To be fair, I'm still sorting out the causal reasons and contributions of the belligerent parties in the current war in South Ossetia. But it was a clever title for a serious topic. Right now the facts are still unclear enough that it's not wise to lay blame completely on any party.
Tensions between Russia and Georgia spiked when a Georgian drone was shot down by a Russian fighter, allegedly taking off from Abkhazia.
But why now? Why would Russia launch airstrikes and move into South Ossetia now?
A couple possibly related factors:
1. Foreign firms are presently finding it harder to do business in Russia
Foreign companies have found it increasingly frustrating to do business in Russia. In particular, the experiences of Mechel and BP suggest that foreign multinationals face the risk of nationalization or interference from the Kremlin on joint projects.
On July 24, Putin criticized Mechel's CEO and accused it of selling resources to Russia at higher prices than those charged to other countries. This caused the stock to plunge 38 percent.
TNK-BP, the joint partnership between energy multinational BP and Russian assets, also faced trouble that month. On July 6, BP sued its Russian partners (four billionaires) in the High Court of London for the equivalent of US$360 million over a tax claim lodged on June 30. The CEO has faced a lot of visa problems, and left Russia on July 25, claiming "harassment".
Some are drawing parallels between the fate of Mikhail Khodorkovsky and Yukos in 2003, but the circumstances concerning Mechel are a bit different. A war in Georgia could distract from issues internal to Russia.
Other than those two high-profile cases, I don't know what is going on internally in Russia right now. Someone who does should comment on whether or not there is a current power struggle going on between Putin and his allies and other Russian elites.
2. Oil is off 22% from its record highs in July.
The price of oil has fallen from a peak of $147.02 per barrel on July 11, 2008 to Friday's close at $115.20 on the NYMEX.
Georgia contains part of the Baku-Tbilisi-Ceyhan oil pipeline, which was expected by 2009 to transport approximately 1 million barrels of oil per day from Azerbaijan's Caspian Sea oil fields. Evidently Georgia is entitled to transit fees of about US $62.5 million per year (Wikipedia)
Georgia also contains part of the Baku-Supsa pipeline, which can transport up to 145,000 barrels per day (though current capacity may be lower). Apparently Russian strikes have attacked the port of Poti, close to the Supsa oil terminal.
The Baku-Novorrossiysk pipeline, which bypasses Georgia and runs from Azerbaijan to Russia, has stopped transporting oil as of February 2008 because fo disputes between Russia and Azerbaijan about natural gas supplies. (Wikipedia)
An attack/invasion of Georgia would have the near-term effect of increasing oil prices, with possibly the long-term effect of extending Russian influence over the Caspian oil fields. Interestingly, Georgia reports that approximately 30 Russian missiles or bombs were launched at the pipeline, but none had hit. If true, this might suggest a desire to highlight the threat of a shock to oil supplies while preserving the existing infrastructure.
Also note that BP is the largest shareholder (30.1%).
3. The Olympic Games
Opening ceremonies for the 2008 Olympics took place on Friday. The timing is odd, to say the least. It may be that someone decided that the Olympics would provide enough of a distraction to deflect attention away from an attack - hopefully delaying the international community's response long enough to make regime change - if that is the goal - a fait accompli.
Though it seems a bridge too far to say it's planned, at the very least, if there's an attack within China, it will seem miniscule by comparison to a full-blown war in South Ossetia/Abkhazia.
So what happens now? Vague predictions:
1. The price of oil jumps on Monday. Global oil consumption is about 80-85 million barrels per day. Right now, I can only guess as to the magnitude of the jump, though I plan on updating this post later with historical indications of what taking 1 million barrels per day off the global market might do.
2. Ukraine decides whether or not to provoke a Russian response by restricting portage of Russian naval vessels. It's already given some indications that this is a possibility, although there's nothing solid.
3. Stock markets around the world drop in response to the jump in oil.
4. The US will talk to the Czech Republic about using the withdrawal of the theater missile defense to be deployed in the CR as a bargaining chip to mitigate Russia's actions in Georgia, and to retain an agenda on Iran.
5. Someone mentions switching positions on Kosovo, causing another diplomatic incident (whether it's official or not).
Thoughts?
No comments:
Post a Comment