GEORGIA: WAKE UP EUROPE
by Diane Francis

National Post
August 12, 2008, 7:19 PM
Canada

Energy, Russia, U.S. Politics, Middle East

The BTU pipeline route is in the way of Russian energy ambitions.

Oil prices did not jump after Russia attacked Georgia even though
this is all about oil and pipeline locations and will result in
higher prices in the long run. The strategy here is to discipline
uppity nation-states, like Georgia, in the "near abroad" that used
to be part of the former Soviet Union.

This is why crude continued its downward price trend, thanks to
a push-back by consumers worldwide against high prices, but the
Russian stock market and Ruble tanked. Investors don’t like bullies
who threaten their competitors as well as customers which is what
this exercise was all about.

The bullying Bear The Russians have been exerting their economic
muscle throughout the region, shutting down pipelines temporarily,
hiking prices unilaterally and generally making mischief. But they
have been playing hardball with Georgia because it is small with
only 4.4 million people and has a minimal diaspora to make a fuss
worldwide. Moscow has financed separatist leaders and guerrillas in
that country and there are now two breakaway provinces.

Last Friday, Saakashvili sent in his troops, with Israeli military
advisors, to one of these provinces despite the existence of Russian
peace keepers. This drew a devastating and rapid counter-attack,
underway as Putin sat in the bleachers at the Beijing Opening Games
Ceremony.

Georgia claims there were plenty of provocations, but facts are that
they sent troops in first, it appears, and then Russia reacted with
might quickly.

All that’s a sideshow The real game here is about the
Baku-Tbilisi-Ceyhan (BTU) pipeline which just opened last year and
pumps one million barrels a day from offshore Azerbaijan to Turkey
via Georgia. The line cost $3 billion, is 1,100 miles long and was
built by a consortium of oil giants which includes the Azerbaijani
government. Key here is that this line could pump 10 million barrels
a day, or Saudi levels of production, by hooking up with other Central
Asian oil producing countries so they can bypass Russian pipelines.

But that’s not all that involved here. Moscow’s over-reaction was
clumsy and unnecessary if only Georgia were involved. That’s not
the case. Giving Georgia a good hiding sends a message to all of the
former Soviet "near abroad" states – from Tajikistan to Kazakhstan,
Ukraine, Azerbaijan and Armenia.

Don’t build big pipelines, say the Russians, that bypass our pipelines
and oil.

Specifically, Russia is opposing another proposed lines from Tajikistan
or other oil-producing "stans" directly to markets in Europe, Asia
or internationally through ports, as the newly-minted BTU does.

Russia’s long-term strategy is to become as much of a monopoly supplier
to the wealthy and oil impoverished European Union or Ukraine and
others as possible.

All that should be worrisome for Europe and world oil markets
which translated into a drop in confidence in the Russian market
and currency. Strong-arm, bully-boy tactics may have won Russia the
battle to deal with the uppity Georgian President, but it will lose
the long-term economic war as companies, entrepreneurs and nations
shrink from involvement or investment there.

The young president Russia is threatening to take Georgia’s President
Saakashvili to the World Court for war crimes after his troops invaded
South Ossetia, the breakaway province. This is predictable.

I met Saakashvili and his wife in Davos shortly after his Rose
Revolution. He was charming, witty and disarmingly American. He grew
up in the U.S. and became a New York attorney when he was plucked by
New York financier George Soros, as well as the CIA, to help bring
about Georgia’s independence after the Soviet Union dissolved in 1991.

Despite his country’s vulnerability, he has been fiercely and
tauntingly pro-American and pro-Israel.

Here’s where it gets very interesting.

Reports that the BTU line was targeted by the Russians are out there
but mostly unconfirmed. And a group of Kurdish terrorists exploded
the BTU inside Turkey which will shut it down for a couple of weeks.

So here you have a provocation by a pro-American Saakashvili, helped
by Israel, and a terrorist attack in Turkey by Kurds who are also
very pro-American.

It’s all very byzantine which makes it all the better for the spooks
and others in the shadows of this mini-war.

As things now stand, the Russians have called off the invasion of
Georgia and think they have accomplished exactly what they wanted to
which was to frighten its oil-producing or oil-consuming neighbors.

At the same time, the CIA and Israelis (and French) may believe they
have also accomplished their mission. Their proxy, in Georgia, sucked
Russia into a dramatic and frightening invasion, thus underscoring
the fragility of the BTU line and Europe’s current energy procurement
policies.

Maybe the Germans and other Euros will now realize they had better
block Moscow’s energy strategy, thanks to Saakashvili’s boldness,
coupled with sabotage by CIA-supported Kurds.

And maybe that was somebody’s plan to do so. Or maybe not.