Features : Power Play


Russia’s recent assault on Georgia raises some scary prospects for European nations dependent on energy supplies from West Asia.


Double act: Vladimir Putin passed the presidency to Dmitry Medvedev but still retains much power.

Ethnic Russians in the Caucasus may have cheered as the Kremlin sent its tanks into South Ossetia, but the impact of the invasion will be felt far beyond the borders of that troubled region. Even as it sent the ruble into a tailspin, slashed nearly 40% off the value of Russian equities and savaged the country’s international image, Russia’s adventurism brought its leaders something they cherish even more than the boost in local popularity: It brought vastly increased political power. The Putin-Medvedev strategy of military action or threats of it in reasserting Russian influence over its “near abroad” provides a chilling reminder to Western European leaders that Russia has the power to cut off a significant chunk of their energy supplies.

John Roberts, energy security specialist at energy information service Platts, says, “The consequences for energy security are very important indeed.” Over the past two decades, Europe has grown increasingly dependent on Russia to meet its energy needs—especially natural gas. Existing Russian gas pipelines supply most of the demand from Germany and the Central and Eastern European nations that are now EU and NATO members. As North Sea output decreases, that dependency will spread. Hence the importance of alternative supply routes through the Caucasus to bring the huge reserves of oil and gas from the Caspian to European markets. The region’s major producers, Azerbaijan, Kazakhstan and Turkmenistan, likewise welcome in varying degrees reduced dependence on Russian pipelines to transport their oil and gas to international markets.

It is hardly a coincidence that all non-Russian oil and gas pipelines run through Georgia. According to Michael Denison, associate fellow at the London-based think-tank Chatham House, Russia’s military intervention in Georgia raises the investor risk of pipeline projects such as the EU-backed Nabucco gas pipeline terminating in Austria, the South European Gas Ring and the White Stream pipeline beneath the Black Sea to Ukraine. “EU projects have to be underwritten,” Denison says, “and for these to be credible much depends on the political guarantees the West is prepared to make in the Caucasus.” Otherwise, producer nations like Kazakhstan will look to divert their exports through expanding pipelines to China. Similarly, Turkmenistan’s abundant natural gas may be exported southward to Iran.

“Russia stands to gain if supply through the South Caucasus is disrupted or investors are put off by the increased political risk,” says Denison. “If Russia is permitted to become the region’s ‘security manager,’” he adds, “then energy projects throughout the region can be held hostage.”

The Kremlin’s strategy may have more to do with dominating Europe’s energy supply than with defending Russian minorities in the Ukraine, Kazakhstan or Latvia. What has been described as its “19th century adventurism” in foreign policy looks increasingly like a return to even older mercantilist policies that seek to extract maximum benefits from control of strategic “choke-points”—in this case, existing and planned pipelines through Georgia.

Jonathan Gregson