear program developed by Iran was the largest issue opposing both countries. Under George W. Bush s presidential terms, the tendency was in firmness and was solidly opposed to Iran acquiring military and civil nuclear capabilities. In the absence of official diplomatic relations between both countries, the situation mostly depended on official statements in which the USA categorically refused to permit Iran acquiring nuclear capabilities, while in Tehran, communication seemed more focused on provocation. Former President Ahmadinejad regularly encouraged attacks on Israel, the American main diplomatic ally in the Middle East. The Iranian nuclear file remains unresolved and a sensitive subject although the main actors have changed since the early 2000s. President Obama has been keen to push on with negotiations, while in Iran, President Rohani has tried to temper the situation. It is important to note that Iran has a key geographical position in the Middle East and has vast fossil fuel reserves. In light of the overall situation in the Middle East including the socio-political instability in Iraq, the Syrian civil war and, more generally, the war against terrorism, the international community is weary of creating new tensions with Iran. The Middle Eastern situation has deteriorated significantly since , at which time the Bush administration entertained the possibility of war Iran while its regional situation was already strongly compromised due to conflicts in Iraq and in Afghanistan, two border countries of Iran. Yet another armed conflict in the region would have been a humanitarian and economic disaster. Seemingly, the fact that Iran may acquire nuclear capabilities is concerning, however is the nuclear file the real issue at stake? To avoid erroneous interpretation, the aim of this publication is to explain why Iran has developed a civil and military nuclear program. The overall position of the country has not evolved much since the beginning of the 2000s. All of Iran s neighboring countries face serious internal crises, which have not improved the socio-political stability of the country. If Iran develops military nuclear capabilities, it would be reasonable to interpret it as being a deterrent force as opposed to a threat or provocation. It was however provocation when President Ahmadinejad launched diatribes against the State of Israel. This situation has since evolved; the current Iranian President is apparently less keen to continue threatening Israel. On the contrary, he is favourable for a constructive dialogue with the USA. From the American perspective, this willingness for dialogue is favourably viewed as a right step in terms of resolving the situation. Iran s economy has been crippled by sanctions; however it has received support from international allies. Iran s main economic partner is China, which is and has been importing

26 oil from Iran, which has greatly helped Chinese economic growth. Recently, Chinese demand for Iranian oil has declined but has remained a valuable import. Beijing has instead perused bilateral oil and gas agreements with Russia, Central Asian republics (mainly Kazakhstan and Turkmenistan) and several African countries. Tehran is, according to Beijing, a first-rate strategic partner: Iran has abundant fossil energy reserves, important production capabilities and onshore routes of transportation, which can be used instead of shipping. Iranian ships needs to cross the straits of Ormuz and Malacca, supply routes, which are not only time consuming but also vulnerable to piracy, principally in the region of the Malacca Strait. The most secure route to deliver energy to China remains onshore transportation. Trade between Iran and China is increasing, in 2011 and in 2012, trading volumes were estimated at over 50 billion US dollars, this tendency has continued growing ever since. The bulk of Iranian exports, remains oil and gas, of which a substantial volume of Liquefied Natural Gas (LNG). Sanctions have caused Iran oil exports to fall 2-3 million barrels per day (mbd) in 2011 to less than a 1 million mbd in Figure 106. Iranian crude oil exports Source: U.S. Energy Information Administration, International Energy Agency Given Iran sanctions have been in place for so long, China constitutes an economic partner of choice owing to its financial and diplomatic power. Moreover, the way in which China relates towards Iran can be compared to the trade relations existing between Moscow and Beijing. In 2015, Eastern and Western Europe accused Russia for supporting a separatist pro-russian conflict in Eastern Ukraine for which economic sanctions were taken against Russia. China does not feel directly concerned by the war in Ukraine and has not felt direct repercussions on its energy imports. According to Beijing, Moscow is a strong strategic

27 partner. As long as the USA doesn t re-establish open diplomatic relations with Iran and ease sanctions, Beijing will strengthen its strategic energy partnerships with Tehran. Beijing often deals with countries where Washington doesn t, as is the case with Iran. In July 2015, a global agreement was found with Iran, the USA and five other world powers. After more than 12 years of negotiations, mostly leaded by the Europeans, Tehran agreed on several conditions: uranium enrichment must be limited, plutonium production must be limited too, and scientific inspections must be reinforced. The embargo on weapons remains active but if Iran accepts all the conditions, the economic sanctions will be cancelled. In other words, these conditions may gradually allow a re-establishment of diplomatic relations between Iran and the USA, and probably a new diplomatic dialogue and tension approach in the Great Middle East.

28 3.12 A sudden political change does not favour oil and gas trade (neither for energy producers nor for consumers) A state and indeed a region can be easily destabilized as long as its local economy strongly depends on one or two types of revenues. Some oil and gas producers have a high level of dependence on their natural resources. In some cases, their natural resources represent over 90% of the domestic GDP. In such cases, if a major problem incident occur in the exploitation process (major incident, terrorist attack, etc.), the local economy may be strongly disrupted along with the political balance which may be threatened. These observations mainly concern some Asian and African states, which currently or are likely to face such situations in the years to come. A certainty remains: brutal political change will threaten economic and social stability. This is currently the case in Egypt and Tunisia, or even in Syria. What is in store for these countries, which have for so long have been dominated by the same political leaders over so many decades? Countries like Congo, Cameroon, Gabon, Equatorial Guinea or Angola risk facing a prolonged period of uncertainty the day the historic leader will cede political power. These countries all have the real potential to develop their national economies thanks to their abundant natural resources. The threat of local conflict often leads to infrastructure destructions which is one of the various consequences which ultimately lead to a strong deceleration in the domestic economic development. A political transition is never an easy moment, especially when it takes place in a country where the political leader has been in place for a prolonged period, as was the case for Tunisia, Egypt and Libya. The departure of such leader, irrespective of the circumstances, will cause a socio-political destabilization especially if it hasn t been carefully planned for in advance. It is necessary that the new incumbent acquires a certain level of legitimacy with regards to his/her people, a very difficult task in Africa where countries are so often divided along ethnic and religious lines. The common factor between Tunisia, Libya and Egypt is that these three countries have a very young population; most of whom are only familiar with the incumbent leader. As people fear political change, especially in authoritarian regimes, the incumbent leader remains a point of irrespective reference of popularity. Let s dedicate a short message to the attention of the main international economic powers regarding their dealings with many emerging African and Asian countries. It is clear that many actors covet fossil energies, precious stones, precious woods, ores or other kinds of wealth. The Western countries have the annoying trend of too easily associating business and politics as soon as a potential interesting country does not correspond to the Western criteria. Recent international history demonstrates that the major economic and diplomatic powers do not hesitate to intervene by supporting opposing political factions, in some cases with the support of paramilitary troops or other local actors, actions, which go against Western democratic values.

29 As mentioned, a political transition is never simple to assume, especially when foreign agents are involved The African continent has probably suffered from the greatest number of conflicts since 1945 and particularly since the end of decolonization during the 1960s and 1970s. To safeguard our energy supplies, it is advisable to let our African partners solve their internal problems themselves should they not ask for international aid. Mistakes such as the invasions of Iraq and Afghanistan demonstrate this is the wisest course; the aforementioned examples led to the durable destabilization of these areas and were a failure in terms of upholding democratic standards. The struggle against terrorism is legitimate, as long as it does not conceal hidden agendas. Many countries have been outraged Western intervention as a means of democratization automatically associated with the fight against terrorism. Westerner powers must come to terms with the necessity of understanding local customs and local social dynamics, as radically change will often accentuate such issues and will often lead to civil war. There however exist several examples where African countries have found a true sociopolitical stability; although it dwells a lengthy process, countries such as Liberia, which have been through terrible civil wars now seem pacified and favourable to a social stable future. Such changes however take time. Stability and security ultimately favour healthy business relations.

30 3.13 Can African energy wealth boost local political and economic stability? Africa is meant to be the richest continent in terms of natural resources. The whole continent shelters wealth coveted by the main international economic powers. While being rich, Africa presents the paradox of being both politically and socially unstable. The period of decolonization, which provided its independence to the majority of the African states during the 1960s and 1970s, generated major problems in terms of stability. To understand the present, it is necessary to present a brief historical context. Africa is the continent of tomorrow. The major international economic actors are already positioned on and in Africa. However due to local political changes, and regional instability, contracts for the exploitation of natural resources face various uncertainties. The old colonial powers have preserved strong links with the areas they had previously managed; the USA, China, Russia, India as well as more discrete actors such as Australia or Brazil are preparing their strategic positioning in order to obtain market share in Africa. The re-cutting of borders in the 1960s had clearly not taken into account ethnic and religious differences, which have led to many of the current issues. Figure 107. Map of Africa Source: Many African countries do not inspire confidence in durable stability; some countries are even in the middle of important internal crises, as it was the case in Mozambique or in Angola. Therefore many potentially rich areas still face uncertainty. Most of the unstable countries possess various natural wealth: oil, gas, ores, wood, etc. which constitute the backbone of their revenues and thus the mainstay of local economic growth. These internal issues have a severe impact on local economic growth and consequently prevent stability,