Can Collaboration Between Two Regions Rich in Fossil Fuels Lead to Development in the Renewable Energy Sector?

Background

Over the last year, there has been increased engagement between the states of the Gulf Cooperation Council (GCC) and Central Asian states (C5), particularly in the energy sector. 2023 saw several steps towards closer inter-regional connections, including the first GCC-C5 Summit held in Jeddah in July, participation of Central Asian states in the Arab-Islamic extraordinary summit in November, and a stream of announcements regarding future investment by the Gulf in Central Asia, particularly in renewable energy projects. The economic diversification goals of the Arab Gulf, combined with the high potential for renewable energy development in Central Asia, have led two regions that have been closely associated with fossil fuel extraction to collaborate on the advancement of renewable energy production.

Several aspects of these renewable energy investment deals are revealing of potential future trends, both in the development of renewable energy projects and in the engagement between these two regions. They are an example of collaboration between resource-rich “developing countries” whose economic gains through fossil fuel extraction are being limited by climate imperatives. These deals show how a shared experience as economies closely connected to fossil fuel extraction can, and likely will, contribute to the development of renewable energy projects. Such projects between the Gulf and Central Asia suggest a step towards energy transition beyond “green colonialism.”

Recent Renewable Energy Deals: State-Owned Entities and Potential Competition

In November 2023, ACWA Power, a multi-ownership company of which the largest shareholder is the Saudi Public Investment Fund, announced that it had signed an agreement with the Ministry of Energy of Kazakhstan and Kazakhstan’s Investment Development Fund for a 1GW wind energy project priced at US$1.5 billion.¹ With this project, Central Asia became the second largest investment market for ACWA Power.² Since 2022, several projects led by ACWA to harness wind power in Uzbekistan have also been announced.

These investments in Central Asia’s renewable energy sector can be read as motivated by ACWA’s ambitions, or indeed Saudi Arabia’s ambitions, to expand its market share in the international renewables sector, rather than indicating expanding interregional cooperation.³ Asna Wajid, Research Assistant at the International Institute for Strategic Studies’ Middle East Programme, describes both ACWA Power and Masdar (the UAE’s state-owned renewables company) as “highlight[ing] the UAE’s and Saudi Arabia’s ambitions to expand their respective market shares in the renewable-energy sector internationally.”⁴

Nevertheless, partially state-owned enterprises like ACWA and Masdar are likely to play an important role in the development of Gulf-Central Asian relations. Writing for The Arab Gulf States Institute in Washington in February 2024, journalist Dania Saadi noted that “Masdar […], and its Saudi peer, ACWA Power, are leading the two OPEC members’ clean energy projects in energy-rich Central Asia.”⁵ Indeed, at the COP28 summit a deal was announced between the UAE and Kazakhstan involving a joint development agreement for a 1GW wind power project with Masdar. Announced just a month after the Saudi deal, this hinted at possible competition between Gulf states for presence in the Central Asian renewables sector. The recent emergence of Nebras Power, a partially state-owned Qatari entity, as another potential investor in Kazakh renewable energy projects provides further evidence of these trends.⁶

Consequently, not only are partially state-owned entities likely to be at the forefront of forging GCC-C5 relations, but they may also become agents of a competition between Gulf states for space in Central Asian markets. Although in recent months increasing attention has been paid to the growing prominence of the Gulf in leading Central Asia’s renewable energy development, the full implications of the centrality of enterprises with significant state ownership in these investment deals and projects has not yet received adequate focus. Currently, there is insufficient evidence to determine whether the specific characteristics of GCC investments in Central Asian renewable projects will result in limitations or advantages.

Emerging Rhetoric of “Developing Nations” Within “a Shared Region”

During his remarks at the the first GCC-C5 Summit held in Jeddah in July 2023, Mohammed Bin Salman, Crown Prince of Saudi Arabia, twice referred to Central Asia and the Middle East as a shared region. First, he referenced the need to strengthen cooperation between the states in order to achieve safety and security in “our region” (minṭaqatnā); then, he described Central Asian states’ support for Saudi’s World Expo 2030 bid as reflective of aspirations for a better future “for our region.”⁷

This rhetoric of a shared region operationalises a new geography for Central Asia that de-centres Russia and positions Central Asia in contact with other decolonized states. Such a geography is not implausible. Irina Zviagelskaya, Chief Research Fellow at the Russian Academy of Sciences’ Institute of Oriental Studies, reminds us that at the time of the collapse of the USSR, the newly independent Central Asian states were initially “perceived by many observers as a future part of an expanded Middle East.”⁸ This language of a shared region implies a connection between the trajectory of the Gulf and Central Asian states as well as similarity in the challenges that they face.

One such common challenge was raised in the joint statement issued by the participants at the Jeddah summit, that included the heads of the GCC and Central Asian states: “the negative social and economic impacts resulting from response measures to climate change, especially those affecting developing countries that are most susceptible to these effects.”⁹ The clause identifies the states of the GCC and the Central Asian states on an equal status as “developing countries,” positioned in contrast to the developed world.¹⁰ This identification engages the perspective that the developing world is being regressively affected as climate change response seeks to repair the damage caused by the economic processes of the developed world. This perspective scored a victory with the launch of the ‘loss and damage fund’ at COP28, an outcome anticipated by the Jeddah summit statement that mentioned its hopes for the Dubai-based conference.

Rather than this perspective solely being used to defend fossil fuel extraction, it appears that this rhetoric of unity as “developing nations” in a “shared region” is contributing to collaboration in the renewable energy sector. At the GCC-C5 summit, President Tokayev notably remarked, in reference to the GCC and Central Asian states, that “our states hold the same or similar views on issues of global sustainable development.”¹¹ Through the recent renewable energy investment deals, these views on global sustainable development are being articulated by two fossil fuel rich regions on their own terms.

Could Renewable Energy Investment Lead to Cooperation in Other Areas?

Both Mohammed bin Salman and Tokayev raised the significance of collaboration on food security to interregional relations in their remarks at the Jeddah summit.¹² Saudi Arabia is reliant on food imports and the reliance is expected to increase in the future as water scarcity renders the cost of domestic agricultural production, particularly of wheat, untenable. Much of its imports come from distant countries — Brazil, USA, Poland, and Ireland — which not only raises food security concerns, but also incurs significant shipping costs given the distances.¹³ The wheat crisis following the Russian invasion of Ukraine not only limited supply but also highlighted the Gulf’s reliance on imported wheat and consequent vulnerability to international price fluctuation.^{14, 15} This context has led to a renewed urgency for cooperation in the agricultural sector.  

A GCC Secretariat report on strategic relations with Central Asia, written to coincide with the joint summit last year, positioned cooperation in the agricultural sector as a priority area of cooperation, second only to the energy sector.¹⁶ Kazakhstan is Central Asia’s largest grain producer and is able to export around half of its total grain produce each year, although its current exports are less than this.¹⁷ Consequently, the report describes Kazakhstan as “one of the five most important states of the world in terms of wheat production.”¹⁸ The development of connections between the two regions through energy investment deals may extend into the agricultural sector in the future.

Global Outlook

Describing the strategic relations with Central Asia, the same GCC Secretariat report states that “the importance of this strategic partnership has increased in light of geopolitical and economic developments, since the GCC states have become an important strategic pole in the global order, thanks to their unprecedented economic growth and projects for economic diversification and social transformation.”¹⁹

The strategic importance of Central Asian states in the global order is also increasing. As a result of the ongoing war in Ukraine, there is a need for alternative transport corridors. This has caused international attention to turn towards Central Asia and its potential for connecting Asian and European markets, via initiatives such as the ‘Middle Corridor.’ Central Asia, in turn, is looking to diversify its economic ties away from reliance on its traditional partners Russia and China, opening up to new connections such as with the Gulf.²⁰

The development of engagement between the Gulf and Central Asia, both in the renewable energy sector and beyond, should therefore be placed within a wider context. This context includes both internal transformation within the Gulf and its continuing rise within the global order, as well as the rise to prominence of Central Asian states as global actors.

1. ACWA Power, “ACWA Power Signs Roadmap Agreement for 1GW Energy and Battery Storage Project in Kazakhstan,” June 13, 2023, https://www.acwapower.com/news/acwa-power-signs-roadmap-agreement-for-1gw-wind-energy-and-battery-storage-project-in-kazakhstan/. ↩︎
2. ACWA Power, “ACWA Power Signs Roadmap Agreement for 1GW Energy and Battery Storage Project in Kazakhstan.” ↩︎
3. Asna Wajid, “The Diplomatic Surge Between the GCC and Central Asian States,” The International Institute for Strategic Studies, November 13, 2023, https://www.iiss.org/online-analysis/online-analysis/2023/11/the-diplomatic-surge-between-the-gcc-and-central-asian-states/. ↩︎
4. Wajid, “The Diplomatic Surge Between the GCC and Central Asian States.” ↩︎
5. Dania Saadi, “The UAE and Saudi Arabia Lead the Way on Central Asian Energy Pivot,” The Arab Gulf States Institute in Washington, February 28, 2024, https://agsiw.org/the-uae-and-saudi-arabia-lead-the-way-on-central-asian-energy-pivot/. ↩︎
6. Official Website of the President of the Republic of Kazakhstan, “President Kassym-Jomart Tokayev Took Part in the Kazakhstan – Qatar Investment Roundtable,” February 14, 2024, https://www.akorda.kz/en/president-kassym-jomart-tokayev-took-part-in-the-kazakhstan-qatar-investment-roundtable-1415636. ↩︎
7. Saudi Press Agency, “Remarks of Prince Mohammed bin Salman bin Abdulaziz Al Saud at the 2023 GCC-Central Asia Summit,” July 19, 2023, https://www.spa.gov.sa/26c65e0d98z. ↩︎
8. Irina Zviagelskaya, The Russian Policy Debate on Central Asia (London: Royal Institute of International Affairs, 1995), 1. ↩︎
9. Saudi Press Agency, “GCC-Central Asia Summit Issues Joint Statement,” July 19, 2023, https://www.spa.gov.sa/en/885fda0640u. ↩︎
10. Saudi Press Agency, “GCC-Central Asia Summit Issues Joint Statement.” ↩︎
11. Official Site of the President of the Republic of Kazakhstan, “Remarks of Kassym-Jomart Tokayev at the 2023 GCC-Central Asia Summit,” July 20, 2023, https://www.akorda.kz/ru/prezident-kasym-zhomart-tokaev-prinyal-uchastie-v-pervom-sammite-centralnaya-aziya-sovet-sotrudnichestva-arabskih-gosudarstv-zaliva-206553. ↩︎
12. Saudi Press Agency, “Remarks of Prince Mohammed bin Salman bin Abdulaziz Al Saud at the 2023 GCC-Central Asia Summit,” July 19, 2023, https://www.spa.gov.sa/en/5667fc9af0y. ↩︎
13. World Bank, “Saudi Arabia Food Imports by Country 2021,” https://wits.worldbank.org/CountryProfile/en/Country/SAU/Year/LTST/TradeFlow/Import/Partner/by-country/Product/16-24_FoodProd. ↩︎
14. General Secretariat of the Cooperation Council for the Arab States of the Gulf, “al-ʿAlāqāt al-Istrātījiyya bayn Majlis al-Taʿāwun wa-Duwal Āsiyā al-Wusṭā,” 10. ↩︎
15. Gulf Research Center, “Potential for GCC Agro-Investments in Africa and Central Asia,” September 2008, https://www.files.ethz.ch/isn/111335/Potential_for_GCC_Agro_5729.pdf, 5. ↩︎
16. General Secretariat of the Cooperation Council for the Arab States of the Gulf, “al-ʿAlāqāt al-Istrātījiyya bayn Majlis al-Taʿāwun wa-Duwal Āsiyā al-Wusṭā,” 10. ↩︎
17. US International Trade Administration, “Kazakhstan – Country Commercial Guide,” September 2022, https://www.trade.gov/country-commercial-guides/kazakhstan-agricultural-sector. ↩︎
18. General Secretariat of the Cooperation Council for the Arab States of the Gulf, “al-ʿAlāqāt al-Istrātījiyya bayn Majlis al-Taʿāwun wa-Duwal Āsiyā al-Wusṭā,” 10. ↩︎
19. Ibid, 3. ↩︎
20. Dania Saadi, “The UAE and Saudi Arabia Lead the Way on Central Asian Energy Pivot,” The Arab Gulf States Institute in Washington, February 28, 2024, https://agsiw.org/the-uae-and-saudi-arabia-lead-the-way-on-central-asian-energy-pivot/. ↩︎