The Geopolitics of the Energy Transition in Greater Asia

Geopoliticisation of the energy transition as a key trend

The most prominent and influential trend in the region is geo-economisation and pro­jection of political power within the resource sector. Critical minerals that are essential to the energy transition are scarce and increas­ingly subject to monopolisation. At the same time, resource nationalism is on the rise. This is evident in Indonesia and the Phil­ip­pines, where protectionist measures have already been applied to nickel.

A similar power dynamic could emerge in connection with control over technologies such as carbon capture and storage. However, the most significant key trend re­mains the monopolisation of the extraction and processing of raw materials, in particular by China in the rare earths sector.

The expert forum also anticipates a fragmentation of markets, which is closely associated with the risk of increasing geo­politicisation and militarisation across the region. External and internal conflicts are perceived as significant threats. The rise of new regional powers is considered inevi­table and represents a potential challenge for the energy transition as it could disrupt key supply markets, in particular for critical raw materials.

Such power shifts contain the potential to escalate into military conflicts with broader regional implications. An overemphasis on security of supply, driven by heightened general security concerns, risks negative effects on affordability and sus­tainability. At the same time, the region can expect a decline in overall security and a growing trend of geopoliticisation and militarisation within energy relations.

Limited relevance: Security architecture and external actors

While the expert forum identified geo­politicisation and military conflicts as key trends, the development of regional secu­rity architecture was regarded as relatively insignificant (and simultaneously uncertain). While this may seem paradoxical, it likely reflects a rejection of Western ap­proaches to security-building and global order. Such concepts are perceived as un­necessary or even counterproductive when it comes to shaping the region’s future in matters of security and energy.

The influence of external actors like Russia and the United States is viewed as uncertain but only marginally relevant. While Russia is geographically and eco­nomically part of the region, it is consid­ered politically and culturally European, and thus partly external. This reflects the inward-looking focus of countries and sub­regions along the Northeast Asia–China–Southeast Asia–Gulf axis, where the strongest dynamics and interdependencies are emerging.

A critical stance toward external interventions is also evident. Conflicts such as Israel’s war in the Levant and Russia’s war in Ukraine are seen as Western aggression – as India’s foreign minister told his EU coun­ter­parts in 2022. Paradoxically, US efforts to exert geopolitical and energy influence in the region seem to have weakened rather than strengthened Washington’s standing.

Meanwhile, China has significantly expanded its influence through economic diplomacy and neutrality. Beijing's role in conflict resolution is widely welcomed, as exemplified by its (even if marginal) con­tribution to the Saudi-Iranian rapproche­ment.

Climate change, socioeconomics and nuclear power as drivers

As well as security factors, there are other significant drivers at play. One the most critical is the impacts of climate change, which are already visible in some economies and are expected to generate a cli­mate-security nexus, in particular in rela­tion to migration. However, within the region, addressing material needs and fos­ter­ing socioeconomic development are seen as more crucial to advancing the energy transition. According to the expert forum, where the energy transition is successful it is primarily a tool for achieving energy security, creating jobs and industries, or establishing geopolitical power.

Nuclear energy plays a significant role. Many countries are investing in nuclear power to ensure energy security and sus­tain­ability, with both small modular units and large facilities in the mix. The expert forum considers this trend to be a fixed determinant of the energy transformation for the coming decade. However, it remains uncertain which actors will supply this tech­nology – the United States, China, Russia or others.

While the region’s enthusiasm for nu­clear power appears to be a long-term phenomenon, critical questions often go unaddressed. Nuclear energy is seen as a readily importable technology, with South Korea emerging as a prominent supplier. However, little attention is paid to the broader value chain and its geopolitical dimensions, for example the issue of long-term security of nuclear fuel supplies. At the same time, the region exhibits a prag­matic approach to energy and climate issues, with Germany’s nuclear phase-out widely regarded as perplexing. Attempts to convey Germany’s position have not to date proven effective.

Regulation and decentralisation: multifaceted but of limited relevance

Regulation influences Asia’s energy trans­formation in various ways: as a harmonising web across the region, as a driver of trade conflicts, and as an exogenous factor (such as the European carbon border adjust­ment mechanism). According to the expert forum, only the latter – regulations that directly impact energy markets and trade opportunities – are particularly relevant for the region.

The influence of national regulations and their regional harmonisation is re­gard­ed as limited. This is notable given that Euro­pean actors frequently promote capacity-building for regulatory harmonisation, which appears to find little resonance here.

Decentralisation of energy systems – an­other goal frequently promoted by German and EU climate diplomacy – is also con­sidered to be of limited relevance, although how and if this trend manifests remains open. While an expansion of solar power and, in particular, small-scale nuclear reac­tors could boost decentralisation, this ten­dency is counterbalanced by large-scale giga-projects that often align more closely with the centralised governance models of autocratic states. While uncertain which approach will ultimately prevail, the expert forum considered this question relatively insignificant, as the expansion of renewable energy can be achieved through both cen­tralised and decentralised methods.

Closure of the Strait of Hormuz

One conceivable scenario is the temporary closure of the Strait of Hormuz, possibly as a result of a war involving (or within) Iran. The likelihood of such a development is in­creased by Israel’s ongoing military actions in the region and Donald Trump’s election as US president.

Such an event would trigger an immedi­ate reaction in the fossil fuel markets, lead­ing to a sharp rise in oil and gas prices and potentially causing supply shortages, in particular of liquefied natural gas (LNG) for countries across the Indo-Pacific. Depending on the scale of the conflict the repercussions could extend to global supply chains, mirroring the disruptions seen during the COVID-19 crisis. It would also increase demand for Russian oil and gas and tem­porarily boost Russia’s geopolitical weight, potentially altering the balance of power between Russia and China.

Even if such a crisis were quickly resolved, it could result in lasting policy changes. One likely outcome would be a stronger prefer­ence for renewable energy and nuclear power, mirroring the shifts seen in Europe following Russia’s invasion of Ukraine and driving the energy transition in that direc­tion.

Energy cooperation between Japan and Russia

A rapprochement between Russia and Japan in the energy sector could significantly reshape the region’s energy dynamics and balance of power. Japan’s reliance on LNG imports from the Gulf region and Australia would be reduced, while the United States might lose influence in Japan’s energy mar­ket.

Russia could position itself as an alternative hydrogen supplier, serving South Korea and Taiwan as well as Japan, and thereby bolstering its negotiating power vis-à-vis China. This would also open new markets for LNG from Russia’s Sakhalin Island and gas supplied through its Power of Siberia 2 pipeline. That could in turn increase China’s dependency on energy imports from Cen­tral Asia, the Gulf region and the United States. Central Asian states might leverage this shift to improve their bargaining posi­tion with Beijing and secure inward invest­ment.

Enhanced cooperation on energy and green technologies between Japan, South Korea and Russia could help reduce ten­sions in Northeast Asia while potentially isolating China. North Korea’s influence might also decline, as this realignment would imply weaker relations with Russia.

Drought on the Mekong River

A severe drought on the Mekong River, which is a critical source of hydropower for Vietnam, Laos, Cambodia, Thailand and Myan­mar, would profoundly impact region­al energy policies. A major reduction in hydro­power capacity would force these nations to accelerate their adoption of solar, wind, and, possibly, nuclear power.

China could tighten its control over the region by constructing additional dams up­stream, exacerbating tensions with down­stream nations. In response, these countries might diversify their energy supplies, poten­tially through the deployment of small modular reactors.

Vietnam would be particularly affected, given the Mekong’s central role in its energy infrastructure; Thailand and Laos would also need to reduce their reliance on hydro­power. Singapore, which receives electricity from the Mekong region, could face pres­sure to secure alternative import sources.

Such a scenario would intensify the geo­political competition for energy resources in the region, deepen China’s reliance on gas imports from Central and Southeast Asia, and elevate the role of nuclear and renewable energy in Southeast Asia’s energy landscape.

Climate security: Focusing on adaptation

Climate security has become a pressing issue for many actors in South and South­east Asia. The region faces risks driven by climate-related changes, whether gradual processes like rising sea levels or sudden events like storms and flash floods. Forced migration, conflicts, and humanitarian crises are just some of the consequences.

The concept of climate security is already deeply embedded in German and European climate diplomacy, but it tends to emphasise climate change mitigation, in the sense of measures aiming to halt global warming (such as the transition to renewable energy). This is not necessarily compatible with the perspective in Greater Asia, where climate change is increasingly seen as an inevitable reality requiring adaptation rather than pre­vention.

Climate diplomacy in the region should therefore prioritise adaptation to climate change. This could include targeted capac­ity-building efforts based on genuine part­ner­ships and tailored to real needs, as well as increased funding, technology transfer and the construction of relevant infrastructure.

The demand for adaptation measures will be immense, in particular for sea de­fences in coastal regions and Pacific islands. This emerging need is likely to become a new arena of competition for international influence. China is expected to step in as a key partner for affected nations, potentially creating dependencies with significant geo­political implications for Europe. It is there­fore crucial for Europe to position itself as a reliable and constructive partner, offering an alternative to China’s possible dominance in this field.

Diversifying resource supply and engaging the right partners

Regional actors largely accept China’s domi­nance as a reality to be managed rather than avoided. At the same time, access to resources and the geopolitics of trade have become pressing concerns, with growing indications of Chinese monopolisation of critical materials, components, and pro­cesses. This poses a substantial and fore­seeable risk for the EU.

One approach would be to promote strategic investments that diversify the supply of critical raw materials within the region while pursuing a broader range of resource partnerships. Diversification could be supported through direct investments and strategic purchasing programmes de­signed to foster new actors and suppliers. Additionally, promoting technologies with different or even flexible material requirements would help reduce dependencies and supply bottlenecks.

In this context – and more broadly in climate diplomacy and geopolitics – it is essential for Germany and Europe to iden­tify the correct dialogue partners. Under certain circumstances, bilateral relationships may offer more effective openings than supranational or international orga­nisations such as ASEAN. However, Euro­pean policymakers must remain aware of the fluid nature of bilateral relations.

Regional actors also demonstrate a willing­ness to explore unconventional alli­ances, and scenarios such as even a rap­prochement between Japan and Russia can­not be ruled out in the medium term. The status quo in the region should not be view­ed as fixed, and European engagement must be carefully planned with this dynam­ic in mind.

Establishing constructive engagement and emphasising tangible opportunities

For most states in Greater Asia, immediate challenges such as socioeconomic development and stability are more important than pursuing climate policies for their own sake. European (climate) diplomacy must seek areas of convergence rather than in­sist­ing on ideological visions.

This applies to both the choice of part­ners and the direction of foreign policy. For example, if the aim is to counterbalance the influence of Russia and China, Europe must engage other states in the region openly and respectfully, regardless of differences in the political systems.

In recent years, Germany and Europe have lost standing in the region – whether due to their failure to fulfil promises on hydro­gen partnerships or their insistence that regional actors take sides in conflicts such as Russia’s war in Ukraine or Israel’s war in the Levant (including demands to decouple from certain powers). Further­more, European communication in many Asian countries is sometimes perceived as paternalistic.

A careful balancing of interests is essential to avoid losing sight of broader strategic objectives. By adopting a more pragmatic and equal approach, Europe can restore its credibility and position itself as a reliable and constructive partner in the region.

The diverging technological priorities of Asia and Europe need to be recognised and addressed. Instead of promoting abstract narratives of transformation, climate diplo­macy should highlight the tangible benefits of the energy transition – namely, en­hanced energy security, cost advantages, and local job creation. Raising awareness and im­prov­ing access to financing are key here. Other­wise, high capital costs in politically fragile contexts will quickly thwart efforts to push renewable energy – and, thus, also inhibit any stabilising function they may have. Sta­bility and economic growth are not merely outcomes of the energy transition: they are prerequisites for its success.

In Greater Asia, technologies such as small modular nuclear reactors are regard­ed as critical solutions for addressing supply challenges and accelerating the shift to clean energy. However, fundamental geo­political questions remain unresolved, including fuel-related dependencies and waste management. These knowledge gaps carry long-term risks that have so far been largely overlooked.

Asia remains a dynamic and flexible region that is open to compromise and to German and European engagement – provided that the interactions are constructive, valued, and on an equal footing.