An Oil Crossroad in the Cross Hairs

August 15, 2008

The current fighting in Georgia brings out many ghosts of the past. Gori, an obscure town on the major east-west highway across Georgia that came under Russian attack this week, was previously known mostly as the birthplace of one Joseph Stalin. And it is Stalin’s deliberately complex borders for the republics of the Soviet Union that is the putative cause of this conflict.

A little-known fact is that Stalin started his political career by organizing the oil workers of Baku in Azerbaijan on the Caspian, which supplied half of the world’s oil at the turn of the twentieth century, and in the Georgian Black Sea oil port of Batumi, through which the oil was transited to Europe. This history, however, was not lost on two wily veterans of Soviet politics: Georgian Eduard Shevardnadze, a former foreign minister of the Soviet Union, and the Azerbaijan leader, Heydar Aliyev, a Soviet-era deputy prime minister and Politburo member.

When their native lands had independence thrust on them with the collapse of the Soviet Union, they ended up as presidents of newly independent Georgia and Azerbaijan after rather circuitous routes. Oil is the one means by which these two countries can hope to establish and maintain their political and economic independence.

The Soviets woefully mismanaged and exhausted Azerbaijan’s oil resources. When world-class offshore oilfields were discovered, they were left unexploited because the Soviets lacked technical expertise and capital. Western oil companies were eager to develop these fields for production. But Azerbaijan is landlocked on an inland sea, and all existing pipelines pointed north to Russia. This is where Georgia, Azerbaijan’s Caucasus neighbor, came in. In order for the Caspian region to again become a source of oil supply to world markets, Georgia had to resume its traditional role as a transit corridor. [...]