It was controversial from the start. Now President Saakashvili claims that Georgia's BTC oil pipeline was a key reason for the Russian offensive.

When it was conceived in the 1990s, the pipeline was backed by the US and Britain as a way to reduce Western dependence on Russian and Middle-Eastern oil. UK taxpayers even underwrote some of the $3billion construction costs. But Russia always opposed it, wanting to maintain its grip on the vast resources of the former Soviet Caspian region. Its strategic value is clear. At current prices it carries more than $1billion worth of crude oil every ten days.

Strangely, when the current war broke out, the pipeline, which is 30 per cent owned by BP, was closed. Just 48 hours before Georgian troops made their ill-fated incursion into South Ossetia, a mysterious fire broke out several hundred kilometres away in the Turkish section. Kurdish rebels later claimed responsibility, though there is still some uncertainty about the cause.

So far, oil markets have not reacted strongly to the war despite reports that the Russians have tried to bomb the pipeline. The market has preferred to focus on signs that global oil consumption is slowing as the world economy has weakened. But a sustained war in the Caucasus or efforts by Russia to seize control of the pipeline would create the threat of higher prices - and hence more expensive petrol on UK forecourts.

Many people have another stake in the future of the pipeline through their ownership of shares in BP, Britain's largest company, although as pension-holders they may well not know that the funds they depend on hold such shares.

With the depletion of reserves from the North Sea, oil from the Caspian region is of growing importance to Europe. As North Sea oil declines, high-quality crude from Azerbaijan is helping to take up the slack - and the BTC is likely to become even more important as the taps are opened on the vast new oilfields of Central Asia.

When it was discovered in 2000, Kazakhstan's Kashagan oilfield was the largest found since the 1960s. It has not yet entered commercial production - but when it does, the BTC will be its route to market. Understandably, Russia wants control over these reserves, which are of growing strategic importance to global energy supplies.

While oil prices tend to be influenced by shorter-term factors, the prospect of direct Russian control of the BTC pipeline would be unwelcome in the West, bolstering the Kremlin's dominance over our energy future. This is one key reason why the current conflict is raising hackles in the West.

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