Russia Draws the Lines

Written By Brian Hicks

Posted February 16, 2007

Cease-fire line, battle line or pipeline? With the Russian presence in Georgia’s breakaway regions, lines are blurred.

Following the dissolution of the Soviet Union, the Republic of Georgia became mired in separatist violence in two major regions along its Russian border: South Ossetia and Abkhazia.

After a few years of Kashmir-style valley skirmishes and burning villages, Russia helped establish armistice treaties between Georgia and its restive components. Under the terms of the 1992 South Ossetian agreement and 1994 Abkhazian accord, Russian troops would keep the peace.

Too often, though, Russia has showed its hand to be more meddlesome than it should be.

In 2006, as world natural gas prices surged and Russia’s muscles got a boost of steroids, Russia began pulling old Soviet munitions stockpiles out of Georgia, towards its friendly border with the breakaway republics.

Russia has issued national passports to residents of Abkhazia and South Ossetia, and the Russian ruble is the only acceptable currency there.

In recent weeks, resource nationalism has reared its head in a uniquely Caucasian way.

In the shadow of the BTC pipeline, which runs from Azerbaijan’s Caspian coast to the Turkish port of Ceyhan on the Mediterranean, the Caucasian separatists and Russia feel vexed by one of the world’s most splendid new oil pipelines passing them by.

The separatists are particularly peeved, because frayed Russian relations with Georgia mean that Georgia pays a high price for gas, which Georgia then augments as it passes fuel along to South Ossetia.

So, according to the South Ossetian Press and Information Committee, the chairman of the government of the self-declared Republic of South Ossetia embarked on a working trip to Moscow in January.

He discussed the price of gas with officials at Russia’s gas export monopoly, Gazprom. In Russia, gas costs 40 US dollars per thousand cubic meters. In Georgia, the same amount costs 238 bucks, and in South Ossetia the price rises to a full 300.

The South Ossetian government has pledged to keep wages in alignment with the price increases for the time being, but the goal of this recent round of meetings with Gazprom was to develop a way around – or straight through – the Georgian diversion.

The Price is Right

The construction of a pipeline directly from Russia’s North Ossetia to South Ossetia would enable South Ossetians to pay the Russian internal price, $40.

This will certainly be a thorn in Georgia’s side, and amount to another de facto annexation of its territory. Georgia could choose to fight, testing the resolve of Russian troops to either keep the peace or to fight for their real cause, the Moscow-friendly government of South Ossetia.

Yuriy Morozov, the South Ossetian chairman, also met with Russian central bank heads, intending to establish a local central bank with Russian help.

Reports also note that "space equipment" (satellites) for the bank’s operations have "already been received." There is no question as to who is doing the giving – Russia is bolstering its buddies to the south from miles above the earth, even while it plans a pipeline to pump what’s beneath the planet’s surface.

This is shaping up to be another interesting round in the post-Soviet era of Caucasian confusion, and we should expect more turbulence for years to come.

Regards,

sig
Sam Hopkins

Angel Pub Investor Club Discord - Chat Now

Brian Hicks Premium

Introductory