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AN OPPORTUNITY FOR PROGRESS: CHINA,


CENTRAL ASIA, AND THE ENERGY CHARTER TREATY
NORIKO YODOGAWA* AND ALEXANDER M. PETERSON**
I. INTRODUCTION ................................................................................. 112
II. CHINAS FORAY INTO RUSSIAS SPHERE OF INFLUENCE TO
OBTAIN HYDROCARBON RESOURCES ........................................... 114
A. Central Asias Hydrocarbon Resources.................................. 114
B. Russias Domination of Central Asian Hydrocarbon
Resources ................................................................................... 116
C. Chinese Competition................................................................. 120
1. The Central-Asia China Gas Pipeline; Turkmenistani
Hydrocarbons ...................................................................... 120
2. Kazakhstani Hydrocarbons ................................................ 121
3. Uzbekistani Hydrocarbons ................................................. 123
4. Pressure on Russia............................................................... 123
D. Sino-Russian Cooperation in Relation to Central Asian
Energy Resources is Unlikely .................................................. 125
III. AN INTRODUCTION TO THE ECT .................................................... 127
A. Energy Charter Transit Protocol ............................................. 130
B. PEEREA .................................................................................... 131
C. Trade Amendment .................................................................... 131
IV. APPLICATION OF THE ECT IN CENTRAL ASIA IF CHINA
BECAME A CONTRACTING PARTY.................................................. 132
A. Why Chinas Joining the ECT Would Benefit Central
Asian Contracting Parties ......................................................... 132
1. Trade ..................................................................................... 132
2. Transit ................................................................................... 132
3. Investment ............................................................................ 133

* Legal Counsel, Energy Charter Secretariat. L.L.M. in International Legal Studies, New
York University School of Law. L.L.B., The University of Tokyo. The author has co-written this
Article in her personal capacity. This Article does not necessarily reflect the views of the Energy
Charter Secretariat or those of the Energy Charter Treaty Contracting Parties, Signatories, or
Observers. The author has made no attempt in this Article to define the legal status of the
Russian Federation in relation to the Energy Charter Treaty.
** Associate, Squire Sanders (US) LLP, Tokyo, Japan. L.L.M. in International and
Comparative Law / J.D., Cornell Law School. The author has co-written this Article in his
personal capacity. This Article does not necessarily reflect the views of Squire Sanders (US)
LLP.

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B. Why Chinas Joining the ECT Would Benefit China ............ 138
1. ECT Investment Provisions ............................................... 138
a. Protection Against Appropriation.............................. 138
b. Fair and Equitable Treatment..................................... 138
c. Prohibition of Unreasonable or Discriminatory
Treatment ...................................................................... 139
d. Most Favored Nation and National Treatment......... 139
2. Counterbalancing Russias Soft Power in Central Asia .. 140
C. Costs to China in Relation to Chinas Acceding to the
ECT ............................................................................................. 140
1. Dispute Settlement .............................................................. 140
2. Transit ................................................................................... 141
3. Energy Efficiency ................................................................ 141
V. THE BENEFITS OBTAINED BY CHINA BY JOINING THE ECT
OUTWEIGH THE COSTS..................................................................... 142

I.

INTRODUCTION

On December 14, 2009, the leaders of the Peoples Republic of China


(China), Turkmenistan, the Republic of Uzbekistan (Uzbekistan), and
the Republic of Kazakhstan (Kazakhstan) inaugurated the Central AsiaChina Gas Pipeline (CACGP),1 a 1,833 kilometer natural gas pipeline
that snakes from Turkmenistan through Uzbekistan and Kazakhstan to
China and connects with the Second West-East Gas Pipeline, which,
stretching across China, is the longest gas pipeline in the world.2 On
November 24, 2011, Turkmenistani gas traveling through the CACGP
started to supply Shenzhen, China, making a 6,811 kilometer journey.3
CACGP supply is expected to reach 65 billion cubic meters per year
(BCM/y) by December 2015.4 The pipeline is Kazakhstans first gas
export route that does not traverse the Russian Federation (Russia), and
was inaugurated following a diplomatic row between Russia and
Turkmenistan regarding hydrocarbon resources.5
The new pipeline presents an opportunity for China to counterbalance
Russias soft power in Central Asia by acceding to the Energy Charter
1. Central Asia-China Gas Pipeline, CHINA NATL PETROL. CORP., http://www.cnpc.com.cn/
en/aboutcnpc/ourbusinesses/naturalgaspipelines/Central_AsiaChina_Gas_Pipeline_2.htm?CO
LLCC=849962296& (last visited Nov. 4, 2012).
2. Id.
3. Natural Gas Arrives at Guangdong from Turkmenistan, CHINA NATIL PETROL.
CORP. (Nov. 25, 2011), http://www.cnpc.com.cn/en/press/newsreleases/Natural_gas_arrives_at_
Guangdong_from_Turkmenistan.htm.
4. Id.
5. Andrew E. Kramer, New Gas Pipeline from Central Asia Feeds China, N.Y. TIMES (Dec.
14, 2009), http://www.nytimes.com/2009/12/15/world/asia/15pipeline.html.

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Treaty (ECT).6 The ECT and the Energy Charter Protocol on Energy
Efficiency and Related Environmental Aspects (PEEREA) were signed
in December 1994 and entered into legal force in April 1998.7 The aim of
the ECT and the PEEREA is to strengthen the rule of law on energy
issues by creating a set of rules to be observed by all participating parties,
thereby mitigating risks associated with energy-related investment and
trade, specifically regarding the cross-border transportation of energy
resources.8
Russia signed the ECT in 1994 and, without ratifying it, applied the
ECT provisionally until 2009, when it announced that it would no longer
apply the treaty.9 In 2001, China became an observer of the Energy
Charter Conference, the decision-making body under the ECT, but has
yet to become a Contracting Party10 of the ECT. Kazakhstan,
Turkmenistan, Uzbekistan, and other Central Asian states are
Contracting Parties.11 China acceding to the ECT after Russia has left by
terminating its provisional application would mean a step towards
becoming a meaningful partner in the development of Central Asia as
opposed to a mere financier, which would help to counterbalance
Russias soft power in Central Asia. There are a few costs that China
would face by acceding to the treaty, including being subject to dispute
settlement by a few Central Asian states that are not already World
Trade Organization (WTO) members, enabling investors to use
international arbitration, and needing to adhere to certain environmental
rules and regulations. These insignificant costs, however, would be more
than outweighed by China being able to secure its investments and build
a bridge for further progress with its Central Asian partners.
This Article argues that acceding to the ECT is in Chinas best interest
because the costs to China in acceding to the ECT would be outweighed
by the benefits. China would secure profitable, lasting relationships with
hydrocarbon-producing states in Central Asia through membership in the
ECT. Membership would demonstrate Chinas commitment to engage as
6. Energy Charter Secretariat, 1994 Treaty, ENERGY CHARTER, http://www.encharter.org/
index.php?id=28 (last visited Nov. 4, 2012).
7. Id.
8. Id.
9. Energy Charter Secretariat, Members & ObserversRussia, ENERGY CHARTER,
http://www.encharter.org/index.php?id=414&L=0#c1338 (last visited Nov. 4, 2012); Russia PM
Putin Rejects International Energy Charter, REUTERS (Aug. 6, 2009), http://in.reuters.com/
article/2009/08/06/russia-energy-charter-idINL639469220090806.
10. See Energy Charter Secretariat, Members & Observers, ENERGY CHARTER,
http://www.encharter.org/index.php?id=61 (last visited Nov. 4, 2012) (listing China as an
observer to the Energy Charter Conference); Energy Charter Treaty art. 1, Dec. 17, 1994, 2080
U.N.T.S. 100 [hereinafter ECT] (a Contracting Party is a state or a regional economic
integration organization that has agreed to be bound by the ECT and for which the ECT is in
force).
11. See Energy Charter Secretariat, Members & Observers, supra note 10 (listing
Kazakhstan, Turkmenistan, Uzbekistan, and other Central Asian states as Contracting Parties).

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a partner for development with Central Asian states, rather than be a


mere exploiter of hydrocarbon resources. In addition, China would
benefit from the mutually beneficial provisions of the ECT.
Part II of the Article reviews the current status of hydrocarbon
resource transport agreements in Central Asia. Part III proceeds to
provide a brief overview of the ECT and the application of the ECT in
Central Asia. Part IV moves on to explore the likely benefits that Central
Asian Contracting Parties would obtain, as well as the likely costs and
benefits for China if it joins the ECT. Finally, this Article concludes by
finding that China should join the ECT because the benefits of accession
outweigh the related costs.
II. CHINAS FORAY INTO RUSSIAS SPHERE OF
INFLUENCE TO OBTAIN HYDROCARBON RESOURCES
A. Central Asias Hydrocarbon Resources
Two countries in Central Asia appear to have substantial hydrocarbon
resources: Kazakhstan with crude oil and Turkmenistan12 with natural
gas.13 Uzbekistan is also estimated to have considerable gas resources;
however, such resources generally are being used to support its domestic
demand rather than being exported.14 Kyrgyzstan and Tajikistan, while
not major hydrocarbon producers yet, are critical for the transportation
of hydrocarbon resources in the region because such hydrocarbon
resources are landlocked.15
12. Turkmenistan was ruled by a long-standing dictator, Saparmurat Niyazov, who isolated
the country while pursuing a personality cult, until 2006. His successor, Gurbanguly
Berdymukhamedov, has allowed a limited opening of Turkmenistans energy sector. However,
Turkmenistan generally remains closed to outside investors. See 2012 Investment Climate
Statement (Turkmenistan), EMBASSY OF THE U.S., ASHGABAT, TURKM. (Feb. 16, 2012),
http://turkmenistan.usembassy.gov/ics.html.
13. See, e.g., BP Statistical Review of World Energy June 2012, BP at 6, 20 (June 2012),
http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publicatio
ns/statistical_energy_review_2011/STAGING/local_assets/pdf/statistical_review_of_world_energ
y_full_report_2012.pdf.
14. See, e.g., id. at 20; Uzbekistan, U.S. ENERGY INFO. ADMIN., http://www.eia.gov/
countries/cab.cfm?fips=UZ (last updated Jan. 19, 2012). But see Uzbek Fuel Reserves Lower
than Government Estimates, BP Says, CENT. ASIA NEWSWIRE, June 19, 2012,
http://www.universalnewswires.com/centralasia/viewstory.aspx?id=12251.
15. See
Kyrgyzstan
Energy
Sector
Review,
THE
INOGATEPROGRAMME,
http://www.inogate.org/index.php?option=com_inogate&view=countrysector&id=54&lang=en
(last visited Nov. 4, 2012); Michael J.G. Cain, Takijistans Energy Woes: Resource Barriers in
Fragile States, WASH. R. OF TURKISH & EURASIAN AFF. (Jan. 11, 2011), available at
http://www.thewashingtonreview.org/articles/tajikistans-energy-woes-resource-barriers-in-fragile
-states.html. But see Tethys Discovers Supergiant Hydrocarbon Reserves in Tajikistan,
CENT. ASIA NEWSWIRE (July 19, 2012), http://www.universalnewswires.com/centralasia/
viewstory.aspx?id=12447; Kyrgyzstan, GAZPROM, http://www.gazprom.com/about/production/
projects/deposits/kyrgyzstan/ (last visited Nov. 4, 2012); Tajikistan Strategic Partnership,
GAZPROM, http://www.gazprom.com/about/production/projects/deposits/tajikistan/ (last visited
Aug. 15, 2012).

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Oil, which can be shipped by tankers, usually entails less direct


commercial and political interaction between buyer and seller states than
gas, which is transported mainly over ground through dedicated pipelines
or over sea in specialized tankers in liquefied natural gas (LNG) form.16
Shipping natural gas through pipelines requires high-pressure pipelines
with compressor stations to repressurize gas that loses pressure due to
friction.17 Pipelines generally operate most economically at volumes of
about 20 BCM/y or greater.18 Investment in pipeline infrastructure is
economically beneficial only if there is reasonable certainty regarding
supply and purchase, which generally requires an agreement between two
or more states.19
The other method of transporting gas, in LNG form using specialized
tankers, is advantageous in that LNG may be shipped to any state and
does not require the long-term state-to-state commitments that the
pipeline method requires.20 LNG transport is more capital intensive than
pipeline transport, however, because shipment in LNG form requires
liquefaction plants to turn the gas into LNG, transportation in tankers,
receiving and storage terminals, and regasification facilities to
reconstitute the LNG into usable gas.21 Accordingly, at relatively short
distances of approximately 3,000 kilometers, pipelines are a less
expensive option to transport gas than LNG shipments.22
China became the second largest net oil importer in the world behind
the United States in 2009, its net total oil imports reached 5.5 million
barrels per day in 2011,23 and it seems that China will need to import 79%
of the oil it consumes by 2030, a larger increment in oil demand than any
other country.24 Chinas gas demand increased by 22% yearonyear in
the first half of 2010, and is expected to reach up to 230 billion cubic
meters (BCM) by 2015 and 340 BCM by 2020.25 Even exploiting domestic
resources, including unconventional gas, much of China will need
substantial gas imports to operate in the near future.26
16. See, e.g., JOHN L. KENNEDY, OIL AND GAS PIPELINE FUNDAMENTALS 24 (1993).
17. See, e.g., id.at 72.
18. Rahul Tongia & V.S. Arunachalam, Natural Gas Imports by South Asia: Pipelines or
Pipedreams, 18 ECON. & POL. WKLY. 1054 (1999).
19. See id. at 1060; Robert E. Hogfoss & Catherine D. Little, Best Time to Invest in Building
Pipelines May Be the Next Few Years, PIPELINE & GAS JOURNAL (Feb. 2009), available at
http://pipelineandgasjournal.com/best-time-invest-building-pipelines-might-be-next-few-years.
20. See Tongia & Arunachalam, supra note 18, at 1054.
21. See, e.g., KENNEDY, supra note 16, at 24.
22. See Tongia & Arunachalam, supra note 18, at 1057.
23. Country Analysis BriefChina, U.S. ENERGY INFO. ADMIN. 2 (Sept. 4, 2012),
http://www.eia.gov/countries/analysisbriefs/China/china.pdf.
24. Julie Jiang & Jonathan Sinton, Overseas Investments by Chinese National Oil Companies:
Assessing the Drivers and Impacts, INTL ENERGY AGENCY 11 (Feb. 2011), http://www.iea.org/
publications/freepublications/publication/overseas_china-1.pdf.
25. Id. at 12.
26. Id. at 11.

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China likely will seek to import the oil and gas that it needs from
Central Asia. Central Asian oil and gas exports are expected to more
than double by 2036, with Kazakhstan mostly exporting oil and
Turkmenistan mostly exporting gas.27 Especially in light of the various
territorial and sea lane disputes in which China is involved,28 China
should seek to import its needed hydrocarbon resources through secure
pipelines rather than solely through oil or LNG shipments. Therefore,
China should seek to create a lasting, mutually beneficial relationship
with the Central Asian states to secure its future energy needs.
B. Russias Domination of Central Asian Hydrocarbon Resources
Russian culture, language, and values are instilled in Central Asia.29
Prior to and during the Soviet Union, Russia united the Central Asian
states under Russian-imposed ideals.30 Top political leaders, academics,
and business people from all Central Asian states, who each had varying
individual ethnic, linguistic, and cultural backgrounds, bowed to Russia as
a way to increase prosperity for themselves and their nations.31 In effect,
all Central Asian states were tied vertically to Russia and did not create
strong bonds horizontally with each other.32
The collapse of the Soviet Union highlighted the lack of horizontal
connections among the Central Asian states, especially in the realm of
transportation infrastructure.33 Central Asian states emerged from the
Soviet Union bound by inefficient arrangements that benefited Russia:
rail, river, and air transport were linked with Russia and nowhere else,
and all oil and gas infrastructure, including all pipelines, ran to Russia.34
At the time of the collapse of the Soviet Union, the only outlet for
hydrocarbon resources from Central Asia was via Russian territory and
through state-controlled Russian pipelines.35 Russia used this position of
27. See Caspian Oil and Gas Exports are Poised for Take-Off, INTL ENERGY AGENCY (Mar.
15, 2011), http://www.iea.org/index_info.asp?id=1881.
28. See, e.g., HONGYI LAI, ASIAN ENERGY SECURITY: THE MARITIME DIMENSION (2009).
29. See, e.g., CENTRAL ASIA: ONE HUNDRED THIRTY YEARS OF RUSSIAN DOMINANCE, A
HISTORICAL OVERVIEW (Edward A. Allworth ed., Duke Univ. Press, 3d ed. 1994) (1967)
[hereinafter RUSSIAN DOMINANCE].
30. See, e.g., id.
31. See, id. See generally OLIVER ROY, THE NEW CENTRAL ASIA: THE CREATION OF
NATIONS (2000).
32. See THE TRANSFORMATION OF CENTRAL ASIA: STATES AND SOCIETIES FROM SOVIET
RULE TO INDEPENDENCE 24748 (Pauline Jones Luong ed., 2004) [hereinafter THE
TRANSFORMATION OF CENTRAL ASIA]; Edward C. Chow & Leigh E. Hendrix, Central Asias
Pipelines: Field of Dreams and Reality, in 23 NATL BUREAU OF ASIAN RES., NBR SPECIAL
REP. 29, 31 (2010), available at http://csis.org/files/publication/1009_EChow_LHendrix_
CentralAsia.pdf.
33. See THE TRANSFORMATION OF CENTRAL ASIA, supra note 32; Chow & Hendrix, supra
note 32, at 31.
34. Chow & Hendrix, supra note 32, at 31.
35. For example, refineries in eastern Kazakhstan processed West Siberian crude oil then
shipped the oil to Samara, Russia, and states such as Azerbaijan received the oil from Russia

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power to continue to dominate Central Asian hydrocarbon resources.36


Russia has not and currently does not allow non-Russian companies to
use its pipelines for transit: every molecule of oil and gas that enters
Russian territory becomes Russian.37 As oil and gas are the biggest
sources of income for Central Asian states bordering the Caspian Sea,
Russia sought to use its stranglehold on the transit of such hydrocarbon
resources to continue to exercise political and economic influence38 over
Central Asia.39
In 1991, certain Central Asian statesincluding Kazakhstan and the
Republic of Azerbaijan (Azerbaijan)attempted to open their
hydrocarbon resources to Western oil companies such as Chevron
Corporation, developing the Tengiz and Korolev oil elds in Kazakhstan,
and BP, developing the Azeri-Chiraq-Guneshli oil and associated gas
elds in Azerbaijan.40 The Western oil companies saw using the old
Soviet pipeline system as the most efficient way to transport low volumes
of oil in order to defer capital expenditures on new transportation
infrastructure.41
However, Russia thwarted the Western oil companies attempts.42
Consequently, Chevron and BP had to pursue more costly and inefficient
options; Chevron opted to transport oil from the Tengiz oil fields in
Kazakhstan, while BP chose to transport oil from offshore Azeri-ChiraqGuneshlioil fields in Azerbaijan.43 Chevron eventually bypassed Russias
rather than from Kazakhstan itself. Id.
36. See MARTHA BRILL OLCOTT, CENTRAL ASIAS SECOND CHANCE 193 (2005).
37. ALEXANDROS PETERSEN & KATINKA BARYSCH, RUSSIA, CHINA AND THE
GEOPOLITICS OF ENERGY IN CENTRAL ASIA 27 (2011), available at http://www.cer.org.uk/sites/
default/files/publications/attachments/pdf/2011/rp_010-4118.pdf.
38. For example, Russia does not follow international practice by continuing to use the
Soviet practice of trading oil by weight instead of volume, which does not adjust for market
values of different crude oils based on quality differences. Chow & Hendrix, supra note 32, at 32.
39. See OLCOTT, supra note 36.
40. PETERSEN & BARYSCH, supra note 37, at 28; The History of the Tengiz Field,
TENGIZCHEVROIL, http://www.tengizchevroil.com/en/about/tco_history.asp#1991 (last visited
Aug. 16, 2012); Today Kazakhstan, Tomorrow Russia?, BUSINESSWEEK (May 24, 1992),
available at http://www.businessweek.com/stories/1992-05-24/today-kazakhstan-tomorrow-russia.
41. Chow & Hendrix, supra note 32, at 31; see Robert V. Barylski, Russia, The West, and the
Caspian Energy Hub, 49 MIDDLE E. J. 217 (1995). Chevron Corporation, which was the first
major entrant in Central Asia, based its initial plans on production of hydrocarbon resources in
Tengiz, Kazakhstan, continuing to travel to Samara, Russia, as had been arranged during Soviet
times. The company made offers to Russian oil pipeline monopoly Transneft to invest in
upgrading the capacity of that line and in debottlenecking the Tikhoretsk to Novorossiysk
segment of the major Russian export line to the Black Sea, so as to defer costly construction of a
new line for initial Tengiz production. Similarly, BP and its partners in the Azerbaijan
International Oil Consortium (AIOC) wanted to take advantage of the existing Soviet-era
pipeline by reversing the direction of flow so that early oil production from offshore Caspian
fields could be shipped via Black Sea by connecting with the same line to Novorossiysk, a
Russian city that sits on the Black Sea. Chow & Hendrix, supra note 32, at 31.
42. Chow & Hendrix, supra note 32, at 32. See Barylski, supra note 41.
43. Chow & Hendrix, supra note 32, at 32. See Barylski, supra note 41. From Tengiz,
Chevron Corporation shipped crude oil by rail and barge to the Black Sea via Georgia and
Ukraine. BP and most of its AIOC partners invested over $500 million in constructing a

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continued obstruction by implementing the Caspian Pipeline Consortium


(CPC),44 which began operations in December 2002,45 and BP led its
partners in the creation of the Baku-Tbilisi-Ceyhan Pipeline (BTC),
which started operations in 2006.46 Russias refusal to work with new
potential partners by opting to keep its stranglehold on the oil resources
of Central Asia cost Russia the opportunity to become a cooperative
member of a three-way synergy between Central Asian states with
abundant oil reserves, Western companies with capital and know-how,
and its own energy transportation infrastructure.47
Russias monopoly of Central Asian gas resources also slowed its own
growth and dampened the Central Asian states opportunities.48 For
example, for many years, Russia dominated the purchase of
Turkmenistans vast gas reserves, buying almost all of Turkmenistans
general output of around 50 to 60 BCM/y.49 In April 2003, Russia and
Turkmenistan signed an agreement stipulating that Turkmenistan would
supply Russia with gas until 2028, specifically 100 BCM/y from 2010
onward, or a total of 2 trillion cubic meters by 2028.50 Open Joint Stock
Company Gazprom (Gazprom), created in 1989 by the Soviet Union
Ministry of Gas Industry51 and currently controlled by the Russian
government,52 generated significant profits by buying Turkmenistani gas
cheaply to supply Ukraine while selling Russias own gas to Western
European customers at three times the sale price to Ukraine.53 By buying
Central Asian gas and shipping it through its own pipelines, Russia
prevented the Central Asian states from gaining independent access to
pipeline from Azerbaijan to a new marine terminal in Supsa, Georgia. Chow & Hendrix, supra
note 32, at 32.
44. See Kazakhstan Fact Sheet, CHEVRON 2 (Apr. 2012), http://www.chevron.com/
documents/pdf/kazakhstanfactsheet.pdf.
45. JOINT UNITED NATIONS DEVELOPMENT PROGRAMME / WORLD BANK ENERGY
SECTOR MANAGEMENT ASSISTANCE PROGRAMME, CROSS-BORDER OIL AND GAS PIPELINES:
PROBLEMS AND PROSPECTS 102 (2003), available at http://siteresources.worldbank.org/
INTOGMC/Resources/crossborderoilandgaspipelines.pdf.
46. Chow & Hendrix, supra note 32, at 32; see THE BAKU-TBILISI-CEYHAN PIPELINE: OIL
WINDOW TO THE WEST, CTR. ASIA-CAUCASUS INST. & SILK ROAD STUDIES PROGRAM (S.
Fredrick Starr & Svante E. Cornell eds., 2005).
47. See Chow & Hendrix, supra note 32; PETERSEN & BARYSCH, supra note 37.
48. See PETERSEN & BARYSCH, supra note 37.
49. Id. at 51.
50. Sergei Blagov, Russia Gas Dreams, ASIA TIMES ONLINE (Jan. 13, 2005),
http://www.atimes.com/atimes/Central_Asia/GA13Ag01.html. Turkmenistan claimed that over
the twenty-five-year period, the approximate value to Turkmenistan was $200 billion and the
approximate value for Russia was $300 billion. See id.
51. About Gazprom 1989-1995, GAZPROM, http://www.gazprom.com/about/history/
chronicle/1989-1995/ (last visited Feb. 12, 2012).
52. Reaching New Horizons: 2011 Annual Report, GAZPROM 135 (May 22, 2012),
http://www.gazprom.com/f/posts/51/402390/annual-report-2011-eng.pdf.
53. PETERSEN & BARYSCH, supra note 37, at 29; Jim Nichol, Steven Woehrel & Bernard A.
Gelb, Russias Cutoff of Natural Gas to Ukraine: Context and Implications, U.S. CONG. RES.
SERV. at CRS2 (Feb. 15, 2006), available at http://www.policyarchive.org/handle/
10207/bitstreams/4324.pdf.

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lucrative western markets.


In 2005, Russia announced that it would move to European market
prices in its gas sales and started raising prices for countries such as
Ukraine shortly thereafter.54 It was not until 2008, however, that Russia
offered to pay more for the gas that it bought from Central Asia, and only
then due to the increased likelihood of competition.55 After the price for
Turkmenistani gas was raised in 2009, European gas demand and prices
plummeted with the global economic recession, and a dispute between
Russia and Turkmenistan ensued.56
Russias greedy guarding of Central Asian hydrocarbon resources has
stalled development of critical production and distribution infrastructure
in Central Asia.57 The Soviet-era Central Asia-Center gas pipeline, which
is controlled by Gazprom and delivers almost all of the gas from
Turkmenistan to Russia via Uzbekistan and Kazakhstan, has failed to
receive necessary updating and repair, even though the leaders of Russia,
Turkmenistan, and Kazakhstan signed an agreement in 2007 stating that
such operations would take place by 2012.58 Another example of failure
to develop needed infrastructure is the Pre-Caspian gas pipeline, which
was proposed to be built on the eastern side of the Caspian.59 The project
still seems to be at a standstill, even though Russia, Turkmenistan, and
Kazakhstan signed an agreement in 2007 promising that the Pre-Caspian
gas pipeline would be developed, and Gazprom and the Kazakhstani and
Turkmenistani oil and gas companies signed an agreement in 2008 setting
forth basic principles for cooperation regarding construction of the
pipeline.60 Russias tight grip on Central Asia creates an opportunity for

54. PETERSEN & BARYSCH, supra note 37, at 29; Nichol, Woehrel & Gelb, supra note 53, at
CRS2.
55. PETERSEN & BARYSCH, supra note 37, at 29; Richard B. Andres & Michael Kofman,
European Energy Security: Reducing Volatility of Ukraine-Russia Natural Gas Prices, NATL
DEF. U. STRATEGIC F. 6 (Feb. 2011), available at http://www.dtic.mil/dtic/tr/fulltext/u2/
a545411.pdf; Q&A: Russia-Ukraine Gas Row, BBC NEWS (Jan. 20, 2009),
http://news.bbc.co.uk/2/hi/europe/7240462.stm.
56. Simon Pirani, Jonathan Stern & Katja Yafimava, The Russo-Ukrainian Gas Dispute of
January 2009: A Comprehensive Assessment, OXFORD INST. FOR ENERGY STUD. 10 (Feb. 2009),
available at http://www.oxfordenergy.org/wpcms/wp-content/uploads/2010/11/NG27-TheRusso
UkrainianGasDisputeofJanuary2009AComprehensiveAssessment-JonathanSternSimonPiraniK
atjaYafimava-2009.pdf; Chow & Hendrix, supra note 32, at 35.
57. See Robert M. Cutler, Moscow and Ashgabat Fail to Agree over the Caspian Coastal
Pipeline, CENT. ASIA-CAUCASUS INST. (Apr. 8, 2009), http://cacianalyst.org/?q=node/5080.
58. Cutler, supra note 57; Kazakhstan, Russia and Turkmenistan Agree to Renovate the
Caspian Gas Pipeline, GOVT OF THE REPUBLIC OF KAZ., http://en.government.kz/site/news/
052007/16 (last visited Dec. 12, 2011); Sbastien Peyrouse, Economic Aspects of the ChineseCentral Asia Rapprochement, CENT. ASIA-CAUCASUS INST. 6869 (Sept. 2007), available at
http://www.silkroadstudies.org/new/docs/Silkroadpapers/2007/0709China-Central_Asia.pdf.
59. Chow & Hendrix, supra note 32, at 35.
60. Chow & Hendrix, supra note 32, at 35; Pre-Caspian Gas Pipeline, GAZPROM,
http://www.gazprom.com/about/production/projects/pipelines/pg/ (last visited July 17, 2012).

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China to engage Central Asia as a new partner for meaningful


development.
C. Chinese Competition
Whereas Western companies moved to obtain rights to hydrocarbon
resources in Central Asia immediately after the collapse of the Soviet
Union in the early 1990s, Chinese companies did not attempt to acquire
substantial rights until 1997, when China National Petroleum
Corporation (CNPC) acquired certain rights to oil and gas fields in
Kazakhstan.61 By 2001, in the Tenth Five-Year plan for National
Economy and Social Development, China stated that it aimed to take
advantage of resources abroad in order to strengthen the Chinese
economy.62
1. The Central-Asia China Gas Pipeline; Turkmenistani Hydrocarbons
In July 2007, China and Turkmenistan signed a production sharing
agreement for certain gas fields in Turkmenistan, and entered into a gas
sales and purchase agreement that envisaged annual deliveries of 30
BCM of gas from Turkmenistan to China through the CACGP until
2037.63 That same month, CNPC and the Uzbek state-owned oil and gas
company signed an agreement for the construction and operation of the
Uzbek section of the CACGP.64 Later that year, in November 2007,
CNPC and the Kazakhstan state-owned oil and gas company signed an
agreement regarding the construction and operation of the KazakhstanChina Gas Pipeline.65
The international, Central Asian section of the CACGP is 1,833
kilometers of two parallel lines (Line A and Line B) with 188 kilometers
in Turkmenistan, 530 kilometers in Uzbekistan, and 1,115 kilometers in
Kazakhstan.66 Line A started operation in December 2009, while Line B
61. See, e.g., BO KONG, CHINAS INTERNATIONAL PETROLEUM POLICY 175 (2010).
Specifically, China acquired rights to the Aktobe field in Kazakhstan, which included the
Zhanazhol oil and gas condensate field and the Kenyiak oil field.
62. Sheng Zhang, The Energy Charter Treaty and China: Member or Bystander?, 13 J. OF
WORLD INV. AND TRADE 597, 602 (2012).
63. Flow of Natural Gas from Central Asia, CHINA NATL PETROL. CORP.,
http://www.cnpc.com.cn/en/press/Features/Flow_of_natural_gas_from_Central_Asia_.htm (last
visited Jan. 12, 2013).
64. Id.
65. Id. Note that the Kazakhstan-China Gas Pipeline is not the same as the KazakhstanChina Oil Pipeline.
66. Id.; Claudia Perez Rivas, Uzbek Energy Company Uzbekneftegas has Formed a Joint
Venture with China National Petroleum Corporation (CNPC) to Build a Pipeline to Bring Gas
from Turkmenistan to China, UPSTREAM (Apr. 14, 2008), http://www.upstreamonline.com/live/
article152400.ece; Jonathan Davis, Turkmen Break Ground on China Pipe, UPSTREAM (Aug. 30,
2007), http://www.upstreamonline.com/live/article139613.ece; Vladimir Socor, Kazakhstan
Expands Gas Transit Pipeline Capacities and Own Exports to China, ASIA TIMES ONLINE (Aug.
16, 2012), http://www.atimes.com/atimes/Central_Asia/NH16Ag01.html.

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became operational in 2010.67 As of June 2012, China had imported


around 18.4 BCM of natural gas through the CACGP, and the total
transportation capacity for CACGP by the end of 2012 should be 30
BCM/y.68 In December 2011, a commencement ceremony was held for
Line C of the CACGP, which will follow the same path as Lines A and B,
traveling from Turkmenistan through Uzbekistan and Kazakhstan to
China, and will increase the supply of natural gas the CACGP brings into
China to 55 BCM/y by December 2015.69
Once it reaches western China,70 the CACGP connects to the longest
gas pipeline in the world, Chinas domestic Second West-East Pipeline.71
Gas from the CACGP is supplied to Shenzhen and Guangzhou in
southern China after making a 6,811-kilometer journey from
Turkmenistan.72 Construction expanding the Second West-East Pipeline
will soon bring natural gas to Hong Kong as well.73 CNPC has also
committed to constructing a Third West-East Gas Pipeline, which will
provide an additional domestic 5,000 kilometer pipeline network with a
capacity of 30 BCM/y to deliver gas received via the CACGP throughout
China.74 This commitment was made in May 2012 after a visit from
Turkmenistani President Berdymukhamedov to China in November 2011
led to an agreement to increase the supply of Turkmenistani gas to China
via the CACGP by 25 BCM/y to a total of 65 BCM/y.75
2. Kazakhstani Hydrocarbons
In addition to the three CACGP lines, the 1,475-kilometer BeyneuShymkent line, which China and Kazakhstan agreed to construct in June

67. Construction on Third Line Begins For Central Asia-China Gas Pipeline, PIPELINES
INTERNATIONAL (Mar. 2012), http://pipelinesinternational.com/news/construction_on_third_
line_begins_for_central_asia-china_gas_pipeline/066998/.
68. Socor, supra note 66; Charlotte Owen, 30 BCM Passes Through Turkmenistan-China
Pipeline, OIL & GAS TECH. (June 6, 2012), http://www.oilandgastechnology.net/pipelines/30bcm-passes-through-turkmenistan-china-pipeline.
69. Line Cs Uzbekistan Section of Central Asia-China Gas Pipeline Starts Construction,
CHINA NATL PETROL. CORP. (Dec. 16, 2011), http://www.cnpc.com.cn/en/press/newsreleases/
Line_Cs_Uzbekistan_section_of_Central_AsiaChina_Gas_Pipeline_starts_construction_.htm;
Socor, supra note 66.
70. Id.
71. Trunk line of Second West-East Gas Pipeline, the worlds longest, begins operation,
CHINA NATL PETROL. CORP., http://www.cnpc.com.cn/en/press/Features/Trunk_Line_of_the_
Second_WestEast_Gas_Pipeline_begins_operation.htm (last visited Dec. 7, 2011).
72. Natural Gas Arrives at Guangdong from Turkmenistan, supra note 3.
73. Hong Kong Branch of Second West-East Gas Pipeline Starts Construction, CHINA NATL
PETROL. CORP. (Mar. 5, 2012), http://www.cnpc.com.cn/en/press/newsreleases/Hong_Kong_
branch_of_Second_WestEast_Gas_Pipeline_starts_construction.htm.
74. Joint Stock and Cooperation Framework Agreement Signed on the Third West-East Gas
Pipeline, CHINA NATL PETROL. CORP. (May 31, 2012), http://www.cnpc.com.cn/en/press/
newsreleases/Joint_stock_and_cooperation_framework_agreement_signed_on_the_Third_West
East_Gas_Pipeline.htm.
75. Natural Gas Arrives at Guangdong from Turkmenistan, supra note 3.

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2010, will also transit gas to China.76 The pipeline will go into operation in
two phases and eventually will provide 10 BCM/y to 15 BCM/y of gas
when both phases are completed by 2013 and 2015, respectively.77
Aside from the CACGP, CNPC is extremely active in the Kazakhstani
energy sector.78 For example, after acquiring a 60.3% stake in
AktobeMunaiGasthe fourth-largest oil company in Kazakhstanin
June 1997, and obtaining a further 25.12% in May 2003, CNPC now holds
85.42% of the companys shares.79 AktobeMunaiGas has production
licenses for the Zhanazhol, Kenkiyak Oversalt, and Kenkiyak Subsalt oil
fields and a contract for an exploration block in Kazakhstan.80 After
taking over AktobeMunaiGas, CNPC invested over $1.5 billion in
building production, storage, and transportation facilities, and in
reconstructing an existing oil and gas processing plant as well as building
a new one.81 These substantial efforts and investments have been met
with promising results; CNPC and AktobeMunaiGas Corp. obtained
high-yield oil flows from various exploration projects in Kazakhstan in
2007.82
Additionally, CNPC acquired PetroKazakhstan in October 2005, and
in accordance with an agreement reached with the Kazakhstan Ministry
of Energy and Mineral Resources, transferred 33% of its shares in
PetroKazakhstan to KazMunaiGazthe Kazakhstan state-owned oil and
gas companyin July 2006, retaining the remaining 67% stake.83 CNPCs
acquisition of PetroKazakhstan allowed CNPC to obtain ownership of
numerous oilfields and licenses in relation to several exploration blocks.84
In December 2005, the first stage of the Kazakhstan-China Oil
Pipeline was completed, stretching 962 kilometers from Atasu in
Kazakhstan to Xinjiang in China.85 In July 2009, China and Kazakhstan
completed a 792-kilometer extension of the oil pipeline to the far west of
Kazakhstan, reaching the Caspian Sea.86 The output of the pipeline is set

76. Socor, supra note 66.


77. Id.
78. See Chinas Pipeline Gas Imports: Current Situation and Outlook to 2025, PETROMIN
PIPELINER, Jan.Mar. 2011, at 6, 8, available at http://www.pm-pipeliner.safan.com/mag/
ppl0311/r06.pdf.
79. CNPC in Kazakhstan, CHINA NATL PETROL. CORP., http://www.cnpc.com.cn/en/
cnpcworldwide/kazakhstan/ (last visited Jan. 3, 2013).
80. Id.
81. Id.
82. Id.
83. Id.
84. Id. The PetroKazakhstan assets included full or part ownership of eleven oilfields and
licenses for five exploration blocks covered by thirteen exploration and development contracts.
85. Michael Clarke, Chinas Integration of Xinjiang with Central Asia: Securing a Silk Road
to Great Power Status?, 6 CHINA AND EURASIA F. Q. 89, 106 (2008).
86. Kenkiyak-Kumkol Section of Kazakhstan-China Oil Pipeline Becomes Operational,
CHINA NATL PETROL. CORP. (July 14, 2009), http://www.cnpc.com.cn/en/press/newsreleases/
2009/Kenkiyak_Kumkol_section_of_Kazakhstan%EF%BC%8DChina_Oil_Pipeline_becomes_

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to double by 2013.87
3. Uzbekistani Hydrocarbons
CNPC currently operates two different oil and gas cooperation
projects in Uzbekistan.88 CNPC signed a production-sharing contract in
August 2006, which provided for exploration and development of oil and
gas deposits in 12,000 square kilometers of the Uzbekistan area of the
Aral Sea with a consortium comprising of CNPC, Uzbekistans
Uzbekneftegaz, Russias Lukoil, Malaysias Petronas, and South Koreas
Korea National Oil Corporation.89 This was in addition to the oil and gas
exploration agreement that CNPC signed with Uzbekistan National
Oil/Gas Group Corporation in June 2006, which covered five land
exploration blocks covering a total area of 34,000 square kilometers in
Uzbekistan.90
4. Pressure on Russia
China used its economic strength to extend a bridge into Central
Asia.91 The CACGP struck an economic blow to Russia.92 The CACGP
was the rst, and so far is the only, major international gas pipeline to
break Russias stranglehold on Central Asian gas transport.93 It was also
Chinas rst major gas import pipeline.94 China offered Central Asian
states loans for economic stimulus and energy investments during the
recent global nancial crisis to further expand its influence in Central
Asia.95 Specifically, China loaned $10 billion to Kazakhstan in April 2009
in return for certain ownership rights of a large Kazakhstani oil
producer.96 A few months later, China announced it was making a $10
operational.htm; China, Kazakhstan Agree on Sino-Kazakh Oil Pipeline Extension to Caspian
Sea, EMBASSY OF THE REPUBLIC OF KAZ., http://www.kazakhembus.com/archived_article/chinakazakhstan-agree-on-sino-kazakh-oil-pipeline-extension-to-caspian-sea (last visited Apr. 19,
2012).
87. Lucy Hornby & Chen Aizhu, China, Kazakh Pipeline Expansion on Hu Visit Agenda,
REUTERS (June 4, 2010), http://in.reuters.com/article/2010/06/04/china-kazakhstan-pipelineidINTOE65307A20100604.
88. CNPC in Uzbekistan, CHINA NATL PETROL.CORP., http://www.cnpc.com.cn/en/
cnpcworldwide/Uzbekistan/ (last visited Jan. 3, 2013).
89. Id.
90. Id.
91. See PETERSEN & BARYSCH, supra note 37, at 40.
92. See id. at 43; see also Fabio Indeo, Russia and China in Central Asia: Growing
Geopolitical Competition, ISTITUTO PER GLI STUDI DI POLITICA INTERNAZIONALE, Oct. 2010,
at 1, 7, available at http://www.ispionline.it/it/documents/PB_199_2010.pdf.
93. PETERSEN & BARYSCH, supra note 37, at 42.
94. See id.; China Trumps Russia in Turkmen Gas Buy, OIL & GAS EURASIA (Dec. 14, 2009),
http://www.oilandgaseurasia.com/tech_trend/china-trumps-russia-turkmen-gas-buy.
95. PETERSEN & BARYSCH, supra note 37, at 42.
96. Eugene Tang, China, Kazakhstan Sign $10 Billion Loan-for-Oil Agreements,
BLOOMBERG (Apr. 16, 2009), http://www.bloomberg.com/apps/news?pid=newsarchive&sid=
aRkoxDWplmJY.

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billion loan to the Shanghai Cooperation Organization (SCO)97 to assist


members during the economic crisis.98 China further committed $4 billion
to Turkmenistan to assist in the development of Turkmenistans largest
gas field, the South Yolotan gas field, in June 2010,99 followed by another
$4.1 billion loan to Turkmenistan in April 2011.100
The CACGP and loans from China highlighted Russias comparative
weakness as an economic partner. To compete with China, Russia signed
an agreement with Turkmenistan to purchase 50 BCM of gas during
2009101 and also promised to start paying more for Turkmenistani gas in
early 2009.102 As European gas demand fell in 2009 with the economic
recession, however, Russia no longer needed the Turkmenistani gas.103
While Russia was pressuring Turkmenistan in April 2009 to reduce the
amount of gas Turkmenistan provided, there was an explosion on
Turkmenistans gas pipeline supplying Russia.104 In response, Gazprom
ceased importing gas from Turkmenistan entirely.105 Due to the
interruption of gas supply, Turkmenistan lost income of between $7
billion and $10 billion, approximately a quarter of its annual gross
domestic product.106 Turkmenistan initially insisted that the blast was
caused by Gazproms violation of the gas supply agreement between
Russia and Turkmenistanand indicated that it planned to seek financial
compensationbut later dropped the allegations.107 China exploited the
dispute, granting Turkmenistan a $4 billion loan to develop the South

97. A non-governmental organization that seeks to address political and economic issues in
Central Asia, China, and Russia, composed of China, Russia, Kazakhstan, Kyrgyzstan,
Tajikistan and Uzbekistan. Backgrounder: Shanghai Cooperation Organization, SHANGHAI
COOPERATION ORG. SUMMIT 2012 (Jun. 7, 2010), http://www.scosummit2012.org/english/201006/07/c_13337029.htm. See generally Chien-Peng Chung, Chinas Approaches to the
Institutionalization of Regional Multilateralism, 17 J. OF CONTEMP. CHINA 747 (2008).
98. China to Provide 10-Billion-Dollar Loan to SCO Members, XINHUA (June 16, 2006),
http://news.xinhuanet.com/english/2009-06/16/content_11552439.htm.
99. China in Central Asia: Riches in the Near Abroad, ECONOMIST (Jan. 28, 2010),
http://www.economist.com/node/15393705.
100. China Lends Turkmenistan $4.1B in Return for Future Gas, CENT. ASIA NEWSWIRE
(Apr. 27, 2011), http://www.universalnewswires.com/centralasia/viewstory.aspx?id=3923.
101. Isabel Gorst, Russia Welcomes End to Turkmen Gas Dispute, FIN. TIMES (London)
(Dec. 23, 2009), http://www.ft.com/intl/cms/s/0/20dfe82e-ef69-11de-86c4-00144feab49a.html.
102. Gazprom Pays More for Turkmen Gas Business International Herald Tribune, N.Y.
TIMES (Sept. 5, 2009), http://www.nytimes.com/2006/09/05/business/worldbusiness/05ihtgazprom.2700002.html. In 2006, Turkmenistan sold most of its gas to Russia at not much more
than $50 per 1,000 cubic meters. In early 2009 it sold its exports at the European price of over
$300 per 1,000 cubic meters. China Trumps Russia in Turkmen Gas Buy, supra note 94.
103. Gorst, supra note 101.
104. Sergei Blagov, Russia Struggles to Revive Energy Ties With Turkmenistan, EURASIA
DAILY MONITOR (D.C.) (Dec. 15, 2009, 8:28 PM), http://www.jamestown.org/programs/edm/
single/?tx_ttnews%5Btt_news%5D=35839&tx_ttnews%5BbackPid%5D=485&no_cache=1.
105. Id.
106. Deidre Tynan, Turkmenistan: Gas Flows Again to Russia, While Discontent Simmers,
EURASIANET.ORG (Jan. 13, 2010, 7:00 PM), http://www.eurasianet.org/departments/insight/
articles/eav011410.shtml.
107. Blagov, supra note 104.

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Yolotan gas field in Turkmenistan, even though Gazprom was interested


in cooperating with Turkmenistan to build a pipeline from South Yolotan
to link into a new pipeline from Central Asia to Europe.108
Despite Chinas economic inroads into Central Asia based on its
willingness to invest money, China does not enjoy the linguistic and
cultural dominance in the region that Russia maintains.109 China must
convince Central Asian states that it is committed to a long-term
relationship with Central Asian states to counterbalance Russias soft
power in the region. Chinas becoming a Contracting Party of the ECT
would signal to Central Asian states that China is willing to undertake
binding policy decisions in the interest of being a mutual partner in
relation to energy development rather than a mere exploiter, and would
be a step towards China becoming a leader in Central Asia.
D. Sino-Russian Cooperation in Relation to
Central Asian Energy Resources is Unlikely
Stroytransgaz, a Gazprom subsidiary, built the Turkmenistani stretch
of the CACGP.110 While some commentators have noted that such action
suggests that Russia would rather cooperate with China than with the
West,111 Russias cooperation is likely a symptom of its vying to stay
connected with Central Asian hydrocarbon production and to keep China
from replacing Russia in its position as financier and overseer.112
Therefore, Russia is more likely to compete than cooperate with China.
Russias lack of cooperation with China in the energy sector is
evidenced by the glaring lack of Sino-Russian cross-border energy
infrastructure.113 For example, an Irkutsk to China gas pipeline that was
proposed in Soviet times did not begin to be realized until BP bought half
of a Russian oil company in 2003 and the merged company started to take

108. Gorst, supra note 101; China in Central Asia: Riches in the Near Abroad, supra note 99.
109. See, e.g., RUSSIAN DOMINANCE, supra note 29.
110. Turkmenistan Ends Building its Gas Pipeline Section to China, PJSC STROYTRANSGAZ
(Oct. 23, 2009), http://www.stroytransgaz.com/press-center/smi/itar-tass/2009_10_23.
111. See Chow & Hendrix, supra note 32, at 38 (arguing that [t]he Russian attitude seems to
be, if Central Asian gas is to be exported by a route other than Russia, it is better for the gas to
go east than west, where it would compete against Russian gas in its primary European
market.) (citing Marat Gurt, Russian Company Wins Turkmenistan Pipeline Tender, REUTERS
(Feb. 19, 2008), available at http://in.reuters.com/article/2008/02/19/turkmenistan-chinaidINL194546920080219).
112. Cf. Igor Danchenko et al., One Step Forward, Two Steps Back? The Realities of a Rising
China and Implications for Russias Energy Ambitions, BROOKINGS, Aug. 2010, available
at http://www.brookings.edu/~/media/Research/Files/Papers/2010/8/china%20russia%20energy
%20downs%20hill/08_china_russia_energy_downs_hill.pdf
(describing
Chinas
growing
dominance in the energy transit sector and possible responses by Russia).
113. See, e.g., id.; Henry J. Kenny, China and the Competition for Oil and Gas in Asia, 11
ASIA-PACIFIC REV. 36 (2004); Stephen J. Blank, The Eurasian Energy Triangle: China, Russia,
and the Central Asian States, 12 BROWN J. WORLD AFF. 53 (2005).

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action.114 Even after BP entered the picture, an argument between BP


and its Russian partners regarding the control of gas exports stalled the
project for more than five years.115 Subsequently, BP announced that it
would sell its stake in the company in June 2012.116 Despite years of
mutual agreements and negotiations between Russia and China, and a
surge in sales of Russian oil to China, there is a lack of cross-border
infrastructure needed for cost-effective delivery of oil and gas from
Russia to China.117 This lack of cross-border energy infrastructure
highlights the fact that China and Russia have not engaged each other as
meaningful partners in the energy arena.118
Furthermore, strategically, Russia should not welcome China as a
competitor for Central Asian hydrocarbon resources. Only Russia enjoys
the cultural and political dominance necessary to guide Central Asian
states in their decisions regarding the exploitation of hydrocarbon
resources,119 and even if Russia was willing to cooperate with China in
certain circumstances by lending backing to Chinas projects in Central
Asia, Russia would lose the ability to obtain leverage by exercising such
backing if it supported China as an equal power in the region. Russias
value is derived from a unique position in the hearts and minds of Central
Asians, something that China cannot buy, even if China economically
dominates Russia. Cooperating with China could damage Russias most
valuable asset by sharing Russias reputation in Central Asia with China.
International organizations in the region also fail to provide a forum
for cooperative engagement of Central Asian hydrocarbons. The
Collective Security Treaty Organization is focused too specifically on
military issues to be an effective forum for cooperation.120 The SCO is not
an effective forum for cooperation because Turkmenistan is not a
member.121 Also, the SCO has not yet proven itself as a forum in which
members may negotiate economic agreements with the detail necessary
for cross-border energy investment, let alone the ability to have the
shared practice, precedent, and insight of numerous members from
around the world to affect rulemaking and adjudication like the ECT,
because the SCO is limited in its geographic scope for membership and
114. Chow & Hendrix, supra note 32, at 37.
115. Id.
116. BP announces plans to sell stake in TNK-BP, BBC (June 1, 2012),
http://www.bbc.co.uk/news/business-18292483.
117. Danchenko et. al., supra note 112, at 2.
118. See id.
119. See, e.g., RUSSIAN DOMINANCE, supra note 29. See also OLCOTT, supra note 36.
120. A security organization composed of Russia, Belarus, Armenia, Kazakhstan,
Kyrgyzstan, Tajikistan, and Uzbekistan. See Alexander I. Nitkin, Post-Soviet Military-Political
Integration: The Collective Security Treaty Organization and its Relations with the EU and
NATO, 5 CTR. ASIA-CAUCAUS INST. & SILK ROAD STUD. PROGRAM 35, 35 (2007).
121. THE SHANGHAI COOPERATION ORGANIZATION, http://www.sectsco.org/EN/ (last
visited Jan. 6, 2013).

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does not have a secretariat capable of administering such agreements.122


Furthermore, China likely would be reluctant to use the SCO because
doing so would offer Russia a comparatively stronger voice than if China
approached energy investment issues through the global Energy Charter
forum. The SCO has only five member states, including Russia and
China, whereas fifty-one states and the European Union have joined the
ECT.123
Even putting politics aside, it would not be efficient for the SCO to try
to reinvent the wheel regarding cross-border energy investment
institutionalization rather than using the established Energy Charter
system. Central Asia does not pose any special issues that the ECT could
not handle. Accordingly, China could use the gap left by Russia and
showcase its difference from Russia by acceding and adhering to the ECT
to become a meaningful partner for development in Central Asia.
III. AN INTRODUCTION TO THE ECT
The ECT, which was signed in December 1994 and entered into legal
force in April 1998,124 seeks to provide a framework for cooperation in
the energy sector.125 The ECT is open to membership by any state or
regional economic integration organization, as opposed to private
entities, and to date the ECT has been signed or acceded to by fifty-one
states, including Azerbaijan, Kazakhstan, Kyrgyzstan, Turkmenistan,
Ukraine, and Uzbekistan, as well as the European Union and European
Atomic Energy Community.126 The ECT covers the whole energy value
chainfrom exploration to end-useand all energy products and
energy-related equipment; furthermore, it is the only legally binding
agreement of its kind that deals with intergovernmental cooperation in
the energy sector.127
States or regional economic integration organizations that have ratified
or acceded to the ECT are referred to as Contracting Parties.128
Contracting Parties with energy resources can use the ECT to attract
investment, protect downstream interests, and ensure reliable
transportation of energy.129 Energy-importing Contracting Parties can use
122. Id.
123. Id. See Energy Charter Secretariat, Status of Ratification of the Energy Charter
Treaty, ENERGY CHARTER, http://www.encharter.org/fileadmin/user_upload/document/ECT_
ratification_status.pdf (last visited Aug. 15, 2012) (listing signatories of the ECT).
124. ECT, supra note 10, art. 44; Energy Charter Secretariat, 1994 Treaty, supra note 6.
125. Energy Charter Secretariat, 1994 Treaty, supra note 6.
126. Energy Charter Secretariat, 1994 Treaty, supra note 6. See Energy Charter Secretariat,
Status of Ratification of the Energy Charter Treaty, supra note 123.
127. Id.
128. ECT, supra note 10, art. 1(2).
129. Energy Charter Secretariat, Frequently Asked Questions, ENERGY CHARTER,
http://www.encharter.org/index.php?id=18 (last visited July 22, 2012).

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the ECT to protect their investments and secure the supply of energy
resources.130 All countries benefit from the ECTs measures to encourage
the efficiency of energy production and use and to minimize related
negative environmental impacts.131 China became an Observer of the
Energy Charter Conference, the decision-making body for issues related
to the ECT,132 on December 17, 2001.133 Observers have the right to
attend all meetings of the Energy Charter Conference and of its
subsidiary groups, and receive all related documentation, reports, and
analyses, as well as to participate in the working debates that take place
within the Energy Charter process.134
Russia signed the ECT in 1994 but has never ratified it to date. Russia
agreed to provisional application of the ECT and PEEREA pending
ratification when it signed the treaty.135 However, this provisional
application ended on October 18, 2009, in accordance with Article
45(3)(a) of the ECT, after Russias notification to the Depository on
August 20, 2009 that it did not intend to become a Contracting Party.136
Although not subject to the provisional application of the ECT or
PEEREA, Russia still has an obligation to adhere to the provisions of the
ECT regarding investment protection and dispute settlement in relation
to investments made in its territory on, or prior to, October 18, 2009.137
The ECT focuses on four main areas: (1) protecting foreign
investments against key non-commercial risks, based on the extension of
national treatment (NT) or most-favored nation (MFN) treatment
(whichever is more favorable); (2) providing non-discriminatory
conditions for trade in energy materials and products, as well as energyrelated equipment where applicable, based on WTO rules to ensure
reliable cross-border energy transit flows through pipelines, grids, and
other means of transportation; (3) resolving disputes between
Contracting Parties, and, in the case of investments, between investors
and host states; and (4) promoting energy efficiency and minimizing
harmful environmental impacts.138
If a Contracting Party fails to amicably settle a dispute concerning its
alleged breach of the ECTs investment protection provisions or the
130. Id.
131. Id.
132. See ECT, supra note 10, art. 34.
133. Energy Charter Secretariat, Members & Observers, China, ENERGY CHARTER, supra
note 10.
134. Energy Charter Secretariat, Frequently Asked Questions, supra note 129.
135. See ECT, supra note 10, art. 45(1); Energy Charter Secretariat, Members & Observers,
Russia, supra note 10.
136. Energy Charter Secretariat, Frequently Asked Questions, supra note 129; see ECT,
supra note 10, art. 45(3)(a); Energy Charter Secretariat, Members & Observers, Russia, supra
note 9.
137. ECT, supra note 10, art. 45(3)(b).
138. Energy Charter Secretariat, 1994 Treaty, supra note 6.

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application or interpretation of the ECT, such Contracting Party may be


subject to the ECTs dispute settlement mechanisms.139 The key dispute
resolution provisions are in Part V of the ECT: Article 26 (investor-state
disputes); Article 27 (state-state disputes); and Article 28 (conditions for
the application of Article 27 to trade-related disputes for which there is a
more specialized dispute resolution procedure).140 The investor-state
arbitration stipulated in Article 26 provides a choice of forum among the
International Center for Settlement of Investment Disputes, a sole
arbitrator or an arbitral tribunal established under the Arbitration Rules
of the United Nations Commission on International Trade Law, and an
arbitral proceeding under the Arbitration Institute of the Stockholm
Chamber of Commerce.141
In effect, breaches of the ECT, including breaches of contracts that
become breaches of the ECT under the umbrella clause (the last sentence
of Article 10(1)),142 are subject to the ECTs dispute settlement
mechanisms.143 The disputing parties, as well as the arbitrators and
tribunals, may have to consider certain standing and jurisdiction
requirements, but those are outside the scope of this Article.144
The ECT also includes a unique conciliation procedure to deal
specifically with disputes over transit that may be invoked by Contracting
Parties, and is faster and less formal than taking a dispute to
arbitration.145 Under this procedure, an independent conciliator is
appointed in order to assist the parties in reaching an agreement.146 If an
agreement is not reached within ninety days of the conciliators
appointment, then the conciliator must decide interim transit tariffs for a
period of up to twelve months while negotiations between the parties
continue.147 The aim of this procedure is to reduce the risk of
interruptions to transit flows while an agreement is reached.148 The
Secretary General of the Energy Charter Secretariat has a role in
appointing the conciliator in such case, but, apart from this specific

139. ECT, supra note 10, art. 26(1), 27.


140. Id. art. 26(1), 27(1), 28.
141. See id. art. 26.
142. ECT, supra note 10, art. 10(1). The states listed in Annex IA to the ECT do not allow
disputing parties to refer their disputes concerning the umbrella clause to international
arbitration. Id., art. 26(3)(c).
143. ENERGY CHARTER SECRETARIAT, THE ENERGY CHARTER TREATY: A READERS
GUIDE 26 (2002), available at http://www.encharter.org/fileadmin/user_upload/Publications/
ECT_Guide_ENG.pdf. See ECT, supra note 10, art. 26.
144. See e.g., INVESTMENT ARBITRATION AND THE ENERGY CHARTER TREATY (Clarisse
Ribeiro, ed., 2006).
145. Energy Charter Secretariat, Frequently Asked Questions, supra note 129.
146. Id.
147. ECT, supra note 10, arts. 7(7)(c)(d); Energy Charter Secretariat, Frequently Asked
Questions, supra note 129.
148. Energy Charter Secretariat, Frequently Asked Questions, supra note 129.

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instance, the Secretariat itself is not involved in dispute settlement.149


The ECT seeks to promote and direct investment in Contracting
Parties, cataly[zing] economic growth by means of measures to liberalize
investment and trade in energy.150 Article 2 confirms that the ECT aims
to create a legal framework in order to promote long-term cooperation
in the energy field, based on complementarities and mutual benefits.151
The ECT does not create investment opportunities by forcing open
access to resources or defining a certain market structure, but once an
energy investment is made between two Contracting Parties, the ECT
provides a stable interface between the foreign investor and the host
government.152
A. Energy Charter Transit Protocol
The ECT also promotes reliable international transit flows.153 The
ECT includes an obligation on the Contracting Parties to facilitate energy
transit across their territory, in line with the principle of freedom of
transit, and an obligation to secure established transit flows.154 However,
the ECT does not oblige any Contracting Party to introduce mandatory
third party access to transit facilities.155 In relation to transit tariffs, the
ECT only requires that such tariffs be non-discriminatory and that there
not be any unreasonable delays, restrictions, or charges on energy
materials and products in transit.156
Negotiations on an Energy Charter Transit Protocol aimed to clarify
the operational meaning of freedom of transit.157 Negotiations within
the Energy Charter process to establish a Transit Protocol began in 2000,
and agreement on certain critical issues was reached in 2002; however,
that progress was followed by a suspension of negotiations in 2003.158
Subsequently, in October 2011, the European Union presented a new
common position with regard to the negotiations on the draft Transit
Protocol and argued that it no longer appeared opportune to continue
such negotiations.159 Taking this into consideration, the Energy Charter
Conference repealed the mandate for negotiations of the Transit Protocol

149. ECT, supra note 10, art. 7(7)(b); Energy Charter Secretariat, Frequently Asked
Questions, supra note 129.
150. ECT, supra note 10, pmbl.
151. Id. art. 2.
152. Energy Charter Secretariat, Frequently Asked Questions, supra note 129.
153. Id.
154. ECT, supra note 10, art. 7(1), (5).
155. ENERGY CHARTER SECRETARIAT, supra note 143, at 29.
156. Energy Charter Secretariat, Frequently Asked Questions, supra note 129.
157. Id.
158. Energy Charter Secretariat, Transit Protocol, ENERGY CHARTER, http://www.encharter.
org/index.php?id=37&L=0 (last visited Aug. 6, 2012).
159. Id.

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at its 22nd Meeting, held on November 29, 2011.160 If the negotiations are
reset and the Transit Protocol is finalized, it could significantly impact
hydrocarbon resource transport arrangements in Central Asia.
B. PEEREA
Article 19 of the ECT requires each Contracting Party to strive to
minimize, in an economically efficient manner, harmful environmental
impacts arising from energy use.161 The PEEREA was negotiated, opened
for signature, and entered into force at the same time as the ECT, April
16, 1998.162 The PEEREA requires its participating states and regional
economic integration organizations to formulate clear policy aims for
improving energy efficiency and reducing the energy cycles negative
environmental impact.163 In relation to the PEEREA, the Energy Charter
process provides Contracting Parties with information regarding good
environmental practices and a forum in which they can exchange
dialogue on experiences and policy advice on energy efficiency issues. At
this forum, the parties to the PEEREA are encouraged to highlight some
aspects of national energy efficiency strategies, such as taxation, pricing,
environment-related subsidies, and other mechanisms to finance energy
efficiency objectives.164
C. Trade Amendment
The ECTs trade provisions, which were initially based on the trading
regime of the General Agreement on Tariffs and Trade (GATT), were
modified by the adoption in April 1998 of a set of amendments (Trade
Amendment) to the ECT to bring the provisions into line with the rules
and practices of the WTO, particularly the principles of transparency and
non-discrimination.165 In addition, the Trade Amendment extended the
ECTs trade rules to energy-related equipment, such as pipeline pipes,
turbines, furnaces, etc., and thus, it ensures that investors will have access
to equipment of their choice on a non-discriminatory basis, both in terms
of MFN treatment and NT.166 It is not mandatory for Contracting Parties
to the ECT to also accede to the Trade Amendment.167
160. Id.
161. ECT, supra note 10, art. 19(1).
162. Energy
Charter
Secretariat,
Energy
Efficiency,
ENERGY
CHARTER,
http://www.encharter.org/index.php?id=37&L=0 (last visited Aug. 6, 2012).
163. Energy Charter Secretariat, 1994 PEEREA, ENERGY CHARTER, http://www.encharter.
org/index.php?id=27&L=0 (last visited May 6, 2012).
164. Id.
165. Energy Charter Secretariat, 1998 Trade Amendment, ENERGY CHARTER,
http://www.encharter.org/index.php?id=26&L=0 (last visited Jan. 12, 2013).
166. ENERGY CHARTER SECRETARIAT, supra note 143, at 15.
167. See Energy Charter Secretariat, Status of Ratification of the Trade Amendment
to the Energy Charter Treaty as of August 2012, ENERGY CHARTER, http://www.encharter.

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IV. APPLICATION OF THE ECT IN CENTRAL ASIA


IF CHINA BECAME A CONTRACTING PARTY
A. Why Chinas Joining the ECT Would
Benefit Central Asian Contracting Parties
1. Trade
Under the ECT, China would ensure non-derogation from the GATT
and Related Instruments (Article 4), and trade-related investment
measures being consistent with Article III or XI of the GATT (Article
5(1)).168 As a WTO member, China already has assumed an obligation to
ensure the above GATT rules in its relationships with many of the ECT
Contracting Parties.169 Furthermore, although it is not mandatory for a
Contracting Party to accede to the Trade Amendment, it appears likely
that China also would accede to the Trade Amendment due to its
adherence and successful use of the WTO system.170
With regard to the relationships with non-WTO member states that
are ECT members,171 which critically include Kazakhstan, Turkmenistan
and Uzbekistan,172 Article 29 of the ECT incorporates the GATT
discipline into Chinas trade in energy with those states.173 Accordingly,
Chinas becoming an ECT Contracting Party would permit such nonWTO member states that are ECT Contract Parties to use the ECTs
trade-dispute settlement mechanism to enforce disputes with China,
which they would not be able to do via the WTO. The ability for nonWTO members to have a proven and effective system for dispute
settlement with China is an invaluable benefit of the ECT.
2. Transit
Article 7(1) of the ECT says [e]ach Contracting Party shall take the
necessary measures to facilitate the Transit of Energy Materials and
Products consistent with the principle of freedom of transit.174 Chinas
becoming subject to Article 7 of the ECT would be beneficial to the
org/fileadmin/user_upload/document/Trade_Amendment_ratification_status.pdf (last visited
January 12, 2013).
168. ECT, supra note 10, arts. 4, 5(1).
169. See, e.g., Understanding the WTO: The Agreements, WORLD TRADE ORG.,
http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm1_e.htm (last visited Jan. 4, 2013).
170. See generally Mary Amiti et al., CHINAS GROWING ROLE IN WORLD TRADE (Robert
C. Feenstra & Shang-Jin Wei eds., 2010).
171. These states are Azerbaijan, Belarus, Bosnia and Herzegovina, Kazakhstan,
Turkmenistan, and Uzbekistan. Energy Charter Secretariat, 1998 Trade Amendment, supra note
165.
172. Id.
173. See ECT, supra note 10, art. 29.
174. Id. art. 7(1).

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landlocked Central Asian states by ensuring that the hydrocarbons


shipped to China are not stopped upstream on the way to China. In this
regard, Chinas accession to the ECT would make China a much safer
destination to send hydrocarbon resources than Russia, where every
molecule of oil and gas that enters Russian territory becomes Russian.175
Also, Central Asian Contracting Parties would benefit from the ECTs
streamlined dispute settlement mechanism, specifically prepared for
transit disputes.176 In particular, for ECT Contracting Parties that are not
WTO members, ECTs transit-dispute settlement mechanism would
present the only available source of uniform dispute settlement with
China regarding transit.177
3. Investment
China has concluded a bilateral investment treaty (BIT) with fortynine states178 of the fifty-one states that are Contracting Parties or
Signatories of the ECT, including Kazakhstan,179 Kyrgyzstan,180
Turkmenistan181 and Uzbekistan.182 Theses BITs, however, do not
provide nearly as much protection to investors as is afforded under the
ECT.183
While the details of the specific BITs between China and Kazakhstan,
Kyrgyzstan, Turkmenistan and Uzbekistan have not been made public,184
in most of the BITs concluded in the 1980s and 1990s, China did not
agree to provide for NT185 or allow referral of investor-state disputes to
175. PETERSEN & BARYSCH, supra note 37, at 27.
176. See ECT, supra note 10, art. 7.
177. See id. art. 7(7)-(8); Understanding the WTO: Settling Disputes, WORLD TRADE ORG.,
http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm (last visited Jan. 4, 2013).
178. See Total Number of Bilateral Investment Agreements Concluded, U.N. CONFERENCE
ON TRADE & DEV. (June 1, 2012), http://archive.unctad.org/sections/dite_pcbb/docs/bits_
china.pdf.
179. Entered into force on August 13, 1994. Id.
180. Entered into force on September 8, 1995. Id.
181. Entered into force on June 4, 1994. Id.
182. Entered into force on September 1, 2011. Id.
183. See Zhang, supra note 62, at 603, 610 ([T]hough China has entered into BITs with all
members from CIS [Commonwealth of Independent States] . . . [they are] rather simple and
could not provide sufficient protection of foreign investment . . . . On the contrary, the
investment protection and promotion provisions of the [ECT] are much more complicated and
comprehensive.).
184. See Total Number of Bilateral Investment Agreements Concluded, supra note 178.
185. See Agreement Between the Government of the Peoples Republic of China and
the Government of the Republic of Albania Concerning the Encouragement
and Reciprocal Protection of Investments, China-Alb., Feb. 13, 1993, available
at http://unctad.org/sections/dite/iia/docs/bits/china_albania.pdf [hereinafter China-Alb.];
Agreement Between the Government of Australia and the Peoples Republic of China
on the Reciprocal Encouragement and Protection of Investments, Austl.-China,
July 11, 1988, available at http://unctad.org/sections/dite/iia/docs/bits/australia_china.pdf
[hereinafter
Austl.-China];
Agreement
Between
the
Government
of
the
Peoples Republic of Bulgaria and the Government of the Peoples Republic of
China Concerning the Reciprocal Encouragement and Protection of Investments, Bulg.-China,

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an ad hoc arbitral tribunal186 for disputes other than those related to the
amount of compensation for expropriation.187 In contrast, in the BITs
June 27, 1989, available at http://unctad.org/sections/dite/iia/docs/bits/china_bulgaria.pdf
[hereinafter Bulg.-China]; Agreement Between the Government of the Peoples
Republic of China and the Government of the Republic of Croatia Concerning the
Reciprocal Encouragement and Protection of Investments, China-Croat., June 7,
1993, available at http://unctad.org/sections/dite/iia/docs/bits/china_croatia.pdf [hereinafter
China-Croat.]; China and Denmark Agreement Concerning the Encouragement and
Reciprocal Protection of Investments, China-Den., Apr. 29, 1985, available at
http://unctad.org/sections/dite/iia/docs/bits/china_denmark.pdf [hereinafter China-Den.]; The
Government of the Peoples Republic of China and the Government of Estonia, China-Est.,
Sept. 2, 1993, available at http://unctad.org/sections/dite/iia/docs/bits/china_estonia.pdf
[hereinafter China-Est.]; Agreement Between the Government of the Peoples Republic of
China and the Government of the Republic of Georgia Concerning the Reciprocal
Encouragement and Protection of Investments, China-Geor., June 3, 1993, available at
http://unctad.org/sections/dite/iia/docs/bits/china_georgia.pdf
[hereinafter
China-Geor.];
Agreement Between the Government of the Peoples Republic of China and the Government of
the Hellenic Republic for the Encouragement and Reciprocal Protection of Investments, ChinaGreece, June 25, 1992, available at http://unctad.org/sections/dite/iia/docs/bits/china_greece.pdf
[hereinafter China-Greece]; Agreement Between the Republic of Hungary and
the Peoples Republic of China Concerning the Encouragement and Reciprocal
Protection
of
Investments,
Hung.-China,
May
29,
1991,
available
at
http://unctad.org/sections/dite/iia/docs/bits/china_hungary.pdf
[hereinafter
Hung.-China];
Agreement Between the Republic of Lithuania and the Peoples Republic of China Concerning
the Encouragement and Reciprocal Protection of Investments, Lith.-China, Nov. 8, 1993,
available at http://unctad.org/sections/dite/iia/docs/bits/china_lithuania.pdf [hereinafter Lith.China]; Agreement Between the Government of the Peoples Republic of China and the
Government of the Mongolian Peoples Republic Concerning the Encouragement and
Reciprocal Protection of Investments, China-Mong., Aug. 26, 1991, available at
http://unctad.org/sections/dite/iia/docs/bits/china_mongolia.pdf [hereinafter China-Mong.]; PRC,
Norway Agreement on Mutual Protection of Investments, China-Nor., Nov. 21, 1984, available
at http://unctad.org/sections/dite/iia/docs/bits/china_norway.pdf; Agreement Between the
Government of the Peoples Republic of China and the Government of the Polish Peoples
Republic Concerning the Reciprocal Promotion and Protection of Investments, China-Pol., June
7, 1998, available at http://unctad.org/sections/dite/iia/docs/bits/china_poland.pdf [hereinafter
China-Pol.]; Agreement on the Mutual Protection of Investments, China-Swed., Mar. 29, 1982,
available at http://unctad.org/sections/dite/iia/docs/bits/china_sweden.pdf [hereinafter ChinaSwed.]; Agreement Between the Peoples Republic of China and the Republic of Turkey
Concerning the Reciprocal Promotion and Protection of Investments, China-Turk., Nov. 13,
1990, available at http://unctad.org/sections/dite/iia/docs/bits/china_turkey.pdf.
186. Some of Chinas bilateral investment treaties (BITs) do not provide any investor-state
dispute settlement mechanism. E.g., Hung.-China, supra note 185; China-Pol., supra note 185;
Agreement Between the Government of the United Kingdom of Great Britain and Northern
Ireland and the Government of the Peoples Republic of China Concerning the Promotion and
Reciprocal Protection of Investments with Exchanges of Notes, U.K.-China, May 15, 1986,
available at http://unctad.org/sections/dite/iia/docs/bits/uk_china.pdf [hereinafter U.K.-China].
Other of Chinas BITs provide that either party to the investment dispute may resort to domestic
court proceedings. E.g., China-Alb., supra note 185, art. 8(2); Austl.-China, supra note 185, art.
XII(2)(a); China-Croat., supra note 185, art.8(2).
187. China-Alb., supra note 185, art. 8(3); Austl.-China, supra note 185, art. XII(2)(b) (when
both parties agree, disputes in general may also be submitted to ad hoc arbitral tribunal); ChinaCroat., supra note 185, art. 8(3); China-Den., supra note 185, art. 8(3); China-Est., supra note
185, art. 8(3); China-Geor., supra note 185, art. 9(3); China-Greece, supra note 185, art. 10(2)
(when both parties agree, investment disputes in general may also be submitted to ad hoc
arbitral tribunal); Hung.-China, supra note 185, art. 10(1); Agreement Between the Government
of the Peoples Republic of China and the Republic of Iceland Concerning the Promotion
and Reciprocal Protection of Investments, China-Ice., Mar. 31, 1994, available at
http://unctad.org/sections/dite/iia/docs/bits/china_iceland.pdf, art. 9(3); Lith.-China, supra note
185, art. 8(2)(b) (referring disputes to the International Centre for Settlement of Disputes
(ICSID) rather than to ad hoc arbitral tribunals, and when both parties agree, investment

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concluded in the 2000s, China agreed to the implementation of both such


matters,188 which suggests that China has a positive attitude towards
modernizing its BITs. This inference is supported by the fact that China
has renegotiated its BITs with Germany,189 the Netherlands,190 and
Switzerland.191192 Nevertheless, it should be noted that all the BITs that

disputes in general may also be submitted to the ICSID); China-Mong., supra note 185, art. 8(3);
China-Pol., supra note 185, art. 10(1); Agreement Between the Government of the Peoples
Republic of China and the Government of the Republic of Slovenia Concerning the
Encouragement and Reciprocal Protection of Investments, China-Slovn., art. 8(3), Sept. 13,
1993, available at http://unctad.org/sections/dite/iia/docs/bits/china_slovenia.pdf; U.K.-China,
supra note 186, art.7(1).
188. Agreement Between the Peoples Republic of China and Bosnia and Herzegovina on
the Promotion and Protection of Investments, China-Bosn. & Herz., arts. 3(1), 8(2), June 26,
2002, available at http://unctad.org/sections/dite/iia/docs/bits/china_bosnia.pdf [hereinafter
China-Bosn. & Herz.] (disputes are referred to the ICSID rather than to an ad hoc arbitral
tribunal); Agreement Between the Czech Republic and the Peoples Republic of China on the
Promotion and Protection of Investments, Czech-China, arts. 3(1), 3(2), 9(2)(c), Dec. 8, 2005,
available at http://unctad.org/sections/dite/iia/docs/bits/China_czechrep.pdf [hereinafter CzechChina]; Agreement on the Encouragement and Reciprocal Protection of Investments
Between the Government of Republic of Finland and the Government of the
Peoples Republic of China, Fin.-China, arts. 3(2), 9(2)(c), Nov. 15, 2004, available
at
http://unctad.org/sections/dite/iia/docs/bits/china_finland.pdf
[hereinafter
Fin.-China];
Agreement Between the Peoples Republic of China and the Federal Republic of Germany on
the Encouragement and Reciprocal Protection of Investments, China-Ger., arts. 3(2), 9(3), Dec.
1, 2003, available at http://unctad.org/sections/dite/iia/docs/bits/china_germany.pdf [hereinafter
China-Ger.]; Agreement Between the Government of the Peoples Republic of China and the
Government of the Republic of Latvia on the Encouragement and Reciprocal
Protection of Investments, China-Lat., arts. 3(2), 9(2)(b) Apr. 15, 2004, available at
http://unctad.org/sections/dite/iia/docs/bits/China_Latvia.pdf (disputes are referred to the ICSID
rather than to an ad hoc arbitral tribunal); Agreement on the Encouragement and Reciprocal
Protection of Investments Between the Government of the Peoples Republic of China and the
Government of the Kingdom of the Netherlands, China-Neth., arts. 3(3), 10(3)(b), Nov. 26, 2001,
available at http://unctad.org/sections/dite/iia/docs/bits/china_netherlands.pdf [hereinafter ChinaNeth.]; Agreement between the Government of the Russian Federation and the Government of
the Peoples Republic of China on the Promotion and Reciprocal Protection
of Investments, Rus.-China, arts. 3(2), 9(2)(c), Nov. 9, 2006, available at
http://unctad.org/sections/dite/iia/docs/bits/russia_china_ru.pdf; Agreement Between the Swiss
Federal Council and the Government of the Peoples Republic of China on the Promotion and
Reciprocal Protection of Investments, Switz.-China, arts. 4(2), 11(2)(b), Jan. 27, 2009, available
at http://unctad.org/sections/dite/iia/docs/bits/Switzerland_China_new.pdf [hereinafter Switz.China].
189. See China-Ger., supra note 188 (renegotiated BIT signed on Dec. 1, 2003, replacing the
previous BIT signed on Oct. 7, 1983); Total Number of Bilateral Investment Agreements
Concluded, supra note 178.
190. See China-Neth., supra note 188 (renegotiated BIT signed on Nov. 26, 2001, replacing
the previous BIT signed on June 17, 1985); Total Number of Bilateral Investment Agreements
Concluded, supra note 178.
191. See Switz.-China, supra note 188 (renegotiated BIT signed on Jan. 27, 2009, replacing
the previous BIT signed on Nov. 12, 1986); Total Number of Bilateral Investment Agreements
Concluded, supra note 178.
192. It appears that China also renegotiated its BITs with Belgium and Luxembourg,
Bulgaria, France, Portugal, Romania, Spain, and Sweden, respectively, considering the fact that
the United Nations Conference on Trade and Developments country-specific list of BITs shows
a signing date in the 2000s while its database of the texts of BITs displays those signed in the
1980s and 1990s. See Agreement Between the Government of the Peoples Republic of China
and the Belgian-Luxembourg Economic Union on the Reciprocal Promotion and
Protection
of
Investments,
China-Belg.-Lux.,
June
4,
1984,
available
at
http://unctad.org/sections/dite/iia/docs/bits/china_belg_lux.pdf; China-Bulg., supra note 185;

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were concluded in the 2000s and are publicly available include a provision
that China could require the investor to exhaust domestic administrative
review procedures before using the BIT-based dispute settlement
proceedings.193 This condition for consent to arbitration is not allowed
under the ECT.194

Accord
Entre
le
Gouvernement
de
la
Republique
Franaise
et
le
Gouvernement de la Republique Populaire de Chine Sur LEncouragement et la
Protection Reciproques des Investissements, Fr.-China, May 30, 1984, available at
http://unctad.org/sections/dite/iia/docs/bits/france_china_fr.pdf; Acordo Entre o Governo da
Repblica Portuguesa e o Governo da Repblica Popular da China Sobre a Promoo e
Proteco Mtua e de Investimentos, Port.-China, Feb. 3, 1992, available at
http://unctad.org/sections/dite/iia/docs/bits/china_portugal_por.pdf; Agreement Between the
Government of the Peoples Republic of China and the Government of Romania Concerning
the Encouragement and Reciprocal Protection of Investments, China-Rom., July 12, 1994,
available at http://unctad.org/sections/dite/iia/docs/bits/china_romania.pdf; Acuerdo Para la
Proteccion y Fomento Reciproos de Inversiones Entre el Reino de Espaa y la
Republica
Popular
de
China,
Spain-China,
Feb.
6,
1992,
available
at
http://unctad.org/sections/dite/iia/docs/bits/spain_china_sp.pdf; Agreement on the Mutual
Protection
of
Investments,
China-Swed.,
Mar.
29,
1982,
available
at
http://unctad.org/sections/dite/iia/docs/bits/china_sweden.pdf; Total Number of Bilateral
Investment Agreements Concluded, supra note 178. In addition to these states, it should be noted
that Japan signed a trilateral investment agreement between itself, China, and South Korea on
May 13, 2012, although this new trilateral agreement does not replace the BIT between China
and Japan signed on August 27, 1988. Agreement Among the Government of Japan, the
Government of the Republic of Korea and the Government of the Peoples Republic of China
for the Promotion, Facilitation and Protection of Investment, Japan-S. Kor.-China, art. 25, May
13, 2012, available at http://www.mofa.go.jp/announce/announce/2012/5/pdfs/0513_01_01.pdf.
193. See China-Bosn. & Herz., supra note 188, art. 8(2) (either party may require exhaustion
of its domestic administrative review procedures); Czech-China, supra note 188, art. 9(3) (only
China requires exhaustion of domestic administrative review procedures); Protocol to the
Agreement on the Encouragement and Reciprocal Protection of Investments Between the
Government of Republic of Finland and the Government of the Peoples Republic of China,
art. 9, Nov. 15, 2004, available at http://unctad.org/sections/dite/iia/docs/bits/china_finland.pdf
(only China may require exhaustion of domestic administrative review procedures); Protocol to
the Agreement Between the Peoples Republic of China and the Federal Republic of Germany
on the Encouragement and Reciprocal Protection of Investments, to art. 9, Dec. 1, 2003,
available at http://unctad.org/sections/dite/iia/docs/bits/china_germany.pdf (only China requires
exhaustion of domestic administrative review procedures); Protocol to the Agreement Between
the Government of the Peoples Republic of China and the Government of the Republic of
Latvia on the Promotion and Protection of Investments, art. 9, Apr.15, 2004, available at
http://unctad.org/sections/dite/iia/docs/bits/China_Latvia.pdf (only China requires exhaustion of
domestic administrative review procedures); Protocol to the Agreement on Encouragement
and Reciprocal Protection of Investments Between the Peoples Republic of China
and the Kingdom of the Netherlands, art. 10, Nov. 26, 2001, available at
http://unctad.org/sections/dite/iia/docs/bits/china_netherlands.pdf
(only
China
requires
exhaustion of domestic administrative review procedures); Protocol to the Agreement Between
the Government of the Russian Federation and the Government of the Peoples Republic of
China on the Promotion and Reciprocal Protection of Investments, art. 9, Nov. 9, 2006, available
at http://unctad.org/sections/dite/iia/docs/bits/russia_china_ru.pdf (either party may require
exhaustion of its domestic administrative review procedures); Protocol to the Agreement
Between the Swiss Federal Council and the Government of the Peoples Republic of China on
the Promotion and Reciprocal Protection of Investments, art. 11(2)(a), Jan. 27, 2009, available at
http://unctad.org/sections/dite/iia/docs/bits/Switzerland_China_new.pdf (only China may require
exhaustion of domestic administrative review procedures).
194. Subject only to subparagraphs (b) and (c), each Contracting Party hereby gives its
unconditional consent to the submission of a dispute to international arbitration or conciliation
in accordance with the provisions of this Article. ECT, supra note 10, art. 26(3)(a) (emphasis
added). The exceptions allowed under this provision are: the Investors having already submitted

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Based on the aforesaid trends observed in Chinas BITs, it appears


likely that Chinas BITs with Kazakhstan, Kyrgyzstan, Turkmenistan, and
Uzbekistan, all signed in 1992, do not include the full protection of
investments included in Chinas BITs signed in the 2000s. If this is true,
these Central Asian states stand to benefit a great deal from having
China subscribe to the ECT and thereby extend more beneficial terms
regarding NT and investor-state arbitration for disputes other than those
related to the amount of compensation for expropriation. In addition,
Chinas accession to the ECT would mean that investors would not be
required to exhaust domestic administrative review procedures before
using treaty-based dispute settlement proceedings. These newly
incorporated changes would serve to protect the above mentioned
Central Asian states investments in energy transport infrastructure,
ensure enforcement of investors rights, and require that China treat such
investments with a certain degree of fairness.
Even if Chinas BITs with these Central Asian states do provide for
the full protection of investments to the same extent as those signed in
the 2000s, Chinas accession to the ECT would still benefit these states
through the ECTs definition of investor. The definition of the term
Investor under the ECT is, in terms of corporate or institutional
investors, a company or other organization organized in accordance with
the law applicable in that Contracting Party.195 This definition requires
only the incorporation under the laws of the host state, unlike the
definition of investor used in Chinas BITs, which usually requires
actual presence in the host states territory.196
The ECTs broad definition of investor could enable a national or
company of a non-ECT member state to enjoy protection under the ECT
by making an investment via a holding company incorporated under the
laws of another state that is a Contracting Party.197 Although there is a
its dispute to a domestic court; and the dispute arising from the umbrella clause. ECT, supra
note 10, art. 26(3)(b)-(c). A number of Chinas older BITs include the abovementioned
exception of previous submission to a domestic court. However, China might be willing to give
up this exception for accession to the ECT, as several recent BITs allow the investor who has
submitted its dispute to a domestic court to withdraw from the court proceedings and to
resubmit it to arbitration. E.g., Czech-China, supra note 188, art. 9(4); Fin.-China, supra note
188, art. 9(3). In any event, China may maintain the abovementioned exception of previous
submission to a domestic court under Article 26(3)(b) of the ECT.
195. ECT, supra note 10, art. 1(7)(a)(ii).
196. Not only the BITs signed around 1992, the year in which China signed BITs with
Kazakhstan, Kyrgyzstan, Turkmenistan, and Uzbekistan, but also more recent BITs require
actual presence by including, in the definition of an investor, a requirement to be domiciled,
having seat, having registered office or hav[ing] their seat, together with real economic
activities in the territory of the host state. E.g., China-Alb., supra note 185, art. 1(2)(b); Hung.China, supra note 185, art. 1(2)(b);China-Greece, supra note 185, art. 1(3)(a), 1(3)(b); ChinaGer., supra note 188, art. 1(2)(a), 1(2)(b); China-Lat., supra note 188, art. 1(2)(a)(ii), 1(2)(b)(ii);
Switz.-China, supra note 188, art. 1(2)(b).
197. JESWALD W. SALACUSE, THE LAW OF INVESTMENT TREATIES 188 (2010); Nils
Eliasson, 10 Years of Energy Charter Arbitration, MANNHEIMERSWARTLING 21 (June 6, 2011),

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caveat that the denial of benefit clause in Article 17(1) of the ECT might
apply to such case,198 this broader possibility of protection under the ECT
could benefit the Central Asian states. For example, even though the
United States does not have a BIT with China, if a U.S. company wanted
to make an investment in the construction of a new pipeline similar to the
CACGP, the company could establish a holding company in, say,
Kazakhstan and have the holding company invest in China so that such
investment benefits from ECTs protections.199 In this hypothetical, the
investment would be made in China and not Kazakhstan, but the holding
company incorporated in Kazakhstan would have some economic
activities and generate tax revenues.
B. Why Chinas Joining the ECT Would Benefit China
1. ECT Investment Provisions
With regard to the two ECT Contracting Parties with which China
does not have BITsthe Republic of Ireland and the Principality of
LiechtensteinChinese investors would obtain protection of their
energy-related investments in these states under the ECT. In addition,
the higher security in investment climate that China must ensure under
the ECT would encourage investment in China. The ECTs main
investment protection provisions are summarized below.
a. Protection Against Appropriation
Under Article 13 of the ECT, a host state may not expropriate foreignowned property or investments, or take a measure tantamount to
expropriation, unless the measure is: (1) conducted for a purpose in the
public interest; (2) not discriminatory; (3) carried out under due process
of law; and (4) accompanied by payment of prompt, adequate, and
effective compensation.200
b. Fair and Equitable Treatment
Article 10(1) of the ECT sets forth a flexible fair and equitable
treatment clause. In relation to past arbitral awards, the tribunals
interpreted, or at least left room for interpreting, the unfair and
inequitable treatment prohibited by this provision to include: breaching
legitimate expectations created by the state and relied upon by the
available at http://www.sccinstitute.com/filearchive/4/41105/Report%20Ten%20Years%20of%20
ECT%20Arbitration,%2030%20June%202011.pdf; see RUDOLF DOLZER & CHRISTOPH
SCHREUER, PRINCIPLES OF INTERNATIONAL INVESTMENT LAW 54 (2008).
198. See SALACUSE, supra note 197.
199. See Total Number of Bilateral Investment Agreements Concluded, supra note 178.
200. ECT, supra note 10, art. 13(1).

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investor;201 failing to maintain a stability of legal framework;202 acting


without transparency;203 acting in an unreasonable or irrational way;204
and failing to provide an opportunity for the investor to be heard or
otherwise denying justice.205
c.

Prohibition of Unreasonable or Discriminatory Treatment

Article 10(1) of the ECT also stipulates that investments shall[] enjoy
the most constant protection and security and no Contracting Party shall
in any way impair by unreasonable or discriminatory measures their
management, maintenance, use, enjoyment or disposal.206
d. Most Favored Nation and National Treatment
Kazakhstan, Turkmenistan, and Uzbekistan, which are not WTO
members, do not provide China with the benefit of MFN treatment and
NT in the WTOs easily enforceable multilateral treaty format. In
addition, in the case of Kazakhstan and Turkmenistan, since Chinas
BITs with these states were signed in 1992,207 it is likely that they did not
provide for the fullest protection of investments. The ECT provides for
this benefit for energy-related investments. The ECTs MFN provision
prohibits states from discriminating against investors on the basis of
nationality and requires states to provide equally favorable treatment to
all investors no matter their nationality.208 The ECTs NT provision
requires a host state to treat foreign investors and their investments no
201. Plama Consortium Ltd. v. Bulgaria, ICSID, Case No. ARB/03/24, Award, 17576
(2008), available at http://www.encharter.org/fileadmin/user_upload/document/Plama_Bulgaria_
Award.pdf; Mohammad Ammar Al-Bahloul v. Tajikistan, SCC, Case No. V (064/2008), Partial
Award on Jurisdiction and Liability, 20002 (2009), available at http://www.encharter.
org/fileadmin/user_upload/Investor-State_Disputes/Partial_award_-_Mohammad-Tajikistan.pdf;
Ioannis Kardassopoulos and Ron Fuchs v. Georgia, ICSID, Case No. ARB/07/15, Award,
43552 (2010), available at http://www.encharter.org/fileadmin/user_upload/InvestorState_Disputes/Award_-_Ioannis_Kardassopoulos_vs_Georgia.pdf; Electrabel S.A v. The
Republic of Hungary, ICSID, Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law
and Liability, 7.140 (2012), available at http://www.italaw.com/sites/default/files/casedocuments/italaw1071clean.pdf. See AES SummitGeneration Ltd. and AES-Tisza ErmKft. v.
Hungary, ICSID, Case No. ARB/07/22, Award, 9.3.69.3.26 (2010), available at
http://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal=showDoc&d
ocId=DC2853_En&caseId=C111.
202. Plama Consortium Ltd., Case No. ARB/03/24, supra note 201, 177; AES Summit
Generation Ltd. and AES-Tisza ErmKft., Case No. ARB/07/22, supra note 201, 9.3.27
9.3.30.
203. See AES Summit Generation Ltd. and AES-Tisza ErmKft, Case No. ARB/07/22,
supra note 201, 9.3.36.
204. Electrabel S.A., Case No. ARB/07/19, 7.142; see AES Summit Generation Ltd. and
AES-Tisza ErmKft, Case No. ARB/07/22, 9.3.369.3.37.
205. Petrobart Ltd. v. Kyrgyzstan, SCC, Case No. 126/2003, at 75 (2005), available at
http://italaw.com/sites/default/files/case-documents/ita0628.pdf; Al-Bahloul, Case No. V
(064/2008), supra note 201, 221.
206. ECT, supra note 10, art. 10(1).
207. Total Number of Bilateral Investment Agreements Concluded, supra note 178.
208. ECT, supra note 10, art. 10(3).

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less favorably than its own nationals and companies in similar


circumstances.209
2. Counterbalancing Russias Soft Power in Central Asia
China must make substantial progress to be perceived by Central
Asian states as more than a mere economic tool. Russian language,
culture, and values permeate every corner of Central Asia, and even
where not accepted, are dominating forces that must be addressed.210
Russia became the dominant power in the region by exerting economic,
cultural, and then political power.211
China is making the proper inroads into Central Asia by first securing
itself as a partner capable of beneficial economic relations.212 Up until this
point, however, China has not made a significant multilateral binding
commitment that it will continue to be a beneficial economic partner.
Central Asian states that saw positive economic development from the
Soviet Union, and later Russia, only to find that such development was
limited in light of what could have been, should now be looking for a
partner that is willing to give more than one-off promises and investments
in infrastructure that may or may not lead to partnership as opposed to
mere exploitation. Central Asian states should want a partner that is
willing to bind itself in front of the international community as a state
that is willing to emerge as a partner for mutual development. Costs in
relation to acceding to the ECT are insignificant compared to the gains
that China would receive, not only in terms of the ECT protection itself,
but also in what such a move would symbolize: when Russia steps out of a
multilateral framework that is beneficial enough for most Central Asian
states to be members, China steps in as a leader for positive change.
C. Costs to China in Relation to Chinas Acceding to the ECT
1. Dispute Settlement
By becoming a Contracting Party, China would be subjecting itself to
ECT dispute settlement procedures with Central Asian states, including
non-WTO members that otherwise would not have available dispute
settlement recourse under an international framework.213 However, as
China is an active and successful user of the WTOs dispute settlement
system,214 such exposure to dispute settlement under an international
209.
210.
211.
212.
213.
214.

Id. art. 10(7).


See, e.g., RUSSIAN DOMINANCE, supra note 29.
See, e.g., id.
See, e.g., supra Part II.C.4.
See ECT, supra note 10, arts. 7(7), 27, 29(7).
See, e.g., Mary Amiti et al., supra note 170, at 32533.

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framework would not likely pose much of a threat.


2. Transit
Article 7 of the ECT could be troublesome for China, as it obliges
Contracting Parties to take measures necessary to facilitate transit of
energy consistent with the principle of freedom of transit and to secure
established energy flows.215 Transit countries also are under an obligation
not to interrupt or reduce existing transit flows, even if they have disputes
with another country concerning this transit, unless the relevant contract
so provides or the relevant court or conciliator authorizes such
interruption.216 However, Article V of the GATT has already provided
for freedom of transit, and, as a WTO member, China already is subject
to this provision.217 Therefore, although Article 7 of the ECT elaborates
some rules specifically related to energy transit,218 it would not impose
too much of a burden on China.
3. Energy Efficiency
ECT Article 41 provides that the terms for accession of each applying
state shall be approved by the Energy Charter Conference.219 At its 4th
Meeting on December 7, 1999, the Energy Charter Conference noted
the policy for the expansion of the Energy Charter process.220 This policy
says: [t]he basic conditions for accession [] involve [] the acceptance of
. . . the obligations contained in the Energy Charter Treaty and the
Energy Charter Protocol on Energy Efficiency and Related
Environmental Aspects.221 Thus, each accession to the ECT that has
taken place to date includes an agreement to adhere to the PEEREA.222
As such, if China acceded to the ECT, it almost certainly would be

215. See ECT, supra note 10, art. 7.


216. See id. art. 7(6).
217. General Agreement on Tariffs and Trade 1994, art.5, Apr. 15, 1994, 1867 U.N.T.S. 187,
33 I.L.M. 1153 (1994).
218. The ECT explicitly covers grid-bound energy transport. ENERGY CHARTER
SECRETARIAT, supra note 143, at 29. The ECT introduces a certain type of national treatment
obligation that may not be present in GATT Article V. Energy Charter Secretariat, Trade in
Energy: WTO Rules Applying under the Energy Charter Treaty, December 2001, at 37.
219. ECT, supra note 10, art. 41.
220. Energy Charter Secretariat, Summary Record of the 4th Meeting of the Energy Charter
Conference held on 7 December 1999 (CC 162), Jan. 27, 2000, at 9.
221. Energy Charter Secretariat, Expansion of the Energy Charter Process (CC 146), Nov.
15, 1999, Annex 2, at 1.
222. Energy Charter Secretariat, Members & ObserversMongolia, ENERGY CHARTER,
http://www.encharter.org/index.php?id=407#c1324 (last visited Jan. 6, 2013). The Former
Yugoslav Republic of Macedonia acceded to the Energy Charter Protocol on Energy Efficiency
and Related Environmental Aspects (PEEREA) several months later than its accession to the
ECT. See Energy Charter Secretariat, Members & Observers, the Former Yugoslav Republic of
Macedonia, ENERGY CHARTER, http://www.encharter.org/index.php?id=303#c931 (last visited
Aug. 6, 2012).

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required to adhere to the PEEREA.223


The PEEREA requires the Contracting Parties that have ratified or
acceded to it to formulate strategies and policy aims for improving energy
efficiency and reducing various environmental impacts.224 Creating and
adhering to such strategies and policy aims could be a challenge for
China, but doing so would improve Chinas global image, underline its
commitment to long-term development of Central Asian hydrocarbons,
and create mutually beneficial and sustainable relationships with Central
Asian states. Furthermore, under Chinas Twelfth Five-Year Plan for
National Economy and Social Development for the period from 2011
until 2015, China is committed to making environmentally sustainable
growth a top priority.225
V. THE BENEFITS OBTAINED BY CHINA BY
JOINING THE ECT OUTWEIGH THE COSTS
China has made inroads to developing Central Asian hydrocarbons by
investing in long-term infrastructure and extending loans that are
favorable to Chinas partners in Central Asia.226 China should capitalize
on its investment by having the ECT protect the infrastructure that it is
building and its continued purchases of Central Asian hydrocarbons.
Chinas acceding to the ECT also would counterbalance Russias soft
power in Central Asia because China would be stepping into the ECT, a
treaty that is beneficial to most Central Asian producer states, after
Russia has stepped out. Chinas making a binding multilateral
commitment to adhere to the ECT, and thereby not unilaterally harm
Central Asian Contracting Parties in the energy arena, would mean a step
towards becoming a meaningful partner in the development of Central
Asia, as opposed to a mere financier.
The insignificant costs that China would face by being subject to
dispute settlement by a few Central Asian states that are not already
WTO members, allowing energy-related investors to use international
arbitration without exhausting domestic administrative review
procedures, and formulating certain environmental policies and
programs, would be outweighed by Chinas being able to secure its
investments and foster a strong position with its Central Asian partners.

223. See Energy Charter Secretariat, About the Charter, ENERGY CHARTER,
http://www.encharter.org/index.php?id=7&L=0 (last visited Jan. 12, 2013).
224. Energy Charter Secretariat, THE ENERGY CHARTER TREATY AND RELATED
DOCUMENTS: A LEGAL FRAMEWORK FOR INTERNATIONAL ENERGY COOPERATION (2004),
available at http://www.encharter.org/fileadmin/user_upload/document/EN.pdf.
225. See Zhang, supra note 62, at 611 (citing Cory Lam, 12th Five Year Plan Hailed as
Greenest FYP in Chinas History, CHINA BRIEFING, Apr. l5, 2011).
226. See PETERSEN & BARYSCH, supra note 37, at 42.