Georgia is a small country bordering the Black Sea and sandwiched between Russia and Turkey. Two regions of Georgia bordering Russia - Abkhazia and South Ossetia - declared independence in the 1990s. After bloody battles both regions did manage to achieve de facto independence. But there's an important difference between the two struggles. Abkhazian separatists engaged in large-scale ethnic cleansing to make their state, which previously had a plurality of Georgians, more ethnically pure whereas South Ossetia remains a diverse region with some villages aligned with the separatists and others with Georgia.
Few people even knew South Ossetia existed before last week. But the pipelines that run through the region supply an enormous amount oil and gas to Europe.
"Whatever political reasons exist for what happened in South Ossetia," says Chris Mayer, an investor advisor, "the oil and gas markets find themselves right in the cross hairs of the whole thing. Resource wars -- fought over oil and gas, pipelines, water and other key resources -- seem likely to have a bigger role in the future. Politicians, though, will be quick to dress up any such war as being fought over something else."
All the talk about Russia protecting the rights of residents of South Osettia from Georgian aggression is utter nonsense; that's like saying the North protected the rights of people in the northern states from invasion by the south during the American Civil War. KGB hero of mother Russia Vladimir Putin doesn't give a whit about the people of the break-away Georgian province, there are very much bigger fish to fry.
The Russians now supply about 25 percent of the European Union's crude oil needs and half of its natural gas. Moscow's attack on the former Russian state of Georgia is a response to a threat to the energy monopoly it uses for political intimidation of Western Europe. There is a key U.S.-backed pipeline that carries oil out of Caspian and Central Asian fields to a Turkish port on the Mediterranean; it was nearly hit in recent attacks. This pipeline and access to oil outside of Russian control is the real prize the KGB-trained Russian leader wants.
Indiana Sen. Richard Lugar, the senior Republican on the Senate Foreign Relations Committee said in an interview with the Associated Press "It is unlikely that aggression against our NATO allies will occur with aircraft and tanks and troops," "A nation could achieve the same and worse effects simply by turning off the taps-- people freeze, industry stops."
The United States is fully aware of the Russian scheme. President Bush sent special envoy C. Boyden Gray to Central Asia to try to get agreement for new routes running through Georgia in addition to the Baku-Tbilisi-Ceyhan oil pipeline that was almost hit by a Russian bombing raid during its foray into Georgia. This pipeline carries Caspian crude oil from suppliers not controlled by Russia or OPEC to international markets. Smaller amounts of oil flow through the Baku-Supsa line, which ends on the Black Sea. The Caspian Sea port of Baku is the capital of Azerbaijan, another former Soviet republic that has control of major petroleum reserves. Russia is desperately seeking to buy all of Azerbaijan's natural oil and gas exports at market prices through Russia's energy giant Gazprom.
If Russia succeeds in snapping up all oil and gas from Azerbaijan and Turkmenistan., where they are also actively seeking long term contracts, American efforts to deny Russia unlimited power to dictate oil and gas prices, and control over energy supplied to Western Europe, will be greatly setback. By use of energy control, Russia can inject itself into American alliances through a divide-and-conquer strategy in the oil and gas market, particularly with gas which is urgently needed in the West. Russia has made expansive deals with individual European countries and companies to extend Russia's distribution throughout the continent. For this reason it is very important for America to establish more pipelines from Central Asia to Europe.
Russia has a history of using oil and gas as a political weapon. In the winter of 2006, Russia's Gazprom threatened to cut off natural gas supplies to Georgia. Russia also reduced its oil supply to the Czech Republic after the country agreed to allow a U.S.-provided missile defense radar system in the country over Russian objection. In previous shows of strength Russia has cut gas supplies to Estonia, Lithuania, Ukraine and Belarus. Of course Russia denies political motivation.
It is understandable why the U.S. wants pipelines built from Turkmenistan, across the Caspian to Azerbaijan, then through the Caucasus to Turkey and on to Western Europe to bypass both Russia and Iran.
Senator Lugar said "Given the characteristics of Russian diplomacy, which have been not only competitive but sometimes gripping people by the throat, they are likely to feel irritated that someone else is in the field."
But the harsh reaction by Russia against Georgia also had another reaction. In a show of solidarity with Georgia, the leaders of five former communist countries went on a stage in central Tbilisi, the Georgia capitol, and linked arms in front of thousands of demonstrators. Viktor Yushchenko, the Ukrainian President, told the crowd: "You have the right to freedom and independence. We are here to demonstrate our solidarity . . . freedom is worth fighting for." President Kaczynski of Poland said: "This country [Russia] seeks to restore its dominance, but the time of dominance is over."
While these displays of independence from Moscow are inspiring, the fact is the Russian bear's appetite has not diminished from cold war days - only the menu has changed.