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Georgia Fighting Raises Concerns Over Oil Pipeline, Prices


One of the world's newest and longest oil pipelines transits war-torn Georgia from east to west, carrying Azeri crude across Azerbaijan and Georgia to the Turkish port of Ceyhan on the Mediterranean Sea. VOA's Barry Wood has more on the strategic importance of what is known as the the BTC pipeline.

The 1,600-kilometer Baku-Tbilisi-Ceyhan (BTC) pipeline was opened two years ago. It has been transporting about 850,000 barrels of Azeri oil every day to the Mediterranean port of Ceyhan.

The line, which cost over $3 billion to build, has a capacity of well over one million barrels a day. It is strategically important because it is the only westward route for Caspian Basin oil that does not cross Russian territory.

"It's an important link from the Central Asian area to the European area," said Alexander Wostmann. "It is important as well because it bypasses Russia and Iran. And, so, it is not only a practical project, it has also been a political project," said Alexander Wostmann, an oil analyst near Cologne, Germany.

Russia is the dominant oil and gas supplier to Western Europe. For strategic reasons, Western governments have sought alternative routes to get Caspian Sea oil and gas to world markets. The BTC pipeline was built by a Western consortium, with major support from the U.S. government. Britain's giant petroleum company, BP, has a 30 percent ownership stake in the pipeline.

So far, BP officials in Tbilisi say the pipeline has not been damaged by the fighting in Georgia. However, Kurdish guerillas claim responsibility for an explosion that last week damaged the pipeline in eastern Turkey. John Kingston is an analyst at Platts Oilgram in New York.

"Let's remember something," said John Kingston. "Right now, the problem with the pipeline is not something the Russians have done. It is what Turkish separatists on Turkish soil [have done]."

No oil has been flowing through the BTC line for several days. David Kirsch of PFC Energy in Washington believes the Russia-Georgia conflict is not primarily about oil.

"They're [the Russians] there to secure their own interests in South Ossetia and Abkhazia and they're not really there to wage energy diplomacy, or to threaten Western interests more widely."

Kirsch spoke on CNBC Television. Oil analyst Wostmann in Germany agrees that the conflict in Georgia is not about oil.

Despite the continuing fighting in Georgia and the suspension of shipments through the BTC line, oil prices Monday continued what has been a three-week long decline. Oil in New York ended the day down 75 cents a barrel at just over $114. Oil prices are now at a three-month low, and the price has fallen 22 percent from its mid-July high of $145 a barrel. Analysts say the recent price decline has occurred because demand has fallen significantly in North America and also in Western Europe.

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