http://www.nytimes.com/2008/08/14/world/europe/14oil.html?ref=europe

A bumper sticker that American diplomats distributed around Central Asia
in the 1990s as the United States was working hard to make friends there
summed up Washington's strategic thinking: "Happiness is multiple
pipelines."

August 14, 2008
Conflict Narrows Oil Options for West
By JAD MOUAWAD

When the main pipeline that carries oil through Georgia was completed in
2005, it was hailed as a major success in the United States policy to
diversify its energy supply. Not only did the pipeline transport oil
produced in Central Asia, helping move the West away from its dependence
on the Middle East, but it also accomplished another American goal: it
bypassed Russia.

American policy makers hoped that diverting oil around Russia would keep
the country from reasserting control over Central Asia and its enormous
oil and gas wealth and would provide a safer alternative to Moscow's
control over export routes that it had inherited from Soviet days. The
tug-of-war with Moscow was the latest version of the Great Game, the
19th-century contest for dominance in the region.

A bumper sticker that American diplomats distributed around Central Asia
in the 1990s as the United States was working hard to make friends there
summed up Washington's strategic thinking: "Happiness is multiple
pipelines."

Now energy experts say that the hostilities between Russia and Georgia
could threaten American plans to gain access to more of Central Asia's
energy resources at a time when booming demand in Asia and tight
supplies helped push the price of oil to record highs.

"It is hard to see through the fog of this war another pipeline through
Georgia," said Cliff Kupchan, a political risk analyst at Eurasia Group
and a State Department official during the Clinton administration.
"Moving forward, multinationals and Central Asian and Caspian
governments may think twice about building new lines through this
corridor. It may even call into question the reliability of moving
existing volumes through that corridor."

At the very least, the analysts warn, a newly emboldened Russia may
figure even more prominently in shaping the region's energy future.

The latest struggle over Caspian oil started in earnest in the 1990s
under Bill Clinton, after the breakup of the Soviet Union. The building
of the pipeline that passes through Georgia, the Baku-Tbilisi-Ceyhan
line, or BTC, remains one of the signature successes of the American
strategy to put a wedge between Russia and the Central Asian countries
that had been Soviet republics.

Attempts to get oil out of Kazakhstan through a non-Russia route failed.
Most of the oil production from the giant field of Tengiz, for example,
in which Chevron is the largest investor, now travels through a pipeline
known as the Caspian Pipeline Consortium, which runs along the northern
Caspian coastline to the Russian Black Sea port of Novorossiysk. And
proposals for new oil and natural gas pipelines in the region have
stalled, in part, because of Moscow's opposition.

Some analysts believe the armed conflict between Russia and Georgia not
only is rooted in historical enmity, but it is an outgrowth of Russia's
fears that Georgia, with its pro-Western bent, could prove to be a
lasting competitor for energy exports.

"Russians treasured the fact they had a monopoly on oil and gas
pipelines from Central Asia, as it gave them considerable clout," said
Marshall I. Goldman, a senior scholar for Russian studies at Harvard and
the recent author of "Petrostate: Putin, Power, and the New Russia." "By
agreeing to having an oil pipeline, Georgia made itself more
vulnerable."

A big concern for the future is what will happen to oil from Kashagan,
the giant oil field in the Caspian Sea that holds over 10 billion
barrels of reserves. Located off Kazakhstan, Kashagan is the most
ambitious attempt to date by Western companies to develop new supplies
in the Caspian. It will be at least five years before oil starts flowing
from there, but the operating consortium, which includes Exxon Mobil and
ConocoPhillips, plans to transport some of Kashagan's oil through the
BTC pipeline.

That would involve building a new pipeline under the Caspian to connect
to BTC. Russia has opposed similar plans in the past.

The Baku-Tbilisi-Ceyhan pipeline, 1,100 miles long, transports 850,000
barrels a day of oil, or one percent of global supplies, from Azerbaijan
through Georgia and Turkey, ending at the port of Ceyhan on the
Mediterranean. Much of the oil is bound for Europe and the United
States.

The oil comes from several fields in Azerbaijan, offshore in the
Caspian. The line, which cost $4 billion to build, also carries some oil
from Tengiz that is barged across the Caspian.

Before the BTC pipeline was built, the West struggled to find routes
that would avoid what Western leaders considered to be potential trouble
spots, but it was difficult. The United States did not want the line to
pass through Iran, for instance. In the end, the United States
government, BP, which operates the pipeline, and other private investors
decided the line should proceed on its current route. That gave a boost
to newly independent counties and to Turkey, an ally, but it also sent
the line through three nations struggling with separatists.

Even before the outbreak of hostilities between Russia and Georgia,
analysts were reminded of how precarious even the favored route could
be.

Last Wednesday, the pipeline was shut down after it was hit by an
explosion in Eastern Turkey. Kurdish separatists claimed responsibility,
although it remains unclear what caused the blast.

. There have also been unconfirmed reports in recent days that Russian
planes had targeted the pipeline, although BP has said the line was not
hit.

BP said on Wednesday that it would take a week to determine how long the
pipeline will remain shut. Other investors in the pipeline are Socar,
the state-owned oil company of Azerbaijan; Chevron; ConocoPhillips;
StatoilHydro, from Norway; ENI, from Italy; and Total, from France.

Russia, which is flush with petrodollars because of the rise in the
price of oil, has not been afraid to flex its muscle in recent years to
bring its neighbors in line. Two years ago, Gazprom, the national oil
company then run by Dmitri A. Medvedev, now the Russian president, cut
off natural gas supplies to Ukraine in the winter because of a price
dispute.

That had a knock-on effect in Europe, where many policy makers began
questioning their reliance on Russian natural gas, although there was no
consensus on what to do. One proposal, favored by the United States, has
been to build a natural gas pipeline parallel to the BTC line.

"For the Europeans, the Ukraine gas crisis was like a snooze alarm,"
said Frank A. Verrastro, the director of the energy and national
security program at the Center for International and Strategic Studies
in Washington.

But Mr. Verrastro, a former senior executive with Pennzoil, said it
would be very hard now to build a new Western pipeline.

"We got BTC because there was a confluence of commercial and diplomatic
interests," he said. "But the United States didn't learn the right
lessons. They thought that all you had to do was lean on these countries
and a new pipeline would happen. But that was an abject failure."

He added: "There is a shift happening in the marketplace. We need a Plan
B. But we don't have a Plan B."