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It discusses the added value that the Energy Charter Treaty (ECT) can potentially offer to Chinese external energy security by protecting Chinese outbound investments in countries along the Belt and Road. The geographical scope of the ECT to a large extent covers China’s main energy partners along the ‘Silk Road Economic Belt’. In addition, participating in the modernization of the ECT could help China shape the treaty to reflect the special characteristics of its foreign energy investments and adjust this mechanism to the benefit of China’s increasing energy activities in the large number of BRI counterparties.
Sets the scene for the book’s regulatory analysis of energy market reform in Central Asia by describing the structure of Central Asia’s energy sector, its investment requirements, the social problems of meeting these requirements and the geopolitical connotations of Central Asian energy infrastructure investments. This background is essential to grasp the main objective that market reform is supposed to achieve (i.e., to ensure the secure and reliable supply of energy at affordable conditions to Central Asia’s population and industry) and to appreciate the context in which reform takes place (i.e., energy poverty and geopolitics). The analysis focuses on the national energy policies (strategies) of the Central Asian states and the reports by multilateral development banks in order to identify the main energy security challenges the region is facing and understand the political priorities which underpin the long-term development of the region’s energy infrastructure. The analysis highlights the contribution that external actors can make to overcome the financing conundrum of energy security in a context of energy poverty and discusses the geopolitical implications of this foreign involvement in Central Asian energy security (e.g., Chinese and Russian infrastructure investments along the New Silk Road).
Focuses on the reform measures needed to improve payment collection rates and improve the financial viability of energy companies, in the context of the market-based reorganization of energy supply. Besides artificially low energy tariffs, non-payment of energy bills and theft of energy are major causes of the financial difficulties which the utilities face in Central Asia, and in transition and developing economies more generally. Chapter 7 examines the tools that Central Asian law provides to the energy companies to enforce the payment of energy bills and critically discusses judicial practice in the field. Surprisingly, the courts generally play an active role in the enforcement of payment claims. However, utilities find it much more challenging to enforce payment claims against enterprises of strategic interest (e.g., agricultural producers and aluminium and mining companies). The political sensitivity of the energy supply often predetermines the outcome of judicial decisions in non-payment cases.
Focuses on consumer protection in the context of energy market reform. Given the region’s energy poverty, consumer protection must be placed at the centre of the reforms. From a procedural perspective, public consultation could make an important contribution to the public acceptability of tariff reforms, but this would require a frank admission of the real causes of energy insecurity in Central Asia, including the highly sensitive topics of corruption and discrimination in favour of strategic enterprises. Judicial practice in Kazakhstan and Kyrgyzstan demonstrates that courts have a role to play in enforcing consumers’ procedural rights. In addition to procedural protection, subsidies are necessary to protect the most vulnerable segments of the population against tariff increases. However, subsidizing the use of energy traps consumers into energy dependency and thus exacerbates the financial impact of future tariff increases. In order to break the vicious circle of low energy pricing that currently undermines Central Asian energy security, subsidies must be channelled away from energy consumption and into efficiency improvements.
Building on the energy law literature on regional market integration, Chapter 3 focuses on the regional dimension of energy market reform in Central Asia. Energy security does not equate with energy self-sufficiency. Given the uneven distribution of resources and the high cost of energy self-sufficiency, states are often bound to cooperate with each other to ensure the security of their energy supplies. Because the Central Asian energy infrastructure was developed during the Soviet era without regard to state borders, the collapse of the Soviet Union had a significant impact on the region’s energy security. As distrust and geopolitical tensions built up, the Central Asian states started to prioritize national energy independence and to focus on the security of their individual national energy systems, at the expense of regional integration. Chapter 3 discusses Central Asian energy market integration agreements and critically reflects on the institutional constraints on the implementation of these agreements (e.g., the lack of trust between the parties, the political sensitivity of energy pricing and the geopolitics of energy in the region).
Examines the reform of Central Asia’s energy utilities in the light of the principles of corporatization, unbundling and privatization defined in the reform textbook literature and advocated by development banks. Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan restructured, or are in the process of restructuring, their national energy (mainly electricity) utilities. Although restructuring has, at least to some extent, improved payment collection rates, it has generally failed to transform the utilities into financially viable entities. Chapter 4 therefore discusses Central Asia’s corporate reform process, and examines the institutional and geopolitical obstacles that have stalled this process. As illustrated by the discontinuation of the restructuring of the Kyrgyz gas utility following its purchase by the Russian state-owned company Gazprom, strategic investment in energy utilities can end reform initiatives. The analysis demonstrates that, in regions of high geopolitical importance, privatization can be an obstacle to reform rather than a force for good.
Builds on the theory of energy tariff regulation to explain the delicate balancing of investors’ and consumers’ concerns in Central Asia’s energy laws and regulations, as well as in judicial and regulatory practice in Central Asia. The social compact governing energy pricing, the negative perception of profit and popular frustration with the mismanagement of utilities makes finding the right balance between utilities and consumers’ interests one of the most significant challenges for tariff reform in general, and for reform in Central Asia in particular. Given the institutional obstacles to tariff reform, efforts to improve tariff legislation are of limited effectiveness in the absence of guarantees of enforcement of the utilities’ rights. Surprisingly, judicial practice in Central Asia (in particular in Kazakhstan) demonstrates that, in countries where the judiciary is friendly towards the government, the courts still have a key role to play in enforcing the tariff laws. This role is quite different to that usually advocated in the rule of law and market reform literature. The case of Kazakhstan illustrates how the courts can contribute to the legitimation of tariff reform by shifting the blame for tariff increases from the government onto the judiciary, thereby helping win public acquiescence in much-needed tariff reform.
Securing a stable and reliable energy supply in affordable and environmentally friendly conditions is the ultimate objective of energy law and policy. Energy systems must function ‘free from serious risk of major disruption of service’. Consumers must have access to a sufficient quantity of energy at socially and economically acceptable prices, but at the same time, efforts to mitigate climate change, protect local air quality and address water scarcity must not be undermined. States must therefore ensure that adequate investments are made in energy production and network capacity, without imposing an unreasonable financial burden on industry and the general public. The stakes are high. The failure to deliver energy security undermines economic development and social and environmental protection, and can also threaten social peace and stability.
Examines the integration into Central Asian energy law of the principles of demonopolization, price deregulation, non-discriminatory access to the network and regulatory independence. The analysis seeks to determine the extent to which the Central Asian energy market structure was effectively reorganized on the basis of these textbook principles. The failure to create a competitive market environment is ultimately attributed to formal and informal institutional constraints, including Soviet energy policy legacies and the readiness of foreign (e.g., Chinese and Russian) investors to invest without any tangible evidence of commitment to reform.
The conclusion draws together the analysis of the various aspects of energy market reform and examines how these different reform measures have helped address Central Asia’s energy security challenges. The focus is on the regulation of the reformed energy markets and on resistance to the implementation of that regulatory framework. The analysis is of broader relevance. It contributes to the conceptualization of energy market regulation in developing and transition economies in general, and to the understanding of institutional constraints on the implementation of the reform textbook in regions of particular geopolitical importance.
Guaranteeing energy security is one of the most complex challenges of energy law and policy. Energy insecurity threatens economic development, social peace and stability. This book focuses on energy security in the strategically important region of Central Asia. The region holds huge energy reserves, but its energy systems are highly inefficient and unreliable, and thus require urgent reform. However, endemic corruption, discrimination and the strong centralization of power have so far blocked initiatives to reorganize energy supply. The case of Central Asia is uniquely relevant for understanding the informal constraints on energy law and policy. In addition, Central Asian energy insecurity illustrates the impact of geopolitics on the regulation of energy markets. The region is strategically located in Russia's sphere of influence and along China's New Silk Road. Its energy situation highlights the complex interactions amongst energy law, geopolitics and institutions.