THE EVENT: A fragile peace between Russia and Georgia seemed to be holding on Thursday even as explosions rocked the strategic Georgian town of Gori, and Moscow and Tbilisi traded accusations of ceasefire violations.
A Georgian Interior Ministry spokesman accused Russia of attempting to destroy Gori and the strategic Black Sea port of Poti, which are still under the control of the Russian military. A senior Russian commander said his armed forces aren't yet ready to give a date for their withdrawal from Georgian territory.
Meanwhile, rebel leaders from the Georgian province of South Ossetia said they intend to achieve full independence from Tbilisi. Russian President Dimitry Medvedev vowed that Moscow would act a guarantor of the security of South Ossetia and Abkhazia if they choose to become independent.
BP PLC (BP) said they have restored gas exports from Azerbaijan into the South Caucasus gas pipeline, which runs through Georgia into Turkey. The 150,000-barrel-a-day oil pipeline from Baku to the Georgian port of Supsa remains shut down, BP said. Both pipelines were suspended as a precaution after Russian bombs fell near them on Tuesday. The 1-million-barrel-a-day capacity Baku-Tbilisi-Ceyhan pipeline remains shut down after a fire in Turkey.
Russia said it would boost the export capacity on the Baku-Novorossiisk pipeline by around 60,000 barrels a day to allow more Azeri oil to reach the Black Sea.
THE IMPACT: Estimates of the amount of people killed or injured in the conflict vary, with Moscow accusing Georgian forces of killing 2,000 civilians as well as military personnel. The U.N. Refugee Agency said 100,000 people had been displaced by the conflict.
The clash threatened vital oil and gas infrastructure. A Wall St. Journal reporter visiting the site of the BTC pipeline, which was pumping around 850,000 barrels a day of crude from Azerbaijan to the Mediterranean before it shut down, found a row of large craters near the pipeline in an uninhabited area, suggesting Russia had deliberately targeted the pipeline, but missed. Georgian officials also accused Russia of targeting the Baku-Supsa pipeline.
Russia has categorically denied attempting to bomb pipelines on Georgian soil.
Analysts say the conflict raises doubts over Georgia's viability as safe alternate route for oil and gas supplies from Central Asia to global markets.
OIL PRICES: Crude oil prices continued to shrug off the conflict Thursday as concerns over weak demand took center stage. After leaping $2.99 a barrel Wednesday on big reported drawdowns in U.S. petroleum stocks, Nymex crude resumed the down pattern of the last month. It is off more than 20% since breaching $147/barrel in July.
WHAT THEY SAID:
"Russian troops are destroying the city of Gori. There are sounds of explosions...They are destroying everything in Poti port...they are destroying newly build roads in western Georgia," said Georgian Interior Ministry spokesman Shota Utiashvili.
"I am not ready to say the withdrawal date because the plan is not ready," said the deputy head of Russia's General Staff Anatoly Nogovitsyn.
"We will achieve independence in accordance with all of the rules of international law," said South Ossetian leader Eduard Kokoity.
"We support any decision taken by the people of South Ossetia and Abkhazia...we won't just support this solution, but will guarantee it," said Russian President Dimitry Medvedev.
Human Rights Watch said its researchers in South Ossetia had, "witnessed terrifying scenes of destruction in four villages that used to be populated exclusively by ethnic Georgians."
"Georgia's reputation as a safe alternate route for pipelines bringing oil and gas from (Central Asia) into the Mediterranean has been compromised...it plays into Russian hands because most of the other viable options go through Russian territory," said Robert Johnston, director of energy and natural resources at consultancy Eurasia Group.