Prodromus

Moscow, with its recent attack on its former Georgian republic has caused concern across the world.  Russia is feeling strong, and is showing that it is no longer going to sit idly by as their former client states forge stronger relationships with the EU and the West.  This new found strength has been gained by becoming one of the world’s largest energy producers. The Russians now supply about 25 percent of the European Union’s crude oil needs and half of its natural gas.  But now Black Sea oil tankers that normally would be filling up with Baku crude, are anchored 15 miles offshore the Georgian port of Batumi, waiting for a cessation of hostilities.

Russia has demonstrated that its military is a force to reckon with, that it can defeat a Western-trained force, and that the West and NATO will not act to intervene.  Like during the Cold War, the West has limited ability to blunt Russia’s military agression.  Both sides know that an armed conflict between NATO and Russia is never going to happen.

After the fall of Communism, both Washington and the EU invested heavily in Russian energy production.  The result has been a network of oil and natural gas pipelines, ports, and tankers that can feed a million barrels a day to the world market. Washington has helped to expand and link that network directly to Europe, where Russia is currently the dominant supplier.  The multi-billion-dollar Baku-Tbilisi-Ceyhan pipeline that runs across Georgia is run by an international consortium, including American oil-giants Chevron and Conoco-Phillips.

Now, US taxpayers are about to get a double whammy.  Two government agencies, the Export-Import Bank (Ex-Im) and the Overseas Private Investment Corporation (OPIC), have made large investments in the Baku-Tbilisi-Ceyhan pipeline, lending money to private companies involved in the construction of the pipeline. Ex-Im Bank gave $160 million in loans, and OPIC has provided $100 million in “political risk insurance”.  If the pipeline is damaged or destroyed, these companies will be forced to write off these loans, and US taxpayers will be left to pickup the pieces.  That is a potential quarter of a Billion dollar bill that may come due soon.