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THE IMPACT OF THE RUSSIA-GEORGIA WAR ON THE SOUTH CAUCASUS TRANSPORTATION CORRIDOR
Mamuka Tsereteli
Jamestown Foundation
http://www.jamestown.org/programs/recen treports/single/?tx_ttnews%5Btt_news%5D=34654& tx_ttnews%5BbackPid%5D=7&cHash=54b53bf6cc
Marc h 4 2009
Executive Summary
The August 2008 war in the Caucasus revealed the new strategic
realities that have emerged in the Black Sea / Caspian Region in
recent years. These realities have been driven by overly ambitious
Russian policies and have weakened Western strategic interests in the
region. The conditions created immediately after the war appeared more
favorable to Russia and less favorable to other nations in the region,
most notably Armenia, Azerbaijan, Turkey, and Ukraine.
But the world economic crisis and its impact on Russia, as well as the
Russia-Ukraine gas dispute in January 2009, have diminished Russia's
gains and further damaged Russia's reputation as a reliable energy
supplier to Europe. In the long run, Russia may face very serious
problems of separatism on its own territory due to Russia's recognition
of the breakaway provinces of Georgia. Given these uncertainties,
it may be natural to expect that there will be stronger drive to
get away from: 1) dependency on Russian energy in Europe; and 2)
dependency on Russian transit infrastructure in Caspian /Central Asia
region. In the long run, that may be reflected by Russia's weakened
strategic position in Europe and Central Asia.
The August war in Georgia demonstrated some risks associated with the
functioning of the transit energy corridor in the southern Caucasus. It
also demonstrated the need for broader security guarantees for a
region that is vital to European and global energy security. The
most important finding of the paper is that while the corridor has
a tremendous potential to augment its transit capabilities with new
pipelines, railroads, marine and air ports, the security of the South
Caucasus transportation corridor cannot be taken for granted. Moreover,
Western countries will need to ensure stability and security in the
region in order for the corridor to meet its full potential.
The Russian invasion of Georgia established new strategic realities
in Eastern Europe and Central Eurasia. It was the culmination of
Russia's impressive comeback in Eastern-European and Central-Eurasian
affairs that has occurred in response to high energy prices, a weak
US strategic position, European division and uncertainty in Turkey's
strategies. The war made clear that Russia is willing to use force to
deepen and promote its interests, while western powers are not. This
fact was predictable, but not certain to some. The war in Georgia
helped firmly establish this reality and may also indicate that
even NATO members may not be fully protected by their commitment
to that organization. As the Russia-Georgia conflict demonstrates,
military force has once again become a major factor in Russian foreign
policy. Nevertheless, economic provisions and energy incentives are
still the primary tools employed by Russia to further its foreign
policy interests abroad.
At the same time, the weak Western response to Russia actions may
send the wrong signal to the Russian leadership about the level of
freedom it has to use force in what Russia considers its sphere of
influence. Furthermore, the weak economy and the declining popularity
of Russian leaders may create internal instability within Russia and
tempt Russian leaders to once again utilize force to further their
objectives. Europe and the United States need to carefully consider
their policy response to such scenarios.
Another major finding of this paper is that energy is an important
factor in the stability of any country and, in Georgia's case,
domestic energy security is also the foundation for stability of
transit, and development of the entire regional infrastructure. The
physical damage to the infrastructure and the environment in Georgia
as a result of the war was tangible but not large. The damage to
Georgia's transportation system is repairable in a relatively short
period of time. The pipelines are gradually approaching pre-conflict
volumes of the oil and natural gas shipments although the shipments
via railway, ports, and air have all shown signs of decline. Instead,
the key problem emerged with the malfunctioning of the largest energy
facility in the country - the Enguri hydro power plant.
The reservoir for the power plant is located on Georgian-controlled
territory while the actual electricity production plant is located
on Abkhaz/Russian controlled territory. The Georgian leadership had
to make a very difficult political decision in accepting the offer
of the Russian company Inter RAO (the subsidiary of the giant Russian
state-owned energy monopoly Inter RAO United Energy Systems (UES)) on
joint operation of the power plant. While there is a positive history
of activities of the Inter RAO UES in Georgia, the Russian state-owned
company's control of a key electricity supplier for the entire country
is not the best political and economic security outcome for Georgia.
Lastly, the paper argues that the initial damage that the war inflicted
upon the political reliability of the transit corridor is gradually
diminishing and that new opportunities are emerging. The complete
reversal of this damage can be possible but will depend on U.S. and EU
policy, the role of Turkey, internal stability in the Caucasus region,
and Russian policy in Central Asia and the Caucasus. It is important
to remember that when the initial decision to revitalize the energy
corridor through Georgia and Azerbaijan was made in the mid 1990s,
the security environment was extremely difficult and there was no
infrastructure to support shipment of oil through the corridor, yet
leadership of the United States and Turkey supported that decision and
helped to implement it. Today's environment is much more favorable
considering the functioning infrastructure and greater demand for
Caspian energy.
New natural gas discoveries in Turkmenistan and the next stage in
oil and gas developments in Kazakhstan and Azerbaijan will require
additional export capacity and a tough battle is ahead between
the different export options, each supported by state sponsors with
competing interests. It is significant in this context that Kazakhstan
and Azerbaijan signed an agreement on November 14, 2008, to develop
a Trans-Caspian oil transportation that will include onshore oil
pipeline in Kazakhstan and a tanker fleet in the Caspian Sea to ship
Kazakh oil to the Baku-Tbilisi-Ceyhan (BTC) pipeline and on to the
world markets. As it was indicated at the Budapest summit devoted
to the Nabucco pipeline project on January 27, significant progress
has been made on the development of a natural gas link between the
Caspian and Europe, and Georgia has an important role to play.
These developments indicate that the energy producing countries
of the region are determined to seek the diversification of export
options, but they need to be supported by the United States, and in
particular European, NATO, or Turkish security guarantees. After all,
Western Europe and Turkey are the major consumers and beneficiaries
of Caspian energy resources.
Mamuka Tsereteli
Jamestown Foundation
http://www.jamestown.org/programs/recen treports/single/?tx_ttnews%5Btt_news%5D=34654& tx_ttnews%5BbackPid%5D=7&cHash=54b53bf6cc
Marc h 4 2009
Executive Summary
The August 2008 war in the Caucasus revealed the new strategic
realities that have emerged in the Black Sea / Caspian Region in
recent years. These realities have been driven by overly ambitious
Russian policies and have weakened Western strategic interests in the
region. The conditions created immediately after the war appeared more
favorable to Russia and less favorable to other nations in the region,
most notably Armenia, Azerbaijan, Turkey, and Ukraine.
But the world economic crisis and its impact on Russia, as well as the
Russia-Ukraine gas dispute in January 2009, have diminished Russia's
gains and further damaged Russia's reputation as a reliable energy
supplier to Europe. In the long run, Russia may face very serious
problems of separatism on its own territory due to Russia's recognition
of the breakaway provinces of Georgia. Given these uncertainties,
it may be natural to expect that there will be stronger drive to
get away from: 1) dependency on Russian energy in Europe; and 2)
dependency on Russian transit infrastructure in Caspian /Central Asia
region. In the long run, that may be reflected by Russia's weakened
strategic position in Europe and Central Asia.
The August war in Georgia demonstrated some risks associated with the
functioning of the transit energy corridor in the southern Caucasus. It
also demonstrated the need for broader security guarantees for a
region that is vital to European and global energy security. The
most important finding of the paper is that while the corridor has
a tremendous potential to augment its transit capabilities with new
pipelines, railroads, marine and air ports, the security of the South
Caucasus transportation corridor cannot be taken for granted. Moreover,
Western countries will need to ensure stability and security in the
region in order for the corridor to meet its full potential.
The Russian invasion of Georgia established new strategic realities
in Eastern Europe and Central Eurasia. It was the culmination of
Russia's impressive comeback in Eastern-European and Central-Eurasian
affairs that has occurred in response to high energy prices, a weak
US strategic position, European division and uncertainty in Turkey's
strategies. The war made clear that Russia is willing to use force to
deepen and promote its interests, while western powers are not. This
fact was predictable, but not certain to some. The war in Georgia
helped firmly establish this reality and may also indicate that
even NATO members may not be fully protected by their commitment
to that organization. As the Russia-Georgia conflict demonstrates,
military force has once again become a major factor in Russian foreign
policy. Nevertheless, economic provisions and energy incentives are
still the primary tools employed by Russia to further its foreign
policy interests abroad.
At the same time, the weak Western response to Russia actions may
send the wrong signal to the Russian leadership about the level of
freedom it has to use force in what Russia considers its sphere of
influence. Furthermore, the weak economy and the declining popularity
of Russian leaders may create internal instability within Russia and
tempt Russian leaders to once again utilize force to further their
objectives. Europe and the United States need to carefully consider
their policy response to such scenarios.
Another major finding of this paper is that energy is an important
factor in the stability of any country and, in Georgia's case,
domestic energy security is also the foundation for stability of
transit, and development of the entire regional infrastructure. The
physical damage to the infrastructure and the environment in Georgia
as a result of the war was tangible but not large. The damage to
Georgia's transportation system is repairable in a relatively short
period of time. The pipelines are gradually approaching pre-conflict
volumes of the oil and natural gas shipments although the shipments
via railway, ports, and air have all shown signs of decline. Instead,
the key problem emerged with the malfunctioning of the largest energy
facility in the country - the Enguri hydro power plant.
The reservoir for the power plant is located on Georgian-controlled
territory while the actual electricity production plant is located
on Abkhaz/Russian controlled territory. The Georgian leadership had
to make a very difficult political decision in accepting the offer
of the Russian company Inter RAO (the subsidiary of the giant Russian
state-owned energy monopoly Inter RAO United Energy Systems (UES)) on
joint operation of the power plant. While there is a positive history
of activities of the Inter RAO UES in Georgia, the Russian state-owned
company's control of a key electricity supplier for the entire country
is not the best political and economic security outcome for Georgia.
Lastly, the paper argues that the initial damage that the war inflicted
upon the political reliability of the transit corridor is gradually
diminishing and that new opportunities are emerging. The complete
reversal of this damage can be possible but will depend on U.S. and EU
policy, the role of Turkey, internal stability in the Caucasus region,
and Russian policy in Central Asia and the Caucasus. It is important
to remember that when the initial decision to revitalize the energy
corridor through Georgia and Azerbaijan was made in the mid 1990s,
the security environment was extremely difficult and there was no
infrastructure to support shipment of oil through the corridor, yet
leadership of the United States and Turkey supported that decision and
helped to implement it. Today's environment is much more favorable
considering the functioning infrastructure and greater demand for
Caspian energy.
New natural gas discoveries in Turkmenistan and the next stage in
oil and gas developments in Kazakhstan and Azerbaijan will require
additional export capacity and a tough battle is ahead between
the different export options, each supported by state sponsors with
competing interests. It is significant in this context that Kazakhstan
and Azerbaijan signed an agreement on November 14, 2008, to develop
a Trans-Caspian oil transportation that will include onshore oil
pipeline in Kazakhstan and a tanker fleet in the Caspian Sea to ship
Kazakh oil to the Baku-Tbilisi-Ceyhan (BTC) pipeline and on to the
world markets. As it was indicated at the Budapest summit devoted
to the Nabucco pipeline project on January 27, significant progress
has been made on the development of a natural gas link between the
Caspian and Europe, and Georgia has an important role to play.
These developments indicate that the energy producing countries
of the region are determined to seek the diversification of export
options, but they need to be supported by the United States, and in
particular European, NATO, or Turkish security guarantees. After all,
Western Europe and Turkey are the major consumers and beneficiaries
of Caspian energy resources.