The conflict that has erupted in the Caucasus has set alarm bells ringing because of Georgia's pivotal role in the global energy market.

Georgia has no significant oil or gas reserves of its own but it is a key transit point for oil from the Caspian and central Asia destined for Europe and the US. Crucially, it is the only practical route from this increasingly important producer region that avoids both Russia and Iran.

The BTC pipeline, running through Georgia, is a key plank of US foreign policy because it reduces Western reliance on oil from both the Middle East and Russia. Georgia has already claimed that Russia has tried to bomb the pipeline and Azerbaijan halts their shipments of oil through Georgian ports (source: Kommersant [1]). How large the impact on oil prices will be remains to be seen as the oil market opens tomorrow.

Read more about the BTC pipeline here: Wikipedia [2]
Read more: Times Online [3]