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The Oil War No One Sees Coming

Russia Georgia and Oil

Written by Brian Hicks
Posted July 25, 2006

There is an oil crisis in the making in the Near East. Ethnic divisions and the international War on Terror are at play, and escalation means jeopardy to major supply routes. This is not Lebanon - This is Georgia.

Though many peoples are lumped together as "Caucasian" in censuses, the original Caucasians fiercely assert their individuality. The former Soviet Socialist Republic of Georgia has been fighting ethnic separatists along its northern border with the Caucasus Mountains since before the USSR fell.

Georgian national forces battled Abkhaz militants in the region for almost a year before Russia brokered a peace settlement that included installing Russian peacekeepers in and around the Abkhaz border zone.

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Georgia wants the Gorge

However, the Kodori Gorge, long a demilitarized zone within Abkhazia and the only section of the territory not controlled by separatists, could become the flashpoint that sparks a regional battle. The end result of this war will likely be two new states along the Caucasus mountains. Here's why:

In the past week, I have noticed a flurry of news reports highlighting increased movement in the long-standing tension between the government in Georgia's capital Tbilisi, Abkhazia, and another separatist region called South Ossetia in the country's north-central area.

Russia has backed several separatist groups in the North Caucasus border regions, including Cossacks, Ossetians, Abkhaz, and even supported the recently-offed Chechen warlord Shamil Basayev when he joined in the Confederation of Mountain Peoples of the Caucasus to fight Georgia. In 1993 and 1994, these groups fought Georgia to secure the eventual cease-fire and de facto independence they have now.

But that de facto independence is not de jure (legal); neither South Ossetia nor Abkhazia is internationally recognized as a separate republic from Georgia.

Today, sources in the Russian peacekeeping team reported stopping a small convoy of Georgians, including the defense minister and interior minister, on their way into the Kodori Gorge to speak to local elders. All signs point to Georgia's intention to capture Abkhaz political leader Emzar Kvitsiani, who will be tried as a traitor in Tbilisi.

South Ossetia's president also said today that Georgia is trying to provoke a war with Abkhazia - and that South Ossetia would come to Abkhazia's aid.

So...

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Why Do I Care?

You care because it involves oil, silly. The Baku-Tbilisi-Ceyhan pipeline has been the United States' lucky star since 9/11. Way off in the distance, but able to make dreams of fossil fuel abundance come true. Well, this summer, the engineers turned on the spigot and the world's main conduit of Caspian Sea oil set-a-pumpin'.

As you can see here, the pipeline runs from Azerbaijan's capital Baku, through Georgia's capital Tbilisi, and southwest (skirting Kurdish regions, I might add) to Ceyhan in Turkey.


BP BTC
(Image courtesy of BP)

The BTC and its natural gas counterpart, the Baku-Tbilisi-Erzerum pipeline, will run no more than 100 miles from the South Ossetian main city of Tskhinvali, making a pretty target for someone wanting to put pressure on the Georgian government. Since 2003's Rose Revolution, where Georgian President Eduard Shevardnadze was deposed in favor of Mikhail Saakashvili, Georgia has enjoyed GDP growth around 6% per annum, but has struggled in its relationship with Russia.

Russia has banned all imports of wine and mineral water from Georgia, whose mountainous landscape yields a profitable abundance of both libations. This has turned Saakashvili sour, and the promotion of separatist activity by his hulking northern neighbor is also not appreciated. Russia is currently still operating militarily in Georgia, though bases are being dismantled and 1500 tons of munitions are being withdrawn in the next year.

Russia's military withdrawal also means that sides are drawn in case of a proxy war through the breakaway Georgian republics. Russia appreciates Georgia's rival supply of natural gas (cf. Russia's Gazprom) no more than Georgia likes its negative agricultural trade balance. The sum total is a regional imbroglio whose only precedent ended with a Russian-brokered peace. If Russia is involved, that intermediary is unlikely to work this time.

All of this is urgent to the world's oil supply, yet you hear not a peep. Even as Russian national oil giant Rosneft launches its IPO and continues to swallow private rival Yukos, Moscow's other moves are ignored. Even the mayor of Moscow has pledged his support for Abkhazia, to little fanfare in the western media or market. And this just in: Russian peacekeepers report that late on the evening of July 25, 2006, shots have broken out in Kodori Gorge.

Tell your friends.

Regards,

sig

Sam Hopkins 

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