Author: Jonathan Gregson






Few in the oil industry doubt that the Russia-Georgia conflict is as much about tightening the squeeze on oil and gas supply to the West as it is about protecting minorities in South Ossetia and Abkazia, or about Russia’s desire to head off Georgia and Ukraine’s moves toward full NATO membership.

Supply was halted when lead operator BP stopped pumping on two key pipelines linking the energy-rich Caspian via Georgia with NATO ally Turkey and the West. The Baku-Tblisi-Ceyhan (BTC) oil pipeline carrying nearly 1 million barrels a day, or 1.3% of world demand, to international markets was shut down when a pumping station was attacked by Kurdish PKK separatists before Russian armies advanced into Georgia.

Many in Turkey think the PKK acted on Kremlin orders, especially since the international politics adviser to Russia’s Duma, Alexander Dugin, declared the BTC pipeline dead. “The BTC is not running at the moment and will not run again,” he told Turkish Cumhuriyet daily, adding that “the world and countries in the region have seen that not NATO but Russia is the only one who could secure energy routes.”

BP also stopped pumping oil through its pipeline from Baku to Supsa, on Georgia’s Black Sea coast, and natural gas into its Baku-Tblisi-Erzerum (BTE) pipeline during the conflict for “security reasons,” though, since the cease-fire, supply has resumed. A further 100,000 barrels a day normally carried by Georgia’s rail system to its Black Sea ports has been suspended.

Although no pipelines in Georgia were physically attacked, Russia has made clear that it could have cut both oil and gas supplies, thereby raising doubts about the security of further pipelines linking the Caspian region’s huge energy reserves to European and US markets and thereby reducing Europe’s dependence on Russian gas.

Worries about a bottleneck in Georgia may set back plans for new gas pipelines, the most important being the EU-backed, $9 billion Nabucco project, which would run 2,000 miles from Erzerum in eastern Turkey via Bulgaria, Romania and Hungary to Austria. Initially 8 billion cubic meters a year would be supplied from Azerbaijan’s huge Shah Deniz field, with even larger volumes coming from Turkmenistan and Kazakhstan down the planned Trans-Caspian pipeline.

The implications to the West’s energy security of Russia’s invasion of Georgia could not be clearer. Moreover, maintaining the interest of investors, including the big Caspian producers like Azerbaijan and Kazakhstan, in these projects may become more difficult as they divert to Russian pipelines to ensure their own oil and gas exports.





Jonathan Gregson