August 12, 2008

Russo-Georgian Conflict Raises the Stakes for European Energy Security

Recent Russian hostilities in Georgia, alongside PKK attacks on the Baku-Tbilisi-Ceyhan pipeline, have exposed the tight link between geopolitics and energy security in upstream European supplies. While the EU is increasingly looking to Central Asia and the Middle East to diversify supply options, it will need strong resolve and plausible political incentives if such a strategy is to succeed.

To say it hasn't been a 'good month' for the Baku-Tbilisi-Ceyhan (BTC) pipeline, which pumps oil from Azerbaijan to Europe via Georgia, would be an understatement. In early August it was struck by Kurdish separatists (PKK) in eastern Turkey in an area originally thought to be immune from Kurdish attacks. The result was a predictable shut down of the pipeline for several weeks until repair work could be carried out. Yet with work in progress, the BTC pipeline, and indeed Georgia, faced a far graver long-term threat in the form of an outbreak of hostilities between Georgia and Russia over the separatist regions of Southern Ossetia and Abkhazia, flanking the north and east of Tbilisi, respectively.

Russia was quick to assert military dominance in the region, ensuring Southern Ossetia and Abkhazia retain de facto independence from Georgia. Yet the fate of these separatist states soon became a side event; the main question occupying diplomatic minds was how far Russia would go in order to reassert dominance over an increasingly pro-Western Georgia seeking NATO and EU membership in order to reclaim 'post-Soviet' space and influence.

The BTC pipeline clearly forms a major part of this equation, particularly as Russia is reported to have fired airborne missiles within hundreds of meters of the prized Georgian asset, which is capable of pumping one million barrels per day of crude oil from Azerbaijan to the Turkish port of Ceyhan. Such a move was designed for political as well as operational effect in underlining Georgian exposure to Russian dominance in the region. Thus, the notion that Georgia can join the EU, or indeed NATO, is now completely off the menu for the foreseeable future, not least because the sinews of collective security would never stretch as far as direct conflict between NATO and Russia. Provided this message is well understood in Brussels, the Russian offensive is unlikely to go much further at this stage, particularly as the strategic balance for Russia will start to lean heavily towards concluding a ceasefire for parallel political gains with the West on issues such as World Trade Organization accession or the fleshing out the small print of the currently moribund EU-Russian co-operation agreement.

Stick or twist for the West

But needless to say, the conflict has left a number of political analysts scratching their heads as to what Western powers can, or indeed should do to prevent the 'loss' of Georgia. With NATO and EU options effectively non-starters, others have pointed to the possibility of a hybrid peace-keeping force in the region. Yet such an option always remained similarly unlikely given Russian sensibilities over 'post-Soviet' space. In the unlikely event that such a deal could be struck down the line, Moscow would extract a heavy economic and political prize over longer tutelage in the region.

The upshot is that energy fuelled geopolitics will come to play an even more pronounced role in the region as one of the last cards the EU has left to play. Indeed, it didn't go unnoticed in Brussels (or the US State Department for that matter) that the conflict has critically exposed Turkey, and to a greater degree Azerbaijan's shared susceptibilities to the fate of Georgia in supplying energy to Europe.

Crunch time for the EU

Both the PKK attacks and the Russo-Georgian conflict thus pose big questions for the EU as to whether it can realistically pursue oil and gas transport links designed to bypass Russia. Russian hostilities have already prompted sharp revisions to risk premiums in Azeri investments (premiums that were already high due to territorial disputes with Armenia over Nagorny Karabakh), with Baku now fully dependent on Russia for oil exports until the BTC link is restored. Such moves have also underlined the fragility of Turkey's supposed 'bridging' role in brining energy supplies to Europe by virtue of its strategic location between Caucuses/Central Asia, the Middle East and Europe. While the Georgia dispute pinpoints potential supply disruptions from Central Asia, the PKK attacks on Turkish soil raise further concerns as to the feasibility of Middle East supplies to the EU, above and beyond challenges associated with sourcing reliable and politically feasible supplies from the region.

However, the EU can ill afford to step back from either option if it wants to diversify gas supplies beyond Russia. Not only would this provide the enfeebled Georgian president, Mikheil Saakashvilli, with a much needed shot of political adrenalin from the West, it would also underline US and European support for Tbilisi without having to commit to the higher risk strategies of deploying peacekeeping forces or offering NATO guarantees. It would also signal a strong intent that the EU is not only willing to contest upstream resources, but is actively trying to diversify and mitigate Russian tutelage over supplies, particularly in keeping Middle Eastern and Central Asian supply options open. Needless to say, converting this strategic option into a unified and cohesive strategy remains much more challenging than its mere prescription. Bush administration officials have already described the situation as "not exactly the greatest hand of cards to have to play".

On the specifics of the 'Caucus question', the West is also well aware that it simply cannot afford to see Saakashvilli forced from office in future under intense Russian pressure. But such a conundrum merely underlines the fact that energy security and geopolitics remain inextricably intertwined in a region still closely controlled by Russia, however pyretic such control might eventually prove to be if imposed by military means.

Ultimately, even with military action subsiding, Russian interests and those of the West will remain diametrically opposed, not only in the Caucuses, but in other post-Soviet territories of the Baltics, Balkans and Ukraine. European energy security and geopolitics could thus become even more charged as the actual and perceived levels of risk to supplies become indelibly blurred. It remains unlikely that the EU will have the stomach required for such a fight, particularly as US pressure rather than EU voices still proved to be more effective in bringing hostilities to an end on this occasion.