George has Georgia on his mind and Vladimir standing on his toes

The Caspian is seing an intricate game of oil /gas warfare, NATO brink statesmanship, Turkish ambitions for the EU and US dislike of Iran, helping Georgia out of a hole in this winter's energy supplies caused by Russian state owned Gazprom guided by the bad boy on the block Vlad Putin.

Azerbaijan's President Ilham Aliyev (another ex Communist dynastic Dictator President, playboy who followed his father in 2003) visited both Brussels and Moscow last month. In Brussels he wanted to get help from the European Union to develop and deliver energy supplies from the Caspian basin to the EU .

In Moscow he played a dangerous game by showing he was unwilling to help Moscow freeze out Georgia from Russian Gas this winter. Don't be surprised if he ends up with Baloneyium in his breakfast.

The Empire Strikes back

From 1/1/07 , Sergei Kupryanov of state owned Russian gas giant, Gazprom told Azerbaijan last Wednesday 6th December (Interfax) that exports willl be cut from 4.5 billion cubic meters in 2006 to 1.5 Bn.c.m and simultaneously double the cost the "European price " of approx US $200 and US $230 per 1,000 cubic meters.

1/1/07 will be a busy day because Gazprom are also scheduled to cut gas supplies to Georgia if they don't agree to pay this "European price" - this threat is also tied in with the Gazprom offer of US$250 MN to purchase the Georgian network and pipeline systems - and the refusal to allow Gazprom to buy the ageing, bankrupt Tbilgazi. Currently Georgia gets about 1.5 billion cubic metres from Gazprom of which 400-450 million cubic metres are imported by the Russian gas company Itera.

Armenia, a much more Russo-centric state (so far) will continue to pay the old US$110 per 1.000 c.m - they still have problems with Georgia over the unending duispoutes in the Nagorno - Karabakh region,

There are three objectives in this policy by Russia

1. To show how Moscow is not frightened to exercise it's economic muscle usinf energy supply and cost as a lever.

2. To prevent Azerbaijan from diverting gas to Georgia.

3. To release supplies to be available for Europe as growing supply commitments are hit by stagnant extraction levels in Russia.

To fuck with the Baku boys even further Alexsandra Chubais' Unified Energy Systems (RAO/UES) said in November it would cut electricity supplies from 300 MW per day in 2006 by 80%, again on 1/1/07.

All this will force Azerbaijan back to use domestic oil and gas supplies, whilst gas should not be a problem they will struggle to meet electricity demand and heating requirements, especially if it is a hard winter - the newly developed giant Shah Deniz offshore field may also not be producing as hoped this winter. This is scheduled to begin in September 2006 for transport to Turkey in the Baku-Tbilisi-Erzurum - with some being fed into Georgia via Tblisis, but construction has hit problems and agreements with Turkey remain to be concluded so nothing has moved yet. To get the deal done, Turkey, a U.S. ally and member of NATO, will have to forgo gas it already has signed to buy, which would allow Georgia to buy it instead.(See below, penultimate para)

The Shah Deniz field is a consortium of British Petroleum ( technical) operator and Norway's Statoil ( commercial) operator, each with 25.5% Azerbaijan's State Oil Company, Total of France, National Iranian Oil Company (NIOC) (this share is shipped as gas to Georgia), with 10% each; a partnership of Agit Alekperov's LUKoil and Italy's Agip with 10% , and Turkish Petroleum = 9%.

Iranian gas could reach Georgia through Azerbaijan’s recently refurbished but small-capacity Astara-Gazi Mahomed-Gazakh pipeline - it will provide relief but nothing more (and is not welcomed by the US) . This line was revived after the mysterious and unexplained bomb blasts in Russia's North Caucasus that sabotaged 2 pipelines carying Russian gas late January this year. This "Iranian" gas will actually be from Turkmenistan which hits the Iran border at a reported US$66 per 1,000 c.m. and for which georgia will be happy to pay US$110 per 1,000 c.m.

The US Ambassador recently made it clear to the Georgian government that it would not be acceptable for the US if Georgia were to form a longterm strategy for energy cooperation with Iran.

President Aliyev characterised these moves against Baku by Moscow as "exorbitant and unjustificable" and is prepared to hit back by cutting northward (Russia) bound crude oil through the Baku-Novorossiysk pipeline (projected 5 Mn tons in2007), use some internally and send the rest southwards in the Baku-Ceyhan pipeline (which is expected to double capacity with a parallel pipeline soon).

The US throws it's hat into the ring... again

Matthew Bryza, is the deputy assistant secretary of state, quaintly titled the "coordinator of U.S. energy policy in the Caspian and Black seas area" and is with Georgian Prime Minister Zurab Nogaideli in Washington to discuss post New year's Day gas supplies , "political blackmail" he characterises it, and their wish to join NATO.(Georgia - 1/7th the size of California with 5Mn population. GDP per head US$2000)

The United States doesn't like Georgia's negotiations with Iran, but says Bryza, any deal is simply a "stop gap" (Oh yeah ?). If they have no alternative, and Iran comes offering, even if we told the Georgians, 'Well, we would prefer you simply freeze this winter - I'm not sure how much weight that would carry," said Bryza.

Meanwhile yesterday in simultaneous meetings whilst the US leant on President Nogaideli in Washington, in Tblisi, after an 8 hour closed session, the three energy ministers of Turkey, Azerbaijan and Georgia (with some help from Us educated running back for Unlce Sam,President Mikheil Saakashvili ) agreed that Turkey would surrender their (9% share) of which 2.8 billion cubic metres of gas it receives from the Shah Deniz project of which Georgia should receive 1.5 billion cubic metres of gas - no transfer prices have been made public.

For some background on US / Russian intervention over energy supplies to Georgia go here. 24/11/03 Georgia, Velvet Underground in Overdrive" more about the Georgians keeping their cool here.

"When the rest of the world recognizes how thinly spread the US military is, thinly spread physically, and economically, because it is not a sustainable institution in its current incarnation, rebellions will occur. Indeed they have already started. The response of the weakening US will be to lash out, often with unforeseeable consequences, just as the consequences of this impending invasion are unforeseeable, and unknown."