How energy infrastructure is shaping geopolitics in East Asia

Large-scale, cross-border energy infrastructure connects states in long-term relationships. A choice of a pipeline route or a decision about where to develop an interconnected power grid reflects economic and energy security priorities among states, as well as political motivations and geopolitical objectives. In Asia, energy-related infrastructure developments, such as those being led by China and South Korea, are shaping regional and global relationships and affecting the broader geostrategic landscape.

The prime example of a cross-border energy infrastructure project being used to advance geopolitical objectives is China’s Belt and Road Initiative (BRI), launched by President Xi Jinping in 2013. It aims to connect Asia, Europe and Africa through trade and infrastructure routes and covers more than 65 countries with a combined population of 4.4 billion. It serves as a blueprint for China’s grand geoeconomic and geopolitical strategy of connecting itself to the global economy and strengthening its influence.

Territory covered by BRI projects spans two thirds of the world’s landmass and 70% of global energy resources, but many of these resources are currently disconnected from reliable energy, water, transport and telecommunication networks. In particular, China has been building a network of transport infrastructure across Eurasia to enhance its energy supply security, as well as to spur the export of domestic excess capacity in industries driven by its economic slowdown.

While BRI infrastructure projects are part of China’s bid to project geostrategic influence, Beijing has also used energy infrastructure projects to reduce specific vulnerabilities. Since China became a net importer of oil in 1993, the search for foreign sources of crude became a priority in China’s national strategy. Beijing’s going abroad policy provided incentives for its national oil companies to pursue overseas investments in targeted regions: Central Asia, Russia, Africa and the Middle East.

Russia and Central Asia have received close attention because of the geographical advantage of short supply lines and their geopolitical significance. Transporting oil overland represented a potential improvement over transporting oil from the politically and strategically vulnerable sea lanes, such as the South China Sea and Malacca Straits, through which more than 80% of China’s crude oil imports flow.

Chinese policy-makers consider the land-based supply routes less vulnerable than the sea lanes, where the Chinese navy does not have a major presence. China has invested in Central Asia’s energy sector for two decades, including developing the China-Kazakhstan oil pipeline and the Central Asia-China gas pipeline (Turkmenistan-Uzbekistan-Kazakhstan-China pipeline, operational since 2009), to lessen its heavy dependence on the Middle Eastern energy imports by sea.

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At the same time that China has developed energy projects to improve its geopolitical position, global events have shaped energy infrastructure projects. Notably, China and Russia agreed to close deals for cross-border oil and natural gas pipelines when relations between Russia and the West were at odds, due to Russia’s invasion of Georgia in 2008 and Russia’s annexation of Crimea in 2014, and when unexpected external factors such as the 2008 global financial crisis and collapsing oil prices compelled Russia to rely on Chinese capital.

Historically, Moscow feared that increasing its dependence on Chinese energy consumption would eventually constitute a threat to national security, as it would fuel the widening gap between a rising China and a declining Russia. However, changes in the geopolitical and geoeconomic environment put more pressure on the Russian economy and served as a key driver to finalize cross-border agreements between the two countries.

On China’s end, there have been strong market and geostrategic incentives to diversify its energy import portfolio with Russian oil and gas, especially as its relations with the US have been getting more complicated. Beijing views pipelines between China and Russia as safer than other land-based pipeline routes, such as the ones from Central Asia to China, because the latter crosses borders of multiple countries and is closer to US military bases in Afghanistan and the Middle East.

Another example of the increasing link between geopolitics and infrastructure is South Korea’s vision for infrastructure development under its “New Northern” and “New Eastern” policies. The Moon Jae-in administration has laid out a vision intended to be compatible with the goals and priorities of both China and the US, and with the current changing geopolitical landscape on the Korean Peninsula.

The US, in collaboration with Japan, is refining its “Free and Open Indo-Pacific” strategy, which aims to advance free markets and freedom of navigation in the Indian and Pacific Oceans. Concurrently, the Moon administration is offering a strategic vision that aims to be independent of both the Indo-Pacific strategy and China’s BRI, and also to overlap with converging interests. At the 2017 Eastern Economic Forum in Vladivostok, President Moon Jae-in proposed expanding South Korea’s cooperation with Russia on joint infrastructure, including ports, railways, natural gas pipelines, electric grids and Arctic shipping lanes.

Cooperation with Russia is a central component of South Korea’s New Northern Policy, because new infrastructure projects that include North Korean participation can alleviate tensions between Seoul and Pyongyang over denuclearization of the Peninsula. At the same time, in 2017 the Moon administration’s announcement of its New Southern Policy outlined a set of core initiatives, including energy infrastructure, to strengthen its economic ties with ASEAN countries. In this way, South Korea has chosen to be a strategic balancer between powers by diversifying its energy partnerships.

South Korea’s balancing act is not an anomaly, but instead a harbinger of what is to come, as the current trend of cross-border energy infrastructure network across Asia and Eurasia reshapes Washington’s role in the world, its strategic pursuits and its energy security goals. This changing landscape of geopolitics and energy markets is different than it was in the late 1990s and the early and mid-2000s, when the US more actively sought to influence the geography of energy transport routes from the Caspian region in order to limit Russia’s control over European oil and gas markets, as well as over the scale and direction of energy supplies to Europe and Asia.

Today, China and Russia have become more capable and active in pursuing their national energy interests. Regional powers such as Azerbaijan and Turkey, whose policies in the 1990s and early 2000s were strongly pro-Western for both political and economic reasons, now want to avoid direct competition and maintain pragmatic relations with Russia and China. Also, China’s rising political and economic power in the region and its strengthened energy and economic ties with Russia and other countries will likely weaken the US position in Asia.

Therefore, the future of collaboration on cross-border energy infrastructure will look increasingly like the case of South Korea. Countries will aim toward strategic balance, in an attempt to avoid direct conflict in an era of great competition for power.

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The views expressed in this article are those of the author alone and not the World Economic Forum.[/box]