Georgia conflict could hurt oil

Russian soldiers are seen on armored vehicles on their way to South Ossetia -- August 10, 2008

TEXT OF INTERVIEW

Scott Jagow: This conflict between Russia and Georgia is having a widespread economic impact. Today, Russia's stock market fell to its lowest level in about two years. And the price of oil climbed a dollar from three-month lows. It's at $115 a barrel. The fighting in Georgia could threaten a key oil pipeline.

Let's bring in our European correspondent Stephen Beard on this. Stephen, tell us more about this pipeline.

Stephen Beard: It's the second-longest pipeline in the world, 1,100 miles. It stretches from the Caspian Sea through Georgia and it winds up on the Turkish/Mediterranean coast, where the oil is shipped off -- most of it to Western Europe.

Jagow: And how crucial is this pipeline to the world's oil supply?

Beard: Well, it's carrying about a million barrels a day, and it's the kind of crude that the West needs the most -- it's the light, sweet crude that we want. From Europe's point of view, this pipeline is strategically very important, because it doesn't pass through either Russia or Iran -- it passes through countries that are broadly friendly to the West.

Jagow: Well Stephen, has this pipeline been damaged that we know of? And what are the prospects for it getting damaged during this conflict?

Beard: Well, there were reports during on the weekend that Russia had dropped bombs in the vicinity of the pipeline. It passes only about 35 miles from the South Ossetia border. BP, which owns 30 percent stake in the pipeline, says it hasn't been damaged -- most of it is actually buried. However, actually, there was an attack on the Turkish section of the pipeline last week -- apparently by Kurdish separatists -- which closed the pipeline down, and a lot of oil had to be shipped by rail and other means to get out to the West. So there's no doubt that although it doesn't appear to have been damaged yet, it is vulnerable. And the longer the fighting goes on, the more vulnerable it could become.

Jagow: All right. Stephen Beard in London. Thank you.

Beard: OK, Scott.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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