United Press International
Aug 21 2008

Analysis: Energy crisis in the Caucasus

by STEFAN NICOLA

BERLIN, Aug. 21

The war in Georgia was not mainly about energy, as some have said, but
it highlights the vulnerability of energy deliveries through the
Caucasus and threatens future projects in the region.

Pipeline security can be quite a fascinating topic, even to the
standards of a James Bond movie. The 1999 blockbuster "The World Is
Not Enough" deals with the construction of an oil pipeline through the
Caucasus, from the Caspian Sea to the Mediterranean coast of Turkey;
it is called "King pipeline" in the film, but it is obvious what
pipeline is really meant: the Baku-Tbilisi-Ceyhan, which transports
oil from the Azeri-Chirag-Guneshli field in the Caspian Sea via
Azerbaijan and Georgia to Ceyhan, a port on Turkey’s Mediterranean
coast.

Shortly before the war between Georgia and Russia captured headlines,
an explosion and fire in eastern Turkey (the Kurdish rebel group
Kurdistan Workers’ Party claimed responsibility, but Turkish officials
denied the fire was man-made) shut down parts of the BTC pipeline. The
world’s second-largest oil pipeline, the BTC is a key element of the
West’s strategy to diversify its energy exports and become less
dependent on Russian deliveries.

Moscow wanted to have part of the BTC pipeline run through its
territories, but when that was denied, it refused to join the
project. British Petroleum leads the project companies, and Washington
became one of its greatest supporters. The BTC pipeline pumps oil to
customers in Turkey and Western Europe, and Russia can’t do much about
it — or can it?

Russia’s offensive into Georgia included attacks on military
facilities, but there are also reports that the Russian military,
while pulling out, is destroying vital energy infrastructure.

While Russia denies this, its military presence in the country forced
shut a pipeline transporting some 100,000 barrels of oil a day from
Azerbaijan to the Georgian port of Supsa, after shippers declared
force majeure, a legal option contractors can fall back on if
circumstances beyond their control make work at a pipeline
impossible. A natural gas pipeline from Azerbaijan to Georgia and
Turkey was also shut down for several days because of the
fighting. All over the country, Russia with vessels and ground troops
has been blocking ports, streets and railroads, severely impeding
deliveries and transit of oil-related products in or out of the
country. Georgian President Mikheil Saakashvili has stated repeatedly
that the country, because of its transit role that undermines Russia’s
energy influence, was a recipient of aggression. That some Central
Asian countries, the Caucasus and the Caspian region — formerly parts
of the Soviet Union — have become a key transit region for Western
energy deliveries is more than a thorn in the eye of the Kremlin.

Nevertheless, experts say the Georgian-Russian conflict was not an
energy war.

"Energy resources certainly were not the main reason for Russia’s
military campaign; that would be simplifying the conflict. It wasn’t a
war about oil," Uwe Halbach, Caucasus expert at the German Institute
for International and Security Affairs, told United Press
International in an interview. "But of course it plays into the whole
thing. New pipeline projects are now in question. At least they have
to be re-evaluated for security reasons."

Observers are concerned that some planned projects, including the
Nabucco pipeline and the Odessa-Brody-Gdansk-Polotsk oil pipeline, are
on hold because of the difficult security situation in the region. At
best, the crisis demonstrates that the West needs to provide better
security for the pipelines designed to bring oil and gas into Europe.

And there is even greater potential for problems flaring up in the
region, according to an expert.

"Any troubles between Armenian and Azerbaijani minorities in Georgia
could potentially re-ignite a dormant conflict between Azerbaijan and
Armenia over who controls the disputed Nagorno-Karabakh region,"
Sergei Blagov wrote in a commentary for ISN Security Watch. "Such an
eventuality may put an end to any plans of sustainable oil and gas
supplies from Azerbaijan and Central Asia circumventing Russia."

There is some good news, however: The BTC pipeline will resume work
next week, officials said.