Russia Values Oil More Than War

Unknown
One counterintuitive feature of the five-day war between Russia and Georgia is its minimal impact on the energy flows from the Caspian to world markets. There is always a legion of experts who would confidently assert that "It's all about oil," and no amount of hard evidence would shake this petro-geopolitical article of faith. There were indeed reports about airstrikes on the Baku-Tbilisi-Ceyhan, or BTC, pipeline, eagerly circulated by The Wall Street Journal, but those turned out to be just products of the desperate Georgian war propaganda. Traffic involving small tankers from Poti and Supsa was interrupted, but these ports have never had any strategic significance on the European energy map since the supertankers carrying Caspian oil to Europe are loaded in the deepwater terminal in Ceyhan. The fact that Russia did not try to completely shut down the South Caucasus energy corridor invites a re-evaluation of risks and longer-term consequences.

Moscow obviously did not want to cause any additional anxiety among European consumers. Nor did it want to deal Tbilisi any unnecessary trump cards for its blame game. From what is possible to deduce from scarce information provided by official sources, Russia's restraint in targeting Georgia's highly vulnerable energy infrastructure was confirmed to Turkish Prime Minister Tayyip Erdogan, who rushed to Moscow for meetings with President Dmitry Medvedev and Prime Minister Vladimir Putin the day after French President Nicolas Sarkozy negotiated the conditions for cease-fire. That visit had a peculiar context, since Russian reassurances were focused on the BTC pipeline that had in fact been shut down, but for a completely different reason -- an explosion in the Turkish section of the BTC pipeline, most probably an attack by Kurdish insurgents, that interrupted the flow of oil for at least two weeks. Neither that emergency nor the combat operations had any noticeable influence on the oil price; it continues to slide to about $115 per barrel.

This trend is punishing Russia with lost profits measured in billions of dollars, but Moscow still prefers to keep energy business separate from the war matters. This compartmentalization is consistent with the pattern that emerged in the course of the second Chechen war. This conflict saw dozens of deadly terrorist attacks, but there was not a single attack on the oil terminals in Novorossiisk and Tuapse or on the strategic pipelines that crisscross the North Caucasus. The fact that the energy infrastructure is safe does not mean, however, that there is no impact from the war.

To Our Readers

The Moscow Times welcomes letters to the editor. Letters for publication should be signed and bear the signatory's address and telephone number.
Letters to the editor should be sent by fax to (7-495) 232-6529, by e-mail to oped@imedia.ru, or by post. The Moscow Times reserves the right to edit letters.

Email the Opinion Page Editor

There are different consequences for Georgia, the Caspian petrostates and Russia's relations with Europe. After the military conflict with Russia, Georgia cannot be marked on oil and gas maps as a safe transit route, and no amount of support from NATO can change this alteration. It means that no new pipelines will be added to those that were constructed earlier this decade. Nonetheless, the Western oil majors still have to secure returns on their investments, so the Azeri oil and gas will continue to flow through the BTC pipeline at pre-war volumes. The leadership of Azerbaijan, which refrained from any expression of support to Georgia during and after the war, would have to give a second thought to Gazprom's proposal to buy any amount of noncontracted gas, particularly since it makes perfect economic sense. Kazakhstan could reconsider its calculations on what portion of the expected oil from its big Kashagan field would be transported via Baku. As for Turkmenistan, it can hardly keep promising everything to everybody, but it probably feels very motivated to deliver on its commitments to Russia. Thus, the blueprints for the proposed trans-Caspian pipeline that would carry gas from Turkmenistan to Azerbaijan now belong in the trash basket.

Russia, nevertheless, should be very careful in harvesting these ripening energy fruits since its reputation has suffered great damage. Every day that it delays withdrawing its troops from Georgia adds more mistrust and suspicion. The European reaction generally amounts to its traditional milquetoast response of: "We don't like it but we can't do anything about it." Meanwhile, Europe is keeping the door open for Moscow to repair a few broken ties. While diplomats continue to exchange bitter tirades, small steps such as resolving the scandalous conflict with TNK-BP or removing a few bureaucratic hurdles that have slowed down the huge Shtokman gas project could be very helpful in restoring a modicum of normalcy in energy relations -- and perhaps in shifting the pessimistic mood in the stock market.

The war in the Caucasus has not opened any perspective of peaceful resolution of its many conflicts. It might stimulate Europe's interest in Iranian gas, which has always been the last-resort option for the struggling Nabucco pipeline project, intended to bring gas to Central Europe from Azerbaijan and Turkmenistan. In Iran, however, the Georgian troubles could play both ways: The probability of a U.S. strike has probably diminished, but the prospect of convincing Iran to discontinue its nuclear program has quite possibly evaporated. Russia's cooperation was crucial for maintaining pressure on Tehran, but the quarrel between Moscow and Washington has reached such an intensity that a meaningful cooperation is reduced to wishful thinking.

The tragedy has not brought any catharsis at all. It is entirely understandable that Georgia remains defiant. And Russia may soon discover that achieving a "military victory" is not as simple as pushing Georgia's U.S.-trained but poorly led army out of South Ossetia. It is a heavy burden that adds to the many tensions in its economy and politics deformed by the country's petro-prosperity.

Pavel K. Baev is a research professor at the International Peace Research Institute in Oslo.