Farrell: Russia's Power Play Could Shift Oil Flows

This was originally published on RealMoney. It is being republished as a bonus for TheStreet.com readers.

There was a report earlier from a Turkish news source that Kazakhstan is considering moving its oil through Russian pipelines and not shipping it to Baku for transport through the Baku-Tbilisi-Ceyhan (BTC) pipeline.

Currently, Kazakhstan ships 500,000 barrels a day by tanker across the Caspian Sea to the BTC pipe and is half the capacity of that pipe. This is the pipe that goes through Georgia to Turkey.

This is only one of the "reassessments" we will surely see as former Soviet satellites consider the newly aggressive Russia and the events in Georgia and South Ossetia. Kazakhstan is one-third Russian ethnically and never sought membership in NATO as its geography makes Russia the natural security partner.

But this is just the beginning. The Kazakhs had considered being part of a new 440-mile underwater pipe through the Caspian from Aktua to Baku, but that is probably up in the air.

That pipeline would have cost over $3 billion and, as events seem to indicate, been under Russian influence. The pipeline would save $3 billion, which would have needed Western financial participation. That's now problematic.

Kazakhstan does ship 200,000 barrels a day eastward to China and look for China to try to reach into the region and become more influential. Look also for the US to attempt a greater rapprochement with China to offset growing Russian influence.

This was originally published on RealMoney on August 25, 2008. For more information about subscribing to RealMoney, please click here.

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