As his blog notes and this piece from the Globe and Mail concludes:
“…Georgia is a crucial transit point for oil and gas. Three major pipelines connecting energy sources in the Caucasus and Central Asia to European markets pass through its territory. One of these, the South Caucasus pipeline, is an important part of the plan for the Nabucco pipeline to Austria, which would deliver natural gas directly to the European Union, bypassing Russia entirely, if built. The Russian government, which controls Gazprom, the world’s largest gas company, has tried frantically to cajole its European customers into ignoring Nabucco and investing instead in its own new pipelines.
That arm-twisting has been unsuccessful in blocking the Nabucco plan, which has firm backing from the EU and could vastly reduce its dependence on Moscow for energy. But even if the result of the war in Georgia is not the overthrow of the Saakashvili government, it is likely to make pipeline investments there look very risky indeed. The outsized Russian response to Mr. Saakashvili’s provocation, which is beginning to look like a full-scale invasion, must be understood in this context.
To suggest that Russia would ignite a regional war for the sake of controlling energy supplies might seem fanciful, were it not for the extraordinary connections between the Kremlin and the energy industry, and the centrality of its operations to Russian policy.
Mr. Medvedev was the chairman of Gazprom’s board until late 2007. The current chair is also Russia’s deputy prime minister.
About a tenth of Russia’s tax revenue comes directly from Gazprom, which is one of the world’s largest corporations. The company also has a habit of cutting supplies to states with which the Kremlin has disagreements in the dead of winter, as it has to Georgia and Ukraine.
The stakes of the Georgian conflict for energy security, to say nothing of the suffering it has caused, make it imperative that the West find a way to respond, although it is not clear how.
European governments, dependent on Russian energy supplies, are wary of antagonizing Moscow by protesting too loudly. In Washington, meanwhile, one of the most unilaterally minded administrations in recent history can hardly expect that pieties about maintaining international order will be taken seriously by Russia. And a military intervention is, obviously, out of the question.
Aside from putting what little pressure it can on Russia to stop its operations in Georgia, the West’s only recourse may be to redouble its efforts to find new ways of getting energy to Europe in the medium term, and reducing oil and gas dependence in the long term.
In attacking Georgia, Russia has crossed a line. Rewarding its transgression by acceding to the Kremlin’s plans for an energy monopoly in Europe would encourage even worse behaviour in the future.”