In the moment where oil prices began to decline on world markets, and after that a barrel of oil has lost about 30 dollars of its price in two weeks, the conflict triggered wednesday between Russia and Georgia because of "south Ossetia", a Georgian separatist province "pro-Moscow", has raised fears of Western countries on energy supply and re-ignited oil prices.

The violent fighting in the Caucasus region weaken the situation of Georgia as a vital corridor for the transfer of oil from the Caspian Sea to the West. The Western countries are concerned about the safety of the pipeline "Baku-Tbilisi-Ceyhan", known as the "BTC" and whose construction costs have reached three billion dollars, especially after the Georgian Prime Minister Addo Georjennitsais has said that Russian aviation bombed last Saturday areas close to the pipeline which was not damaged.

Despite that Georgia is not a producer of oil or gas, Western oil companies give a lot of interest in this country for the development of oil and gas exports from Azerbaijan on the shores of the Caspian Sea. This is explained mainly by the position of Tbilisi. Pro-West and neighbouring Azerbaijan, Georgia occupies a strategic position between Iran, with its rich crude, and pipelines carrying gas and oil in the region monopolized by Russia.

Since the arrival of Georgian President Mikhail Saakashvili, in power since 2004, and his encouragement to the rapprochement between Tbilisi and the West, two pipelines have been activated. But the dispute with Russia would endanger the role played by Georgia as passage of pipelines. A matter that started with the decision of Azerbaijan, last Saturday, concerning the suspension of oil exports via the Georgian ports of Batumi and Kulevi on the Black Sea.

The pipeline "BTC", 1774 km long, has been activated in 2006 to transport 1.2 million barrels per day of Azerbaijani oil from Caspian Sea to the Turkish port of Ceyhan on the Mediterranean. The company British Petroleum (BP), holds 30% stake in this pipeline in which ten other Western oil giants such as American "Chevron" and ConocoPhillips" participate.

The British Petroleum has also upgraded the pipeline "Baku-Soupsa", which dates back to Soviet times and which leads to the coast of Georgia on the Black Sea. The western companies have also a potential pipeline "Baku-Tbilisi-Erzeroum", with 692 kilometers long, to transfer some 8 billion cubic meters of gas per year from the offshore "Shah Deniz" in Azerbaijan to the borderes between Georgia and Turkey.

Although oil prices have again turned higher today on world markets and the barrel won more than a dollar, Paul Stevens, an analyst at the Institute "Chatham House in London and specialist markets Petroleum, said that the fate of the pipeline "Baku-Tbilisi-Ceyhan" should not affect in immediate future, the oil markets. He says that the transfer of oil through this pipeline has been interrupted since last Wednesday after a fire caused by an explosion in Turkey.

Stevens addes that even if the pipeline remained closed for a week or two more its impact on the supply of oil on the world market is limited.

For Natalia Levchenko, economic analyst at Global Insight, she believes that pipelines of gaz and oil would not be affected unless there is an escalation of tension and Russia decides to impose a total economic embargo on Georgia.

However, Michael Denison, an analyst at "Chatham House, thinks that this possibility is low, explaining that it would be an extremist act from the part of Russia to control pipelines, specially that NATO will take this act For a genuine threat to its security, which will require a military response.

Despite this, analysts agree that the battles in Georgia will push the investors, on long-term basis, to avoid investing in oil and gas in the Caspian Sea, which was until recently considered as alternatives to Middle Eastern and Russian oil and gas.

The question now is: Will the European mediation, which the french minister of Foreign Affairs Bernard Kouchner has begun today, help calming the situation between Moscow and Tbilisi, or oil prices will demonstrate a new outbreak and inflationary pressures in the four corners of the world will increase at a time when the global economy has not recovered from successive blows which had hitten it during the past year?!