Tuesday, August 12, 2008

The Russian-American Struggle Over Georgia

The outbreak of fighting in recent days between Russian and Georgian forces for control of the Georgian province of South Ossetia takes place against the backdrop of the geo-strategic struggle for control of the petroleum resources of Central Asia. Deeply involved are the Russians and the Americans.

The Caspian Sea region is home to major petroleum reserves. Kazakhstan has proven reserves of 30 billion barrels of oil and Azerbaijan has reserves of 7 billion barrels. Georgia is crucially placed for the shipment of oil to world markets.

For the Russian government, petroleum is a tool that can be used to launch the country as a renewed great power, allowing it to acquire considerable authority in the regions that made up the former Soviet Union. While Washington favors the rapid development of Russian petroleum because it provides an alternative for the West to Middle Eastern supplies, the Bush administration has been wary of policies that can reconstitute Russia as an economic and therefore military threat. While George W. Bush and Vladimir Putin made a great show of their personal friendship in the early days of the Bush presidency, this was soon followed by much frostier relations. At the heart of the tensions was petroleum.

The battle over oil from the Caspian Sea region has involved selling arms to governments and to political movements intent on overthrowing governments. It involved major petroleum companies that were determined to cash in on the potential bonanza. And it involved battles over the pipeline routes that would be used to ship the oil to market. While the Russians wanted the petroleum from Azerbaijan to flow into their pipeline system and to markets from there, the US was opposed to the Russian route for this Caspian region oil. The preferred US route was to build a pipeline through Georgia and Turkey, the latter a staunch American ally and a member of NATO. The pipeline would carry the petroleum to a Turkish Mediterranean port and from there, by tanker, to markets.

During the late 1990s, the Americans poured money into the region and feted the leaders of the Caspian Sea states at White House dinners. To make the pipeline economically viable----its price tag was $3.1 billion---the petroleum companies told Washington that government money would be needed. The US, UK, Japan and Turkey agreed to subsidize the project. In 1999, President Bill Clinton journeyed to Istanbul to initial the deal for the construction of the pipeline.

The Baku-Tbilisi-Ceyhan (BTC) pipeline, now completed, is one of the largest post-Soviet engineering projects. In May 2005, it began the delivery of oil along its 1,776-kilometer (1,104-mile) length from the Baku fields to the Mediterranean. The pipeline, operated by BP, included the participation of British, French, American, Italian, Japanese and Norwegian companies, as well as the State Oil Company of Azerbaijan. It delivered 800,000 barrels of oil daily earlier this year, but has been temporarily shut down in recent weeks as a result of an explosion. The pipeline's capacity is expected to be expanded to about 1.5 million barrels a day in the near future.

The pipeline is an economic, but also a political, venture. With Washington calling the shots in the background, a route that is secure from a Western point of view has been selected in preference to alternative and shorter routes through Russia or Iran.

Raising the stakes still higher in this contest over pipeline routes was the question of how the petroleum of Kazakhstan would flow to markets. Washington proposed that Kazakhstan (located on the eastern side of the Caspian Sea) and the major petroleum companies should jointly construct a pipeline beneath the Caspian to link up with the BTC pipeline to Turkey. Some oil from Kazakh sources is now reaching markets via Russian pipelines, but the proposal to hook Kazakhstan up with the BTC route remains a live option.

The US power play in the region was stepped up by the administration of President George W. Bush in the aftermath of the terror attacks on New York and Washington. Ostensibly to aid in its invasion of Afghanistan, Washington sent US forces to Kyrgyzstan and Uzbekistan. But when the Taliban government in Afghanistan was driven from power -- much to the annoyance of Moscow -- the US decided to keep forces in these countries indefinitely. In addition, the United States provided military instructors to Georgia. These moves helped tighten the American grip on the oil-rich Caspian Sea region.

As the struggle continues, petroleum makes it a high stakes affair. The U.S. has gone so far as to propose that Georgia be admitted to membership in NATO, a development which Moscow staunchly opposes.