Energy Cold War in the London Times

From The Times

September 8, 2008

How the West is losing the energy cold war

Russia's victory in Georgia is having far-reaching effects as its neighbours rethink the wisdom of selling gas and oil to Europe


Picture yourself as the autocratic leader of a small-ish former Soviet republic, bubbling with oil and gas and keen to sell it. But where? One route is old, cheap and easy. It leads north, to Russia. But memories of the Kremlin's imperial embrace are still fresh. The other is new, costly and tricky. It goes west, in both senses - via your neighbour, Georgia, and to supply Western customers direct.

Azerbaijan, a country of 8 million people on the Caspian Sea, plumped for the western route. After all, America was the strongest country in the world and Russia - back in the 1990s - was weak. So Azerbaijan supported the building of a $4 billion, 1,000-mile-long, million-barrels-a-day oil pipeline from Baku, its capital, via Tbilisi, in Georgia, to Ceyhan, a port on Turkey's southern coast. BTC, as it is known, is the only oil pipeline from the former Soviet Union not controlled by the Kremlin.

Azerbaijan also supported the Baku-Tbilisi-Erzurum gas pipeline into eastern Turkey. Europe, with US backing, wants to extend it all the way to Austria. That project is named Nabucco - an operatic touch that underlines its importance in saving Europe from energy slavery.

Now not only is that plan in tatters but much else besides. As the shock waves from Russia's dismemberment of Georgia echo across the region, Western interests are toppling like dominos. Almost unnoticed in Britain, Dick Cheney, the US Vice-President, paid a near-disastrous visit to Azerbaijan last week. Its President, Ilham Aliyev, inflicted a series of public snubs, including phoning the Russian President, Dmitri Medvedev, the moment that a meeting with Mr Cheney finished. A disgruntled Mr Cheney apparently then failed to appear at an official banquet. Azerbaijan seems to be ruling out supplying gas to Nabucco.

The reason is simple - Mr Aliyev does not want his country to suffer Georgia's fate. It all too easily could. Like Georgia, Azerbaijan is not shielded by Nato. Talks on a US military presence have got nowhere. Relations with the EU are dormant, not helped by rigged elections and bullying of the opposition. Russia has been stirring up the Lezgin ethnic minority, whose homeland straddles the border between Russia and Azerbaijan. Mr Aliyev, an instinctive fence-sitter, has been talking nicely to Russia's energy giant Gazprom. It has offered to buy his country's entire gas exports - at world prices.

Just across the Caspian Sea, Kazakhstan and Uzbekistan have stitched up a deal to build a new gas export pipeline north to Russia. That further kiboshes Western hopes of finding gas from Central Asia to fill Nabucco, which is threatened by the rival South Stream project across the Black Sea, promoted by Russia.

It gets worse. Even Turkey, the linchpin of Western security planning in the region, is wobbling. It depends on a Russian pipeline across the Black Sea for most of its gas. The Kremlin has been assiduously cultivating Ankara, just as the EU has been giving it the cold shoulder. The sight of a semi-independent Kurdistan emerging as the result of the US invasion of Iraq has chilled relations further.

Iran is the other beneficiary of Georgia's defeat. If the westward route is blocked, the choice for Central Asia and the Caucasus is to deal either with the mullahs of Tehran or with the former KGB men in Moscow. Neither offers much comfort to the West. Iran has said that it will block a gas pipeline across the Caspian - a vital link in the Nabucco project.

It may seem hard to get worked up about this in Britain. But if energy supplies to the rest of Europe are under Russia's thumb, Britain's security is deeply compromised. The absurdity is that Europe should be laying down terms to Russia. Not only is the EU the Kremlin's largest customer, Europe's economy is more than ten times larger than Russia's, its population more than three times bigger. The magnet of European integration has brought peace to the western Balkans: if it is a choice between snuggling up to Russia or getting on track to join the EU, countries such as Serbia choose West over East. The same is happening, tantalisingly, in Belarus, where the autocratic leader Alexander Lukashenko is desperately flirting with Europe in the hope of staving off the day when his country is swallowed up in a new Russian-run superstate. Belarus has released all its political prisoners and is hoping that the EU will now relax sanctions.

The West used to be deluded about the former KGB regime in Russia. Belatedly it has shed its illusions. But it is still fatally divided and distracted. Germany and Italy prize their economic ties with Russia far above the interests of nominal allies in Eastern Europe and the former Soviet Union. British Eurosceptics react with garlic and silver bullets when a common European foreign policy is discussed. America is far away, bogged down in two other wars. It is not going to fight harder for Europe than Europe itself will do. Russia knows this, and believes it has a green light to push ahead. Turn down the heating: this is going to be a long winter.