Leading researcher of the Center of Northeast Asian Studies and SCO of the Far East Institute of RAS Vladimir Matveyev’s speech theses during the SCO Business Council’s roundtable (December 25, 2008)
The world crisis has had a dramatic impact on post-Soviet territory and, first of all, Central Asian economies. According to the data of IMF, they are suffering from crisis more than many other countries, which is connected with their exports orientation to oil and gas and other raw materials. In conditions of global crisis not only oil prices but also other raw materials’ ones have dramatically dropped. Under developing world recession resource demand keeps on falling. After oil and oil products prices drop, natural gas prices will also begin to fall in the European market.
In the gas market of the post-Soviet space serious changes occurred towards 2009. It is connected with the fact that as far back as 2008 Russia (in the name of “Gazprom”) had to make unprecedented arrangements with gas-producing countries of Central Asia: from the beginning of 2009 gas release prices formed on the principle of “net back.” It was expected to raise gas prices for gas producing countries, and increase currency earnings.
However, current events in the world market for hydrocarbons show once again the downside of heavy dependence of raw-materials economies on world market fluctuations. Sharp foreign currency earnings reduction boomerangs against state budget revenues of these countries, and with it has an adverse effect on national currencies.
And what is more, many former Soviet countries linkage to raw materials in conditions of the deepening global crisis has another downside. It is a problem of foreign financing. Raw materials market, especially the oil and gas one, considerably depends on extraneous capital to be able to implement capital-intensive designs. One of the world crisis sensible consequences is a reduction in the availability of foreign banks credits. Market of capitals is in frozen condition, that is why access to foreign financing has considerably reduced. All in all in 2009 volume of bank arrears, as predicted by S&P, for example, can reach in Russia 10% of all credit portfolio, in Kazakhstan – up to 20%.
Gloomy colours are added to joyless picture of severe economic situation of raw materials economies by high corporate debts in currency of materials sector’s companies. After all, many companies require state support.
Of course, the economic crisis frustrated a lot of plans. Today, new rules of game and market players’ functions adjustment will be made in extreme conditions of economy compression, investment programs and companies strategies review, deficiency in financial resources.
Yet the crisis introduces not only disharmony but also some positive. It allows to appraise economies prospects in a new way, as well as speed up their integration and renovate cooperation in many structural sectors. It is also of great importance to such an international integration group as the Shanghai Cooperation Organization.
Global financial crisis negative consequences manifestation in the real economy of the most world countries requires urgent anti-crisis measures. Nevertheless, right now it is justified to create a foundation for long-term decisions, that must lead to stable economic development.
All that is associated with formulation of long-term strategic planning documents. That is not to say that the SCO member states are not engaged in this planning, but there are some particularities.
At present, Russia actively improves long-term social and economic development concept, so called concept-2020, which is very important in the context of the world financial crisis and ways of its overcoming. Kazakhstan also has its Country Development Strategy covering the period till 2030. Some other Central-Asian countries have such documents as well. China focuses on long-term strategy documents too. These strategies remain major datum point for national courses. However, they are acting severally. Thereby a possible economic effect of multilateral economic integration of the SCO countries is missed. Meanwhile there are proposals for high-efficiency prospective joint projects development, above all in power engineering and transport.
There are by now on the Shanghai Cooperation Organization space, at least, three major problems - ecological, transport and energy ones. In this case, efforts combination of all the SCO member states and observer countries is of paramount importance to them.
The third session of the SCO Forum held in Beijing in May 2008 showed the Chinese party also began to place primary emphasis upon necessity for strategic studies enhancement within this organization.
To our opinion, there came a time of new stage of the group development, when it is not productivity of individual though large national corporations or countries that is of importance, but overall efficiency of joint investment projects, first of all, infrastructure ones.
Today’s problem of universal importance in conditions of deepening world crisis and uneven recession in demand for energy resources in different countries is unbalance of interests of energy resources manufacturers and consumers.
On this basis, in conditions of developing world energy instability and increase of energy source materials risk the SCO countries energetic cooperation is of outmost importance. Here is a series of positive opportunities. They consist of gas resources export coordination on the ground of corresponding institutes and infrastructure development. As is seen from taken measures, Russia is determined to and has a possibility to create such a coordinating organ of gas exporting countries.
Countries coordination on a Eurasian scale is quite possible too. It concerns not only gas exporting countries, but also consumer ones. So much more that there is an initiative advanced at the Shanghai Summit of the Heads of the SCO member states in 2006 by the then President of Russia Vladimir Putin on formation of such institutional structure as the SCO Energy club, where observer countries could also take part. It is within the framework of the Energy club that energy policy coordination of the Organization countries is possible.
Until recently the issue of an Energy club formation has been delayed. In the meantime, advantage of this step is obvious. Such institutions establishment in the SCO space (or, at least, in Russia and Central Asian region), becomes one of the decisive factors for competitive ability maintenance of Central Asian gas producing economies. A coordinating organ will make gas consumers deal with an alliance of gas producing countries, where Russia would be permitted to form regional market and establish its Eurasian “Gas OPEC”.
Within the scope of the SCO Energy club it is also reasonable to create a new financial and production energy and transport infrastructure for energy resources market. New international financial institutions formation is of great importance here, that will ensure financial flows against real barrels and gas real cubic meters of gas producing countries. Construction of a single pipeline and energy infrastructure of the SCO space and neighbouring Asian countries meets the SCO’ s strategic interests, in particular, integration of oil- and gas pipelines of Central Asia, Siberia and Russia’s Far East, as well as APR countries in order to provide free energy resources market. For these purposes Russia tries to conduct an active dialogue with individual countries of the Asian-Pacific Region.
The sense of any energy dialogue also consists of national energy strategies compliance. The fewer contradictions between them, the higher level of regional energy cooperation.