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The Regulation of Energy Investments Along the „Belt and Road“

by Dr. Peter Hefele

International conference on international energy law

Energy is a central aspect of China’s “One Belt – One Road” (OBOR) policy. It is of strategic importance for China to ensure a secure and reliable supply of external energy resources to the Chinese market. Central Asia and Russia play an increasingly important role in this respect. And Europe as well has to find an answer to this dynamic development. However, the energy investment environment in these countries is challenging.
February 27, 2017 Ordering Information

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More than 50 renowned practitioners and researchers in the fields of law, economics, energy technology and political sciences from East, Southeast and Central Asia as well as Europe participate at the symposium.
Dr Peter Hefele, director of KAS RECAP, outlined the importance of a well-functioning cooperation between the Silk Road countries in order to achieve a sustainable development of the region.
Prof. Dr. Anatole Boute, Associate Professor at the CUHK Faculty of Law, co-organized the conference and drew on his expertise in energy law in his presentation and comments.
Mr Kanat Botbaev, a transit expert at the Energy Charter Secretariat, co-organized the conference. He discussed the key findings of a session on the transboundary transport of energy.
Participants used the extensive list of RECAP publications to inform themselves about energy and climate policy in Asia.
Ms Yvonne Choi Ying-Pik, the Hong Kong Commissioner for Belt and Road, explained that Hong Kong aims to play a key role in the Silk Road project by using its experience as a hub for finance and infrastructure.
Europe marks the end of the new Silk Road in the West and thus plays a key role in shaping the project. Prof. Dr. Marc Bungenberg, a lecturer in public, civil and European law at Saarland University, spoke about foreign investments and energy security in the EU.
A central aspect of the conference was the legal arbitration of conflicts between government, companies, and investors from different OBOR countries. Prof. Dr. Kaj Hobér from Uppsala University in Sweden explained the role of the Energy Charter Treaty.
Participants from all over the world used the conference as an opportunity to connect. Dr. Danae Azaria from Greece, Dr. Andrei Belyi from Russia and Mr Vitaliy Pogoretskyy from Ukraine are talking in this photo.
Dr. Hao Zhang, Associate Professor at the University of Sydney, held a presentation on China's investments in the smaller countries along the new Silk Road.
Many experts from institutions in Hong Kong also contributed to the conference. Dr. Kaho Yu, a lecturer at CUHK, presented new multilateral mechanisms designed to balance out state interests regarding OBOR.
Participants engaged in lively discussions in-between sessions. In this photo, Professor Anatole Boute is talking to Dr. Andrei Belyi and Mr John Yeap, a partner at the international consultancy Pinsent Masons.
On Day 3, experts convened to work on directives aimed at guiding further research. Professor Anatole Boute was summarizing the key findings of the preceding two conference days.

The annual meeting on Regional Energy Cooperation in Asia (RECA) is an important platform for Eurasian countries to discuss current topics of energy cooperation. This year, KAS RECAP, the Chinese University of Hongkong (CUHK) and the Energy Energy Charter (Brussels) jointly organized a two-day workshop on energy investments along the “Belt and Road”. The meeting was attended by leading energy law experts from Europe, Central Asia, and China – both from academia and business.

In her keynote speech, Madam Yvonne Choi, commissioner for Belt and Road of Hong Kong government, highlighted the huge importance and changes for Hong Kong as a hub in Eurasian legal and financial cooperation.

The following sessions focused on four fields of interest:

  • The evolution of regional and global energy markets under the impact of the OBOR initiative and China's rising power, and how to create reliable governance structures

  • The role of international and national law in this respect

  • The crucial role of transboundary trade and transit and how to make investments safe

  • The impact of China's OBOR strategy on the development of its neighboring countries.

Ad 1) It has become clear that OBOR will unleash its economic potential successfully only if it is considered as a truly multilateral project. China has to invest more in the creation of governance structure with mutual benefit to all countries along OBOR. The evolution of the strategic axis provides – in the best case – a great opportunity to mutual learning. It might also enhance regional and global stability and hopefully, overcome the threat of a revival of the 19th century "great game" in Central Asia. Europe should also seek a more active role as a normative power.

Ad 2) The specific instruments, state and private actors and diverse governance structures along OBOR create quite a number of challenges for national and international law as well as bi- and multilateral agreements. Huge investments in infrastructure go far beyond pure commercial projects – not at least due to the fact that main stakeholders are state-owned enterprises or at least private companies, which are massively backed by governments. Better legal protection by an enhanced transnational law might mitigate some of the potential conflicts (i.e. access to and transfer of resources; access to arbitration in case of conflicts). But the political implications of energy investments go far beyond the capacity of any legal system. Further political agreements and security mechanisms have to be established.

Ad 3) Recent examples of Chinese investment projects show a rather project-based approach, including far-reaching exemptions from national energy/resource law regulations. This might create political resistance in the respective country, delegitimize future projects and become a source of security threats. China and other partner have to make huge efforts in understanding the complex interaction between investment and political, economic and social impetus. International agencies like the Energy charter should strengthen their efforts to improve international regulatory frameworks and become a platform for proactive conflict settlement.

Ad 4) China has promoted its OBOR initiative as a big opportunity for economic development and increasing wealth – both for its own economy and society as well as for its neighboring countries. Yet, infrastructure investment does not necessarily guarantee economic and social progress. Central Asian countries have to carefully look into the opportunities as well as into potential risks of domestic and transboundary conflicts related to the extraction of natural resources. The interests of other main powers like Russia and the EU also have to be carefully considered to avoid increasing geostrategic conflicts. This is likewise true for China's neighbors in East and South East Asia, which face similar challenges regarding China's rise and outreach.

KAS RECAP will continue its cooperation with CUHK and Energy Charter to strengthen Euro-Asian cooperation in the field of energy and to promote Hongkong's role as a center for academic and business excellence in OBOR.

A more in-depth report will soon be available on www.kas.de.

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The Regulation of Energy Investments along "One Belt–one Road"

February 23, 2017

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Dr. Peter Hefele

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