CONFLICT in Georgia has shaken but is unlikely to scare off investors in the region, drawn by its energy resources and vital oil and gas links to the West. Analysts agree that while the dispute has had a limited impact on the price of oil and gas, investors will be more nervous about investing in the Caspian region, questioning its reputation as means of reducing exposure to Russia. “Situations like this lead to a general sense of instability and so I think investors will have to weigh-up chances of continuing problems in the region going forward,” Jeffrey Woodruff, Senior Director in Energy, Utilities and Regulation at Fitch Ratings said. Fitch downgraded Georgia to B+ with a negative outlook last week when Georgia launched an offensive against separatists in the breakaway region of South Ossetia. “You wonder how much transportation risk has been mitigated or reduced by building infrastructure through more volatile regions, but it's too early to make that assessment just yet,” Woodruff added. Fighting in Georgia has skirted dangerously close to major oil and gas pipelines that provide a valued alternative to Russian supplies. Two major pipelines feed gas and oil to Europe from the Caspian Sea, which was seen as a relatively secure supply route enabling Europe to reduce its dependence on Russian energy. On Tuesday BP closed the Baku-Supsa gas pipeline which leads to the Georgian port of Supsa because of the conflict. Earlier last week the Baku-Tbilisi-Ceyhan (BTC) oil pipeline, which runs close to Georgia's capital Tbilisi towards the Turkish port of Ceyhan, was shut down because of an explosion unrelated to the Georgia conflict for which Kurdish separatists claimed responsibility. A gas pipeline from Baku, through Tbilisi, leads to the port of Sukhumi in Georgia's other separatist region Abkhazia, where Russia sent troops on Monday. The closure of the BTC pipeline places further pressure on Georgia's energy infrastructure and flow of Caspian oil and gas to markets in Europe. “(The conflict) should give second thoughts about seeing any region as the safe haven or the magic bullet type solution to energy security,” Clifford Gaddy, a senior fellow at Brookings said. Harden resolve? But some investors argue the conflict will have no effect at all on investments and say earlier clashes between Russia and separatist regions have not stopped them. One drew a comparison with Chechnya, although, unlike Georgia, it is not a major energy transit route. “If you look at the long war in Chechnya that Russia had, again it had no measurable impact on the domestic growth scenario,” said George Nianias, chairman of Denholm Hall Capital Markets, which invests in private Russian companies. “And that was a long and a bad and a protracted war. I don't really see this having any impact ... Investors will look at it, digest it, and if they see that event has no impact on their investments, they won't divest,” Nianias added. The Georgian conflict is a reminder to European countries, which draw energy from the Caspian, that Russia will always have an interest in controlling pipelines transiting its border countries. It may also concern the Nabucco consortium which, with the backing of the EU, plans to build a new pipeline, to draw gas from the Caspian and the Middle East by 2013. “One likely result is that the events will harden the resolve of those governments and companies who seek to bypass Russia in extracting Caspian resources,” an analyst at a US-based assistance organization with offices in Georgia and Russia said. “The Russian military actions in Georgia will likely have a profound affect on relations between Russia and all the former soviet states, particularly Ukraine, which like Georgia aspires to join NATO,” he added. – Reuters __