Petropolitics at Heart of Russia-Georgia Clash - August, 2008

Interestingly, a day before the Georgian invasion of South Ossetia the Baku-Tbilisi-Ceyhan (BTC) pipeline was set-ablaze in eastern Turkey. According to some news reports this action was said to have been carried out by PKK fighters; or was it the work of the GRU in anticipation of the Georgian invasion? Now there is talk in Moscow that the pipeline in question may not be allowed to resume its operation. With approximately half of the West's oil/gas imports already in Russian control, the chances of finding a new route that can bring Central Asian/Caspian Sea energy to the West free of Moscow's control are fading quite fast. Russia's global energy dominance is clearly on the rise.

Arevordi

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Petropolitics at Heart of Russia-Georgia Clash

August, 2008

Firemen struggle to extinguish the fire at the Baku-Tbilisi-Ceyhan (BTC) pipeline near the eastern Turkish city of Erzincan August 7, 2008. The BTC pipeline is still ablaze after an explosion and may not repon for another one to two weeks, a senior source at Turkey's state-owned pipeline company Botas told Reuters on Thursday.

In both geopolitical and economic terms, the United States appears a loser in the Russia-Georgia conflict. If the pipeline crossing Georgia, bringing approximately a million barrels of Caspian oil a day to the West, remains shut down for much longer, it could result in higher oil prices. "We could see $4 a gallon gasoline again," warns Edward Yardeni, an American consulting economist. The 1,100-mile Baku-Tbilisi-Ceyhan (BTC) pipeline provides only about 1 percent of the global demand for oil. But, as Prof. Michael Klare of Amherst College notes: "There's not a lot of spare [crude oil] capacity" in the world. In the long-running struggle for control of Caspian oil and gas and influence in the ex-Soviet states of that region, the clash has been a blow to US clout. "The Russians come out of this as winning this round," says Professor Klare. "They are the power brokers in this part of the world…. But there will be more skirmishes to come."

Klare, author of "Rising Powers, Shrinking Planet: The New Geopolitics of Energy," sees the conflict as "not a battle for democracy," as portrayed by Washington. "It was a battle for energy," he says. Oil reserves underneath the Caspian Sea are believed to be huge, perhaps as much as 200 billion barrels. That compares with the estimated 260 billion barrels in Saudi Arabia. In his State of the Union Address in 1980, President Jimmy Carter proclaimed what has become known as the "Carter doctrine." It stated that the US would use military force if necessary to defend its national interest in the Persian Gulf region. Carter saw the Soviet invasion of Afghanistan at that time as "a grave threat to the free movement of Middle East oil." President Clinton, as Klare sees it, expanded the Carter doctrine "more or less" to include Caspian oil. The BTC pipeline, taking crude from Azerbaijan through Georgia to the Turkish port of Ceyhan, where it is loaded on tankers for the international market, was "Clinton's brainchild," says Klare.

President Bush has heated up what Klare regards as a struggle over vital resources, rather than a throwback to the cold-war era or classic balance-of-power politics. In that struggle, the US helped Mikheil Saakashvili win the presidency in Georgia after its 2003 "Rose Revolution" and helped build up and train Georgia's armed forces. When the American-educated Saakashvili attempted to show his mettle and restore the breakaway regions of Abkhazia and South Ossetia to Georgia's control, the Russians took the opportunity to show who is boss. Klare worries that an American military adviser might be hit inadvertently by a Russian bomb, raising US-Russia tensions further. "Throughout the Caucasus, the US has been striving to establish pro-American governments for strategic reasons," says William Beeman, chair of the anthropology department at the University of Minnesota. One reason aside from Caspian oil, Professor Beeman suspects, is to provide a staging area for possible attacks on such perceived enemies as Iran and Syria.

The $4 billion BTC pipeline, managed by and 30 percent owned by British Petroleum, was routed through Georgia to avoid sending Caspian oil through Iran, Afghanistan and Pakistan, or Russia. A 10-mile pipeline could have connected Caspian oil to the well-developed Iranian pipeline system. Beeman charges that millions in government bribes changed hands to place the pipeline in its tortuous route. Georgian authorities charged Russia with trying to bomb the pipeline last Tuesday, a pipeline that had been buried deep in a trench for the sake of security. BP stated it was unaware of such bombings. In any case, the BTC flow of oil – about $1 billion worth every 10 days – had already been stopped by an earlier fire at a facility in Turkey. Kurdish rebels, known as the PKK, claimed the fire was their responsibility.

There have been plans to take the same Georgia route for a Caspian natural-gas pipeline ending in Europe. Klare considers the Russian action as partially a warning that this is not a good idea. Such a pipeline would offer serious competition to Gazprom, the giant Russian oil-and-gas conglomerate. Russia supplies one-quarter of the oil and half the natural gas consumed in Europe, and the revenue is seen as key to Russian prosperity. The European Union has been keen on the Georgia plan as a way to gain bargaining power and reduce the risk of supply cutoffs. But the Russia-Georgia war may have reduced the prospects for such a gas pipeline getting financing and European backing. "I wouldn't hold my breath," says Klare. He advocates that the US, EU, Russia, and the Caspian states develop a comprehensive regional energy plan for Caspian oil and gas.

Source: http://www.csmonitor.com/2008/0816/p14s01-cogn.html

Russia: BTC Pipeline is 'Dead'

A Turkish energy ministry official confirmed that the BTC pipeline blast was a terrorist act. But what’s more, Russia’s international politics advisor to the Russian Duma declared the pipeline “dead” and that it would never operate again. An adviser to the Russian parliament also claimed the closed pipeline would not be opened again and declared the line is “dead”. “The world and countries in the region have seen that not NATO, but Russia is the only one who could secure the energy routes,” Alexander Dugin, international politics advisor to the Russia’s Duma, told Turkish Cumhuriyet daily. “In this context, regarding Turkey’s energy politics, it should be said that the BTC is not running at the moment and it will not run again.” How can they know it will not run again? Because they have the communist PKK at the ready to ensure it stays dead with more bombings if necessary. Earlier this week, we asked “Did Russia Employ Communist PKK Ahead of Georgia Invasion?” The PKK took responsibility for the BTC pipeline bombing. But it remains likely that the communist terrorists got marching orders from Vladimir Putin, one of the opening kinetic salvos into the drive on Georgia. The comment above from Alexander Dugin is a clear indicator for those not already aware that Russia’s intent in Georgia extends far beyond the dirt and people in the former Soviet republic. The larger target is western Europe and the United States. But the conflict is too hot to term it Cold War II. At least in Georgia - and Turkey, if one believes as I do that the PKK acted on Russian request or direction.

Source: http://threatswatch.org/rapidrecon/2...eline-is-dead/


In related news:

Georgian rail bridge blast hits Azeri oil exports

Azerbaijan suspended oil exports through ports in western Georgia on Sunday after an explosion damaged a key rail bridge there. Georgia accused Russian troops of blowing up a railway bridge west of the capital Tbilisi earlier in the day, saying its main east-west train link had been severed. Russia strongly denied any involvement. "Transportation of oil and oil products in the western direction by railway has been suspended," Azerbaijan's state railway company said in a statement read out on television. It gave the bridge explosion as the reason for the suspension. "The last shipment made by this railway contained 15 tanks," it said. Another 72 oil tanks had been due to be sent to next-door Armenia before the railway link was cut off, it said. The railway line runs from Tbilisi, through the Russian-occupied Georgian town of Gori, before splitting in three and running to the Black Sea ports of Poti and Batumi and southwest to just short of the Turkish border. Azerbaijan is emerging as an important oil supplier to the West and its fast economic growth depends heavily on revenues from oil exports from the land-locked Caspian Sea. Last week it suspended crude shipments via its key, BP-operated (BP.L: Quote, Profile, Research) Baku-Tbilisi-Ceyhan link to Turkey after a fire damaged it. Earlier this week BP closed the pipeline taking crude from Azerbaijan's Caspian port of Baku to the Georgian port of Supsa on the Black Sea, citing fighting between Georgian and Russian troops. A pipeline running from the Caspian Sea to Russia's Black Sea port of Novorossiisk currently remains Azerbaijan's only oil export outlet.

Source: http://uk.reuters.com/article/oilRpt...43375520080816

Russia-Georgia conflict raises worries over oil and gas pipelines

Several important lines pass through Georgia, and for Europeans and others, the routes represent a crucial counterbalance to Russia's control of energy resources.

Russia's invasion of neighboring Georgia has raised doubts about the security of oil and gas pipelines that cross through the former Soviet republic and the wisdom of further investment in the transport lines. The foray also put an emphatic stamp on Russia's growing influence over the region's natural resources and, by proxy, over Europe. MapThe pipelines, supplying about 1% of the world's daily oil needs, have not been damaged by the fighting, but the prospect of that led pipeline part-owner BP to shut down one of the oil lines as a precaution Tuesday. A second oil export line has been out of commission since last week because of a fire in Turkey. "The Russians have clearly demonstrated their military capability of getting very close to the pipelines," said Edward Chow, an energy expert at Washington's Center for Strategic and International Studies. "And they also sent the Black Sea fleet off the Georgian coast, so they also have demonstrated that they can blockade Georgia anytime they want."

The pipelines begin in Azerbaijan and pass through Georgian territory en route to ports on the Black Sea and the Mediterranean Sea, where tankers take the crude mostly to Western Europe. Chow worries about whether transit lines through Georgia will remain secure in the long run and whether additional foreign investment would be safe. Russia is an energy giant on two continents through the state-controlled Gazprom, its largest company. Gazprom produces 85% of the nation's natural gas, controls 17% of the world's reserves and is a major supplier to countries across Central Asia and Europe. Its former chairman, Dmitry Medvedev, was elected Russia's president in March.

For Europeans and others, the routes through Georgia represent a crucial counterbalance to Russia's control over pipelines and energy resources. Some hoped expansion projects throughout Georgia might further loosen Russia's grip over European energy supplies. Those projects were not far along, Chow said, but in light of Russia's actions, "investors would have to reconsider how attractive those projects are." James L. Williams, publisher of the Energy Economist newsletter, was blunt about the possible repercussions. "For Russia, control of Georgia and the pipeline would restore much of its influence over many of the former satellites of the U.S.S.R.," he said. "It would have the clear benefit of increasing Russia's energy chokehold on Europe."

Amy Myers Jaffe, an energy fellow at Rice University's Baker Institute, believes an assertive Russia flush with oil and natural gas revenue can exercise its power by controlling crucial resources. "When the Russians are trying to claw back their power, energy is the major lever in their pursuit to do so," she said. However, political and economic analyst Natalia Leshchenko of consultant Global Insight believes the pipeline issue has been overblown. "The Georgian president brought in the whole pipeline issue to probably send more worries to the West, and especially to the European consumers, to draw more attention to the conflict," she said. "It's not that we should ignore it, but it's certainly not a cause to panic." So far, energy markets have shrugged off the risk. The cost of oil fell again Tuesday, dipping $1.44 to $113.01 a barrel on the New York Mercantile Exchange. The closing price was more than $34 below the peak posted on July 11. The most prominent among the existing pipelines is the 1,000-mile Baku-Tbilisi-Ceyhan line, which can carry up to 1 million barrels of crude a day from the Azerbaijani coast on the Caspian Sea, through Georgia and Turkey to the port of Ceyhan on the Mediterranean Sea.

The BTC is owned by a consortium of companies. It was expected to carry more than 900,000 barrels of oil a day this month for export, bypassing routes that would have taken the oil through Russia and subjected it to that country's transit fees. Deliveries through the BTC pipeline were halted Aug. 4 after a fire along the Turkish portion of the route. A Turkish separatist group claimed responsibility for the incident. BP also shut down a smaller line, the Western Route Export pipeline, which was recently overhauled. It can carry up to 160,000 barrels of oil a day from Baku on the Caspian Sea in Azerbaijan to the Georgian Black Sea port of Supsa. Also as a precaution, BP also shut down the South Caucasus gas pipeline, which transports natural gas from Baku through Georgia into Turkey. That gas is not exported.

Source: http://www.latimes.com/news/nationwo...,3564413.story

Russia's Strike Shows The Power Of the Pipeline

It was surely not lost on Russia's bully in chief, Vladimir Putin, that the oil giant BP decided to shut down the pipeline that runs through parts of Georgia controlled by Russian troops. Indeed, that was one of the aims of the cross-border incursion. Putin understands better than anyone that oil and gas are the source of Russia's resurgence as a military and economic power and his own control over the Russian government and key sectors of its economy. It is oil and gas that provide the money to maintain Russia's powerful military, along with a vast internal security apparatus and network of government-controlled enterprises that allow the president-turned-premier to maintain his iron grip on the levers of political and economic power.

A little pipeline history: It was just as Putin was coming to power in 1999 that an agreement was reached to create the Baku-Tbilisi-Ceyhan (BTC) pipeline. The project would allow Azerbaijan and its production partner, BP, to bypass Russia and transport their newly drilled oil instead through Georgia and Turkey to a port in the eastern Mediterranean. Because of its control of the only pipeline system linking former Soviet republics with the West, Russia had been able to extract most of the profit from any oil and gas that these newly independent countries could produce. But with BTC, which had the active support of the U.S. and European governments, Russia would lose its monopoly chokehold, opening the way for Western oil companies to make multibillion-dollar investments in the energy-rich Caucasus states.

No sooner was BTC completed, however, than Western officials began exploring the possibility of other pipelines that could reach beyond Georgia and Azerbaijan to Turkmenistan, which was thought to have some of the world's largest gas reserves. Their interest was not only in "energy security" and the prospect of oil riches for Western energy companies, but also in promoting Western-style democracy and free-market capitalism in the former Soviet republics. In time, much of their efforts focused on a $12 billion project known as Nabucco, named after the Verdi opera, that would take gas across the Caspian sea, through Georgia, Turkey, Bulgaria, Romania and Hungary, finally reaching a terminal near Vienna. With Europe already dependent on Russia for a quarter of its natural gas, and that number set to rise with construction of a new northern pipeline running under the Baltic Sea to Germany, European leaders were keen to find alternative sources of natural gas. The effort took on greater urgency in winter 2006 after Russia briefly cut off supplies in its gas-pricing dispute with Ukraine.

Nabucco also became a top priority of the Bush State Department -- in particular, of Matt Bryza, a deputy assistant secretary of state, and C. Boyden Gray, a Bush family confidante who was named a special envoy for Eurasian energy, who began actively courting the leaders of Azerbaijan. Putin, quite correctly, viewed Nabucco as part of a larger campaign by Washington to contain and isolate Russia and limit the expansion of its burgeoning energy empire. With Gazprom, the state gas monopoly, Putin launched his own competing proposal called South Stream to build a new pipeline to the Caucasus. Suddenly the Russians were offering to pay Turkmenistan and Azerbaijan multiples of what they had previously offered to secure long-term supply deals. They penned an agreement with Italy and its oil company, Eni, to build a pipeline that would run under the Black Sea from Russia to Europe and end up at the same Austrian terminal as Nabucco. And Russian officials offered highly favorable transit agreements, ownership shares and guaranteed gas supplies to secure transit agreements from Bulgaria, Serbia and Hungary.

To industry observers like Ed Chow, a senior fellow at the Center for Strategic and International Studies, Nabucco has always looked more like a diplomats' pipe dream than a viable economic project. Its promoters had not only failed to secure supply and transit agreements but also had yet to identify an oil company eager to champion the project and finance the pipeline. Now, with its successful military incursion, Russia has raised serious doubts in the minds of Western lenders and investors that a new pipeline through Georgia would be safe from attack or beyond control of the Kremlin. What we've been reminded once again is that Vladimir Putin is perfectly willing to sacrifice the rule of law and the good opinion of others to protect the Russian empire and the energy monopoly that sustains it. The techniques he used to bring Georgia to heel, while more lethal and destructive, have the same thuggish quality as the techniques Putin uses to silence domestic opposition and to expropriate the energy assets of Yukos, Shell and BP.

For the United States and Europe, this ought to be sufficient warning about the folly of extending membership in NATO or the European Union to every one of Russia's neighbors, particularly when they are unwilling to back it up with military action. But it also is a reminder of the futility of trying to co-opt Putin by offering him a seat at the G-7, membership in the World Trade Organization or the honor of hosting the 2014 Winter Olympics. We may not be willing to send troops to Tbilisi, but at the least we should be willing to deny Russian companies the right to raise capital on Western stock exchanges, extend their pipelines into Western markets or use their energy profits to buy up major Western companies. Vladimir Putin thinks he has looked into the soul of the West and discovered that we need him more than he needs us. It's time to convince him otherwise.

Source: http://www.washingtonpost.com/wp-dyn...203003_pf.html

RUSSIA ATTACK: CONSEQUENCES FOR GEORGIA PIPELINE AND POTI PORT

The British Petroleum pipeline that brought Georgia into the international spotlight has been turned off after six days of sporadic Russian bombing in the country. BP spokesperson Rusiko Medzmariashvili stated that the Baku-Supsa pipeline, the older of two BP pipelines that cross Georgia, has been shut down "as a precautionary measure." She did not specify a date for the decision. The larger Baku-Tbilisi-Ceyhan pipeline is also not operating due to a fire in eastern Turkey, she said. Medzmariashvili confirmed that no oil is currently heading out of Baku for the Black Sea cost, although he added that "alternative routes are being considered right now." Among the alternatives are rail lines and other, smaller pipelines crossing Georgia.

The decision comes after nearly a week of fighting between Georgia and its northern neighbor, Russia. Russian bombs have hit the western coast of Georgia, including the towns of Senaki, Zugdidi and Poti, which is just 13 kilometers from the Supsa terminal. Early on August 13, a land attack sank two ships adjacent to the port, according to Alan Middleton, chief executive officer of the Poti Port Corporation. The strike was the second Russian attack on Poti since full-scale hostilities began on August 8. On August 9, approximately 20 bombs were dropped on the commercial port and the surrounding area. While the port was largely unharmed, the bombs reportedly killed 11 people and injured nearly 80 others. Port employees told EurasiaNet that the bombs disintegrated into shrapnel-like metal balls upon impact. "[Russia] purely just dropped the bomb to try to kill people and cause mayhem, " Middleton said in an interview the following day. "[It] certainly did." The port, however, remains "fully operational."

Middleton estimated daily losses for both the Ras Al Khaimah Investment Authority (RAKIA), which operates the port, and the government, at a "conservative" $1 million per day. Ras Al Khaimah, a United Arab Emirates concern, purchased a 51 percent stake in the port this past April; the government holds a 49 percent share. During a recent guided port tour, no serious damage to facilities could be seen. The bombing resulted in some holes in metal cargo containers and broken windows in the customs office. Middleton said that the port is working at "limited capacity" because workers refuse to come back. That sense of wariness can be felt throughout Poti. A day after the August 9 bombing, the usually busy central market was quiet. Most cars were headed out of town, after a government warning that more bombing was expected. At the Maltaqza Hospital near Poti, doctors remained on high alert. All injured bombing victims were being relocated to other hospitals in the area in preparation for more wounded, according to hospital director Zeinab Charchalia.

Although the hospital had kept over 40 doctors and surgeons on call, the facility suffered from a lack of personnel and equipment, she said. The attack, according to Nino Mcheglishvili, the assistant director of Poti’s health service, was a surprise for the town. "We expected to take injured from Tskhinvali or Senaki. Not our own," she said, adding defiantly that "whatever happens, we will not leave town." Middleton also expressed optimism that life at the port would soon return to normal. RAKIA’s $200 million investment plans are still on track, including the development of a free economic zone near the port, he stressed. "We are in it for the long-term," he said. Editor’s Note: Molly Corso is a freelance reporter currently based in western Georgia.

Source: http://www.eurasianet.org/department...av081308.shtml