Why Georgia Matters

Russia's invasion of Georgia has implications beyond Russia's desire to regain territory or influence over the lost territories of the old Soviet empire. Just as important is the desire to control access to the Caspian's Sea 35 billion barrells of oil and trillions of cubic feet of gas. The question is who will control the flow of oil from the Caspian Sea to Europe; Russia or the more friendly countries and allies such as Georgia, Turkey, and southern Europe?

The Caspian Sea region has become a central focal point for untapped oil and natural gas resources from the southern portion of the former Soviet Union . Beginning in May 2005, oil from the southern sections of the Caspian Sea began pumping through a new pipeline (built by a BP-led consortium) to the Turkish seaport of Ceyhan. The 8-year effort of Western capital, technology, and diplomacy had aimed to decrease reliance on Middle Eastern oil. Although oil reserve growth in the Caspian region ha s not met levels that had been expected in the 1990s, European countries are paying special attention to the natural gas resources that could lie beneath the Sea as a way to diversify their sources of gas imports.

Estimates of the Caspian Sea region's proved crude oil reserves vary widely by source. For this reason, EIA estimates proven oil reserves in the region range between 17 and 49 billion barrels, which is comparable to OPEC members Qatar on the low end, and Libya on the high end. In 2006, regional oil production is expected to total 2.3 million bbl/d, comparable to annual production from South America's second largest oil producer, Brazil. During 2007, EIA expects over 200,000 bbl/d of annual production growth, comprised mostly of growth from Azerbaijan. By 2010, EIA expects the countries of the Caspian Sea Region to produce between 2.9 and 3.8 million bbl/d, which would exceed annual production from South America's largest oil producer, Venezuela.