A simmering conflict is approaching its boiling point in the Caucasus, as Russia continues with its revisionist attitude in its ‘near-abroad’ unfazed and unabated in spite of the West’s backlash. On July 10, as Europeans were haggling over Greece and the U.S. was busy sealing the Iran deal, Russian-backed South Ossetian forces redrew the province’s borders unilaterally by moving the border posts deeper into Georgian territory. According to the European Union Monitoring Mission in Georgia, signposts were placed 985 feet farther south near the village of Orchosani, while next to Tsitelubani the South Ossetian territory was expanded by a whopping 3,330 feet. Villagers went to bed in Georgia, only to wake up in South Ossetia. Predictably, Moscow denied the charges.
With this latest land grab, the Russian-backed separatists managed to gain access to almost a mile of the BP-operated Baku-Supsa pipeline, which carries some 145,000 barrels of Caspian oil per day to the Black Sea. Perhaps more worryingly, the E60 highway that runs from Kyrgyzstan via Azerbaijan and Georgia all the way to the western tip of France is now just a stone’s throw away from the rebels in South Ossetia. Apart from being the primary Georgian road, linking the country’s east to its Black Sea shore, it also represents a key commercial highway. For example, during the 2008 Russian invasion of Georgia, the road played a key role in keeping the oil flowing from Azerbaijan to European markets. BP operates a second pipeline, the 1.2 million bpd Baku-Tbilisi-Ceyhan, which also runs along the E60.
This isn’t the first time pro-Russian forces have pushed back the border. In 2010, Georgia lost two more kilometers in the Akhalgori region to South Ossetia, while in 2013 the border shifted twice: in spring, five villages covering roughly 100 hectares were fenced in overnight, while in autumn, two further settlements were absorbed.
However, July’s expansion was a long time in the making and a strategically calculated move by the Kremlin. It is safe to assume that Russia is silently ramping up efforts to raise the white-red-and-blue in South Ossetia as it did in Crimea. In light of these plans, the “Treaty of Alliance and Integration,” drafted in December 2014 and signed in March between the Georgian separatists and Russia, effectively legalized Moscow’s takeover of South Ossetia. Furthermore, control over borders, finances, foreign policy, internal affairs, military matters, healthcare, monetary policy as well as the social policy of the 50,000 South Ossetians are to be transferred to Russia. Separatist leader Leonid Tibilov, coincidentally a former KGB official, hailed it as “the best possible guarantee of state security,” before delivering a parting shot to the West that they should mind their own business.
However, Russia’s game plan in Georgia may be more complex than it first appears. For instance, what if the South Ossetian land grab is part of a larger strategy to offset Moscow’s medium-term loss of influence in Ukraine and to strengthen the hold Gazprom has over the future of Europe’s energy security?
The Great Caspian Game
The real tale starts from Gazprom’s financial woes. The world’s largest gas company is expected to register a post-Soviet production low of 414 billion cubic meters for 2015, almost 20 percent less than forecasted in May. The company’s bottom line will take a 27 percent hit, a decrease that will then feed back into Russia’s budget revenues, where Gazprom accounts for 9 percent of total income. Coupled with a slowing Russian economy and declining demand in Europe, Moscow’s prospects as the EU’s main troublemaker look dim. The Kremlin will simply not stand for that. Without Europe and Kiev in its pocket, Moscow’s strategic weight on the international scene would be severely impaired.
On top of it all, Ukraine has been actively looking for alternative energy sources by turning to the former Soviet republics of Kazakhstan, Turkmenistan, and Uzbekistan. In the past, compliments of Ukrainian gas magnate Dmitry Firtash’s Russian and Turkmen business connections, Ukraine had the lowest gas prices in its history, almost three times lower than at the height of the Maidan protests. Firtash, however, has since fallen out of grace with the Poroshenko regime as part of Kiev’s purges, meaning Poroshenko is unlikely to call on him to help with what Ukraine’s Energy Minister recently called “transit problems” in transporting Central Asian gas. A quick look at a map shows that the pipeline network from all three countries goes to Europe through Russia – the sole alternatives would be to ship gas over the Caspian sea and then via Turkey (where Russia is already building a pipeline) or via Georgia’s pipelines.
Indeed, Georgia has taken multiple steps toward becoming a favored transit country for Central Asian gas. In anticipation of a rise of European demand for Caspian gas Georgia opened a pipeline terminal in the Black Sea port of Poti in November, with first deliveries expected in 2018. In the meantime, Ukraine even signed a memorandum of understanding with an American company that seeks to ship LNG from Georgia’s newfound 12.9 trillion cubic feet of prospective natural gas resources.
And so, the South Ossetian/Georgian land grab must therefore be framed against this familiar backdrop of Russia’s looking to secure its interests both in the Caucasus and within Europe. Even if few expect Russia to rekindle the 2008 war, simply destabilizing Tbilisi and taking steps towards integrating the separatist province into the Russian Federation are more than enough to dissuade both Western companies (such as BP) and Central Asian countries to commit to the billions needed to expand the capacity of existing Georgian pipelines. Europe’s dreams of tapping the massive Shah Deniz II field in the Caspian, and Ukraine’s hopes of getting cheap, non-Gazprom Turkmen gas are essentially scuttled if Russia expands its control over the Caucasus region. In a second stage, the hybrid war strategy deployed from South Ossetia could even be replicated in Abkhazia. Poti, Georgia’s emerging gas hub, is a mere 30 kilometers away from the separatist region and is highly dependent on access to the now threatened E60 highway. Moscow’s end game? Coaxing Europe into embracing its 63 bcm per year Turkish Stream pipeline.
The first signs are already visible. On July 31, Georgia bowed to Russian pressures and declined to back a new round of Western-backed sanctions against Moscow. So why is the West silent in the face of repeated Russian aggression in the shaky region? Offsetting Russia’s land grab in Georgia should be high on leaders’ agendas, because Europe’s energy security and its dreams of diversifying away from Russian gas would be rendered null if potential transit countries such as Georgia are abandoned.
Andrew is an EU affairs advisor for an international consulting firm.