Central Asia Relies on Gulf as it Targets Energy Transition
Since gaining independence in 1991, states in Central Asia and the Caucasus have historically had the strongest energy ties with Russia and China. Yet in the past 5 years, they have significantly expanded their energy cooperation with the member states of the Gulf Cooperation Council (GCC). This cooperation is unidirectional: Gulf companies and institutions are investing substantial capital in energy assets and infrastructure across Central Asia and the Caucasus, but not vice versa.
The GCC and Central Asia have a history of ties in the traditional energy sectors of oil and gas, but the new interregional cooperation prioritizes alternative energy sources—including solar, wind, hydropower, and hydrogen. This shift reflects a change in the GCC’s wider energy diplomacy agenda: to transition from being the world’s leading fossil energy center to being the world’s leading energy center more broadly. Recent Gulf investments in Central Asia and the Caucasus are the active edge in this effort.
To explain why these new Gulf-Central Asia energy connections are being developed, it is necessary to understand who is involved in bringing them to life. In both regions, the energy sector is defined by blurred lines between private and government-owned companies. The result is that the distinction between private and public interests at stake in strategic energy decisions can also be blurry in both regions. Nonetheless, the new Gulf investments in Central Asia’s energy landscape are typically led by a GCC company or a GCC government, though their specific project is routinely supported by the other.
Today, the two largest Gulf companies involved in developing new energy assets in Central Asia and the Caucasus include the UAE-based Masdar, and Saudi-based ACWA Power. Masdar, once a wholly-owned subsidiary of the UAE’s Mubadala sovereign wealth fund, is now jointly owned by Mubadala, the Abu Dhabi National Oil Company (ADNOC), and Abu Dhabi National Energy Company (TAQA) since December 2022. ACWA is 44 percent owned by Saudi Arabia’s PIF sovereign wealth fund, alongside a number of wealthy individuals and institutional investors. In both cases, Masdar and ACWA cannot be considered solely private or solely governmental companies. While they are inarguably driven by basic financial motives, they also remain accountable to the political elites in the UAE and Saudi Arabia, who are well represented on their boards and among their shareholders.
If Masdar and ACWA are the largest Gulf companies active in Central Asia and the Caucasus, their projects vary significantly across the region. Masdar currently has the broadest range of projects. In Uzbekistan, this includes five solar parks (ranging from 100-457 MW), two wind projects (one 500 MW project already underway, plus a new 1GW park announced at COP29), as well as plans to explore pumped hydropower. In Azerbaijan, Masdar already operates three solar parks (ranging from 230-445 MW) and one 240 MW onshore wind park. Next door in Armenia, Masdar also has a 200 MW solar park. In Kazakhstan, Masdar does not have any completed projects, but at COP29, the company signed an agreement to develop 1 GW solar park, including 600 MW of battery storage. Likewise, in Kyrgyzstan, Masdar only has a set of agreements, including a vague promise offered in January 2023 to develop 1 GW of renewables, followed by, in December 2023, a commitment “to explore” 3.6 GW of hydropower and renewables alongside the British EDF energy provider. Notably missing here are investments in Turkmenistan, Tajikistan, and Georgia.
ACWA Power’s regional assets currently include a 240 MW wind park in Azerbaijan, and in Uzbekistan, four wind parks (ranging from 100-1500 MW) already completed or soon to be finished. They also have several utility-scale solar parks in Uzbekistan’s Samarkand region, which include large battery energy storage systems (BESS), and a new project underway for a 1500 MW Combined Cycle Gas-Turbine (CCGT) facility in the Sirdarya region. In each of these cases, the National Electric Grid of Uzbekistan is listed as the sole off-taker, and each facility is described on the company’s website as being a “Build, Own, Operate, Transfer” project, in which ACWA Power has claimed it ‘will take the lead in the construction, engineering, operation and maintenance the plant.’ What, when, or how the “transfer” phase will take shape remains unclear, however.
The COP29 United Nations climate talks in Azerbaijan in November 2024 saw a wide range of new energy cooperation agreements between the regions, with Saudi Arabia showing the most ambitious outlook to the developing energy landscape of Central Asia and the Caucasus. At COP, the Saudi Minister of Energy signed an agreement with three of the region’s presidents—Azerbaijan’s Ilham Aliyev, Kazakhstan’s Kassym-Jomart Tokayev, and Uzbekistan’s Shavkat Mirziyoyev—to enhance cooperation in renewable energy development and transmission and to push forward a long-elusive goal of regional power grid interconnection. The Saudi renewable energy champion ACWA was also involved in these agreements, being named as the company responsible for the renewable energy projects in the three countries.
At COP29, the Saudi Electricity Co. also signed an MoU to develop regional interconnection projects with its counterparts in Azerbaijan, Kazakhstan, and Uzbekistan. COP29 also yielded a new bilateral energy “roadmap” between Saudi Arabia and Azerbaijan, but the larger 4-country agreements that Saudi officials take interest in include extending their bilateral energy diplomacy to regional energy diplomacy. This symbolizes a move beyond the more limited series of bilateral energy agreements they have been signing with the other state’s leaders since 2022.
Another notable development at COP29 was the joint agreement between Masdar, ACWA, and SOCAR Green—a branch of the State Oil Company of Azerbaijan established to implement “renewable energy projects, green hydrogen production, [and] carbon capture, utilization, and storage.” This three-country initiative is focused on exploring a 3.5 GW offshore wind project within Azerbaijan’s Caspian domain, as well as a green hydrogen and water desalination plant. The new energy projects discussed in the MoU are not surprising in and of themselves, but the fact that Masdar and ACWA are working together is notable as GCC actors are often assumed to be in competition. Rather, this project may demonstrate the possibilities for cooperation between the Gulf’s two green energy pioneers– both across the GCC borders, as well as with the Central Asia and Caucasus states hosting their investments.
By working with SOCAR Green, Masdar and ACWA are well positioned to teach Azerbaijanis about the Gulf model of “greening” oil money by funneling it into the alternative energy sector. Regardless of whether energy watchers deem this model to be good or bad, it is expanding at a rapid pace in the Gulf. As the GCC governments and companies continue to promote non-fossil energy projects abroad, including in Central Asia and the Caucasus, they are laying the groundwork for a cooperation model that puts the GCC at the center of the post-oil energy future. In this role, the Gulf’s political and business leaders aspire to do more than offer capital to undercapitalized regions; they also aim to reap the most profits possible from controlling the vast networks of technology, infrastructure, knowhow, and resources that are needed to realize the transition to alternative energy sources.
The Gulf’s investments in Central Asia and the Caucasus thus reflect a broader energy diplomacy agenda: to leverage their role as the world’s leading fossil fuel producers in order to remain an energy epicenter, whatever the fuel system. In this respect, the GCC’s interregional cooperation with Central Asia and the Caucasus is already a success. But whether these high-level agreements and large-scale projects will yield the kinds of financial and political returns that their Gulf proponents hope for remains an open question.
Photo: Dunyo
