The continuing presence of Russian troops in the South Caucasian republic of Georgia is causing a headache not only for the White House, but also for Central Asian countries that normally export oil through Georgia. Yesterday, Azerbaijan made arrangements to start exporting oil to Iran - a move that could put the Caspian oil producer at odds with its most powerful ally, the US.
The State Oil Company of Azerbaijan (Socar) awarded a tender for 300,000 tonnes of Azeri light crude to Middle East Petrol Farm (MEPF), an oil trading and shipping company in Dubai, for loading in late September or early October, Bloomberg reported, citing a Socar official. A decision on whether to export the oil to Iran would depend on the operational status of the Baku-Tbilisi-Ceyhan (BTC) Pipeline, the official said.
MEPF provides oil transshipment services throughout the Caspian region and Middle East, including Iran. It owns the Dubendi oil terminal on the Caspian Sea, about 50km northeast of Baku, the Azeri capital, at which Caspian crude is unloaded from tankers and transferred to pipelines or rail cars for export. The BTC Pipeline, with a capacity of one million barrels per day (bpd), is the largest of two oil pipelines that normally transport Azeri crude westward through Georgia to Black Sea and Mediterranean ports. The Aug 5 closure of the BTC line, which discharges oil at the Turkish oil export terminal of Ceyhan, predates Russia's recent invasion of Georgia by about a week, and was caused by an explosion and fire in the pipeline's Turkish section. It is still unclear whether damage to the line was caused by a technical fault or sabotage.
BP, the British oil company that operates the pipeline, said test flows would start yesterday and normal operations could resume as early as Aug 27. But that schedule could be disrupted by events in Georgia. "It turns out that it's going to take longer than expected to get BTC up and running," said Kate Hardin, an analyst at the US consulting firm Cambridge Energy Research Associates. The smaller Baku-Supsa pipeline between Azerbaijan and Georgia's Black Sea port of Supsa has been closed since shortly after the start of hostilities between Russia and Georgia earlier this month. Rail shipments of Caspian oil through Georgia have also been suspended due to Russian-inflicted damage to a Georgian rail bridge.
US, European and Georgian officials said yesterday that Russian troops remained in control of about one-third of Georgia, including the Black Sea port of Poti and the central city of Gori, in defiance of a French-mediated ceasefire agreement signed six days ago and numerous verbal warnings from Washington. Analysts agree that Russia has been testing the limits of US power and influence in the South Caucasus region and beyond, as Iran has been doing in the Gulf region, with disturbing implications for the global balance of power in two key oil producing regions of the world. Some suggest Russia's position as a major energy exporter combined with an economic boost from high oil prices have been key factors emboldening the country recently.
"It's very much the 'Great Game' out there right now. The whole area is volatile," said Simon Wardell, a senior analyst with the business intelligence firm Global Insight. "It just underlines that for Azerbaijan, Kazakhstan and Turkmenistan, the option they should take is one of diversification, because there's no single safe route for energy exports." Kazakhstan, at least, was already pursuing such a strategy. In a research report issued yesterday, Fitch, the bond rating agency, said KazTransGas, the national operator of gas pipelines in Kazakhstan, planned to spend more than US$8 billion (Dh29.2bn) to build three new pipelines, while its oil sector counterpart, KazTransOil, would invest $2bn in two new pipelines. The companies' plans included developing new export routes to China.
Neither Mr Wardell nor Ms Hardin believe Russia's recent actions in Georgia will deter Western oil companies from investing in Central Asian oil and gas projects. "The resources in the region are still attractive enough," Ms Hardin said. "Over a 30-year period, this type of risk looks less important." "Oil companies are desperately seeking new sources of oil, so they are willing to take those risks," Mr Wardell added.
For its part, the US may have to deal with increasing risk to its foreign policy as its Central Asian allies seek stronger commercial relationships with Iran and China. At the same time, Russia has been making moves to improve diplomatic and trade relations with Iran, the current arch-enemy of the US, and may be seeking to route its own oil and gas exports through Iran to the Gulf and India. In the context of long-running energy projects, "from a strictly commercial perspective, of course Russia is talking to Iran", Ms Hardin said.
tcarlisle@thenational.ae
