GEORGIAN OIL PIPELINE: THE FRONT LINE
Ben Macintyre
Times Online
August 13, 2008
UK
The BTC pipeline was conceived in the 1990s as a way of reducing the
West’s reliance on oil and gas from the Middle East and, crucially,
Russia. Now it is under threat. At stake are the balance of power in
the Caucasus, and the vital questions of how, and where, the US and
Europe will obtain their oil.
Snaking 155 miles across Georgia is a man-made underground river of
crude oil. An astonishing feat of engineering, the oil pipeline is
a barely visible gash in the earth and measures just 34 inches in
diameter at its narrowest, yet it represents a vital artery in the
circulation of global energy, and a key to understanding the conflict
between Georgia and Russia raging above ground just a few miles away.
The pipeline meets just 1 per cent of the global demand for oil,
but it carries enormous political significance. For Georgia, it
represents independence from Russian hegemony, a physical, political
and economic link to Europe that is outside Moscow’s control. For the
West, the pipe is a small but crucial counterbalance to our growing
dependence on Russian oil and gas. For Moscow, the pipe represents part
of a systematic attempt to reduce Russian influence in the Caucasus,
a thorn in the paw of the bear.
The pipe runs just 35 miles south of South Ossetia: by stamping its
military authority on Georgia, Russia is simultaneously reasserting
its control over the region and, by implication, the pipeline.
As the conflict rages, Georgian authorities have repeatedly accused
Russian jet fighters of targeting the oil pipeline with bombs,
accusations that Moscow has denied. Oil may not be the cause of the
war between Georgia and Russia, but it is a central element in the
wider geo-strategic picture, and a source of incendiary tension that
has helped to inflame the area.
At stake is not merely the balance of power in the Caucasus but,
by extension, the vital question of how the US and Europe will
secure enough oil to power the cities and machines on which modern
life depends.
The Baku-Tbilisi-Ceyhan (BTC) pipeline, the second longest in
the world, connects the oil fields of the Caspian Sea with the
Mediterranean coast of Turkey; it runs for 1,100 miles, through
Azerbaijan, Georgia and Turkey, and pumps one million barrels of
oil a day to the Turkish port of Ceyhan, where the oil is loaded on
to supertankers.
The BTC pipe, owned by an energy consortium led by BP, is the only
way to bring significant quantities of oil from the Caspian fields
while bypassing both Russia and Iran. Georgia has no significant oil
or gas reserves of its own, but thanks to the pipeline it has become
a crucial conduit, harking back to its ancient role as a trade link
between Europe and Asia.
More than that, the pipeline is a central element in Georgia’s
independence from Russia. In the words of Georgia’s President
Saakashvili, "All strategic contracts in Georgia, especially the
contract for the Caspian pipeline, are a matter of survival for the
Georgian state." Saakashvili’s miscalculation was to assume that
Western reliance on Caspian oil would translate into material support
against Russian aggression.
The BTC pipeline was conceived in the 1990s as a way of reducing the
West’s reliance on oil and gas from Russia and the Middle East. The oil
reserves beneath the landlocked Caspian Sea are thought to be vast,
perhaps as much as 200 billion barrels, compared to the estimated
260 billion barrels in Saudi Arabia.
History ensured that the pipeline would follow a tortuous route. To
get the oil from Azerbaijan to Turkey meant passing through Iran,
Georgia or Armenia. Hostile and unpredictable Iran was out of the
question. The long, bitter dispute between Armenia and Azerbaijan over
Nagorno-Karabakh, and the lingering historical feud between Armenia and
Turkey over claims of genocide during and just after the First World
War, also ruled out Armenia. The route through Georgia, circuitous
and physic- ally challenging, was selected as the most practical.
Russia, predictably, was opposed from the start, fearing that the
independent pipeline would reduce its global energy clout, undermine
its regional influence and perhaps pave the way for the introduction
of Western troops into Georgia to defend the pipeline.
In the Soviet era, all oil routes from the Caspian passed through
Russia. The BTC pipeline therefore represented a direct challenge in
Russian eyes, economic, political and highly symbolic. Despite the
formidable logistical challenges, and Moscow’s continued opposition,
construction began in 2002, and was completed, astonishingly, in
just two years. Built from 150,000 lengths of pipe each 12 metres
long, it crosses an estimated 1,500 streams and rivers, the largest,
at Ceyhan, 1,600ft wide; it traverses mountain ranges and roads,
railways and power lines. More than 15,000 builders and engineers
worked on its construction, and 400 archaeologists were deployed by
BP to sift through the artefacts unearthed by the diggers.
For most of its length, the pipe is buried in a trench at least
a metre deep, to protect it from terrorist attack. In many parts,
only a strip of land where the vegetation has not fully grown back
betrays its meandering path.
The pipeline also faced vigorous opposition from environmentalists
pointing out that the pipe runs through pristine areas of wilderness,
many prone to violent earthquakes, including the beautiful
Borjomi-Kharagauli National Park in Georgia.
The section of pipeline running through Georgia is the shortest of
the three. Here it is patrolled by camouflaged, American-trained
anti-terrorist units, defending the supply from possible attack by
South Ossetian or Abkhazian secessionists.
The pipeline is similarly guarded in Turkey but, stretching over
670 miles, it is far harder to defend. Indeed, the pipe is currently
shut down as a precautionary measure after suspected Kurdish rebels
attacked a pumping station in the wilds of eastern Turkey on August
6. The resulting fire was finally extinguished on Monday.
BP yesterday announced that it has closed two more gas and oil
pipelines, the south Caucasus gas pipeline and a second oil line
running to Supsa on the Black Sea.
The Georgian section of the BTC pipe was inaugurated in October 2005,
by a delighted President Saakashvili, and the first oil was pumped
into a waiting supertanker at Ceyhan in May 2006.
The entire project cost an estimated $4 billion, underwritten by UK
taxpayers through the Export Credits Guarantee Department. Fully
operational, the pipe can pump one million barrels of oil a
day, with oil rushing through the pipe at the rate of 2 metres a
second. Alongside the oil pipe runs the South Caucasus Gas Pipeline,
taking natural gas to Erzerum in Turkey.
The sheer scale, ambition and potential vulnerability of the pipeline
project seized the public imagination far beyond the region. Most
notably, a fictional version of the BTC pipeline appeared in the 1999
James Bond film The World is Not Enough starring Pierce Brosnan. In
the film, Sophie Marceau plays Elektra King, a half-Azeri oil heiress
responsible for an oil pipeline linking the Caspian and Mediterranean.
The real pipeline earns Georgia some $62 million a year in transit
fees but the dividends are as much political as economic. The former
Georgian President, Eduard Shevardnadze, one of the project’s principal
architects, saw the pipeline as a guarantee of Georgia’s stability,
a way of binding the West to Georgian independence.
That view was loudly echoed by the West, to Russia’s continued
annoyance. "The US has consistently supported BTC because we believe
in the project’s ability to bolster global energy security," George
W. Bush declared recently. The US has also pushed for the building
of a pipeline across the Caspian, which could link up Turkmenistan’s
oil reserves to the BTC, potentially vastly increasing the amount of
oil flowing West and bypassing Russia.
Viewed from Moscow, the BTC is an economic irritant, just as Georgia,
angling for Nato membership and buoyed by Western support, is a
political threat to its regional power. Russia has not hesitated to
use its oil and gas power as a political weapon in the past: in 2006,
Russia’s Gazprom threatened to cut off natural gas supplies to Georgia
in the middle of winter.
Russia currently supplies one quarter of the oil and half the gas
consumed in Europe – a level of dependency that at once explains
the West’s enthusiasm for an alternative supply route, Russia’s
resentment and, fatally, Georgia’s misplaced confidence in Western
support. Optimistic Georgians refer to BTC as the "pipeline of peace",
yet it has played an important role in the war that has now erupted.
There is simply not yet enough crude oil flowing down the pipe to
wean the oil-thirsty West from dependence on Russia and the Middle
East, and certainly not enough to prompt US military intervention in
defence of Georgian independence.
The Caspian oil flowing beneath its land represented Georgia’s
dowry to the West; when running at full bore $1 billion worth of oil
gurgles through the pipe every ten days. So far the Georgian section
of pipeline is still intact. The bonanza will start to flow again –
and will only increase in importance as other Caspian reserves come on
stream – unless, that is, Russia can intervene and wreck the marriage.
Power in the pipeline: Why the BTC matters
It was controversial from the start. Now President Saakashvili
claims that Georgia’s BTC oil pipeline was a key reason for the
Russian offensive.
When it was conceived in the 1990s, the pipeline was backed by the
US and Britain as a way to reduce Western dependence on Russian
and Middle-Eastern oil. UK taxpayers even underwrote some of the
$3billion construction costs. But Russia always opposed it, wanting to
maintain its grip on the vast resources of the former Soviet Caspian
region. Its strategic value is clear. At current prices it carries
more than $1billion worth of crude oil every ten days.
Strangely, when the current war broke out, the pipeline, which
is 30 per cent owned by BP, was closed. Just 48 hours before
Georgian troops made their ill-fated incursion into South Ossetia,
a mysterious fire broke out several hundred kilometres away in the
Turkish section. Kurdish rebels later claimed responsibility, though
there is still some uncertainty about the cause.
So far, oil markets have not reacted strongly to the war despite
reports that the Russians have tried to bomb the pipeline. The
market has preferred to focus on signs that global oil consumption
is slowing as the world economy has weakened. But a sustained war in
the Caucasus or efforts by Russia to seize control of the pipeline
would create the threat of higher prices – and hence more expensive
petrol on UK forecourts.
Many people have another stake in the future of the pipeline through
their ownership of shares in BP, Britain’s largest company, although
as pension-holders they may well not know that the funds they depend
on hold such shares.
With the depletion of reserves from the North Sea, oil from the Caspian
region is of growing importance to Europe. As North Sea oil declines,
high-quality crude from Azerbaijan is helping to take up the slack –
and the BTC is likely to become even more important as the taps are
opened on the vast new oilfields of Central Asia.
When it was discovered in 2000, Kazakhstan’s Kashagan oilfield
was the largest found since the 1960s. It has not yet entered
commercial production – but when it does, the BTC will be its route
to market. Understandably, Russia wants control over these reserves,
which are of growing strategic importance to global energy supplies.
While oil prices tend to be influenced by shorter-term factors,
the prospect of direct Russian control of the BTC pipeline would be
unwelcome in the West, bolstering the Kremlin’s dominance over our
energy future. This is one key reason why the current conflict is
raising hackles in the West.