Russia supplies a quarter of Europe's gas, much of which travels via Soviet-era pipelines through Ukraine. On New Year's Day, Russia cut supplies to Ukraine over debt and pricing disputes, though kept enough gas for European consumers. But Moscow turned the taps off soon after, accusing Ukraine of siphoning off the remaining supply.

This has escalated Europe's aims to decrease reliance on Russian gas supplies. The Budapest summit is grappling with the multitude of problems connected with bringing one of its pet projects, the 2,050-mile Nabucco pipeline, to fruition, the one potential project that could solve many of Europe's energy concerns at a stroke.

The project is heavily backed by the United States. In the Bush administration, the State Department attempted to bring suppliers, transit countries and consumers together. During her confirmation hearing earlier this month Secretary of State Hillary Clinton was asked about the Nabucco project and assisting Europe with ending dependence on Russian gas.

"We've had individual envoys on specific pipeline issues, but we haven't brought it all together in a way that I think reflects the elevated seriousness of the challenges that are being posed," she said. "Specifically with respect to Russia and its interactions with Ukraine, Georgia, other European countries, its recent purchase of the Serbian gas utility, I hope we can make progress with our friends in NATO and the EU to understand that we do need a broader framework in which we can talk about energy security issues."

Attending the Budapest summit were pro-Nabucco officials from Austria, Romania, Bulgaria, Turkey and Germany and potential supplier nations Azerbaijan, Kazakhstan, Turkmenistan, Iraq and Egypt, as well as Georgia, a potential transit country. All had gathered to brainstorm how to move Nabucco off the drawing board to reality.

Nabucco's eventual success will hinge on four interrelated issues: guarantee of supply, guarantee of financing, lingering regional geographical issues and the internal policies of transit countries. While none of the obstacles is necessarily insurmountable, collectively they add up to a series of substantial hurdles whose resolutions could significantly delay if not derail the project altogether.

Nabucco is the most extensive gas pipeline yet proposed, as it would link in its various permutations the Caspian region, the Middle East and Egypt via Turkey, Bulgaria, Romania, Hungary, Austria and further on to the Central and Western European gas markets. It is also the most expensive Western energy project yet proposed for the post-Soviet space. Nabucco's cost is now estimated at 9 billion to 10 billion euros ($11.8 billion to $13.1 billion). If built, Nabucco would be nearly twice the length and triple the cost of the West's one Caspian shining success to date, the Baku-Tbilisi-Ceyhan oil pipeline.

The Nabucco Gas Pipeline International consortium was registered June 24, 2004, and now includes Austria's OMV, Bulgaria's Bulgargaz, Hungary's MOL, Romania's Transgaz, Turkey's BOTAS and German energy giant RWE. While the syndicate to build the pipeline now exists, funding remains a significant problem.

Competing Russian projects -- South Stream and Nord Stream -- would eat much of the potential gas supplies for Nabucco. Moscow is making a major play for Caspian-area reserves in Turkmenistan and Azerbaijan, and publicly doubting Nabucco's viability.

"For instance, the issue regarding the legal status of the Caspian Sea has not been settled yet," Dmitry Peskov, press secretary for Russian Prime Minister Vladimir Putin, said in a recent interview with Interfax. "Then, whose gas will Nabucco transport? Gas has to be supplied by Turkmenistan, but Turkmenistan's deposits have not been determined; there are no statistics."

Hungarian Prime Minister Ferenc Gyurcsany identified Nabucco's supply problem by noting that countries with gas reserves thus far are reluctant to commit themselves until it is clear that the pipeline will be built. Currently the only promised volumes for Nabucco's proposed 31 billion cubic meters throughput is Azerbaijan's future Caspian Shah Deniz production, estimated at 8 bcm. While Nabucco promoters are hopeful that the difference can be made up by Turkmen exports, the reality is that for the present and immediate future, Ashgabat's output already is promised to Gazprom and China.

Two of the world's largest untapped and undesignated gas reserves have been touted as Nabucco answers: Iraq and Iran. Iran's offer has not received serious consideration, especially in light of Washington's current sanctions regime, and Iraq's security, legal and political development has not reached a stage where it can promise gas field and export development.

Financing for Nabucco will not be easy to find at a time of global recession and plummeting energy prices. Consortium members have said the European Union should provide either pre-financing or guarantees to convince commercial banks and suppliers the project is viable. In Budapest both European Bank for Reconstruction and Development President Thomas Mirow and European Investment Bank President Philippe Maystadt said only that they would consider providing funding.

Complicating the picture, Turkey, where about 60 percent of the pipeline will transit, apparently is negotiating both for higher transit fees than those currently offered as well as the right to buy and sell gas from Nabucco. The latter concern is understandable in light of the fact that Turkey currently receives more than 65 percent of its gas imports from Russia via the Blue Stream pipeline under the Black Sea, and the Ukrainian dispute has heightened concerns in Ankara that it too could be subjected to "pipeline politics" if Nabucco goes forward.

Turkey also is using Nabucco as a bargaining chip with the EU on accession; on Jan. 19 Turkish Prime Minister Recep Tayyip Erdogan stated his country may withdraw from the project if Turkey's EU accession discussions "remain blocked."

Finally, Nabucco at present represents a continuation of Bush administration policies of promoting pipelines that bypass both Russia and Iran. In the meantime, Moscow undoubtedly will press forward with its alternatives, the Nord Stream and South Stream gas pipelines, in an attempt to reassure Europe that Russian pipelines bypassing Ukraine will alleviate future concerns about energy security.

The Budapest summit participants issued a declaration encouraging foreign direct investment in the project while calling for the creation of an energy partnership and cooperation among the European Union, Turkey, Georgia and Caspian and Middle Eastern nations. The attendees also stated their support for energy conferences in Turkmenistan and Bulgaria later this year as well as a "Southern Corridor Summit" organized by the Czech presidency of the Council of the European Union for May 7.

In the wake of the summit, the Nabucco Gas Pipeline International consortium remains upbeat, stating that construction will begin in two years, with the first gas flow in 2014. The project still requires $11.8 billion to $13.1 billion in financing and a feed of 23 bcm of natural gas.

During his Jan. 26 presentation "Caspian Energy, the U.S., EU and Russia" at Johns Hopkins' Central Asia-Caucasus Institute in Washington, Ambassador C. Boyden Gray, the U.S. special envoy for EU affairs and Eurasian energy, said that while Nabucco was feasible, the summit to watch for progress was not Budapest, but the Southern Corridor Summit. Besides Gray's audience, doubtless officials in Washington, Moscow and Brussels will be paying close attention to upcoming events in Prague as well.

When asked by a member of the audience if he thought that Nabucco would be built, Gray, a former lawyer, replied succinctly, "Eventually."

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