Many Western analysts have chosen to interpret the recent fighting in the Caucasus as the onset of a new Cold War, with a small pro-Western democracy bravely resisting a brutal reincarnation of Stalin’s jack-booted Soviet Union. Others have viewed it a throwback to the age-old ethnic politics of south-eastern Europe, with assorted minorities using contemporary border disputes to settle ancient scores.

Neither of these explanations is accurate. To fully grasp the recent upheavals in the Caucasus, it is necessary to view the conflict as but a minor skirmish in a far more significant geo-political struggle between Moscow and Washington over the energy riches of the Caspian Sea basin - with former Russian President (now Prime Minister) Vladimir Putin emerging as reigning Grand Master of geo-strategic chess and the Bush team turning out to be middling amateurs, at best.

The ultimate prize in this contest is control over the flow of oil and natural gas from the energy-rich Caspian basin to eager markets in Europe and Asia. According to the most recent tally by oil giant BP, the Caspian’s leading energy producers, all former “socialist republics” of the Soviet Union - notably Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan - together possess approximately 48 billion barrels in proven oil reserves (roughly equivalent to those left in the US and Canada) and 268 trillion cubic feet of natural gas (essentially equivalent to what Saudi Arabia possesses).

During the Soviet era, the oil and gas output of these nations was, of course, controlled by officials in Moscow and largely allocated to Russia and other Soviet republics. After the breakup of the USSR in 1991, however, Western oil companies began to participate in the hydrocarbon equivalent of a gold rush to exploit Caspian energy reservoirs, while plans were being made to channel the region’s oil and gas to markets across the world.

Rush to the Caspian

In the 1990s, the Caspian Sea basin was viewed as the world’s most promising new source of oil and gas, and so the major Western energy firms - Chevron, BP, Shell, and Exxon Mobil, among others - rushed into the region to take advantage of what seemed a golden opportunity. For these firms, persuading the governments of the newly independent Caspian states to sign deals proved to be no great hassle. They were eager to attract Western investment - and the bribes that often came with it - and free themselves from Moscow’s economic domination.

But there turned out to be a major catch: It was neither obvious nor easy to figure out how to move all the new oil and gas to markets in the West. After all, the Caspian is landlocked, so tankers cannot get near it, while all existing pipelines passed through Russia and were hooked into Soviet-era supply systems. While many in Washington were eager to assist US firms in their drive to gain access to Caspian energy, they did not want to see the resulting oil and gas flow through Russia - until recently, the country’s leading adversary - before reaching Western markets.

What, then, to do? Looking at the Caspian chessboard in the mid-1990s, President Bill Clinton conceived the striking notion of converting the newly independent, energy-poor Republic of Georgia into an “energy corridor” for the export of Caspian basin oil and gas to the West, thereby bypassing Russia altogether. An initial, “early-oil” pipeline was built to carry petroleum from newly-developed fields in Azerbaijan’s sector of the Caspian Sea to Supsa on Georgia’s Black Sea coast, where it was loaded onto tankers for delivery to international markets. This would be followed by a far more audacious scheme: the construction of the 1,000-mile BTC pipeline from Baku in Azerbaijan to Tbilisi in Georgia and then on to Ceyhan on Turkey’s Mediterranean coast. Again, the idea was to exclude Russia - which had, in the intervening years, been transformed into a struggling, increasingly impoverished former superpower - from the Caspian Sea energy rush.

Clinton presided over every stage of the BTC line’s initial development, from its early conception to the formal arrangements imposed by Washington on the three nations involved in its corporate structuring. (Final work on the pipeline was not completed until 2006, two years into George W. Bush’s second term.) For Clinton and his advisors, this was geo-politics, pure and simple - a calculated effort to enhance Western energy security while diminishing Moscow’s control over the global flow of oil and gas. The administration’s efforts to promote construction of new pipelines through Azerbaijan and Georgia were intended “to break Russia’s monopoly of control over the transportation of oil from the region,” Sheila Heslin of the National Security Council bluntly told a Senate investigating committee in 1997.

Clinton understood that this strategy entailed significant risks, particularly because Washington’s favoured “energy corridor” passed through or near several major conflict zones - including the Russian-backed breakaway enclaves of Abkhazia and South Ossetia. With this in mind, Clinton made a secondary decision - to convert the new Georgian army into a military proxy of the United States, equipped and trained by the Department of Defense. From 1998 to 2000 alone, Georgia was awarded $302 million in US military and economic aid - more than any other Caspian country - and top US military officials started making regular trips to its capital, Tbilisi, to demonstrate support for then-President Eduard Shevardnadze.

In those years, Clinton was the top chess player in the Caspian region, while his Russian presidential counterpart, Boris Yeltsin, was far too preoccupied with domestic troubles and a bitter, costly, ongoing guerrilla war in Chechnya to match his moves. It was clear, however, that senior Russian officials were deeply concerned by the growing US presence in their southern backyard - what they called their “near abroad” - and had already begun planning for an eventual comeback. “It hasn’t been left unnoticed in Russia that certain outside interests are trying to weaken our position in the Caspian basin,” Andrei Y. Urnov of the Russian Ministry of Foreign Affairs declared in May 2000. “No one should be perplexed that Russia is determined to resist the attempts to encroach on her interests.”

Russia Resurgent

At this critical moment, a far more capable player took over on Russia’s side of the geo-political chessboard. On 31 December 1999, Vladimir V. Putin was appointed President by Yeltsin and then, on 26 March 2000, elected to a full four-year term in office. Politics in the Caucasus and the Caspian region have never been the same.

Even before assuming the presidency, Putin indicated that he believed state control over energy resources should be the basis for Russia’s return to great-power status. In his doctoral dissertation, a summary of which was published in 1999, he had written that “[t]he state has the right to regulate the process of the acquisition and the use of natural resources, and particularly mineral resources [including oil and natural gas], independent of on whose property they are located.” On this basis, Putin presided over the re-nationalization of many of the energy companies that had been privatized by Yeltsin and the virtual confiscation of Yukos - once Russia’s richest private energy firm - by Russian state authorities. He also brought Gazprom, the world’s largest natural gas supplier, back under state control and placed a protégé, Dmitri Medvedev - now President of Russia - at its helm.

Once he had restored state control over the lion’s share of Russia’s oil and gas resources, Putin turned his attention to the next obvious place - the Caspian Sea basin. Here, his intent was not so much to gain ownership of its energy resources - although Russian firms have in recent years acquired an equity share in some Caspian oil and gas fields - but rather to dominate the export conduits used to transport its energy to Europe and Asia.

Russia already enjoyed a considerable advantage since much of Kazakhstan’s oil already flowed to the West via the Caspian Pipeline Consortium (CPC), which passes through Russia before terminating on the Black Sea; moreover, much of Central Asia’s natural gas continued to flow to Russia through pipelines built during the Soviet era. But Putin’s gambit in the Caspian region evidently was meant to capture a far more ambitious prize. He wanted to ensure that most oil and gas from newly developed fields in the Caspian basin would travel west via Russia.

The first part of this drive entailed frenzied diplomacy by Putin and Medvedev (still in his role as board chairman of Gazprom) to persuade the Presidents of Kazakhstan, Turkmenistan, and Uzbekistan to ship their future output of gas through Russia. Success was achieved when, in December 2007, Putin signed an agreement with the leaders of these countries to supply 20 billion cubic meters of gas per year through a new conduit along the Caspian’s eastern shore to southern Russia - for ultimate delivery to Europe via Gazprom’s existing pipeline network.

Meanwhile, Putin moved to undermine international confidence in Georgia as a reliable future corridor for energy delivery. This became a strategic priority for Moscow because the European Union announced plans to build a $10 billion natural-gas pipeline from the Caspian, dubbed “Nabucco” after the opera by Verdi. It would run from Turkey to Austria, while linking up to an expanded South Caucasus gas pipeline that now extends from Azerbaijan through Georgia to Erzurum in Turkey. The Nabucco pipeline was intended as a dramatic move to reduce Europe’s reliance on Russian natural gas - and so has enjoyed strong support from the Bush administration.

It is against this backdrop that the recent events in Georgia unfolded.

Checkmate in Georgia

Obviously, the more oil and gas passing through Georgia on its way to the West, the greater that country’s geo-strategic significance in the US-Russian struggle over distribution of Caspian energy. Certainly, the Bush administration recognized this and responded by providing hundreds of millions of dollars in military aid to the Georgian military and helping to train specialized forces for protection of the new pipelines. But the administration’s partner in Tbilisi, President Mikheil Saakashvili, was not content to play the relatively modest role of pipeline protector. Instead, he sought to pursue a megalomaniacal fantasy of recapturing the breakaway regions of Abhkazia and South Ossetia with American help. As it happened, the Bush team - blindsided by their own neo-conservative fantasies - saw in Saakashvili a useful pawn in their pursuit of a long smoldering anti-Russian agenda. Together, they walked into a trap cleverly set by Putin.

It is hard not to conclude that Russian Prime Minister goaded the rash Saakashvili into invading South Ossetia by encouraging Abkhazian and South Ossetian irregulars to attack Georgian outposts and villages on the peripheries of the two enclaves. Secretary of State Condoleezza Rice reportedly told Saakashvili not to respond to such provocations when she met with him in July. Apparently her advice fell on deaf ears. Far more enticing, it seems, was her promise of strong US backing for Georgia’s rapid entry into NATO. Other American leaders, including Senator John McCain, assured Saakashvili of unwavering US support.

Whatever was said in these private conversations, the Georgian President seems to have interpreted them as a green light for his adventuristic impulses. On 7 August, by all accounts, his forces invaded South Ossetia and attacked its capital city of Tskhinvali, giving Putin what he long craved - a seemingly legitimate excuse to invade Georgia and demonstrate the complete vulnerability of Clinton’s (and now Bush’s) vaunted energy corridor.

Today, the Georgian army is in shambles, the BTC and South Caucasus gas pipelines are within range of Russian firepower, and Abkhazia and South Ossetia have declared their independence, quickly receiving Russian recognition. In response to these developments, the Bush administration has, along with some friendly leaders in Europe, mounted a media and diplomatic counterattack, accusing Moscow of barbaric behaviour and assorted violations of international law. Threats have also been made to exclude Russia from various international forums and institutions, such as the G-8 club of governments and the World Trade Organization. It is possible, then, that Moscow will suffer some isolation and inconvenience as a result of its incursion into Georgia.

None of this, so far as can be determined, will alter the picture in the Caucasus: Putin has moved his most powerful pieces onto this corner of the chessboard, America’s pawn has been decisively defeated, and there’s not much of a practical nature that Washington (or London or Paris or Berlin) can do to alter the outcome.

There will, of course, be more rounds to come, and it is impossible to predict how they will play out. Putin prevailed this time around because he focused on geo-political objectives, while his opponents were blindly driven by fantasy and ideology; so long as this pattern persists, he or his successors are likely to come out on top. Only if American leaders assume a more realistic approach to Russia’s resurgent power or, alternatively, choose to collaborate with Moscow in the exploitation of Caspian energy, will the risk of further strategic setbacks in the region disappear.

Michael T. Klare is professor of peace and world security studies at Hampshire College and author of Rising Powers, Shrinking Planet: The New Geopolitics of Energy (Metropolitan Books). Courtesy TomDispatch.com