Legal Framework needed for Energy Co-operation in North-east Asia
Professor Dr AFM Maniruzzaman
The countries of north-east Asia now account for more than one-fifth of the world's energy consumption and their energy demand is predicted to shoot up to one-third of the world's total over the next 20 years. The energy-hungry countries of the region, such as South Korea, China and Japan, are now heavily dependent on expensive oil imports from the Middle East and elsewhere and will become increasingly so given their expanding economic activity. China's recent huge surge in energy demand has turned it from an energy exporter to a net importer. With rising oil prices and terrorist threats resulting in instability and insecurity of energy supply, the region must find an alternative.
The solution lies in Asia's comparative advantages. South Korea and Japan, although poorly endowed in natural resources, have capital and modern and efficient energy technologies, while China, Russia and Mongolia have an abundance of natural resources and relatively cheap labour. Russia's existing gas reserves, which are expected to last for the next century, are enough to meet the demands of north-east Asia for decades to come. Here is an opportunity for energy co-operation for the benefit of the entire region.
Unfortunately, there has been no multilateral energy co-operation between China, Japan, Russia, Mongolia and North and South Korea, except for some bilateral arrangements that have undermined the spirit of multilateralism. The current approach of separate arrangements with the contending countries of the region for bilateral development of Sakhalin, Sakha and Irkutsk (Kovykta) will exacerbate regional political tensions. It will also inflame tensions among the adjacent bordering states in exploring, exploiting and sharing the seabed resources, including oil and gas, of the East China Sea and the Yellow Sea. What is needed is a co-operative venture among the countries concerned. A multilateral approach to energy co-operation in north-east Asia could also accommodate bilateral agreements on maritime jurisdiction as well as resource development issues.
It should be remembered that the European Union owes its origin to the European Coal and Steel Community, founded in 1951 by a handful of European states to co-operate in the commodities and avoid another European war. Apart from easing political tensions, including those between the two Koreas, a multilateral energy cooperative venture and energy integration in north-east Asia would have a significant impact on the world's energy security and offer economic benefits to the region.
But for this to occur, a multilateral legal framework is essential to protect investment and encourage trade. The Energy Charter Treaty, which was originally a European venture, has proved to be a successful legal framework. It has 51 signatory states, plus the EU, around the world. It has, for the first time, brought together rules about investment and trade in energy and increased investor confidence.
The issue is whether the nations of north-east Asia should embrace the Energy Charter Treaty in its current form for their own regional energy co-operation. The treaty already has an Asian dimension. It has been ratified by Japan; Mongolia is a full contracting party; and China, South Korea and Association of South-east Asian Nations have observer status but it is not clear whether it will serve as the ideal legal framework in the context of regional co-operation among north-east Asian countries. The time has come to contemplate whether these nations should jump on the treaty bandwagon or devise something similar according to their own regional peculiarities and tastes.
The recently initiated dialogue towards regional energy co-operation in north-east Asia should continue on a regular basis between the six nations. There is an urgent need to form a “North-east Asian Energy Community” as a platform for such constructive dialogue. Although there have been some sporadic efforts under the auspices of various institutions and international organisations, a constructive dialogue is needed that will lead eventually to a north-east Asian energy charter treaty. This is both desirable and practicable for the region. The Asia-Pacific countries should talk seriously about the matter and, perhaps, form a regional experts' group to study aspects of energy co-operation that could pave the way for a multilateral legal framework in the region.
The author is Professor of international law and international business law at the University of Portsmouth, UK.
This article was first published in the Financial Times, London on 14 November 2005. Published with permission.