AFOE’s Edward Hugh offers a solid analysis of the current financial turmoil roiling Russian markets, that among other things debunks the idea that the invasion of Georgia was an essential cause — as opposed to a catalyzing event — of the capital flight in the invasion’s aftermath. In other words, absent other fundamental weaknesses and contributing factors, there’s no way of knowing whether globalized markets would have “punished” Russia’s muscle-flexing in the Caucasus.
While most of the loud arguments about the Russian invasion have framed it in terms of NATO enlargement and some sort of moral obligation to defend Georgia’s young democracy, the fact is that Russia’s message was more directly addressed to the Central Asian energy sources that are shaping up to be tomorrow’s geopolitical brass ring. Judging by the immediate fallout, that message has gotten through. Azerbaijan, a key stop on Dick Cheney’s post-invasion tour, just decided to reduce oil shipments to the EU in order to increase Russian and Iranian deliveries. The move had been a temporary reaction to the threat the Russia-Georgia conflict posed to the trans-Georgian pipeline, but has now been continued indefinitely to “spread risk.” (For more on just what those risks are, see this ISN piece.)
Azerbaijan’s predicament highlights the difficult balance the Central Asian energy producers need to strike between a desire to lean towards the West on the one hand, and the reality that the West’s tough talk and plans for future military integration did nothing to deter Russia from showing who has the military upper hand in the region now. That leaves the West with a tough choice of its own: push forward with the integration of Georgia, Ukraine and the Central Asian countries into the U.S.-NATO military sphere of influence (with or without membership for the former two), which means confronting Russia head-on at a time when Russia enjoys the tactical upper hand; or else develop a concerted energy security policy — whether NATO or EU — which means finding solutions that aren’t necessarily easy to come by, and for which the proposed ones (ie. Nabucco) are unraveling.
On the other hand, as Hugh’s analysis above makes clear, the other fundamental weaknesses and contributing factors to Russia’s economic turmoil — as well as the difficulty Russia’s military sector will have meeting the demands of its ramped up military procurement schedule — are significant enough to seriously weaken Russia’s longterm strategic position. Russia needs Western capital to upgrade its dilapidated energy infrastructure if it hopes to meet its energy commitments into the next decade. That’s one of the reasons it’s been so aggressive in trying to corner the market on the ‘Stans.
It’s also why an expert cited in the Reuters article on the difficulties facing an EU energy security policy made it clear that the EU’s dependency on Russian supplies is no greater than Russian dependency on EU demand. A conflict with Russia might ultimately be unavoidable. But there’s every reason to believe that Russia’s need to responsibly integrate the global order will become clearer to the leadership in Moscow with time, meaning our hand will only get stronger, and Russia’s steadier.