Tag Archive for 'oil'

Pravda has put out a helpful timeline of the current Georgia-Russia conflict

Maybe I have a one track mind but, I don’t think this kind of conflict often erupts for purely egotistic political reasons. There’s a lot of energy backstory that isn’t being told in that Russian chronicle, such as the sabotage by someone of natural gas and electricity supplies headed into Georgia from Russia (gee, I wonder who it could have been… in the depths of a Caucasian winter in January 2006), the subsequent commissioning of the South Caucasus gas pipeline in December 2006, and all of the wrangling that’s been going on over the trans-Caspian gas pipeline since the mid 90s (Russian and Iran don’t want it, everyone else does, because Russian and Iran have gas already, and everyone else gets their gas from them).

Perhaps the largest diplomatic stick Russia can wield today is its oil and gas reserves (assuming they don’t want to actually like, invade a NATO country, or shoot off some plutonium fireworks), and they are jealously guarding the ability to wield that stick. Georgia has successfully circumvented them with the pipeline from Baku to Turkey (and eventually on to Europe), and I think in part now, they’re paying the price, so that others in central Asia with gas they’d like to independently pipe out of the region, including, perhaps most importantly, Iran, think twice about setting up their own circumvention. For instance, Iran built a pipeline into Armenia. It was supposed to be extendable, eventually onward to Turkey and Europe. Before it was built, Gazprom bought a controlling interest in the pipeline company, and summarily reduced the diameter of the pipeline from 1.4m to 0.7m, making it unable to carry enough gas for extending it to Turkey and Europe to be worthwhile.

I think that the blurring, or erasure, of the lines separating nations and corporations is interesting, and at least somewhat unexplored.  (Maybe one major difference is that a nation-corp can more dependably rely on its nation’s armed forces to step in occasionally.  Though, historically, US companies have had a pretty good chance of getting help on demand, at least in Latin America).  We wouldn’t be surprised if Exxon did something like buy up a potential competitor, but when a nation does it, how do we react?  In oil and gas, all of the major players are nation-corps. I think this is actually one of many very good reasons for the industrialized world (that, by and large, has used up its oil and gas) to invest heavily in renewable alternatives to oil and gas. If we develop renewables for national security (and environmental) reasons, the costs may well be reduced enough that other economies can use them simply because they’re cheap, distributed (more difficult to sabotage than a pipeline or LNG terminal), and don’t require you to be on good terms with Russia, or Iran, or Saudi Arabia, or Venezuela, or get permission from the IAEA to spin up your centrifuges.

Pipelines are beasts curiously subject to consensus, because they are so easy to destroy.  If anybody in the area doesn’t want one to function, it doesn’t.  So Russia may well be able to maintain its pre-eminent position as gas supplier to Europe for a long while to come, and keep the squeeze on in central asia indefinitely.  At least, until we stop relying on natural gas.  Or until someone in central asia really decides it doesn’t want Russia’s natural gas infrastructure to function.  Now wouldn’t that be fun for everyone!