The EU and European transnational companies in Central Asia: relocating agency in the energy sector

ABSTRACT

This article argues that in the contentious energy market of Central Asia transnational corporations (TNCs) and local governments are the real forces at play. While the European Union (EU) has repeatedly shown interest in the region, scarce profitability of the economic ventures and lack of control over the actual investors have resulted in a loss of interest. Deconstructing the EU energy security strategy towards Central Asia, this article reflects how TNCs formally based in Europe have used the ‘Shield of Nationality’ as protection from the blows of resource-rich governments, while remaining driven by capital accumulation. A case study of the Italian oil and gas company ENI in Kazakhstan highlights how the mediation of home governments between corporations and local administrations depends on its relationship with the TNC. The article suggests that future research of the energy sector should consider the role of TNCs and their ambiguous relationship with their ‘home countries’.

KEYWORDS:

• oil and gas
• European Union
• Central Asia
• ENI
• energy security
• transnational corporations

Introduction

Since 1991, the relationship between the European Union (EU) and Central Asia has been characterized by a variety of European actors interacting with strongmen-led governments on a bilateral basis. First came the private sector, which had already been invited to the region during the late Soviet era. New discoveries of oil and gas fields and the thirst for cash in hard currency made business in Central Asia enormously profitable for Europe-based companies, large transnational corporations (TNCs) and smaller companies alike. Royal Dutch Shell, British Petroleum and British Gas, ENI, Total SA, OMV Petrom, and other oil-producing TNCs entered the markets of Kazakhstan, Uzbekistan and Turkmenistan in search of hydrocarbons, while European diplomacies and EU institutions played a game of catch up with private interests (Allison and Jonson 2001; Azretbergenova and Syzdykova 2020; Stegen and Kusznir 2015). Since then, government and business interests have aligned over energy security preoccupations. This became especially true for European TNCs which were partly state-owned, as opposed to their US counterparts.

This article analyses the strategies and behavioural inconsistencies between European TNCs, the EU and its member states. What explains the lack of coordination between Europe’s supranational institutions and TNCs? This article argues that different interpretations on how to achieve the goal of energy security among EU institutions, member states and TNCs is the reason behind the inconsistent behaviour of the EU in Central Asia. The constellation of different ‘European actors’ weakens the EU’s bargaining power vis-à-vis local actors and sends the signal to Central Asian partners that the normative agenda can be easily compromised.

Contrasting EU and member states’ strategies towards Central Asia, this article shows how TNCs formally based in Europe have used the ‘shield of nationality’ (Wellhausen 2014) as protection from the blows of resource-rich governments in the region while remaining fundamentally driven by policies of capital accumulation. The article analyses the diverging interests of the EU, member states and companies, as well as direct competition between private European energy companies and formal strategies aimed at reducing corruption. The lack of competition among TNCs exploiting oil resources in Central Asia seemingly clashes with the EU’s ideas about fair and open markets. But instead of concentrating on this aspect, EU institutions and European lobby groups have mostly focused on influencing change in the legislation and jurisprudence in Central Asian states to protect investments.

Methodological considerations

Because only marginal volumes of natural gas from Central Asia are exported to Europe, this article concentrates on the oil sector.¹ The business structure of oil is complex because it entails pipelines and railways, hubs and ports, tankers and barrels, making it more of a tradable commodity. Kazakhstan’s oil is sold across the Mediterranean Sea, to Iran, to China and to Lithuania, whereas Uzbek and Turkmen gas is pumped via pipeline to Russia, Iran and China only (Azretbergenova and Syzdykova 2020; Pirani 2019). The choice to focus on oil inevitably slants the article geographically towards Kazakhstan. As shown in Table 1, as of 2020, European investments in the energy sector of Central Asia are limited to Kazakhstan and Turkmenistan.

Table 1. Participation of European Union foreign companies in Kazakhstan’s and Turkmenistan’s oil and gas fields in 2020.

Foreign company	Country of origin	Oil and gas fields
Kazakhstan
Total SA	France	Kashagan
Royal Dutch Shell	UK, the Netherlands	Kashagan; Karachaganak
ENI	Italy	Kashagan; Karachaganak
Turkmenistan
ENI	Italy	Burun

In the oil and gas industry, Central Asian governments mostly deal directly with European (and other Western) TNCs, rather than relying on existing diplomatic networks with the EU or its member states. In fact, such a bilateral arrangement has proved convenient for Central Asian governments and TNCs, while the ‘home countries’ of TNCs only benefit through profit repatriation fees, which can be marginal compared with the cash flow enriching private shareholders and Central Asian elites. In short, despite the hype regarding old and new EU strategic documents towards Central Asia, discussed herein, the principal relationship in the energy sector remains one between national governments and TNCs. The central argument of the paper is that EU institutions, member states and TNCs pursued the objective of energy security in different ways. In this sense, in dialogue with the other contributions to this special issue (Arynov 2022; Bossuyt and Davletova 2022; Dzhuraev 2022; Fawn 2022; Pierobon 2022), the article proposes to re-analyse the evolution of EU–Central Asian mutual interests in the energy sector to recalibrate the academic debate on the topic.

In the section ‘EU energy strategies towards Central Asia: from energy security to the New Green Deal’ we show how the attitude of the EU has changed over a decade. While initially energy security was interpreted as a diversification of suppliers of oil and gas, by 2019 this strategy was abandoned (High Representative of the Union for Foreign Affairs and Security 2019). We argue that part of the reason for this change is that the window of opportunity for investments had closed. The market was saturated, and the efforts of Central Asian governments consisted in regaining control of the energy sector (Orazgaliyev 2018).

The last section ‘When governments become companies’ lawyers: ENI in Kazakhstan’ is a case study proving that the real actors of the energy market are foreign companies and Central Asian governments because they play according to the same rules, while EU institutions are often sidelined or absent from the picture because they lack interest in business performance. While the objective of TNCs is profit, home governments, particularly when tied to the TNC as in the case of Italy, are reduced to ‘company lawyers’ to prevent private trouble, thus jeopardizing wider EU foreign policy goals, aimed at democracy and human rights promotion. Our analysis of the reactions of Italian governments throughout the years benefits from a series of journalistic investigations as well as our fieldwork in the country.

The fieldwork was conducted among oil workers and industry experts between 2018 and 2020 in Almaty, Nur-Sultan, Aktau and Aksai. While most of the companies have their headquarters in Nur-Sultan, the largest consortia have offices in Atyrau, the so-called ‘country’s oil capital’. Some of the key interviews used for this paper were conducted via voice over internet protocol, due to lockdown restrictions after the start of the Covid-19 pandemic.

This research relies on a systematic review of the literature² exploiting the keywords ‘Europe’ and ‘Central Asia’, and its selection process is discussed in the next section. The final review consisted of 91 studies and helped in grounding our critique towards the common practice of flattening EU, member states and TNC interests into a single energy security strategy.

The choice of analysing the ambiguous relationship of ENI and the Italian government in Kazakhstan has two main reasons. First, Table 1 shows that there are only three European TNCs in major oil and gas fields in Central Asia: Total SA, Royal Dutch Shell and ENI. As mentioned, British Gas (BG) was another big investor in Kazakhstan. Yet, in Kashagan the company sold its shares to KazMunayGas after being denied selling them to the China National Offshore Oil Corporation and Sinopec (Ostrowski 2010; Palazuelos and Fernández 2012). Similarly, BG participation in Karachaganak was acquired by Royal Dutch Shell when the company was bought (Shell Global 2015). BP became an investor in the field of Tengiz in Kazakhstan in 2000 after merging with American Arco, which since 1997 cooperated with Lukoil in the joint venture LukArco. Still, in 2009, BP sold its shares of LukArco to Lukoil, and in October 2020 withdrew from further exploration of three offshore blocks in the Caspian Sea (Putz 2021). Finally, also OMV Petrom, owning the rights of extraction in four small oilfields in Kazakhstan, Komsomolskoe, Aktas, Tasbulat and Turkmenoi, sold its assets, Kom-Munai LLP and Tasbulat Oil Corporation LLP, to Kazakh investors in February 2021 (Sorbello 2021).

Second, ENI, along with Chevron, has been the most important company in Kazakhstan for years. The Italian TNC led the Kashagan consortium until 2009. ENI is also co-operator with Shell of the Karachaganak Petroleum Operating B.V. Particularly in these big joint ventures, the participation of other shareholders is marginal, and only operators engage in day-to-day activities bearing the responsibility for the production and financial results.³ Yet, the case of ENI is peculiar because the Italian government owns shares in the company, while the Netherlands and the UK governments are not shareholders in Shell. Similarly, the Romanian government has shares in OMV Petrom, but the size of investments in Kazakhstan was different (OMV Petrom n.d.). The quarrels between ENI and Kazakhstan jeopardized ENI’s shares in Kashagan after initial conspicuous investments. Losing Kashagan could have meant ENI’s bankruptcy, while OMV Petrom investments in Kazakhstan were only around 4% of the group production. By comparison, in 2019, Kashagan produced 400,000 b/d against the 6450 b/d of Komsomolskoe, Aktas, Tasbulat and Turkmenoi combined (OMV Group 2021). This explains why the confrontations between ENI and Kazakhstan often required the intervention of the Italian government. Again, the main argument of the article is that these interventions, led by different interpretations of how to ensure energy security, were dictated by an ambiguous relationship between the state and its TNC, which ended up affecting the credibility of the EU efforts of democracy promotion in the region (Dave 2008).

A survey of the literature: energy’s downfall in the institutional agenda

This article is accompanied by a systematic review of the literature⁴ on the relationship between the EU and Central Asia. The search, carried out in April 2021 on Scopus and the Web of Science of the Institute of Scientific Information employing the keywords ‘EU’ and ‘Central Asia’,⁵ was narrowed using the following:

• The literature should be part of the expanded field of social sciences.

• The literature should focus on Central Asia and the EU.

Based on the first requirement, the initial screening revealed 324 studies on Scopus and 189 on the Web of Science. The application of the second principle of exclusion and the removal of doubles narrowed the review down to 91 studies.

Of 91 studies, 33 (or 36.26%) focus explicitly on energy. For the studies pertaining to the energy sector, see Appendix A. The studies are many, but their reading in chronological order by year of publication highlights a progressive fading of the EU conviction to achieve the objective of energy security relying on Central Asian supply of oil and gas.

According to Nanay and Stegen (2012), the scarce engagement of the EU in Central Asia in the 1990s was due to a lack of adequate institutional structures, doubts over the energy potential of the region and a willingness not to worsen the relationship with the Russian Federation (Nanay and Stegen 2012, 347–348; Youngs 2009). By 2000, the EU internal energy market was sufficiently competitive, hence the European Commission acknowledged the necessity to ensure its energy security in the green papers ‘Towards a European Strategy for the Security of Energy Supply’ (European Commission 2000).

The first steps to improve the energy relations beyond the EU borders were taken in 2002 with the ‘Memorandum of Understanding’ of Athens and the formalization of the dialogue with Norway (Prontera 2014, 199). That was the same year in which Nabucco, a gas pipeline linking Central Asia with European markets, was first brought to the discussion (Nanay and Stegen 2012, 351).

In 2004, the EU promoted the Baku Initiative, which saw the participation of all the countries of the Caucasus and Central Asia along with Moldova, Ukraine, Belarus and Turkey. The year 2006 was the moment of the entry into force of the Energy Community Treaty that created a common energy market with the Balkan countries (EUR-Lex 2006). After the development of such a coherent diplomatic effort targeted at improving the EU energy security, the 2007 Strategy could not but dedicate attention to the energy relations with the Central Asian republics. Nevertheless, according to Delcour (2011), by then the EU was already a latecomer in the region (Delcour 2011, 91).

As Prontera (2014) noted, the EU energy policy privileged neither a market approach based on liberalization nor a strategic one based on the promotion of European TNCs and bilateral relations (Andrews-Speed, Liao, and Dannreuther 2002). Rather, the EU tried to promote a regional architecture able to enforce the agreements taken on a bilateral basis. This multilateralism may be one of the reasons at the core of its ultimate failure. In fact, the Russian–Ukrainian gas crisis of 2005–06 showed the first cracks of a regional cooperation that could not hold all these countries together. At the Astana conference of 2006 in Kazakhstan, Russia and Turkey participated only as observers. These signals probably pushed EU leaders to think of the Black Sea Synergy (European Commission 2010) and the 2007 Central Asia Strategy as possible solutions to bypass the ‘Russian risk’ (Locatelli 2010, 961). Indeed, in 2008, 84% of EU imports of natural gas were originating only from three countries: Norway, Russia and Algeria (Locatelli 2010, 960).⁶

Hence, between 2006 and 2009, the Nabucco project reached the apex of its credibility, producing a series of news updates on sector-specific journals (Oil and Gas Journal 2008; Petroleum Economist 2006, 2007a, 2007b, 2009; Petroleum Review 2009; World of Oil 2008).⁷ The Nabucco pipeline project became the centre of an EU energy policy that culminated in 2009 with the ‘Third Energy Package’ (Mayer and Peters 2017, 138), but already in 2010 Locatelli (2010, 965) noted how this solution was riddled by logistical uncertainties and risks.

After remaining on paper for more than 10 years, by 2013 interest in academia and policy circles had shifted from Nabucco and towards a less ambitious project: the Trans-Adriatic Pipeline (TAP). As shown in Figure 1, while the number of studies on the relations between the EU and Central Asia blossomed after 2014, there was a drastic decrease of research on energy. This trend in the literature corresponds to a waning interest in infrastructural projects that would link Central Asian hydrocarbon basins with consumers in Europe. The expectations did not prove realistic because, with an already relevant array of investors, Central Asian republics could not supply a resource volume that would justify the investment.

Figure 1. Comparison of the trending topic for studies on the European Union and Central Asia over the years. Source: Designed by the authors.

Until 2014, academics and EU policymakers proposed the strengthening of the energy relations between the EU and Central Asia as the only real alternative to differentiate gas imports in an increasingly precarious exchange with Russia (Amineh and Crijns-Graus 2014; Kirchner and Berk 2010; Locatelli 2010; Nanay and Stegen 2012; Prontera 2014; Ratner et al. 2013). While this argument has been repackaged in milder tones by Ibrayeva et al. (2018) and Chumakov (2019) in recent years, the present article concurs with Amineh and Crijns-Graus (2018) in noting that the EU is powerless in Central Asia because its member states maintain the upper hand in foreign policy (Amineh and Crijns-Graus 2014, 816; 2018, 179; Spaiser 2018).

Moreover, as argued in the next section, in the event that Kazakhstan, Turkmenistan and Uzbekistan were fully committed to the task, they would hardly be able to deliver energy supplies sufficient to relieve the EU from its reliance on imports from Russia, which in 2018 amounted to 26.9% of crude oil, 46.7% of solid fuel and 41.1% of natural gas (Eurostat 2018).

Initially, EU institutions and European TNCs aimed for the same prize: Central Asian energy resources to ensure energy security. Yet, as the next section highlights, while Central Asia gradually disappeared from the list of EU energy priorities with the failure of the Nabucco project (Amineh and Crijns-Graus 2018), European TNCs proved effective in continuing their operations in the region. Still in need of oil supplies and tax revenues, Italy sided with ‘its’ TNC: ENI. This practice often side-stepped the rule of law and led to the de-legitimation of EU institutions, which advocated a process of democratization in the region.

EU energy strategies towards Central Asia: from energy security to the New Green Deal

The EU is required to operate in the field of energy based on the Treaty on the Functioning of the European Union (TFEU), which in article 194, section b, gives its institutions the authority to act in the market to ensure ‘the security of energy supplies in the Union’ (EUR-Lex 2012). Practically, this means that both Parliament and the Commission have active roles in the energy market. Yet, since the composition of Parliament affects the political orientation of the Commission, the 2009, 2014 and 2019 elections have progressively shifted the attention towards the European Green Deal, energy efficiency, and the increasing reliance on renewable energy sources. In other words, José Manuel Barroso’s attempts to negotiate the Trans-Caspian Gas Pipeline (TCP) are far from Ursula von der Leyen’s efforts to ensure the effective implementation of the European Green Deal (EU Commission n.d. a).

Given the high level of energy consumption compared with the substantial lack of indigenous natural resources, the EU member states have always been net importers of energy. This led EU institutions to strive for a diversification of suppliers and routes to import oil and gas. Already in the late 1990s, the EU was backing the proposal of building what became the Baku–Tbilisi–Ceyhan (BTC) pipeline from Azerbaijan to Turkey,⁸ because it would have contributed to source and transit diversification. When it was completed in 2005, the BTC bypassed Russia and thus helped to reduce EU energy dependency on Moscow. Still, pipelines circumventing Russia, such as the BTC, failed to become the main road for Central Asian oil exports to Europe. By 2016, the Russian routes of the Atyrau–Samara pipeline and the Caspian Pipeline Consortium (CPC) accounted for the entirety of Kazakhstan’s westward exports.

In 2012, the EU revised its 2007 Strategy towards Central Asia by revamping a project that could have become a crucial part of the Southern Gas Corridor (SCG), which was already on path to connect the gas fields in Azerbaijan with European consumers (Council of the European Union 2007; European Commission 2007). The TCP was the subject of an intergovernmental agreement between Azerbaijan, Turkmenistan and the EU. Linking Turkmenistan and Azerbaijan would have ensured a reliable supply of gas to Europe and the possibility to scale up the SCG in the future. As these conversations were being laid on the table, Russia had successfully completed the construction of the Nord Stream pipeline, bypassing the Baltic countries and Ukraine, in November 2011. In addition, Russia’s Gazprom was in the process of garnering the consent of several transit countries to build the ambitious South Stream pipeline across the Black Sea. Although South Stream was shelved after Russia’s clashes with Ukraine in 2014, Moscow remained the prominent supplier of gas to Europe, with around 243 bcm exported in 2018, twice as much as Norway, the second largest supplier (Dediu, Czajkowski, and Janiszewska-Kiewra 2019).

The efforts by the European Commission to resume the conversation on the TCP became part of a geopolitical debate on the role of Russia in the former Soviet space (Cutler 2018). At the time, Turkmenistan was selling its gas via land pipeline to Russia and China. But its gas was comparatively cheap: Russia bought it at the rather low price of US$110/mcm, while its European customers were paying up to US$500/mcm; China took Turkmen gas as a payback for its investments on the development of the fields (Henderson and Mitrova 2015). Therefore, the prospect of supplying gas to European customers via a more direct route was seen as convenient for Turkmenistan. At the same time, a successful agreement with the EU would have been a diplomatic coup for Turkmenistan, a country with an abysmal record on human, civil and political rights. For EU institutions, TCP negotiations became a bargaining tool against Russia, one mobilized as a direct consequence of its aggression against Ukraine. Russia was also one of the main obstacles to the construction of an undersea pipeline across the Caspian, given the unresolved legal status of the sea. As negotiations over Ukraine improved, however, the conversation about the TCP fell off the table, another demonstration that the negotiations were contingent on other, more important, diplomatic variables.

As suggested by the literature review, by 2014 the strategy of suppliers’ diversification had failed, but the EU energy dependency worsened. The latest data from 2018 show that several countries in the EU-27 have increased their energy dependency rate since 2000. Overall, in 2018, the EU imported 58% of the energy it consumed. Two-thirds of the imports were constituted by crude oil, followed by 24% of gas and 8% of solid fossil fuels. The only Central Asian country in the list of the most relevant EU energy suppliers is Kazakhstan with 7.2%, well behind Russia (29.8%), but in line with Iraq (8.7%), Saudi Arabia (7.4%) and Norway (7.2%) (Eurostat 2018). Before oil prices and production volumes were driven down by the Russo-Saudi trade spat and the Covid-19 pandemic, in 2019 the biggest oil fields of Kazakhstan had an output of 650,000 b/d from Tengiz, 400,000 b/d from Kashagan and 234,000 b/d from Karachaganak. At the same time, in March 2020 the CPC hit a record high of 1.65 million b/d of oil transported (Coleman 2019, 2020). Kazakhstan’s annual oil production, at around 90 million tonnes, if entirely sold to EU countries, would only satisfy around 17% of the EU’s total consumption.

The Commission’s understanding of the meaning of ensuring ‘the security of energy supplies in the Union’ (EUR-Lex 2012) changed accordingly. While originally it was interpreted as finding alternative reliable suppliers of oil, gas and fossil fuels, it then involved the diversification of energy sources by developing renewable alternatives. This is well exemplified by the 2019 EU and Central Asia: New Opportunities for a Stronger Partnership, which unsurprisingly dropped the emphasis on energy security and enhanced the narrative on human rights and connectivity (Russell 2019). Human Rights Watch, a non-governmental organization (NGO) devoted to the protection of human rights globally, claimed that the first, 2007, strategy had not done enough in the realm of human rights: ‘In 2019, the EU adopted a new strategy on the region, with marked improvements on the previous one from 2007, which was weak on human rights’ (Williamson 2019).

As of 2021, the Commission and Parliament are decisively oriented towards the reduction of carbon emissions, expressed through investments in renewables and energy efficiency.⁹ This reinterpretation of their role is projected towards a greener future, but as proved by the increase in gas prices of the autumn of 2021, it does not resolve the immediate dependency on Russian supplies of many of its member states (Temnycky 2021). The following section showcases a case study of Italy’s ENI in Kazakhstan, which serves to exemplify the argument of a disconnect between different interpretations on how the goal of energy security is to achieve and at what cost.

When governments become companies’ lawyers: ENI in Kazakhstan

‘The Italians built this, the Americans brought that, the French introduced us to it.’ These are commonly heard sentences while interviewing experts, both local and foreign, on the energy sectors across Central Asia. The country toponym, however, has seldom anything to do with the corresponding government and is often tied to private investment by either large TNCs or entrepreneurial groups.

When researching the ‘Italian factor’ in Kazakhstan, the observer would gather that ENI is no different from Kazakhstan’s NOC KazMunayGas, an arm of the government used to satisfy the political objectives of the Italian government. The reality, though, is more complex. ENI was in fact a public company until 1992, when Prime Minister Giuliano Amato sanctioned its transformation into a private enterprise to diminish the influence of the political parties in the wake of the Tangentopoli corruption scandal (The Conversation 2016). At that time, ENI was considered by Italian parties as a cash cow to milk, and it did not resemble the lucrative enterprise of today (D’Amato 2005).

While the privatization was completed only in 1995, the Italian government still owns 30.33% of ENI’s shares, directly through the Ministry of Economy and Finance and indirectly through the government-owned investment bank Cassa Depositi e Prestiti (ENI.com n.d.). This partly justifies the proactivity of the Italian cabinet in Kazakhstan throughout the years. Nevertheless, the scarce profitability of certain investments could suggest that Italian intervention has been often dictated by a non-remunerative relationship with ENI. On the other hand, while ENI’s behaviour in Kazakhstan wavered between its public and private souls throughout the year, its only objective has been the maximization of profits.

Under Prime Minister Silvio Berlusconi (2001–06 and 2008–11), personal and political interests mixed heavily with the management of ENI. This allowed Italy to remain a major buyer of Libyan and Russian oil and gas, in light of Berlusconi’s questionable ties with Muhammar Gaddafi and Vladimir Putin. Berlusconi was instrumental in the election of Paolo Scaroni, earlier a successful entrepreneur in London, as ENI’s chief executive officer (CEO) in 2005 (Greco and Oddo 2018, 168). Scaroni and his successor, Claudio Descalzi, have been acquitted on charges of corruption in Nigeria, in a trial concluded in March 2021 in Milan (Dominelli 2021). Still, Berlusconi’s role in Kazakhstan was marginal, and limited to the colourful tales of his visit to Nazarbayev’s dacha, followed by congratulations on Kazakh men’s manliness (Ferrucci 2013).

The real puzzle started in 2006 when ENI faced government fines in Kazakhstan for the delays at the Kashagan oilfield, having declared that the deadline for the first extraction foreseen for 2010 would not have been respected (Collier and Venables 2012, 162; Tekin and Williams 2011, 132). At the time Romano Prodi was Italy’s prime minister. It became clear that Kazakhstan’s government was using sanctions to obtain compensation from the Kashagan consortium, Agip-KCO (Sarsenbayev 2011). In addition, ENI was stripped of its single operatorship at Kashagan in favour of a dual operatorship with Shell, embodied by the new consortium: the North Caspian Operating Company (NCOC).

ENI’s punishment was partially borne by the Italian bank UniCredit, which overpaid the acquisition of Kazakhstan’s ATF Bank, property of Bulat Utemuratov, a close ally of Nazarbayev’s. The acquisition followed a 2007 visit of Prodi to Kazakhstan along with a number of Italian entrepreneurs, including ENI’s Paolo Scaroni and then-CEO of UniCredit Alessandro Profumo (Marozzi 2007). ATF was purchased for US$2.275 billion (Financial Times 2013), while industry sources put the value of ATF at no more than US$850 million (Mondani 2013). After the acquisition further government sanctions against ENI were dropped, essentially unveiling the purchase as a concealed bribe destined for Nazarbayev and his associates. ATF was later sold for US$464 million to Galimzhan Yessenov, son-in-law of Almaty mayor Akhmetzhan Yessimov, while UniCredit guaranteed US$630 million of ATF’s debt for the next two years, de facto further discounting the acquisition (Gordeyeva 2013). The deal was a disaster for UniCredit, but advantageous for some: Utemuratov became Kazakhstan’s first billionaire (Forbes.kz n.d.), Profumo entered the board of ENI, and Prodi started receiving an annual retainer worth millions as a member of Nazarbayev’s international board of advisors (Mayr 2013).

In 2013, Italy’s Prime Minister Enrico Letta maintained the government’s habit to act as ‘informal lawyers’ of Italian companies rather than defending and promoting sovereign interests abroad. When the wife and daughter of a prominent opponent of Nazarbayev were abducted in Rome and flown into Kazakhstan with the help of Italy’s secret service, the Italian Ministry of Interior behaved contradictorily concerning the scandal. When questioned by Parliament, minister Angelino Alfano claimed ignorance regarding the events – an explanation difficult to believe, given that Alfano sat at the top of the chain of command that would have authorized the extraordinary rendition (Sorbello 2019, 211). The action was the subject of further questioning at the EU Parliament (Kiil-Nielsen, Lochbihler, and Keller 2013).

ENI was touted as involved in the case, because Jorg Mayerbrock, a former employee of the Italian oil and gas company, was hired as the pilot of the private jet rented to fly to Kazakhstan (Greco and Oddo 2018). A journalistic investigation unveiled the connection between the Italian government’s response and ENI, and suggested that the search for Mukhtar Ablyazov and his relatives was commissioned by the Kazakh government to the Italian company (Mondani 2013).

Since obtaining shares in all major consortia of the country, the Kazakh government has notably reduced its hostile engagement with energy companies. Similarly, ENI’s loss of the single operatorship in Kashagan side-lined the Italian company and reduced its interactions with Kazakh authorities. ENI had acted as a classic energy corporation, overcoming competition by undersigning disputable conditions imposed by local governments (Cooley and Sharman 2015; Maugeri 2006). In Kazakhstan, this was hardly unique. In fact, Mobil Oil, Philips Petroleum, Texaco and Amoco were all tried in the United States following the ‘Kazakhgate’ scandal which targeted the middleman James Giffen for violation of the Foreign Corrupt Practices Act. While Bryan Williams was jailed, Giffen was sentenced with a fine on the ground that his involvement benefited his country’s economy (Yeager 2012, 456). Chinese corporations were never prosecuted, but their corrupt involvement with the local elite has been hinted at by Mukhtar Ablyazov (Cooley 2012, 141).

In 2012, Italy was importing 17% of Kazakhstan’s total exports, making it the country’s largest customer. Despite China’s rise as an importer of Kazakh oil, Italy still maintained first place. Yet, for Italy, Kazakhstan only constituted 4.2% of its total oil imports (Koch 2013, 115). In 2018, Kazakhstan ranked eighth in the list of oil suppliers to Italy, behind Azerbaijan, Iran, Iraq, Libya, Saudi Arabia, Russia and Nigeria (Statista 2021). These quantities did not justify the involvement of the Italian government to secure energy supplies, but any of the blows assessed by the Kazakh government could have jeopardized ENI’s financial stability, status and international reputation, creating a double loss for ‘its’ home government: financial and energetic. In other words, Italy’s energy security was at risk.

ENI’s unclear business transactions did not limit to Central Asia: they extended to Africa, from Libya to Egypt (Greco and Oddo 2018). Fieldwork sources referred to having assisted in a discussion involving the payment of a bribe of 7% on top of the value of a contract for the improvement of conditions of Block 3 in Angola in the 1990s. Clearly, the bribe was not paid in person, but rather deposited in a bank account at the Cayman Islands in the name of former President José Eduardo dos Santos.¹⁰ As sources reported, a 7% bribe on top of contracts was an informal rule in Africa in the 1990s. Arguably, ENI became a financial powerhouse because of similar corrupt business dealings in Africa and Central Asia.

These problematic deals were never addressed by EU institutions. The official report of the meetings between ENI and EU institutions indicates a regular schedule of appointments between the company and the Commission, but none of the meetings since 2014 ever focused on ENI’s engagement in Central Asia. Only six out of the 46 meetings involved a discussion on ENI’s engagement in Africa, but the Commission proved especially interested in the company’s role in supplying energy for the internal energy market of the EU (EU Commission n.d. b). Similarly, Royal Dutch Shell had 83 meetings with the Commission, two of them on Africa, one on Iran and one on the Nord Stream, but Central Asia was never discussed (EU Commission n.d. e). OMV had 15 meetings since 2015, and Total only three, but none on Central Asia (EU Commission n.d. c, n.d. d).

In fact, unlike the United States, which approved the Foreign Corrupt Practices Act after the Watergate scandal, the EU does not dispose of tools to counteract the bribery of its companies abroad. Italy is part of the Organisation for Economic Co-operation and Development’s (OECD) Anti-Bribery Convention, the Group of States Against Corruption of the Council of Europe, and the United Nations Convention Against Corruption, but the EU did not uphold its anticorruption standards to European energy companies (Pleines and Wöstheinrich 2016).

Conclusions

The article has interpreted the lack of coordination between EU institutions and TNCs as different understandings on how to achieve the objective of energy security. Throughout the discussion we showed how over time the EU lost interest in Central Asian energy resources, while European TNCs consistent search for profit jeopardized its general Strategy in the region. Similarly, European national governments expected companies to cooperate in satisfying their internal energy demands, but they often had to intervene directly to guarantee the desired result. This was exemplified in the case study of ENI in Kazakhstan, which showed a rather tight collaboration between the company and the highest ranks of the Italian government despite scarce or negative returns for the Italian economy (Statista 2020, 2021).

Similarly, the initial European strategy to achieve energy security in cooperation with the governments of Central Asia was not entirely pertinent to the reality of private interests engaged in energy production and trade in the region. In fact, the trans-Caspian projects to extend the BTC oil pipeline and the Southern Gas Corridor that the EU backed were found to be unsustainable with respect to economic returns and the availability of resources. China proved to be a faster and more convincing partner, often overpaying for projects to secure gas and oil supplies to satisfy its growing internal energy demand. At the same time, the EU progressively changed its strategy on how to achieve energy security, excluding the topic from its documents regarding Central Asia, whereas Central Asian leaders leaned towards the Chinese and Russian model by which importers pay without attaching conditions (Rettman 2011).

This deconstruction of the academic debate on the Central Asian energy sector appears necessary in light of the growing simplifications adopted to justify narrow interpretations of states or international organizations as monolithic blocs. The analysis indicates that the EU’s objectives in terms of energy cooperation were not followed by concrete actions in the same direction. The case study of ENI in Kazakhstan has shown how Central Asian governments have often acted seeking compensation or attempting to increase their shares in different project consortia causing the defensive reactions of TNCs, which were then aided by their national governments. These interactions were often in open contrast with the EU strategies, which aimed at strengthening human rights and the rule of law in the region.

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No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the Research and Innovation Staff Exchange project ‘NEW MARKET: An Exploration into the Changing Nature of Business Environments, Informal Economies and Emerging Markets in the post-Soviet Region’, financed by the European Commission [grant agreement number 824027] (https://cordis.europa.eu/project/id/824027).

Notes

1 The exact figure is not clear because Central Asian countries do not result as major suppliers of natural gas to Europe (Eurostat 2018). Still, it is a relatively known fact that most of the gas bought by Russia in Central Asia is later resold to European countries (Henderson, Pirani, and Yafimava 2012).

2 A systematic literature review is a technique that allows an unbiased literature review to be undertaken, including all works found through predetermined parameters.

3 Financial department employee, interview by the authors, 14 April 2020.

4 No language limitation has been applied. As seen in Table A1 in Appendix A, there are works in Russian, French, German and Italian.

5 A search of ‘EU’, ‘Central Asia’ and ‘energy security’ would have further limited the search to 45 studies on Scopus and 31 on Web of Science.

6 The Russian war of aggression in Ukraine that started in February 2022 has now upended the once strong relationship between the EU and Russia in terms of energy trade. The war could lead to a revision of the EU's energy strategy and, consequently, of its relationships with other countries and regions. The analysis provided herein is current as of December 2021.

7 While non-academic, these sector-specific journals are Scopus indexed. The full references are in the respective sections.

8 With a capacity of 1 million b/d, or around 400 mty.

9 Employee at DG ENER, European Commission, interview by the authors, 4 November 2021.

10 Financial department employee, interview by the authors, 6 April 2020.

Appendix A

Table A1. Systematic review of the literature on the EU and Central Asia revolving on energy.

Title	Author(s)	Year	Source
Central Asian, Caucasus energy rivalries intensify	Bahgat, G.G.	2009	Oil and Gas Journal
Central Asia’s resources: Reserves and potential for Europe | [Die Rohstoffe Zentralasiens: Vorkommen und Versorgungspotential für Europa]	Rempel, H. et alia	2007	Osteuropa
Competing for Caspian energy resources: Russia’s and China’s energy (Foreign) policies and the implications for the EU’S energy security	Umbach, F.	2012	International Comparative Social Studies
Competition for energy resources: Market and power in entral Asia | [Wettlauf um Energieressourcen: Markt und Macht in Zentralasien]	Westphal, K.	2007	Osteuropa
Dealing with the neighbours	–	2006	Petroleum Economist
Economy, geopolitics, environment: The triple gas issue in the relations between the EU and Russia | [Économie, géopolitique, environnement: Le triple enjeu du gaz dans les relations UE-Russie]	Bourguignon, D.	2008	Revue de l’Energie
Energy interests of the European Union and Russia | [Energetické záujmy Európskej únie a Ruska]	Gonda, V.	2013	Ekonomicky casopis
Energy security: Europe’s new foreign policy challenge	Youngs, R.	2009	Book
European energy security co-operation: Between amity and enmity	Kirchner, E. & Berk, C.	2010	Journal of Common Market Studies
Europe’s energy security: Options and challenges to natural gas supply diversification	Ratner, M. et alia	2012	Section of European Energy Security: Options and Challenges
Fuelling the New Great Game: Kazakhstan, energy policy and the EU	Collins, N. & Bekenova, K.	2017	Asia Europe Journal
Gas: New Nabucco challenges	–	2009	Petroleum Review
Hungary leaves Nabucco on its deathbed: Hungary demands fed by Russian fuels	–	2007	Petroleum Economist
I’m not dead, croaks Nabucco	–	2007	Petroleum Economist
Importance of the Caspian countries for the European union energy security	Ibrayeva, A. et alia	2018	International Journal of Energy Economics and Policy
Measuring the security of external energy supply and energy exports demand in Central Asia	Akhmetov, A.	2015	International Journal of Energy Economics and Policy
Nabucco loses its plot	–	2006	Petroleum Economist
Natural gas: Nabucco takes a step forwards	–	2009	Petroleum Economist
New players and their role in natural gas supply diversification	Subhankulova, R.	2014	World Petroleum Congress Proceedings
News: Industry: South Stream expansion plans	–	2008	Petroleum Review
Prospects of trans-Caspian gas pipeline	Chumakov, D.M.	2019	World Economy and International Relations
Rethinking EU energy security considering past trends and future prospects	Amineh, M.P. & Crijns-Graus, W.H.J.	2014	Perspectives on Global Development and Technology
Russia and the Caspian region: Challenges for transatlantic energy security?	Nanay, J. & Stegen, K.S.	2012	Journal of Transatlantic Studies
Russia stays one step ahead	Brower, D.	2007	Petroleum Economist
Russian and Caspian hydrocarbons: Energy supply stakes for the European Union	Locatelli, C.	2010	Europe – Asia Studies
Shift of the EU energy policy and China’s strategic opportunity	Mayer, M. & Peters, S.	2017	China Quarterly of International Strategic Studies
Sixth Nabucco pipeline partner named	–	2008	World Oil
Testimony of Keith C. Smith, center for strategic and international studies. hearing on ‘European and Eurasian energy: Developing capabilities for security and prosperity’	Smith, K.C.	2012	Section of European Energy Security: Options and Challenges
The EU: A Latecomer in Central Asia’s Great Game	Fischer, S.	2011	Chapter in Shaping the Post-Soviet Space? EU Policies and Approaches to Region-Building
The EU-Energy Security and Geopolitical Economy: The Persian Gulf, the Caspian Region and China	Amineh, M.P. & Crijns-Graus, W.H.J.	2018	African and Asian Studies
The institutional dimension of European energy security: Potentials and limitations of the EU external energy governance | [La dimensione istituzionale della sicurezza energetica europea: prospettive e limiti dell’external energy governance]	Prontera, A.	2014	Stato e Mercato
The new politics of energy security in the European Union and beyond: States, markets, institutions	Prontera, A.	2017	Book
Transportation – Quick takes: Nabucco capacity attracts strong shipper interest	–	2008	Oil and Gas Journal