Photo: iStock
Szabolcs Veres
30/08/2024 06:00
According to the International Energy Agency's World Investment 2024 report, the total investment across all energy sectors worldwide is expected to surpass 3 trillion dollars in 2024. Specifically, the agency forecasts that 2 trillion will go into clean energy initiatives with the remaining 1 trillion dollar aimed at oil, gas, and coal projects.
In November 2023, ACWA Power, whose largest shareholder is the Saudi sovereign wealth fund, announced that it had signed an agreement with the Kazakh Ministry of Energy and the Kazakh Investment Development Fund for a 1 GW wind power project worth 1.5 billion dollars. With this project, Central Asia became ACWA Power's second-largest investment market. Since 2022, the company, which is majority-owned by Saudi Arabia, has also announced numerous projects in Uzbekistan aimed at harnessing Uzbekistan's wind energy.
These investments in the Central Asian renewable energy sector are primarily due to Saudi Arabia's ambitions to expand its market share in the global renewable energy industry. In addition, Masdar and ACWA Power are at the forefront of clean energy initiatives undertaken by two OPEC members in resource-rich Central Asia.
Within a common region
In his speech at the first GCC-C5 summit in Jeddah in July 2023, Saudi Crown Prince Mohammed Bin Salman twice referred to Central Asia and the Middle East as „ common region". This rhetoric could shape a new geographical concept that decentralizes Russia and Central Asia. Today, Russia and China are close partners. They are actively engaged in Central Asia: China economically and Russia politically. However, the Central Asian leaders want to diversify their partnerships. The Gulf states offer excellent opportunities for this.
Surprisingly, this shift to the Middle East is not necessarily bad for China or Russia. An increase in investment and financial flows[1]from the Gulf states to Central Asia could benefit both Moscow and Beijing. Their development interests in the region are substantial.
Global outlook
The strategic relations between the Arab Gulf states and Central Asia have gained considerable importance due to recent geopolitical and economic developments. The Gulf states are gradually emerging as a new global strategic hub, driven by unprecedented economic growth and prosperity. At the same time, the strategic economic importance of the Central Asian states is increasing. The conflict in Ukraine has necessitated alternative transportation routes, shifting the international focus to Central Asia.
Central Asia is also working to diversify its economic relations. These states, which were traditionally dependent on Russia and China, are now forging new links with the Arab Gulf states.
As far as energy cooperation is concerned, relations between the Persian Gulf countries and Central Asia should be understood in a broader context. This includes both the renewable energy sector and the fossil fuel industry. This broader context also includes the internal changes in both regions and the rise of the Gulf states as global players.
[1] In general, the Gulf states are currently in a very strong position in terms of investment. In terms of investment, there are four unavoidable funds in the region where capital is concentrated: SFH (Saudi Arabia), QIA (Qatar), and Abu Dhabi Investment Authority (United Arab Emirates). These funds have assets of around 2.2 trillion dollars.
The author is a researcher at the Eurasia Center