Energy in Azerbaijan

[Eddo211]

Re: Energy in Azerbaijan

What happened in Greece should be a lesson to all countries.....especially Armenia. I agree on that Londontsi

[Artashes]

Re: Energy in Azerbaijan

Believe it or not --- what took place in Greece , is also happening to USA & Euro. They are being fleeced by the bankers as well. The Fed system & the Central bank system are actually separate from govt of respective countries & only superficially appear as if they are the same as govt.
This independent --- deep state manipulator --- ( not turk deep state ) is manipulating for a separate set of goals altogether.
The politicians have in essence sold out to the Mega bank manipulator & are selling their respective countries & constituency down the road for their emmediate financial gain. And that is how the manipulator has robbed USA, Euro and all others their cancerous act has been able to infiltrate.
The play is on for world dominance whereby the manipulator dictates to the individual countries.
Russia, China, India, Iran, to name a few are trying to resist, but all are compelled to utilize the manipulators financial system at some point & time, or pay a steep penalty.
An extremely incideous game is taking place right now.
My personal opinion is this was one of the primary reasons for the Genocide. --- The Armenian people were one of the most difficult people to trick. Actually goes back before the Genocide, as one of our great strengths & wealth was the fact we derived much of our wealth & strength/independence from dealing amongst ourselves.
Artashes

[Artashes]

Re: Energy in Azerbaijan

Believe it or not --- what took place in Greece , is also happening to USA & Euro. They are being fleeced by the bankers as well. The Fed system & the Central bank system are actually separate from govt of respective countries & only superficially appear as if they are the same as govt.
This independent --- deep state manipulator --- ( not turk deep state ) is manipulating for a separate set of goals altogether.
The politicians have in essence sold out to the Mega bank manipulator & are selling their respective countries & constituency down the road for their emmediate financial gain. And that is how the manipulator has robbed USA, Euro and all others their cancerous act has been able to infiltrate.
The play is on for world dominance whereby the manipulator dictates to the individual countries.
Russia, China, India, Iran, to name a few are trying to resist, but all are compelled to utilize the manipulators financial system at some point & time, or pay a steep penalty.
An extremely incideous game is taking place right now.
My personal opinion is this was one of the primary reasons for the Genocide. --- The Armenian people were one of the most difficult people to trick. Actually goes back before the Genocide, as one of our great strengths & wealth was the fact we derived much of our wealth & strength/independence from dealing amongst ourselves.
Artashes

Also, you will hear this sentence often from USA govt representatives from the president on down ---
--- " it's not in the USA best interest"
Now, if you watch many of the presidents visits to foreign countries that are considered " emerging markets" you will see he (president) or his representitive(s) are accompanied by business representatives ,
"BIG business" people.
If you read the write up you will see the president extolling these business people & company's.
The USA govt is actually representing big business which is NOT the same as representing the American people.
Wheather it be bush senior, junior, clinton, or obama, they have all represented the mega bank financial interest of the super wealthy/powerful.
These interests have not only done zero for the interest of the common but in fact have been highly deter mental to the common wheel.
Although I'm not so good at getting reference material because of poor computer skill & min education, I can clearly recall these events. In each instance there is headline newspaper articles to be found & I'm sure not hard for the skilled researcher. Look to Mongolia visit by president & any & all other emerging countries that big USA business wants to infiltrate. Look who accompanies the official USA rep and look to the following write up in the main newspapers.
Artashes

[Mher]

Re: Energy in Azerbaijan

Baku Offers Iraq Access to European Pipelines

BAGHDAD (Hurriyet)—Azerbaijan has offered Iraq access to the “Southern Gas Corridor” connecting the Caspian Sea to the European Union to help Baghdad sell natural gas to Europe, Baku’s foreign minister said Monday.

Elmar Mammadyarov told journalists in the Iraqi capital that officials in Baghdad had already expressed interest in joining the massive project, which is supported by the United States and aims to reduce Europe’s dependence on gas from Russia.

“It’s a huge project … and it’s open if Iraq is also interested to deliver their own natural gas,” Mammadyarov said at a joint news conference with his Iraqi counterpart Hoshyar Zebari.

“The project is there, so if any other countries … want to join the Southern Gas Corridor, including Iraq, who already expressed some interest for this project, we are ready to start negotiations.” Gas pumped from the immense new Shah Deniz II field will travel across Azerbaijan and Georgia and across Turkey through a new Trans-Anatolian Pipeline, which is set to be a key part of the Southern Gas Corridor from the Caspian Sea to Turkey and the EU.

Russia, meanwhile, backs a new pipeline under construction known as South Stream that aims to transport 63 billion cubic meters under the Black Sea to Europe.

Europe’s annual demand for additional gas import may reach 80 billion cubic meters by 2020 and surpass 140 billion cubic meters by 2030, according to the South Stream website.

Iraq currently produces relatively small quantities of gas, most of which is kept for its domestic market, and flares off a large amount of associated gas from its vast oil fields.

But the country is looking to ramp up exports of natural gas to fund reconstruction of its conflict-battered economy and infrastructure.

http://asbarez.com/119399/baku-offers-iraq-access-to-european-pipelines/

[Mher]

Re: Energy in Azerbaijan

Azeri SOCAR oil exports drop 6.5 pct in January-February
Tue, 11th Mar 2014 15:08

BAKU, March 11 (Reuters) - Azeri state energy company SOCAR cut oil exports by 6.5 percent to 3.727 million tonnes in January-February from 3.984 million tonnes a year ago due to falling oil production, a SOCAR source said.

The source said SOCAR exported 169,649 tonnes of oil via Russia through the Baku-Novorossiisk pipeline in January-February, down from 251,755 tonnes in the same period last year.

Exports of oil through the Baku-Supsa pipeline via Georgia increased to 565,129 tonnes from 560,936 tonnes last year, while exports through Baku-Tbilisi-Ceyhan via Georgia and Turkey were 2.992 million tonnes, down from 3.2 million tonnes last year.

The Azeri government has been concerned about output from the Azeri, Chirag and Guneshli (ACG) oilfields - the biggest oil project in Azerbaijan and one of the largest globally for oil major BP - after production fell in 2012.

Output from the project rose in 2013. As for this year, BP said in January that production might be slightly lower than in 2013 as the company planned maintenance work at the Central Azeri and West Azeri platforms, halting operations for a couple of weeks.

It did not say when the work would start.

Azerbaijan's oil and condensate output fell by 5.2 percent year on year in January to 3.6 million tonnes.

The State Statistics committee has not yet released figures for output in February.

For 2013, Azerbaijan has said oil and condensate production rose by 0.4 percent to 43.5 million tonnes after two years of decline.

http://www.lse.co.uk/macroeconomicNews.asp?code=u3m9hx0t&headline=Azeri_SOCAR_oil_exports_drop_65_pct_in_JanuaryFebruary

[Mher]

Re: Energy in Azerbaijan

OPEC predicts Azerbaijan's oil output at 0.86 mn bpd in 2014

March 12--Azerbaijan's oil output will slightly decrease by 10,000 barrels per day (bpd) to 0.86 million bpd in 2014, according to OPEC March oil market report.

The highest level of the country's oil production in 2014, according to the forecasts, will be observed in the fourth quarter -- at 0.89 million bpd. In the first quarter of the year the production will amount to 0.83 million bpd, in the second quarter -- to 0.86 million bpd, in the third quarter -- to 0.88 million bpd.

In 2013 Azerbaijan's oil production amounted to 0.87 million bpd, according to OPEC estimations.

Azerbaijan's proven oil reserves amounted to 7 billion barrels as of early 2013, according to BP. Oil production in the country amounted to 0.872 million bpd in 2012.

The main volume of oil produced in Azerbaijan falls on the Azeri-Chirag-Guneshli offshore fields block. This block produces Azeri Light oil with a sulfur content of 0.15 percent (35 degrees API).

Participants of the project to develop Azeri-Chirag-Guneshli are: BP (operator -- 35.83 percent), Chevron (11.27 percent), Inpex (10.96 percent), AzACG (11.6 percent), Statoil (8.56 percent), Exxon (8 percent), TPAO (6.75 percent), Itocu (4.3 percent) and ONGC Videsh (2.72 percent).

http://investing.businessweek.com/research/stocks/news/article.asp?docKey=600-201403120948KRTRIB__BUSNEWS_64044_54922-1&params=timestamp||03/12/2014%209:48%20AM%20ET||headline||OPEC%20predicts%20Azerbaijan%27s%20oil%20output%20at%200.86%20mn%20bpd%20in%202014%20

__________________________________________________ __________________________________________________ _________________________
Even if the Azeri news (Trend.az) is telling the truth, at 0.86mbpd, their production would have dropped to 313 million barrels for the 2014, still following (and even underperforming) their expected decline: http://carnegieendowment.org/images/...n_Graph-01.jpg


Also I must note that there is no sign of a reversal in 2013 as this articles sort of hint at through quoting Azerbaijan who tries to deviate from the basic numbers, which is why they are not releasing 2013 numbers 3 months into 2014.


Their production since 2010 peak:
2008: 870,000 Barrels per day
2009:1,007,000 Barrels per day
2010:1,035,000 Barrels per day
2011: 983,000 Barrels per day
2012 872,000 Barrels per day
2013 870,000 Barrels per day (OPEC Estimate-according to trend.az)
2014 860,000 Barrels per day (BP Estimate-according to trend.az)

http://www.indexmundi.com/energy.aspx?country=az&product=oil&graph=production

[Vrej1915]

Re: Energy in Azerbaijan

The Crimean Crisis and the Energy Ramifications for Azerbaijan
March 26, 2014
by Eugene Chausovsky


The Kremlin’s partition of Crimea from Ukraine has put other states along Russia’s “near abroad” on edge. But while most of Russia’s neighbors seem to be worried about becoming Vladimir Putin’s next target, one state, Azerbaijan, stands to benefit, at least over the longer term, from the sudden turn of events.

The Crimean crisis has revived fears among European Union states over their dependency on Russian natural gas imports, as well as the reliability of Ukraine as a transit state. This, in turn, is giving greater impetus to energy diversification projects across Europe, creating an opportunity for Azerbaijan to capitalize on its role as an alternative energy supplier at the head of the Southern Corridor energy route.

Azerbaijan already plays an important role as a regional supplier. In 2012, Azerbaijan exported 24 million tons of oil and 7 billion cubic meters (bcm) of natural gas, primarily via the Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzerum pipelines, respectively. Azerbaijan also has plans to significantly increase its natural gas exports once the Shah Deniz II gas field comes online in 2017-2018. That will mean an additional 10 (bcm) of Azerbaijani gas heading to Europe.

While the opening of Shah Deniz II can certainly fill Baku’s coffers, the existing export arrangement falls short of maximizing Azerbaijan’s earnings potential. The pivotal movement for Baku, at least prior to the outbreak of the Crimea crisis, came in June of last year, when a consortium developing the Shah Deniz field ended the long-running competition over export routes by choosing the Trans-Adriatic Pipeline (TAP) project over the more ambitious Nabucco West initiative. Azerbaijan had been genuinely interested in developing Nabucco West, but Russia managed to undermine the project by negotiating lower natural gas prices with several Central European countries along its route, including Bulgaria and Hungary. Russia also got these countries to sign onto its own pipeline project known as South Stream, further compromising the attractiveness of Nabucco West.

In the end, Azerbaijani officials felt compelled to go with the more modest TAP pipeline, with its 10 bcm pipeline capacity, compared to that of the 23 bcm-capacity Nabucco West. The TAP route, which goes through Turkey and Greece to Italy, avoided Central Europe altogether and the potentially lucrative market it offered to Azerbaijan.

The rapidly widening rift between Russia and the West over Ukraine has given new life to Azerbaijan's role as an alternative energy supplier. The EU has already frozen negotiations with Russia over South Stream in order to "take into account broader political developments, including the Crimea crisis," EU Energy Commissioner Günther Oettinger said. On March 21, Paolo Scaroni, head of the Italian energy firm ENI, a 20 percent shareholder in South Stream, went even further; “I don't know if South Stream will ever be built.”

If South Stream does indeed head south, Azerbaijan is well situated to fill the resulting export void. The fracture in EU-Russian relations not only provides greater momentum for TAP, but also larger energy projects down the line, potentially even the revival of some form of the Nabucco project. "If before the EU limited its support to important strategic projects like Nabucco by statements only, now it will have to act in a way to facilitate the materialization of those projects," according to Gulmira Rzayeva, an Azerbaijani energy analyst.

While new opportunities may be opening, Azerbaijan needs to move carefully. Aggressive action could invite Russian retribution. Moscow has proven that it is willing to disrupt energy supplies in order to advance its interests -- not only in Ukraine, but also in neighboring Georgia during the 2008 war. Yet, if the past is any indicator, Azerbaijani officials are capable of finessing the energy export issue. Baku has already shown that it can find the balancing point amid competing geopolitical interests, as Azerbaijan supplies energy not only to Turkey and the West, but also to Russia and Iran.

Ultimately, the Ukraine crisis provides both risks and opportunities for Baku. The odds seem much better today than just a month ago that Baku, given its strategic location and energy resources, can emerge in a stronger energy-export position in the coming months and years.

Editor's note: Eugene Chausovsky is a Eurasia Analyst at Stratfor [www.stratfor.com].

[Vrej1915]

Re: Energy in Azerbaijan

http://www.isn.ethz.ch/Digital-Library/Articles/Detail/?id=178075

Does Declining Oil Revenue Equal Less Security for Azerbaijan?
By Eric Eissler for ISN
March 25, 2014

[Summary: Declining oil revenues and a changing energy marketplace are
placing Azerbaijan's social and economic development under strain.
Worse still, observes Eric Eissler, the lost income might curtail the
country's defense spending at a time when Baku needs it most.]


To say that Azerbaijan lives in a unique but troubled geopolitical
location is perhaps an understatement. Flanked by assertive regional
powers and embroiled in a `frozen' conflict with neighboring Armenia
(which still occupies 20% of Azerbaijani territory), Baku's diplomatic
relations are undoubtedly complex. Nevertheless, this former Soviet
republic has been able to utilize its hydrocarbon wealth to balance
its regional ties and safeguard its overall security. But the veneer
might be slowly starting to slip.

Rising from the Ashes

Upon gaining independence, Azerbaijan inherited a massive quantity of
hydrocarbon reserves, estimated in 2012 to stand at 7 billion barrels
of oil and 0.9 tcm of natural gas Put another way, the country was
effectively born with a ready-made source of income that could boost
its social and economic development during a period of great
uncertainty. In order to better capitalize upon this, Baku established
the State Oil Fund of Azerbaijan Republic (SOFAZ) in December 2000.
Since then, the revenues that it has pumped into Azerbaijan have
formed the backbone of the country's development.

Indeed, the amount of hydrocarbons-based revenue that SOFAZ has
injected into the country increased dramatically between 2000 and
2013. In 2007, for example, the fund invested $686 million back into
the country. By 2012, however, this figure increased to $11.64
billion. In total, Azerbaijan has allocated an estimated $49.73
billion for economic development and regeneration.

A major benefactor of this investment has been Azerbaijan's armed
forces. In an address to a military parade in June 2013, President
Ilham Aliev laid bare the extent of his country's defense expenditure
when he declared:

`In 2003, our military budget was $163 million. Last year [2012] this
figure was $3.6 billion, this year [2013] it has reached $3.7 billion.
This in itself shows that military buildup is the top priority, great
funds are allocated from our budget for military buildup.'

Increased defense expenditure has allowed Azerbaijan to gain the
military upper hand against Russian-backed Armenia. Baku has invested
heavily in purchases of combat and transport helicopters, combat
aircraft and air defenses that can be deployed along the `line of
contact'. Moreover, by possessing the strongest armed forces among the
South Caucasus states Azerbaijan has been able to keep Russia out of
its domestic politics. This, in turn, has enabled Baku to develop
close ties with the likes of Israel and the United States, thereby
boosting its international profile in the process. In marked contrast,
the only recent `positive' in Russo-Azerbaijani relations was Vladimir
Putin's visit to Baku in 2013 ` the first official Russian delegation
in seven years .

Trouble Ahead?

But the good times are possibly coming to an end, at least for
Azerbaijan's elite, pro-government forces and the country's military.
On December 3 2013, Baku gave the country's Tariff Council the green
light to raise gas and petrol prices. As a result, petrol prices
increased by up to 33% and natural gas prices almost doubled. This was
effectively the beginning of the end of cheap gas and petrol prices
for Azerbaijan's citizens.

Skyrocketing domestic fuel prices were quickly followed by an
announcement that SOFAZ will reduce its transfers of oil revenues to
state coffers in 2014. It has been estimated that SOFAZ's actions will
lead to a 17-18% reduction in government spending. This, in turn,
helps to explain why the government has dramatically hiked up the
price of domestic fuel. Dr. Vugar Bayramov, the Chairman of the Board
form the Center for Economic and Social Development (CESD) told the
ISN:

`The government is attempting to compensate the budget with revenues
from the non-oil sector. One of the main reasons for increasing the
petrol tax rate was to compensate for this deficit.'

But why has Azerbaijan taken such drastic measures? The answer to this
question lies in declining oil production. Estimates suggest that
Azerbaijan produced on average 872,000 barrels per day in 2012. By
contrast, production stood at 1.02 million barrels per day in 2010.
And while Azerbaijan is increasingly developing its natural gas
exploration and production capabilities, gas alone will not be able to
offset declining oil production. That's due in part to a decline in
gas production from 17.24 bcm per annum in 2010 to 15.6 bcm per annum
in 2013.

In addition, Azerbaijan's gas sector also faces a number of additional
challenges. These include the United States' and the West's growing
exploitation of unconventional resources such as shale oil and gas, as
well as the vagaries of the oil and gas markets. While oil is sold on
the global marketplace, gas tends to be traded regionally and is only
sold on a global level as Liquefied Natural Gas (LNG). As a result,
gas sales are not as consistent as oil purchases. Gas prices remain
very much subject to current regional requirements and their
respective markets.

Currently, Azerbaijan's economy is not yet diversified enough to cope
with such a dramatic fall in oil revenues. This is also reflected by
the fact that many Azerbaijanis continue to live below the breadline.
While relative poverty has fallen in recent years, and Gross Domestic
Product (GDP) per capita has risen from $1,908 in 2002 to $6,220 in
2012, many citizens living outside of the capital continue to struggle
making a living. It's also difficult to see how Baku can make
much-needed investment in education and further training against a
backdrop of declining oil revenues.

Around the Neighborhood

Worse still, declining oil revenues casts further doubt over the
sustainability of Azerbaijan's defense expenditure at a time when it
arguably needs it most. Like many other former Soviet states,
Azerbaijan is undoubtedly viewing the events unfolding in Ukraine with
a sense of unease. The region as a whole is also likely to be unnerved
by popular demands in Russia for Putin to go after other `lost'
territories, such as Belarus and Kazakhstan. Yet, while there is no
suggestion that Azerbaijan is under immediate threat, the fact Moscow
has Russian troops based in neighboring Armenia might become too close
for comfort for Baku in the coming years.

Yet it could have been so different for Azerbaijan and its citizens.
While SOFAZ did a good job in terms of transferring the country's oil
revenues, it has done little in the way of improving economic
conditions for the generations to come. In 2012, for example, SOFAZ
made significant purchases of gold, only for the price of gold to fall
dramatically after the purchase. The same can also be said of its
investments in Turkish Lira, especially given that this currency
plummeted to all-time lows against the Dollar and the Euro in the
opening weeks of 2014.

Consequently, if Baku wants to continue lavishing its military with
substantial defense expenditure and improve social and economic
conditions for the majority of the population, it needs to keep a
tight rein on long-term planning and asset management. As it currently
stands, Azerbaijan is unable to meet both requirements. Bearing in
mind the neighborhood and times that it finds itself in, these are
lessons that the country needs to learn ` fast.

[Vrej1915]

Re: Energy in Azerbaijan

http://www.rightsidenews.com/2014032534044/world/geopolitical/from-estonia-to-azerbaijan-american-strategy-after-ukraine.html

From Estonia to Azerbaijan: American Strategy After Ukraine
by George Friedman
Tuesday, 25 March 2014

As I discussed last week, the fundamental problem that Ukraine poses
for Russia, beyond a long-term geographical threat, is a crisis in
internal legitimacy. Russian President Vladimir Putin has spent his
time in power rebuilding the authority of the Russian state within
Russia and the authority of Russia within the former Soviet Union.
The events in Ukraine undermine the second strategy and potentially
the first. If Putin cannot maintain at least Ukrainian neutrality,
then the world's perception of him as a master strategist is
shattered, and the legitimacy and authority he has built for the
Russian state is, at best, shaken.

Whatever the origins of the events in Ukraine, the United States is
now engaged in a confrontation with Russia. The Russians believe that
the United States was the prime mover behind regime change in
Ukraine. At the very least, the Russians intend to reverse events in
Ukraine. At most, the Russians have reached the conclusion that the
United States intends to undermine Russia's power. They will resist.
The United States has the option of declining confrontation, engaging
in meaningless sanctions against individuals and allowing events to
take their course. Alternatively, the United States can choose to
engage and confront the Russians.

A failure to engage at this point would cause countries around
Russia's periphery, from Estonia to Azerbaijan, to conclude that with
the United States withdrawn and Europe fragmented, they must reach an
accommodation with Russia. This will expand Russian power and open
the door to Russian influence spreading on the European Peninsula
itself. The United States has fought three wars (World War I, World
War II and the Cold War) to prevent hegemonic domination of the
region. Failure to engage would be a reversal of a century-old
strategy.

The American dilemma is how to address the strategic context in a
global setting in which it is less involved in the Middle East and is
continuing to work toward a "pivot to Asia." Nor can the United
States simply allow events to take their course. The United States
needs a strategy that is economical and coherent militarily,
politically and financially. It has two advantages. Some of the
countries on Russia's periphery do not want to be dominated by her.
Russia, in spite of some strengths, is inherently weak and does not
require U.S. exertion on the order of the two World Wars, the Cold War
or even the Middle East engagements of the past decade.

The Russian and U.S. Positions

I discussed Russian options on Ukraine last week. Putin is now in a
position where, in order to retain with confidence his domestic
authority, he must act decisively to reverse the outcome. The problem
is there is no single decisive action that would reverse events.
Eventually, the inherent divisions in Ukraine might reverse events.
However, a direct invasion of eastern Ukraine would simply solidify
opposition to Russia in Kiev and trigger responses internationally
that he cannot predict. In the end, it would simply drive home that
although the Russians once held a dominant position in all of
Ukraine, they now hold it in less than half. In the long run, this
option -- like other short-term options -- would not solve the
Russian conundrum.

Whatever Putin does in Ukraine, he has two choices. One is simply to
accept the reversal, which I would argue that he cannot do. The
second is to take action in places where he might achieve rapid
diplomatic and political victories against the West -- the Baltics,
Moldova or the Caucasus -- while encouraging Ukraine's government to
collapse into gridlock and developing bilateral relations along the
Estonia-Azerbaijan line. This would prevent a U.S. strategy of
containment -- a strategy that worked during the Cold War and one
that the Europeans are incapable of implementing on their own. This
comes down to the Americans.

The United States has been developing, almost by default, a strategy
not of disengagement but of indirect engagement. Between 1989 and
2008, the U.S. strategy has been the use of U.S. troops as the
default for dealing with foreign issues. From Panama to Somalia,
Kosovo, Afghanistan and Iraq, the United States followed a policy of
direct and early involvement of U.S. military forces. However, this
was not the U.S. strategy from 1914 to 1989. Then, the strategy was
to provide political support to allies, followed by economic and
military aid, followed by advisers and limited forces, and in some
cases pre-positioned forces. The United States kept its main force in
reserve for circumstances in which (as in 1917 and 1942 and, to a
lesser degree, in Korea and Vietnam) allies could not contain the
potential hegemon. Main force was the last resort.

This was primarily a strategy of maintaining the balance of power. The
containment of the Soviet Union involved creating an alliance system
comprising countries at risk of Soviet attack. Containment was a
balance of power strategy that did not seek the capitulation of the
Soviet Union as much as increasing the risks of offensive action
using allied countries as the first barrier. The threat of full U.S.
intervention, potentially including nuclear weapons, coupled with the
alliance structure, constrained Soviet risk-taking.

Because the current Russian Federation is much weaker than the Soviet
Union was at its height and because the general geographic principle
in the region remains the same, a somewhat analogous balance of power
strategy is likely to emerge after the events in Ukraine. Similar to
the containment policy of 1945-1989, again in principle if not in
detail, it would combine economy of force and finance and limit the
development of Russia as a hegemonic power while exposing the United
States to limited and controlled risk.

The coalescence of this strategy is a development I forecast in two
books, The Next Decade and The Next 100 Years, as a concept I called
the Intermarium. The Intermarium was a plan pursued after World War I
by Polish leader Jozef Pilsudski for a federation, under Poland's
aegis, of Central and Eastern European countries. What is now
emerging is not the Intermarium, but it is close. And it is now
transforming from an abstract forecast to a concrete, if still
emergent, reality.
Forces Leading to the Alliance's Emergence

A direct military intervention by the United States in Ukraine is not
possible. First, Ukraine is a large country, and the force required to
protect it would outstrip U.S. capabilities. Second, supplying such a
force would require a logistics system that does not exist and would
take a long time to build. Finally, such an intervention would be
inconceivable without a strong alliance system extending to the West
and around the Black Sea. The United States can supply economic and
political support, but Ukraine cannot counterbalance Russia and the
United States cannot escalate to the point of using its own forces.
Ukraine is a battleground on which Russian forces would have an
advantage and a U.S. defeat would be possible.

If the United States chooses to confront Russia with a military
component, it must be on a stable perimeter and on as broad a front
as possible to extend Russian resources and decrease the probability
of Russian attack at any one point out of fear of retaliation
elsewhere. The ideal mechanism for such a strategy would be NATO,
which contains almost all of the critical countries save Azerbaijan
and Georgia. The problem is that NATO is not a functional alliance.
It was designed to fight the Cold War on a line far to the west of the
current line. More important, there was unity on the principle that
the Soviet Union represented an existential threat to Western Europe.

That consensus is no longer there. Different countries have different
perceptions of Russia and different concerns. For many, a replay of
the Cold War, even in the face of Russian actions in Ukraine, is
worse than accommodation. In addition, the end of the Cold War has
led to a massive drawdown of forces in Europe. NATO simply lacks the
force unless there is a massive and sudden buildup. That will not
occur because of the financial crisis, among other reasons. NATO
requires unanimity to act, and that unanimity is not there.

The countries that were at risk from 1945 to 1989 are not the same as
those at risk today. Many of these countries were part of the Soviet
Union then, and the rest were Soviet satellites. The old alliance
system was not built for this confrontation. The Estonia-Azerbaijan
line has as its primary interest retaining sovereignty in the face of
Russian power. The rest of Europe is not in jeopardy, and these
countries are not prepared to commit financial and military efforts
to a problem they believe can be managed with little risk to them.
Therefore, any American strategy must bypass NATO or at the very least
create new structures to organize the region.

Characteristics of the Alliance


Each of the various countries involved is unique and has to be
addressed that way. But these countries share the common danger that
events in Ukraine could spread and directly affect their national
security interests, including internal stability. As I observed, the
Baltics, Moldova and the Caucasus are areas where the Russians could
seek to compensate for their defeat. Because of this, and also
because of their intrinsic importance, Poland, Romania and Azerbaijan
must be the posts around which this alliance is built.

The Baltic salient, 145 kilometers (90 miles) from St. Petersburg in
Estonia, would be a target for Russian destabilization. Poland
borders the Baltics and is the leading figure in the Visegrad
battlegroup, an organization within the European Union. Poland is
eager for a closer military relationship with the United States, as
its national strategy has long been based on third-power guarantees
against aggressors. The Poles cannot defend themselves and the
Baltics, given the combat capabilities necessary for the task.

The Dniester River is 80 kilometers from Odessa, the main port on the
Black Sea for Ukraine and an important one for Russia. The Prut River
is about 200 kilometers from Bucharest, the capital of Romania.
Moldova is between these two rivers. It is a battleground region, at
least of competing political factions. Romania must be armed and
supported in protecting Moldova and in organizing southeastern Europe.
In Western hands, Moldova threatens Odessa, Ukraine's major port also
used by Russia on the Black Sea. In Russian hands, Moldova threatens
Bucharest.

At the far end of the alliance structure I am envisioning is
Azerbaijan, on the Caspian Sea bordering Russia and Iran. Should
Dagestan and Chechnya destabilize, Azerbaijan -- which is Islamic and
majority Shiite but secular -- would become critical for limiting the
regional spread of jihadists. Azerbaijan also would support the
alliance's position in the Black Sea by supporting Georgia and would
serve as a bridge for relations (and energy) should Western relations
with Iran continue to improve. To the southwest, the very pro-Russian
Armenia -- which has a Russian troop presence and a long-term treaty
with Moscow -- could escalate tensions with Azerbaijan in
Nagorno-Karabakh. Previously, this was not a pressing issue for the
United States. Now it is. The security of Georgia and its ports on
the Black Sea requires Azerbaijan's inclusion in the alliance.

[Vrej1915]

Re: Energy in Azerbaijan

Azerbaijan serves a more strategic purpose. Most of the countries in
the alliance are heavy importers of Russian energy; for instance, 91
percent of Poland's energy imports and 86 percent of Hungary's come
from Russia. There is no short-term solution to this problem, but
Russia needs the revenue from these exports as much as these
countries need the energy. Developing European shale and importing
U.S. energy is a long-term solution. A medium-term solution,
depending on pipeline developments that Russia has tended to block in
the past, is sending natural gas from Azerbaijan to Europe. Until now,
this has been a commercial issue, but it has become a strategically
critical issue. The Caspian region, of which Azerbaijan is the
lynchpin, is the only major alternative to Russia for energy.
Therefore, rapid expansion of pipelines to the heart of Europe is as
essential as providing Azerbaijan with the military capability to
defend itself (a capability it is prepared to pay for and, unlike
other allied countries, does not need to be underwritten).

The key to the pipeline will be Turkey's willingness to permit
transit. I have not included Turkey as a member of this alliance.
Its internal politics, complex relations and heavy energy dependence
on Russia make such participation difficult. I view Turkey in this
alliance structure as France in the Cold War. It was aligned yet
independent, militarily self-sufficient yet dependent on the
effective functioning of others. Turkey, inside or outside of the
formal structure, will play this role because the future of the Black
Sea, the Caucasus and southeastern Europe is essential to Ankara.

These countries, diverse as they are, share a desire not to be
dominated by the Russians. That commonality is a basis for forging
them into a functional military alliance. This is not an offensive
force but a force designed to deter Russian expansion. All of these
countries need modern military equipment, particularly air defense,
anti-tank and mobile infantry. In each case, the willingness of the
United States to supply these weapons, for cash or credit as the
situation requires, will strengthen pro-U.S. political forces in each
country and create a wall behind which Western investment can take
place. And it is an organization that others can join, which unlike
NATO does not allow each member the right to veto.

The Practicality of the U.S. Strategy

There are those who would criticize this alliance for including
members who do not share all the democratic values of the U.S. State
Department. This may be true. It is also true that during the Cold
War the United States was allied with the Shah's Iran, Turkey and
Greece under dictatorship and Mao's China after 1971. Having
encouraged Ukrainian independence, the United States -- in trying to
protect that independence and the independence of other countries in
the region -- is creating an alliance structure that will include
countries, such as Azerbaijan, that have been criticized. However, if
energy does not come from Azerbaijan, it will come from Russia, and
then the Ukrainian events will dissolve into tragic farce. The State
Department must grapple with the harsh forces its own policies have
unleashed. This suggests that the high-mindedness borne of benign
assumptions now proven to be illusions must make way for realpolitik
calculations.

The balance of power strategy allows the United States to use the
natural inclination of allies to bolster its own position and take
various steps, of which military intervention is the last, not the
first. It recognizes that the United States, as nearly 25 percent of
the world's economy and the global maritime hegemon, cannot evade
involvement. Its very size and existence involves it. Nor can the
United States confine itself to gestures like sanctions on 20 people.
This is not seen as a sign of resolve as much as weakness. It does
mean that as the United States engages in issues like Ukraine and must
make strategic decisions, there are alternatives to intervention --
such as alliances. In this case, a natural alliance structure
presents itself -- a descendant of NATO but shaped for this crisis,
much like the alliance I forecast previously.

In my view, Russian power is limited and has flourished while the
United States was distracted by its wars in the Middle East and while
Europe struggled with its economic crisis. That does not mean Russia
is not dangerous. It has short-term advantages, and its insecurity
means that it will take risks. Weak and insecure states with
temporary advantages are dangerous. The United States has an interest
in acting early because early action is cheaper than acting in the
last extremity. This is a case of anti-air missiles, attack
helicopters, communications systems and training, among other things.
These are things the United States has in abundance. It is not a case
of deploying divisions, of which it has few. The Poles, Romanians,
Azerbaijanis and certainly the Turks can defend themselves. They need
weapons and training, and that will keep Russia contained within its
cauldron as it plays out a last hand as a great power.



George Friedman is the Chairman of Stratfor, a company he founded in
1996 that is now a leader in the field of global intelligence.
Friedman guides Stratfor's strategic vision and oversees the
development and training of the company's intelligence unit.