Oil and diplomacy may not always mix

Now energy experts say the hostilities between Russia and Georgia could threaten American plans to gain access to more of Central Asia's energy resources. At the other end of the continent are China and India, whose hunger for energy will keep competition for supplies tight, as well as increase pressure to hike oil and gas prices. Georgia and the Caucasus, under the watchful eyes of Russia -- with an imperial appetite that has lately proven not shy of resorting to military measures -- do not seem like the safe passage for oil and gas as was previously believed. Western states and multinationals as well as Central Asian and Caspian governments may now be more reluctant to build new lines or move large volumes through this corridor. One thing is sure: A Russia headed by a leader who sees his country's ascendance to global power through the monopolizing of energy resources and transportation lines and who has demonstrated his proclivity to use armed force to tame dissidents to that end will be the main actor in shaping the region's energy future. This reality poses a danger to the US and its Western allies' hopes of shifting their dependence on oil supplies from the Middle East to the Caucasus and Central Asia.

The latest Russian invasion of Georgia has left the American strategy aimed at driving a wedge between Russia and the old Soviet Central Asian countries in limbo. The success maintained by the Baku-Tbilisi-Ceyhan (BTC) pipeline could not be repeated in getting oil out of Kazakhstan through a non-Russia route. A great deal of oil from the rich Tengiz fields (Chevron is the biggest investor in this venture) passes through the northern Caspian coastline to the Russian Black Sea port of Novorossiysk. This pipeline is called the Caspian Pipeline Consortium. It had alternative routes in the planning stage, but Russian pressure consolidated the present route.

Another fierce competition is likely to unfold, as oil from Kashagan -- the giant oil field in the Caspian Sea off Kazakhstan that holds over 10 billion barrels of reserves -- will be transported. Western companies attach a great deal of importance and commercial value to developing this new supply source, which will be operational in at least five years from now. The operating consortium, which includes Exxon Mobil and Conoco Phillips, plans to transport a major part of Kashagan oil through the BTC pipeline. This initiative requires building a new pipeline under the Caspian Sea that connects to the existing BTC, which ends at the Turkish port of Ceyhan. This oil is bound for Europe and eventually the United States. There is no doubt that the Russia that wants to be reinvented by its leader Putin as a "petrostate" will be unhappy and will oppose the initiative as it has done on previous occasions.

As long as Russia values her monopoly on oil and gas pipelines from the Caucasus and Central Asia, not only will she have her hand on the spigots, but she will also make it very difficult for the West to build a new westward pipeline.