Nicholas Gwosjev: The riots in Kazakhstan subsided, and another problem began to surface

【Text/ Nicholas Gwos Jeff Translation/Observer Network by Guan Qun】

Has the West's pursuit of green energy and its desire to meet climate change goals indirectly trigger kazakhstan's current turmoil? This shows what is the relationship between environmental policy, energy options and Eurasian geopolitical stability?

Recall that for years, dictatorships in the Middle East seem to have been living in the shadow of precariousness. In 2008, a series of political protest movements in Egypt ended in failure and posed no serious threat to the regime of Hosni Mubarak. However, the 2010 european drought, which led to massive restrictions on grain and other food exports in Russia, and the replacement of food as the main product of agriculture by biofuels in the early 21st century (in part due to new energy prices), made it more difficult for governments throughout the Middle East, particularly in Egypt, to subsidize food prices and reduce various costs of living. Egyptians already harbored a lingering grudge against the government's level of governance, and the quadrupled price of bread in Egypt finally triggered the "Tahrir Square Revolution."

Over the past two years, Western governments and energy companies have come under increasing political and shareholder pressure to abandon the production and use of hydrocarbon energy in favor of green energy in the future. U.S. shale gas producers, already frustrated by the 2020 Saudi-Russian oil price war and the subsequent COVID-19 pandemic, have now interpreted that the current U.S. administration is no longer prioritizing U.S. energy self-sufficiency (and export capacity) at the expense of climate and the environment.

Western energy companies have been reluctant to make a new round of large-scale investment in oil and gas production. Despite the uncertainty created by the Opmikharong outbreak, oil (and gas) demand is climbing and supply is tightening. As Tsvetana Paraskova reports, "In the last week of 2021, hedge funds are buying oil futures and options contracts at the fastest pace in four months." ”

To compensate for the losses caused by falling stock prices, oil sellers are seeking to maximize profits, partly to ease the overall losses caused by the pandemic and to support their capital reserves. The combination of the increasingly large OPEC Group's disciplined control of oil production growth and the one-time release of strategic petroleum reserves in other countries will also put real downward pressure on oil prices, which means that the oil supply will continue to exceed demand.

The oil consortium, established by Kazakh state-owned enterprises in partnership with their Western partners, has seen oil demand grow, with Western and Asian consumers willing to pay higher prices for oil (various oil "premiums" above benchmark world market prices to guarantee delivery). There may be a fatal calculation buried here. A major by-product of Kazakhstan's export of crude oil is "liquefied petroleum gas" (LPG), a mixture of hydrocarbon gases released during oil production. Liquefied petroleum gas (propane used by many Americans) is Kazakhstan's main energy product for heating, cooking and driving cars (such as car gas). For years, LPG has been sold to domestic consumers at subsidized prices well below the cost of production. In addition, the State subsidizes other commodities.

Demonstrations broke out in Kazakhstan

The government's guarantee of the basic livelihood of citizens in exchange for citizens staying away from politics is a deal we can see in many totalitarian countries. As we have seen in Egypt and Venezuela, protests always follow when a government is powerless to artificially distort commodity market prices to fulfill this tacit social contract.

The decision to lift the cap on LPG prices has indeed provoked long-standing anger at the current situation in Kazakhstan, especially at a time when the notion is prevalent among the populace that if large profits are not stolen by the elite, energy-producing countries like Kazakhstan should be able to guarantee a higher standard of living.

At the same time, it could spur other energy producers to try to keep more energy "domestic." While not affected by the events in Kazakhstan, Mexico recently announced on its own that its state-owned oil companies would begin to reduce oil exports to ensure that energy is used more domestically, a move that could further tighten international energy markets.

The protests gave President Qasim Yumait Tokayev an excuse to completely dismiss the "first president" Nur-Sultan Nazarbayev's Chairman of the State Security Council and remove several of Nazarbayev's key aides. In fact, the Kazakh twin-peak co-governance model that has lasted since 2019 has come to an end. Because measures to restore LPG price caps and commitments to implement political and economic reforms will take time to bear fruit, and because of concerns about the loyalty of the security forces, Tokayev has asked the Collective Security Treaty Organization for security assistance. The question now is whether the arrival of peacekeeping and gendarmerie forces from Russia, Belarus, Kyrgyzstan and Armenia will prompt The Kazakh military and security services to submit to Tokayev's command and disperse the protests, thereby consolidating Tokayev's position, or will their arrival further exacerbate the unrest?

In addition, Kazakhstan is very important to both Russia and China. Without the Kazakh economy, there would be no Eurasian Economic Union and many important Russian-Kazakh joint ventures. Moreover, at a time when Russia has not yet decided what attitude to take toward Ukraine, the long-undefended Russian-Kazakh border is a weak link that Russia does not want to face. For China, Kazakhstan is the cornerstone of the "New Eurasian Land Bridge" in its Belt and Road Initiative, and an important supplier of energy and resources to China. Worldwide shortages of natural gas supplies have further disrupted supply chains (U.S. LNG tankers have left their traditional Asian customers in favor of crazier European buyers), and the crisis in Kazakhstan has been a test of whether Moscow and Beijing share a common view of how to manage central Asian geopolitics.

Just as energy is an important undercurrent of Russian-Ukrainian tensions, concerns about disruptions to energy supplies in major energy-producing countries have wide-ranging negative implications. As Europe's energy crisis deepens, Germany continues to face the test of whether to slow down its administrative approval process for the Nord Stream 2 pipeline project. While LPG is not natural gas (or pipelined or delivered in the form of LNG), the next wave of protests disrupting oil and gas exports will put more pressure on the new German coalition government to take steps to improve Germany's energy and economic security environment, even if it leads to a breakup of the union.

Finally, the events in Kazakhstan were a wake-up call for other Governments in Eurasia, particularly Azerbaijan and Russia. The social contract is important, and economic issues inevitably spark political protests. Kazakhstan, which is seen as having a fairly stable government and institutions in general, has shown its vulnerability, which other Governments do not welcome. It is also questionable whether Nazarbayev's "way" of succession (handing over day-to-day work to successors while retaining the responsibilities of the country's leaders and thus not fully "retiring") is realistic, and Vladimir Putin is drawing on this approach to try to maintain his career and position in Russian politics after 2024.

The situation is changing rapidly, and the situation is changing so rapidly that opinions and perceptions have not kept pace with the development of the situation. This suggests that political issues such as energy use and climate change, often seen as a domestic policy issue, can and will inevitably have a growing impact on global geopolitics and geoeconomy.

(Observer.com translated by Guan Qun from the U.S. "National Interest" website)

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