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Thursday, August 14, 2008

Russia Vs. Georgia: The Oil Angle

I am always annoyed by leftists and anti American types that attribute any U.S. geopolitical action to the phrase "it's all about oil". This view is so terribly simplistic that it would be laughable if the subject matter wasn't so important. Oil is the energy source that makes just about everything run. Of course, oil is considered in many geopolitical decisions. That said, assigning its importance to some nefarious consideration is not only wrong but slanderous.

It is rather ironic to watch the Russians force their way through their neighboring country of Georgia because the entire conflict is wrapped up in oil and most of the intentions are entirely nefarious. A couple days ago, I pointed out that in the view of Putin's main rival, Garry Kasparov, that Putin's entire geopolitical view is wrapped in the idea of constantly increasing the price of oil. In the last seven years, not only has Russia significantly increased their own exportation of oil but of course the price has exploded. As such, the country has seen an enormous increase in wealth. Here is how Powerline described Russia's potential nefarious motives in Georgia vis a vis oil.

News reports indicate that Russia may have tried to bomb the Baku-Tbilisi-Ceyhan pipeline, which runs through Georgia. If so, the bombs missed, and flow of oil through the pipeline was not interrupted. The BTC pipeline runs from the Caspian Sea to the Mediterranean coast of Turkey; note Russia to the north and Iran to the south:

The pipeline, in which British Petroleum is the lead partner, can carry up to one million barrels of oil per day. It is of considerable strategic significance, as it is the only means by which countries in the region like Azerbaijan can get their oil into the international market without relying on Russia. The Daily Mail writes:

It is crucial to the world’s volatile energy market and the only oil and gas route that bypasses Russia’s stranglehold on energy exports from the region.


As such, any disruption in this oil pipeline would have a tangible effect on the supply of oil and as such would satisfy Putin's motivation, as Kasparov sees it, in continuing to increase the price of oil.

Now, in my opinion, Europe is by nature not motivated to confront tyrants. Beyond that, oil gives them an extra motivation to capitulate to Russia. Here is how Investor's Business Daily explained it.

It's clear former President Vladimir Putin, not his handpicked successor Medvedev, is calling the shots. Putin's made no secret of the fact that he wants to depose Georgian President Mikheil Saakashvili and set up a pliant puppet regime, giving him de facto control of Georgia's oil pipeline — the main conduit to Europe from the oil-rich Caspian Sea that's not on Russian soil.

Why would Russia do this? As we note elsewhere on this page, roughly a quarter of Europe's energy comes from Russia. This tightens Putin's stranglehold on Europe's economy and gives him all the diplomatic leverage he needs.

If you don't believe this, look at the EU's weak response to the crisis in Georgia. It "brokered" a cease-fire that is essentially a total capitulation by Georgia to Russian demands. Appeasement is back.

In other words, Europe is now in the untennable position of being significantly reliant on a tyrant for a great deal of their energy sources. As such, this group that is feckle by nature becomes even more feckle for fear that their energy supplies will be cut off. There is even more though. The reality is that the entire Russian economy is nothing more than a house of cards built entirely on the back of oil prices that are artificially high due in large part to a significantly speculative oil market. As such, all of the power that Putin desperately is attempting to consolidate into his own hands will crumble once the bubble pops on the oil market.

What is playing out here, is the practical effect of allowing tyrants and despots to control a country's energy supply. Of course, on this matter, the U.S. is even worse. Here is how IBD put it.

Yet today, Americans get nearly 70% of their oil from overseas, making us vulnerable to blackmail by the likes of Saudi Arabia, Venezuela, Nigeria, Iran and now even Russia. Developing the full range of energy sources we have available may be the single most effective way of ensuring our nation's security.

It is absolutely amazing that we have as a nation been sleep walking through the last three plus decades and we have allowed ourselves to become totally dependent on a bunch of despots for nearly all of our energy supply. Above all else, the war between Georgia and Russia makes one thing clear above all else, domestic energy independence is the number one national security priority.

Every single day we allow Saudi Arabia, Venezuela, and Nigeria to supply us with most of our energy is another day that we continue to be in the same vulnerable position that Europe now finds itself in.

Imagine our geopolitical position if we didn't rely on Saudi Arabia so much for oil. Imagine what would happen to most of the despots of the world if the major democracies all made a serious effort to attain energy independence. T. Boone Pickens is right...energy independence is a matter of national security.

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