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2008-08-14

Georgia-Russia fight endangers U.S. oil goals

Jad Mouawad, New York Times



When the main pipeline that carries oil through Georgia was completed in 2005, it was hailed as a major success in the U.S. policy to diversify its energy supply. Not only did the pipeline transport oil produced in Central Asia, helping move the West off its dependence on the Middle East, but it also accomplished another American goal: It bypassed Russia.

U.S. policymakers hoped that diverting oil around Russia would keep it from reasserting control over Central Asia and its enormous oil and gas wealth and would provide a safer alternative to Moscow's control over export routes that it had inherited from Soviet days.

A bumper sticker that U.S. diplomats distributed around Central Asia in the 1990s summed up Washington's thinking: "Happiness is multiple pipelines."

Now energy experts say that the hostilities between Russia and Georgia could threaten American plans to gain access to more of Central Asia's energy resources in a year when booming demand in Asia and tight supplies helped push the price of oil to records.

"It is hard to see through the fog of this war another pipeline through Georgia," said Cliff Kupchan, a political risk analyst at Eurasia Group and a State Department official during the Clinton administration. "Multinationals and Central Asian and Caspian governments may think twice about building new lines through this corridor. It may even call into question the reliability of moving existing volumes through that corridor."

At the very least, they warn, Russia may figure even more prominently in shaping the region's energy future.

The latest struggle over Caspian oil started in the 1990s under President Bill Clinton, after the breakup of the Soviet Union. The building of the pipeline that passes through Georgia, the Baku-Tbilisi-Ceyhan line remains one of the signature successes of the American strategy to put a wedge between Russia and the Central Asian countries that had been Soviet republics.

Previous attempts to get oil out of Kazakhstan through a non-Russia route have failed. Most of the oil production from the giant field of Tengiz, for example, in which Chevron is the largest investor, now travels through a pipeline known as the Caspian Pipeline Consortium, which runs along the northern Caspian coastline to the Russian Black Sea port of Novorossiysk.

Some analysts believe the armed conflict between Russia and Georgia is rooted not only in historical enmity, but also an outgrowth of Russia's fears that Georgia, with its pro-Western bent, could prove to be a lasting competitor for energy exports.

"Russians treasured the fact they had a monopoly on oil and gas pipelines from Central Asia, as it gave them considerable clout," said Marshall I. Goldman, a senior scholar for Russian studies at Harvard. "By agreeing to having an oil pipeline, Georgia made itself more vulnerable." A big concern now centers over Kashagan, the giant oil field in the Caspian Sea that holds more than 10 billion barrels of reserves. Located off Kazakhstan, Kashagan is the most ambitious attempt to date by Western companies to develop new supplies in the Caspian.

It will be at least five years before oil starts flowing from there, but the operating consortium, which includes Exxon Mobil and ConocoPhillips, plans to transport Kashagan's oil through the BTC pipeline. That would involve building a new pipeline under the Caspian Sea, which might encounter opposition from Russia.

The Baku-Tbilisi-Ceyhan pipeline, 1,100 miles long, transports 850,000 barrels a day of oil, or 1 percent of global supplies, from Azerbaijan through Georgia and into the Turkish port of Ceyhan on the Mediterranean. Much of the oil is bound for Europe and the United States.

The oil comes from several fields in Azerbaijan, offshore in the Caspian. When the pipeline was under construction, the West struggled to find routes that would avoid trouble spots.

The United States, for instance, did not want the line to pass through Iran. In the end, BP, which operates the pipeline, and other investors decided the line had to proceed on its current route, through three countries struggling with separatists.

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