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ENQUIRE PROJECT DETAILS BY GENERAL PUBLIC |
| Project Details |
| Funding Scheme : | General Research Fund | ||||||||||||||||||||||||||||
| Project Number : | 14608118 | ||||||||||||||||||||||||||||
| Project Title(English) : | China’s Shaping of the Eurasian Energy Market: Protecting Chinese Outbound Investments Along the Belt and Road | ||||||||||||||||||||||||||||
| Project Title(Chinese) : | 中國對歐亞能源市場的塑造：保護中國在“一帶一路”沿線的對外投資 | ||||||||||||||||||||||||||||
| Principal Investigator(English) : | Prof BOUTE, Anatole | ||||||||||||||||||||||||||||
| Principal Investigator(Chinese) : | |||||||||||||||||||||||||||||
| Department : | Faculty of Law | ||||||||||||||||||||||||||||
| Institution : | The Chinese University of Hong Kong | ||||||||||||||||||||||||||||
| E-mail Address : | anatole.boute@cuhk.edu.hk | ||||||||||||||||||||||||||||
| Tel : | 3943 1927 | ||||||||||||||||||||||||||||
| Co - Investigator(s) : |
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| Panel : | Humanities, Social Sciences | ||||||||||||||||||||||||||||
| Subject Area : | Social and Behavioural Sciences | ||||||||||||||||||||||||||||
| Exercise Year : | 2018 / 19 | ||||||||||||||||||||||||||||
| Fund Approved : | 684,829 | ||||||||||||||||||||||||||||
| Project Status : | Completed | ||||||||||||||||||||||||||||
| Completion Date : | 31-8-2021 | ||||||||||||||||||||||||||||
| Project Objectives : |
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| Abstract as per original application (English/Chinese): |
AIM
To understand how China’s key energy partners along the Belt and Road (New Silk Road) institutionally protect Chinese energy investments, and formulate proposals on the external normative influence that China can exercise to improve energy investment protection in these strategic destinations.
PROJECT BACKGROUND
China's “Belt and Road Initiative” aims to increase regional integration based on infrastructure investments. In the energy sector, integration with the Eurasian market is an essential part of China’s ambitious foreign energy policy. By linking the Russian and Central Asian resource bases with its domestic infrastructure, China expects to improve national energy security. However, foreign investments face significant regulatory risks relating to the strategic importance and political sensitivity of energy. The regulation of foreign energy relations is the subject of growing interest in the academic literature, but the Chinese and Eurasian perspectives remain largely unexplored. There is no doubt that Chinese investments reshaped the Eurasian energy landscape, but little is known about China's influence on domestic energy regulation in neighbouring countries, in particular in the key Russian and Central Asian energy investment destinations.
PROJECT DESCRIPTION
Focusing on strategic markets for China’s energy security, this project critically analyzes the protection of energy investments under the domestic law of China’s partner countries. On this basis, the project examines the regulatory influence that China can exercise over the design of these markets to improve the protection of energy investments. Three theoretical strands underpin this project. First, building on the literature on the regulation of “network-related industries”, this research examines investors’ rights under Russian, Kazakh, Uzbek and Kyrgyz law. Second, based on the literature on “constitutional economics” in the former Soviet Union, it assesses how domestic courts balance private and public interests in the resolution of investment disputes involving the government. Third, building on the “legal approximation” literature, it analyses how existing regulatory harmonization in the Eurasian region (Eurasian Economic Union) limits the possibility for China to further shape the Eurasian energy market.
SIGNIFICANCE OF PROJECT
With depleting domestic energy reserves, foreign investments are an essential component of China’s energy security policy. This project contributes to the Belt and Road energy objectives by making recommendations on how China can cooperate with its strategic energy partners to mitigate investment risks. This analysis is relevant to Hong Kong’s role as Belt and Road investment and arbitration hub. More fundamentally, this analysis contributes to understanding the legal implications of China’s increasing influence on the regional and world energy markets. 中國對歐亞能源市場的塑造：保護中國在“一帶一路”沿線的對外投資 項目目的 瞭解中國在“一帶一路”（新絲綢之路）沿線上的主要能源合作夥伴如何從制度上保護中國的能源投資，並就中國可以在這些戰畧目的地發揮的外部規範性影響製定建議，以改善這些戰畧目的地的能源監管。 項目背景 中國政府在2015年提出了“一帶一路”倡議，目標是在基礎設施投資的基礎上加强區域一體化建設。在能源領域，融入歐亞市場是中國雄心勃勃的對外能源政策的重要組成部分。中國希望通過將俄羅斯和中亞的資源基地與其國內基礎設施連接起來以改善國家能源安全。然而，外國投資面臨著與能源戰畧重要性和政治敏感性有關的重大法律和政治風險。對外能源關係的監管是學術界越來越感興趣的話題，但中國和歐亞的觀點在很大程度上仍未得到探討。此外，投資法文獻主要側重於國際保護，對國內法律和法院的關注較少。 項目介紹 本項目圍繞中國能源安全的戰畧市場，對中國合作夥伴國內法下的能源投資保護問題進行了批判性的分析。在此基礎上，該項目考察了中國可以對這些市場的設計施加的監管影響，以改善其對能源投資的保護。此項目有三個理論基礎。首先，本研究以有關“能源網絡輸送和筦道相關企業”監管的文獻為基礎，調查了俄羅斯、哈薩克共和國、烏茲別克和吉爾吉斯斯坦法律下投資者的權利。其次，在前蘇聯“憲法經濟學”文獻的基礎上，該項目評估了國內法院在解决涉及政府投資糾紛時如何平衡私人利益與公共利益。第三，在“法律近似”文獻的基礎上，該項目分析了歐亞地區現行的統一監管如何限制中國進一步塑造歐亞能源市場的可能性。 項目意義 隨著國內能源儲備的不斷减少，外商投資是中國能源安全政策的重要組成部分。該項目為“一帶一路”能源目標做出了貢獻，在中國如何與戰畧能源合作夥伴合作以及降低投資風險方面提出了建議。這一分析與“一帶一路”倡議下的將香港作為投資和仲裁中心的角色有關。更重要的是，此分析有助於理解中國對區域和世界能源市場日益增長的影響力的法律影響。 |
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| Realisation of objectives: | All the research objectives of the project have been achieved, and have resulted in publications in some of the leading journals in the field of energy law and geopolitics. OBJECTIVE 1: Gain in-depth understanding of domestic energy, investment and natural monopoly laws, and their application by domestic courts, in countries of strategic importance for China’s energy security (Russia, Kazakhstan, Uzbekistan, Kyrgyzstan). Produce scholarly output on the “Domestic Protection of Energy Infrastructure Investments in the Former Soviet Union”. The project engaged in a detailed analysis of energy market regulation, energy tariff reforms, and what these mean for energy investors’ rights in strategic jurisdictions along the Belt and Road Initiative, with a focus on Central Asia and in particular Kazakhstan, Uzbekistan, and Kyrgyzstan. The analysis looked at national regulation, and its application by domestic courts, with a focus on the balancing of investors' right to cost-recovery energy tariffs and consumers' tight to affordable prices. The outcome of the research, entitled “Energy Justice Along the ‘New Silk Road’: Balancing Investors’ and Consumers’ Rights in Central Asia”, appeared with Oxford University Press, in the book Energy Justice and Energy Law, that is part of the prestigious series edited by the Academic Advisory Group on Energy, Environment, Natural Resources and Infrastructure Law to the International Bar Association. Taking into account the focus of the project on energy law and geopolitics along the Belt and Road, research was done on the important decision of the European Court of Justice in the OPAL case concerning access to gas pipeline interconnections in the context of geopolitical tensions. The case is highly relevant to understand the interactions of energy, investment and natural monopoly laws, and geopolitics, in a region that is also of great relevance for Chinese energy investments along the Belt and Road. The outcome of the research was published in the Common Market Law Review, the leading European law journal, and was cited by the Advocate General to the European Court of Justice. OBJECTIVE 2: Influence the debate on China’s increasing foreign power by analyzing the scope for Chinese regulatory influence in shaping market rules in the strategic Eurasian energy market. Produce scholarly output on "China's Shaping of the Eurasian Energy Market: Exporting the 'Chinese Energy Model' Abroad?" The project researched China’s regulatory influence on the shaping of the Eurasian energy market by looking at (1) the role of investments by China’s State-owned Enterprises (SOEs); (2) regulatory competition between the EU, Russia and China on the shaping of energy market rules in the former Soviet space; (3) the existence of a Chinese energy market “model”. First, the project focused on the influence China exercises through foreign investments by its SOEs. Analysis was done on the extent to which foreign investments are used as instrument of geopolitical influence, by researching the regulatory channels through which the government can shape investment decisions. The outcome of the research is an article on "For Profit or Strategic Influence? Chinese Outbound Investments and the International Economic Regime", published in the Journal of World Energy Law & Business, the leading energy law journal, published by Oxford University Press. Second, research was done on the regulatory competition that China faces in the post-Soviet energy sector. The analysis looked at China’s external regulatory approach to the shaping of energy markets in the region and compared this to the strategies adopted by the EU and Russia. The focus was on gas market regulation, with a focus on gas pricing and network access regimes. The research, entitled “Shaping the Eurasian Gas Market: the Geopolitics of Energy Market Regulation”, was published in Geopolitics, a leading International Relations journal. Third, the project engaged in an in-depth study of the Chinese gas market model, in order to understand what market approach China can export to its neighbors. The analysis focuses on gas price and tariff regulation and gas pipeline regulation in China and the outcome is a publication on “China’s textbook approach to regulatory reform of the natural gas market”, published in Utilities Policy, one of the leading journals in the field of energy policy. OBJECTIVE 3: Contribute to the study of China’s external energy relations by providing an in-depth analysis of existing harmonization of energy, investment and natural monopoly rules under the Eurasian Economic Union. Produce scholarly output on “Regional Energy Market Integration in Eurasia: the Belt and Road and the Eurasian Economic Union”. The project engaged in in-depth analysis of the existing harmonization of energy, investment and natural monopoly rules under the Eurasian Economic Union. The outcome of this research was published in the Russian law review Oil and Gas Law journal (to make the analysis available to the legal community working on Eurasian gas market regulation in Russia and Central Asia). The research was also used for the publication on “Shaping the Eurasian Gas Market: the Geopolitics of Energy Market Regulation” (with Geopolitics). The conclusions of the research have also been presented at different conferences and webinars. OBJECTIVE 4: Influence the debate on investment arbitration by highlighting the merits and limits of bringing investment disputes before national courts. The project's analysis of domestic energy and natural monopoly laws, and their application by national courts, has helped understand the importance of national tribunals in the shaping of energy law, including on matters of high geopolitical sensitivity. By helping to understand how domestic courts apply tariff regulations, and enforce network access regimes, the project contributed to the debate on the regulation of energy investments under national law, and the interactions of national and international judicial protection. The citation of one research output from this project by the Advocate General to the European Court of Justice in the famous OPAL case (concerning a Russian gas pipeline investment in the EU) demonstrates that the project already has impacted the debate on national energy law, judicial protection and geopolitics. OBJECTIVE 5: Present conclusions at international energy and investment law conferences, as well as to the Hong Kong legal community (e.g., HK law firms) and government (Belt and Road Commission) to disseminate findings on Eurasian energy law and domestic protection. A webinar (due to Covid restrictions) was organised in July 2021 to present the outcome of the research conducted during the project. The event, entitled “Gas Market Reform Along the Belt and Road”, was attended by the legal industry (including practicing lawyers in China, Central Asia and the EU), energy law and policy scholars (based in Hong Kong and abroad), energy analysts at leading consulting and analysis companies, the energy industry (oil and gas companies), international organisations (such the Energy Charter Secretariat that is active in the Central Asian energy market) and non-governmental organisations (such as the Konrad Adenauer Foundation Energy Security and Climate Change program, based in Hong Kong). In addition, the PI shared the conclusions of the research with representatives of multilateral development banks working on gas market reforms in Central Asia and with local government bodies (energy ministry). The project helped to make recommendations on ongoing gas market reforms in the region. The research was also presented at international conferences, including “The European Union in Central Asia: An Uninvited Guest in China’s and Russia’s Backyard?” (conference at the University of Groningen); and “International Law and Distribution” (the joint conference organised by the University of Edinburgh and Glasgow). | ||||||||||||||||||||||||||||
| Summary of objectives addressed: |
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| Research Outcome | |||||||||||||||||||||||||||||
| Major findings and research outcome: | The research project contributed to the understanding of energy market regulation as a geopolitical instrument, and the influence that China exercises on the shaping of the Eurasian energy market. It also helped understand the relevance of national energy and investment law for Chinese investments in energy projects along the Belt and Road. The project first analysed how national governments and regulators in key energy jurisdictions along the Belt and Road Initiative (BRI) regulate energy tariffs, and balance investors and consumers' rights in this process. To facilitate the financial viability of energy investments, governments are engaging in tariff reforms, and courts have in certain cases played an important role in enforcing investors' rights. This sheds light on the role of national law and the judiciary, in protecting investors' rights along the BRI. The project then engaged in a legal analysis of the use of foreign investments for geopolitical purposes, by examining the Chinese regulation of outbound investments based on international principles of governance of state-owned enterprises. Most of the regulatory steps previously in place to direct outbound investments have been eliminated or simplified, giving companies greater control over their own investments. Third, the project examined China's gas market regulation model, to understand what approach to gas regulation China could export to the BRI. The analysis demonstrated that reforms in 2019–2021 integrated key aspects of the liberalisation textbook model in China’s gas regulations. In many ways, China thus follows the approach already promoted by the EU in the field of energy market regulation in the region. Fourth, the analysis looked at regulatory competition in China's strategic rear, looking at how the EU, Russia and China seek to shape the Eurasian energy market. Paradoxically, the EU, Russia and China recognize common principles of gas market regulation at the domestic level, but geopolitical considerations prevent the implementation of these principles at the regional level, hindering the creation of a competitive Eurasian gas market. Fifth, the project analysed existing regulatory approximation in strategic energy jurisdictions along the Belt and Road, with a focus on the Eurasian Economic Union (EAEU) gas market. By allowing foreign (e.g. Chinese) investments to derogate from the EAEU gas regime based on bilateral agreements, the EAEU accommodates China’s increasing importance as investor in the Eurasian energy infrastructure. On the same basis, the EAEU gas regime does also not pre-empt a possible Chinese initiative of regulatory integration in the energy sector, with one or more EAEU members. | ||||||||||||||||||||||||||||
| Potential for further development of the research and the proposed course of action: |
The Ukraine war has a significant geopolitical impact on the region, and it is necessary to examine how this will affect the regulation of energy markets. In particular, China - that will replace the EU as main importer of Russian gas - is now in a stronger position to influence Russia's natural gas market structure, e.g. by demanding reform to the monopoly of pipeline exports. In addition, the Chinese gas market remains in development, and continued analysis of regulatory changes is needed to understand how this can impact on China's possible role as an exporter of rules in the region. Similarly, the national gas markets in Central Asia, and other BRI countries, are being reformed, and it would be important to keep researching the changes that are introduced to the national regulatory arrangements in the gas sector of these strategic partners for China's energy security. | ||||||||||||||||||||||||||||
| Layman's Summary of Completion Report: | China's Shaping of the Eurasian Energy Market contributed to the understanding of regulation as an instrument of foreign policy and geopolitics. Energy, and in particular natural gas, is a key component of the Belt and Road Initiative (BRI). For Chinese infrastructure investments in the energy sector of BRI countries, national regulation is important as it influences the financial viability of these investments. At the same time, foreign investments, and their home state governments, can influence the regulation of national energy markets. States can seek to influence energy market rules abroad in order to exercise strategic influence, or protect the interests of their foreign investors. The European Union and Russia have actively sought to shape the energy market rules in key energy investment destinations along the BRI, but there is still scope for Chinese influence, in particular in the states that participate in the Eurasian Economic Union. As the Eurasian Economic Union gas market is being developed, China has a role to play in helping to shape the regional gas market architecture. | ||||||||||||||||||||||||||||
| Research Output | |||||||||||||||||||||||||||||
| Peer-reviewed journal publication(s) arising directly from this research project : (* denotes the corresponding author) |
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| Recognized international conference(s) in which paper(s) related to this research project was/were delivered : |
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| Other impact (e.g. award of patents or prizes, collaboration with other research institutions, technology transfer, etc.): |
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| SCREEN ID: SCRRM00542 |