RIYADH, Aug 30: The ongoing tussle in Georgia has serious energy connotations. The old energy wizard, the Halliburton fame US Vice President Dick Cheney heads to Caucasus this week, amidst growing signs of a prolonged tussle between the US and Russia.

Concerns over Georgia and the possibility that the tropical storm Gustav could become the first major storm since 2005 to hit oil installations in the Gulf of Mexico, finally caught up with the markets.

Post-Georgia Russian worries have helped push the oil price up by 8 per cent before it started to fall back somewhat. Despite little change in fundamentals, crude markets bounced back last week in what was described as the biggest gain in more than two months - rising 5 per cent last week amid rising tension in Georgia. And the rise continued this week too.

The disputed regions of South Ossetia and Abkhazia had visible energy links. This was no ordinary piece of land. The war was never really just about territory or ideology; it was about influence over a vital energy corridor to the West. And the markets take such indications very seriously.

This disputed region is home to the pipeline carrying oil from the Caspian Sea to Europe. The 1,774-km Baku-Tbilisi-Ceyhan (BTC) pipeline, carrying Azeri oil from the Caspian Sea fields to Turkey’s Mediterranean port of Ceyhan, is the second-longest oil pipeline in the world, capable of transporting 1.2 million barrels of crude per day, bypassing Russia.

It stretches from Baku, Azerbaijan, through Georgia, passing very close to the Georgian capital Tbilisi and then travelling on to the Turkish coastline from where the oil is shipped to hungry western markets.

And this energy corridor made the region increasingly important for the West. Neither Russia nor the West could have remained oblivious to the geo-political and strategic importance of the developments in South Ossetia and Abkhazia - from an energy security point of view. In fact it was not just the BTC pipeline that was coming under fire. The entire infrastructure around the region was under threat. The British oil company BP also had to stop using a railway line that exported Azeri oil through Georgia, following reports of damage to the line. This railway track too carried between 50,000 and 70,000 barrels of oil a day.

Russia was already furious over Georgia’s overtures to West. The message from Moscow was clear; it cannot tolerate any intrusion in its oil-rich backyard. On the other hand, for the US and the West energy security is a vital issue. Russian flexing of muscles has been taken seriously in both Washington and Brussels for obvious reasons.

The US says it needs to have a significant re-think of how it relates to Russia, cancelling joint-military exercises and warning of serious long-term implications.

The strategically timed signing of the US missile defence shield plan with Poland also needs to be seen in this perspective.

Meanwhile, Angela Merkel, Germany’s chancellor went to Russia to serve President Dmitri Medvedev a stern warning, before travelling on to Tbilisi where she notably switched her position on Georgian membership of Nato.

Had there been no such Western interests in the region, would Georgia have been tempted to initiate the conflict in the first hand and secondly would the Russians have moved in so swiftly in reaction?