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The Economist
August 16, 2008
U.S. Edition
The dangers of the safe route; Caucasian pipelines
How conflicts in the Caucasus affect Western oil
Georgia?s pipelines to the West weren?t bombed but they remain
vulnerable
IT?S not just the Russian-Georgian conflict that has made August such
a rotten month for the West?s favourite oil pipeline. On August 5th a
pumping station on the 1,100-mile (1,760km) Baku-Tbilisi-Ceyhan (BTC)
pipeline in eastern Turkey was set ablaze. The PKK Kurdish separatists
claimed responsibility. The entire route, which had been carrying
850,000 barrels of Caspian crude oil a day to Western markets, shut
down and world oil prices, which had been falling, nudged up
again. BP, which spent $4 billion on BTC and still manages it, put a
brave face on things, saying that the disruption would be
temporary. But the station was still burning when Georgia and Russia
went to war two days later.
The company?s other oil pipeline, Baku-Supsa, carrying crude to
Georgia?s Black Sea coast (now blockaded by Russian warships), had
only recently re-opened but was also forced to shut down. On August
12th, even as the conflict was fading, BP stopped putting gas into the
Baku-Erzurum gas pipeline. The only pipeline from Azerbaijan that was
fully operational this week is the one running through Russian soil to
the port of Novorossiisk.
For the past decade Georgia has been championed as a reliable country
through which new pipelines, safely controlled by Western companies,
could bypass both Russia and Iran. On the face of it, the past week
has made a mockery of that claim. But not completely. Georgia will
point out that its energy infrastructure survived the war unscathed:
no pipeline was bombed. Russia, mindful of the need for good relations
with Azerbaijan and Turkey, has been careful to point out that this
was not an oil war.
Yet the crisis'including the dangerously unresolved dispute between
Armenia and Azerbaijan over Karabakh'raises wider issues. South
Caucasus is supposed to be the location for the next generation of
so-called "fourth corridor" projects, by means of which Western
strategists dream of ending Europe?s dependence on Russian gas and
getting Caspian gas to European markets.
The jewel in this scheme, the Nabucco pipeline'designed to ship
Caspian gas to Europe in 2013'is already in trouble for lack of
unequivocal European support, a rival Russian scheme called South
Stream and the fact that there is no major Western energy company
based upstream in Turkmenistan to lobby for the deal. One of the first
foreign-policy initiatives by Russia?s president, Dmitry Medvedev, was
to court Azerbaijani and Turkmen leaders in order to persuade them to
sell their gas to his country. With an eye on events in Georgia, they
must now decide how to respond to his friendly advice.
August 16, 2008
U.S. Edition
The dangers of the safe route; Caucasian pipelines
How conflicts in the Caucasus affect Western oil
Georgia?s pipelines to the West weren?t bombed but they remain
vulnerable
IT?S not just the Russian-Georgian conflict that has made August such
a rotten month for the West?s favourite oil pipeline. On August 5th a
pumping station on the 1,100-mile (1,760km) Baku-Tbilisi-Ceyhan (BTC)
pipeline in eastern Turkey was set ablaze. The PKK Kurdish separatists
claimed responsibility. The entire route, which had been carrying
850,000 barrels of Caspian crude oil a day to Western markets, shut
down and world oil prices, which had been falling, nudged up
again. BP, which spent $4 billion on BTC and still manages it, put a
brave face on things, saying that the disruption would be
temporary. But the station was still burning when Georgia and Russia
went to war two days later.
The company?s other oil pipeline, Baku-Supsa, carrying crude to
Georgia?s Black Sea coast (now blockaded by Russian warships), had
only recently re-opened but was also forced to shut down. On August
12th, even as the conflict was fading, BP stopped putting gas into the
Baku-Erzurum gas pipeline. The only pipeline from Azerbaijan that was
fully operational this week is the one running through Russian soil to
the port of Novorossiisk.
For the past decade Georgia has been championed as a reliable country
through which new pipelines, safely controlled by Western companies,
could bypass both Russia and Iran. On the face of it, the past week
has made a mockery of that claim. But not completely. Georgia will
point out that its energy infrastructure survived the war unscathed:
no pipeline was bombed. Russia, mindful of the need for good relations
with Azerbaijan and Turkey, has been careful to point out that this
was not an oil war.
Yet the crisis'including the dangerously unresolved dispute between
Armenia and Azerbaijan over Karabakh'raises wider issues. South
Caucasus is supposed to be the location for the next generation of
so-called "fourth corridor" projects, by means of which Western
strategists dream of ending Europe?s dependence on Russian gas and
getting Caspian gas to European markets.
The jewel in this scheme, the Nabucco pipeline'designed to ship
Caspian gas to Europe in 2013'is already in trouble for lack of
unequivocal European support, a rival Russian scheme called South
Stream and the fact that there is no major Western energy company
based upstream in Turkmenistan to lobby for the deal. One of the first
foreign-policy initiatives by Russia?s president, Dmitry Medvedev, was
to court Azerbaijani and Turkmen leaders in order to persuade them to
sell their gas to his country. With an eye on events in Georgia, they
must now decide how to respond to his friendly advice.