Energy: Russia, Georgia and Azerbaijan – Linked and Divided by Oil Pipelines

Baku, 15 Aug 2008. Why was Russia so quick to attack Georgia? What will be the result of Russia bombing the BTC pipeline that runs through Georgia? And what can we learn from history if we look at Azerbaijan’s troubles in the region?

Baku, 15 Aug 2008. Why was Russia so quick to attack Georgia? What will be the result of Russia bombing the BTC pipeline that runs through Georgia? And what can we learn from history if we look at Azerbaijan’s troubles in the region?

With the fall of the USSR, independence from Russia heralded a new sense of hope and optimism for the future for many of the former Soviet territories, including Georgia and Azerbaijan. They were anxious to shed their reliance on the faraway Soviet central government and move forward with their own national identities. Geographically, politically, culturally, socially, religiously, and economically, Georgia and Azerbaijan are unique, sovereign states in their own right, and separation from Russia was widely regarded as progress.

Although many older citizens were more economically comfortable under communism, the younger generation tended to hold bitter feelings towards Russia. For example, Azeri science books fail to mention that Russia was the first country to launch a craft into space. I met 17 year-old Fareed at a restaurant in the northwestern Azeri city of Ganja – who was eager to speak English with any foreigners – and he insisted the US was the first in space, effortlessly rattling off the names of Buzz Aldrin and Neil Armstrong.

This deep-seated resentment against the political and economic damage done by Russia runs deep in Azerbaijan and Georgia, who are both American allies. So it’s no surprise that this western-looking weltanschauung toward entrepreneurship and progress has brought about rapid economic change. In fact, according to the CIA World Factbook, Azerbaijan ranked number one in the world in real GDP growth rate in 2007, expanding at an astronomical 23.4%.

Contributing to this meteoric growth is a new pipeline, called the BTC pipeline (Baku-Tbilisi-Ceyhan). It stretches from the Caspian Sea city and capital of Azerbaijan, Baku, westward across the small nation, through Georgia and past the capital, Tbilisi, into neighboring Turkey, and ends at the Mediterranean port city of Ceyhan, thereby entirely bypassing the Black Sea. This stretch between Baku and Ceyhan makes BTC the second longest oil pipeline in the world, at 1,768 kilometers.

In 2006, the $3.8 billion line became operational, carrying nearly 360 million barrels of oil and 300 million cubic meters of gas per year. BTC is a lifeline to Europe, cutting out Russia from any oil transportation in the region, and freeing Azerbaijan and Georgia from Russia’s position of power over their oil. The pipeline is the only major vessel for Central Asian products over which Russia has no influence. So not only does BTC free the people in an economic sense, it frees them politically and nationalistically.

This changes the economic landscape of Russia’s neighboring countries, as well. No longer can they be held ransom to Russia’s oil supply – now there is another source of oil coming out of the region. In the past, Putin would threaten to reduce gas supplies as a way to discourage its neighbors from siding with western policy too much. But now, with the release of the Caspian reserves, oil and gas can reach the Mediterranean free of Russian conditions. Russia cannot be happy.

On 10 August, 2008, Russian jets fired more than 50 missiles at the BTC, just south of Tbilisi. They did not manage to rupture the pipeline, which is as shallow as one meter underground, but their intention is obvious.

If the Russians would have damaged the BTC pipeline, the global ramifications could have been tremendous. 1% of the world’s oil passes through that tube, and 11 stakeholders manage it, from eight nations. The panic that would ensue would surely result in yet higher oil prices, and an overall gloomier outlook on the world economic landscape. Nevertheless, the Georgian conflict so far has had no foreseeable effect on the price of oil – in fact it has fallen. But for the long-term, the Georgian president speculates on what Russia’s agenda is.

“They need control of energy routes,” President Saakashvili of Georgia said. “They need sea ports. They need transportation infrastructure. And primarily, they want to get rid of us.”

Azerbaijan has experienced very similar conflict. Between 1998-1994, Azerbaijan and Armenia fought over the small territory, Nagorno-Karabakh. Much like South Ossetia, the region is not considered politically independent but contains its own ethnic groups. Furthermore, Russia pushed for its independence. Yet another similarity is that the people of each of these small regions want independence from their mother nation.

So what does this mean? It is apparent that the region is culturally and ethnically diverse, and that these boundaries are what really matter to the people, not political lines. And with the conflict in Georgia, Russia’s insecurity concerning the region is increasingly apparent.

The Azeris say that Russia is worried that Azerbaijan could forge an alliance – or a nation – with its ethnic brothers to the west (Turkey) and to the southeast (Iran). Imagine the power these three Muslim countries could wield with their oil and gas in a single state with borders stretching from Pakistan to Greece, with shores on the Indian Ocean, Persian Gulf, Caspian Sea, Black Sea and Mediterranean Sea. Hence Russia’s alleged support for Armenia’s invasion of Azerbaijan. The Azeris even go so far as to say Russia is commanding the war but Armenia is doing the fighting – all to destabilize the region.

The recent conflict in Georgia has made international headlines, and has involved leaders such as Bush, Putin, and Sarkozy. It leaves the Azeris scratching their heads, wondering why the US didn’t step in even after Armenia violated a UN Security Council resolution declaring Nagorno-Karabakh part of Azerbaijan. How many of us remember the Armenian invasion? What kind of headlines did it make?

Yet now the US has airlifted Georgian troops out of Iraq and brought them back to Georgia, and has given humanitarian and medical aid using C-17 military aircraft and navy forces.

So why is the US supporting Georgia so strongly now when they didn’t support Azerbaijan during their invasion?

Perhaps it is because we are living in a new Zeitgeist, different from that during the pre-9/11 conflict in Nagorno-Karabakh in the early 90s. Maybe the stakes are higher now and the international community cannot afford to allow for any more destabilization. Russia, on the other hand, has its own agenda, and at this rate will increasingly alienate itself from the other G8 nations and the rest of the world.

Vladimir Gonzales, EconomyWatch.com