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Chechnya Oil Pipeline Politics True Underlying Cause for Moscow Metro Bombings

Politics / Russia Mar 30, 2010 - 01:13 PM GMT

By: OilPrice_Com


Best Financial Markets Analysis ArticleThe tragic news of the 29 March twin suicide bombings of two Moscow Metro stations during the morning rush hour has produced outrage worldwide, with the Kremlin quickly adding that the attacks were carried out by the Caucasus Mujaheddin, a northern Caucasus-based militant Islamist guerrilla group that claimed responsibility for the bombing of a Moscow to St. Petersburg express train last November.

The grim death toll can be seen as yet another statistic in the Kremlin's ongoing war with Chechnya separatists that erupted in December 1994. Underneath and driving the savagery of the last 16 years is a resource that few commentators note - oil.

The two female suicide bombers were caught by closed circuit television (CCTV) cameras boarding the metro at Yugo-Zapadnaya station in the far southwest of the city in the early morning, assisted onto the train by two other women. According to the CCTV videos, the quartet seemed to be between 18 and 20; two of them were clearly of Slavic appearance. The first bomber blew herself up at Lubyanka metro station at 7.56am. H er bomb, equivalent to about four kilograms of TNT, exploded at the height of rush hour and killed at least 25 people inside a train that had just pulled into the Lubyanka station. The explosive used was believed to be hexogen (RDX); the device was filled with iron scrap and screws for shrapnel. There has been to speculation that the second bomb, detonated at the Park Kultury station, was in fact supposed to have been detonated at the Oktyabrskaya station, next to the Ministry of the Interior.

Kremlin experts lost no time in asserting that the incident had implications far beyond Russia, claiming that the Caucasus Mujaheddin receives inspiration and financial support from unnamed networks both in the East and the West. As the death toll mounts, the bombings represent Moscow's worst terrorist attack since February 2004, when a suicide bombing killed at least 39 people and wounded more than 100 on a metro train.

What is certain at the moment is that the carnage will continue, as last month Chechen rebel leader Doku Umarov, fighting for an Islamic emirate embracing the northern Cacuasus, vowed to take the conflict to Russian cities, noting in an interview on an Islamist website, "Blood will no longer be limited to our cities and towns. The war is coming to their cities."

The attacks are a direct assault on Russian President Vladimir Putin, former KGB operative. The Lubyanka bombing is highly symbolic, as it is the subway stop for the employees of the KGB's successor organization, the FSB, a two-minute walk from Red Square. London Royal United Services Institute analyst Jonathan Eyal observed, "This is a direct affront to Vladimir Putin, whose entire rise to power was built on his pledge to crush the enemies of Russia ... It's an affront to his muscular image."

Few today remember that Putin's first job when appointed Prime Minister on 9 August 1999 by Russian President Boris Yeltsin was to build an oil pipeline bypassing Chechyna, as Transneft, Russia's pipeline monopoly, controlled the Baku-Novorossiisk line, the sole export route for Azerbaijani "early" oil exports, which crossed 95 miles of Chechen territory, a region which had been at war with the Kremlin since 1994. Following Putin's appointment Yeltsin held a council of war over Dagestan and Putin made a rash promise that he could end a crisis caused by the incursion of 2,000 rebels from Chechnya into Dagestan in "a week and a half or two weeks."

Work began on the bypass line on 26 October. The conflict combined with other issues reduced Azeri exports via Baku-Novorossiisk in early 2000 to an average of only 10,000 barrels per day (bpd.) In April 2000 construction finished on the $140 million, 204-mile Baku-Novorossiisk bypass via Dagestan to Tikhoretsk. The bypass had a potential capacity of 120,000 bpd, but by then Azerbaijan already had other plans, having worked with neighboring Georgia to develop an alternative pipeline route to Georgia's Black Sea port of Supsa, completely outside of Russian control. When Yeltsin resigned on 31 December 1999 Putin became acting President and has continued to lead the Russian state ever since, initially as President and since 2008 as Prime Minister.

Putin has made it a centerpiece of his policy to resolve Chechnya for once and for all, but as the Moscow bombings so, eleven years after his accession to power, Chechnya continues to roil Russia. The issues go back to the 1991 December collapse of the USSR. When the first Chechen war erupted in 1994, many observers were baffled as to why Moscow, which had peacefully let the Soviet Union implode, was so determined to hang on to Chechnya, a small poor mountainous region in the Caucasus measuring only 30 by 70 miles.

But oil greased the equation from the outset. The post-Soviet development of the Caspian's vast reserve of oil and natural gas quickly became Russia's fixation, with an ever increasing importance as the rest of the post-Soviet economy withered. Energy was the one export that the Russian Federation could still produce that was guaranteed an international market, and its importance has only risen with time.

In May 2007 the U.S. Energy Information Administration projected that by 2015 Caspian basin energy production could reach 4.3 million bpd, concluding that in addition to the region's proven reserves of 17-49 billion barrels, comparable to Qatar at the lower estimate and Libya on the high end, the region could contain an additional hydrocarbon reserves up to 235 billion barrels of oil, roughly equivalent to a quarter of the Middle East's total proven reserves. Nor is oil the only energy deposit there. The Caspian's potential natural gas reserves are as large as the region's proven gas reserves and could yield another potential 328 trillion cubic feet of gas.

Russia was determined to hang on to as much of this largesse as possible. An independent Chechnya could not only lead to a loss of revenue from the republic's modest oil production (of such quality that Chechen oil was used to light lamps in the Vatican) and ruin plans to extract transit fees for Azeri "early oil," but lead to a significant potential loss of Caspian reserves once the sea's waters and seabed were divided.

The demise of the USSR opened up a can of worms over the Caspian's legal status, however. The Caspian is the world's largest inland body of water, with a surface area of 143,000 square miles, its status regulated under the USSR-Persia Treaty of 26 February 1921 and the 25 March 1940 USSR-Iran Treaty. In place of the USSR and Iran there were now five Caspian littoral states - Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan and wrangling began immediately over the Caspian's division. The 1982 U.N. Convention on the Law of the Sea (UNCLOS) defines the Caspian as "a special inner sea."

Two opposing positions quickly developed - Russia insisted that the Caspian's waters and seabed should be divided according to coastal length, while Iran held out for an equitable 20 percent division for each of the five littoral states. Under the Russian formula, Azerbaijan, with 259.1 miles of coastline, would receive 15.2 percent of the Caspian's waters and seabed, Iran with 319.1 miles of coast - 18.7 percent. Kazakhstan, with 526.4 miles of coastline, would receive the largest share, 30.8 percent of the Caspian, leaving Russia with its 315 miles of shore 18.5 percent of the Caspian and Turkmenistan's 285.4 miles of coast giving it a 16.8 percent share. Azerbaijan and Kazakhstan soon supported the Kremlin's stance, while Turkmenistan under its mercurial, megalomaniacal leader Sapamurat Niyazov wavered between Moscow and Tehran.

The two Chechen wars threatened to tear Moscow's proposal apart. After the first Chechen war erupted in 1994 and began to spill over into neighboring Dagestan, a number of the more militant Chechen guerrillas like Shamil Basayev eventually declared their intention to create a unitary northern Caucasian Chechen-Dagestani Muslim state. Chechnya and Dagestan were poorer than the rest of Russia, and Dagestan, though home to a mosaic of ethnic groups, was predominantly Muslim.

While the August 1996 Khasavyurt Accord led to a truce ending the first Chechen war, it would be shattered three years later.

Much had changed in the interim, including U.S. penetration of Azerbaijan's and Kazakhstan's energy sectors. As reported by EC-TACIS, for the period 1994-1999 the main sources of foreign direct investment in Azerbaijan were the United States with 28 percent, followed by Britain with 15 percent. FDI in Azerbaijan exploded from only $30 million in 1994 to $827 million in 1999, about 17 percent of Azerbaijan's GDP, with approximately 90 percent of FDI concentrated in the country's hydrocarbons sector, while Kazakhstan FDI accounted for $1.6 billion in the same period. Russia was clearly losing the battle to develop Caspian energy, and an independent Chechen-Dagestani state would make Moscow's position untenable and hence had to be stopped at any cost.

In justifying his 1999 incursion in Dagestan Basayev said, "Our Muslim brothers from Dagestan have asked us for help, and it is our duty to help them," adding, "Our first and foremost task here is to help protect our Muslim brothers from being exterminated by both the Russians and the puppet government of Dagestan." Dagestan, with its 249 miles of Caspian coast if independent in conjunction with Chechnya, would pare Russia's Caspian shoreline nearly back to the Volga delta, leaving it a paltry 66 miles of coastline and shrink its offshore share under Moscow's own formula by four-fifths, from 18.5 to 3.92 percent of a region of which Dick Cheney observed the year before Putin's appointment, "I can't think of a time when we've had a region emerge as suddenly to become as strategically significant as the Caspian."

Upping the ante, in 1998 Bassayev publicly joined the Wahhabi movement even though Chechen President Aslan Maskhadov, although a Muslim, had no intention of turning his nation into a strict Islamic state.

After Basayev in 1999 launched guerilla raids into the neighboring Russian republic of Dagestan which Putin vowed to crush, Maskhadov was forced to finally condemn Bassayev by name but still he did not move to arrest or prosecute him. The raids into Dagestan were followed the next month by series of explosions that hit four apartment blocks in the Russian cities of Buynaksk, Moscow and Volgodonsk, killing 293 people and injuring 651, which prompted Putin's government to invade Chechnya for a second time.

It was war that took no quarter. Basayev determined to take his war into the heart of Russia, declaring all Russians fair game because "They pay taxes. They give approval in word and in deed. They are all responsible." Among the atrocities perpetuated by Basayev was the June 1995 armed takeover of a hospital in the southern Russian town of Budyonnovsk, with 1,500 people held hostage, 166 of whom died when Russian troops stormed the building, and the September 2004 seizure of a school in Beslan, in the southern Russian republic of North Ossetia, where Basayev's men took some 1,000 adults and children hostage. After Russian security forces stormed the school more than 330 people, half of them children, died. Basayev's fighters also took their terror campaign to Moscow; in October 2002 taking 700 people hostage in Moscow's Dubrovka theater. In the ensuing attack by Russian special forces 129 hostages and 41 guerrillas were killed.

Maskhadov, the last legitimate president of the Chechen Republic of Ichkeria, elected in an internationally monitored election in 1997, was killed on 8 March 2005 in a village just outside the capital Grozny and Basayev was killed on 10 July 2006. Even journalists were not immune - Anna Politkovskaya, who fearlessly covered the Chechen conflict, was murdered outside her home in Moscow in October 2006. Russia only ended its counter-terrorism operation and pulled out the bulk of its army from Chechnya in April 2009.

In the wake of the Moscow Metro bombings President Dmitri Medvedev pledged to step up security in Moscow and intensify security in the turbulent northern Caucasus, telling his constituents, "We will continue the operation against terrorists without hesitation and to the end...It is necessary to tighten what we do, to look at the problem on a national scale, not only relating to a certain populated area but on a national scale. Obviously, what we have done before is not enough." As if echoing Medvedev's words, there have been a half a dozen bombings in Dagestan this month alone.

In perhaps the most ominous legacy of the Chechen conflict, on 23 November 1995 Basayev directed a Russian television news crew to a 32-kilogram package of cesium-137 buried in Izmailovsky Park in eastern Moscow, while after the 2002 Moscow theater siege Ahmed Zakayev stated that Chechen militants would seize a nuclear facility. It is the stuff to give security specialists nightmares worldwide.

The effect of the Moscow Metro bombings rippled across the world; in New York, municipal and Metropolitan Transit authority (MTA) officials intensified security, doubling patrols of the subway system and sending New York Police Department's heavily armed Hercules units toting machine guns to several transit hubs, including Penn Station and Grand Central Terminal. City officials said that a similar response occurred after both the 9/11 and after the 2005 attacks on London's transit system.

More than 100,000 people have been killed in 15 years of conflict in Chechnya - with Medvedev labeling the plotters "beasts" and vowing to "find and destroy them all," the only certainty is that the bloodshed will continue. Russia will not leave the northern Caucasus because of the Caspian's future oil prospects, which will leave the region a bleeding militant Islamic sore on Russia's southern flanks. Russian military officials said last week that there were up to 500 terrorist groups operating in the northern Caucasus, so Medvedev's revenge squads will be busy.

And the division of the Caspian's offshore waters? As far away as a final peace in the north Caucasus.


This article was written by Dr. John CK Daly for who offer detailed analysis on Crude Oil, Geopolitics, Gold and most other commodities. They also provide free political and economic intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit:

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