Geopoliticalmonitor.com
In recent years the United States and a handful of its western allies have fostered closer military and political ties to Georgia, going as far as promoting Georgia’s membership in NATO. In the wake of Russia’s determination to maintain a strong position in the Caucasus, western leaders should now wonder if their Georgia policy has been too rash, says Alessandro Bruno of Geopoliticalmonitor.com. 
The Russian response to Georgia’s attack on Tskhinvali in 2008, an attempt to quell autonomist demands from the pro-Russian population of South Ossetia, was predictable. It signaled that Russia will take military action to protect ethnic Russians living in areas of foreign countries. This is of great importance to Western strategic interests because it suggests that, if it feels threatened, Russia will take control or cut off the oil and gas pipelines transferring Caspian resources to Europe.
The Baku-Tbilisi-Ceyhan pipeline (BTC), the world’s second longest oil pipeline run by the consortium of BP (30.1%), SOCAR (Azerbaijan’s NOC) (25%), Chevron, ConocoPhillips, Hess, TPAO (Turkey), Statoil, ENI, Total, Itochu and Inpex (Japan) passes approximately 50 km south of Tskhinvali. The alternative oil pipeline for BP’s production from Azeri-Chirag-Gunashli oilfields in Azerbaijan, the Baku-Supsa pipeline constructed by the USSR from Azerbaijan through Georgia to the Black Sea and is now also operated by BP, though it gets closed when tensions between Russia and Georgia overheat. The only remaining route is the Baku-Novorossiysk pipeline through Russia to the Black Sea, which can transport only 100,000 boe/d of the current 250,000 production from the ACG fields, cut to from the average 800,000 boe/d due to the BTC closure. Despite the BTC consortium’s carefully designed route to exclude Iran, Armenia and Russia, the pipeline network is still wrought with political and security risks.
Raising the regional security stakes, the BP-operated BTC pipeline has also fueled social tensions in Georgia by elevating income disparity. The BTC pipeline is a major economic development project in Georgia. BP has incurred large compensations for those who gave up property located in the pipeline’s path. The minimal investment in other economic activities has left many Georgians unemployed and the pipeline, which offered some 2,000 jobs during the construction phase, has retained only 100 permanent staff. BP claimed that it would invest to improve infrastructure in the community, improve water quality and fixing roads, but the combination of social tensions in Georgia and military tensions suggests that BP will not be in a position to complete any of its well meaning reparations. The BTC had been presented as a grandiose development scheme to improve the lives of Georgians, a vast majority of whom still live on less than USD 30 a month. Additionally, BP’s will now tread waters even more carefully in light of the shareholder conflict over TNK-BP.
Moreover, environmental groups have outlined the health & safety risks associated with the use of the same inadequate anti-corrosion coating that caused the pipeline corrosion and spillages in the Prudhoe Bay in 2006. Our conversation with the industry experts suggests that the ‘pigs’ and hydrogen foils, are no longer considered the best available technology for monitoring pipeline corrosion. Continuous fiber optic sensing, which requires a higher upfront investment and yields highly safe long-term results, is a superior corrosion detection technique, as confirmed by the Saudi Aramco’s order of Fox-Tech’s products.
Finally, the BTC pipeline is built through the Borzhomi Mountains, where there is a high risk of landslides and where an oil spill could create significant environmental damage to an area known for its mineral water. BP took this risk to avoid having the pipeline built too close to a less environmentally risky route in the southern Akhalkalaki region because of Georgian government concerns over a Russian military base in the area (a remnant of the USSR) and the fact that the region is populated by ethnic Armenians with separatist ambitions. Georgia’s environment minister, Ms. Nino Chkhobadze, has questioned BP’s bypassing of Akhalkalaki on social and environmental grounds, demanding that BP reconsider the route. Her main concern, before the Russo-Georgian war began on August 7, was to include Armenians in the project such as to make them less dependent on Russian employers.
The regional disputes lingering from the breakup of the Soviet Union in the early 1990’s are no doubt a risk to oil supplies, although the real threat to Caspian resource supply routes comes from Russian concerns over US encroachment in its Black Sea and Caspian ‘backyards’ by actively sponsoring Georgia’s membership in NATO. This mirrors similar US efforts to establish nuclear missiles in Russia’s Baltic neighbors. The United States has promoted the pipeline to reduce dependency on Persian Gulf resources. Russia, meanwhile, is still the largest supplier of Caspian oil and gas and sees the BTC as a competitive threat. Washington lobbied strongly in favour of the BTC pipeline in the late 1990’s, seeing the Caucasus republics as a necessary alternative to having oil and gas from the Caspian flow through Iran or Russia, which was what oil majors Shell and other were planning.
The pipeline also received funding from the western governments, the World Bank, European Bank for Reconstruction and Development and other aid institutions. Oil companies will now have to think more carefully about their pipeline routing options. Will they yield to Russia’s regional power concerns, relying on its regional clout and friendly relations with allies such as Armenia, Kazakhstan, Turkey, Iran and Turkmenistan or will they continue to take risks with the former Soviet republics that have chosen to allow more US influence than Russia is willing to accept?
Europe is eager to find alternatives to its dependence on Russia for energy. North Africa appeared to be that alternative; Russia and Libya had started formal talks to allow Gazprom to build and run a planned pipeline taking Libyan gas to Europe to sweeten the deal and Russia forgave Libya’s USD 4.5 billion debts owed to the former Soviet Union. However, Russian companies are less welcome to do business in post-Qadhafi Libya due to their lukewarm support for the anti-Qadhafi rebels. Had the Libyan deal proceeded, Gazprom would have dominated gas supply sources and routes to Europe. At its peak, Libya exported some eight billion cubic meters of natural gas per year to southern Sicily via the GreenStream pipeline, which is run and operated in a 50/50 joint venture with ENI of Italy and Libya’s NOC; while ENI says that oil and gas production are gradually reaching pre-civil war levels. Gazprom and ENI have a number of joint ventures and plan to build the proposed pipeline to Europe together. Gazprom had made Libya its main priority in North Africa and has established a subsidiary ‘Gazprom Libya’, registering it in Tripoli. Now, it has to find a new North African partner.
A Regional Arms Race
The continued military tensions between Georgia and its neighbors and the related arms build-up should also be considered in the context of the growing military ambitions of its neighbors. The southern Caucasus is full of dormant conflicts. Since 2005, Azerbaijan increased its spending on arms by 70%, ostensibly to protect itself in its dispute with Armenia over the region of Nagorno-Karabakh. The projected revenue from the BTC pipeline has allowed Azerbaijan to buy jet fighters, helicopters, tanks, guns and other artillery in expectation of a military ‘solution’ to its row with Armenia. Armenia has also seen more militarization, as Russia moved its own military infrastructure remaining from the USSR from Georgia to Armenia. The increased military spending by all countries in the region on ethnic-nationalistic grounds combined with the energy and security needs of the West have left the region volatile. Georgia has also made a risky military gamble. Since president Saakashvili came to power in the so-called ‘Rose revolution’ of 2003, Georgia has made a tenfold increase in military spending.
The Stockholm International Peace Research Institute (SIPRI) said that in 2007, Georgia saw the largest average growth rate of military spending in the world. In an effort to ingratiate itself with the United States, Georgia has deployed troops to Iraq, increasing its contribution from 850 to 2000 in 2007, making it the third largest contingent in the country. The US has also provided military aid and training to Georgia, promoting its inclusion in NATO. Georgia has also purchased armament from Israel, including high profile weaponry such as an Elbit Systems unmanned aircraft, or ‘drones’. France and the United States have also supplied other equipment, largely aimed at improving the characteristics of existing Georgian hardware – inherited from the Soviet Union.
The Israeli ban on arms sales to Georgia, hints that the latter will be looking for other suppliers. Presumably, Georgia’s neighbors, Azerbaijan and Armenia, will be looking for similar equipment. Among the various US defense contractors, General Dynamics, which makes tanks, ammunition and Rockwell Collins, one of the principal suppliers of night vision technology, could see increased demand for their wares in the Caucasus. Of course, the political fallout of Georgia’s Ossetian campaign is still unclear and any arms purchases will be considered accordingly. For the US, Georgia can serve as a base to pressure Russia in concert with similar strategies in the Baltic States. Russians, however, while confirming the threat, view Georgia’s militarization as part of an effort to threaten regional minorities such as the Ossetians and Abkhazians who look to Russia for support.
Should the West sell more military equipment to Georgia, Russia, might respond by offering Iran, Syria and other Middle Eastern countries more advanced armaments than it was previously willing to sell, including the anti-aircraft S-300 missile, an effective insurance policy against a possible aerial attack from the US (or Israel). This is because, even as Russia has agreed to a ceasefire with Georgia, it cannot trust the Saakashvili government so long as it continues to pursue NATO ambitions. Had Georgia been a part of NATO, fellow members, in accordance with Article V of the organization - “The Parties agree that an armed attack against one or more of them in Europe or North America shall be considered an attack against them all” – would have been obliged to take action…against Russia. Fully aware of the risks of angering Russia, the major energy supplier to the EU, Germany, Italy and Hungary vetoed Georgia’s inclusion in NATO last March.
The Bigger Arms Race
As for the resurging ‘arms race’, the Georgia crisis played a pivotal role in endorsing the US ballistic ground based missile defense system in Poland, involving so-called ground-based missile interceptors (GBI). Russia’s swift military reaction to Georgia’s attack on Ossetia has ostensibly removed any objections to the deployment of the GBI on Polish territory. Boeing has been in charge of the GBI project’s technical development, for which the company obtained an initial USD 1.6 billion. The project also involves subcontractors Orbital Sciences Corporation, Lockheed Martin, and Raytheon. The United States claims the GBI’s are intended to protect Europe from Iranian attacks; however, Iran is nowhere near development of platforms able to convey nuclear warheads to Europe – much less nuclear warheads. Clearly, the intended target is Russia, which does have nuclear capability. While, the systems are presented as having a defense role only, Russia does not see it this way, prompting more spending of its oil sales bounty on armament.
Even as the Defense dept. has encouraged dropping the most expensive military projects - notably the Lockheed Martin F-22 and the Future Combat Systems - a multi-billion dollar program involving electronic equipment and hardware for the Army contracted to Boeing – because of the small ‘militia’ nature of current warfare, a Cold War would revive the need for large scale and advanced platform to contend with Russia’s sophisticated defense systems. Even the Navy’s DDG 1000 Zumwalt stealth destroyer project led by Northrop Grumman would receive a boost from a new ‘cold war’. The Navy had originally wanted to buy over 30 of these vessels, costing an initial USD 3.2 billion per unit. By July 2008, the projected costs were considered prohibitive by Congress, which has only allotted sufficient funds to build one unit. Congress may yet be convinced that more Zumwalt class ships are needed to confront a more powerful Russia.
There can be no doubt that the defense industry has much to gain from the re-emergence of a well armed and powerful enemy such as Russia. The US Defense secretary has also shown skepticism toward military procurement request for expensive and ultra-sophisticated military platforms such as the Zumwalt or the F-22 Raptors, unsuitable to fighting militias and guerrilla groups; nevertheless, defense lobbyists may prove more convincing in obtaining funds for these aircraft if the enemy a military power of Russia’s scale. Yet, while Russia’s military spending has increased under Putin’s and Medvedev’s leadership, it is nowhere near Soviet levels, and it remains only a fraction of the United States (USD 30 billion vs. USD 500 billion).
US military spending shall ultimately depend on Washington’s intentions. Will it risk angering the Kremlin by continuing to arm and advise Georgia and other countries, formerly in the Russian sphere of influence, risking Russian retaliation on oil supply, Iran and North Korea? Will Obama or his successor lobby for Georgia’s membership in NATO, against the wishes of many European allies, wisely concerned about Moscow’s reaction? Should the answer to any of these questions be ‘yes’, the result will be a resurgence of the Cold War.
Alessandro Bruno is a contributor to Geopoliticalmonitor.com.