UK risk firm gauges Russia-Georgia conflict scenarios

Eric Watkins
Senior Correspondent

LOS ANGELES, Aug. 11 -- There is a 20% probability that Russian military forces will target oil and gas pipelines during the current hostilities taking place in Georgia, one of several scenarios postulated by the London-based risk advisory service, Exclusive Analysis (EA).

The analyst, noting that Georgian President Mikheil Saakashvili has been pushing the territorial reintegration of Georgia's separatist regions since he came to power in 2004, said he also has been lobbying US and European Union interests in the Caucasus and in the wider Commonwealth of Independent States.

EA said Saakashvili focused on two primary areas in his lobbying efforts. First, he focused on Georgia's accession to the North Atlantic Treaty Organization and second, on Georgia's status as "a key ally for energy security through the construction of oil and gas pipelines that would weaken Russia's monopolist position as the main controller of energy supplies for Europe."

This two-prong lobbying effort, according to EA, has led to the "worsening" of Saakhasvili's personal relations with Russian Prime Minister Vladimir Putin, with the result that "there is a strong personal dislike between the two."

EA said Russia's ideal outcome would be the replacement of Saakashvili with a pro-Russian ally and the withdrawal of Georgia from the NATO accession process. The deeper implication is that Russia would then be in a position to control the flow of oil and gas through the region.

Scenarios
The analyst provided several scenarios and forecasts with a one-week outlook:

-- Scenario 1. A negotiated settlement leads to a ceasefire between Georgian and Russian forces. Probability: 60%.

-- Scenario 2a. Russia widens its target set to include strategic railways and roads in Georgia. Probability: 60%.

-- Scenario 2b. Russia widens its target set to include major transnational energy infrastructure (e.g., BTC oil pipeline, Baku-Tbilisi-Erzurum gas pipeline, Batumi oil terminal). Probability: 20%.

-- Scenario 3. Russian ground forces venture east from Abkhazia and seize more ground in the area of Gori. Probability 80%.

-- Scenario 4. South Ossetian and Abkhaz forces take independent action and launch attacks against key assets on Georgian territory. Probability: 55%.

-- Scenario 5a. The US engages militarily in support of Georgia. Probability: 10%.

-- Scenario 5b. NATO forces engage militarily in Georgia and South Ossetia in support of Georgian forces. Probability: 5%.

Regarding specific vulnerabilities of Georgia's oil and gas transport assets, EA noted that the BTC pipeline is buried 1-10 m underground, meaning that "pump stations would be the most likely Russian targets, of which two of the pipeline's eight stations are in Georgia."

Rails remain sound
The analyst also noted that railway lines have not been targeted and that rail cargos—including shipments of oil—to Georgian ports are reportedly operating as normal.

It said the main railway line from Azerbaijan extends through central Georgia, past Tbilisi and Gori, with branches running across to the ports at Poti and down to Batumi.

"We are not aware of any damage yet to railways, with latest information from Azerbaijani State Railways indicating that their oil cargos to Georgian ports are running uninterrupted," EA said.

However, it noted: "Poti port has already been targeted and other naval facilities as well as commercial ports along the Black Sea coast are at significant risk of attack and disruption."

It underscored the importance of Batumi as Georgia's main commercial port, saying it is both an oil terminal and seaport. The oil terminal was acquired by Kazakhstan's state oil firm KazMunaiGaz in February after they bought out the stakes of its other partners.

KMG exported 9.5 million tonnes of oil and products from the terminal in 2007, EA said. The Supsa terminal is the termination point for the Baku-Supsa Pipeline. The four storage tanks can hold as much as 160,000 cu m of oil.

The Kulevi oil terminal is owned by Azerbaijan's State Oil Co. of Azerbaijan Republic (SOCAR), which has suspended oil shipments since the current fighting began. At present, the capacity of the terminal is 9 million tonnes/year, including 2 million tonnes of oil, 3 million tonnes of diesel fuel, and 4 million tonnes of black oil.

While emphasizing the threat to oil and gas exports the analyst also noted that Georgia may suffer substantial reductions in its own sources of energy—especially gas that is supplied via "pipelines coming through Russia and/or owned by Russian companies."

Contact Eric Watkins at [email protected].