NATO, Russia, and Oil pipelines

by Steve Rosenthal

15 June 1999 16:23 UTC

(The following is from Stratfor.com. It presents detailed information about the relationship between NATO-Russian rivalry and competition for control of oil and pipelines in the Caspian region.)

Conflict Threatens Caucasus Pipelines June 15, 1999

SUMMARY

Competition between Russia and NATO for influence on Russia's periphery will undoubtedly accelerate following their confrontation in Kosovo. Besides the Baltics and Ukraine, competition between Russia and NATO is already fierce in the Caucasus. Increasing tension in this already unstable region may drive oil companies operating in Central Asia to look elsewhere for pipeline routes to move their oil. In particular, they are likely to look south, to Iran.

ANALYSIS

Besides Kosovo, the Baltics, and Ukraine, another area of heated contention between Russia and the West is in the Caucasus. There, Russia is increasingly cooperating militarily with Armenia and is believed to be cooperating politically with Abkhaz separatists, to counterbalance NATO influence in Azerbaijan and Georgia. Complicating matters, the wild card Chechnya is forging its own path with the aid of Middle Eastern interests. Caught in the middle are international oil companies, who are attempting to cash in on Central Asia's oil wealth.

The main pipelines for Central Asian oil -- the Baku-Novorossiysk pipeline and the Baku-Supsa pipeline -- pass through the Caucasus and are vulnerable to regional unrest. The older and larger Baku-Novorossiysk line was ruptured by an explosion early on June 14, apparently during an attempt by Chechen rebels to steal oil from the route. The pipeline has been illegally tapped in the past. Flow through the pipeline has also been halted repeatedly by the Chechen government, on the grounds that Russia has failed to pay fees for use of the portion of the pipeline that passes through Chechen territory.

The recently opened Baku-Supsa route, while touted as a safer route for avoiding the Chechen instability, also quite poignantly avoids Russia altogether -- undermining Russian influence on the region's oil and Russian revenue from that oil. The Baku-Supsa route was opened following military maneuvers training to defend the line by Ukrainian, Georgian, and Azeri troops, acting as part of the regional alliance then known as GUAM, and under the framework of NATO's Partnership for Peace. GUAM, which also included Moldova, expanded to include Uzbekistan during meetings in Washington DC, held concurrently with the NATO anniversary summit in April, and established a charter encompassing military cooperation within the group and with NATO. GUUAM members, though part of the Commonwealth of Independent States (CIS), have opted out of the CIS Collective Security Treaty.

Intensifying this increasing competition between Russia and NATO in the Caucasus, Azerbaijan claims that Russia brokered the sale of several Chinese surface to surface missile complexes to Armenia, which remains in a fragile truce with Azerbaijan over the contested Nagorno-Karabakh enclave. Russia has also provided Armenia with advanced jet fighters and surface to air missile systems. Reports have now surfaced, denied by Yerevan, that three of the Chinese missile systems are targeted at Georgia's Supsa oil terminal. On June 14, in the largest incident of its kind since the two countries signed a cease-fire five years ago, 300 Armenian troops reportedly attacked Azeri positions in the Terter region. Baku claims three Armenian assaults were repulsed with heavy losses.

As tension escalates in the Caucasus, NATO must again decide – now that it has put a toe in the pool, whether it intends to dive in. Oil companies may not be willing or able for the situation to be resolved. While the Baku-Supsa route was a Russia-skirting stopgap until the expensive and controversial U.S.-backed Baku-Ceyhan pipeline to Turkey could be built, neither route looks particularly secure now or in the future. As long as foreign access to the oil fields is not threatened, oil companies may now revive their interest in previously considered alternative pipeline routes. One of these, through western Afghanistan, has its own security concerns to contend with. But the other, and perhaps most rational route -- south through Iran -- is primarily blocked by U.S. political opposition. However, U.S.-Iranian relations have been gradually improving, and we expect to see U.S. oil companies with interests in Central Asia take another shot at accelerating U.S.-Iranian detente.