The failure of the Nabucco project which, when started in 2002, was hailed as a landmark project that would enable Europe to diversify gas supplies by reducing dependence on Russia, brings into relief the power that small nations have over oil and gas policy. Azerbaijan, which is a unique position as the only independent gas supplier in the region played a big role in the failure of the project. The Nabucco project and its failure shows the major role that small nations play in the formulation of oil and gas policy in contrast to the extant literature that mainly focuses on the role of big countries like the US or Russia in the formulation of oil and gas policy. By focusing on the Nabucco project as a case study I will show how small countries like Azerbaijan play a crucial role in choosing the routes and means of gas delivery to Europe. The successful completion of the Baku-Tbilisi-Ceyhan pipeline, in spite of the reservations expressed when the project started showed that gas pipelines were a feasible economic option. Therefore the failure of the Nabucco project and the role that Azerbaijan played in this is extremely important. While the focus of the thesis will be on Azerbaijan, other actors such as Russia and the EU will also will be looked at. Crucially, this thesis will look at how the dismissal of Nabucco and the failure of other projects impact the energy supply diversification policy of certain countries in EU, especially Bulgaria, Romania and Greece. Methodology: I intend to use a qualitative method, which fits perfectly with my study case as I already have identified crucial actors and policies in the gas and oil market of Central Asia. The thesis will look at political discourse analyzing policy papers, think tank reports, newspaper articles and different types of contemporary media to see how the interests around the Nabucco project were shaped and shifted and how such dynamics led to the failure of the project. Theory: I will look at the geopolitics and geo-economics of the region to analyze the interests of the actors who played a role in the Nabucco project. I will use the rational choice approach to analyse Azerbaijan’s and other actors’ policy preferences.