Conflict in Georgia: It's About the Oil. Again.

Take a look at the map of the Caspian Region Pipelines and maybe you'll have an "Aha!" moment like I did. I didn't know what to make of the conflict in Georgia until the map hit my in-box.

It came attached to a research note from Innovest Strategic Value Advisors. The note was titled, ominously, A New Arms Race in the Pipeline, and it warns of

.....a re-arming of the region and the opening of a new Cold War.

Yikes! This was no hawkish screed, like the one called Russia Resurgent that graced the cover of The Economist.

It was financial analysis.

Among the various US defense contractors, General Dynamics, which makes tanks and ammunition, and Rockwell Collins, one of the principal suppliers of night vision technology, could see increased demand for their wares in the Caucasus.....

That's not the only place where new opportunity lies. Russia's swift incursion into Georgia convinced Poland to let the US install a missile shield -- called GBI for "ground-based interceptor" -- on its territory. The two governments signed an agreement on August 14 for 10 installations.

Boeing has been in charge of the GBI project’s technical development, for which the company obtained an initial USD 1.6 billion. The project also involves subcontractors Orbital Sciences Corporation, Lockheed Martin, and Raytheon.

All in day's work for the military-industrial complex that President Eisenhower warned against in his farewell address to the nation.

But here's the bottom line: the Georgia conflict, it turns out, is another snapshot of the geo-political consequences of oil addiction. We'll have to keep going to the world's bad neighborhoods to get the stuff we crave. Innovest analysts explain how competition with the US for control of oil supplies led to the Russian advance into South Ossetia.

It centers around the pipeline that cuts through Georgia, skirting Russian control, called the Baku-Tbilisi-Ceyhan pipeline (BTC). It's the most modern and largest pipeline, built thanks to strong lobbying from Washington (under Clinton's watch) and money from western governments, the World Bank, European Bank for Reconstruction and Development and other aid institutions.

Russia regarded the BTC pipeline as a competitive threat, and the Georgian President's impetuous assault on Ossetia was one provocation too many..

The US has been lobbying hard to get Georgia into NATO, too, a move the Europeans wisely nixed. It would have obligated NATO to defend Georgia from the attack it provoked from Russia.

Keep in mind it was profits from the pipeline that went to feed Georgian assertiveness and the arms race in the region:

Since president Saakashvili came to power in the so-called ‘Rose revolution’ of 2003, Georgia has made a tenfold increase in military spending. The Stockholm International Peace Research Institute (SIPRI) said that in 2007 Georgia saw the largest average growth rate of military spending in the world.....

In an effort to ingratiate itself with the United States, Georgia has deployed 2000 troops to Iraq, making it the third largest contingent in the country. Georgia has purchased drone bombers from Israel’s Elbit Systems. It also has acquired from France and the US other equipment to improve the characteristics of its existing Soviet-era hardware. Russian press reports have commented that while both the sides are using Soviet T-72 tanks and Sukhoi-25 jet fighters, the Georgian variants have been upgraded with night vision capability.....

The Georgian military build-up should also be considered in the context of of the growing military ambitions of its neighbors. All signs show that the Caucasus region is in the midst of a regional arms race.

Maybe that does mean good times are ahead for the defense industries, but erase the pipelines off the map and none of this would be happening. It is a direct result of the global addiction to oil. It's not a pretty picture, and it's only bound to get uglier in these geographic choke points as supplies dwindle and the price rises.

Time yet for a new clean energy paradigm?

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