Future of Energy Transportation in Eurasia after the Georgia Crisis

By Berdikeeva, Saltanat | Insight Turkey, October 2008 | Go to article overview

Future of Energy Transportation in Eurasia after the Georgia Crisis


Berdikeeva, Saltanat, Insight Turkey


The Russian invasion of Georgia in August 2008 has changed the geopolitical and energy security environment in Eurasia. It has raised concerns in the West not only about Russia's emerging political and military power projection into the region, but also about its ability to transform the current and planned energy transportation routes in and around the Caspian basin. The South Ossetian crisis opened a window of opportunity for Russia to exert its power without regard to international criticism. With the invasion of Georgia, Russia seized an opportune moment to establish its supremacy and strengthen its position as the sole supplier of energy in the former Soviet Union. The Kremlin is now potentially capable of turning the tables to gain a near-full control of the energy routes flowing from Central Asia, a move with implications for Western interests in Caspian energy.

Russia's January 1, 2006 cutoff in gas supplies to Ukraine due to price disputes, with subsequent gas shortages in five European countries, came as a wake-up call for the EU. The EU has since sought to secure Central Asian gas through various pipelines circumventing Russia. These plans, however, are unlikely to come to fruition in the aftermath of the conflict in Georgia. The heightened instability in the region casts doubts on the security of the existing energy pipelines from the former Soviet republics, while increasing the premium of investing in the extraction of energy and the building of proposed gas pipelines in the region. Irrespective of Central Asia's role as an important alternative energy supplier to the EU, Russia remains the singularly most important supplier of energy to Europe, providing close to 25% of its crude oil imports and 40% of its gas, with the Russian gas share predicted to reach 50% by 2020.

Despite some worries in the aftermath of the bombings in South Ossetia that the disruption of energy supplies from the Caspian through Georgia would have a significant impact on supply security due to a temporary closure of two pipelines--oil line Baku-Tbilisi-Ceyhan (BTC) and gas line Baku-Tbilisi-Erzurum (BTE--also known as the South Caucasus Pipeline)--oil traders and the European Commission reacted calmly to the disruptions because the EU imports less than 3% of its oil from Azerbaijan through Georgia, and because the pipelines were promptly back in business. Nonetheless, EU energy commissioner Andris Piebalgs recently restated the Union's official policy that the diversification of energy supplies has become even more important after the events in Georgia, necessitating political decisions to remove obstacles for building the proposed Nabucco pipeline, which is to extend from the BTC line to Turkey, Bulgaria, Romania, Hungary and Austria.

With the cloud of war slowly clearing in Georgia, the geopolitical Great Game in the Caucasus and Central Asia and the fight for energy supplies from these regions have stepped up. However, the roles of the key players in the game are waiting to be redefined now as each player is likely to play its cards in a more pragmatic way. Thus political factors will continue to play a role in the decisions of the EU, Russia, and energy suppliers from the Caucasus and Central Asia, as will the less-discussed economic calculations of each in regard to energy supply capability and the viability of pipeline projects. The latter are likely to matter even more in the calculus and the discussion. This essay will assess the existing and proposed energy transportation routes in Eurasia, examine the stakes and interests of Russia and the West in them, ascertain the policies of the sellers (Kazakhstan, Turkmenistan, Uzbekistan and Azerbaijan) on various transit proposals, and determine Russia's significance as an energy supplier to Europe.

Challenges of Multi-Vector Energy Policies

The aftermath of the January 2006 cutoff in gas supplies to Ukraine, which affected energy supplies to France, Italy, Austria, Hungary and Poland, was a watershed for Europe's decision to start to consider reducing its heavy dependence on Russia and seeking alternative energy sources directly from Central Asia. …

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