The attacks are a direct assault on Russian President Vladimir Putin, former KGB operative. The Lubyanka bombing is highly symbolic, as it is the subway stop for the employees of the KGB's successor organization, the FSB, a two-minute walk from Red Square. London Royal United Services Institute analyst Jonathan Eyal observed, "This is a direct affront to Vladimir Putin, whose entire rise to power was built on his pledge to crush the enemies of Russia ... It's an affront to his muscular image."
Few today remember that Putin's first job when appointed prime minister on Aug. 9, 1999 by Russian President Boris Yeltsin was to build an oil pipeline bypassing Chechyna, as Transneft, Russia's pipeline monopoly, controlled the Baku-Novorossiisk line, the sole export route for Azerbaijani "early" oil exports, which crossed 95 miles of Chechen territory, a region which had been at war with the Kremlin since 1994.
Work began on the bypass line on Oct. 26. The conflict combined with other issues reduced Azeri exports via Baku-Novorossiisk in early 2000 to an average of only 10,000 barrels per day (bpd). In April 2000 construction finished on the $140 million, 204-mile Baku-Novorossiisk bypass via Dagestan to Tikhoretsk. The bypass had a potential capacity of 120,000 bpd, but by then Azerbaijan already had other plans, having worked with neighboring Georgia to develop an alternative pipeline route to Georgia's Black Sea port of Supsa, completely outside of Russian control. When Yeltsin resigned on Dec. 31, 1999 Putin became acting president and has continued to lead the Russian state ever since, initially as president and since 2008 as prime minister.
Putin has made it a centerpiece of his policy to resolve Chechnya for once and for all, but as the Moscow bombings so, eleven years after his accession to power, Chechnya continues to roil Russia.
But oil greased the equation from the outset. The post-Soviet development of the Caspian's vast reserve of oil and natural gas quickly became Russia's fixation, with an ever increasing importance as the rest of the post-Soviet economy withered. Energy was the one export that the Russian Federation could still produce that was guaranteed an international market, and its importance has only risen with time.
In May 2007 the US Energy Information Administration projected that by 2015 Caspian basin energy production could reach 4.3 million bpd, concluding that in addition to the region's proven reserves of 17 billion-49 billion barrels, comparable to Qatar at the lower estimate and Libya on the high end, the region could contain an additional hydrocarbon reserves up to 235 billion barrels of oil, roughly equivalent to a quarter of the Middle East's total proven reserves. Nor is oil the only energy deposit there. The Caspian's potential natural gas reserves are as large as the region's proven gas reserves and could yield another potential 328 trillion cubic feet of gas.
Russia was determined to hang on to as much of this largesse as possible. An independent Chechnya could not only lead to a loss of revenue from the republic's modest oil production (of such quality that Chechen oil was used to light lamps in the Vatican) and ruin plans to extract transit fees for Azeri "early oil," but lead to a significant potential loss of Caspian reserves once the sea's waters and seabed were divided.
The demise of the USSR opened up a can of worms over the Caspian's legal status, however. The Caspian is the world's largest inland body of water, with a surface area of 143,000 square miles, its status regulated under the USSR-Persia Treaty of Feb. 26, 1921 and the March 25, 1940 USSR-Iran Treaty. In place of the USSR and Iran there were now five Caspian littoral states - Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan and wrangling began immediately over the Caspian's division. The 1982 UN Convention on the Law of the Sea (UNCLOS) defines the Caspian as "a special inner sea."
Two opposing positions quickly developed - Russia insisted that the Caspian's waters and seabed should be divided according to coastal length, while Iran held out for an equitable 20 percent division for each of the five littoral states. Under the Russian formula, Azerbaijan, with 259.1 miles of coastline, would receive 15.2 percent of the Caspian's waters and seabed, Iran with 319.1 miles of coast - 18.7 percent. Kazakhstan, with 526.4 miles of coastline, would receive the largest share, 30.8 percent of the Caspian, leaving Russia with its 315 miles of shore 18.5 percent of the Caspian and Turkmenistan's 285.4 miles of coast giving it a 16.8 percent share. Azerbaijan and Kazakhstan soon supported the Kremlin's stance, while Turkmenistan under its mercurial, megalomaniacal leader Sapamurat Niyazov wavered between Moscow and Tehran.
The two Chechen wars threatened to tear Moscow's proposal apart.
Much had changed in the interim, including US penetration of Azerbaijan's and Kazakhstan's energy sectors. As reported by EC-TACIS, for the period 1994-1999 the main sources of foreign direct investment in Azerbaijan were the United States with 28 percent, followed by Britain with 15 percent. FDI in Azerbaijan exploded from only $30 million in 1994 to $827 million in 1999, about 17 percent of Azerbaijan's GDP, with approximately 90 percent of FDI concentrated in the country's hydrocarbons sector, while Kazakhstan FDI accounted for $1.6 billion in the same period. Russia was clearly losing the battle to develop Caspian energy, and an independent Chechen-Dagestani state would make Moscow's position untenable and hence had to be stopped at any cost.
In the wake of the Moscow Metro bombings President Dmitri Medvedev pledged to step up security in Moscow and intensify security in the turbulent northern Caucasus. Russia will not leave the northern Caucasus because of the Caspian's future oil prospects.
Courtesy: OilPrice.com
