Headlines about conflicts in far-away lands are often met with a collective shrug of the shoulders by the broader market, especially when the conflict has been running for as long as this one.

'But this time it's different'

The favourite words of every market analyst.

(It probably isn't, but that doesn't mean you should ignore it).

So, this conflict is centred in Nagorno-Karabakh

Key Nagorno-Karabakh Facts (BBC)

  • A mountainous region of about 4,400 sq km (1,700 sq miles)
  • Traditionally inhabited by Christian Armenians and Muslim Turks
  • In Soviet times, it became an autonomous region within the republic of Azerbaijan
  • Internationally recognised as part of Azerbaijan, but majority of population is ethnic Armenian
  • An estimated one million people displaced by 1990s war, and about 30,000 killed
  • Separatist forces captured some extra territory around the enclave in Azerbaijan in the 1990s war
  • Stalemate has largely prevailed since a 1994 ceasefire
  • Russia has traditionally been seen as an ally of the Armenians

The conflict has been going on for three decades.

Time to ask the key question...

So what?

Important oil & natural gas pipelines run pretty close to the conflict region.

The Baku-Tbilisi-Ceyhan pipeline (red) transports oil from the Caspian Sea into Turkey, via Georgia.

The Baku–Tbilisi–Erzurum Pipeline (blue) is a natural gas pipeline that runs parallel, but finishes in Erzurum.  

The first aim of the pipeline is to supply Turkey and Georgia.
As a transit country, Georgia has rights to take 5% of the annual gas flow through the pipeline in lieu of a tariff and can purchase a further 0.5 billion cubic metres (18 billion cubic feet) of gas a year at a discounted price.
In the longer term, it will supply Europe with Caspian natural gas through the planned Southern Gas Corridor pipelines, such as the Trans Adriatic Pipeline and Trans-Anatolian gas pipeline.

(Via Wikipedia)

Reuters noted in their earlier report;

Any move to all-out conflict could drag in major regional powers Russia and Turkey.
Moscow has a defence alliance with Armenia, while Ankara backs its ethnic Turkic kin in Azerbaijan.
Armenian, Azeri forces battle again, at least 21 reported killed
At least 21 people were killed on Monday in a second day of heavy clashes between Armenia and Azerbaijan over the territory of Nagorno-Karabakh that reportedly involved air power, missiles and heavy armour.
So what?

Well, The EU are trying to reduce their energy dependence on Russia.

This 'Southern corridor' was an EU initiative started back in 2008.

Significant loans were granted via the European Investment Bank, & the European Bank for Reconstruction and Development, together with other regional development partners.  

The whole history is here

Completion of the Nordstream 2 project was thrown into some doubt after the poisoning of Navalny.

Some may cry foul, and accuse Russia of 'fuelling' the conflict for strategic benefit.

Maybe that's the case, but I would say again...

So what?

A drawn out conflict could certainly lead to a closure of the pipelines, either for safety reasons, or due to strategic attacks.

However, this story is worth monitoring for different reasons, as a prolonged escalation could substantially influence the geopolitical landscape.

U.S. Secretary of State Pompeo said recently

"The US believes the Nord Stream 2 pipeline creates a risk for Europe by becoming dependent on gas that's coming out of Russia and also threatens Ukraine, something I know many German people care deeply about,".

If the EU becomes even more reliant on Russia for energy, they will once again find themselves in the middle of another conflict, instead of securing their future energy supply.

To finish, it is worth noting that Nord Stream 2 doesn't have too many fans in Eastern Europe either;

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Further Reading;

Clashes on Azerbaijan-Armenia Border Threaten Regional Transport and Energy Routes - Jamestown
On July 12, Armenian and Azerbaijani forces exchanged fire along the state border in the Tovuz region of Azerbaijan and Armenia’s Tavush province, resulting in several days of intense cross-border clashes involving heavy artillery exchanges (Mod.gov.az, July 12). The two countries have been under a …
Explainer: Why The Nagorno-Karabakh Crisis Matters
Reasons to hope that the Nagorno-Karabakh cease-fire announced on April 5 holds include pipelines and military alliances.
6 ways Germany could kill the Nord Stream 2 pipeline
Germany has multiple options if it decides to try and halt the project, but they carry costs.
Russia, US continue to clash over fate of Nord Stream 2 gas pipeline | S&P Global Platts
Pipeline a ‘matter of honor’ for Germany: Lavrov US eyes ‘coalition’ of opposing countries Shipping insurers warn against covering vessels Russia and the US continue to clash over the future of the No
The ‘Expanded’ Southern Gas Corridor: What Comes After 2020? - Institute of Energy of South East Europe
by Marika Karayianni*
What Nord Stream 2 means for Europe