Prompted by the war in Ukraine and increasingly fraught trade relations with the United States, the European Union is on the hunt for natural resources.
That search is increasingly focused on Central Asia, as the recent European Union-Central Asia summit in Samarkand showed. The summit, at which the EU announced nearly 12 billion euros in investments in Central Asia, opened a “new chapter” in the relationship between the two regions, European Commission President Ursula von der Leyen said, The Caspian Post reports citing Eurasianet.
But now that the summit’s heady rhetoric has faded, experts say the EU’s road to Central Asian resources is long and winding. “We’re not talking short-term here for sure,” Aruzhan Meirkhanova, a senior researcher at the Center for Regional Analysis at NazarbayevUniversity in Astana, told Eurasianet in an interview.
Natural gas needed by European economies may never flow in serious volumes westward out of Central Asia on routes bypassing Russia, some observers believe. The primary obstacles are geography and infrastructure.
The cheapest and fastest way to move goods from Central Asia to Europe remains the Northern Corridor, though Russia, which Europe wants to avoid. The recent drone attacks on the Caspian Pipeline Consortium’s network highlighted European worries. Meanwhile, the southern route passes through sanctioned and underdeveloped Iran.
That is why European hopes are pinned to the much-vaunted Middle Corridor across the Caspian Sea, South Caucasus and Black Sea to Europe. That route is the focus of European investments, with 3 billion euros of the 12 billion announced in Samarkand earmarked for infrastructure development. That is on top of the 10 billion euros pledged to the Middle Corridor last year that von der Leyen told the summit will reduce transit times in half to 15 days.
Despite the hype, the corridor still needs massive investments in road and railway networks and port capacity expansion, especially at Aktau on Kazakhstan’s Caspian coast.
“They finally put numbers on the table,” Aliya Tskhay, a Scotland-based expert on Central Asian energy, told Eurasianet in an interview about the EU summit. “In that respect, it is quite a positive.”
But the 12-billion-euro commitment spread across five countries and several initiatives - “that is really, really underwhelming. It is not really enough,” Tskhay said, pointing to the European Bank for Reconstruction and Development’s 2024 estimate that Middle Corridor infrastructure alone needs 18.5 billion euros in upgrades.
In an analysis that focused on the region’s potential to supply the United States, Atlantic Council experts were even more skeptical of whether Central Asia is worth the investment. “In the short and medium term, low export capacity, high transit costs, geopolitical volatility, and a high-risk investment environment significantly reduce the region’s commercial viability,” they wrote.
Slim Chances for Natural Gas
Natural gas imports from Russia to the EU have fallen by two-thirds since the Russia tanks rolled across Ukraine’s borders in 2022, hiking prices and slowing economies across the continent, according to Bruegel, a Brussels-based think tank.
That sent Europe searching for new supplies from Algeria to Azerbaijan. Hopes that Turkmenistan, with the world’s 5th largest proven reserves, can help fill the gap were boosted by a swap deal launched in March of this year to eventually send up to 2 billion cubic meters of gas a year to Turkey. Hungary also inked a framework for gas supply with Turkmenistan in 2023.
But swap deals are inherently unwieldy because they require delicate cooperation from the participating countries and are limited by gas reserves of each country in the chain of swaps, Tskhay said.
It is unclear how much gas Turkmenistan has available due to its major and long-standing commitments to China, which are governed by contracts that are not public, Tskhay added.
And, even if all 2 billion cubic meters of Turkmen gas in the Turkish swap deal ends up in Europe, which has not yet been seriously discussed, that represents about 2 percent of the supply Europe lost from Russia.
What could really start Turkmen gas flowing to Europe is construction of the Trans-Caspian Pipeline along the Middle Corridor, which has been discussed since the 1990s. But the prospects for that project are vanishingly small, Tskhay said. A 2018 convention on legal status of the Caspian Sea gave each of the littoral states effective veto power over major projects in the sea. Would Russia sign off on a pipeline that would compete with its gas supplies to Europe?
The “more or less obvious answer is a ‘no,’” Tskhay said.
Getting Oil Around Russia Holds Promise
The prospects for oil supply from Central Asia, principally Kazakhstan, are much better. The country currently supplies 13 percent of Europe’s oil, Kazakh President Kassym-Jomart Tokayev said at the summit. About 80 percent of that supply passes through the Caspian Pipeline Consortium via Russia to the Black Sea.
But Europe wants more of it flowing through the Middle Corridor. Tokayev referenced those efforts in his remarks to the summit, underlining that Kazakhstan is “developing alternative routes to transport raw materials” to Europe.
Though the current flow of oil to Europe through the Middle Corridor by tanker across the Caspian is “a drop in the ocean,” the “tiny, tiny steps” of progress show the route has considerable potential in the coming years, Tskhay said.
A Long Game for Critical Minerals
EU attention at the Samarkand summit was fixed mainly on critical minerals, a key to the continent’s clean energy transition. Central Asia’s wealth of critical minerals and rare earths has sparked great-power competition over access, with China, which has been investing in Central Asian mining operations for years, leading the pack.
Kazakhstan has major reserves of lithium, copper, lead and rare earths like neodymium, cerium and lanthanum. Uzbekistan has announced a $2.6 billion drive to develop its critical minerals sector and Kyrgyzstan and Tajikistan have also been promoting recent discoveries.
European leaders made clear in Samarkand that they want to make a major play, pledging $2.5 billion toward the sector’s development, and tried to distinguish themselves from their rivals, with von der Leyen promising Europe would help develop local processing capacity.
That should be music to Central Asian ears, Meirkhanova said. “Very few people, I think, want the situation to repeat like … oil,” she said. “In the sense that [critical minerals] will bring a lot of investment with no development.”
Aside from Kazakhstan’s Ust-Kamenogorsk Titanium and Magnesium Plant, most processing currently takes place in China and Russia, according to the Atlantic Council.
In addition to processing, many of Central Asia’s rare earth deposits must be surveyed. The discovery of potentially massive rare earth mineral deposits near the city of Karaganda in central Kazakhstan that the government publicized in the days leading up to EU summit underscores this point. The chief engineer at a firm that conducted the geological surveys of the area called the eye-popping estimates of 20 million tons of minerals, which would give Kazakhstan the third largest reserves in the world if confirmed, “very approximate” in an interview with RFE/RL.
Exploration of the potential deposits will take “about six years or more,” the engineer told RFE/RL.
Though the EU pledges are not enough to complete the infrastructure work to bring minerals to Europe, the bloc’s focus should be on first steps, like helping Central Asian countries create legal frameworks to extract the minerals, reducing paperwork at borders and funding some of the geological exploration, Mierkhanova said. The EU commitments are “more than enough” to do that, she said.
Once the EU creates a conducive environment, Mierkhanova said, “private investments will come, and you will not even need the EU money.”
That seems to be Europe’s intent. At the summit, von der Leyen announced a European forum for private investors will take place in Uzbekistan in June.
Tskhay estimates it may take 20 years of investment for Central Asia to become a significant mineral supplier to Europe, but the engagement now is necessary for the bloc to get its foot in the door for opportunities many years down the road.
“What Europe needs to solidify is that access and kind of commitment that some of those materials will come from Central Asia,” she said. “And that, I think, realistically will happen.”
