"“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” "

Chinese premier Wen Jiabao 12th March 2009

""We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

Timothy Geithner US Secretary of the Treasury, previously President of the Federal Reserve Bank of New York.1/3/2009

Sunday, August 10, 2008

US / NATO / EU left to ponder over the consequences of Saakashvilli's blunder - the Russian Bear carries his gun and his hands on the gas + oil taps

It is extremely difficult to construct a coherent picture of events in the Caucasus and even harder to forecast the consequences both on the ground but on commodity pries, especially oil and gas.

The Russkis are calling for President Saakashvillis head. His short lived, and ineffectual attack on the tiny town of Tskhinvali, the capital of South Ossetia, reveals he truth of Tallleyrand's dictum: it was worse than a crime, it was a blunder.

1. It appears that 3 days after the deliberate "invasion" of Georgian forces into South Ossetia (which is by any international legal standards Georgian territory) there has been a declared withdrawal and ceasefire from 5 am local time, (EST +8 hrs)and something like a 90% ceasfire - ie Georgians are still shelling in Abkhazia and into Ossetia - firing at aircaft. TV coverage is very confusing as the location / date / forces are not identified.

2. The Russians are relentlessly pursuing military action on the ground and from the air. It seems (BBC) that a military airport near Tibiklis has been bombed and some reports talk of the International airport being bombed.

The Russians have sunk at least one missile coastal patrol boat , they say it ignored shots across it's bows - there are also credible reports of widespread damage at Poti and maybe the BT oil terminal at Supsa - it would be like shooting fish in a barrel as they have overwhelming air superiority.

There are reports , most likely exagerated of 7/8 Russian planes shot down. At least one Georgian plane has been shot down in Ossetia.

3. Some 20-25 thousand Ossetians who have been given Russian passports have fled north to Russia and many Georgians in ossetia have fled south - there have also been smaller scale movements in Abkhazia.

4. It seems most Western Embassies have told nationals to leave , there has been no information about flights out -- passengers reaching London etc.,Poland, a major US ally who are already members of NATO have called for an EU stabilisation force to be sent in.

5. There are no reports of consequential armed events in Nagorno Karabak, Armenia etc.,

6. There are no reports of damage to the BTC pipeline although Georgia has cklaimed it was bombed but missed. The Russians must surely know precisely where the pipeline lies - pumping stations etc. It s probably safe to assume that 1% of the world's oil supply has been held up for at least 4-6 weeks and maybe for 6 months.

7. Geneva conventions apply as this is an international conflict - looking after civilians etc., and Georgia is a member of the ICC. This is aproblem for lawyers way down the road. It is evident in Gori that civilian targets were hit

8. There is much talk but little evidence of any result of EU intervention , diplomacy. Zalmay Khalilzad (a Pushto speaking Afghani-American) the US representative at the UN has tabled a motion about Ruissia's "inappropriate behaviour" which in their diplomatic doublespeak isn't even a rap over the knuckles. Silence reins on the surface but anxious phone calls will be made and nails chewed in Downing Street. Quote is ""We have made it clear to the Russians that if the disproportionate and dangerous escalation on the Russian side continues, that this will have a significant long-term impact on US -Russian relations."

The Russian response has been dismissive ..Russia's UN ambassador Vitaly Churkin branded "completely unacceptable" US claims that the Russian military in Georgia has waged a campaign of "terror." "This is completely unacceptable, especially from the lips of a representative of a country whose action we are aware of in Iraq, Afghanistan and Serbia." (Trans. Kosovo)

The Russian Press talks of Georgian "genocide".

The timing for Putin et al is perfect, Bush wants no more adentures and the contenders don't want to, and haven't even mentioned Georgia.

Somebody in Sarkozy's office (everyone in France is on Vacances) said they should all stop fighting.

NATO's secretary general Jaap de Hoop repeated his call for an immediate cease-fire, he also expressed his concerns about the disproportionate use of force and lack of respect for the territorial integrity of Georgia."

The Ukrainian Foreign Ministry stated that the country reserved the right to forbid vessels of the Russian Black Sea Navy to return to their base in Ukraine’s Sevastopol.

A "Ukrainian official" said that Ukraine was not willing to become involved in the conflict. They also have had their gas cut off.

9. It can only mean markets will open lower and oil / gas prices will move up at least US$5 and maybe more for near month contracts.

10. Casualties / deaths are impossible to assess. Visually there a few dead and few injured but bad civilian residential damage. Much of the shelling / missile strikes / bombing seems haphazard.

The Russkis are calling for Saakashvillis head. His short lived, and ineffectual attack on the tiny town of Tskhinvali, the capital of South Ossetia reveals he truth of Tallleyrand's dictum: it was worse than a crime, it was a blunder.

Not an ideal man to unify the Georgians - but can Uncle Sam have his glove puppet changed or removed ?

Where will Georgia get their gas from this year ? - it was turned off before in December '06 afterwhich they agreed on doubling the price with Gazprom.

Monday papers
Daily Telegraph - Georgia: America admits it has few options for dealing with Russia-Georgia war
Independent Georgia bows to might of Russia
Times Retreat and terror in face of Russian Army (Exclusive ! ?)
Guradian Russia rejects ceasefire calls as Georgia withdraws
Daily Mail Russia tanks 'turned back' at Georgian border as refugees flee in panic byline "A Daily Mail reporter - shy war correspondent?

As we go to bed Oil is holding steady with no major movement at all.

Thanks to aangirfan for link to excellent backgrounder in Sunday Herald 'This is no longer about the future of a tiny far-away country but about the nature of the world order in the 21st century - Rob Parsons, former BBC Moscow correspondent

On Thursday night, Georgian forces launched a lightning attack that brushed aside Ossetian resistance within hours. By Friday afternoon, they had taken control of the Ossetian capital, Tskhinvali.

The Georgians have modernised and restructured their armed forces to bring them into line with Nato standards, and their special forces now serve regularly in Iraq and Afghanistan. They are well-trained and battle-hardened. But the Georgians miscalculated. They thought that if they moved quickly before the Russians could act, the international community would then act to ensure the conflict was contained.

The Russians were indeed caught off balance. Moscow had a tough choice: face the humiliation of accepting a fait accompli or incur the anger of the international community by effectively going to war against a Western ally.

With Putin at the helm, there was never really any question what the Russians would do - at least not once Russian peacekeepers died. The ferocity of the Russian response, though, has caught the West by surprise.

The ferocity of the Russian response, though, has caught the West by surprise....Why ? on't we have mebassies . military attaches, surveillance , intelligence - or is everyone on holiday ?

We must not forget 2 things - the recent exercises with US troops and the bombing / damage / cutting off of the BTC pipeline in Turkey.

Again the oil price remains fairly unmoved by all this. Latest 1230 EST US$116.31
Up US$ 1.11 Up 0.96%

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