Category: Asia and Pacific

August 15, 2008 | 1817 GMT

Yoray Liberman/Getty Images

Workers at the Baku-Tbilisi-Ceyhan pipeline terminal in Turkey

Summary

Russia’s military defeat of Georgia puts Azerbaijan in a difficult position. With all of its existing energy export routes now back under Russian control, Baku faces a stark set of choices that may force it to reach an accommodation with Moscow.

Analysis

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Azerbaijan is losing some $50 million to $70 million per day due to the closure of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline, the Caspian Energy Alliance said Aug. 14, adding that Baku’s total losses from the closure amounted to some $500 million. The 1 million barrel per day (bpd) BTC line, which passes from Azerbaijan to Turkey via Georgia, was shut down Aug. 6 following an attack on the Turkish part of the line, claimed by a Kurdish separatist group. If not for that attack, however, it might well have been shut down anyway amid the military conflict in Georgia that began two days later.

Azerbaijan exports oil and natural gas to Western energy markets via three pipelines — all of which pass through Georgia, and all of which experienced cutoffs in the past several days. Two
of them — the BTC and the 150,000 bpd Baku-Supsa — carry oil. The Baku-Tbilisi-Erzurum line carries natural gas at 9 billion cubic meters per year. The pipelines were built to provide a transport route for Caspian Sea energy to reach Western markets without having to pass through Russia, which controls the majority of pipeline infrastructure into Europe. Now that Russia has established a firm military presence in Georgia, however, it is highly likely that all three lines will continue to operate, or not, at the pleasure of the Kremlin.

This puts Azerbaijan in a predicament. With its export routes to the West blocked by the Russian presence in Georgia, Baku is carefully considering its options. Though other potential pipeline routes exist, they are plagued with problems that could prove insurmountable. Azerbaijan may have no real option but to try to reach some sort of accommodation with Moscow.

Initially, Baku was excited by the conflict in Georgia’s South Ossetia region because it provided a possible blueprint for dealing with Azerbaijan’s own restive separatist enclave of Nagorno-Karabakh — and for potentially imposing a new military reality on Baku’s regional rival, Armenia.. If successful, such a campaign could have allowed Baku to use Armenian territory for a new energy export route. Sources tell Stratfor that, following the Georgian military’s Aug. 8 invasion of South Ossetia, Azerbaijan’s leadership convened an emergency meeting at which they reportedly gave serious consideration to invading Nagorno-Karabakh, contingent on the eventual success of the Georgian operation.

However, the Georgian offensive not only failed, it resulted in the Russian invasion of Georgia proper — which has effectively suspended Tbilisi’s ability to control its own territory. Russia also used air bases in Armenia to assist in the Georgian intervention, which marked a significant change in the dynamic between Baku and Yerevan. Russia keeps military assets in both Azerbaijan and Armenia, and sells weapons to both — indeed, part of Moscow’s strategy in the Caucasus is to ensure that the two rivals remain distracted by their tense relations — but from Baku’s perspective, the Russian decision to activate its assets in Armenia means Moscow is choosing sides. However possible it might have been for Azerbaijan to invade its neighbor, it has suddenly become inconceivable.

For Baku, this is the worst-case scenario. Its energy lifelines, intended to circumvent Russian territory, are now under the overt control of the Kremlin, while its alternative of forcing a new path through Armenia is completely taken out.

Baku also suddenly found itself trying to block the flood of Azeri volunteers heading to Georgia to fight the invading Russians. Azerbaijan’s government did not want to provoke Russia, especially with Russian tanks only a couple of hundred miles from Baku itself. For that matter, with a presidential election set for Oct. 15, Azeri President Ilham Aliyev does not want a security crisis on his hands. Even though Azerbaijan has been using its energy revenues to build up its military in recent years, it is nowhere near ready to defend itself from a Russian invasion. Its security situation is in many ways even more dire than that of Georgia (or even Ukraine).

Turkey, Baku’s strongest ally in the region, theoretically would not stand by if Russia invaded Azerbaijan — but then, Ankara has been silent on the Russian intervention in Georgia. To the Azeris, this is a sign that they cannot depend on the Turks to commit themselves to a fight with Moscow if push should come to shove. Also, now that Georgia is under effective Russian military control, the only route for Turkish aid to Azerbaijan is cut off — neither Iran nor Armenia would provide passage.

With the Russians in control of Georgia and with domination of Armenia out of the picture, Azerbaijan’s only other feasible export route would be southward through Iran, hooking into existing Turkish pipeline infrastructure or sending exports out via the Persian Gulf. The problem with this option is one of timing: Any move into Iran would have to wait for an accommodation between Tehran and the United States over Iraq, which appears to be getting ever nearer but could still be derailed. At $50 million in losses per day, however, Azerbaijan does not have the time to wait for these pieces to fall into place and then build a new pipeline into Iran. A Russian move to cut off all three pipelines going through Georgia would make the cost unbearable. Baku counts on i ts energy export revenues in order to maintain military parity with Armenia, so a sharp drop in funding could quickly become a national security issue.

That leaves one other option, which from Baku’s perspective is the least desirable but the most realistic: seeking accommodation with Russia.

Russia now effectively controls the entire already-built energy transport infrastructure between Baku and Western markets. Russia could accommodate transport of Azeri energy through Georgia for the right price. That price would be both financial and political: Azerbaijan would need to align with Moscow on matters of import in order to keep the pipelines open. Baku also could ship its natural gas through Russia proper via pipelines such as Baku-Rostov-on-Don, which used to provide Azerbaijan with natural gas supplies before it became a net exporter. There also is the Baku-Novorossiysk oil pipeline, which has a capacity of nearly 200,000 bpd, although very little Azeri crude normally goes through it.

Azerbaijan has tried to avoid shipping its energy exports through Russian pipelines while other feasible options were open. But Baku may have to reconsider now that Russia holds all the cards.

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