Not a Safe Route

Russia's invasion of Georgia threatened a major transit corridor for oil and gas from the Caspian Sea, raising questions about Western energy security. Major pipelines through Georgia supply Europe with more than 1 million barrels of oil per day and 26 percent of the continent's natural gas. At the height of the fighting, more than 50 Russian missiles targeted the most important oil pipeline, called BTC because it runs from the Azerbaijani port of Baku, near Tblisi, the Georgian capital, to the Mediterranean port of Ceyhan, Turkey. Other missiles placed within 100 meters of one of BTC's pressurized vents could have caused a major explosion.

Completed only three years ago, BTC is the culmination of a Western campaign to free Europe from energy dependence on Russia; now the war has Europe wondering whether Georgia is the route to independence. "Russia's military has changed risk perception around Georgia as a transit route," says Tanya Costello, a specialist on the former Soviet Union at the Eurasia Group, a political-risk consultancy.

For now, this is a practical risk only east of the Atlantic. The pipelines through Georgia mostly feed Europe, and energy analysts don't see any direct threat to the American market. But oil prices, which had been declining, spiked again late last week on the news. And while no one believes energy was the main motive for Russia's incursion, it surely played some part in Moscow's thinking on the region. "When Baku-Tblisi-Ceyhan was constructed," says Costello, "you had a much weaker Russia that was more amenable to an energy dialogue. While Russia didn't like the existence of a pipeline that bypassed its territory, Moscow had accepted its existence. Now we're in a situation where Moscow sees the situation in zero-sum terms. A resurgent Russia will be less happy to see routes across Georgia expanded."

In the long term, that could redraw the energy-supply map, according to Julia Nanay, a senior director at PFC Energy. BTC was only the latest of several Western-backed pipelines, all conceived with an eye to skirting Russia. European partners had been planning to extend the South Caucasus gas pipeline—it runs alongside BTC but ends, landlocked, in Turkey—to Austria, via Bulgaria, Romania and Hungary. "Nabucco [the extension] will have even more of an uphill climb now" that investors doubt the reliability of that gas route, says Nanay. Doubts stirred by the Russian invasion also threaten a proposed trans-Caspian gas link between Turkmenistan and the South Caucasus pipe, which would send central Asian gas through Georgia.

Even Azerbaijan—which is deeply invested in the success of the Georgia corridor because those pipes originate in Baku—may look instead toward Russia as an energy outlet, for the right price. Its state oil company is seriously considering a bid by Moscow to buy the entire national gas output, meaning that Russia would control the gas that the West had worked so hard to get from another source. Its soldiers don't loom, Russia has used its economic might to snap up supplies. "It's clear Russia wants to maintain a monopoly on gas exports from the former Soviet Union into Europe," says Katherine Hardin, a senior director at Cambridge Energy Research Associates. "In central Asia in recent years, it has paid higher gas prices and then just passed those prices along to Ukraine. Instead of military force in Kazakhstan, it just offers a higher bid."

Russia has yet to launch a direct attack on energy targets. (As fate would have it, BTC was knocked out of commission by Kurdish terrorists days before the Georgia war, so it's not clear how occupying Russian soldiers would have treated the Georgian segment of the pipeline had it been operational.) But as part of the fighting, Russians did destroy a railway bridge to the Black Sea port of Batumi across which BP—the main Caspian producer—had intended to offset the BTC stoppage. And in any case Europe hasn't forgotten Russia's blunt 2006 reminder that it controls the spigot, when it shut off Ukraine's gas.

To be sure, several European buyers have excellent relations with Russia and don't necessarily fear greater dependence. Germany is building its own pipeline through the Baltic Sea to guarantee its supply of Russian gas (a recent Rice University Energy Program modeling exercise found that Russian efforts to deprive Germany of gas would likely be futile, as market deregulation would allow other suppliers to fill the gap). Italy struck a swap arrangement with Moscow, too.

Still, for Europe, that means that its attempts to diversify its energy supplies may have failed. Russia, which already supplies 40 percent of European gas demand, may control even more if the war in Georgia ends up killing off new pipeline projects. The Soviet Union is dead, but Russia's enmity toward Georgia and covetousness of central Asia's hydrocarbons suggest that George Kennan's adage lives on: in terms of energy, Russia can have at its borders only enemies or vassals.