Academic journal article CEU Political Science Journal

Changing Games and Evolving Contexts: Political Bargaining in European Energy Disputes

Academic journal article CEU Political Science Journal

Changing Games and Evolving Contexts: Political Bargaining in European Energy Disputes

Article excerpt

1. Introduction

Energy has recently become a very important item on the political agenda of most Western countries and it is bound to be even more so in the future due to the increasing scarcity of natural gas and oil. In recent years, energy resources and their allocation have been the central element of conflict between producing countries and those in the distribution systems. The intensity of these conflicts, however, has reached over the past 6 years a level that was unseen since the seventies. More specifically, political scientists have noted that the conflicts between Russia and some of its former satellites, beginning in 2004, can be justified not only in economic terms, but also, and more importantly, in political terms.

In the literature, political scientists attribute this new Russian approach towards Ukraine, Belarus and, to a lesser degree towards Moldova, not only to a Russian desire to collect as many financial resources as possible from these countries, but also to use the financial leverage gained by increasingly expensive gas exports to gain economic and political control over these countries. In fact, Putin himself recognized the importance of gaining access to the old Soviet pipeline system in order to restore, at least in part, Soviet prestige.

(1). It is probably a secondary goal to secure a steady flow of gas and oil through its former satellites, when one compares it to that of establishing a tighter economic and political relationship with those areas that play an important to role in the Russian economy. The relevance of this topic, however, is not in the expansion of Russian political influence per se, as it was the case during the Cold War. The concern of the highest European spheres stems from the growing suspicion that Russia may also use the energy weapon to advance its political agenda in Eastern and Western Europe.

Political bargaining models can offer valuable insights and contribute to the explanation of the outcome of important political confrontations, like the ones between Russia and its former satellites. However, the understanding of the evolution of these confrontations can depend on the quality of the formal models that one uses to disentangle all the threads that one identifies as relevant. If one of the important threads is not accounted for in the model, then our understanding will be inherently flawed and the adoption of the model, however accurate and refined, will systematically produce inaccurate explanations and predictions. In other words, in this article I am interested in finding an answer to the following questions: "are current political bargaining models lacking consideration for any aspect relevant to our understanding of political crises? If so, what is missing and which model can better model these crises?" In order to do so, I follow a somewhat different approach. I introduce my hypothesis, which I test presenting the data and the statistical approach selected. The results show that for quite a few of the gas disputes analyzed there was a negative impact on the GDP growth of the European countries chosen for their primary importance as members of the Council of the European Union. Based on these findings, I quickly review the current state of game theory, and then I address how game theory could be improved in light of the empirical results obtained.

2. Hypotheses: an evolving environment?

Given the importance that Russia has as an energy supplier, it is important to understand not only why these crises started, but also how these disputes were solved. Game theory provides some useful insights to understand why some disputes were settled much earlier than others. Deviations from the expected outcome of the dispute can be attributed to the particular distribution of pay-offs, and elements like issue-linkage, asymmetries, repetition, signals, perception, and brinkmanship. (2)

However, in this article I argue that the very onset of the dispute changes the nature of the political bargaining crisis, as it was clear in the case of the 2006 Ukraine-Russia dispute, when European customers reacted by harshly criticizing and urging the disputing parties to reach an agreement. …

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