What's in it for Russia? Georgia, Ossetia, & Caspian oil and gas

One impact of Georgia's nose-thumbing Russia has been for the US and Europe to take a step backwards, away from it. This leaves Georgia, not only vulnerable to a Russian take-over, but it also frees Georgia to succumb to Russia.

See also: Russia Never Wanted a War by Mihkail Gorbachev in New York Times of 19 Aug 08 for a view critical of Georgia's role in the conflict.

The US invasion of Iraq was identified by many oil 'peakniks' as the first of the oil depletion wars. Hostilities around Ossetia between Georgia and Russia, identify this region as the second of the oil depletion warzones.

The World’s longest oil pipeline runs through Georgia

Illustration source: http://www.american.edu/ted/ice/ossetia.htm
South Ossetia is a Georgian state, north of Tbilisi, Georgia, where the world's longest oil pipeline - the Baku-Tbilisi-Ceyhan (BTC) pipeline - runs through on its politically and geographically circuitous route to the Mediterranean from the Caspian Sea. The Caspian Sea is the largest closed body of water in an ancient fiery region full of legend, bordering central Asia. It is also an international wildlife preserve,[1] with many threatened species, including the near-extinct Caspian sturgeon (source of caviar and little sturgeons).

(Photo of Caspian Seal from Wikipedia)

The entire pipeline is underground and fascinatingly high-tech,[2] to cope with the climate, seismic, and gravity features of the regions it tunnels through as well as the high wax content of the oil. It is patrolled by US trained Georgian soldiers. [2] The crude comes from the Azeri-Chirag-Gunashli oil field in the Caspian Sea, which has slowly been coming on line since 2005 with Gunashli only beginning production in May 2008.

There has been for a long time conflict as to whether the inland body of water known as the Caspian Sea is a sea or a lake. The political difference is that, if it is a lake, then the hydrocarbons (oils and gases) it produces belong to the countries bordering its shores. These are, clockwise from the port of Baku: Azerbaijan, Russia, Kazakhstan, Turkmenistan, and Iran. If it is a sea, however, such products are divided up by median lines.

Caspian oil and gas

Much has been hoped for from the Caspian's oil and gas reserves.

Their location, however, for many reasons, makes profitable oil extraction especially difficult and probably impossible in many cases.

Source: http://www.martinhovland.com/mud_volcanoes_files/garadag2.jpg
The highest density of mud volcanoes occurs in Azerebaijan and in the Caspian Sea

Conditions make the region sound like a strange and hostile planet, scorching in summer and frigid in winter. Caspian oil has a super-dangerous high sulphur content which means that workers need to wear oxygen tanks to avoid hydrogen sulphide during exploration and extraction. The water is often ice-bound. The winter climate, as well as wet and freezing, is stormy with severe winds. The site of the most important oil reserves off Kazakhstan, in Kashagan field, are located in shallow water which is hard to navigate, and the deposits are in pockets, inconveniently separated by rock layers, 4.02 km or 2.5 miles below the seabed at pressures around 500 times sea level. It has been necessary to build special platforms and equipment. An offshore gas platform and plant for Stage 2 of the Shah Deniz project was costed at $10 billion plus.

Even if the reserves in the Caspian do prove to be huge, and it becomes possible to extract a good portion, the amount of petroleum and other fuels and materials expended in order to do so mean that the margin for profit is much smaller than with wells in the past. This is just one of the reasons why oil is becoming so dear; the easy to get supplies were taken first; now only obscure and difficult deposits remain. On top of this, demand for an ultimately finite supply is rising daily along with population numbers and economic activity.

Geopolitics

Although it is true that the pipeline avoids "using tanker transport along the Black Sea and the highly congested Bosporus, "[2] which a shorter pipeline through Russia would have led to, other, more political reasons, have been highlighted by the August Georgia-Russian confrontation.

It is largely these political associations which caused the pipeline to be much longer than it might have been, adding an estimated $3.20 per barrel to the cost of transporting the oil.[2]

Russia is the big power in the area, yet it has been left out of the pipeline in question. What is more, there are several more pipelines in the … um… pipeline and none of them involve Russia. Prior to this one there was the Baku-Supsa pipeline, which transports oil from Azerbaijan to the Black Sea coast of Georgia. Sohbut Kabuz reports that there is a preliminary agreement for construction of a pipeline to ‘connect Romania's Konstanza port to Italy's port of Trieste.” There is another planned to link Ukraine's Odessa-Brodi pipeline to Poland's Gdansk port in the Baltic Sea, and another to transport Azerbaijani and Turkmen natural gas to Europe via Romania and Ukraine. “All give key roles to Georgia,” Kabuz says. [3]

But Russia obviously believes that the countries around the Caspian, and their product, should be within its hegemony. Unsurprisingly, it is suspicious of US 'democracy' missions and gifts and influence in the area. The Baku-Tbilisi-Ceyhan pipeline is not just an insulting symbol, it is actually siphoning oil out of the area beyond the reach of Russian taxes, and more like this are planned.[3]

Logically, a pipeline through Russia and Iran would have made more sense.
On the face of it, the pipeline took a very strange route when there was a much shorter one available with less geologically unstable terrain (high seismic activity). But that route went through Russia or Iran. Although Russia's oil supply appears to have peaked, the US supply peaked ages ago (in about 1973), but the US is a glutton for oil. Obviously the US does not want to deal with Russia any more than it has to. Not surprisingly the construction of the Baku-Tbilisi-Ceyhan pipeline was the outcome of US influence in the region. The US paid Turkey something like one fifth of the construction costs ($823m) and has been extending its influence via NATO in the area for some time. The pipeline was designed to accommodate an oil throughput of one million barrels per day, which is around 1/87th of recent daily world demand. (EIA stats)

Colin Campbell, thought that the US invasion of Iraq might have indicated that US expectations may have diminished in the light of the many difficulties associated with extraction and transport in the Caspian region.[4] This disappointment factor might explain, in part, why the US cavalry did not come galloping to Georgia's rescue in the latest hostilities.

Sharing the Caspian coastline, Turkmenistan and Kazakhstan gained independence following the fall of the Soviets in 1991. Campbell writes in his superbly informed article on this complex subject, “The Caspian Chimera,” that Dagestan and Chechnya reluctantly remain part of federated Russia but “still seek independence, in a vicious campaign attended by many acts of terror. (...) [adding that] “Tehran, the capital of Iran, lies only 100km from the Caspian shore, so its role in the future of the region cannot be ignored." [4]

The position of Iran vis a vis the Caspian Sea (or lake) also explains some of the US interest in that country. Both Iran and Russia were obviously excluded from any participation in the construction of the pipeline.

China has been negotiating now since at least 2004 with Kazakhstan to build a 750 km extension of the Atasu-Alasankou oil pipeline to connect with the Kenkiyak and Kumkol oil fields, which are operated by China National Petroleum Company in Kazakh. CNPC stated that it expects to obtain about 5 per cent of its current requirements from the pipeline – 400,000 barrels a day. China's interest in the area could overshadow Europe's because the projected growth in demand from China is greater than Europe's.

Azerbaijan and Georgia receive gas from the Shah Deniz project in Azerbaijan. Interruption of supply forced Georgia to purchase gas at very high prices from Russia between January and July 2007. Georgia was desperate to lose its energy — and political — dependence on Russia and hopes that Shah Deniz may allow her to do this for a while. In the current petroleum gas and oil supply scenario, any country which has a reliable supply for a few years into the future becomes a potential magnet for development or for exploitation, and, in this region, US support.

Europe currently relies on Russia for a quarter of its gas supplies. More diverse supplies would be desirable.

Russia has developed a reciprocal relationship with Venezuelan oil in supplying oil to different customers.[5] Chavez in Venezuela has a strong relationship with Cuba and is a strong promoter of Latin American oil and solidarity with non-US states, especially in the third world. Not insignificantly, on 5 August, Putin announced that Russia ought to "restore [its] position in Cuba and other countries." This was after a visit to Cuba in July from Russian Deputy Prime Minister Igor Sechin. It is well-known that Latin America has good reason to fear interference by the US in its politics and its oil. [3]

Sorbet Khabuz feels that Russia percieves its old allies as disloyal when they cooperate on oil-ventures with the EU or the US. He says that Putin objected strongly to Kosovo's independence and "was unhappy that the Albanian Macedonian Bulgarian Oil pipeline (AMBO), extending from Bulgaria's coastal city of Burgaz through Macedonia and ending at Albania's Vlora port, would pass through Kosovo." [Referring to the Baku-Tbilisi-Ceyan pipeline], he notes that, "The pipeline project in question is being actively supported by the EU and the US with the goal of carrying Azerbaijani and Kazakh oil to the Black Sea via Georgia." [3]

Why did Georgia rattle its sabers?

On the face of it, it seems very unlikely that Georgia would have picked a fight with Russia if the Georgian president had not believed that he would receive backing from the US and Europe. Neither the US nor the EU have the means to enter into serious new wars, however. The US is already involved in Iraq and Afghanistan because of its own dwindling oil and gas supplies. Russia does have a reasonable supply of oil, coal and lots of gas and the capacity to defend itself. It can be very tough about managing its oil exports and it can form alliances with other oil exporters. It has also been suggested that Russia would not like Iran to develop nuclear capabilities and that this would provide a common point with the US.

One impact of Georgia's nose-thumbing Russia has been for the US and Europe to take a step backwards, away from it. This leaves Georgia, not only vulnerable to a Russian take-over, but it also frees Georgia to succumb to Russia.

Of course, Russia has evacuated, for the time being. If, however, we treat the recent (tragic for the civilians who have been victimised) events as a dress rehearsal, we now know that no-one is going to stop Russia from taking Georgia. A respectable ostensible reason may be to unite Georgian South Ossetia with Russian Northern Ossetia. From there it would be but a small step for Russia to assimilate Georgia. This would then solve Russia's problem of being kept out of the Baku-Tbilisi-Ceyan pipeline and the Baku Supsa pipeline and all the planned pipelines.

Russia has oil and gas, but it has probably passed its oil peak. If Russia were to acquire Georgia it would then control the BTC pipeline and become oil-rich as well as gas-rich. Although the US and the EU won't like buying the oil from their pipeline in Georgia from Russia, they have already shown that they don't intend to go to war over this prospect. The incentives for Russia to take Georgia and the pipeline are enormous; face-saving and energy securing in a region and a world where most powers are receding in their capacity to fuel daily business, let alone wars.

Historic precedents

There is an historic pattern of Russia taking over Georgia in exchange for protection from regional enemies, particularly Persia (old name for Iran) and Turkey. From 1810 to 1878, beginning with Western Georgia, most of Georgia was annexed to the Russian Empire, in an association which, after an initial unsettled period, was not too uncomfortable for the land-owning aristocracy of Georgia and probably made little difference to the severely ill-treated serfs. (Georgia freed its serfs even later than Russia did.)

After the Russian Revolution of 1917, Georgia declared independence from Russia. In 1921 the Red Army occupied Georgia and, Georgia remained a Soviet Republic (state) until 1990.

Historically the Caucasus oilfields were one of the main objectives of Hitler's invasion of the USSR in August 1941, but the German army and its allies failed to reach them. Georgia furnished the Red Army 700,000 soldiers (of which 350,000 died). There were, however German sympathisers who formed the Georgian Legion and fought with the Germans.

Political tension in Georgia prior to the Ossetia incident
There have been many historical tensions within post-soviet Georgia, principally from ethnic separatists in South Ossetia. The country has a history of corruption, even in Communist times by Russian standards.
In November 2003 the "Rose Revolution" in Georgia carried pro-Western Mikheil Saakashvili to power. Georgia accuses Russia of fanning separatism in Abkhaszia and south Ossetia in order to undermine Georgia's government. Russia has accused Georgia of spying and vice versa. Russia maintained or maintains two military bases in Georgia, scheduled to be withdrawn in 2007 and 2008. The United Nations has been involved in Peace Keeping in South Ossetia for some time and there are thousands of displaced people in Georgia. In November 2, 2007 Georgians demonstrated against the government, protesting that President Mikheil Saakashvili's government was corrupt. [6]

Also, if we know the United States, their versions of economic reform and democracy carry very heavy penalties for ordinary people. Wikipedia reports that

"The Georgian Government is committed to economic reform in cooperation with the IMF and World Bank." "Saakashvili is still (2006) under significant pressure to deliver on his promised reforms. Organisations such as Amnesty International have serious concerns over human rights [3], and discontent over unemployment, pensions and corruption (...).Georgia's relationships with Russia are at it lowest point in modern history due to Georgian-Russian espionage controversy and related events."

Sounds like the usual privatisation and asset-stripping drill that accompanies friendships with the USA to me. See review of Naomi Klein's Shock Doctrine

All in all, it might be very hard for Georgia to remain friends with the US if Russia and many of its own citizens did not want it to. Such sentiments are expressed here in a pro-Russian page. And the US doesn't seem all that keen either. One hopes not to see a re-run of situations like the one where the US encouraged the Kurds and Shi'ites to rise up against the Iraqi goverment, but left them to be slaughtered. And was Hussein set up by the US when he asked diplomat, April Glaspie, if Kuwait was important to the US, and she said, "No," and then he invaded, presumably believing that the US would turn a blind eye. After this the US went to the UN and the UN authorised force to get Hussein to withdraw his troops. Hussein agreed to withdraw, but the US seems to have used the opportunity then to attack his troops anyway.[7]

Alternative to war

Instead of war, there may be a different outcome, as oil-writer, Mark Jones suggested [6]:

"It should be borne in mind that the changeover from declining to ascending hegemony can happen - and has historically - not by means of war but with the consent and active participation of the declining power (...) Since the 1939–45 war, the US has in fact made a practice of co-opting present and potential rivals into junior partnership. It has done this not only to Britain, but also to Germany (1960s), Japan (1970s and 1980s) and latterly even to Russia (from 1991).(...)

Of the US situation, he observed,

"If the US has to compete on a level playing field with the rest of the world, then it may find that its urban infrastructure is just as uneconomic and unsustainable as was the Soviet Union’s loss-making effort to base itself on the industrialization of the Urals and Siberia. The US currently uses twice as much energy and raw materials per capita as the EU-15 average, and more than ten times that of China. It is desperately uncompetitive. When the dollar has to be backed up by real values, US per capita GNP may fall by half in just a few years, as in the Great Depression. Under these conditions it is hard to see how the US can hope to maintain its global reach and present hegemonic position. (...)

And, in the case of global war:

If, on the other hand, we are set on a course of global war, which was the outcome for “classic” economic depressions before 1914, and again through 1929–36, then Americans have only a very small window of opportunity (like Hitler enjoyed in 1939) before their military advantage evaporates." - Mark Jones, Battle of the Titans in Sheila Newman, (Ed.) The Final Energy Crisis, Pluto, UK 2008.

See also: Russia Never Wanted a War by Mihkail Gorbachev in New York Times of 19 Aug 08 for a view critical of Georgia's role in the conflict.

Sheila Newman is the editor of Sheila Newman, (Ed.)The Final Energy Crisis, Pluto Press, UK, 2008 which is due out around August 27 in Australia and round about the same time in the US. It should already be available in Britain. It is a collection of scientific, economic and political articles about oil depletion and other fuels and new technologies, including fission, fusion, geothermal, cellulosic biofuels and terra preta, by ten different authors.

ENDNOTES

[1] The Caspian Sea is considered an independent zoogeographical region due to the diversity, specificity and endemism of its fauna. Waters of the Caspian Sea house 400 endemic aquatic animal species, including the Caspian seal (Phoca caspica) and sturgeons (90% of the world catch). The sea coast provides important sites for many nesting and migratory birds such as flamingoes, geese, ducks, gulls, terns, swans. Many multinational companies are exploring the region for oil and gas. Source (with interesting descriptions of geophysical features and wildlife: http://www.worldwildlife.org/wildworld/profiles/terrestrial/pa/pa1308_full.html

[2] "Baku-Tbilisi-Ceyhan (BTC) Caspian Pipeline" at Hydrocarbons Technology com, http://www.hydrocarbons-technology.com/projects/bp/)

[3] Sohbet Karbuz, “War stirs energy corridor in Georgia,” in Today’s Zaman//www.todayszaman.com/tz-web/detaylar.do?load=detay&link=150151&bolum=109

[4] Colin Campbell, "The Caspian Chimera," in Sheila Newman, (Ed.)The Final Energy CrisisSecond Edition, Pluto, UK, 2008.

[5] Sheila Newman, “Venezuela, Chavez and Latin-American oil on the world stage,” in Sheila Newman (Ed.) The Final Energy Crisis, Second Edition, Pluto UK, 2008.

[6]http://en.wikipedia.org/wiki/History_of_Georgia_(country); http://en.wikipedia.org/wiki/2006_Georgian-Russian_espionage_controversy;

[7] "Please cast your minds back to 1990. We must remember the complete history of James Baker, the aristocratic Secretary of State to Bush 41. He instructed our ambassador to Iraq, April Glaspy, (remember her?) to tell Saddam Hussein that we had no interest in his fight with Kuwait. Saddam was itching for war with Kuwait whom he accused of slant drilling into Iraq's oil fields. Right after receiving Baker's message sent through Ambassador Glaspy, Saddam invaded Iraq. From that moment on Mr. Baker left April out there turning slowly in the wind. He denied all knowledge of her conversation. (Someone please tell me what lowly ambassador writes their own portfolio?)" Source: Re: Philip Klein's Talking with the Enemy, "Baker's World", The American Spectator, http://www.spectator.org/dsp_article.asp?art_id=10496

[8] Mark Jones, Battle of the Titans in Sheila Newman, (Ed.) The Final Energy Crisis, Second Edition, Pluto, UK 2008.