WASHINGTON, Aug. 14 (UPI) -- As diplomats pat themselves on the back for halting the bloodshed in South Ossetia and military analysts avidly focus on the confrontation between Georgia and Russia, its wider economic implications are slowly emerging. The biggest casualty of the showdown has been the West's naive belief that Georgia provides a secure alternative energy corridor that avoids either Russia or charter "axis of evil" member Iran. Over the last decade Western energy firms have pumped $5 billion into developing Georgia's Batumi, Poti and Kulevi Black Sea ports, along with the Baku-Supsa oil pipeline and the South Caucasus natural gas pipeline, but Western investment's crown jewel is the $3.6 billion, 1,092-mile, 1 million barrel per day Baku-Tbilisi-Ceyhan oil pipeline, which began operation in May 2006.
All the facilities primarily transmitted Azeri hydrocarbons, but rising Caspian petro-state Kazakhstan, which currently exports the majority of its oil via Russian-dominated Transneft pipelines to the Russian Black Sea port of Novorossiisk, for the last several years expressed increasing interest in utilizing Baku as a terminus for exporting increasing volumes of its crude westward via Georgia to Western markets and developed a Caspian tanker fleet to ship Kazakh crude for offloading in Baku. For years Baku, Azerbaijan's capital, has been urging Kazakhstan to use BTC, but further Kazakh interest in exploring Azeri-Georgian transport alternatives may well prove to be one of the most enduring legacies of Georgian President Mikheil Saakashvili's South Ossetian military misadventure.
For the Kazakh government, diversity in export options is integral to developing the country's rising energy industry, a vision that dovetailed nicely with Washington's post-Soviet image for the Caspian region, best summed up in a bumper sticker frequently seen several years ago on gas-guzzlers inside the Beltway, "Happiness is multiple pipelines."
In August 2005 a subsidiary of Kazakhstan's state-owned oil and gas company KazMunayGas, the Kazmortransflot merchant marine, took possession of its first tanker for Caspian service, the $18.75 million Astana, designed by the Vympel Ship-Design Company in the Russian city of Nizhni Novgorod and built at Russia's Vyborg Shipyard in Leningrad Oblast. The Astana since has been joined by sister ships Aktay, Abaj, Kazakhstan and Almaty. The tankers sail from Kazakhstan's Caspian Aktau port to Makhachkala, the capital of the Russian republic of Dagestan, and to Baku, carrying oil from Kazakhstan's Tengiz and Buzachi fields, making seven to eight voyages per month.
Besides oil exports, Astana began to acquire export assets as well, and in February KazMunayGas bought Georgia's Batumi oil terminal. A mere six months later, on Aug. 10, Rovnag Abdullayev, head of the State Oil Co. of Azerbaijan Republic, said that because of the fighting, Batumi port authorities suspended the facility's seaborne 200,000 bpd shipments, which are supplied by rail.
Bowing to reality, the next day Kazakh Prime Minister Karim Massimov directed KazMunayGas officials for the moment to divert the country's maritime Baku-bound oil exports to internal consumers while KazMunayGas President Serik Burkitbayev told reporters, "In line with an order issued by the military administration, we took out of the port all our dry cargo vessels and tankers, which have been filled with oil. By this morning we filled up an oil tanker, but right now, all tankers have been taken out (of the port) and we are sending oil to storage." The decision is hardly minor, as, according to Burkitbayev, the port now handles nearly a million tons of crude oil a year.
Perhaps it is mere coincidence, but on Aug. 14 Stroitransgaz Engineering's Krasnye Barrikady ("Red Barricades") shipyard in Russia's Volga delta town of Astrakhan announced it had established a joint venture with Singapore's Keppel shipyards, whose website boasts, "We are the world leader in FPSO (Floating, Production, Storage and Offloading vessels) and FSO (Floating, Storage and Offloading units, simplified FPSOs without oil or gas processing facilities) conversions, having completed the most number of such projects since 1981. Today we are also recognized as the leading LNG (liquefied natural gas) repair yard in Asia outside of Japan with our fast-growing track record in LNG carriers."
The announcement follows meetings between Krasnye Barrikady and Keppel officials with Astrakhan Oblast Governor Aleksandr Zhilkin, who approved the joint venture, which will supply equipment for developing northern Caspian undersea natural gas and oil fields. According to Russian media reports, Keppel will also participate in a LUKoil tender next month to provide about 20 rigs and tankers for the massive Vladimir Filanovskii oil-gas condensate field in Russia's Caspian sector, discovered in 2005 and expected to begin production in 2012.
After Georgia's disastrous South Ossetian military misadventure, anyone want to guess whom Astana will consider in the future as a transit partner for its rising oil exports? On Aug. 13 Kazakhstan sent humanitarian aid to the conflict zone, which is most likely all Tbilisi is likely to get for the foreseeable future. As for Batumi's future, what is Kazakh for "fire sale"?