But there is also Caspian Sea oil and natural gas to consider, particularly from Azerbaijan, which inhibits Russia's monopoly. Oil and natural gas pipelines built with the help of Western energy companies in the 2000s bring energy from the Azerbaijani capital of Baku through Georgia to Turkey and onwards to Europe. Furthermore, the Nabucco pipeline network has the potential to bring Caspian Sea natural gas across the Caucasus and Turkey all the way to Austria, with spur lines coming from Iraq and Iran. Obviously, this is a complex and politically fraught project that has not materialized. Winning out over Nabucco has been the Trans-Adriatic Pipeline (TAP), a far less ambitious network that will bring Azerbaijani natural gas across Turkey to Greece and Italy. Because TAP avoids Central Europe and the Balkans, its selection over Nabucco constitutes a clear victory for Russia, which wants Central and Eastern Europe dependent on it and not on Azerbaijan for energy. In fact, Russian political pressure was a factor in TAP's victory over Nabucco.
The real long-term threat to Russian influence in Europe comes less from Azerbaijan than from the building of liquefied natural gas (LNG) terminals. These are facilities located on coastlines that convert LNG back to natural gas after it has been liquefied to enable transport across seas and oceans. With an LNG terminal, a country is less dependent on pipelines emanating from Russia. Poland and Lithuania are building such terminals on the Baltic Sea and Croatia wants to build one on the Adriatic. The Visegrad countries of Hungary, the Czech Republic and Slovakia have been building pipeline interconnectors, in part to integrate with -- and take advantage of -- these Baltic terminals. This LNG comes from many sources, including North Africa, the Middle East and North America. That is why Russia is deeply concerned about vast shale gas discoveries in the United States and elsewhere in Europe -- natural gas that could eventually be exported with the help of LNG terminals to Central and Eastern Europe.
Russia is also worried about the European Union's attempt to break its energy monopoly through legal means. According to new legislation known as the Third Energy Package, which is still in the process of being implemented, one energy company cannot be responsible for production, distribution and sales, because the European Union defines that as a monopoly. And such monopolistic practices actually describe Russian energy companies like Gazprom. If the European Union gets its way, Russian corporate control will be unbundled.
Therefore, we forecast that Russia's use of energy to extract political concessions will weaken over time, but will nevertheless remain formidable in parts of Central and Eastern Europe. While energy has served as an effective tool for Russia to wield political influence in Europe, Moscow is first and foremost concerned about maintaining the revenue from energy exports that has become so crucial for Russia's own budget and economic stability. In this sense, maintaining European market share (and further developing market share in Asia) takes precedence over political manipulation for Moscow.
Consequently, Russia will have to become even more subtle and sophisticated in the way that it deals with its former Soviet republics and Warsaw Pact satellites.
