BERLIN – Russia’s invasion of Georgian territory last week, in addition to a reconfirmation of Moscow’s military strength, is complicated Europe’s efforts to diversify its oil and gas supplies away from the growing dominance of the Kremlin-controlled energy giant Gazprom.

In the post-Soviet era, and especially since 9 / 11, Central Asia has become a central focus for the western countries in search of more secure energy sources.

But this week the offensive, while British Petroleum shut down an oil pipeline and temporarily stopped pumping gas through Georgia, was wondering about the plans for a Eurasian corridor free of Russian influence.

“The Caspian region wonders what this means for the future,” said Giorgi Vashakmadze, an energy executive in Georgia. “Russia is showing that controls this corridor.”

The Russian-Georgian conflict is the latest in a series of setbacks for Europe’s planned Nabucco pipeline – the best hope of weaning itself from Gazprom, which set off alarm bells by cutting vital supply of gas to the continent in the winters of 2006 and 2008.

Hype around Nabucco has grown more measured in recent months over concerns about the volume of available gas reserves.

Elimination of constructing a gas pipeline under the Caspian Sea, the only way for Europe to gas from the region to use pipelines from both Russia or Iran, as Nabucco may have to do.

The European gas demand is expected to more than 50 per cent in 2025, according to the U.S. Department of Energy.

“There is not enough gas in the region,” says Fariborz Ghadar, an energy specialist and director of the Penn State Center for Global Business Studies. “The Nabucco pipeline now depends not only on gas from the Caucasus and from the east of the Caspian Sea, but also from Iran.”

That prospect is unacceptable for the U.S., which is still pressure on Iran over its nuclear ambitions. The Ministry of Foreign Affairs this week told Turkey, which is hosting Iranian President Mahmoud Ahmadinejad that it would increase its aid – seen as politically important – for Nabucco pipeline as the Iranian gas pumps.

Europeans, that the harp more about the involvement of Russia, already a Europe with 20 to 40 percent of its gas. Gazprom is expected to feed Nabucco through its Blue Stream pipeline, which would meet in Turkey, and the company already owns 50 percent of a stake in the Austrian Baumgarten gas hub, where Nabucco would eventually end.

“This goes against the whole concept of Nabucco, that it would not be either Russian or Russian-controlled gas,” says Zeyno Baran, an energy and Central Asia expert at the conservative Hudson Institute in Washington.

Nabucco is expected to be online in 2013, gas pumping stations along a 2050-mile route from Georgia to Austria, which then distribute the gas across Europe. But the six-year-old project has been mired in setbacks this year.

In January, Bulgaria and Hungary its first inked a deal to support Gazprom the South Stream pipeline, which run parallel to Nabucco. In February, the six members of European energy companies Nabucco consortium overseeing the construction reduced pioneering a year, until 2010, citing environmental study delays. In May, they announced that the pipeline’s cost had risen nearly 60 percent, mainly as a result of rising steel prices. And so far, Nabucco has received only one offer, from Bulgaria, but only for 1 billion cubic meters (bcm) of Nabucco is expected to be 35 billion cubic meters capacity.

The frankness with which Nabucco authorities are now talking about involvement of Russia as a supplier, represents a shift from politics to the pragmatic.

“Nabucco was not planned determined to be an anti-Russian project, but rather to a pro-European project,” says Christian Dolezel, a spokesman for Nabucco. “The main focus is to transport gas from alternative sources.”

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The Russian invasion of neighboring Georgia has raised doubts about the safety of the oil and gas pipelines that cross by the former Soviet republic and the wisdom of further investment in the transport sector.

The foray also an emphatic stamp on the growing Russian influence on the region’s natural resources and, by proxy, anywhere in Europe.

The pipeline, supply of about 1% of the global daily oil needs, have not been damaged by the fighting, but the prospect of such part-owner pipeline led BP to shut down one of the oil lines as a precaution Tuesday. A second oil export line from the Commission since last week as a result of a fire in Turkey.

“The Russians have shown their military capacity of getting very close to the pipeline,” said Edward Chow, an energy expert at Washington’s Center for Strategic and International Studies. “And it also has the Black Sea fleet the Georgian coast, so they also have shown that they can at any time they want to blockade Georgia.”

The pipeline started in Azerbaijan and Georgian territory en route to ports on the Black Sea and the Mediterranean Sea, where tankers usually the crude to Western Europe.

Chow concern about whether the transit routes through Georgia remains safe in the long term and whether the additional foreign investment would be secure. Russia is an energy giant on two continents by the state-controlled Gazprom, the largest company.

Gazprom produces 85% of the nation’s natural gas, controls 17% of global reserves and is a major supplier to the countries of Central Asia and Europe.

The former chairman, Dmitry Medvedev, was elected president of Russia in March.

For the Europeans and others, the routes through Georgia are a vital counterbalance against Russian control over the pipelines and energy sources. Some hoped extension of projects in Georgia may be quite apart from Russia grip on European energy supply.

Those projects were not far addition, Chow said, but in the light of the actions of Russia, “investors should reconsider how attractive these projects.”

James L. Williams, publisher of the newsletter Energy Economist, is blunt about the possible consequences.

“For Russia, Georgia and the control of the pipeline would restore a large part of its influence on many of the former satellites of the USSR,” he said. “It would clearly be in favor of the increase in Russian energy chokehold on Europe.”

Amy Myers Jaffe, an energy fellow at Rice University’s Baker Institute, believes that an assertive Russia flush with oil and natural gas in revenue can exercise its power through a limitation of resources is crucial. “When the Russians trying to go of their power, energy is the most important lever in their efforts to do this,” she said.

However, political and economic analyst Natalia Leshchenko of consultancy Global Insight believes that the pipeline has been overblown.

“The Georgian president has been through pipeline issue is likely to send more worries to the West, and especially to European consumers to pay more attention to the conflict,” she said. “It’s not that we ignore it, but it is certainly no reason to panic.”

Until now, energy markets have shrugged off the risk. The cost of oil fell again Tuesday, dipping $ 1.44 to $ 113.01 per barrel on the New York Mercantile Exchange. The closing price was more than $ 34 lower than the peak on July 11.

The most prominent among the existing pipelines is the 1000-mile Baku-Tbilisi-Ceyhan line, which can carry up to 1 million barrels of crude oil per day from the Azerbaijani coast of the Caspian Sea, through Georgia and Turkey to the port of Ceyhan on the Mediterranean Sea.

The BTC is owned by a consortium of companies. It was expected that the transport of more than 900000 barrels of oil per day this month for exports, bypassing the routes that would have taken the oil through Russia and subject to that country payments.

Deliveries through the BTC pipeline were halted on August 4 after a fire along the Turkish part of the route. One Turkish separatist group claimed responsibility for the incident.

BP also shut down a smaller line, the Western Route Export Pipeline, which has recently been revised. It can carry up to 160000 barrels of oil per day from Baku on the Caspian Sea in Azerbaijan to the Georgian Black Sea port of Supsa.

Also as a precaution, BP also shut down the South Caucasus gas pipeline, carrying gas from Baku through Georgia to Turkey. That gas is not implemented.

Credit : elizabeth.douglass @latimes.com and map pic : latimes.com

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