The Georgian Conflict on Podcast

I spoke with Chris Power, international editor of BusinessWeek. Listen to this recording, which is also downloadable as a podcast.

Targeting the Pipeline

Until now, the notion that the battle in Georgia had an oil component was an educated conclusion, in my case based on the 11 years I spent living in the region, including in Tbilisi during the 1990s. Now we have two independent reports, including one this morning by my former Wall Street Journal colleague Guy Chazan, confirming that Russia took advantage of its assault to tell the West that the Baku-Ceyhan pipeline isn't necessarily safe.

(Credit where credit is due: Damien McElroy of The Daily Telegraph actually had the story first. But the WSJ had the foresight to publish an actual photograph, so that there is no parsing the facts now.)

The WSJ report says that the attack, coming within 10 feet of the Baku-Ceyhan line, occurred last Saturday. Here is Chazan's description:

"The line of craters left by the alleged Russian attacks runs through the middle of a hilly, mostly uninhabited plain some 15 miles south of Tbilisi, near the town of Rustavi. The area lacks military or even human targets. The only sign of civilization is a small farm surrounded by haystacks and grazing herds of cows and sheep. The 45 craters -- each some 60 feet across -- scar the hillside like footprints left by a giant."

On Tuesday, a jet returned and appeared to bomb a nearby smaller oil pipeline that terminates at Supsa, a port on Georgia's Black Sea coast.

The goal? As Chazan states well: "Russia wasn't only aiming to humiliate its neighbor militarily but also to damage its reputation as an energy corridor."

Georgia has no appreciable oil or natural gas. But the U.S. got behind it under the Clinton administration as a corridor for 1 million barrels a day of oil, plus considerable volumes of natural gas.

The United States originally intended the corridor as a way to weaken Russia's hold on its traditional colonial south. The strategy has been to take away the countries into which it normally expands: Eastern Europe, the Caucasus and Central Asia. That explains the U.S. support for NATO expansion. And it explains the so-called East-West Energy Corridor, of which Georgia is part.

The bombings did not strike the actual lines. But they demonstrated that Russia can, and might, do so.

Photo: Guy Chazan, The Wall Street Journal

Georgia, Russia and Rethinking China

Years after his humiliating knockout by Muhammad Ali, the boxer George Foreman returned to the ring to a string of triumphs and the world championship despite being in his 40s. It was more marketing than sport. When asked about his choice of opponents, Foreman famously remarked that he didn't fight anyone his mama couldn't whup.

That's one way of looking at Russia's effective annexation of South Ossetia and Abkhazia over the last 24 hours. With apologies to my Georgian friends, Georgia simply isn't a serious military actor; with the exception of the Chechens and Armenians, none of the Caucasus peoples is (which is why the Abkhazians and Ossetians are relying on Russia to fight their battles).

Where Foreman was smart is that he never got back in the ring with Ali. Fifteen years after its near dismemberment by Russian-backed forces, however, Georgia wasn't so wise. It doesn't mean a return to 1993, which ushered in a literally dark decade, when Georgia often lacked even electricity to light itself. But Russia's military demonstration does show that Georgia isn't an independent actor at the moment.

Vladimir Putin (for it's clear now who is truly in charge in Moscow) has also shown that Russia doesn't intend for Georgia to join NATO. And NATO has shown that it doesn't have the gumption or inclination to stand up to Russia.

The question for the U.S. and the West as a whole is fundamental, and goes back to the original objective of the Western energy corridor: As O and G readers know, Washington's rationale was not sending a million barrels of oil a day to the West, but turning the Russian-dominated Caucasus and Central Asia into a financially independent, pro-Western region.

Georgia is a key component of the strategy, as a crossover point for the Baku-Ceyhan oil pipeline, its companion natural gas line, and the smaller Baku-Supsa Early Oil line.

Georgian absorption into NATO is effectively off the table. But does that mean an end to the West's challenge to Russia's regional energy power?

The short answer is no -- all these lines will continue to operate. Russia won't interfere with them. Why? Because its larger economic-political strategy in Europe depends on not spooking the Europeans, who could then be encouraged to back the construction of more non-Russian energy pipelines to Europe, and thus dilute Russian power there.

(I just received reliable confirmation that, contrary to a statement by Georgia, Russia did not bomb near the Baku-Ceyhan line. Bombs were dropped near the smaller Baku-Supsa line, which leads to Georgia's Black Sea, but caused no damage. The Supsa line passes near South Ossetia so it's possible that this was a fog of war situation.)

So Russia will let the Baku lines be. But it seems to me that an expansion -- the proposed trans-Caspian oil and natural gas lines, and the proposed Nabucco line to Europe -- are now effectively dead. No Caspian president would gamble his survival by embracing such a project, and that's precisely how they would calibrate such a decision.

The West simply has too few levers with Russia.

But there is one, and it's China. Since the goal of U.S. policy is energy independence for the Caucasus and Central Asian states, why does the oil and natural gas have to go West?

China is building oil and natural gas lines from Turkmenistan and Kazakhstan to Xinjiang and beyond. Washington has already quietly gotten behind these efforts, but it might be the wisest course to turn up the volume by offering actually to help to build such lines.

The next U.S. president would have make such a shift part of a larger, well-considered China strategy. Russia would hate such a U.S.-China energy tandem, but that is what leverage in this region is all about.

It's Official: The Caspian is a Terrorist Target

The surprise isn't that terrorists appear to be responsible for an explosion that has shut down the Baku-Ceyhan oil pipeline, and sent world oil prices up. It's that no such attack occurred earlier in the Caspian Sea region.

On Tuesday, a pump near the eastern Turkish town of Refahiye blew up. The thousand-mile pipeline, which connects the Caspian and Mediterranean seas and ships a million barrels of oil a day, could be shut for two weeks.

A Kurdish rebel group known as the PKK says it's responsible for the explosion.

If accurate, the attack underlines the vast target presented by the energy infrastructure that's gone up on both sides of the Caspian, and on into Turkey, since the 1991 Soviet collapse.

During the 11 years I lived on the Caspian, I frequently asked oilmen and diplomats about any precautions being undertaken to prevent terrorism, say, at the Tengiz and Kashagan oilfields in Kazakhstan, and the offshore Baku fields in Azerbaijan. After all, the Caspian is just north of Afghanistan and Pakistan, with all that implies. These fields currently export about 1.3 million barrels of oil a day, and the volume will increase to about 4 million barrels a day in about a decade or so.

I never got back anything but blank stares. I assumed that meant the threat was understood, but that no one was going to discuss preventive measures in place.

But this week's blast makes me wonder. BP deliberately built the pipeline underground, mostly to prevent the siphoning off of oil by thieves, and to forestall attacks by the various militant groups that populate the Caucasus and Turkey.

The vulnerable spots were always the eight pump stations along the route -- they are completely in the open. NATO and the U.S. had sent trainers to help assemble a strong protective force for the entire infrastructure, and I had assumed they were particularly concentrated at the pump stations.

Security may be particularly tight at the stations. But the apparent attack shows that the infrastructure remains vulnerable.

Guest Column: America's Ostensible Ally in Baku

Next week, Dmitry Medvedev travels to Japan for his first G-8 summit as president of Russia. But before that, he is on a three-day trip to Azerbaijan and Turkmenistan. If the West hasn't taken note of that, it should -- Vladimir Putin and now Medvedev have neatly cemented strong relationships with the oil- and natural gas-rich Caspian countries of Kazakhstan, Azerbaijan and Turkmenistan, nations that during the 1990s the U.S. sought to bring into the Western fold. These countries continue to be strategically important, both because of the tight energy supply, and because of the energy independence they can provide to Europe. In an email exchange, my friend Tom de Waal -- co-author of the classic Chechnya, and author of the trenchant Black Garden -- told me that in The Oil and the Glory I overplayed Azerbaijan's alienation from Russia. His argument was compelling, and I asked him to expand it into a guest column. The result follows.

By Tom de Waal

Russian President Dmitry Medvedev arrives in Baku today.

In the West, there is a widespread assumption that Azerbaijan is an ally, and in the same anti-Russian camp as Georgia. I think that is a misperception. Azerbaijan is now developing a foreign policy of “complementarity,” which used to be the aspiration of the Armenians – be on good terms with everybody and get the best out of everybody. The model here is Kazakhstan, rather than Georgia.

Actually this was always the case. I suspect the Azerbaijanis have always been good at delivering the message in Washington, “You are our main ally and friend” and then going to Moscow and repeating the same refrain. Heydar Aliyev, the first post-Soviet Azerbaijani president (and father of the current president), was careful to keep good relations with Russia; before he talked seriously to Western partners about the non-Russian Baku-Ceyhan oil pipeline, he got a Russian oil pipeline in place – the so-called Early Oil line from Baku to Novorossiisk. Aliyev also wanted to give the Iranians a stake in the offshore Azerbaijani oil consortium, known as AIOC, but was of course over-ruled by the Americans. Aliyev kept his good contacts in Moscow, but was held back by Boris Yeltsin’s personal antipathy to him -- although he did successfully bury the hatchet with another Gorbachev-era reformer who had been his enemy in the Politburo, Eduard Shevardnadze.

Once Vladimir Putin came to power, Aliyev made it a strategic priority to rebuild relations with Russia. Aliyev was very successfully at charming the Putin Kremlin, and his daughter, Sevil, made a useful marriage with a well-connected Moscow Azerbaijani, Mahmud Mammadquliyev. The elite-level relationship has deepened under his son, Ilham Aliyev.

Medvedev, with his background as former chairman of Gazprom, the Russian natural gas giant, now speaks the same language of money and energy as the Azerbaijani elite. They must find it a relief not to have to bother with all that talk of democratization and human rights that enters conversations with Western politicians.

The Georgians enjoy the access they get in Washington but I wonder if they secretly envy the lobbying power in Russia of people like Vagit Alekperov, the Azerbaijani chairman of Lukoil, who have made sure that Azerbaijan doesn’t suffer the kind of boycotts, visa bans and border closures that the Georgians do.

The price for Azerbaijan is that it will not pursue NATO membership, which would alienate Russia, but I believe that is not a big priority for the country’s elite. The Azerbaijanis now feel secure enough because of their vast and growing oil wealth. Moreover, NATO standardization would also threaten to bring unwelcome transparency to the notoriously corrupt Azerbaijani armed forces.

This is not a love-match but a marriage of interests—as indeed is the Azerbaijani-U.S. relationship. Both Baku and Moscow are still capable of actions that hurt ordinary people:

In Azerbaijan, the authorities have needlessly banned the re-broadcasting of Russian television channels, barring Russian-speaking pensioners who cannot afford satellite television from their only form of entertainment; in Russia, the authorities have played to a xenophobic constituency by stopping Azeris from trading at markets. The newspaper commentariats in both countries continue to exchange hostile remarks, and men like former Azeri presidential adviser Vafa Guluzade continue to blame all of the country’s ills on the Russians.

But on an elite level, there are plenty of common interests. And consider also an opinion poll conducted by Azerbaijani political analyst Rasim Musabekov in Azerbaijan in February 2008.

Asked to name the three nations friendliest to Azerbaijan, 89% of Musabekov’s respondents unsurprisingly named Turkey. But Russia came in second place with a 20% vote of approval, well ahead of the United States, which was named by 5.7%, just behind Iran and on the same level as Ukraine.

This suggests that, on the street level, Russia and Russians remain popular with ordinary Azeris. They are still on the same wavelength in a way that Americans or Europeans will never be.

Fence-Sitting on the Caspian

Oil and the Glory readers are acquainted with irascible Valekh Aleskerov, Azerbaijan’s preening, blustery, table-pounding former chief oil negotiator. Aleskerov was in Washington this week for a conference run by my friend Zeyno Baran at the Hudson Institute.

I unfortunately wasn’t present, but heard that Aleskerov was his best, straight-talking self. I was particularly struck by a point on the second round of Pipeline Politics currently under way between Moscow, Europe and the U.S.

He noted that Azerbaijan’s courage was largely responsible for the diplomatic triumph in the game's first round, capped by last year’s completion of the Baku-Ceyhan oil pipeline linking the Caspian and Mediterranean seas. Azerbaijan President Heydar Aliyev opted to ignore Russian threats and, in partnership with Georgia’s Eduard Shevardnadze, spearhead the strategy of the thousand-mile, U.S.-backed line.

But Aleskerov was speaking in the context of the second-round battle between the West and Russia over who will control the resources of the Eastern side of the Caspian. Russia wants to take Kazakhstan’s and Turkmenistan’s natural gas north for onward shipment to Europe. But Europe and the U.S. are pressing a competing proposal to ship the gas west through a new trans-Caspian pipeline linking Turkmenistan to Turkey.

The Western proposal is prudent since going along with the Russian plan would mean isolation for Kazakhstan and Turkmenistan, which would then rely on a single buyer and shipper of this huge cash-earner.

The trans-Caspian idea is beset with indecisiveness and bungling from the Caspian all the way to Washington -- mainly in Europe and Washington -- but one of the problems is that neither Turkmenistan nor Kazakhstan have committed to the proposed line. And that’s the foremost step before anyone else can move. As Aleskerov put it: “Turkmenistan will not take risks like Azerbaijan took risks” with Baku-Ceyhan.

Yesterday, Kazakhstan unintentionally provided Aleskerov a coda.

For more than a decade, Kazakhstan’s president has played the cautious middle ground in Pipeline Politics. When Nursultan Nazarbayev is in front of Russian leaders, he says, We will ship our oil through Russia! Before Chinese leaders, it’s, China or bust! And with his Turkic brothers or the West, he’s a gushing fan of Baku-Ceyhan.

Yesterday was more of the same in the Kazakh capital of Astana. Standing with Turkish President Abdullah Gül, Nazarbayev was uncontainable. “Kazakh oil will be transported to the Baku-Tbilisi-Ceyhan pipeline,” he stated unequivocably.

Well, yes, because Chevron intends to ship a few hundred thousand barrels a day that way from its Tengiz oilfield. And so do the Italian-led developers of Kashagan, the mother of all Caspian oilfields, once they get on line in a few years.

But do the Kazakhs intend to ship any of their state-owned oil through the line? More to the point, would Nazarbayev ship oil or natural gas through trans-Caspian lines were they built?

As I write these questions, their absurdity becomes almost profound. Why would Nazarbayev not do so? And if there's no reason not to, why doesn’t Nazarbayev – the strongest current leader in the eight-nation Caucasus and Central Asia region – commit definite volumes to Baku-Ceyhan and a trans-Caspian line?

The answer is wrapped into Russia's own assumptions in its Pipeline Politics strategy. As Aleskerov put it so well, Vladimir Putin assumes that Turkmenistan and Kazakhstan "will not take risks like Azerbaijan took risks.”

Photo: Auz
Rights: Creative Commons

Diplo-Capitalism: Bush's Clintonian Iran Strategy

One needn't be a gene physicist to see that President Bush looks a lot like -- gulp -- former President Clinton these days. He's hosting Israeli-Palestinian talks, speaking with Syria, and now we hear that he's opened a pen-pal exchange with the mother of all totalitarians, North Korea's Kim Jong Il.

As my former Wall Street Journal colleague Jay Solomon notes today, neo-con John Bolton hates this shift. "Our foreign policy is in free-fall at the moment," the former U.S. ambassador to the U.N. and advocate of uni-polar diplomacy tells Solomon. Engaging dictators, Bolton says, will only "diminish our prestige and influence."

Bah humbug.

So what's next in Bush's embrace of the foreign policy he's spent seven years deriding? Adoption of Clinton's diplomatic two-step with corporate America?

As readers of this blog know, I see one of America's most triumphant foreign policies of the last decade as the successful linking of the Caspian and Mediterranean seas through the Baku-Ceyhan oil pipeline. When this million-barrel-a-day came on line last year, it cemented a decade-long challenge to Russian suzerainty in Central Asia and the Caucasus.

And it was all a joint diplomatic-commercial effort of Clinton administration officials and Big Oil, specifically BP, Pennzoil and a few other companies. It was cutting-edge stuff -- geopolitics at the intersection of diplomacy and commerce.

Now it seems Bush is following the same tack. Today my friend Dean Rose was kind enough to pass along a transcript of Bush's news conference this week on the fresh intelligence that in fact Iran stopped seeking development of a nuclear weapon four years ago.

Bush said he's working to get companies both in the U.S. and abroad to help persuade Iran to stop enriching uranium. One presumes Bush was talking about oil companies -- what other type of company would he be describing?

Here's Bush's direct language when asked what's next in U.S. policy on Iran:

"And I believe now is the time for the world to do the hard work necessary to convince the Iranians there is a better way forward. And I say, hard work -- here's why it's hard. One, many companies are fearful of losing market share in Iran to another company. It's one thing to get governments to speak out; it's another thing to convince private sector concerns that it's in our collective interests to pressure the Iranian regime economically.

"So I spend a fair amount of time trying to convince our counterparts that they need to convince the private sector folks that it is in their interests and for the sake of peace that there be a common effort to convince the Iranians to change their ways, and that there's a better way forward."

This is not to mock Bush but simply to note the dovetailing of long-standing foreign policy practices.

Photo: ynse
Rights: Creative Commons