The Daily Reckoning’s

Time to return to the story that put a floor under the oil price two weeks ago, and may yet send it shooting skyward — the Russo-Georgian hot war that may well start a second Cold War.

Today and tomorrow mark the annual summit of the Shanghai Cooperation Organization — a loose alliance of population giant China, energy giant Russia, and four of the energy-rich former Soviet republics in central Asia.  The SCO formed in the summer of 2001 and at the time appeared to be yet another country club of government leaders who get together to discuss "international cooperation," "mutual interests," and other hokum.

But around 2005, the SCO brought pressure to bear on the United States to close a military base in one of its member states, Uzbekistan.  As it was, Russia was already itchy about America mucking around in its backyard (NATO expansion, Western-engineered "revolutions" in Georgia and Ukraine, etc.)  At this point, though, it became evident the SCO was evolving into what diplomats might call a "counterweight" to U.S. power.

That was then.  This is now:  The SCO "expressed grave concern on Thursday over tensions in Georgia and called for reconciliation and more talks to resolve the conflict," according to the Financial Times.  "This was at odds with Russian president Dmitry Medvedev’s earlier call for 'united' support from the group’s leaders for Moscow’s intervention in Georgia and subsequent recognition of South Ossetia and Abkhazia as independent states."

Oops, sounds as if Russia overplayed its hand.  Not that any amateur geostrategist should be surprised.  As the FT points out, China isn't too keen to give its imprimatur to secessionist movements in Georgia, seeing as it has its own secessionist movements in Tibet and Xinjiang (the western province dominated by ethnic Uighur Muslims) — to say nothing of Taiwan.

And this may not be the only blow Russia takes at the SCO conference.  Russia may also lose out on a bid to expand SCO membership to one or more of the following countries — Iran, Pakistan, India, and Mongolia.  Given the decades-long enmity between India and Pakistan (to say nothing of India and China, which still have an unresolved border dispute), Moscow has suddenly bit off rather more than it can chew.

One would hope that given Moscow's momentarily chastened state, wise leaders in Washington would take advantage and try to calm the waters with Russia — which unlike Iraq and Iran actually do possess nuclear weapons that could reach the United States. 

But that hope would be in vain:  The number of NATO warships in the Black Sea is growing, and the State Department's top Russia hand just hurled a slew of insults Moscow's way in the Washington Post: "Russia is going to have to come to terms with the reality it can either integrate with the world or it can be a self-isolated bully. But it can't be both. And that's a choice Russia has to have."  Another diplomat, cowering under anonymity, told the Post it's time for Russia's leaders to "sober up."  That's swell — insinuate that Putin and Medvedev have at least figuratively hit the sauce like old Boris Yeltsin.  No doubt this article will be fodder for much caustic commentary on the Voice of Russia in the next couple of days.  (VOR's rhetoric has become much more fierce since I first wrote about Radio Moscow's successor mouthpiece six months ago.)

I imagine Pat Buchanan will write about this in a few days — every column he's written about the Russo-Georgian war since its outbreak has been a gem — but it's worth noting now that both major-party presidential candidates are surrounded by advisers chomping at the bit for a new Cold War.  It's not just McCain's neocons (including his national security guy, who was a registered lobbyist for Georgia's government); Joe Biden talked trash to Russia last night in his speech accepting his nomination as Obama's running mate, and the clueless delegates clapped like seals.

As if the energy markets didn't have enough to worry about.