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Georgia: A Blow to U.S. Energy
The plans of the U.S. and Western oil companies for expanded pipelines
in the Caspian region may well be a casualty of Russia's attack
Moscow's Anger
Georgia was a key transit point for any line to the West. John Wolf, a
former U.S. ambassador and now head of the Eisenhower Fellowship
program in Philadelphia, was in the thick of the bargaining and
arm-twisting that created the so-called East-West Energy Corridor. Wolf
recalls powwowing with the leaders of Azerbaijan, Georgia, and Turkey
on the construction of what would become the 1,000-mile-long
Baku-Ceyhan, the Caspian's first independent oil export pipeline. These
leaders knew they risked provoking Russia's wrath but figured the
gamble was worth it, Wolf says. Now almost 1 million barrels a day
normally course through the pipeline. For Georgia, it's not the fees it
collects from pipeline transit�about $60 million annually�that are
important. Instead, the pipeline's presence signaled Georgia's
stability and encouraged a flood of foreign investment.
That stability, of course, has proved illusory. Yet the Russians
won't interfere with the Baku-Ceyhan pipeline directly, analysts say.
Moscow's strategy depends on not spooking the Europeans, who might then
be encouraged to back the construction of other non-Russian energy
pipelines. Since there have been no confirmed attacks on the pipelines
running through Georgia, no European leader has called for a
reconsideration of energy policy.
Besides, the Russians may not need to shut down the Baku-Ceyhan line
to win the advantage in the energy wars. "There's no doubt that what's
happening has increased the investment risk within the region," says
Nick Butler, a former senior executive at BP who directs the Cambridge
Centre for Energy Studies at the University of Cambridge's Judge
Business School. Already, on Aug. 12, BP shut down a secondary oil
pipeline that ends at Georgia's Black Sea port of Supsa, saying there
could be a risk of attack on the line.
Russia's Pipeline Plans
Both Chevron and ExxonMobil (XOM)
had also planned to ship hundreds of thousands of additional barrels a
day along the route traversing Georgia. Now that may be subject to
change. "Do you want to put more eggs in the South Caucasus basket?"
asks Edward C. Chow, a former Chevron executive and now a senior fellow
at the Center for Strategic & International Studies in
Washington."And if you do, are there certain accommodations that need
to be made with the Russians to protect them?"
What about the White House's plans for a pipeline to ship natural
gas to Europe? The proposed pipeline's success depends on Turkmenistan,
which has the fourth-largest natural gas reserves on the planet, an
estimated 3 trillion cubic meters. The Turkmen are cautious: Under
former President Saparmurat Niyazov, they refused to defy the Russians
and support the construction of the Baku-Ceyhan pipeline. "[Niyazov]
thought about it and probably decided he didn't want to wake up dead,"
says former U.S. diplomat Wolf.
The assault on Georgia may make the Turkmen even more wary of the
new pipeline. Instead, they may end up cutting a deal with the
Russians, who are vigorously pursuing new gas pipelines of their own in
a bid to dominate energy in the region. "A new Iron Curtain," says
analyst Ruppel, "is descending around the periphery of Russia."
With Jack Ewing in Frankfurt
https://www.business
week.com/magazine/content/08_34/b4097000700662.htm?chan=top+news_top+news+index_news+%2B+analysis
leaders knew they risked provoking Russia's wrath but figured the
gamble was worth it, Wolf says. Now almost 1 million barrels a day
normally course through the pipeline."
The Russkis can turn off the spigot until customers fork over 100 Euros per barrel. The Brits pay $8 per gallon with $30,000 median annual income. Surely, the Americans can afford $12 at the pump. Still, they get a bargain because dollars are worthless paper.YPiR