The Caspian Basin's massive potential as an energy supplier is well-known, but nearly two decades after the collapse of the Soviet Union there are still only a few routes for bringing energy resources from the region to Europe.
One traditional and well-established route goes through Russia, with new but far from sufficient avenues traveling through the Caucasus and Turkey (the Baku-Tbilisi-Ceyhan oil pipeline and Baku-Tbilisi-Erzurum gas pipeline).
Changing the existing setup is the focus of the Baku conference. Russia was invited to attend the conference, but according to U.S. Deputy Secretary of State Mathew Bryza, Moscow "chose not to show up."
This is perhaps a result of the nature of this discussion, which is expected to center on finding ways of getting Caspian oil and gas to Europe while circumventing Russia.
Officials from Bulgaria, Hungary, Estonia, Lithuania, Poland, and Ukraine, all either former Soviet satellite states or former Soviet republics, are in attendance. Some of these countries received good news when Azerbaijani President Ilham Aliyev addressed the summit touting the possibilities of the proposed Odesa-Brody-Plotsk-Gdansk oil pipeline.
In a talk last Saturday at the Council on Foreign Relations, Medvedev mentioned a new Russian idea on how these resources should flow:
We even worked out a special energy security concept which was proposed to our partners and the G8 summit in St. Petersburg. What's the essence of this strategy? It's the opportunity to create a new equal system of energy security where interests of all participants in the energy chain are well-balanced: countries and companies which produce oil and natural gas, as well as other energy products; transit countries; and consumer countries. This may be the most complex problem. But that's the essence of the strategy, because the existing regulation is not sufficient, in our opinion, and in some cases it's not beneficial to the Russian Federation.
It's not quite clear what he means by this, although presumably he'd like to see more piplines going from the 'Stans through Russia.
The real issue here is gauging Russian intentions -- we can't be sure, at this point, whether or when Russia would again turn off the gas to Europe.
There are to important things to say about this. Firstly, it looks from Medvedev's proposition that Russia wants to see higher gas prices, and that prospect should be worrying for European leaders. While I don't like routing gas and oil supplies through the Caucasus -- it encourages bad behavior in Azerbaijan and makes Georgia a greater flashpoint than it needs to be -- but I'd rather use the Caucasus routes that give Russia less of a chance of arbitrarily throwing its weight around.
Concomitantly, routing oil and gas through the Caucasus encourages good Russian behavior. With the pipelines close but out of reach, Russia will need to deal with these countries on a moderately more level field. Sabre rattling with Georgia is a public display of bad faith; working with the Caucasian countries (and, notably, Ukraine, should the proposed new pipeline be laid) would be a symbol of good faith, and the basis for further relations. It could act as a very public litmus test for Russia's trustworthiness as a responsible global player.